t

I
fl
Chapter ! 0 a
Contpany Audit * I t C
d
J
C
lSec.209( l)and( 2) l J
1 0 . 1 i,ocnuoN oF-RooKSoF Accloiii'ir
Conditiorts
Locstion C
office
eir trr" toott,rf iiccotttttJuii ft itpf tt tlri registered
l. l{e gistered I
office ' placein lndia' C
itiri in tnit, All.,r. o'ly of rit" booksrlraybe keptat any other
?. Anl' other place .I.he to keepthe:
. Btlarcinlust paSSir |esoiutionacccrrdingapproval
',
Boartl
books at suchotherplace'
C
resolttlion
: nniii,rr"or"nt, ' 'ihe Boardresolutiorr rtrustspecify- C
'Board
nnd
1 of (i) the natureof booksto be kept at suchother placc;
' resoluliott
ol'sut'hotherpface,
!
( ii) thetull addrcss
;- -.-....,....-.
, Noticeto
:
: - irl" "onlpu"yshallgive
a noticeto the registrar. t
Hoard
shall be given within 7 dctvs of passingthe
1 ,"girtru, .
*:,il:::
c
iri respectof branchoffice may be kept at
,,1--':
': (
Branch office Natureof books, Alt ttre Uooit of account
3. , SUchbranchoffice'
I
ift" t'i"""tt oiit"" ittuit prepareup-to-datesummarised
returns' t
Duties of the . t"l
, ",;;;;;,
i retu'lns
or a'v two su'|nn'1arized
ior t
:i;,;',;:;,,:t,:::i;:i,X;;iaration
::
' , (c)
'-' The summarised returnsshall be sent to the company(at
the t
, placewhere t'e books arekept)
registcredofTiceor at suchother
i tinreof compilationof the returns'
t"itl''ina reasonable
t
t
ISec.209(l)] t
oF BooKSoF AccouNT
io.z coNTENTS
u'ith respectto - I
er"f .o*pany shall keepbooksof accoutrt
Natttre of books to
be kePt
(a) receiPtsand exPenditures; I
(b) sale and Purchaseof goods;
(c) assetsand liabilities;
I
other
cost incurred on nraterials.labour and I
(d) prescribedparticuIars relating to
items if-
or processingor manufacturing or rninirrg; I
(i) the company is engagedin production
and
is made by CG'
I
(ii) an order for maintenanceof cos*'records
I
114
I
I
(

I
 I 15

lL).3 .}'H.(,['ER IX)OKS OF ACCOTIN'I''

[Sec 209(
. 3)i
'I
il r u e t t t t t l - f i t i rt ' i t ' x ' ' I h c h u o k r t t l t t r t t ) ( ' ls t l p n r c s sa n ' , l r r r t s l c l i , r r r .
li.
' . T h e h o t l k sr l t r s t n ( ) tc o t ) t a i na n r . f l c l i t i o u s t r a n s a c t i o l l .
2t,9(r) Accruul hasisoJ C--ashbasis an,.l IJrlhrid systern ofl rnaintenance of books is
tuccounting prolribited

Double entry S i n g l ee n t n , s ) s t c r t ro f ' n r a i n t e n a n coc f b o r r k si s p r o h i b i t e d .

syr^lenr :

' l : t i lrl R V A T IONOF B OOKS OF ACCOT- r N]' ISec.209(aA)l

. h J o t , k sr r l a c c o u r r t i , r S y c i r r s i n r r n e r . l i a t , rflrr" . . J i n g t h . l . r , r r . , ' t v e i r rs l t a l lh " n r a i n t a i n " J .
," 'l-!1i
, r'i::',';ntvcluchers shall also be presen'ed.

t{}.5 ANN[IAL ACCOUNTS- LEGAL REQUIREMENTS ( S e c .2 1 0 a n d 2 l l )

', Duty of loying of lt is the duty of the Board of direclors to lay the annual accounts at
L,rr'] r11l{{ii
, unnual accounts every AGM.
ankriln! accounts
;ri .itr 4CM Meoning of annual . (l') B/S
gccounlS
(ii) P&L A/c

Reqttrrementsof : B/S {i) The B/S shallbe in tlre sarneform as set out in Part I of Schedule
VI.
!3/S:rerdI'&L i 'Notes' given at
liit: : (ii) The B/S must comply rvith the the end of Part I
o f S c h e d u l eV l .

P&L A/c (i) No form hasbeenprescribedfor F&L A/c.

(ii) P&L A/c must comply with the requirementsof Part Il of
VI.
Schedule
B/S trnd P&L A/c B/S and P&L Alc must sive a true and fair vreu'.

Meoning of FY - The period for which P&L A/c is preparedis called as FY.
year'
Er'iylanq:ial
. lt may be more or lessthan a calendaryear.

Msximum period ' FY shall not exceeda period of l5 months.

i
of FY :
: r But, it may exceed upto 18 months with the special permissionof
, resistrar.

tj ii
Cn""g," . The Board is empowered to decide the period covered in a FY.
from year to year . The period covered in a FY may be different from the period
, i coveredin the PrecedingFY(s).
:
n"'pforiniiity : Samepersons{rE responsiblefor preparationof B/S and P&L A./c as are responsiblefor
i maintenanceof booksof account.
 t
tl
C h a p .t D
l1'..}
..ltrliting ond At.t ut :ttut cr
(Sec,?1trtnd22i1 ;
rtl I
I U.rr ACCCf l'l'1'lll{l
l(lAl' as rnay be.prescribed
C
. iS, nrcalls tlre stanclards of accourltitl!-lrccoitlmendedbv
hle;rningof by. C(i .uu.r,,ti.tiun * ittr Nitic,rral Ailvisory
(l.nrr'ittce on Accounttng T
itcc0unting "fi..
Stalrdarils' f
st:rndartls "--:r-^'r1-'' r-rl tlrc
thc standards
sl; of accounttng specifiedby the ICAI
' [-lnril hS are prcscribedb}' CCi'
s h a l lb c A S . {|
AS'
Cotrwliuttc'en'ith Evea'colnpally slrall cornplv u'ith J
Duties of the j.t
c{inlJ}ailyregat.(ling C
Disciostrrcitr clse
' Deviationticlnl AS:
AS
of non- ' Reasotrsfor cleviaiion:
t
(Sec.211) complfunce . Financinl ei ct due to deviation C
n' tt) *'tt"ttt"r the P&L A/c and B/S complywith AS'
D u t i e so f t h e a u d i t o r
I
ift" ou,i,ro.,f.l"ff
""i"
C
rcgarding AS (Sec' lftheP&LA/corB/SdoesrrotcornplyrvithAS,theauditorshallqualifotheaC
ud
a

report
22',7\
!

RE'PORT
(Sec.217) t
TO.7 CONTENTS OF BOARD'S
t
i (a) The state of the company's affairs (
Contents to reserves
Profits proposed to be transferred
specifiedu/s ; (b)
the Board
t
2r7(r) I (") Dividenclrecommendedby
(d)
to close of FY'
Material changes subsequent
t
Conservatio n of energlt
I
Disclosures i

relating to TechnologY absorPlion

il
conservationof sttl' oulgo I
Foreign exchange earnings
energy etc.
Nature of : Changein
- t
Changesduring business;
disclosure (a) natttreof the colnpulny's I
the financial required
. (b) comPanY's subsicliaries'
yar of the(olnparry; I
by subsidiaries
: i"l natureof businesscarriedon
hl* t"lol-*
i in cllslet "T,":]Ttt,r1 whlchcor"r'1"v "n
(d) generaily, I
- -a* - ---- -'-
lle and
Nature of duties' Qualifications
, Designation, Remuneration' terms I
bisclosure of i Nature of
Age' i"ti Nature of employment'Other
, disclosure , experience, "-Of"Vment' sharesheld' Whetherthe employeeis
particulars of . and conditlon',p"iJ"ntufJoi"quity I
, required
any di;";;;. *unug"r. This is requiredfor thoseemployees
certain i a rerativeof
amount as describedin The cornpalrlesI
employees
, : getting ,ul^ry *o'" than specitic
; act.
I
 (.'rt:'ti;rtttl' rl tr,iii - i I ll7
(_[:rp- !'

-fltc
;lct:tttttttittg
n c l i r e c t o rs. sh l l l : j { a t ca s t o r l l t e t l l e r t h c i ' h a v oc o r n p l i c dr v i t hA S
l)isclcqtirs i't proper
--. -- .- -t - -,r,-
. ' . r . , . ( | . . ' . r '' irr ea-cc t,i ttitii,criai ticP:trtttrcs-tirc tiirectors silaii givc
i ;rl:'q siillle.
e xplarrationfbr lltc
!iit';.; iilriY -
*'i.:J,. r\1 Accotuttitrg T l r c c l i r c c t t r r s h a l ls t a i ea s t i i n l t c t h c r t l r cr c c p t t t t t i r l gp t l l i c i e s
poIic'ies . h a v c b e e nc o n s i s t e n t lay p p l i e c l r. r i t r l
[Sec?
" 1?{24{)] . ttse.tlhv thernarc rea-sortalrle.
'I'he rnadebY
Judgmants urd clirectt,rsshallstateits ttl tvltctlier 1hcjtttlgnlents antl cstimates
estinrutes thetn arc -
. rCitS()lllblCrnd prtttlt.ili.rrrtl
' u i v c a t r t r ea t t df t i r ' i c r ' r.
"
pr.llcr carefor -
I'roper ond i'hei elirec,t.rsshallstutcas io tvhethertltel had take'
rvith
sufficicnt care . ttrc mitinlenanccof a,Jeqtraic'accounting records in accordance
t h c p r o v i s i o n so l ' t l r i sA c t '
. salegtrartlingthe assetsof the company; tzzd
prevcnting
-_ and detectingfraud 1nd othel i1e-gllarities,
.
t'- . :'
to ,vhether theV hlve aclopted the assumptionof
Going concent i The Jir;;tor, ,ttoit ,tote as
:,Assritption tgoingconceml'lr]!eqenatlnq:'nlllll 1-t"9!".tt:
:-. -,--.:.- front the date of Passinglh;
j .--E;;t buy_bnc[ should be compleredvt'ithin ]2 ntonths
I{s:,,r' l.: i*;'
resolutionfor buY-back'
lt(!!! .rrcrilr.p'ttltion period of 12 months'the
If a buy-backcould not be complctedr.vitlrinthe specified
,
of btrvFrack for the same'
i Boardshalldisclosethe reasons
'fn" g;"iO ,nutt giu" frfi"ii infot*ution ancl expla'ations in respect of every reservatlon,
cotlir, 1 . : t [ t so n .
, qualificationor adverseremarkcontained in the auditors'repofi'
agditt,l]:1
IeI)9JI i.

