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Audit TY Bcom
Audit TY Bcom
Audit TY Bcom
Introduction to Auditing
Q.1. D d r U 3 d m A u d ' I t :
(4M)
legal f m , when such an examination is canduded with a vkw to express an opinion thereon. r,
.'
Analysis of the above definition brings out clearly the following features of
It is the systematic and scientific examination of the account of a business whether
It is done by Independent persons or body of persons qualified for the job. (Eg: Chartered Accountant)
It
a. 2.
4
(a)
Advantabes: True and Fair Accounts:- Audit provides an assurance to the various users of flnal
PVc's such as owners, management, creditors, lenders, investors, government etc
that the Nc's are true and fair. Audit ensures that the final Nc's are reliable and authentic.
True and Fair Balance Sheet:- The user of Accounts can be sure that the Assets
and Liabilities shown in the audited balance sheet show the true financial position of
the concern as it is i.e. neither more or less. Thus, there is neither any window
dressing nor any secret resews in an audited Balance Sheet
. ..
6 A C I ~ M M E ..R C E C E ~ S 2 . . .
(c)
Tr~edF8kFralit&bAlc:-~~mbe~tthat~audi&edProfit
~ ~ ~ s h o w s ~ b u e ~ d M a n d ~ m i t i s ~ m o r e n o r l
(d)
TaWywh~-~AuditrrdW~b~anbetelien.b~l~withthebookso
~ e ~ a n d ~ t h a t a x a h l e ~ . A n ~ e u g a r n e e d n o t g
-.
(8)
Aspark-m~udltsd~nd~ornk,~tofd~~dR!r"lesan
qulremlsiddownbytew.
~ ~ - ~ w d t h e ~ n i w G i .
( 9
theAAS~dcnmrby~~.Theauditedaerx#lnsacr,basedon objective s ~ and nd on pabmd wMms and fandm a4 a pftieutar audiir &
waccomms.
(g)
Digckse all ma8erfal facts-
t#mtbirsgdid-I
(h)
to be reasorlab& free from errors and frat&. The auditor with his exp& knowl*
would take due care t see that enus and frauds are detected so ttrat accounts o
Sock, Assets, etc act as a moral check on employees fwclng them to keep the amounts regular up-to-date and free from any maw feaud.
)
Advke on System, Taxatbn, Fhmca- The audb can a h advice the accounting system* internal cantml, intempl check, hteml a m f h m a , W o n , etc.
' 8
*
7
'.
2
. &
Im=-w
ii)
(2)
~ ~ h e d ~ - ~ e ~ t o ~ t m t y t t w ~ ~ ~ , t r m c r e ( k n s m a r babis.
- 4
kjst~ S E -
~ ~ ~ ~ e v i d e n c e t h a t t h e a m o u n t e. 3 1 1 bw -
pakmsiw~utanc~ndusivr,in~.
i
(3)
:-Dueb~~ti.re~ofafirmdonotshowthe h m m t I in)ama8kn abaut the p m m m r ~ d the partner. MCDWS are tmsm~on ~ l hbbdcd ash and do not show the current value of Asseb and UabilMm. The m t s do not reveal fads which cannot be measured In terms of money. An Auditor may not b Indecmdent- He is appointed by the owners and hence e
o n ( i m by a debtor
~tissaldthattwkhcais
.
5
.
1
'
'
I
(4
cannot be expect&
(5)
Frauds:- Frauds usually involve ads designed b control them suctr as forgay, deliberate failure to record transactions, false explamtions and so on and hence am
dicutt to detect.
(6)
Auditor has to rely upon Exoerts (AAS-9):- Auditor may have to rely upon experts in
related fields such as lawyers, engineers, valuers, etc for estimating contingent tiabitities, valuation of fixed assets, etc.
(7)
mean that the user can take for granted the future profitability or pm-
o the f
concern. Audit does not comment on whether the management is efficient or not.
I
-
ct,
(a)
~ - ~ m l h n D b l ~ ~ a i w s n d . l l i r v l r w r d m f l n r w i d - ~ ( t ~ * r r , ~ h # ~ r d ~ w * - ~ & ~ L ~ l c )
s E ~ o & I E m - ~ & F F c w e r r S k r r o C F ~ a n d ~ .
(a)
TheincknW9direoondoryau*~bb~~~Lo
.. I
?$Yag
r..
(d)
T h e ~ ~ ~ t h a t e f f e d d m e r r w o r ~ o n t h e ~
I
(1)
I
D
'a
U
7
-My,
fonvarc! and s
i m In h/g ac -h
m u s t n d a l l o w b l a s ~ a r e r r i d e ~ o b j ~ . ~ ~ e ~ d o * ~ f ~ favour. \
1
(2
ConfidmWi:- The Auditor should m e the confidentiality of inbmatbn acquired pd
in tfie course of his work and s h l d noQ dselose any such inbmation t tfie third o
(3)
SMlis and Competenee:- The Audit should be performed and the report should be
(4)
auditor. he will continue to be responsible for M n g and expressing hk, opinion on the financial statements. The Auditor should carefully direct supervise and review
work delegated to assistants.
(5) Audit Evidence:- h e auditor should obtain sufficient appmpfhte audit evidence
infomation.
(6)
Planning:- Planning enables the audiia to m d u d an eflecthre audit in an eRident and timely manner. Primarily planning should be based on the knowledge of the dients business. Plans should be furttrer developed and revised as tt8cessary during the course of the audi .
6A TA
&3it
MMg~-CUigEs .
-A'
6
d
, .
Tv0CO~/AUOIITM
A-
a;&j,.&,
2,-
*:
ooarnemrum-mAuata~~.ms(tenwhlohrshrpabntin
provldblp~~theaudit~~in~withthebssicprtrrdplgs. (8) Audit snd . T b Au&W should d~at ttb WI the ~ d n t h e b s s l s d a u d # e v l d e n e e ~ ~ ~ ~ T h e
!!"
mi
~Aud~musth#ethefoaowing~:-
Chatwed
~~-
L
I
auditor must know how to judge people. He has to judge and weigh the evidence
Honest- An audi& must be hamst Further he must exercise ~"8880n8ble and care skill before he believes that M . h ecmtifh is t . m
(7)
Watch dog but not Bbad hound:- It is said that an auditor should act like a watch
dog but not like blood hound. He st.lwld be alert but not swpldous. He has to safeguard the interest of the owners.
-1
(8)
Confidential:- He should kdep the information obtained during the murse of audit confidential and not divulge it t outsiders. o
Q. 6. What are the d i i typesof frauds? What are the duties o an a u d i r in respect o f f
fad?
Ans:. Types o Fm&f
Freudsmaybeoffo8~~:(i)
fli)
(iii)
k~
C,
(i)
(or)
@)~~~mbqpmpla$db~ouldcashp~ymenbbynaordhO&nnya
-payments.
.
