How would you verify the following items, 1. Trade creditors 2. Loans 3. Debtors 4. Stock in trade

VERIFICATION OF TRADE CREDITORS :-
Auditor shall verify the trade creditors of the following way :

1. The auditor will check the accounts of the creditors and will compare the it with the purchase ledger.

2. He will compare the accounts with the invoices, receipts, credit notes and the statements.

3. He will verify their balances and will trace them to the list of creditors.

4. Auditor will check the addition in list.

5. He will find the differences if any between figures of the creditors statement and the balance of ledger.

6. For the confirmation of balances auditor may send the balance statements to the creditors.

7. Auditor will also check the entries of the goods inward book and compare it with the purchase ledger.


VERIFICATION OF LOANS :-
Auditor should check the agreement documents for getting loan. In case of bank loans and over draft auditor should examine the agreement with bank. Following procedure should be followed by the auditor :

1. To find out the borrowing powers of the firm auditor should examine the legal documents of the company.

2. Auditor should check the resolution of directors of the company for obtaining the loan.

3. Examine the rate of interest, repayment plan and duration.

4. Confirmation of loan should also be checked by the auditor.

5. He should prepare the movement of accounts during the year.

6. He should also verify the interest paid and payable.


VERIFICATION OF TRADE DEBTORS or DEBTORS or BOOK DEBTOR :-
Auditor will adopt the following procedure for the verification of debtors :

1. Postings in debtor's ledger should be verified by the auditor from the other records.

2. While auditing the book debts auditor should ask the debtors to send the debt statements directly to him.

3. Auditor should obtain a certificate directly from the bank regarding the balances.

4. He may examine the bank ledger by himself.

5. The object of the auditor should be to satisfy himself about the bonafied debts shown in the balance sheet.

6. He should also verify that all bad debts are written off by the authorized person.

7. He should obtain the list over due accounts.

8. Auditor should compare the ledger accounts with the list of sundry debtors balances.

9. Auditor should note down all the undue advances and allowances given and enquire about them.


VERIFICATION OF STOCK IN TRADE :-
Auditor can verify the stock by taking the following steps :

1. Auditor should ensure that issue of stock sheets has been properly controlled.

2. He should verify that all the stock sheets have been signed and counter signed.

3. Auditor should test the stock sheets with the record if continuous stock records are maintained.

4. Auditor should take the copy of those instructions which are given to the staff about the method of stock taking.

5. Auditor should demand the originals if final stock shares are supplied. These can be tested by the auditor to find the differences.

6. Auditor should also ensure that a physical check has been made at least once during the year.

7. He should verify that stock in transit is received before the closing date.

8. Cut off should also be checked by the auditor.