ETC' ( Sec .219)

1 0 . 8 i:incur,nTloN oF ANNUALAccouNTS,

N*t-i;lt: ttl : (a) Balancesheet

: (b) Profit and loss accounl
dtlcsttnents
(c) Auditor'srePort
requirlng to B/S
(d) Everyotherdocuntentrequiredto bc annexedor attached '
circul*tion as
'annual accounts etc' u/s 219 and220.
The above documents have been refened to
(a) Everymember
Persouscntitled to
(b) Everydebenturetrustee
receiveannual
(c)Allpersonsu,lroareentitledtoreceir,etlrenoticeofGN4,e.g.'theauditors.
accounts, etc.
Who can demqnelthe . (a) A member
SnpplYingof lrolder
annuol sccounts,etc- (b) A debenttrre
annual accounts'
(c) Any dePositor-
etc. $n dcmand
Duties of the iti; iii.ri i'pptv theannualaccounts'etc'
";;.il;y
company :- free ofcost
:- 'tvithin 7 da,}'sof demand'

, Consequences
of . aLU il directthe companyto furnishthe annualaccounts'etc'
de1auft
1ltt lut{it ittg (nd Assurlncc - -{.!9:-Ll
WHII.F- F',XAMININf: C[',RTi\Ii\,i
1 ii. {) ( , ' { ) N S T n E R A T 'tr{}N Stioll ,\TINITORS
IiOCUMEN'I'S
(it l t c o n t a i n st h e o t r j e c t sl b r ;i;i' iil;;;;;^t' i' i"i*"J. rfd"il',;; ti'" po"'"iioiit'"
( l) &It:iitorandttm
colllpan)'.
of Associatiort
lii) I t s h a l i c o n t a i t tf t r l l o s ' i n g c l a u s e s :
. N a t t r ec l a t t s c
N
( . S i t t r a t i o rct l a t r s e
' O b i e c tc l a t r s e
. l - i a b i l i t yc l a u s e
' C , a p i t acl l a u s c
.:.
P. . A s s o c i a t i o r(rS t r b s c r i p t i o nc) l a u s e
( i i i ) I t s h a l lb e
. Printcd,
Divided into Iltrtlbered paragraplr&
.
' S i g n e db Y s t r b s c r i b e r s '
all the requiredintarmaiiorr
( i v ) Auditor sho'ld clreck rvhetherMoA contains
(r') I l e s l r o u l d c a r e f t r l l y s t u d y v a r i o u s p o w e r s o f c o n r p a n y e n l i s t e d i r r l v l i . . ) A '
into by the conrpany, he should
(vi) while checking transactions/ contracts entered
ensrrehimselfthattlTSTry!I3:n!15:(1,"::1-"!!-911"!
!y"-Y9n )
rhe companyfor its Qrvttg,overitanu{
( i ) AoA ;;ri;iiN iiir".i a i"drutions framedby
(2) Articles of signed the MOA '
( i i) AOA rnust be signeclby the personwho have
Association
( i i i ) For example it contains the following:
(AoA) ' VotinB rights of trtembers;
r PowerSof Directors;
. Qualifications of Directors;
' Conditions for making the call;
' Provisions regarcling maintenanceof accounts'
(iv)Auditorshoulti"o."tuttystudytheAoA&noteitsimportantcontentsinhis
w o r k i n gp a p c r s . r : . - - . r r --.. . r ^ +t^-
contents which directly / indirectly relatett'
(v) He should pay special attention to its
books of accountsand financial statements' - - , . - , - - ; r . : - - -
_-____-__- ^,- ' .,-- -^-.:^:..;:
for subscription to comPanY's ;sharss ;;;-^, or
lit ii ;";;t un in"iioiioir to-the pubtic
(3) ProsPectus
debentures'
'^^"i'orl r^ ic.re prospectus/
nros statementsln lie' <lf'prtlspectus
( i i ) A public colnpany is required to issue
beiore rnaking allotrnent of shares'
of capital'
( i i i ) It contains tenrts & conditions rv'r't' issue
( i v ) I t r r s t r a l lcYo t t t a i t t s :
. Details of atrthorisecl'issued,subscribed& paid up capital'
. Whether issue is at par / DiscounV Premiunr'
.Particularsregardirrgunderwritingcommissionetc.
' Up coming projects of the company-
relevant conditions listed in the prospectus"
(v) Auditor should carefully study all
(End use of money raiscri by i:ublic
(vi) He should also check ,"q.-.i."*"nt of CARo
issue).
( - - h l p . t r{ l L' (,ttr!tttrt\,,'i bL!i | - | l il9

! {},! O ,,'"'ryIT'A F SFTARECAPITAL

( i ) l ' r c f e r c n c es l r a r eh a v i n g p r . c f c r c n t i ar i g l t t s i r s t o -
' P a l ' m e n to t ' t i i v i d e n d&
. R e p a v r n e not f c a p i t a l
(ii) [quitl sharei.e., shareotherstlrarrprefercnceshare
(i) Autltorised /' ' M . * i , t , , , , t t, , n , u r , i u
t t'."pit,,1.
\ 4"1 Ki*rt $f shgre
Regislercd sharc ' Set out in lrlOA.
capital
' r'opitrtl . Wlrich can be issuetlby thg sqrrrrpany.
' '[
(ii) Issued & s ubscrihed ltat part ol- authorisedcapital,
shure coJtitrt! . Which has L'cenactually allotted by thc contpan),.
' -l'lrat
(iii) Paid up slture copital , part of strbscribt:d
capital,
. F o r w h i c h r n o n e -/v o t h e r c o n s i d e r a t i o n ,
' I las been receivedby the cornpany.
.
!

(3) C c n er a l : (i) Authorisecl capital should be verified bv examining N4OA & audited financial
s t a t c r n e n tosf I l t e p r e r i o u s\ c a r .
i'rI,''i| :t i:l::dtions
:1ii; lssued & subscribed capital shoulcl also tre exarnined by referring to last years
* , i i t , ' :t i e l i t i n g
: audited financial statements.MRL should be obtained regarding non-issuanceof
shre e {:apital
: capital in year concerned.
I (iii) In casefresh issue of capitalis made in current year, following should be considered:
. Conditions w.r.t power of cornpany to make fresh issue & complianceof same.
'
. . Corrditions rv.r.t minirnurn subscription (909'.'of sltares offered to public). If
. minimurn subscriptionis not received u,ithin 120 days of issue of prospcctus,
money received hasto be refunded to applicants.
. Wlrether apolication money received by company has been kept in separatc
bank account.
i ' Whether application money payable on each share is not less thatr 5o/oof
: nominal value of a sha.re.
: r Paynrent of brokerageas per rates stated in prospectus.
. Special provision for shareissued at premium or at discount.
. Compliance with guidelinesissued by SEBI in this regard.

tit Aritli{ of shares I. Stage-I ; (a) Test check a few r:riginal applications received rv.r.t entries in
Application : application & allotment register.
iss**d for cash
. (b) Examinenoney received with correspondingentriesin cash book.
, (c) Examine letter of regret in case sum is refunded to unsuccessful
a P p il c a n t s .
. (d) Check correctness of accounting treatment in share capital
account.
; (e) Examinearithmetical accuracyof totals in application& allotment
, Resister.
 t
I
-lu,Ii t i rt1: t urcl4s stu'qnr:e Chap.10
I l{} J
Stnge-lI (a I F.xar.irre ,,,ir.rut. Ul,rf,
"i
,ti..,,,r.,i;. ';;;i"g * . i "ri,.t,-'"nt .,f t
, I I Iotttttttrt shares.
( b ) t x a n r i i t c l e t t e ro f a l l o t r n e n ts e n t t o s u c c e s s f u lal p p l i c a n t s ' C
{c) chcck rvlrether mone}' received on allotnlent has been
appropriately creditedto sharc capital account.
C
'f'racc
(d) relevant entriesin caslt book /bank statements' C
(e) EnsLrreappropriateness of accounting treatmenton allotrnent.
(f) Ascertlin u'hether sltare certificates ltave been dclivered within l ||

(g)
ntotttltsof al lotment-
Ensure t!1atreturnof lllotment h,asbe3n lled wlth ROC:
e
I Stuge-III ia) Exanrine minute book of director's rneeting to check resolrtttqrn C
Calls rrrakirt0! rc a l l .
tb) Test clrcck sornecall lettersrvith referenceto calls register.
t
, (c) Exanrine amount receivedon calls with copiesof rcceipt issuedt,; t
, shareholders.
. (O) tro"" rclevant entriesin cashbook / Bank statements' C
properly credited
, (e) fr*on.,ine rvhether share capital accounthas been
o f d i s c l o s u r ei n C
t D I n c a s c o l ' c a l l s i n a r r e a r s e. x a n t i n ea p p r o p r i a t e n e s s
r balancc sheet. !
, (g) Examine calculationsof interest chargedon calls in arrears.
, (t',) g*"n.ti.e schedule of calls received in advance
to ensure its C
, accuracy oftreatment in books ofaccounts'
oi tu1":! P3.1d C
-:- ,1! _lxalinec{9ut1tion 91-:{Eil1dya1c1
commission
(s) Audit s15h21s5 ; (a) Sfrr."i *"y 6" itiu"O io iinJ"t*titers towards payntent of underwriting C
or to promoters for sen'ices renderedby them'
issued for 'nrus. parties' C
(b) auditor should exanrine relevantcontract enteredinto with such
consideration cash consideration-
(c) llxarnine Board resoltttion to issuesuch sharesfor non- t
other than of such shares"
(d) Ensure appropriatenessof accountingtreatment on allotment
cash
(e) t
(Sec.78) I
1 0 . 1 1 NUOTTOF SECURITIES ISSUED AT PREMIUM
at premium. I
N; t;r;;i;;i i, i"q,,ii"J i;;h" ;ni"t;; io ir','" rhesecurities
No condition for
I

The Cornpanies any restrictionor conditionregardingissue

Act doesnot prescribe t
issueof securitiesat
I

at Prelnluln.
of securities
Drenrium I
Auditor should that ihe premiuntis tratrsferredto the'securities Premium
U t i l i s a t i o no f
premium
"n.ui"
Account'.Furtherhe will also ensurethatthe
'securitiesPretniumAccourtt'is r-rscd
only
a
for the followingPurposes:
(a) lssuingfulll'paid bonusshares'
I
(b) Writing off the preliminaryexpenses of the company'
I
(c)Writingoffthecorrrrrrissionpaidordiscounta|lowedonissueofsharesor
debenturesof the contPanY. I
(d) providing for the premium payable on the redemption of any redeemable
preference sharesor debent'.rresof the company'
t
i
; (e) For buy back of sltares- I
I
I
I
I
I
I
 ( ' r t t r t J t 1 1 t 1 1u, r1l i t - I I 121

{Sec.79)
'l'he
,t \.il:tres sharcsto be issrrcdat a discountrrrusttrelottg to a classof sharesalready issuedbl thc

, \ r r t l i t . ' r s l t o t r l de n s u l c t l r r l ( ) r c l i r r r n l i c s o l u t i o r r i s p a s s e . li n C e r t e r l r l M c e t i n gi r l . l i t
specifies the rate ol-cliscotrntat t"hlcf the sllil '-s sltall be issuecl.

A u d i t o r s h o u l de n s u r et l t a t a p p r o v a lo f t h e C l - B h a s b e e no b t a i n e d '

iua;to. shoulcl that rhe sha,.s llaie becn issued vt'ithin

",,r,,r*
r f t l r e C l - B . l l o r v e v e r ,t h e C l - B r n a y e x t e n d s u c ht i m e .
s a n c t i o ro

i,,ditor rno"fa.fi""i that the marirnt,,,,ioi".rf cliscountcloesnot exgegel-L0?6. Howeler.

F1{:{runt
C l , [ J r l a v s a n c t i o ni s s t r eo f s h a r e sa t a d i s c o t r n t e x c e e d i n gl 0 % oc o n s i d c r i n g e s p e c i a l
t h
circunrstancesof the case.

i' Auditor should cfieck that at the dateof the issue. at least I year has elapsedsince
t h e d a t eo n w h i c h t h e c o t n p a n yw a s e n t i t l e dt o c o m m e n c eb u s i n e s s .
;lir t',..
i ear
ri inourJuiiou" tr-r"itir; p;;;lr;;aut."ntnini pu.ti"r'tiu.i allowed
of thediscount
D i s c' "*ui.r,in"J
on the issueofthe shares.