(c)rnmeybe~m.outdma*hhh~d~hmoad,l#~r ,
V)-m~k*Muf.
,
-3 ;
of)
. . ,--
---
@~reccrindb)Ooodrrylssfmkhedind~)~kW.
1)0o~dr~mrybenWppqwhtedbynotne&dng~~.tpla
recd~anly~~rrclorivedandn~laplmpria&0thebal~. 2 ) m m a y h m k p p m p & W o u t d d ~ b y ~ i n g d u m & a ~
mlm.
3)Goodsmaybeaduslly$tdenOLROfthemin h a n d ~ i n t h e w a ~ . (B) AUOfTOR'S
MITY
&
for
errors~kgudsasperAAs-4isafi~.-
(I) T h e W a h o u # p l a n a u d i t i n s u e h a w a y b e n s w e t h a r t t h e a m a r e w
ffwnm~emusandfra&soasBoshawabueandfairview. (2)
olAudlting,the~risna(lo~heMm~foranyenororfraudremainirrg
undiscovered.
(3)
d see that it is mdfied. If a Fraud is detected and is material he should report it b the ownets or shareholden.
If any error is d&ected, audibw M
m ~ . r ~~ u rq r r u j ' g
which
E m OFB)UISSW:- When the bansadon is Mt mwded in the books o f ~ ~ w h d l y o r p a r b ' d l y t 5 8 l a K I w n a s E m r r o f O mFwq-Salsson ~h.
effeetnoraereditm Such omidon baaiedWholeCbn~. theother hand On
~onlyaneaspectdthem~kreeordeditisUtobePartlal~. DuetPSuehemmrtheW~mayn0tt;ally.
~rneynotberec~rdedinh~dae~~u~,~iherekthered&f
For eg:- Goods pumhmd f h X have been d e w t Purchase Nc. But X's Alc o has not been credited.
E f W W OF COMMRSJONr T h m enw arke when any bansaction is wrongly recordsd o posted. It may consist of mistakes committed by clerks while recording r entries, pos6'rrg, -*ngs etc. Ma# d the emn, o cbmmissbn will affect the f agreement of bial Warm.
ERRORS OF WPUCATl0N:- These emrs arise when any transadion is entered twice in the bodks of otiginal entry. This will not cause disagreement of trial balance.
3 1
41
committed in such a way that the effect of both the errors on @Ibalance I counter s balanced (set off) by each other. For eg:- If Total Purchase Nc is cast shod by Rs.
1,000/- but at the same time total of Wages Alc is overcast by Rs. 1,0W/-. effect The
Accountancy are not observed. Such emws affect the Profit 8 Loss Nc and the Balance Sheet Fw eg:- Repairs to building may be debited b Building Nc instead of Repairs Alc or Rent paid to X may be debited to his Alc instead of Rent Alc.
The Auditor has t be very careful for detecting these emom because these errors o
are not disclosed by the trial balance and such emrs affect the financial statements.
Q. 8. Critically Discuss the !htment: m4N AUDITOR IS A WATCH DOG BUT NUT A BLOOD HOUND.'
(8M)
h.:- above statement is famous remark of Justice Hopes in the Kingston Cotton Mills The
Case in 1896
andlossaccowrtandMancestreet.~a"tnreanddairvlWoftheCmof
the mpany. To that purpose he would use mamabk skills and care In auditing
cljticismand~afterthe~andRobMrrscaseinU~~stambard
d~expededdanyaudidwhesundergonea~~e.InU~~h
amld&bcktaking.
E m hr England Otis nowoonsideredessadhl that the audieorshould be
physical~~rttthesW~atleagtbsometimeandmiCthe~
11
NBCOWAUblXTS
verihtion procedwe i p w y followed and he would test check a few items. It will s
not now do if he merely accepts a signed certificate of the various o stock. f
Though essentially the auditor Is not a blood hand, he has t be very alert o
watchdog nand not be me that will bark only if a thief trips on it If raasonaMe care would detect a fraud and the auditor has not deb&d. If he will be held l i d o . .
In the Irish Wodlen Co. Ltd vs T y m Case the auditor w a held liable for
damage sustained by the company by reason of falsification which might have been
%f'lj v- - : V i0w-
*
4
(48M)
4 3
a)
t show a much better condition than the actual condition. The profits and the net o worth are ovemtated in the final accounts.
b)
ii)Hide Losses
c)
iy
il) iii)
iv)
d)
Understating expenses.
II
- ---
5)
U)
iii)
iv)
9)
1) 8)
hi
V * ~ ~ o b l n c r r m e Cwvalrresof-~ua~ ~ ~ o n s l b r
V ~ C k r l ~ S W C
b)
vi) . S t u d y e ~ o f ~ i n m e t h o d d ~ n g a n d
vii)
w'
T e m h ~ m d ~ : - ~ e e m l n g c v d L o dkthetypedfraudthatiscomm~tbedi ng n ~ 0 n ~ t h e ~ d e a s h . S u e h ~ ~ k e o m m M w h e r e t h e ~ n
are custotnm is and the amount subsqtmtiy received li#n &customer b credibd la the account o the fcmm c sm f ut a according to the amount so mbpprqlated.. This pmaws is adapted 'wilh very
colleded (twn
.-
subsequent every dIedon so that no custom~1. acrxwnt is outstanding for a longer period. For 99:- Suppose the cashier has received cash from Mr. A. At that time the cashier does not pass any entry for the receipt He has thus mSsappqxhted the
money. After some days the cashier We cash from Mr. B at this moment vs cashiergivesereditto Mr. A
A andtoMr. Band hecattlesun this process, sothat
he can use money for himself. When cashier Okralty gets Ma own money* he puts its in the cash box dthe ccmpeny gMng credit b the last penun fmrn.what he had received the cash but has not cred$d Ms accovnt earlier. TMs m u o ammlttirg t df h a fraud is also known as 'LADDING" OR 'CARRY - OVER - FRAUDS".
such frauds my det& by the adoptkn o ~ f ~ ways:-n g Set up a good htmal contrd system foe mcmAng cash transactions. T h e e a s h-- i e r ~ ~__ n o t h a v e a n y a e c e s s ~ f -- e ~ b o o k . h
-
i) ii)
iii)
,
? ,
--r==.--.
-T Y B C O M / A m m -
-211
iv)
v)
vf)
All mipts and payments shoufd be done by only Nc payee-cheques. Confirmation must be obtained from the customers a regular intervals. t Copy ofthe receipt issued to the debtoas must be checked giving more attention to
the dates.
=%
gf/
a)
~Resa~vs:-
are not shown on the face of balance sheet. Such a condition exists where the assets are omitted or undervalued or whxe liabilities are overstattat&. When secret reserves are created, financial position of the
company seems to be worse than what it actually is. It is exactly opposite to the tern
WINDOWDRESS1NG".
b)
CREATE^-
Seaet Reserves are created to mislead oompeeors, hide abnomtal profits or m m i t ---
fraud etc. However a secret reserves is legatly allowed to be created by banks. Banks are allowed not to disclose their provision for bad and doubtful debts in order
to maintain public confidence.
