Verification of Transactions for Reviewing Internal Control in Company

During the auditing of internal control methods of the organization the following documents and transactions related to a particular area has to be verified and ensured by the Auditor. These are-

       a.Verification of Supply of Services and Income: For verifying the supply of services and income and the related internal control methods, the following documents have to be scrutinized-

  • Tender Files and Quotations.
  • All the Invoices and receipts.
  • Register of Income.
  • Issued Debit notes.
  • GST Return filing by the company.
  • Work statements and job cards of the employees and workers.
  • Cost sheets for working out the cost approximation of the service.
  • Various price lists for services that are fixed.
  • Account of the customer’s ledger for verifying the total billed amount by any of the prescribed ways.
  • Register for booking of services and goods.
  • File or register for correspondences with the customers and clients.
  • Service contracts and agreements for technical consultancies.

        b.Receipt of Inputs, including goods and services related to Inward supplies and availing of Input Tax Credit by the company: The following have to be verified for the Internal control methods verification-

  • Documents related to tender and quotations.
  • Order of purchases.
  • Invoices and bills for the made purchases.
  • Purchase register maintained so far.
  • Debit notes issued for the returned input services.
  • Detailed list of vendors and suppliers.
  • File of correspondence with the suppliers and vendors.
  • Verification of relevancy of the filed Form GSTR-3B, Form GSTR-9 and Form GSTR-9C.
  • Verification of the maintained Input Tax Credit register.
  • Cash account and bank account of the company to verify the payments in random cases.
  • Verification of the usage of inputs in the entity.
  • Account of Ledger of the inward suppliers.

        c.Financial Record Scrutiny: To scrutinize the financial records, all the following documents and accounts are to be checked for internal control methods verification-

  • Verification of all the accounts of major expenses for confirming the adjustments related to the recoveries from the clients in the accounts of expenditure.
  • Comparing the values of the Income accounts and taxable services that have been shown in the GST Return for the relevant period.
  • Checking all the issued debit notes and journal vouchers for verifying the recoveries from the clients for which GST has not been paid.
  • Checking the Trial balances.
  • Checking all the income accounts in the trial balances that show credit balances.
  • Verification of bills, invoices and other relevant documents related to the Income Accounts for which Goods and Services Tax has not been paid.

       d.Use of Inputs and Input Services in Exempted Services: The following has to be ensured for verification of internal control methods in the organization-

  • Verification of documents to ensure the use of inward supplies.
  • Checking the details of all the Input Services on which the Input Tax Credits have been availed.
  • Checking the outward supply and its costing that have been prepared for calculating the cost of output services and for submitting any quotations.
  • Checking the work statements and job cards for finding the accurate quantum of the input services used.
  • Checking the maintained records for the inward supplies usage quantity for the outward supply services exempted from taxes.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or