$i ; i \T]DITOF ISSUE OF SWEAT EQUITY SHARES : (Sec.79A)

'Sweat equity shares' means equity shares issued by the company to the
rl" t t i : lc l i ' s w e a t
: enrployeesor directors -
r i r t l { , t ! { ys n a r e s
, (a) at a discount;or
. (b) for consideratior.rother than cash
, for providing know-how or making available rights in the nature of intellectualproperty
, rishts or value additions, by whatevername called-
I Auditor should verify that the srveatequity shares belong to a class of shares
\:, i xi. .' t"rfshares
ar19ady corl,pan)'.
jpeg! _L)11f19
' \ r ; , ' 1 . , 1 ; "O
g :f . It should be ensured that Special Resolutlgn in this regard is passed in General
Meeting.
rilr*lu{ion required
Further ensure whether Special Resolution passed by the company specifiesthe
[ o l l o w i n gp a r t i c u l a r s :
(a) Nurnber of shares
(b) C u r r e n tr r t e r k c tP r i c c'
(c) Consideration.
(!_)_lhe 9la::_ l'-! -"q-'g'Ef: :E!!-b:j:":l:d,
9.:llqjov"es191.!rom
"1-giry-:jo.:-
'iiNrllany nrJii.i-*iil year has
t;;if-y tlrat at the dateof issue of sweat equity shares,at least I
must
'i :(lmpleted I elapsedsincethe dateon rvllichthecompanyrvasentitledto commencebusiness'

Listed companies - n"J,t"iirit"iJ tr,"tttt" *gtr"tio"t uvsegl i;

.- *qrlfrlianceof "tii"i" "-r"G
t h i s b e h a l fh a v e b e e n c o m p l i e dw i t h .
Rules
Anllsted co;nfanies Auditor slrould ensure compliance rvith the rules prescribed
CenlyI G9n Il1_T"nt
by_
"
 t
I
artd Assurqnce
Auelitins and
Auelitirtg Assurance Lhap- t0
Chap' tu ;
122 -=--
_
(*" tt -) C
i0"i+ "' ""' ^-'^-
i r . t , r r il - O F t t u Y - i t A L K u [ S H a t t E S
i_i"l*--ll"i':' ;
rcr,sr,i tl,roback
Srrrf "r'li:,::::,,::::'X!,li''i'"
, i - lrreercserve, t
'
2. Securities Pretniutnaccount ;
, l. of freslrissueof shares
Proceeds I
olan earlicrissue
thebuy-backshallnotbemadeout ofthc proceeds
I lorvever,

by the articlesof the contpany

ensurerhatthe buy-backis authorised I
'oryer in articles : i,,ai;;; ;ilil

,$p,,'ci:ri,*nu,l.,tionii.;sp""i"in"|.i".i"-""ii,";i,Gih;;;;;";k',l.;
of paid
25o/'of aggregate
:, iuJiiur. shouldverify rhatthe buy-backdoesn'texceecl f
Linrits 'n buy-back by
passingSpecial
sharesin any FfY driesnctl C
Resolution
,,. Auditorshouldalsoensurethatthe buy-backof equity
, exceed25o/oof its total paid up equirycapitalin that F/Y' !
of debt owed by the compartymust not be morq a
Debt_equity ratio I auditor shouldcheck that the ratio
, t h a n N v i c e r t t " u g g r " g u t e o f p a i d u p c a p i t a l a n d f r e e r e s e r v e s a-f t e r s u c h b u y - b

.i;*;l,t;;;;;ft;;;tii"iir'"'t'"'";ilil1;"r' i"irvp"iil;' C
Stur"**,,rt n" f"n' "'"

, . ; ; ; - r i * i t r o , : . ' ' n " J i i * ; h ; | d ; ; ; " k ;passing

l * . h " 'the
; F Resolution'
;;k;';";;i;;withirt
. dateof
completion of buy-
periodof 12 rnonths'the Boarc! t
tlack
i r If buy-backis not completedwithin the specified

files with the Registrara declarationof

Declaration of : AuditoruftouiOcnsurethat the "otpuny I
within nixt r vear.
, solvency.ru,ingir,ui it *itr not be ,"nd"r"i insorvert
solvency
extinguishesand physicallydestrc
rES
Extinction of shares ; Auditor should ertsurethat the company
of buy-back.
compretion
' ,no.", u""ghrback within 7 daysof e
bought back
A-uditorrvill alsoensurethat the "";p;;y doesnot rnakefurtherissueof the samekind I
Prohibition of furthe.

'.'". the mainraina registerconrainingthe foll.wing

Register of shares i A;Jti;, *iit """tto that "', "o*funy t
"n.ur"
' particulars"t
hought-back
(u) The sharesboughtback; I
.
the sharesbought-back;
, (b) The considerationpaid for I

shares r
:] ;::::::::::i:H,l"l*,,"a,,v des,r.ving.f

w RtlcuE
il\ * ?otoce t5t lorv"^91 fu\V*d{r
**\:":'/;tDobr
1.4
lF ilLL,s,r^'x)
2 li[&-
LcnoftN\'ar lTh;:l:"**hc*t
l>:W^ont
t o,:,
?nr,nn
'' i
i.. ir,... |L?t"
r E(l^n*
ch
on-i-\ :I
b {),ro*rar
\b*s\ru
 -l

{' o ntytttttl', ludit - I I r2J

, r . . i , e : 1crat l l s A u d i t o r s h o u l d c l r c c k * h e t h e r p o \ \ , c ri s s p < : c i f i e di n t h e a r t i c l e st n
t h c u n c a l l e da l n o u n to r r s l t l r e s . "l.epf

1 t ' i ; r1 ' ; r ; ; i i \ a n c e ' A conrpanYmav pav intereston calls paicl in advance.

' I-he intcrestshall tre paid at such rate as ntay be specifiedin the articles
' A colpalll can pay- ilterest (@60/0per annunr.
r r {i i l t . .r i g i r i r A t t t c m b e ri s t r o te t t l i t l c dt o a n r v o t i r r gr i g l t t si r i i " i p " . t o f ' c l l l s i n a d v l r n c c
)

)
\
, ' - [ i I . } I . I " OF
C A L L S IN A R R trA RS
Verify the amount ol'calls in arrearstiom tlrc share register
)
[]:<amineAOA to ascertaintlre company'spowers regarding:
) (a) Interestchargeableon calls in arrears.
(b) Forfeitureof slraresfor non payrneiito{'calls.
)
'iri
! - r V c r i l - y c o m p l i a n c ew i t l r A O A f o r r h e i n l e r e s tc h a i g e d .
) -
[)i:ciosure E . r r s t r rteh a t c a l l s i n a r r e a r sh a v c b e e nd i s c l o s e da s a d e d u c t i o nl r o n r the total paidup
c a p i t a l o n t h e l i a b i l i t i e ss i d e .
)
. Ensure that separatedisclosurehasbeen made in regardto calls due lrom:
) (a) Directors and
(b) Others
I
)

)
iri.r'7 ATJDITOF REDEEMABLE PREFERENCESHARES (Sec.80)

) lr r!' preference : Auditor shouldensurethat the terrnof preferencesharesshallnot exceed20 years.

'il
t.

) Ensure that the articles of a company authoriseit to issuethe preferenceshares.

i, t'r in articles
) ,aidshares nuJitor rfio"iO whetherthe preference are fully paidup.
sharesto be redeemed
"tr""[
I \ i ; . t ' i t sO f Auditor should clreck that thesehave been redeemed

f, r ctl enrption (a)

(b)
out of the profits;
Out of a fresh isstreof slrares

I I ' r ' r n r i u mp a y a b l eo n , E,nsurethat Company has utilised:

r - rt l e n t p t i o n ; (a) Profitsof the conrparry

I (b) Securitiespremium account

I
, .rrtr t!l l.- i{R. (a) Creationof CRR is mandatory,if preferenceslraresareredeemedout of profits.
:
1 (b) Amount to be transferred to CRR Nominal amount of preference sharesredeemed
: by the company. Auditor shouldcheck adequacy of CRR.
\,,tice to registrar Auditor should ensure whether Company has given notice to the registrar within 30
) duys of redernptionofpreference shares

T olQt'r
C\,..\ . .

t
'vb*^5S'Ypvu".ir.trtr hu
,kt|'tu^ tu-A
c K.2 Now\\ai*4f
) ft"lit
I AO A u\cr f,,-f
nayf."n
5 -rgL'.tWn; [t.I*.Slt*
ft.
b
b
 ' j A d h r\1elr'\ T,lttr.l'.*ilt'lt
v tlr,'rtr,''llii
t2{ ,1udilirtg ontl Assw'ancc

IO IR , { I ] I ) I T O F A L T E R A T I O N O F ' S I { A I T EC , { P I T A L

AOA , V e r i f y . t f i a t t f t e a l t c r a t i o ni s a u t f t o r i s e db y A r t i c l e so f A s s o c i t t t i o n ,

frlr1,." tllat the altlration tl' Ordinary on at a GeneralN'lecting

OR . 1, "n lesoltlf
' Inspect the minutesof shareholdersauthorizingalteration'
I\inutesof Meeting
. Inspect tlre rninutes of Board nreetings for Director's Resolution oll allotntent
the resolutiorrof lncnrbers
. corisolidatign,conversionor sLrbdivisionpassedptlrsttalltto
:-
tlre satnewith qounterfiiils ol"ncr*
Certific:rtes .' t *nnrin" the canceiiedcefiificates, if any, and agree
c e r t i f i c a t c si s s u c d .
l{egistrirr of Compenres.
[;rtimation to IIOC , A,irrur" tfiat necessaryintimatiop [.rasbeel sentto
. V.iifv thoi ih" sharecapital, as altered,is correctly disclosed in the Balance Sheet.
Disclosure
(

D l-, (Sec.100- 104)

1t,.19 AUDIT oF REDUCTION oF SHARE CAPITAL
caprtal. Thrr:
Power in articles Sp""if," piovisiou in articlesis requiredfor effectingrcductionof share
Auditor shouldstudYAOA.

Spcciat resoltrtion Ci'""r.,"t'"ti snil;b;; t;;;J ut ;il'lo*punv'

"i of
, gnru." that Conhrniuiionoi court has beenobtainedbeforeeffectingthe re<Juction
sanction of court
-_;t#.5x,"*lg;1y:H#a::*,.x* ;;;;;d'ai'lr'e 'o*"
oic;;;,
r;o*", "'an*r'o
-.-E;;i;e
wh_ether companyhasdeliveredto theROC:-
Registration
I tul a certified copyof the orderof the Court'and
(b) a ccrtified copyof the minute f!Pf!""-9,P=lF 9tt-{: -
-" and mirtute' Thtes
: A;d;i;; triJr [""o,ne effective oniv on registratio' of the order
Ilfiilil; ,l;;;i-
, examinewhether ROChasregisteredthe same'
reduction : "^-"""-

10.20 AUDIT OF FORFEITURB OF SHARES

;--n,,aito. iL"rrJ rp""in" pr*iilon in thearticlesis givenfor this purpose'
t. Authorisation "h*r.in"t of shares"
f_orlorfeily19
. Also the articlesmustbe studiedto checkgroundsfor forfeiture
*f a
, Groundsfor , . b;;";"iit; foii"itut" is rnadeon the groundof non-paytrrt:ni
Legal
, forfeiture call.
requirements bonofide groun'-l
. However, forfeiture is also possible on any
for forfeiture : contained in the articles'
checkthata valid call havebeenmadeby rhe company.
. -,- *^l^ L,, rL,,

Cull made A;J,t"r.f;id

O"fVifthecallremainsunpaid,thecompanyproceedforforfeitureof
: i shares.
= -
to the defaulting
N;i"" i" i n"OGi should ensure that norice of forfeiture
, forfeirure , shareholder is given beforeeffectingforfeiture-
resolution
1-R"*t;ii;;i;;.ih" th;"t ituJ fotfeited only rvhen the Board passesa
t forfeiture , effectingforfeiture' Auditorshouldexaminethe same"
;:- --:--..
tl!:'rp. I i ('rtniy;11ry.4 tklil - II

! 0 . 1 1 { ' r " : ' { r ' } 1 o\ ]N s H A R n , C A P I T A L

:
!\ i r;: .l i.r 4
, An optiop oil sharesarisesu,lrerra personhas acqrrireda right under an agreernetrtriith
l h e c o r n p a r r yi t ' h c s o c h o o s c s .

I rl:;t l 1l
-' ' Option on sharecapital generall,varisestlnderthe [ollolving circumstances:-
, (a) rati{led by the corltpany:
tJlder the promoter'sagreenrents.subsecltrentlv

1(b) C o l l a b o r a t i o na g r c e n l c l l t s ,
i

. (c) Loan agreetnerrts:

i (d) Debenturedeeds:
i

, (e) An agrcernentfor convcrtible preferenceshares;

' (f) Employee stock option schcmes'

!t,"rr,,:r,'-t :r(;i
,; ir ;-"p";t ;rror"s ni,rptio" i" '"tp".t ;f i;";;;; J"u""t"i"i, it slic'Lrla
,
"-iigr,i
obtain:-
:
. (ui APProvalofCC and
; (b) Specialresoluiionin a generalnteeting.
:
r. with the ScheduleVI of the conrpaniesAct.
Ensurecompliance

i I I .' r'tAllE TRANSFER AUDIT (Sec .80)

A;";;;i;;dh";;ti;"s \^,eresentto the transferorsand, in caseof joint -holders, to

Notice
each of the holders and the objections, il any' raised by them, u'ere taken into
consideration before the transfer were registered'

AOA r*p""t tn" unJ ih;';;;iti"'ii"i"ii[i; ;h;;;;;";'i;; ;'s

",ti;l;r;4";;;liution ";i"
, for- of transfer, time limits by articles or by law, issue of share certificates etc'

Intr lnl:l t:ontrols Revierv the intemal controls relating to recording of share trans

R e r , * ! , ' q : n l e not f i E;t";;""*pf i"""" *ittl ttt" provisionsof section108to sectionl08F of the Companies
(lr,i,r,tr* nric,sACt i Act.

