Supplementary or alternative checks: introduction
- compare purchases and sales daybook totals with corresponding totals in nominal ledgers or other principal records;
- compare purchases for a given period with sales, covering both physical consistency (goods traced from purchase to sale) and credibility (for example is the mark-up reasonable);
- compare stock accounts, or stock taking records, with purchases and sales records;
- examine any periodical analyses, which show the quantities of each line purchased or sold, and compare with the corresponding purchases/sales record;
- compare the total number of individual components purchased for manufacture over a given period with sales recorded for the final commodity;
- compare goods and services purchased over a given period with recorded payments to suppliers in the same period, and ensure they are consistent, allowing for any period of credit taken;
- compare goods and services supplied over a given period with recorded receipts from customers, in the same period, allowing for any period of credit given;
- compare amounts withdrawn from or paid into the trader’s banking account(s), with inputs and outputs figures for the same period;
- relate the number of employees to outputs, especially with small service traders such as hairdressers, and if possible compare with actual observation. Does the result seem reasonable?
- relate the weekly wages bill to outputs - does the productivity per employee look unusually high, or low?
- match customer and consignment details from freight company invoices to corresponding declared deliveries. Failing this, a broader relation of freight charges to outputs may be possible;
- relate the number and capacity of delivery vehicles to declared outputs - this will be particularly useful in the case of transport businesses; and
- use costing or estimating records to establish how sales are priced up relative to purchases, and test whether declared purchases to sales ratio agrees with this.
NOTE: This list is not exhaustive and the officer is expected to use initiative in testing the accounts.