Audit substantive procedures for raw materials purchases.

Raw materials are materials or items used as inputs in the production of another more advanced or useful item. In order to manufacture a product manufacturing entities need to procure raw materials to do so. in almost all cases, purchases of raw materials are material to the manufacturing company. Therefore, the auditor needs to obtain sufficient and appropriate audit evidence with regard to purchases of raw materials by performing relevant substantive procedures.

The following are audit substantive procedures that may be performed to verify the purchase of raw materials;

Select a sample of transactions and carry out the following tests

  • Check whether appropriate measures have been taken as per the company’s policy to ensure that purchases are made from most competitive sources 
  • check the relevant invoices  
  • Match the invoices with goods received notes to ensure that goods have been received for all billings made by suppliers  

Match supplier’s invoice with purchase orders to ensure that

  • Purchase was duly authorized 
  • Rates and quantities mentioned on the invoices are the same as those mentioned in the purchase order.

Check posting of supplier’s invoice to creditor’s account/general ledgers.

Perform cut off procedures on purchases

Perform analytical procedures on purchases made during the year by comparing the current year purchases with last year and investigating significant differences if any.
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