77. REVISION OF COSTS. ASSESSMENT OF THE INTERNAL CONTROL SYSTEM FOR OTHER EXPENSES

Such items of other costs as "Expenses for the repair of fixed assets", "Legal and consulting services" are traditionally used as channels for "cashing out" of funds, which attracts closer attention of auditors to them.

Before conducting an audit, it is necessary to set goals correctly: search for evidence of possible fictitious data or check the formal side of the costs (the existence of a contract, an act of acceptance of work, a correctly executed invoice, indicating VAT in the correct amount).

Further actions of the auditor depend on the choice of the target.

1. Ask the accounting department to print the General Ledger for each month for the General Business Expenses account, analyze the composition of expenses, clarify the list of the largest expenses (or regularly recurring average expenses by amount), and ask to provide documents on such expenses.

2. Determine the degree of “materiality of traces”. Assess the risks of fictitious expenses; Please note that in many cases the services are actually real.

3. Find out from representatives of the organization being audited: how the initiation of such expenses is recorded, how you can find out who actually raised the question of the need for such expenses;

▪ whether the organization’s budget provided for such expenses;

▪ how the involvement of organizations that performed the types of expenses that attracted your attention was organized: who negotiated, what other applicants were there, etc.;

▪ who made the final decision on the choice of contractor, where this is documented;

▪ how the work results were accepted, whether any comments or shortcomings were identified, and where they were recorded.

4. Draw a conclusion about the organization of decision-making on the largest expenses.

A substantive check can be built according to the following scheme.

The possibility of fictitious services is assessed. For example, if façade repairs are included in the costs, there is less risk of fictitious costs, as these repairs must be visible. If the provision of such services is not obvious (for example, they repaired geographically remote facilities, or the work was hidden - repair of a heating main, transfer of pipes, etc.), it is necessary to study the documents more closely. Fictitious works may be indicated by:

1) lack of detailed engineering documentation. For example, when moving pipes, there should be a clear plan - where they lay and where they need to be moved; if asphalt is being repaired, then there should be asphalting boundaries on the plan indicating the asphalting area; if the roof was repaired, then there should be an indication of which part of the roof, etc.;

2) no complaints, acceptance of work the first time: in real documents, something is usually corrected, deleted, etc.;

3) the unwillingness of the employees of the audited organization to discuss these issues, the manifestation of alertness and even hostility towards the inspector; refusal under various pretexts to inspect the repaired facilities;

4) lack of any information about the contractor on the Internet.

If possible, a cross-check of the contracting organization gives the best result.

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