C)
HOW SECRET RESERVES ARE CREATED:Basically, secret resenres are created by understanding the net worth of a mwrn
since net worth of a concern is equal to Assets less Liabilities, Secret Reserves can
be created by 0) understatementof assets and (ii) wxbfstatement of liabilities or (iii) -
OVM-
OBJECTIONS AGAINST SECRET RESERVES:Final Nc's do not shaw h e and fair view.
Shareholder's Suffer.
iv)
v)
w 3 u M s E s
vi)
vii)
8)
14
N o l n s u r a n c e c l a i m -~ t w ~ ~ ~ O f ~ ~ a n d m o a t ~
It is against canad
1)
2)
(4)
Thern~e~tedinthesamgare~bet0~:OlCAl
a)ObwMan
ConfimrabJon.
b)lnspectloH
a)
Otrservab10n;the dient.
b)
as, s&
C)
accumy of vouchers,
d)
profirs, ratio, curtent ratio, (input -output ratio), cWurs turnover e k It a h Invohre8 r n p a r i s o n s d f l g m a o f m n t yarwtth thatofthe pmbusyear.
14
AUTAM CO 5SSES
)
B -
NBCOWAU6ITIW
{q
a)
TRUANDFDFAIRVIEW:-
Report requlr8ments:- The statutory aUhx of a company has to express the opinion
by the pmRt & lw amount. The term "True and Fair' is k t defined in any
b)
Legal requirements as to true and fair secticm 211 (5) of the companies act provides
that the accounts o a company, shall be deemed as not disclosing a true and fair f
1) ii)
view, if they do not disclow any matters which are required to be disclosed By virtue o provision o schedule VI t the act (or) f f o
By virtue o a nobificson or an order of the central government modifying the f
disclosure requirements.
Therefore, the Auditor will have to see that the final accounts are drawn up in
confirmly with the provision of schedule VI and that they contain all the matter lo be
disdosed therein.
General Requiments:- To ensure a true and fair view, an auditor has to see in ----
accounting principles.
i)
Liabilities:. Liabilities are not undervalued or overvalued and the same are properly classified.
Material Uabilities are not omitted.
Accounting Aspects-
ii)
I)
IS
GAUThM
ii) A U u n
"5
u a w a l
1 6
, ~ ~ ~ , ~ i t e m s m a l s
1)
m@
~by~Wdthe~aetoranyather~ieaManatura.
c i gm B0twem:* wn l
t
TYPE
1) Meaning
AUDW
breport#theymtrue&falr.
MSTEGA~
account$Forspedfic~.
2) Nature uf 3) type^
Audit m be statutwy orvduntwy. Investigation may be statutory y It may be wntinmmt interim or under canpanies act, h a m e tax
final.
4) Appoinbnent
shamhddws.
as] =V
o Audit covers the entire scope of lnvegtigation may be limited t a particular R in Alc's or may get m accounts
much beyond Nc's depending
6) Re-Audit
I ) C o m ~ # ~ b a y Auditi(conpu~~mmpPnieci lmrestigetlonhMCMPI$OIY. 8) Qualification A d t o r d a company must be No qtralificatlkns am ptescfiW by kmr fbr any n i. practising Chattered AeawntornL
16
TYPE
1) Meaning
ACCOUNT1NG
Aocwrtting
AUDITING
report whether they are true &
'
t shuw financial posh as at tfie Balance Sheet shows true & fair o year end and P/L Nc to &ow the financial position and if P&L N c ProffOeoss for the year only. ~~IOWS e & fair a/c of profit I h
Loss.
3) scow
accounts only.
4) Done by
. f
o f
aooounts only.
who need not have any special expert who must be a practising chartered accountant.
Auditors is appointed by owners I shareholders & reports to them.
6) Beginnhg and Accounting begins with vouchers Auditing begins where aaxlunbing
End
and bods of original entry and ends ends i.e. with final a/c's, Audit is
7)
Work
Nature
analysis,
Past
summarises current transactions transactions. Auditing is thus accounts are checked by an auditor. (analytical) (R-rdtng)
GAUTAM C M U=
CLASSES
Chapter 2
Planning, Procedure and Classif~cation Audit. of
Q.1. Wha~rtepetobteksnbycnauetaWmcmmmamatbeneweudn
~~llC4W Ans.: The auditor has t W e o
a)
~ppd~-Audbrherb~nappdnbnent~ltan~odkartlsperdinothe
h
-3
+-
In case of r n
dtheworkbbe~nJedartbythe~~*Heshould~thathisappoi~iskr
b)
SpdbOt$d:-IncasedmtaUqEaudlthehmbaehievecertainoqjects
which should be s p d f i d Bo avoid m un i -g s at a later date. This MI help
hkrrbcarryaut~audithpropermanner.
c)
Listdmd--HeMobEalnaktdbodrsof-,etc maintained at the head office and at any other place so that all of them can be bm@t under audit
Important o f k m : -A lst of mpomibfe ofRcers bogether with the nature & type of
their responsibility shouW be obtained specimen signature of mpondble officers are
d)
obtained so
as to
e)
of India.
18
;
1 9
TYBCOM/AUbITTW
H e a d ~ a n d ~ b r a n e h e s i f a n y . - H e ~ a l s o ~ h ~ ~ u
kanchand WoQAw,any so that he can try t ewer the audit ofthe entire if o
ogra.
g)
hrporBent 'hcmmts- Certified copy of the h n r n n t documents should be
obtained t 6nd out from there important points M n g dbd on acccmb. For eg:-in o
~~, mnbact with (he vendors, pmnotem, undamilers et6. and in the csse o audit m r s h i p fhm, ~ f ~deed should be obtained. i p
h)
Nature o B u s b s e He shadd also ascertain the nature and type of business f carried on by the dient so that he can mny out audit in sysbmatic manner.
Audit Pmgmnme:- A proper audit programme before cammencement of the actual audit should be prepared keeping in mind the system of internal control and internal
check. Ifh e system of internal control & Interns! check is not adequate he has t o
include detailed checking in audit programming.
i)
j)
Sycrtem of Internal Contrd and Cheek:- A statement a the system of internal control ,
and internal check regarding difbrent transactions of purchase and sale, income &
expenditure, assets & liabilities is obtained to see that system is adequate and
k)
Accounting System:-
the dient and see that the accounting system I adequate and praper according b s
generally accepted accounting prlndples. For eg:- in case of a limited company the
accounts are to be kept on mercantile system with effect fKHn 15-6-98. If he is not
satisfied with the system he has to nxxnnmend to h dient, so as to enable him to i s
make necessary amendments in order to make the system free fmm the defects.
