A GRN audit tests whether goods or services billed by a supplier were actually received, by matching the invoice to a goods receipt note, the purchase order and the inward gate or stores record. Where a reliable GRN does not exist, which is common at mid-market clients, the test falls back to matching the invoice directly to the PO and to whatever inward evidence does exist: the stores inward register, a weighbridge slip, a transporter's delivery challan, or a stock ledger movement, with the gap between invoice date and the earliest of these dates used as a cut-off and existence indicator in its own right.
Why GRNs are often unreliable at mid-market clients
A GRN is supposed to be raised at the stores gate at the point goods are received, independent of and prior to the purchase invoice being recorded in the accounting system. In practice, at a large share of Tally-based clients, one of three things happens instead.
- No separate GRN document is maintained at all. Receipt is inferred from the stock ledger being updated when the purchase voucher is entered, which means receipt and recording happen in the same act and prove nothing independently.
- A GRN book exists on paper at the factory gate but is never reconciled to the accounting system, so it sits in a cupboard and nobody can produce a clean digital extract of it for testing.
- A GRN is created in the system, but only after the invoice is entered, as a formality to satisfy a three-way-match report that the client's own process checklist calls for. The GRN date in this case is not a receipt date; it is a data-entry date that trails the invoice.
Before relying on any GRN register for testing, check whether GRN dates are ever earlier than, or always on or after, the related invoice date across the population. A GRN register where the GRN date never precedes the invoice date is not evidence of receipt timing; it is evidence that the GRN is being created to match the invoice, and the register should not be used as an independent source for cut-off work.
What to test when GRNs don't exist or can't be trusted
The absence of a GRN is not itself a reportable finding on every client — many legitimately small operations never formalised one — but it does mean the existence assertion for purchases has to be supported some other way. Work down this list in order of strength of evidence, using whatever the client actually generates.
| Evidence source | What it supports | Limitation |
|---|---|---|
| Weighbridge slip or transporter's proof of delivery | Independent, third-party-generated evidence of a physical delivery on a specific date | Exists mainly for bulk material purchases; not generated for services or small-parcel goods |
| Security gate inward register | Independently timestamped record of a vehicle or consignment entering the premises | Often maintained manually and not linked to invoice or PO number; needs manual matching |
| Stores inward register or bin card | Quantity received into a specific location, often with a storekeeper's signature | Usually only for goods, not services; quality varies sharply by client |
| Stock ledger movement (quantity increase) | Corroborates that inventory increased consistent with the purchase | Movement is often posted from the purchase voucher itself, so it is not independent of the invoice |
| Vendor acknowledgment, work completion certificate or service sign-off | For services and job work, the closest equivalent to a GRN | Frequently informal — an email or a site engineer's note rather than a controlled document |
| Physical inventory count performed during the audit | Confirms existence of goods on hand at a point in time | Only addresses goods still on hand; does not help for consumed or resold items |
- 01Establish what the client actually generates, client by clientDo not assume the fallback hierarchy above applies uniformly. A single client may have good weighbridge records for raw material and nothing at all for packing consumables bought from local vendors.
- 02For the sample selected for purchase testing, trace each item to the strongest evidence availableNot just the first document found. If a weighbridge slip exists for a sampled purchase, use it in preference to a stores register entry someone wrote up later.
- 03Where no independent evidence exists for an item, say so explicitly in the working paperRather than accepting the purchase voucher and the supplier invoice as sufficient on their own, which proves the transaction was recorded, not that the goods arrived.
- 04Corroborate with the subsequent event for goods: consumption or saleA raw material purchase that is later issued to production, or a traded good later sold, is indirect but real evidence the goods existed and were received, even without a contemporaneous GRN.
- 05For services, look for the output of the service rather than a receipt documentA maintenance contract's effect should show in the maintenance log or reduced downtime; a professional service should have a deliverable. Absence of any trace, combined with absence of a sign-off, is a red flag regardless of whether a GRN concept even applies.
GRN-to-invoice timing as a cut-off indicator
Where GRNs do exist and are genuinely generated at the point of receipt, the gap between the GRN date and the invoice date, and between the GRN date and the date the purchase is recorded in the books, is itself useful audit evidence, independent of whether any individual transaction is tested.
- Goods received before the year end but invoiced and recorded after it is the classic understatement pattern: the liability and the purchase should be accrued in the year of receipt, not the year of invoicing. Profile the gap between GRN date and invoice date around the year end specifically, not just across the whole year.
- Goods received after the year end but recorded before it, which is rarer but happens where a GRN is backdated to absorb a purchase into the closing period for a budget or target reason.
- A consistently long average gap between GRN and invoice across the whole year is less an audit risk than an operational observation, but a gap that widens sharply only in the last month of the year is a cut-off question specifically.
- Where the GRN-to-invoice gap is unusually short or negative across most of the population, treat it as the warning sign described above: the GRN is trailing the invoice, not preceding it.
Common practice, not a requirement
Running the GRN-to-invoice and GRN-to-booking gap as a dated profile across the full population, not a sample, around the year end is standard practice for a purchase cut-off test where reliable GRN data exists. It is not a statutory requirement, and where GRN data does not exist reliably, the fallback evidence hierarchy above has to carry that part of the testing instead.
How we think about this
Matching invoices to GRNs, flagging where a GRN register trails rather than precedes the invoice, and profiling the receipt-to-invoice gap around cut-off are exactly the kind of check that should run across every transaction, not a sample, because the pattern that matters is often invisible until the whole population is looked at together. Deciding what to do when no reliable receipt evidence exists at all for a client is a judgement about audit risk, not something a system can resolve on its own.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Purchase & AP auditCut-off testing for purchases: procedures and worked examplesWhich dates to compare, how terms of delivery decide the answer, how to size the window, and four worked examples including the two that are usually misjudged.
- Purchase & AP auditPurchase invoice vouching: a practical approachWhat to examine on a purchase invoice, in what order, the tickmarks worth using, and how to record the test so a reviewer can tell what was checked without asking.
- Purchase & AP auditPurchase register audit: what to check before you test anythingWhat a purchase register must contain, the checks that establish it is complete and internally consistent, and the defects that quietly invalidate everything tested on top of it.
- Purchase & AP auditTesting purchase order approval controlsHow to test whether purchases above a threshold actually went through the approval matrix, and the invoice-splitting pattern that is the most common way around it.
Free tools, no signup
Each one reads a file entirely in your browser — or, for two of them, just answers a few questions — and nothing is ever uploaded.
- GSTR-2B reconcilerMatches your purchase register against GSTR-2B — missing invoices either side, amount mismatches.
- Bank reconciliation checkerMatches your cash book against a bank statement — what's outstanding on each side.
- Fixed asset register checkDuplicate asset codes, missing location or useful life, negative net book value.
- Payroll red-flag scannerBank accounts shared across employees, and records missing an ID, PAN or salary.
- CARO applicability checkerAnswer a few questions about the company and see which CARO 2020 clauses likely apply.
- MSME payment delay checkerMSME-flagged invoices paid — or still unpaid — beyond the 45-day Section 22 limit.
- Related-party transaction screenerTransactions above a threshold you set with no approval reference, grouped by counterparty.
- Depreciation useful life checkerCompares a useful life in use against the Schedule II, Part C indicative figure.
- Materiality calculatorOverall and performance materiality against PBT, revenue, assets or equity, with reasoning shown.
- Sample size calculatorStatistical sample size for a test of controls or a substantive test of detail.