This is a composite, illustrative scenario, not an account of a named client. An advance of roughly ₹9 lakh paid to a raw material supplier had been carried under advances to suppliers for eighteen months with no goods receipt note ever raised against it. The confirmation letter sent to the supplier as part of standard balance confirmation procedures was returned by the courier marked as undelivered, with the address on file no longer a functioning business location — a fact the company's own vendor master had never flagged because nobody had tried to contact that supplier through any channel other than the original transaction.
Why eighteen months of ageing hadn't triggered a review on its own
The advances to suppliers ledger was reviewed monthly by finance, but the review checked whether each balance had moved, not how old it was or whether goods had actually arrived. This advance hadn't moved — no partial receipt, no refund, nothing — which meant it simply appeared unchanged month after month and didn't draw attention the way a balance with unusual activity would have. Ageing by itself was never applied as a standalone test to the advances ledger; it took the confirmation bouncing to prompt someone to ask how long this had actually been outstanding.
What the investigation into the bounced confirmation found
- 01Tried alternate contact details on file for the supplierThe phone number was disconnected; the GST registration associated with the supplier's GSTIN showed as cancelled as of roughly a year earlier.
- 02Checked purchase orders and goods receipt notes against this supplier code for the full periodOne purchase order existed, matching the advance amount, with no goods receipt note ever raised against it in the eighteen months since.
- 03Asked the purchasing team who had placed the original order and what follow-up had occurredThe individual who had placed the order had since left the company, and no one had picked up the relationship or chased delivery after that departure.
- 04Assessed recoverability given the supplier's apparent closureWith the GST registration cancelled and no contact possible, the advance looked unlikely to be recovered either through delivery of goods or a refund.
| Signal | What it should have prompted | What actually happened |
|---|---|---|
| No goods receipt note raised | Chase the supplier for delivery or a refund within 60–90 days | No follow-up for eighteen months |
| Supplier GST registration cancelled | Flag the vendor as inactive and review open balances | Never checked |
| Order-placing employee departed | Reassign the open commitment to someone else | No handover occurred |
What went into the file
- The bounced confirmation letter and the alternate contact attempts, documented as the trigger for the wider review.
- The purchase order and absence of any goods receipt note, establishing how long the advance had genuinely been unresolved.
- The GST registration status check supporting the recoverability assessment.
- A proposed provision against the advance, given the doubtful recovery, and a recommendation for ageing-based review of the advances ledger going forward rather than movement-based review alone.
Common practice, not a requirement
Reviewing an advances ledger for whether balances moved catches balances that are actively being managed, well or badly. It does not catch a balance that's simply been forgotten. An ageing test applied specifically to advances — not just to debtors — would have raised this one well before the confirmation letter needed to bounce for anyone to look.
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 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 auditVendor reconciliation in statutory auditHow to select vendors for confirmation, the seven categories every difference falls into, how to handle non-responses, and what an unconfirmed balance is worth.
- Revenue, receivables & cut-offDebtors confirmation procedure: balance confirmation in practicePositive versus negative confirmation, selection criteria, handling non-responses and disputes, and the alternative procedures that cover the gap when confirmations fail.
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.
- Purchase register checkDuplicate payments, round-sum amounts, weekend-dated invoices, incomplete records.
- 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.