AUDIT IN DEPTH

Audit in depth as the name implies means checking a transaction extensively from origin to end. It is an audit technique which is used to evaluate the effectiveness of internal control system in an organisation. It is used in investigation exercises whereby the objective is to thorough examination of transactions or records. In this technique all aspects relating to the transaction are checked such as sanctity of transaction, validity of transaction, adherences of prescribed procedures, arithmetical accuracy of transaction, accounting treatment of transaction etc. It is also called vertical vouching as against horizontal vouching.

For example, a purchase of goods may commence when a predetermined re-order level has been reached. The ensuing stages may be summarized as given below:-

1. Authorization of Purchase requisition: Check whether the requisitions are pre-printed, pre-numbered and authorized. See whether the purchase requisition have been authorized by competent official.

2. Issue of Request for quotation: Check whether request for quotatio0n have been issued or not. If not find the reasons of not issuing request for quotation. Check whether the requests for quotation have been issued to approved vendors.

3. Issue of Purchase order: Check whether purchase order have been issued or not. If purchase order have been issued check whether it has been issued from the competent authority. Check whether the purchase order have been issued to the approved vendor who has given lowest quote. If not check the reasons. Check whether the reasons of issuing the purchase order to a vendor other than the lowest bidder have been approved by the competent authority.

4. Receipt of goods and entry of goods in store ledger: check whether the goods receipt is as per specification given in the purchase order. If not check whether the deviations have been recorded and the communication has been made to the supplier or not. Check whether the goods receipt have been properly recorded in store ledger or not.

5. Approval of payment of Supplier Invoice: Check whether the amount has been approved by the competent authority.

6. Payment of supplier invoice: Check whether the supplier bill have ben paid correctly. Check whether all deduction for short receipt of goods, late delivery of goods, inferior quality of goods, advance payment for the goods have been done or not.

7. Accounting of Transaction: Check whether accounting made is correct or not. Check whether correct expenses code have been debited or not. Check whether the applicable accounting standard have been complied with or not.

It should be noted that the above list is not necessarily comprehensive, nor does its constituent stages inevitably
take place in the sequence suggested.