(lr, rr ii"ansfer Examine each share transfer form and consider whether:

f,{;l 'l:. . application for transfer has been made in the prescribedform.

i
. has stampedthe date on rvhich it was presented.
prescribeclauthority,'
:
' each transferform is dated, signedand properly witnessed'
,
: ' name and addressol-the transfereehave been given in full'
letter of
. . transfer deed has been accompanied by the related share certificates or
' allotment.

i
. the amount of consideration is correctly stated in figure and in words-
individual
i . in case of the transferee being a firm, the transfer is recorded in the
, narnesofthe partners.
 !
t
I
I

Cirapter', t T
J
SpecialAudit
;

I
t2.l AU D I T OF I'D U C A T ION A I, INSTiTUTION/COLLEGE !
C
tr'reli rnin any ( l ) S t t r c i yt h' e p r o v i s i o r i so f a p p l i c a b l es t a t u t eo i p . , t h " t " g u t s t a t u so f t 6 e i r i r t i t , , t " .
rvc r li (2) li.ranrirrethe trrrstdectl or regrriaticrr. !
(3) Study'thernirttrtcsofnrectingsofgoverningbody-/trusleetogainknorvledgeofanyinrportanf
!
decisionrvhiclr rnay'aflcct tiie accountsfirr e.g.. purchaseof compurer erc
(4) E''aluatcthe sy,sterr.r
of internalcontrol. !
( 5 ) o b t a i n l i s t o f a c c o u n r i r r gr e c o r d s& a c c o u n t i n gp o l i c y a d o p t e i lb y t h e m .
!
Receipts Feefrom (i) Check the admission fee to confirm rviretlrer amount has beerrcrediter-l
sludenls . t o a s e p a r a taec c o u n t .R e f u n d a b l em o n e \ / i s s h c w r r a s l i a b i l i t i e s . !
(ii) Chcck rvlretherdernandsfor fee are raised against all students.
T
' (iii) Ascertainrvhetherthe amourrtsdemancledfiorn studentare as per.r.ates
: specifiedaccordingto their course. t
:
1iv; verify the fee received by cornparingfee collection registerand copy cf'
, receiptsissuedto students,For cheque received, exarninepassbookaltd I
for cashreceived,check entries in cashbook.
(v)
!
, Check authorisationfor fee concessions.
: (vi) Ensure that in case of late payment of fee, fine has been properly I
. inrposed,collected& accountedfor.
. (vii) Ascenain accounting& authorisationfor fee received in advance.
I
: (viii) ln casehostelfacility is also grantedto students, check whether hostel I
, dues are properly dernanded& collected on timely, basis.Also ascertain
, whether all hosteldues ltave beenproperly accounted for. I
:
Rent : (i) Exarnineagreementrvitlr tenantsto knorv rates of rent & their due datcs t
( i i ) V c r i f y ' r e n t r e c e i v e db y c o m p a r i n gc o u n t e r f o i l ' so f r e c e i p t si s s u e di v i t h I
tlre bank passbook.
I
i;;o;;, (i) Verify investment registers to check rvlretlrer interest rv.r.t. same has
Investment been duly accountedfor. I
, (ii) Intcrest and dividend received should be checked with reference !<r
' entries in bank pass book.
t
:
, Donstions a ,(i) Donations rriay be of two types, for specific use or fbr general use, I
; gr&nls : Check recordingof such amount in separateaccounts.
: . (ii) Vouch counterfoilsof receiptsissuedto donors.
q
: I
: (iii) Verifo grant from government or any local authority with reference tc fi
s a n c t i o nl e t t e r .
.1 l

154
.l
n
q
a
i

d
I
 Trty:urds sttulents ('lreck tht- trasis rirr pri'r'idinu
sitrc',iarsrrips
t; ,tuJ"nt !eritv
i i C \ n ( ) \ \ ' t ( ] d q e r n c nltc t t r t l r . , - r l rsrt u d c n l s .
( i i ) t , r a r r ri n c i ) o y r n e n*l ,.1. 1 .
1 - r r i zt,l,i.srt r i b u t i o 'c c r c r ' o n i e s .
(iii) Irxanri'e r'hethcr cxpcrscs olr brioks
i. iibrarl,& -sports
pnrperll' authoriserl& accourrtcrlfcrr.
I-o*,urds stoff I : l r a r ' i n e t h e t s r m sa n c rc . r i i r i t i . n s o f i a r a r ; , i . e a c l r
c a t e g o r yo f s t a f f .
( . h c c k t h e c a l c u l a t i o l t\ \ . r - t .
o r , r r r r . n , , , , , ' . r a r . i , :pna y a b l e& d e d u c t i o n s
thercrlrorn.
\
(iii) \r,trclr paYlnellttnaclc tc, teraclrcrs& other
pcrsonrrel rvith rferencer.
\ b r r n k p a s sb o o k
()tmmo:.t
. (il Votrc-lip.,r,r'eniigai'st clccrr icitr, & *atcr U;fl Lic.
\ Expenditule . (ii) llxatnirte payrnelrtstor.r,ardsrrraintenance of iiostel.
(i) l-xar'ine wltether all 1l.rcdassetsare p.o1,,"ily
\ iur-
( i i ) V e r i l y o r v n c r s h i p& e x i s t e r r c ec i f f i x c d a s s c l s"..uu,.,i.d
[ n ' c x a m i r r i r r gr t - c o r d s& c o n d u c t i . gp l r y s i c a l
r e l i f l c a t i o nr c s p e c t i v c l _ r
b (iii) Vcrify whetherdc:prccialionhas beenproperly calculatccl
u,.r.tcaclr class of fixcd assets.
( ! y )-Veiii/co.puii
O b t a i n M R L u ' . r . t e r i s r e n c c . o r 1 1 e { r i p c t v a l u a t i o no f a s s e t s .
\
1ij Cnrriiiii.,,',t''iir, ip".i,irnti.,,ti,,i,
i;Ati;t;, il ii,; .u,,ieurio*pared
ro
b that ofprevious year. "
( i i ) c h e c k t h a t a n y d e p o s i t p a i d b 1 ' t h es t u < i e ncr. n a d r r r i s s i o r r .
i f r e f t i i r d a b l e i, s s h o r v na s a I i a b i l i t y
\ & 1o-t!i31sf91ed to p&t_ accounr.

i 'lF!
i-
l
I- OF HOSPITALS
\
t'. !
t\ i Y-
-1, (i) nospiiiiscanb" tu" t;i; p;;t;i;..;
b "; the legal
Auditor shouldascertain status& study applicablestatute,if any.
(ii) Examinethe trust or partnership deedor N'IEMoRANDUM,ARTICLES as perthe starusof
\ prints r1s
lospitq!,-(o_th91 rsqlJle !I Eelious ropic)
t Ite i.:,1" i,.. From Putients : (i) Check copiesoruitti i;ii';a 1" 11'll-
patientsto ensure
piti#.ir i;iah ."i"ien.e-io reeisterof
tlratall patientshavebeenbilleclproperly.
t : (ii) Checkcalculation of ferv bills.
(iii) Examine whetherbills are raised properly bifurcating
t services charges& payments regardingmedicine.
(iv) Check internal contro! & authorisationfor bills raised
into rent charges,

b rates.
at concessional

( v ) c h e c k c a s h c o l l e c t c c ls l i o * , r r i ^ c a s h b . o k r v i t l r d u p l i c a t e
t rccejpts issuedto thern.
copies of

t From grqnts . (i) check copies of cor-rcsponcleirce

e n s r l r et h e p u r p o s eo l ' g r a n t -
u,rth tire gnu".,inr.,-,t oi ioCalbodies to

T (ii) Ensure rvhethergrant or donations receive<i 1br specific purpose

havc
b e e n p r o p e r l ya p p l i e d _
I ( i i i ) C l b t a i n M R L r e g a r d i n gu s c o f g r a n t s .
(iv) Examine accountingfor grants rvith special attention to classiflcation
into
t capital & rcvenue.
Income (i) Examineinvestment
t Investntenl
front
(ii) Vouch interest,
'"gist"r.
dividerrdetc. to ensurew,hether same has been properly
t accounted for.
( i i i ) C h e c k c o l l e c t i o n ol varlous nrcoqles received on
investment ."vith
b rclcrelrce to entrv in c a s h b o o k .

t
D
D
b
b
f,
 t
t
156 '1i,l it ing und Asstl'ttnce Llh:rp.l2 t
II'itlt .ri,.:!tp(.! n: (i'r I . r r s r r r - , ' e r t l h n r i s r t i o n n l r , : r : - i r - r r l r p r r . , " * , t ] " n tS" 1 . 9 c i r l l . , , ' : r r r i t r l o * p * , f ;i,,,- S
puri'ltrr'st':: '{ { i i , t 6 ' . , , , , , , . , , c r a r i o i . r s i l e n r s o 1 - e x p c n < i i t u r e l v i t h t h o s e o l - p r e v i o u s y e a r ( A- I t l
vuritttr'sd'\frtttdr G
" (iii) t,hcck ferv calculation-srv.r,t sraff salarv to clreck r,,,hether theseare irr
i . r c c t l n l a n c er v i t ht h e p a v r u l e s .
t
( i r ' ) S l r e c i r i ia t t e n t i o ns l r o u l Jb e g i r c n t o p u r c h a s eo f h i g l r v a l u e m e d i c i n e s&
iriicctions. Also check *'hetlrc-r tfrere is strict control over their purclrases t
arrcissrres.

l'c-ttrtitttt ( i ) I t - r a n r i n ec a l c u l a t i o u& a c c o u r r t i n go f p r o v i s i o nf c r rt a x a t i o n . {!

Assets & (i) I'.r.anrineu'hetircrall llrcil ilssetsare properll'accoutrtcd for.

liabilities ( r i ) [ ] l r e c k o w n e r s h i p& e . r i s t e n c eo f f i x e d a s s c t s b v v e r i f y i n g r e c o r c l s& c o n d u c t i n gp h y s i c a l !
r c r i f i c a t i o r r c s p e c t i v c l .r
;
r c p l c c i a t i o nh a s b e e np r o p e r l y c a l c u l a t e do n e a c hc l a s s o f f i x e d a s s e t s "
(iii) \/crit.,'ivhethed
( i i ' ) O b t a i n M R L f o r e x i s t e n c e .o r v n e r s h i p
& valuationof assets. G
: (v) Verily corpusi capital firnd u,ith specialatlcnticrntL\ any increasein the same as comparcd io
, t h a t o f p r e v i o u sy e a r . C!
I (r,i) lrxarnine aricqrraclof intenral controlsovcr purclrascand issueof stock. el
. (r,ii1 Examine rvhetheranl,clain.r against1fisfts*spitalhas been properly accounted for.
!
I
I2.3 AUDIT OF CINEMA HALL
C
Prelinrinary ( i ) Stud_v"
the provision of applicablestatutc as per tlre legalstatusof tlre cinemahall" 11
(2) F,xaminethe trust dced or regulatiotrs.
(3) Study the minutes of irreetingsof goverrring body / trusteeto gain knowledgeof any I
irnporlantdecision u,hich may affect the ar:counts,for e.g.,purchasc of projectoretc.
I
(4) Evaluatethe system of internalcontrol.
(5) Obtain list of accounting records& accotrtttitrgpclicy adopted by thenr. I
(i) Check that tickets issued are serially nurnbered& kept rn
Rit:eipts P-rom slnws
propercustody.
t
(ii) Perform compliance proceduresto clreck ,uvhether there is I
strict internal corrtrol on entry to citterrtalrall rvhichshould t-'e
o n l y a g a i n s ts h o r v o { ' t h e t i c k e t . I
(iii) Clreckinternal cotrtrol rv.r.t.issuattcettf free passes"
tl
(iv) C h e c kc o l l e c t i o r rs h o r v n i n c a s l rb o o k r v i t h n u m b e ro { ' t i c k e t s
sold for each sl.tttr.v. i
(u) Check internallt, generated daill, report ,'vith number of
ticketssold fbr eaclr category( balcony , first classetc.). !
(vi) For advance booking. ensurethat dilferent seriesof tickets ;

