- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
Hi
If there is a audit risk in scenario that “Company purchase their goods from suppliers in foreign country and goods are in transit for up to 3 weeks.”
For its explanation would it be correct to write that “There is a risk that goods may not arrive but still be recorded leading to overstatement of inventory.”
For its response would it be correct to write that “Only those goods which have arrived should be included so physically visit the company to verify which goods have been received and ensure only received goods are included in inventory”
I don’t think inventory is the audit risk. Goods will physically not be in inventory until they actually arrive, so there is no danger of them being in the inventory count. Goods received notes are also raised only when goods arrive (that is their purpose) so there will be no danger of book stock being increased either.
The only real audit risk I can see is if the goods take three weeks to arrive, the invoices for the goods is likely to arrive first, and might be processed as though the goods had arrived (Dr Purchases, Cr Supplier). Of course, ideally, this shouldn’t happen as invoices should not be approved until checks are performed to ensure the goods were ordered and had arrived in good condition.
So basically for explanation of audit risk I shall write that ” There is a risk that the invoices for the goods is likely to arrive first, and might be processed as though the goods had arrived (Dr Purchases, Cr Supplier).”
And its response would be ” Invoices should not be approved until checks are performed to ensure the goods were ordered and had arrived in good condition.”
Would these be fine and correct?
- The topic ‘goods in transit audit risk’ is closed to new replies.