Q.During vouching, the auditor finds a cash-purchase invoice for ₹18,000 from a supplier that does not appear anywhere else in the firm's records, and no corresponding Goods Received Note exists. What should the auditor suspect, and what steps should be taken?

An invoice with no receiving-side confirmation is the classic sign of a wholly fictitious cash purchase used to extract cash.

Why this is suspicious. As discussed under Vouching of Specific Transactions, a genuine cash purchase should be corroborated by a Goods Received Note (GRN) confirming the goods were physically received into the business's stock. The absence of any GRN — combined with the supplier not appearing anywhere else in the firm's records (no other transactions, no listing in any supplier directory the business normally deals with) — is precisely the profile of a fictitious purchase entry, created solely to justify a cash outflow that was, in substance, misappropriated rather than genuinely spent on goods.

Steps the auditor should take:

1. Verify the supplier's genuineness independently — check whether the supplier's name, address, and contact details correspond to a real, traceable business (a search of business registries, or attempting direct correspondence/confirmation with the named supplier).
2. Check the physical stock records — was there a corresponding increase in stock quantity at the time of this purchase? If the stock records show no matching increase, this strongly corroborates the suspicion of fabrication.
3. Trace whether the 'purchased' goods were ever subsequently sold or used — if the goods never appear anywhere in later transactions (sales, consumption, production), this is further evidence they were never actually acquired.
4. Examine the authorisation on the invoice — who approved this cash payment, and does that person's authority extend to purchases of this size and nature? …

A common shortcut is stopping at 'the invoice looks fine, so the purchase must be genuine' — the whole point of this scenario is that a fabricated invoice can look perfectly genuine on its face; it is the ABSENCE of independent corroborating evidence (the GRN, stock movement, supplier traceabi …