(vii)
are issued.
Reconciletotal entertainmenttax collecte.J rvith total number q
of ticketssold lbr eaclrcategory.
q
q
I
I
Jl
d
G
 Spet'iul -ltt':.i;: t57

liront { i) S l r t t l ,r t' g r c , c t l l c tct lt r I c r t t li n t o l i ' r a t l v e r t i s c t t i c t l t '

,,ldvert$etrtent
' , r ' . r . 1s l i c i e- s s l r i l r t se r h i b i t c t l l t a s
(ii) i \ s c e r l a i r r$ , h c t h , : r i n c o n t c
t r c c r tp r o p c r l t 'r c c o g t l i s e i&l c o l l e r c t e t l '
(iii.t s l i t r v i t h r e f c r c l r c et o a g r c c l n _ e n t
( l l r e c kc l r l c u l a t i o r r o

Restoururi Irtcrtnte
(i) Strrch the iirreernent enterecl in1ti l',r' cincnla hall ii ith
rcstilttralltriiil in lhe prenlisets.
1ii) C h c c ks c r l l g c i i o rot 1 ' s h a r ei t t r es t l t t t r i t t t itl r ec r t l l e '
(iiit S t a l l p t a y i - . cr u l t l t y c i n e t t t ah a l l . l r r t l r i s c a s c .e l l s t t r e: t h o t t t
r c c o g r i i t i c l n& a c c o u n t i n g0 f ' s t a l l i n c o t n e s ,a l s o c c ' r t t s i d c ' r
control Or,crsttrck of footllrttrff. cold dritlks. ice creatnsctc.

(I) Towards ( I) [:xarnine .,vl.,etherexpenditure inctlrred has been propcrly

E-rpentliture c l a s s i f i e di r r t oC a p i t a l& I { e v c t t t t e '
(ii) Vouch tlie ilavntettt nrade fcrr repairs artd rnaintenatlcelll
infiastruct'.rre .
s r an]'
E x a m i n e e x p e n d i t u r e i l r c u r r e c lo n a r l v e r t i s e l n e n t o
i(iii)
p r o t t t t 'ilo t t a l c i t t t tP i t i t n .

l(iv)Vouchpaynlentstolvardstllrnlrirewiththecopiesof'bills
g i v e nb 1 ' c i i s t r i b u t o r s '
,
(u) Check agreernententeredinto with distributors'
'-: - -'
(ii) Advonce nnii :, (r\
o Paid (1) rdvancepaid relating to fihns alreacll'rtrn
Clheckwhetherall advance
lo Distributor has been proPerlY adjustcd.
(iii) front distributors'
ObtainMIIL & confirmation
'(il
E;i;; ,"ii"trr"i all fixed assetsare properlyaccourrtedfor.
A s s c l r& l i a h i l i t i e . ;
assets by verifying recortls &
. (ii) Ensure about orvnership & existence of fired
c o r t d u c t i n gp h y s i c a lv e r i f i c a t i o nr e s p e c t i v c l y '
on eaclt class of fixed
Verify whether depreciationhas been properll' calcutatec
assets.
of assets.
(iv) Obtain MRL rv.r.t existence,ownership & valuation
to any itrcrease in tlre same as
(v) Verifl corpus/ capital llnd lvith special attention
c o m p a r e dt o t h a t o f p r e v i o u sy c a r '

12.4 NUUN OF CHARITABLE INSTITUTIONS

statuteas per thelegalstattrsof the irrstitution'
Prelirrilnan il j St"Jiifr" fiouiri"n-oi uflf i.uUfe
\YOrk- (2) Examinethe trust deed or regulation'
of any
meetings of governing body / trustee to gain knorvledge
' - Study the minutes of
I (3)
, i*pottant decision which may affect the :rccounts'
(4) Evaluatethe systemof internalcontrol'
policyadcptedby them'
i (5) obtain list of accountingrecords& accounting
institutc'
Listtheactivitiesrtrnby charitable
i (r)
 I
t
i:sq - lytllyttg t:rttl Asstrrottt'e Chap" t? t
(i) [ ] : . : a r n i r rdct r r r a t i o r r sr e c l i v c r i a s s l r o r v n i i . r c a : , h ! x ; o k * i t i r
t
rclircnce to copies ol- rcct-iptsissuecl.
(ii) I l r r s u r et l r a ta l l d o n a t i o n sr c c c i v e dh a sb e c n t a k e n i n t o i l c c o u r r t . C
(iii) ( , . h e c kp e r i o d i c i r r r c r r r a rl . p o r r w . r . t . d o n a t i o n s
r c c e i v e dd u r i ' g
t l r l r tp c r i o d( r n o n t h l l ,o r q u a r t c r l y ) . t

(iv) D.nati.n nia' alsc'rbe rccei'ed irr kincl. ensure their proper I
r e c o g n i t i o ni n b o o k s o f a c c o u n t .
(v) lf anv grant lras lreerr rcceived for sorre particurar purpose
c r ; r n r i r r cr v h c t h e rt l r e s a n r el r a sb e e n u t i l i s e d f o r d e s i g n a t euds e
]
orrl\..
I tt c 0tttes (i) Vouch income fror. irrvcstr',r"nti o . Jivitiln.t. inrcn:srt,., t
tlratllreseare prolterly accountedfor. "i,rur"
G
(ii) L - h e c kc a l c u l a t i o no f i n t e r c s ti n c o m c .
(iii) I ' h e r em a y b e i n c o u r c o n a c c o u n to f r e n t . E x a m i n e a g r e e m e n t t
r v i t h t e n a n t st o c l r e c k t e r n t s& c o n d i t i o n st h e r e o l .
(iv) c l r e c k s u b s c r i p t i o 'd e t a i l st o e n s u r et h e i r p r o p e r r e c o g n i t i o n "
C
Pa;'rnent Exltenses (ii iiou.i, ip".i,,iiyi" .ir".r.i"ri"tr,", huu" C
:
"tt ""p"ir."r,
beenntade torvardsobject ofthe trust. ".p"iiirr
C
; (ii) Check paymentto staff torvardssalary etc.
. (iii) Verifl, that all paynrent arc made after proper sanction by C
Otoperauthoritv.
i
, (iv) Cornpare other expenses like stationery telephone etc. with
t
, thoseof previotrsyear (ARI)).
C
T'trxoliott (i) Examine rvhether tlre trust e'joys income tax exemptionunder
t l r e I n c o n r eT a x A c t 1 9 6I . t
(ii) check whether p.yrne't of tax has been made, if circumstances I
requireso.

ASSetS a1111: Inveslnrenl (i) Checkauthorisation of purchase

" I
& ;l;;f I;;;;il;i
Liabilities (ii) I'}hvsically
checktlre investment
certificate. I
i oti,i, ii'iti
' Liohilities I
I
I
12.5 A U D IT OF C L U B S
q
Preliminarv iii Studythe provision of applicablestatute as per the legal statusof the clrrb t
( 2 ) E x a n r i n ei n t e r r r a ln r l e s& r c g u l a t i o n so l c l u b .
( 3 ) Study the minutes of rleetings of governing body to gain knowle<Igeof any
important decision. rvhich may affect the accounts. For e.g., purchaseof sports
equipmene t tc.
n
r{
(.1) Evaluatethe syslem of intemalcontrols.
.{
(-5) Obtain list of accounting records& accounting policy adopted by them

!
1
I
el
.l
d I
 ,\'t:;t i,t! .ltttlil 159

' r ' o L r c i ra t l t r i s s i o n i c c * i t h t n e l l t t ) c l sl i s t & copies of caslt

.-lI ttrission.fee
, r . c i 1 , i 5r : s t i t Jt t , i i r c r r r .
( l l r e c k t h e a c c o t u t i n g p o l i c v o f c l u i r r e g a r d i r l g r c c o g n i t i o lol l '
atlrnission i e e ,a s i t i s r r o r m a l l yt r e a t c da s a c a p i t a l r e c e i p t .

Suhst'ription (i) i r . , a r r r i r t c : t r t ' s c r i p t iIocr:r. i s t c r* i t l t r t r t ' t t t b e r lsi s t & c o p i e ' o l -

r c c ei p t s i s s r r e d to thcrtr.
l l e c t r n c i l et o t a l s t r b s c r i n t i o r ld u e u ' i t h c o l l e c t i o n s a n d a r r c a r s
\ \ , . f . 1s a r n c .
Clreck suhscription irr arrcArs to etlsurc rvhether alr(\lttlt
irrecoveritblelias becrl *'ritten off.
C h e c k a d j L r s t n r e'nut.l r . t . s t t b s c r i p t i o rne c e i v e d i r r a c l v a n c e .

f'ront Services l l x a r n i n et l r e i a t e c r i r c r i a e n l i s t e di n r u l e s l b r d i t f c r c n t s e r v i c c s
provided tc likc sporls.su'itrinting pool rtndreslatlrantetc-
ntenthers (ii) llrantinc rvhethcr clrzrrgcshas been recovcred fornt menlbcrs
u . r . t . s p e c i asl e r v i c t : sp r o v i d e dt o t h e n l .
(iii) Vc'ruchrevenuefortn sale of cigars,rvines etc.
.'.
Purchuses t r) E,xanrineu'hethcr pa)'lncllt rv.r-t. different sports items &
firrnitureetc. has becn nrade after proper sanction'
Errsurethat bulk ptrrchasesof food itenrs. sports rnaterialetc.
have becn made fronr approvedverrdor.
check entriesin cash book regardingpayrnents on accoulltof
purglrases,
Adntinistrative , (i) rvhethersalary to staff has been properly calculated&
E,nsure
expenses I for.
accounted
check pavmentstowarcls phone& electricity etc. rvith copiesof
b i l l s r e c c i v c db v c l r r b .
C--ompare variousexpensesrvith t!1t ofprevious ytll
Attend ph-vsical verification of stock conducted by the
nlanagernetlt.
(ii) F x a t n i n es t o c kr c g i s l c r .
(iii) C h e c kv a l t r a t i o no f c l o s i n g s t o c ka l s o '