19
1
b)
Client & acoouttSng Yeac- Ttm heading d the wdlt pmgramme ccm&ins the name of theclient and the AcmunUng year in respedufwhkh theaudit is to be conducted.
AudSt R m d m - The main part of the audit plPgmmme a m b h det8iied
instrucbionsregardi~howtheaudltisdobe~sdrigktfm~~rststepof
duation of internal amtds, rwtirret
c)
ctreckin& vouching,
vdfWhm, ledger
Time Table- The audit po r r mgive ths schedule o audit wok. It r r gan f
nfhe ~
UmetaMefor~job.lt~fh8tSme~bbeW8nandtheacbraltkne
above.
21
TYBCOUVA~~
(4) AAS 3 published by the Institute of Chartered Accountants o India (ICAI) contains f
4)
@)
the audit pracedurss performed and the ecrndusions drawn from the evidence obtained. This tms den&- the file o -snalyds, s u m f i e s , mmmen$ and c6mspwdence built up by the auditors during course of audit. W o r m papers is the link between the clients records and the aud!tors repoR
-
b)
1)
Requisite~ts:The exact form and contents of the working papers depend upon the facts of each -
cas0.
2)
A c t 4
3)
4)
5)
Standard foams like specimen letters, query sheets etc are more useful. WarWng papers should be complete and detailed. -Working papers should contains all important matters especially qualitative mattep -like evaluation of internal control overall checks etc. They should record all impwtant
Statements obtained from the dient such as schedules and grouping should be
properly verified before filling them in the audit file.
permanent file useful in successive audits and the +vent file (audit note book) -- pertaining to the audit for the audit for the current year.
c)
1)
Advantages:W d n g papera provide evidence that the audit was conducted in amordance with
Working papers help the auditor to plan and carry out the audit.
Working papers help the a u d h b supwise and review the audit work.
3)
-
2I
{SSS
4)
22
Workkrg(rapers~evideneetnoourEsdLaw~~audit~~in~oF
aauitfornegligembfieldagaiMtheaudiDor.
gy
T & W : -
(W
I n b d s y s ~ m s s ~ ~ ( h r ~ d b u d n e c l s ~ a r wduminous. tt is not posstble ,fw an rsudWoc. t go through eaeh and gvery o tmmctiuns. Heme test checks is mummy, The underlying Inof test ~~~~~~~~~~~~~andformmodnion ontiwyhdi; -
w=-=1)
F u l ~ n g ~ W h e n h 8 n m b a d t r a ~ i s ~ t h e a u d i
earrnotdredta#thetrsnsaceknsi.e. 100%.E8:*BenkAudit.
2)
F t l ~ ~ - I n n r o d o o s e r , ~ O O W ~ a n d ~ I . f e s t c h e d d n g a l l a w s e n d a u d # o r t n ~ ~ n i ~ t ~
d m
1)
lgmms
sta(istical
3)
~,dossndindicatehow~e25W~aobbeeeleded.Sudrhrbudion dealedthhowmenymsn,tok,cukdsd.ndnothowthegarebbe-4)
smph&,R h k - $ampliq risk mmm thr palsdbiflty that mndusio~ls- -on based
sampb(stcheclQng)maybe~tmn~an1009(~. - -
22
23
WBCOWAVbITIM
(4M)
Aud#in
64
from the beginning to the end.lihrough the entire flow of transadigs. It involves
s w n g the entire trarsadms at the various stages through which they have
passed.
Aspads aCverfficatlon:- .
At each stage relevant-r and at!h!lies are examined; [t is jdged whether the person who has exerdsed the authority in relatlon b the transactions !s1fit do so in to terms of prescribed procadure.While auditing in depth, the aud&eviews all accounting aspeds of the transaction from the origin t the end. It enables him to o have an o m view and M u a t e the procedures through selected b a n d o m . v I Eg:- The various stages In purchase of goods are:- i) Purchase requisition - pre
printed, pre numbered and euthorised.
A : AAS - 3 published by the Institute of Chartered Accountant of India (ICAI) contains m detailed discussion on the Audit Notebook.
(*MI
In case of recuning audiEs, audit working papers are divided between a permanent tile useful in successive audits and the current file pertaining to the audit for the
wrrent year. A wrrent file is known as "Audit Notebook". Audit Notebook means
recwd of;(a) The Audit Plan; (b) The Audit Procedures performed; (c) The condusions drawn - ._ ---
--
auditor during the course of audit it is the link bebeen the dients records and the auditors report,
S:- Audit Notebook contains the following details:-
a) b)
c)
23
24
~ f = Y
c)
d)
F~wiihda~-~Ihrlvldta8p8r?dsmoretRortthed~
placehe~familEetwllh~afdi~tnl8~.
...
.%
25
TYBCOWAUDIlTW
RarenEs emws and buck- Constant chWng by the auditars help b detect and even prevent errors and frauds.
f)
g)
Chedr an mpby88~:Since the auditors visit regularly throughout the year; it acts a check on the employees bo keep alc's ready & tpbdab. The shareholder wod&be happy as they recekce dMdends soon after the end o finandal year. f
Early dkldendr, b
a)
b)
kpmsive:- Since the auditnr spends more time on the audii work, the 'gudit fees are
much mom.
MIin I& --
ineffident. The queries during the last visit may remain unsolved.
c)
Enam & Frauds in B00168:- If an 8mplOyee changes some figures in the books already checked by fhe a d & during h i earlier hits, it would be df c l t dated ih ut o
such errors & frauds subsequently.
d)
accwnEs staff. The day to day accounting work may suffer if the accountants have to
attend to audit work every now and then.
e)
Undue Reliance on Auditors:- The client and the aamnbnts may became unduly
upon the auditor. Even small routine matters may be referred to the auditors.
Cmtinuous'audit may become a routine affair of a there vouch and post audit.
(ADD IN CST) A .- Test checking is an accepted audit procedure which should be adopted for audit m:
work after taking the following precautions:)
Avoid Unsuitable Areas:- Auditors should identify the areas where test check may not be suitable.
all checked.
i
Eg.:- If there are only 10 export sales in a year, it warM be preferable to have them
d)
f n b m e l ~ - ~ h e ~ d ~ h e ~ ~ d l ~ c ~ m ~ t n t ) b r v
m a y m - m m o b
head.
g)
S y s l m s m d ~ S y s t e r n s n d ~ ( a a ~ ~ f m m ( h beginntng b the end must be studid h W r 8equmca. tt immhm fadom o f autbmtion, dmmmEtnd mcudngand eviderrdng thesame.
27
lYBCOM/AUDIlTNG
( S PQRS) OM
Statutory Audii (SA)
TW 1) Objedives
aims
to
report
to
2) Status
3) Voluntary
outside expert.
SA is compulsory under law. Eg:-
IA is voluntary.
