It implies examination of a few selected transactions from the beginning to the end through the entire flow of the transaction, i.e., from initiation to the completion of the transaction by receipt of payment of cash and delivery or receipt of the goods. This examination consists of studying the recording of transactions at the various stages through which they have passed. At each stage, relevant records and authorities are examined; it is also judged whether the person who has exercised the authority in relation to the transactions is fit to do so in terms of the prescribed procedure. For example, if payment to a creditor is to be verified “in depth”, it would be necessary to examine the following documents:
- The invoice and statement of account received from the supplier.
- The entry in the stock record showing that the goods were received.
- The Goods Received Note and Inspection Certificate showing that the goods on receipt were verified and inspected.
- The copy of the original order and authority showing that the goods in fact were ordered by an authority which was competent to do so.
It is to be emphasised that, so far as the management is concerned, the internal control should have willing acceptance at the hands of the employees and there should exist proper mechanism for such motivation.