Know How The Auditor Considers The Verification Of Every Good On Consignment
The term consignment actually refers to the relocation of goods for sale on a commission basis from the consignor team to the corresponding allocated agent or the so-called consignee who is at a different place.
Check this out for knowing the details on the verification and evaluation steps conducted on stock on consignment.
- All the stock provided under the unsold category must be thoroughly checked and verified by the management respectively.
- It is the responsibility of the Auditor to get a written certificate from the allocated consignee for the obtained stock. This should contain details on the physical number or quantity of the item being taken from the consignor.
- Check in detail the sale accounts from the consignee to know an estimate about the quantity that should be held within the consignee after the completion of dealings. This precaution can prevent any fraud dealings taking place in between.
- Such allocated or consigned goods are never detailed as sale products. So, revenue cannot be charged on these items until they are sold off to a third party.
- It should be ensured by the Auditor that the consignee is not debited for the goods given to him by the consignor.
- And also, these stocks are priced at a cost much lower than the market value. The rate of the item depends on the non-recurring expenses met by the consignor and the consignee respectively.
- In addition to this, the estimation of all the closing stock is inclusive of charges due
- Loading and carriage,
- Insurance value
- Octroi and other expenses,
- Unloading rate and so on.
It is also advisable not to include the vending or distribution charges along with the stock price.
- All the normal type of losses occurring on the consignment should be completely separated from the abnormal or unexpected type of losses. Further, the price value maintains an inverse proportion with the normal loss. This means the rate of the item must be increased for normal kind of loss like the natural vaporization of the product or so. But the abnormal problems like a robbery or embezzlement and even the catching of fire on these goods should be accounted to the Profit and Loss section respectively.
- If the consignor takes appropriate measures to send over the stock goods at the invoice price, then a stock reserve can be surely generated for the unsold stock type.