Other asse/s& ( S a m ea s i n t o P i c1 2 . 3 )
lisbilities

l2"6 AUDIT OF HOTELS

(l) asperthe
St"Jv iii" pi""iii"iioiapplicablestatute
Prcliminary
(2) E,xaminethe internalrules & regulationof hotel'
of any important
( 3 ) Study the minutes of meetings of governing bodl' to gain knowledge
purchaseof cars etc'
deciiion, which may affect the accounts'For e'g-
(4) Evaluate the systemof internal controls'
r 5 \ obtainlistofaccountingrecords&accountingpolicyadoptedbythent.
 I
t
i60 1udi t ing tu td ..1.ssur
un{:a C h a p "1 l I
lleccipts Room renis/ solcs (i) S l r r r i rt l l r i l r , \ c ( ' t r l ) i t n cr\ c p o r tp r c p . r r c t lh y t l r c m a p l t t c r n , J r . ! r
(ii) I : r r s u r ep r o r r c n r e c so f b i l l i n g . A r s o ' e r i l v w h e t h e ra p p r l r p r i l t c: . ! r r : :
t
h a r c b e en c l r u r g e cal c c o r c l i n g t o c a t c g o r r . o fr o o m s - C
(iii) c l r e c k r v h c r l r e rb i l l s l r a v eb c e n r a i s e d t o a l l p a r t i e sl i s t e d i r r g u e s t
r c g i s t e r .l n c a s e i t i s r r o ts o ,o b t a i n I l e c o n c i l i a t i o n - t
(i.') lf receiptsare in fbrcis. currenc),!.,nsure compliancervith lrt.N,lA.
(r') Vorich reccipts l}orn roorn rents. .,\lso ensure their correct posting
t
i n r e l e v a r rat c c o u n t s . t
(r'i) S p e c i a la t l c r r t i o ni s g i r e n t o r c c e i p t sa c c e p t e dt h r o u g hc r e c . l ci ta r d s .
R asltt tt ru n ! I nt'o tt te (i) Iliarni^ea tc* ultti issired
rc,ci,storne.s
to
t
tt.,"i,]iir...rr,r,,,",,,
""rii"
( ii) P e r f o r ' c o n r p l i a l r c e p r o c e d u r e s t o c h e c k i n t er n a l c . n l r r , i r , , i , t
restaurant.
(iii) C h e c k a { - c v ,b' i l l s u ' i t h o r d c r b o o k s t o e n s u r et h e i rc o r l e c r l r t : s s . t
Olltcr Irtcomes (i) l n . o t . , h o t e l p r o ' i d e s b a , r q i , c tr r a i l l f i v a i i o u , l u n . t i o r r s -s t u d v t
lari ff strrrct rrre
(ii) E n s u r ec o r r c c t n e s sb f b i l l i n g F o rl e t r i r r go u t b a n q u e th a l l . t
(iii) In case spaces have bee. let out to shopkeepersor travel agencies
etc., check agreelnententeredinto rvith them.
|!
(iv) vouch collectio.s from aboveand cnsure their correctpostings. t
F;fu;;l L Purchqse ,rf
Various ilenLs
iij c,""[ uuu'o'.i'uti";
i;; il;;M;; ..,i,i;;i ;;;ii;; f;irJ,r,.u*,og"u,
t
linens,crockeryetc.
(itl v_9:'_.1paymcntw-r-t.sanrervithcopiesof bills issuedby vendors. C
t. i; it,i (i) TestCneckr"* r"r".y ;"yn-,;'r;;,iiuJ" ;; pil;;;"i iLrr l"itn
entries in cashbook. C
(ii) Regarding casual labour, check attendance records & rvage
payment registers. Also ensure adequacy of internal controls over
|l
this areato rule out possibilityof durnrny labour. I
(iii) comq1ry paynrerr to staff rvith th:rt nrade in previousperiod (ARp).
J. Tares (i) Hotets;h;;s" uu'iori i;;t li;; .rrto"i"., i;;il;;
I
i;.;*l*.
s c r v i c et a x c t c
l|
(ii) Ensuretlrar same has beendepositedto authoritieson tirnely basis.
4. Commissiorr (i) Nornrally hrtels pay cor.mission to various travel age'ts for I
bookings reccived through them.
I
(ii) l n s p e c tt h e a g r e e n r e net n t e l e di n t o r v i t l r t l r e m .
(iii) Check rvhetlrerpii)nrentsha'e bee' made as per agreeine't. I
(iv) Ensure appropriatenessof accour.rtingof commissir:rnirr coryect
account and period.
q
5. Expansiott (i) Ensure
'ut,"tn".roo'iiuJJiiiori
;rt;;;;; / -";.. to r,orci .l
Expenses "Joilionu
buildings (cci'struction of new health club etc.) have been properly
.a
. (ii)
i
l
capitalised.
Horvever, redecoration & daily maintenance expensesshould be
c h a r g e dl o r e v e n u e .
',
: (iii) Vouch pay.nrents r.,,ith respect to it. Trace entries in relevant
u!!oul'lr-

rl
(
 SStcciitlAudit r 6l

As:rets rtiitt irr"ti risiriil

i::,',r* (i) C i r - ; k , i l t: t l r " , u . i . , . . i i t ,r, r rr c i ir o d sa te c o r r s i s t e t r t iavp p i e o .

(ii) stock taking.
z\ttcnd plr;-'sical
(iii) E n s u r ct h a t s t o c k sa r e k e p t u n d e ra p p r o p r i a t ca u t h o r i h ' .
Caslr und foreign (i) l ' l r - sr i c r l l - rc l r c c kt l r c c a s l i .
curreilc_l' (ii) [:nsurc application o{- proper conlersiorr rate in case of foreign
currenc\'.
(iii) O b t a i n B a r r kr e c o n c i l i a t i o ns t a t e n r e n t .

I r:*[riiili,:s I. Littttts (i) l r r c a s c l r o t e l l r a s r u f . n n n y f o n g t " i n , l o a n f r o r r r b a , , k .i n r p e c ii h e -

lclanagreernent.
(ii) Chcck regularity of pa1,1ne1tol interell chalges,
2. Other (i) Clhocku'hetherall liabilities have been taken into account.
Iiabilities (ii) Fnsure whether outstanclingexpenditureshas been properly shorvn
as liabilities.

e 2 . 3 A T J D ITOF P U B L IS H E R S
As usual

Inconte V"ii.ritn"."."iptr*...t i"ia.

sale
""*u"i.iu""t properly adjusted& not shown
Ensure that books sold on approval are
as sales.
ln case books have bcen distributed free of cost (Sample copies),check
authorisation.
Sirnilarly clteck authorisationfor discount on sold copies.
__.-(iu)
Income from 1() In case of publication of magazines& newspapers,a major sourceof
advertisement income is through advertisentent.
.
. (ii) E,xarninebills raisedw'ith subsequentreceipts.
To Autlrcrs lnspect agreemententered into w.r.t. mode of computations& payment
of royalties.
(i i ) Vouch paymentsmade to author's rv.r.t.royahies.
(i i i ) Trace correspondingentries in cashbook.
(iv) Auditor ma1'seekconfirmation from authorsas well.
(v) If any advance has been made to the authors, examine rvhether theseare
in accounts.
properly ad-iusted

A ssefs & Attend phy'sicalstock taking conducted by managementw.r.t. stock of

books.
I ia trili t ies
: (ii) check rvhetlier these are shown in financial statements at a proper value.
: /.''\
(lll) Special atterrtionshould bc given to internal controls w.r.t. movement
of books.
Others i In usual waY-
titttittes ; fil If any casehasbeenfiled againstclient for breachof copyrightasat Bis
date, check adequacyof disclosure in financial statements.
(i i ) In this case,he may seek expert's opinion as well.
 I
t
r62 Audi t irtg and,4 ssururtca t.,fixp" ! 2
t
12.8 ,.\UIItrT'OF HIRE PURCIIASE COMPAI.]Y t
Ilrciri*itr'rt (i) O b t a i n k n o w l c d g eo f b u s i n e s si n u s u a lr v a ; , . (l
"
(ii) Special attentionis giverr to the provisionsstatetl in MOA and AC),,\.
(iii) Understarrdthe nature of llire purclrasetrzrnsactionas well as the accr.'untirrg
tt
treatrlent adoptedby client fbr the sanre.
t
(iv) Note: - Hire purchasetransactionis one u'here
- Possessionof goodsis transl'erredto purchaser,
t
- On paylnent ofjust a parl of'tt'tal price C
- B u t t i t l e i s p a s s e dt o h i n r .
- ;
O n l v o r r f u l l D a v m e nol f b a l a n c ei n s t a l m e n t s .

Examine hire . (i) Whether theseare properly dated& signed by conccrnedparties. t

! : ' ii t ' Ch ; 1 s C
(il) Ensure the terms & conditions speciliedthcrein specificallyrv.r.t
;
;!grcelnent - the assetin question
- hire purchaseprice C
- no. of instalments t
- amount of instalrnents

Purchase of Asset (i) Check rvhetherpurchaseof assetsis properly authorised.

t
( ii ) Vouch paymentmade for the same. C
(iii) Trace entriesin relevant ledger.
(iv) Ensurethat client has valid title over the said asset.
C
Examine Hire (i) Check u,hetherpayments are regularlyreceived from the hire purchaser'. C
prlr{:hase i (ii) E,xaminewhether instalnrentshave been properly apportionedbetween - C
transaction (a) Principal&
(b) lnterest
I
, (iii) Examine accounting policy adopted by the client to ensure whether these are in I
accordancewith generally acceptedaccotrnti ng principles.
. (iv) Check adequacyof provision for doubttul dcbts. t
Repossession of I (i) Sometimes,due to non-paymentof instalrnentsby hire purchaser,the elient may I
t"possess the goods as per agreernent.
goods ,
; (ii) if anl'-
Check valuationof goods repossessed, I
: (iii) V e r i l y s e c o n ds a l eo f t h e g o o d s ,s o r e p o s s c s s e d . t
t
12.9 AUDIT OF LOCAL BODIES
t
. t. A rnunicipalitycan be de fined as a unit ol'local self-governmentin an urbanarea.
', 'local *
I
2 self-government'ordinarily meansthe adrninistrationof a locality a village,
. a town, a city or any other areasmallerthan a state. I
, :. It raisesits revenuethrough local taxation and spendsits incorneon local servrces.
I
t
t
t
s
C
s
;
 Speciol ,,ltalit
163
Budgetary
n-_ - -,
t t arL<taalr a: ir'et""ers
:J;flil:T:Iilff..|"1"'"'n'in;ng ori^"or-,i
,",.,nnJ
tr,"
'I'he
objectives of local bodies
buclgetan,procedurearc:
ftccngal]6\.t\\ Dl . Firrancial,iccountabiliry,.
Or:{f \'l
)t
'(
ftouL
L/
. Conlrol ol-expe,nditure.
ancl
,,-\\,t)."! |,,,.1l pr.,.l,tr.
-^. l o c t t s r r rc t l r a l l l r r t , J sa r e r r i s n . l r - . t , * ^ . - . _ .
| r and rnonef is spentin accordance
\ ; ,, d b oi' \Pg' y\'frtut 11i u'iih rlrenricsrncrr.*.]i;,tii:"0
' | .E{pt'nditttre
\ N'tatlers
of regurarrevenues.
, , o i.,1plr { ' (itnlrol an<lexpendiru.",or" g"n".^rry
to the executi,r,cs
lor exarnple, a"tesured
.o,u*irrinn"rs. Thus,it
\ rvhetherexpenditurc sh'uld bJseen
. is w,ithinlimits.
. Accourtting
tv,tunicipal
b , Systenr
accounrirrg,yii",i; ;;;"tit
k"pi ;; i; i1," ryrt.rn.
-
"urir
b -,11dit, 1"lreimporr",ii"t,i""ti".sof
o,e,
",,.lit
b rhcccnrent
arrdpreserrtarion
of nnanciarsraremenrs;
rrcrr!ldt surteme
fl :::::::::j::"1T::ss:lf andweaknesses
b i3 ::::::: ::::lr::-ngrrrs
on rtreadherence
orsysterns
of nnanciar
contror;
to tegatand/oradministrarive
requiremenrs;
b i:l ::::::: uponrvhethervatueis being fuuy
received
luu slttEllls;

. )i] on money spenr;and

(e) .,"^:.:::::
t detection oferror, fraud
t'-
-
and rnisuseofresources.
*:r.!::j!"e Prelimincry , Auditcrsho.lciouini,,ill;
t , functionsancl financial sratus
i;i;;;;;;;-uuort ir," constitution.
local bodv-
b : Understqntl
surn.;"ni
"f.;;;;.b*

.' r.n"*r"Jg""il;;,,r'"a
b"ds",;il-;;;G
t , jinancial
, qdministration
.
Srim
t The auditor should obtain.
budger as it is
complete knowledge about
.an importantioii or n*".i"i prl",ii"g
the

b : Vouch income a l -> The revenueiterns

control for urban local bodies.
""A

D . n.(tr
! and etcpenditure
i
:-- ;;tl";i;J;
public places,grants,etc.
properfy tax, collection
!"q
t \-\' \ l .
.t\ , i,
\ t- . . . I t,
\ t:
I
The,cxpenditure
may includesalaryand wages,
: employees, rent, printing allorvances to
) and' stationery, repairs
f. ntarntenance.
etc. and

t - I J e s h o u l d v o u c h i n c o r n ea n d expenditure account in
) manner. the usual

I VeriJicalion
ns.rets
of , .
ond ;
Assersrnayconsisr oi lo,.o,;;iilidr, ;i;;; ;,,; machinery,
v e h i c l e s .o f f i c e c q u i p m e n r ,

