61. REVIEW OF INVENTORIES. CONTROL OF COMPLIANCE WITH THE LEGISLATION. CONTROL OF FINANCIAL REPORTING

Legal Compliance Check in this area may concern the following issues: the correct application of VAT offset on purchased inventory items;

▪ actions of officials when organizing procurement in the interests of the organization, and not in their own;

▪ compliance by budgetary organizations with legislation on procurement for public needs.

Checking that all recorded inventory transactions actually took place is aimed at identifying fictitious inventory transactions. In large and medium-sized enterprises, such situations are extremely rare. A more particular case is "incomplete information" about inventory transactions. The criteria for a fictitious transaction are not clearly defined, and each time the final decision is made by the court. To check, you need to look at the list of materials and suppliers for at least some month (which also takes a lot of time), and select two or three atypical deliveries - as a rule, this is an average supply from a not too well-known supplier. Signs (but not evidence!) of the fictitious nature of the consignment note are: the execution of a "simple", and not a bill of lading;

▪ the invoice is in perfect condition, there are no signs of bending or scuffs along its edges (in principle, the forwarder should have carried it with him in the car, but sometimes invoices are carried in paper folders, which really eliminates leaving any traces on the documents);

▪ lack of invoice number, or inaccurate number (with index, fraction, etc.);

▪ lack of car number and driver’s name;

▪ lack of delivery address;

▪ unclear description of the cargo;

▪ lack of data on cargo tonnage;

▪ lack of indication of time for unloading;

▪ visual similarity of the signatures on the invoice “authorized”, “released”, “accepted”, or they were made with a pen of the same color, etc.

We find out whose car was - an organization, a supplier or a third party. Please bring the accounting card for this material from the warehouse, check the card data (date, quantity, cost) with the invoice data. Checking that all transactions that actually took place are recorded is aimed at identifying unrecorded stocks.

In the presence of "shadow turnover", the organization has stocks that are not reflected in the official accounting. Identification of such stocks is also possible by the inventory method. If the identification of cases of theft of stocks is carried out by reconciling accounting data with the actual availability of stocks, then in this case it is the other way around: the actual availability is verified with accounting data.

For verification, the auditor must select any warehouse, including open, two or three objects for verification. It is not recommended to select objects whose characteristics cannot be determined in a short time for various reasons, for example, crushed stone deposits covered with snow, an embankment of small metal products, etc.

Checking that inventories are recorded at a valuation that does not exceed their market value rarely reveals errors, since high inflation quickly "eats" possible deterioration in inventories as a result of storage.

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