Compulsory
4) Appointment
Under Companies Act. IA auditors is appointed by the S. Auditor is appointed by the management itself shareholder of account.
S. Auditor is responsible & report
Reports to
6) Period
management. IA is continuous
7) Qualification
Auditor.
8) Removal
I. Auditor can be removed by the S. Auditors can be removed by management on its own. shareholders only if approval by central government.
9)
Scope
& Management decide scope of duties Duties of S. Auditor are laid down
of I. Auditors. It includes Non- by law [Eg:- Co's Act]. Its scope
Duties
Accounting Matters.
is h i t e d to accounting matters.
27
Chapter3
Internal Control.
(2.1.
What do you mdemtmi by tntmal Cartmn What are*fhe duties d an auata
regarding internal cxmtd? &is.:- Mamhg:- AAS-g lssued by the lCAl deals with the study and waluath of internal
organlsation and all the methods and procedure adopted by the rnartqpmnt af a
~fnarmectionwim~ndtitdeli~~~~con~.r,ihe~landth
~oncem~errsuretheoFdetlycrndefticient~ofbbudn~,
8 1
)
A ~ S D l l l Y R G A F U ) 1 N ( 3 i M T E R N A L ~ & ~ ~
AAS 6 makes the tollwing
regarding Hi-
was adualfy in operation during the year and evaluab the system t asmhin haw o
muchhecandyuporrit.
3)
i)
ii) 4)
are reliable.
bdeddewhat, when,howandhuwmuchbche&
S b p k Evaluatim- In order to evaluate the system d Internal c n the adtor oW
Intemal m W . He can undmbd the systm with the help of m , discwshwiththemanaggmentarthe~lquedflowchart. Mcranahtmcea through the system t understandthe eMltrd m m . o few
b)
pradices. He can check same b m d b n s in depth. Thus, he can take up some sale
t m m t k m s and check all doamah right ~IW sale order t the receipt from tke the o
m u m & were observed or not. He can also. used the techniques of questionnaires b aest the system. Evaluate the system:- He should judge on the basis of a h 8 t&is whether he can
rely upon system and if so upto what extent
% .
Report on Stores Conbd:- Under the companies act (MA0 CARO,1988) the auditor
labour t jobs. o
(4/8M)
Ans.:- The Objective of Internal Control i.0. Accounting Controls and Operational Controls
a)
Aecwnting Con-:-
i)
ii) iii)
hr)
v)
) vii)
The assets of the concern are safeguarded the assets are not used or gold without
proper authdsation and are vehfied regularly,
viii)
b)
Operetbnal ur AdmAbnidstdve Contrd:- Operational oontrds aims to ensure that the management polides in respect d the and administration of the caxrm
~~
6AUTM ~ M E R C E CL~SSES.
I C 1
L .
- 8
..
.. ,
.
* .
,
-,
m.
m ~ . ~ k r t u m e w r s w s e w I h e ~ i s ~ k n ~ o r d e s E y
a n d .
Eg:- aurrySr Conbd,
Quarrti$lbiveu*.
MbWd I
~ t h o s
Mdt,
Q.3. w h a b i ~ ~ W h r t p o L t b ~ b e ~ r r # k ~ q
im8m8ldredC7
Ans.:-
--
(a)
feaWm&s~m
Itltemd && l * t v b
~ ~ - m e ~ ~ ~ b e ~ - h t r o d u d ~~dkr(ansl~mvarlour(nnwdiarsinwo~mlar..
i)
Mvbbnd~-WolfcdthsmIm~Jlouldbe&ridedlntDdMmnt
emwyees. Different penars should deal with dlhrmt asp& of a transactions
d e ~ a n d s ~ . T h e ~ i n a ~ t h a l d b e d M d e d a ~
a)
~ a n d ~ ~ m ~ a n d d o a n m b ( ~ 0 h P l k
vcuchen, w l s e l e t o b e p s p r v e d c l h o u # b e w d a v n ~ .
O)
~checlc-Rw,uuorkd#lldbe~inruQ,.waythtdoarn*rbp*psred
b y U W ~ ~ 8 i l ~ ~ b y ~ ~ ~ . - b h e b o d c k r s
te hk)
~hDukk-l'he~orYw~mua~chfigedRwn~totLne.
~h*ka~haredn~hndhgosh,cltocloto~calrunrd
muds*
6 A U f M COllAMEKE CtAS5ES v)
31
TYBCOArWAUbTTTtJG
Annual k v a - The employee h u l d be asked t go on leave at bast wtoe every o year b enable detediorrs of e m , frauds & misuse. ASS& to Property
All employees should not have excess t books o Nc's. o f
1
vi)
VQ
R :
mount should be e n M against the right accwnt & on the right date; in the vouchers, in the Journals and Ledgers.
d) B
P m p t R d n g : - The tramdims should ba r d e d in the books prwnptly. Mechanical Devices such as a h register, time docks should be used to prevent
on the basis of
x)
Safeguarding:- The assets like cash, stock etc should be safeguard in kept in safe
custody. These assets should be adequately insured such assets should be verified
regularly.
xi)
Canplete and Acwrak- W reads should ahways be complete and accurate.
Q. 4. What is Interm1Audit3
Am.:- AAS 7 issued by ICAI defines Internal audits as follows:'Internal Audit is a separate component of Internal Control established to determine whether other internal controls are well designed and proparly operated."Thus
a) b} c)
d)
Operational controls.
31
L
b)
~ ~ - ~ C o n b d s a i m b e n s t r r e ~ -
i)
ii)
ill)
dl-mduly-, a l l ~
a proQerfyreoorded. m
alltrcnsac(knsarenoadedpanpQa$wonsstlwyaxu.
theaoowntlng~~by~nranaQsmenthrespedd--,
iv) v)
vi)
vii) viii)
m~~oftheeonoemare~the~afendmorssldwithout
properamofmmandare~ragulrrly.
e m n r & f m d s a m ~ a n d ~ .
f t r e ~ O f ~ b s ~ ~ r r n d a a c u r a Q e .
thelnalafc'sammliabbandreadyintkne.
c)
~ o r A d m ~ ~ . - ~ O p a r l s ~ m b o e n s w e t h a t t h
artd Mdent manner. Eg:- awHty Con(rd,Budpa(ery Conbd, In(anel Check, lntemsl Audit, QuanWive Con- etc* I ttre Financial Audit the audhx .studies UI& those o p i ' a b d contrlols which n gffeeEs the a / c ' s u f ~ ~ .