P
f u r n i l u . " u n ' df i n i n g s .e t c .
,tig,(itities . Reserves, long_termand short_term
\ i' b\"'l loans and unutilised grants
I \,''.\, -
a r e i r r c l u d e di n t h e l i a b i t i t i e s
side.
:'
b --T:
_ __
:
;
verification of assetsand liabilities
usuallnanner.
shouldalsobe carriedout in

b ruciirreporr Fr""rr1F";;;;;ei"i." onnnun"ilr

;t;i;;;r. H" ,h;;iJ;k; .;;;;;;,"
I __,l.olp..tto_ns
of budgeted and actua! figures. ,h"

I'
)
I
I
I
--I

t
.,1wl i t i n,qu rtd !j-ss rt,'!! 9 \ (-hap. I I I
l6-1
t
r2.10 AUDI'I Ots LEASING CON{PANIES
-l.essct."
t
IVIe:rning l-""t" ii n.o,lt,,i.li f.rctrveen the'Lessor'*'ho is legal ttu'ne'rrti-titc assetancltlre
r v h <at c q u i r c st h e r i g h t t o u s et h e q r e c i f i c a s s e to n p a 1 ' t r e n o
t l'lrxed rentals. f
(u) Operutittg Ietrsc:lt is a leasearrangenlclltuherc. iri retrtnt o1'rcttl.the lessr'rrlrllous
r ypes
the lessec-to ttsethe assetfbr a ceflaitl period-
I
(b) I-inun<:iol leasc: FIcrc, tlre onncrslrip of assct is retainecl *'itlr llte lessor bttt in ;
strbst:rpce.all the risks and reu'ards trl-olvncrship of thc zlssetare transferrcdttl lhc
lessce. t
' C o r n p a n i e s. ' \ c t , I 9 5 6 ' a n d ' R c s e r ' " ' eB a r l k o f I n c l i aA c t
Audit procedure E n s u r c t h a t p r o v i s i o n so f
;
have beeu contpiled rvith.
I
E x a r n i r t ec o r n p l i a n c er v i t h A c c t l t r n t i r r gS t a n d a r di 9 - ;
I
S t u d 1 ,t f i e M O A & A O A o f l e a s i n g c o n r p a r t i c st o k t t t t * t h c k i r t d o f ' a s s c t st l c i l t l
leasc-out. t
i.cnttreilf
to conllrrn ilctails sttch as arnotttttof lease-rentals,
Stucly lcase agreernents
leasc,dates of payntentetc.
t
a
Exanrine tlre Ieaseproposallbrrn subntittedb1'the lcssec. t
t
Check the board rcsolutionautlrorizingthe lcaseagrselllent.
I
C o p i e s o f t h c i n s u r a n c ep o l i c i e ss h o t r l da l s o b c e x a n r i n c d ' !
!
Exanrile the invoices for the purchirsesof assetsgivetl on lease and check rvhethcr t
the leasing colrtpanyhas proper title over assct-
Exarnine rvhether the lease-rcntals reccived frorn lessees havc beelr propcrll t
accountedfor.
tlnsure tltat transaction in regard to
'Sale and Lcase back' have been propcrlv T
identificd artd disclosedin Accounts-
Examine tfte accounts ol lesseesto identifu those from rvhom lease rcntals are:
C
overcluc.Revierv the action taken b1,tlre companyto recove: the dues. t
: l
Ascertain tlre adequacyof provisiotls for doubtful debts against lessees.
: I
:l
Examine the caseswhere the items given on financial lcase ltave bcen rc-possessed-
Vcrify tlre secondleaseor outright sale oltlrese itelns'
I
I
l2.ll AUDIT OF NON-GOVERNMBNTAL ORGAi\ISATIONS (NGO'S)
I
from
Background l. NGOs can be defined as non-profit nraking orgartisntionsrvhich raise firnds
members, donors or contributors I
rat
scl<:
2 - T h e y a l s o r e c e i v e d b n a t i o n o f t i m e , c n e r g ) 'a n d s k i l l s l o r a c l r i e v i n gtheir
obj ectivcs l i l<ei rnpartingeclrrcirtiotr, providirrg rneclic:al { trcil it ics etc.
t
agetrciers. I
3. NGO woulcl include religious organisations,voluntarY health and rvelf'are
hospitals,okl age homes,researchfoundations etc'
((lRY). !
4 . S o n r ee x a m p l e so f N G O s o p e r a t i n gi n l n d i a i n c l u d e C l h i l d R e l i e f a n d Y o u
U N I C E F , V i d Y a ,e t c -
or as a I
Legal form Non-Co"".nmental Organisations are generally incorporated as societies
trust. I
NGOs can also be incorporatedas a company under section 25 of the Companies
Act. 1955. t
f } j . r \ v , {) I,\r1 1r.t
r\l'rt,v: Y)}r'r' { l^ ,i,' t J. i 1r"e.d riff tr Q*.tn b,I
PT}'t I
tr) tt { - r .l
,3l,"l,;fu!.r".rnn, ,i i(VfI
rt'\ .r I tl ^IU
I
r-f,
n_r* U-tl "V! tNl { ' t L l ' i r ' ^ r } : i : r i l,u c.b. , n : . 4I
I

I' "i
\'l"J,r 'iu
\t
;

f
s
f,
J
Char Special Audit 165

'- t ' The rnain sourcesof iurrds include grants atrd dottations,fund raising progmmmes.
jOtot" ,,. " '!:: ,
aovertlsernents,subscnptlol)s,gltts, saleot product or publications,etc.
nr , ' lyrV
.' - . . - . ,r^" hv 'n- n r 1 e (
Uq' " ' Donations and grants received in the nature of capital receipts are shown as
. {^* n+,\
r'
1er.4 l i a b i l i t i e s i n t h e B a l a n c eS l t c e to f N C O .
Jl'

-) A r \ lvrJ{- -rl l i u } r : n
Ji r Thcse rnay either be in the forrn of corpus contritrution or a contribution torvards
reyglving.fund.
,a)

A contribution nrade torvards the capital or the corpus of an NCO is kt',orvnas

corpus contribution.

The grant towards a Revolving Fund is trsed to rotate the amount b1' gil'irrg
temporary loans from thc fund to other NGO or beneficiarieslor their projects.

Donations and grantsare also receivetlfor acquisition of specifict-ixeclassetsor for

.
runnir.rgsorne specific projcct. For example, it nray be receivedfor running flood
relief camp in cerlairr-arelr,
. , r,,''{ _ 0 _r / cjr/
: C:F''LQl\u\r' \
\ tir,'l' :r r , l: r'it sll Balance sheet': . 9p:Bub llund: The contributions/
grants received torvards corpus
items : ihould be examined with reference to the letters tiorn the donor.
. tne intercst income should be checked rvith InvestmentRegister.

. ' Reserves: Examine board resolutionsof J'IGO.

: .
i Ear-marked Funds. check requirements of donors, board
i resolution of NGO and ruies and regulationsof the schemesof'
i the ear-marked funtis.
i
' Loans: Examineloansrvithloan agreements"
i
; . fr*gO Assets:Vouchall acquisitionsI saleor disposalof assets
: in usualrvay'
includingdepreciation
. Investments: Check lnvestment Register and the investments
physically. Also examine that investmentsare in the name of the
NGO.
. Cash in Hand: Physicallyverifo the cashin hand'

' Bank Balancc: Check the bank reconciliationstatements.

. stock in Flantl: Attend physical verificationof stock in hand and
obtain adequate MRL for the qtrantitiesartcl valuation of the
same.

; Expenses ' Programnrc ond Project Expenses: Verify agreement with

' '
I . ..t,,,',ll"u donor/contributor supporting or project.
the particularprogramtne
t'l','^i
.b
,./
hul t\
\ , - \ fr -.) l))N .,: Vouch
voucn various
\ a t l o u s disbursements
c l l s o u r s e l l l t w-r.t. same.
, i,"
',-*
i''tlnl''.tl\\
g\t'{ n Other Expenses: Verifo that provident fund, life insurance
r$u' \,
premiurn, employee's state insurance and other administrative
, charges are properly accounted for'
 t
166 . 1 u l i t i n g t t n < l. . 1 s . s t t i ' L t' i t , {..hap" f i
I
Receipls (i) Conlribuliotts tttrrl (irants Jrtr pntjccts and progrununes: Clreck I
r.'irlr ri,rtr,r.c rtrri rrrrrrlc lr'ltPrs
:lgfeefXCn!S t(r r'rlSil!-e that
r e c e i v e chl a l ' e h c c n a c c o u n t e (f lo r E x a r t r i n er c l e \ , a nct n t r y r n [ ; n s :
ilrntlc
I
book.
(.ii) Receipts from ./uttd raisirtl; prollrilmnrlr: Vcrifi, in clctail tlrr
a
intenralcolltrol svstcrnanclobtairr confirnrationslionr the persor.r.
rvhoare respollsiblc lbr collectiorrol- funclsand nlLrdettf rccei6rt.
a
(iii) Lternbership I'cts'. (lhcck fees rcccived *,ith lv,lernber,shir_, I
R e g i s t e r I. { c c o l r c i l e f c c s r t - c c i v c dr r i t l i f ' c e st < .b e r c c e i v e dd u r i u g
the ycar. a
( i v ) S u h s < ' r i p t i u n . sl : x a n r i n e t l r e r t r * i t h s u b s c r i p t i o nr e g i s t e r i r r r r i
r e c e i p t si s s u e c l . C
(v) Interest onrl Dividcnrls: C'lreckIhe irrtcrestand dividends reLr.;r.,,..{ j
a n dr e c e i v a b l eu i t h i n r c s t n t e n t sh c : l dt l u r i n q t h ev e a r .
t
t
12j2 ,{UDI'T OF A PARTNERSHIP FIRM
(i)
t
llasics , l - l r c i r t t c l i t o ri s t r s u a l l .avp p o i r r t e r b
l - r l l t e p l r r l n e r sc i t h c r o n l l r c h a i i s o l : r t l c c i s i o r r

ta
- / AUUOir,\ed
r'll' \l- ( J F,
'.
JtUrl ,, .
taken by thernor to conrply rvith a conditiorrin tlte partnershipaereemerrt. t
. ^ r . . n J ,( i i ) l l i s r c n r u r r c r a t i iosrar l s of i x c r lb r t l r cp a r t r r c r s .
l) RW
*
\r"Y.J
\;1 p'"1'ntj/" iiiit
t 'itt'
The teltcr o{'appointmentsl'rotrlclcle.rrly,state
'flrelndianPartnershipAct,
tlre nature and scopeof audit. e
(iu) l9-i2doesnt'rtprescribcauditofapartnershipfirm.
t r J nl q y , a s l t 0 f ' u
t > v'-
. "
. (v) Before startiirgthe audit, auditor should examine thc partnershipagreementanli C
. notc the provisionstherein.
Advantages (i) Auditecl accountsprovide a reliablemeansof settling a;;ili; U"t*""ri- ih<: C
., Nclr' partners and thus,the possitrilityof occurrenceof a disputeamong thellr , . 1
mitigated.
J
-) (r h'"rtr,i'i*'l (i i )
.
On the rctirenrentor death of a parlner.ar-rditedaccounts constitute a nr;li:rbkr
C
DqoU\ evidence for cornputing tlre anlc)untsclue to the retiring partner or tr: li:s
) J+',.r!,9A tl Cigr't*
representativeof the deceasedparlner in respectof his shareof capital,profits and J
goodrvill.
- -/0..
J*ptl,ru $s./ ] ( i i i ) The audited accountsare generally acceptedby the Income Tax Departmentas tlre I
: basis for computingtlte assessableincomeof the paftners.
+ 7 m( 1ott"os, y ,'di'aloo
Y1r(iv) Audited staternentsof accounts are relied upon bv the banks when advancing I
*0lr
loarrs.
(v) Auclited statementsof account can be helpful in the negotiationsto admit a persorr I
as a padner
(vi) An audit is an efl'ectivesafcguard againstan1,undue advantagebeinq taken by a
I
rvorking parln_el: I
Considerations (i) Confirming that the letter of appointrnent.signecl by a partner,duly authorised,
cle arly statesthe natureand scope of audit. I
(ii) Stud;"ing the nrinutebook.
(iii) Verifr,'ing that the business in rvhich the partuership is engagedis authorir;eiJbv I
the partnershipagreenrent.
(iv) Examining rvhetherbooks of accountappearto be reasonable. I
Verifying generallythat the intercstof rro parlner has suff-ered
prejudiciallv [r1.an I

