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Checklist for verification of items of Expenses to be followed by the Auditor

As part of their duties, auditors are responsible for verifying the expenses of an entity to ensure that they are valid and accurately recorded. To do this, auditors use various procedures such as examining records and performing analytical procedures. However, the extent and timing of these procedures depend on the auditor's professional judgment, which takes into account the effectiveness of internal controls. It's important for the auditor to ensure that the entity recognizes expenses based on recognized accounting principles.

(a) Examination of Records: One of the primary techniques used by auditors to verify expenses is the examination of records and documents. Since most transactions are supported by documentary evidence, the auditor needs to examine a large number of documents during the audit process. Business enterprises have accounting systems in place that generate documentary evidence for each transaction. Therefore, the auditor should examine the relevant records to ensure the validity, accuracy, and other assertions regarding the expenses incurred by the entity. The extent of the examination will vary based on the auditor's evaluation of the effectiveness of the internal controls.

(b) Analytical Procedures: To verify expenses, auditors should also perform analytical procedures, which involve analysing significant ratios and trends. This includes investigating fluctuations and relationships that don't match other relevant information or deviate from predicted amounts. These procedures help the auditor to identify any anomalies or unusual patterns in the data and investigate further if necessary.

To ensure that no significant expenses are overlooked, auditors often use a checklist of items to verify. In this context, we have discussed a checklist for auditors to verify items of expenses.

Read More:

1. Checklist for auditors to consider when obtaining Written Management Representations in accordance with SA 580

2. Checklist of Specific Documentation Requirements under various Standards of Auditing (SAs)

Reference:

This document is prepared with the help of "Guidance Note on Audit of Expenses" issued by ICAI

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