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what is the audit risks of using bank overdraft to purchase products for the business? please...

what is the audit risks of using bank overdraft to purchase products for the business? please provide the explanation.

does it meant that the business will have cash flow issues?
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Answer #1

Audit Risk of using Bank Overdraft to purchase products for business are:

  • The Bank OD can be used to withdraw cash by unnecessary purchases from the vendors & then receiving kickbacks by way of collusion.
  • Usage of Bank OD Limit for purchase of Fixed assets rather than working capital requirement.
  • Unauthorised usage by employees by collusion with the vendors.
  • Unnecessary spending may occur.

The above mentioned will be the risk of using Bank OD for the business & will definitely will cash flow issues in future due to Over spending.

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