33
'TYBCOhrVACIDm
Chapter: 4
1
Am%:-
a)
rn no unrecorded assets
arnd labillflee. He has t ascertain that w assets is omitted from the books of the o
mrtwm.
b)
Audn Rqmk- Under CARO ,2003the auditor has b report on whether management has c~nductmi physilcaj veritication of the fixed assets and sany t
differmas between such physical inventwy and book record.
c)
Emits after Bahnce S M Dater Auditur should ascectain whether any events
after the balance sheet date has affected any item of asset as the year end (i.e. loss by fire).
d)
Subject to charge o lien:- Auditor should ascertain whether the assets o the f f
concern are subject to any charge, lien or encumbrances i.e. given as a security
against ban.
e)
Existence:- M ishould confirm that all the assets of the concern physically exists
Pow&on:- Auditor has to verify that all the assets belonging to the concern are in its possession i.e. no assets is mi-ad
purposely by the officers o the concern. f
Legal Omemhip:- Auditor should confirm that an asset is legally owned by the
caneem. Thus in case of land etc the tilled deed should be in the name of the
concern.
33
TYBCOWAUD~
(IM)
VEFT/FEAT~
1)Mesnlng
2) Time
PregentafanycRaFgeafVwchingbdoneforawtrolem Wrfficatbnisdorreattheendd
transadlorr.
3) Basis
4) ValWbn
VoucM~g b
only
on
Verjfioadtorrisbasedanm
-examkration.
aswellasdocum~evidence.
valuation in Its scope.
VOUChin~h,mtpmcrllyancsm VertRmdasoetinduderlhe
..
with valuabion.
-v
ofthe && pcsseswbythefirm.
verffJes
rn exist-
of h e bafance sheet.
Mmsdfor hisd-t.
6) Personnel's
Q.3.
Prarcbiealmfr#voudrSngany-
Depositedin Bank
mmw
a)
b)
c)
d)
0)
#) g) h)
ProperValu8uon.
i)
j)
Properly Recorded in the Books o Nc. f Auttrorlsabion by Board ProQer Resdution Passed.
k)
Recmdgablon.
35
WBCOWAUbW
Q. 4. -1
I) 2) 3)
4)
valuation*
P * We.
w Possession.
5)
0)
Chapter- 5
Q.1)
Whgl is c
For the increase in earning capacity of the assets (Enlarging the sitting
accommodation of a cinema hall or adding more rooms and spindles a textile mill.)
For acquiring a benefit of the enduring nature (cost of makhg additions to building or machinery) For reducing the cost of production or acLnnistmtlon or distribution (use of mechanical devices in place of hbnan being o repairing for increasing the efficiency r
of a machine.)
e)
f)
xpenditure, direct w incidental, for putting the asset to use. (Erection charges of machinery etc.) Expenditure incuned to acquired a right to carry on a business. Eg:- Goodwill, Patents etc.
admCnjgbafjYe expenses,
b)
C)
F a maintaining fixed ammb d the business in pmper worldng order pairs, renewals, w h i i w&bg of the building and -f o
mhm mpair parts. For the produdion d mfdyd the brrsims 1.e. ifmmce premium.
d)
Forpurchasinggoodsmeansbsale~orre~periodi.e.eostdraw
a)
b)
TheauditorM~~hhnselfwithttre~rerrrcd~04the~
~mhecancheck~therd~onof~treeitedasrev8n~8and~.
HeshouldalsoknrrwthedrwmstancesinwMchanltemdexpendWmbe
clasdfi8dasRev~~18or~.
He should see that principles 04 accounth~ have been fully observed in making heir
c)
decision.
d)
I
& i ~ ~ d h b ~ ~ h g p l u x l $ S E e d d ~ h ~ ~ ~ ~ .
Chapter: 6
Company Audit
Q. 1. w
regarding the -ntment o auditnR f @MI Am.:- Appointma- Section, 224 o the companies act, 1956 contains detailed provisions f
a)
nM~uditors:The first auditors of a company are appointed by the directors in the first meeting of
the Board of Directors to be held within 30 days of incorporation of the company. Such auditors hold their office till the conclusion of the Rrst annual general meeting. If
the directors fals to appoint an auditor the shareholder can appoint 1st auditors in
general meeting.
b)
Sum~entAuditors:-
Except in the case of first auditor every company shall at each annual general
meeting appoint an auditor who will hold office from the conclusion of meeting until
the conclusion of the next annual general meeting. Normally, a retiring auditor is
appointed unless:i)
ii) lii)
iv)
c)
1)
Appointment by Canbal Government:Where no auditors are appointed at an annual general meeting within 7 days of such
a meeting the company shalt intimate this information to the centd government
which may appoint a person to fill the vacancy.
I)
adi$rgmddln~dmyappdntornsirpdntthe~da~aremment
Iftheappd~danaudlQriabobemadebya~resolutkn,andffW
.-
TYBCOWAUbIITNG
U ~ ~ 6 1 9 , t h e o e n & 8 1 I ~ m I h e a d .v l e g a f t h e c o m p t r o l l e r a n d
d)
I)
11)
iii)
Am.:- c l u a w b m - (Sec228)
a)
AChrvteFedAaamknt-ApmshwldbefjmcWng~BceOunfant~n
(he meaning d chartered aomurtPnt
act 1849.
b)
AfirmdChartsred--AffmrwheredaHtheparbnetsam-
c)
m of companies.
a)
m-@=-=* (*
strarecapital. HeisnotpemdlyCiableforthe~ofthempany.
38
39
WBCQM/AWDW
F b) h Empbyee or dimckm o a company cannot be appointed as sbbtay auditor of f Ihe company. If an Employee is appointed 601 &I sudltor of the same ampany then
there will be mh bethen his duty as auditor and s l inWest in the company. l t ef
o) A person kho is a parher of or in the employment of an.Empbyee or an officer or dmck o the company. He is also not quatifled fos the a@poinbnentas statutory f
adibr o the company. Otherwise he may not be in a position to W with t t l f oa
d)
g)
If a person has already secured number of audits specifically described under sec
224(1) he is prevented fmrn becoming an auditor of the company i excess of a n
prescribed limit
h)
Due to any o the reasons given above if a person i disqualified from living f s
(4f8M)
An$.:- To enable the auditor to discharge his duties o r p Ki on the accounts effdv* f e c tw the companies act gives him following rights:- .
I
39
d
b)
~toObblnlnlDnnsPon&~.-~(~~1ofthe.compeniclsad~tltlee
(heaudibrdaewtpany'0mqukefronrtho~dthecompsnyswh
lnbnnetbn&~mthseudhmay~~fo;'mpec(ormance
of Ma duties as auditor.
c)
' .
accounts are audited by another person, the oo-ordktion cian (I) visit the branch
office if he deems i t ~ b d o s oii).havea rSghtofacass&a# times bthe
of d A t t d General S & h 231 of h e Act provides that, =all n o w of and other c x r m m m mbthg to any general meeting of a company shall be h w d e d to a audih of the company and tha auditor shall be entitled to attend any gamd meeting and to be heard art any general meeting which he a t h & on any part of the business which concerns the
w
1
Ri@ to R
auditor. e)
i) ii) M ) i iv)
v)
Other R i g k - auditor has the rightb mceive intimation of his appointment (Sec 224) to make written representationwhen threatened \Iv3th rarnwal (Sec 225) to seek opinion of an exp& if required.[ROC v s P.M. HEGDW E t rciemnritneremumtion o eer ue v ve a o to have lien on audit nrorldng papers &. The right of the company a u d h cannot be m J e in any way. Any Resohdb b dd limiting the powers of the auditor wid be void.
