Material is an important cost in any manufacturing entity as it involves a major portion of the total production cost. The objective of checking material procurement is to ensure that the right material is procured at the right price, at the right time, and in the right quantity. This internal audit checklist aims to evaluate the effectiveness and compliance of procurement activities, purchase procedures, and related controls. The examination covers documentation, legal compliance, authorization matrix, adherence to accounting standards and auditing standards, procedural compliance, transaction recording, governance, and reporting. By using this audit checklist, the internal auditor seeks to identify strengths, weaknesses, and opportunities for improvement within the procurement and purchase functions of an entity.
I. Whether the Internal Auditor has ensured the availability of documents such as Purchase/service policy of the entity, Purchase order/service contracts, Original invoice, State and/ or city entry form, etc.
II. Whether the internal auditor has verified documentary proof for compliance of Payment of GST on the goods purchased from unregistered dealer, Deduction and payment of TDS on freight on purchases and services, Payment of custom duty and custom clearance of imported material, etc.
III. Has the internal auditor ensured compliance with AS 1 Disclosure of Accounting Policies, AS 2 Valuation of Inventories, AS 11 The Effects of Changes in Foreign Exchange Rates, etc.
IV. Whether the internal auditor has checked that the entity has a clear and comprehensive (up-to-date) procurement policy/service contract
V. Has the internal auditor ensured that purchases/services are centralized in the purchase/service department or purchases/services are made from approved authorities
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