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Kim Smith.
Kim Smith.-
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Noah098
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“Sitia Sparkle Co purchases their goods from suppliers in Africa and the goods are in transit for up to three weeks.
At the year?end, there is a risk that the cut?off of inventory, purchases and payables may not be accurate and may be under/overstated.
The audit team should undertake detailed cut?off testing of purchases of goods at the year?end and the sample of GRNs from before and after the year? end relating to goods from suppliers in Africa should be increased to ensure that cut?off is complete and accurate.”Maam i don’t understand the part relating to GRNs, i mean what exactly is the audit procedure using GRN and how will it be benificial?
Kim Smith
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See page 75 of the notes – the Goods Received Note (GRN) is the document that will be raised to record the receipt of goods. The liability is incurred when the goods are received – but the liability is recorded through the processing of the invoice. A purchase invoice should only be processed when it has been matched to a GRN – this matching is an internal control to ensure that payments are not made for goods that have not been received.
See also page 77 – GRNs (and Goods Despatch Notes) that record inventory movements are important in establishing an accurate cut-off.
Now see explanation of purchases cut-off on page 97.
Noah098
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