GAUTAM CO MERE t U S S 5 %
1 (
The Basic duty of the auditor is to make a report to hemembers of the company.
a)
,T +
b)
c)
d)
8)
f)
ii)
a)
b)
Whether Loans & Advances made by the Co. are properly secured and the terms are prejudicial. Whether the transactions o the oo. which are represented merely by book entries f are prejudicial.
Whether investments have been sold at a price less than purchase price. Whether Loans & Advances made by the Co. have been shown as deposits.
Whether Personal expenses have been charged to revenue Alc.
Submit CAR0 Report:- The auditor is required to submit a report to the shareholders
on such a matters as may be specified by the 'Central Govt. under Sec 227(4A) of
c) d) e) iii)
the Companies Act. The matters to be specified in such a report have been
prescribed by the Co. Law Board. It is the duty of the auditor to report on the
specified matters in the case of
1) A Manufaduring Co. 2)Service Co. 3) Trading Co. 4) finance Co.
iv)
Sign Audit Repat- It is the duty of the auditor to sign his report or authenticate any
v)
ceiling on the no. of m p a n y audits that an auditor can hold. This ceiling was
htrokDdbdbtrlbu(siheaude~nron(l-mdmbavold+bya
I
1)
a)
the I) mat audltas o s) (he Auditors appdntd .in any d"vrro r caured
c)
remunerabIonw b e f f r r e d b y t h a ~ ~ t ,
d)
CAG:- In caw o an au&w appointed uls 618 by the cmpbdler and awWx f
be notad indudes
a)
Basic Principle:- AAS 1 lays down Integrity, objectivity and Independence as one of the basic principles governing an audi The Audbr should be straight forward, honest and sincere in Ms appmch to his pdbmhai work. He must be fair and
tothewisheswdi~aQanottrer~who~have~hJmorbhfs
43
TYBCOWAVD.TING
bhhmc- Independence is a condition of mind and pers~lal character and shouid not a m b e d with the superficial and visiaMe standads of Independma, which are
imposed by law. For eg:- The Cmparrles Act, 1956 has certain provisions whlch
d)
Vi84bllM- Independence of the auditor should not only exist but should also appear to so exist 80 all reasonable persons. The relationship maintained by the Auditor shall be woh that no reasonable man can doubt his obJedMty (L inkgrity. There is a callecbhre aspect of independence that is important to the accounting p~fession a as whole.
e)
Subjdve- As independence, is the state of mind & character. It i the duty of every s
auditw to determine for himself whether or not he a n act independently in the given
case. H8 should not place himself in a position which would affect his independence.
43
Chapter 7
:. -
m m
1) m i n g
ecy
2) Nature
3)Sltssesarofls
lt&iinnatuedver#ioatlon.
Ce.
irnpmve$netltbrthe~of~h
4) S C W
accounts
There is a fwnat pmcdbed by There Is no standard fbmM for a o d f h t e . It has to be given the companies ad according t the requirements. o An
?)Responsibility
hdd An audW can be held responsible responsible fat anyMng wrong In if cerwicate given hlm is wrong.
auditor cannot be
theaccolmts.
Q.2. WhatdoyuumeanbyAudStFieportandwhatareLcmhts.
OR
(MI
The ICAl's latest sbndad (AAS28) &wedinA@ 2003 on,The Auditors Report on amtents o an Audit Report. f finandal statement' lays dourn the m n g
8
44
45
TYBCOM/AUDIlTW
W-TheWR~WdbeEssuedm~prtneedlettet~ofthea~.It
&Id bear a Wle "Audit Repart:
b)
--The
Audit Report should be addressed t the sharsholder in case of a o mlpany.' In other cases, its shwld be addressed to the pmpdebrs, parb.lers etc i.e
t a a p e f s ~ w t r o b a ~ t h e a ~ ~ .
c)
ldentily Flnandal SMemmk- The Audit Report should d d y identily the Rnandal
statements. Eg:- The WS and P a A k of XYZ CO. LM. for th-8year en& 31-3-08.
d)
Responsibility- The Report should state that the financial statements are basically
the responsibility of the management. It should state that the responsibility o the f
audibr is to express an opinion on the financial statements based on his audit.
e)
Scope- fhe Report should describe the scope of the audit. It should state that the
audit was planned and perfumed to obtained reasonable assurance whether the
Oplnion on Accwnk- The Audit Report should dearly give the audin opinion whether the financial statements give a tnre & fair view of the affairs of the concern as at the end of the year and of the Pat for the year. The report should state whether the financial statements comply with applicable laws & Rules and the AS, prindples etc.
Place of SIgnahm- The M r t Report should give the place of signature.
Date o Report- The Audit Report should indicate the date when the audit was f
g)
h)
45
46
TYBCOM/AUDIRW
c)
~8:-Wtrerethe~givega~e~orrttreA/C'8heissaidbglve
a negative Audit R q m t 'Fhue an Audit Repat Is said t be negadva when the o
eud(brk,not;allsffedregerd~lgwnyorramodihev~slmardnpoctsmatin viewdwaRdm~theMsdondghreatrue&W*.
d)
Nom-Wherehe~is~toghreanyoplnioninakmof
and were nd miWe for examination. In ttte absmx d the C3ooks & Vcmbm we are unable t express any o
destroyed in a fire in the pm&m d tJle cr#rcem
opinion on the Nc's.
P a W Opinion:- When the m&btis able b give an opinion on some matters, but
not all the matters. he g h m a perbial opinion. Thus, an audW may be unable t ghre o
audit~.Aud~shouldgive~TwgivinOs~partial~OnhisAudit
Repart.
47
-:-I
Meaning:- Invest@Uon' is an axamination o Alc's for spedfic puqmw. f
( ) 4
a) b) c)
d)
e)
Natm o Asdamtent:- I n v d g a b n is a spedfic n c m a a h g assignment. f T w - l ~ ~ i may be:- I) SEsMory urder C o m p b Act, Income Tax Act ii) o n votuntary for valuation of shares, guociwill, etc. Appoinbnerk- Investigabr may be appdnted by outsidw eg:- Income Tax Dept.
ROC, Investors, Lenders, etc. S c q s - Investigation may be limited to a particular item In Alc's ar rrpy go much
9
g)
RW*-
ti)
2)
a)
b)
Expat Help- Auditor should consider whether help fmm any exprt have special
CIS skills is needed in the conduct of the audit
c)
i)
li)
Fadas in CIS Affecting Audit- The Audltw shouM mnsider the effect of the
following factors on audit in a ClSE Extent of use of ClSE to process accounting information.
