What is transaction testing?

Transaction testing is a process to ensure complete integrity of business transactions. It is designed to validate the continuity of business transactions with the replication of associated data. It helps in the examination of specific transactions, supporting documentation and checking internal control’s reliability. It is performed to ensure complete integrity and success of business transactions.

Why do you need Transaction testing services?

Transaction involves certain risks of business that should be combated through transaction testing procedures. There can be numerous risks which include:

• Processing of unapproved expenses,
• Bid Manipulation for Preferential Vendor Selection,
• Transaction not conducted at Arms-length pricing,
• Fictitious/Inflated Turnover in the Financial Books,
• Split/Preferential Payments,
• Concentrated Party Transactions,
• Unauthorized sales of free products,
• Related customers/ dealer transactions, and
• Creation of ghost customers to use sales promotion schemes

To ensure that the above scenarios are taken care of, MBG offers a range of Transaction Testing Services.

These help in various areas concerned such as:

• Procure to Pay (P2P);

• Finance & Accounts (F&A);

• Hire to Retire (H2R);

• Logistics & Distribution (L&D);

• Capital Expenditure (CapEx);

• Inventory Management (IM); and

• Order to Cash (O2C).

Scope of Work:

Transactional Mapping:

• Verifying revenue from operation including checking sale orders, invoices and controls in billing process
• Unearthing inflated turnover / fictitious sales and /or Sales on Return (SOR) basis
• Reversal of accounted sales through recording sales return in subsequent accounting period
• Analyzing written off stocks / debtors and reversal of booked profits

Identification of Fictitious Transactions:

• Identification of preferential party transactions
• Review of undervalued or skewed business transactions
• Any extraordinary extended creditworthiness transactions
• Assessment of prioritized settlement credit transactions

Detailed Transactional Review/ Transaction Assessment:

• Transaction review including the antecedents, genuineness, proposed and actual end uses of the transactions
• Transaction assessment to check whether the transactions are with related parties and whether requisite approvals were obtained
• Identifying & commenting on transactions of substantial amount which seems not to be normal trade transactions at arm length
• Concentrating transactions – sole customer, sole supplier, major transactions with related parties’ / group companies.
• Analysis of relationship in two-way deals with the same party appearing as customer and vendor
• Verifying receivables thoroughly covering especially reciprocal receivables against each other

Conflict of Interest & Integrity Assessment Review:

• Conduct background checks on the select entities involved in the transactions
• Identification of entities which appear as “related parties” of the Target identify the promoters, stakeholders, directors or partners of such entities
• Details of Substantial debts raised in sister/associate/group companies either through corporate guarantee of borrower or against security of promoter or promoter’s family assets

Our Methodology:

We at MBG ensure to provide transaction testing services in a clearly defined and detail-oriented manner. Oure methodology regarding transaction testing includes:

• Preliminary Activities – Scoping, Kick off Meeting

• Business Process/Transaction Monitoring/Due Diligence/ System Understanding

• Incidence Review incl. Research & Analysis

• Performance of Key Procedures incl. Market Intelligence, Discreet Communication

• Collation of Findings and Discussion/Reporting to the Management

Benefits of Transaction Testing Services:

Transaction testing services can be a powerful mechanism that organizations can seek during the pandemic as well as post pandemic situations as well. Customers can derive significant benefits from MBG’s transaction testing services. Some of these are listed below:

• Identify actual root cause of the problem.
• Preventing recurring occurrence of the same issue.
• Prevent financial implications/ errors
• Appraise a positive message to the management
• Risk management controls to prevent future incidents
• Signify organizational concern, boost employees’ confidence and improve public relations
• Uncover loss exposure to the organization arising out of impropriety or misconduct