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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

HM Revenue & Customs
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The Audit Process: (C) confirm

Confirmation of understanding of the traders VAT relevant systems can be obtained by tracing a number of transactions through the various stages of the process. The exact technique will depend on the nature of the system, the type of evidence available and the audit objectives from the planning stage. Confirmation can also be obtained from visual observation, for example, the trader’s use of the till, watching staff keying in invoices, examination of stocks and records. Confirmation can be carried out as a separate process, or in conjunction with the previous process. A thorough understanding will avoid confusion and disagreement at a later stage. The extent of confirmation testing should be recorded on the Comments section within the EF Audit screen. The headings below will assist in confirming your understanding of the trader’s business and help you in your evaluation of the overall compliance.

  • examination of annual accounts;
  • comparison of trader report details with the VAT account and build up of the VAT account;
  • inspection of premises, equipment and stock, and trader’s lifestyle; and
  • credibility queries and references.

As the result of the confirmation process, the EF summary screens may need further amendment.