describe in detail the audit trail of the purchase of inventory, the sale of invemtory and an employee payroll

Answer 1

By audit trail I presume you mean what the auditors would expect to see for verification purposes. The basics are as follows:

Purchase of inventory:
1. Purchase order placed by the company with its vendor specifying the goods and the price
2. Delivery order from the vendor accompanying the goods upon arrival. This should be acknowledged by the storeman to confirm that the goods did arrive and in good condition and are what the company ordered.
3. Invoice from the vendor. Someone in accounts should verify this to ensure what is invoiced is what was received and that the price is as per the purchase order.
4. Correct posting of purchase transaction into the General Ledger (GL) and creditors subsidiary ledger

Sale of inventory:
1. Purchase order from customer and order confirmation from the company
2. Delivery order prepared by the company to accompany goods going to the customer's location and acknowledged by the customer's storeman to confirm receipt as above.
3. Copy of Sale invoice with evidence that someone has matched the details in the delivery order with the sale invoice
4. Correct posting of sale transaction into the GL and debtors subsidiary ledger

Employee payroll:
1. Copy of employment contract signed by the company and the employee and subsequent letters of increments
2. Salary voucher acknowledged by employee with evidence that someone has checked calculation of basic pay, overtime, superannuation fund deduction if any, etc
3. Correct posting of salary transaction in GL