Sptern of internal control in use.
in)
d)
change in a CISE.
.
GAUTAM C O M I H M CLASSES
~ O W A t l D ~
9)
~~~-~stK#wurrderstand~~drislceot~ClSEi.e.tadraf
Audlttrid. a - p m h g m d ~ ~ f ~ ~ ~KI, ) e r r o r s & u a w
OQ'*
mwlermQor
. ~
d C I S E : - ~ 8 h Q U ( d h a v ~ ~ ~ o f ~ E b
~ s u ~ , ~ & ~ # e ~ p e r f o r m e d ,
'.
g)
kdtPlsming:-InFWwdngW~d&,audtwNchio~byCp,eudta should understand the hadware hemfhm and %re human ware hr .
h)
E f i e e t o f C l S E o n ~ - ~ f h e w o t ~ c h a n g e s t h e ~ i n g ,
the
AudSt~~88:-~~cxursiderthe~hdes~ingaud#prpreedwes
toredmauditrislestoalawlevel.~canmeOthermsnual.Aard#Prdum
~ a ~ b i n a b ' O t l o f b o j h t 0 ~ ~ ~ & ~ .
j)
EmdlntemalConErdinCe-mshorddeduabeWWhClSE bystudyingwhetherthes~:-I)8ns~88connect&eompl~in~,proceasing
andoutput, ii)ProvldeaforUmelyd~o11oferors&frauds,Ui)Pddm&ta
securstyagainstpourer~metc.
IWmmWm- AudW should document the Audit plan, the nature, timing and
e~tofauditpmoedwggparformedand~~dmfmtheevidence
obtained.
FAUf
CO MER CUSS
Jaa 1 Jan. I7
lam. 20
Mar. 25
Ta&Inaceb/d
'
4,000 20,ooo
T Discount o
Q.5
WritesbortMtescmany~r:
C)- c d t-r p
Qi)lnvestigatioa.
@i) T s ckdcbg. et cv) Rights of a ampany auditor. (v) Qwlitiof Kmpany auditor,
(vi) Auditing in cm@z cnvimnment.
I
(i i)
OCTOBER 2003
Q 1[a) What do you understand by the twm v o d h g ? E h p k bessence of v d & in auditing. . (b) How wouM you verify tbe fU o(i) Plant dad r+hcbeq.
an 'IntedCbsdr'. Alc? Wbee cwcl~ions you draw? will (b)IEnvwillyoar,asanaudit~,muhscrutinyoftbefol~ og Intbeba ktofKT&Co.
Date
I
Tosales To Sales
Pdcuh
I Rs.
I
R8ri
2003
Feb. 4 Feb. I2
Feb. 12 Feb. 18 Feb. 26
By SaCtsRctran
450
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2002 4 , m
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Jan. 1 Jan. 2 Jaa.4 la5 Jan.6 Jan. 7
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To Balahoe bM ToSaleP
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3,000 13,600
42,490
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Q 1(a) What are tba a d m h g a nnd limitations of Atding? .
@)WhatislataimAuditlWhatareits~ddhhmaga?
Q. 2 (a)Warttherigbofrm AuditarlndertheCompPniesAct, 19561 (b) How d yan vouch tllc foIlowing? (i) IncomeTnxReW (ii) Cllstan Duty P i ad
Q . 3 ( a ) ~ i S A u d i t ~ ? T H h a t e r e i t r ~ r a d W m ~ ? (b) Explain the term "Iatemal Control". What me its objaetivcs? Q. 4 (a) Dishpish between Audit of Accaunts of a pattnership finn d a Limited Cornpaay. (b) Sautinisc aod give your cmmmts as en Auditor mthe folfowingLedger Account.
8 8
Dr.
Date
M .VyasAc!counL s
Partidm T O W To Aacltase Returns To Bilts Payable ToBaakAlc
Ils.
10,000 20,000 4,950 SO
Date
2002
Particulars
]Byba.lm~ceb(f ByPurche By Purchase By Bills Payable
U. s
l0,OOa
28,000 1, O 4O O 20,000 100
2004
Jm.14
Jan. 22 Jan. 22
Jaa I
Jan21
3,000
b.23
Jan. 23
To DisQwnt Afc To W A l c
To D s o n Alc icut To Bills Payable
ToVaishyaAlc
By Iatercst
By B a h dfd
By Plachase
1, 3W
140 20,100 21,000
21,000
23,000
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J18,loo
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3.400
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Date 2004 -1
Oct.10
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OCTOBER 2006
10
(b)
Would you vouch fie following? (i) Inkfist Received on ~ ~ (ii) Call Purcl~asesofstalionq.
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write shod notes on any four of the followi1'g: (a) Internal Check @) Secwt Reserves in conlputer Environment valuation ofclosing Stock lrnpo*ance of internal Audit. , (
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Distm%uishben verification and V d l n g you vouch the following: (b) How (i) Advertisement EW"ses (ii) Cash Sales (a) D ~ s c fow CUW ~ I ~ ~ in I an Audita m C ~ p ) Explain the disclos~S u i ~ e m e nof Sched w s 8 t ~ ~
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any Auditor,
any Auditor?
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4 (a) whata the qualilatiom and disq"'fiaiw Of a (h) ~ ~ comment of the following the ~ o~o k olBhumik. ?meuters Ltd. and i ~ i LedgerAcCOunts. ~ (D ln r Snlanees A!c Piuliculars Dr. 1 us. I Date Particulars Date 2006 By Profit & Loss AJc 2006 A ,0 To Bank (March) 10,000 Sept., 30 l0,ooo May, 8 To Bank (April) 10,000 June, 10 To Bank (May) 10,000 To Bank(1une) July, 10 10.000 Aug., I0 To Bank (July) I0,OW Sept.. 8 To Bank (Aug.) 60,000
(ii) In the Book af MIS. Paresh & Sons. lntcrest an Investment A!c.
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60,000
60.000
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I Q. I
OCTOBER 2007 Wllat is Internal Conlrol? What are objeclive? (b) What are the advantages and limitaiions oftest check in auditing?
(8)
Q. 2 (8) What are the responsibilities ofan Auditor for errom and frauds?
(b) Whal are the qualilies an Auditor should posses?
Q. 3 (a) Discus the discIosu~ requirer~lentsrelating to "Current Companies Acc 1956. (b) m a 1 the duties of a company Auditor?
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Q. (a) What are the different types of Audit Repon? ~ ~hem brief l in ~ ~ i ~ an Auditwho$vwill you make a scrutiny ofthe following ~~d~~~ ~ ~ ~ L ? A
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Auditor of a compeny. e n t af a (b)Auditorsdghtof&cc~toboolcoofaecorad (c) v U h( of p d m k y aplm. O C iZ t l (d) Objdyes of wisdow W g n. (a) Adting incompdseavirnoment.
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