1. OPENING STOCK: The auditor should verify the opening stock appearing in the trading account. The closing stock of last year becomes the opening stock of current year. The books and papers must be examined to find the true value.
2. PURCHASES: The auditor should verify the purchases appearing in trading account. The cash purchases and credit purchases are added. The amount must be the same in purchases account, trial balance and trading account.
3. PURCHASES DISCOUNT: The auditor should verify the purchase discount stated in the trading account. The checking of various papers, creditor accounts, purchase discount account is necessary. The amount stated in trial balance must be the same as stated in trading account.
4. CARRIAGE INWARD: The auditor should verify the carriage inward account. The carriage inward is a carriage on purchases. The carriage should be verified in relation to purchases. The amount, in trial balance and trading account should be the same.
5. SALES: The verification .of sales must be made. The cash sales and credit sales are stated in trading aCcount. The overstatement or
understatement of sales can upset the gross profit amount and rate of profit on sales.
6. SALES RETURNS: The verification of sales returns is desirable. There should be no inflated or deflated sales return. The auditor must check the record with care and skill in order to achieve true trading results.
7. SALES DISCOUNT: The sales discount can be verified with the discount account and the rate of discount. It can be confirmed from customers. The auditor should check such figures in order to determine the fair profit.
8. CLOSING STOCK: The closing stock is counted and valued by the management. But it is the responsibility of auditor to watch the stock valuation process. The inflated stock prices cannot provide the real gross profit
.9. GROSS PROFIT: The auditor must verify the gross profit figure. The can check the gross profit of previous years. There should be no change in
the rate of gross profit. The changes in it should be noted and inquiry can be conducted to know the errors.
10. PERCENTAGE OF GROSS PROFIT: The auditor can note the rate of gross profit. The change in gross profit is possible due to increase in sale price but no change in cost. It is also possible due to decrease in cost mice and the same sale price. The inflated price of closing stock can upset the percentage.
Similar Accounting Articles:
- PROFIT AND LOSS ACCOUNT
- Profit And Loss Appropriation Account
- TRIM BALANCE
- Verification of Trial Balance
- VERIFICATION OF RESERVES