Stated capital

Test of controls

They check whether opening balances are correctly brought forward from the previous audited
balance sheet.
When share capital has been issued during the year, obtain the prospectus and identify the value
of shares issue and the amounts called for
By inspecting the details of the bank account that has been opened for the share issue, ensure the
matters stated below:
1. They check whether the value deposited with the bank is agreed with the amount invited
and the number of application received.
2. They check whether the amounts refunded as per applications rejected are agreed with
the debit entries in the bank statement.
They check whether the amounts received are credited to the stated capital account.
They check the details of share issue with name of the shareholder.
They check minutes of the board of directors meeting and ensure that the share issue has been
authorized.
They check whether amounts received and the amounts receivable for the share issue have been
included as stated capital in the balance sheet.

Substantive procedures for Reserves

They check whether opening balances are correctly brought forward from the previous year
audited balance sheet.
When there are new transfers to reserve, they check whether those are correctly accounted for.
In the case of revaluation reserve, check whether, revaluation of assets have been done by a
professionally qualified person and whether revaluation profit has been correctly accounted for.
Where reserve shows reduction, check whether reserves are utilised for approved function.
They check whether reserves are correctly classified and presented in the financial statements.

Test of controls for cash sales

They check whether the persons who can receive the cash are prescribed.
They check whether receipts are issued on all cash sales transactions.
They check whether receipts are issued according to serial order.
They check whether daily receipts are properly banked.
They check whether proper segregation of functions are implemented in respect at cash sales and
cash collections.
They check whether daily receipts are completely banked.

Test of controls credit sales

They check whether incoming orders are recorded according to the serial order.

They check whether discounts are approved by a responsible official.

They check whether procedures are available for approving the customers
They check whether selling prices are prescribed and revision of prices are made only by a
receivable official.
Thy check whether, all sales are invoiced under the approval of a responsible official.
They ensure whether sequence check of invoices is carried out.
They check whether dispatch notes with sequential order is prepared.
They check whether adequate segregation of functions are available in respect of sales
transaction.
They check whether cut off have been identified at the year end.
They check whether budgeting controls are available in respect credit sales.

Substantive procedures- cash sales

Evaluate the internal control in respect of cash sales, if satisfactory, select the sample and vouch.

Cash received for cash sale, rupees and coins.

1. They check with the duplicate copy of receipts.
2. They check the cash handed over to chief cashier with summaries of the cashiers.
They check whether the summary prepared by chief cashier is correct.

They check following in respect of remittance by post:

1. They check whether opening of the post carried out under the supervision of the
responsible official.
2. They check whether all cheques and remittances are crossed as account payee only.
3. They check whether all remittance are recorded in a rough cash book.

Check following of the cash banked.

1. They check whether daily collections are promptly banked.
2. They check and ensure that the collections are not used for expenditure.
3. They check dates, value in the bank receipt are agreed with the corresponding details in
the book of accounts.
Agree the bank receipt note with receipts in the cash book.
They check the bank reconciliation to ensure that receipts in cash book and bank statement have
been compared and assured the correctness.
They check the bank receipt with details in the rough cash book which recorded at the time of
opening the post. Inquiry into any difference.