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Audit of transport costs for wholesale company

Yuriy Grakovsky
expert on accounting and taxation


A significant share of operating expenses in company engaged in wholesale trade belongs to costs of auto transport. This is not surprising, because goods must be delivered from supplier (manufacturer), placed to storages, then shipped to customers in accordance with existing agreements (generally, delivery of goods is carried out by transport wholesale businesses). Also at this time, other business processes proceed in parallel: sales representatives, employees of wholesale business, collect applications for products from customers (usually retailers are scattered over fairly large area), supervisors, commercial directors are looking for new customers, as an extension of markets for goods, etc. And in implementation of these and many other problems company has significant transportation costs, which can not be avoided, so their optimization is one of important tasks in organization of company’s work. In this regard, auditing of transportation costs takes important place, an objective of which is to develop conclusions:

-About legality and feasibility of costs associated with operation of motor vehicles in wholesale company;

-Compliance as of laws and regulations of Ukraine, as well as internal company documents relating to use of motor transport;

- Timeliness and correctness of operations associated with use of motor vehicles and their reflection in accounting.

This article addresses to performing these tasks by auditor. It would be useful for employees of accounting firms, professional services, internal audit or control and inspection services, wholesale businesses, as well as accountants, managers, logisticians, keeping records and monitoring work of vehicles.

Checking accounting on costs associated with delivery of goods from supplier (producer)

Normally, delivery of goods to wholesale enterprise is at expense of this enterprise. In this case, delivery by own or leased vehicles, transport, booked at ATP, supplier of goods or transport (followed by setting cost of auto services) is possible. In any case, according to par. 9 of RSA 9, cost of transporting goods to place of use, for loading and unloading operations as part of transport-ordering costs (hereinafter - TOC) is included in cost of goods. Auditor will need to find out by comparing costs of shipping goods from suppliers contained in travel pages of trucks, acts of works (services), customer coupons, invoices, tenants, with turnover in debit of subaccount 281 "Goods in stock". TOC value is included in cost at time of sale (shipment), but not at time of expenditure. Otherwise, auditor should fix violation, which results in distortion of accounting and reporting, as well as malformation of selling price for goods.

Study of organization of control over transport upon delivery of goods to customers

This question is usually subject to coverage during internal audit at units of wholesale company. To do this, along with staff of internal audit, it is appropriate to attract other professionals: managers, logisticians, transportation department specialists, etc.

First of all, enterprise should develop and approve routes of delivery to clients - buyers. Moreover, routes must be such that, on the one hand, they covered all clients, on the other - to develop optimal alternative routes in order to reduce shipping costs. When automated processing of data routing, information is entered in accounting program. When starting the line, drivers receive with other documents (waybills, invoices, tax invoices) an assignment as route plan, which reflects route for the day, showing names of customers, their location, numbers and dates of invoices, weight of goods, distance between places of delivery. After completing the assignment, a routing sheet, which indicates actual execution of work, is handed in together with other documents. When identifying abnormalities, responsible person (manager, logistics manager, etc.) finds out the reasons (wrongly delivered goods to another customer, buyer was not in place, wrong information submitted by sales agent for ordering goods, etc.), if necessary – demands explanations from driver or sales representative. Then these data on deviations from calculation of potential losses should be given to administration - manager or his deputy on commercial area. This way a procedure for controlling operation of vehicles upon delivery of goods should be constructed. When checking evidence of lack of control in operation of motor vehicles, auditor or other expert checking this area of work should not only fix detected violations, but also suggest ways to address them and avoid in future. Typically, such proposals should be limited to organization of effective control system over operation of vehicles with responsible persons at all stages of control.

Study of organization of control over transport in the sales staff work

As noted above, vehicle is often used by staff of wholesale enterprise, because they need to enter into new contracts, taking orders in retail outlets for supply of products, sales managers and supervisors need to check work of their subordinates. And in this case, optimal routes should also be developed for more rational use of private cars, together with tasks of issuing route lists to organize monitoring of routes compliance, analyzing deviations. This area of work is studied by auditor or other specialist with appropriate qualification in a manner similar to that described in previous section of this article. It should be added only that auditor needs to examine registration of waybills for service passenger vehicles in form #3, approved by Order of the State Statistics Committee of Ukraine from 17.02.1998, № 74.

Checking recording of costs on delivery to customers in accounting and documental confirmation

In accordance with par. 19 of RSA 16, cost of delivery of goods (products) to customer is included in cost sales. This also includes "cost of transportation of finished products (goods) between warehouses units (branches, representative offices) of enterprise". That is, for example, if goods come from central warehouse and then for subsequent shipment to customers are transported to "peripheral" warehouse, the cost of transportation is not necessary to include in cost of goods, as part of sales cost. Auditor studying cost-sharing should focus on this by analyzing turnovers on debit of account 93 and sub-account 281.

You must also check accuracy of documents confirming performance of works to deliver goods. Such documents are traveling sheets for trucks of typical form #2-TN, approved by Order of the Ministry of Transport and the Ministry of Statistics of Ukraine from 29.12.1995, № 488/346, invoice for shipment of goods to buyer, trip sheet (when enterprise is using such internal document mentioned above). One should pay particular attention to completeness and accuracy of recognition of information relating to spent fuel, mileage and weight of cargo. Upon delivery of goods by third-party vehicles, paperwork confirming provision of transport and freight forwarding services should be checked. Such document can be an act of works (services) of lading, freight forwarder report. If auditor finds that information contained in documents and filled in accordance with contract, is not complete, he should ask to make amendments to contract with transport (freight forwarding) enterprise concerning content and layout of source documents.

Checking validity of application of fuel consumption rates, cost of repair and maintenance of vehicles

If company has motor vehicles (own or rented), it always carries significant costs to operate it. First of all, it is cost of fuel. At present, basic document for establishment and development of fuel consumption rates is the Rules #43. This document is quite extensive, its description and analysis of requirements is a topic for another consultation. Therefore, let’s focus on specific points, where auditor’s attention should be paid. First of all, it is validity and correctness of calculations with increasing consumption rates in following cases: work in cold weather (p.p. 3.1.1 Rules #43), working in mountainous and/or routes with hilly terrain (pp. 3.1.2 Rules #43); work requiring frequent stops (on average more than one stop per kilometer) (pp. 3.1.5 Rules #43)*, etc. It is also necessary to examine validity and correctness of calculations at lower consumption rates outside inhabited locality, on public roads (p.p. 3.2.1 Rules #43). Validity of adjustment rules should be confirmed, first, with order of head of the company, and secondly, with relevant data relating to travel and route sheets on outside temperature, route, name and location of clients - buyers, etc.

Another, no less important cost item is the cost of repair and maintenance of vehicles. These costs are necessary for exclusions and reducing vehicle downtime. On the other hand, implementation of these expenses must be justified. Auditor together with specialists who possess technical knowledge relating to operation of vehicles, necessarily examine validity and proper registration of such costs. In this case, documents are subject to study, such as invoices - orders and acts of works (services) from station, overhead to obtain from suppliers and acts to withdraw, transfer sheets for auto parts. You should also analyze other documents that are available - logs of technical faults and requests for car parts, registration cards of tires and batteries. After studying all the above, one need to draw conclusions about validity and accuracy of such costs.

This article examines key issues to be covered by audit of transportation costs for enterprises of wholesale trade. However, set out list is not exhaustive. If necessary, author is ready to continue discussion in pages of magazine.

* This mode of operation is characterized by sending out goods at retail outlets, located in close proximity to each other, for example, one street.



RSA 9 - Regulation (Standard) of Accounting 9 "Inventories", approved by Order of the Ministry of Finance of Ukraine from 20.10.1999 № 246

RSA 16 - Regulation (Standard) of Accounting "Expenses", approved by Order of the Ministry of Finance of Ukraine from 31.12.1999 № 318

Rule #43 - Limits of fuel and lubricants for motor transport, approved by Order of the Ministry of Transport of Ukraine from 10.02.1998, № 43

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