I
(u)
activ ity engagedpartner.
(vi) Confirming that a provision for the finn's tax payable by the partnershiphas been
made in the accountsat proper value.
(vii) Verifoirrg that the profits and losscshavebeen divided among the partners in their

I
t
'{

rl
r{
q
C h ; , r. l i ,SpeciolAudir t61

l2.l t r " . r r l ) [ ' 0I,'

l ' SNIALL C0illP;\NIES

.! I t i s a c l v i s a b l cl b r t h e a u i l i t o r r o s u b r i i i t i o i r i " i , l i ; . r , i o , , a r o r e c c i r e
;ur
i, ,ti.rlgf a c k r r o u l e c i g e r r i e on ft ' t h e s c o p co f t h c i r r e s p o n s i b i l i t i c b
s o t h i n r e s p e c ts i t l r c u L r d i l
r
r A,. ri r ,r. i.'r .ir'ir('tl'1 , :l'\ and anl adclitionalrvtirk to be trndertaken.
t .uY- \ :
T h i s s h o u l t l s u b s e q u e n t l l ' b ec o n f i r r n e di n r v r i t i n g . p o s s i b l v i n t l r e e n g a g c p r e i r t
letter.
Ipt-ernal control I A t t c il l r r r ss l t o u l clla k e c a r c l o [ 1 1 , , *t r r l l r ed i r c c t o r Sa' l t ( l l t i ( ) rt rl t c i r l l , r t l i l r u sr r r rl l r r .
s y s t e n lo f -i n t e r n a lc o n t r o l .
a
S h o r t c o r n i n g si n i n t c r n a lc o n t r o l a r i s eb e c a u s co 1 - s r n a lrlr t r r r r b eorf c n r g r l r . r r , e e s .
t
T ' l r i s r v i l l r e q t r i r et h e r n t o i n c r e a s et h e a r n o u n t o f t e s t i n go f t r a n s a c t i g r ras n c l1 6
extend the proceduresfor the verificatiorrof liabirities anclassets.

3. Le{.ier oi' I L-etter of-rcpreserrtationon tlte conrpanl"s lettcr head aclclressecl to tlre rrrdit,-rr:;
; i l Lr ' . s l s ( : t l i t t n S should bc obtained.
a
T'he ptrrposeof such lettcr is to place on record representationo1-nranagerllent on
significant nrattersaffecting the account
For example, it can be obtained for orvnerslripof assetand basis of valrratiorrancl
d i s g l o l g r go l $ r . q ,
l i l b i l i t i e s a n d c o n r i n g e n lti a b i l i t i e s .

t 2 1 4 AI'DIT OF INCOMPLETE RECORDS

r r ' . * r r :i t l t t Those accountins recordswhich do not satisfy1herequ'irernerrts
of being proper booksof
i ('r,:rrr,'tli,- account-

Meanirrg
Irr'. riilgilete I accounting recordskept by the entity on single entry system,or
' accounting records nray have been destroyed by fire, flood, etc. or seized by
ft:{ i,t tis-
insl:r nces G o v e r n m e n ta u t h o r i l i e s .

r tlrt l. Request the , ' lf books of account have been maintainea o,i sinste e,lt;
" management : system, the auditor should requestthe client to copv-crtthem
1 r l , ' . t : e l t t r e si f
to convert it to , to double entry basis.
f(:,.,.r, i {Iri Afe
ttouble entry : ' In case, books of account are not available for audit, hc
i n e * r n p l e t ea t 6asrs ' should make sure that management reconstnrcts the records
.:licll{':-: site. , from availabledocumentsin hand.
i

: . For example, trading transactionscan be accounted on the

: b3til gf ti,-ll9p_ary',.W9!IXgJigs_a1d
bal1lstatements.
Check opening , Ensure that statenrentof af'fairs at the beginrii"g of the year is
{a!e of affairs , preparedand all the accountsare openedirr the ledger.
j
3. Vouch E * , t " . r t i re
l v i d e n c es l r o r r l db e o b t a i n e dt o c l r e c ka r r t h e n t i c i rovl '
lrnnssclions various transactions.
: ' Examine the relevant docurnents and perforrn analytical
'
orocedures
' r Confirmation lrom debtors and lenders should also be
. obtained.
:
: . To vouch expenses,bank statementscan be used.
'
: o Same ways,
income can be traced from bank statements.
 i
t
. I i t.i i ; i t i :: t ut t i .'1,\.\t tr ail r' ( t-hap.liJ
168 !
t \:c.ijlcatit rr o1' asset:; :.rnd liabilitic,; {lall lt,: dtine i:r
4. li:riliuilitttr tt-l' !
o.r.tc/.f tt tt t! pcr'lirrttii ttu llllpro;.rlilr1'.:llr( )ccd tlrcs.
licbiliries " l ; t ) r e , . . a n t p l et.o r c r i l - r i r r . , c n t o r 1. t h c : i i r t l i l c r c ; r n r t l i s e r ' , et i r i r 1
l r l r r : , i c a l v c l i f l c a l i o r r c l r t - r - i c do t l t t r \ ' t h ' t i r t i t t r l t i l . t ' t t t o t ltt), b t : t i t L
stock register atttl lllatlascnlcllt re pl'r:sr:lllation lctter- t
. \ n r r l v t i c a l p t - o c c r d t t r . ct :'lsi l t a l s < tb e t r s c d t r i r c r i l ' , ' i t r v er t t c r )
., cnn tt.: er.atttiitccl on the llasis tlf- llreI iorts 1car":'r
t
\;('upitai
\
l r t r r l i l c cbl a l r r t r c ts l t c e t . i l ' i i r l r i l a b l t . e
. l l l r r k l g l r t t c a t t t t c c x r i t t t i r t c c tl 1 ' g b t a i r r i t t g c i r t r l l l t t t r l t i t t nf r , : t r '
lllrrk.' t
4. Audit opiniolr O n t h e t t a s i s t - . 1e- v i t l c r r c : ec c r l l c c t c c lt u t l c r t r r c l t t : . i i l t i st i r i t v l t t t l t e r e f l ' , r r n . t l t c a t t d ' 1 r , , !
s l r o r r l t fl g l r r r r r l : r t lt1'j : 1 ' p i r t i o t t .
lf c a 1 l l o t g c t s t r f f i c i e r r t a n ( l a p l ] r o ] ) r t a t c e v i ( l e t r c e s er c t t l t l t et i l c r l , r r i l i t i : 1 :
[c
C
;-;1
procedures as abor.e,lrc nnr provitle a qrralilied atldit report ttr isstte I iliscl:rinrer
opinion. r) F${!. N,1 '1;'K
e
C
t
T H E ORETICAL QUESTIONS
C
96 May Mention the irnporlantitems to be exarllirreclby the auditor in tlte iltrtlit of a Ilospital. C
Leastrrl',
96 Nov What consiilerationsare to be kept in rnind u,hilc conductirrgauclit of tlte leasingtrans:rctionof a.
Company? f
institutrort-
M e n t i o nl h e i r 1 l p o r t n nl ltt a t t e r sr e q u i r i n gt h e a t t e n t i o no f t l r ea r r d i t o ri n t h c a u d i t o l ' a c h a r i t a h l e
97 May I
97 Nov B r i e { 1 ys t a t ct h e s p e c i a ls t e p si n v o l v e d i n a t r d i to f a c l u b '
98 May Me'tio1 the inrporlantiternsto lrc erarnined by the auclitorin the nudit of a t{ospital-
f
audit of'a cinettrahall-
98 Nov Statctlre specialpoints that you as an autlitor r.villconsiclerrvhile coitductingthe I
Institutiort runnirlgti
99 iVtay Mention the specialpoints to be cxarnincclby the auditor in the audit of a Charitablc
dispensaryi1 a srnali village rvhich chargesRe. I per patient per visit irrespective
of tlre disease. I
of a club"
99 Nov r s a n a u d i t o rw o r . r l dc o n s i d e ri n c o n d u c t i n gt h c a u d i t
i V l e ' t i o nb r i e f l l , e i g h ts p e c i a lp o i n t s1 , o r a t
00 May M e n t i o nt h e s p e c i a ls t c p si n v o l v e d i n t h e a u r l i tt t f a n E d L r c a t i o n aI rl . r s t i t r r t i o n .
institution runnirtg !
00 Nov Menti.rn the special points to be exarninedby the auditor in tlre audit of a charitable
Accountancv Clourse and rvhich cltarges orrly lls. 500 per
hostel fbr stLrdentspursuing the Charterecl
t
motrth front a stuclentfor his lodgirrg/boardirrg'
l o o k i n t o u ' h i l e a u c l i t i r t gt h e b r t o k l' r f : r f,
03 May M e n t i o n a ' y e i g h t s p e c i a lp o i n t s ,u l ri c h v o u a s a n a u c l i t o r v o uk l
parlnershipfirrn.
lnstittrtion'?
I
04 Nov W S a t a r e t h e s p e c i a ls t e p si n t , o l v e di n c o n d u c t i n gt h e a u d i t o f a n B d t t c a t i o n a l
05 MaY W h a t s p e c i a ls t e p sr v i l l y o u t a k e i n t o c o n s i d e r a t i o ni r t a t r d i t i r r gt l l c
a c c o u n t so 1 3 l l o t e : l ' ? q
il llor R/hat spccial steps will yoLr takc into consicleratic'rn
amr-rsement park'?Mention An\/four points specific to the
in aucliting the receipts fiorn entry fees of an
issuc' q I

I
I
 Chapier 13
GovernmentAutlit

t-? I INTRODU(]TION

f ,rrr'r','rrrtr*nt l. G o v e r r t r n e nat u t l i t t n e a t t s
.Meaning
,'!"rqr!it . t h e s y s t e r n a t iac n d i n d e p e n d e net x a m i n a t i o n ,
' e n d o t h e r o p e r a t i o n so f i r p u b l i c c n t i t r ' .
o f l l n a n c i a l .a d n r i n i s t r a t i v a
. f o r e v a l u a l i n ga n d v e r i f u i n gt h e r n .
Its objective is to ensure the accorrntabilityof the governrtrententitl in resp';ctot
public revenueand expenditure. '
3. for
Alriiitor presetltsa report containing audit lindings along with recon.rrnendati','ns
future actions.
4. In India. tlre {unction of governnrentaudit is perlbrrned by Comptroller and Auc'litor
General. r' n fl 1

C-OMPTROLLER & AUDITOR GENERAL _ CCTtAiNPTOViSiOTTS

t I i , i r i rt r t { n l e t r t

Itemoval or , . He carr be removed from the office only on the ground of proven mis-behavitluror
itrcapacity.
it":,rlitlntiOn
t'),t '
: . Moreover, he can be removed fiom office only when each house of parliarnent
/ '.V L '' i
:r i.: ,,/c\'i. . decidesto do so by a majority of at leasttwo third of memberspresentand voting-

,-
. He can resign any time through a resignationletter addressedto the Presidentof lndia.

!dernunerati;;
. u"p"lo i"l"'v;a;i;;i;;;i" tn"tof" j"ae".itr'" S"p'"'; '';'
H"tr-,^ri
; r
" to make laws to determine salary and other corlditionsof
The parliarnentis competent
serylce.
'[
*t'igt:' H" ,t ['rJ ;ffi;" a;;;i; t;;;; ;.;p t' "e""ibl v"u'i,*r'i"n"'"iis"u'ri"i'
"ii 'I'erritory
gioni*,"u trntl . l-le shall cornpilethe accountsof the Uniorr/State/Union and
oi iiiitti
Presi&nvGo'iernor/Adniinistrator
,unitt accou,tts , submit those acsounts to the
tlomptroller &
. resPectivelY.
Auditor General
1'

To autlit receipls l-te shall audit all rcceipts and ".p""Jitrl. of ony body,
: *hich lras
the Consolidated Fund of
and expentliture r beerl substantially financed lionr
, lndia/State/UnionTenitory'
Note: A body or authority shall be treated as substantiallyfinanced if
the amount of a grant or loan itl one year is greater than;
( i ) R s . 2 5 l a k h s ,a n d
tota]exnenlltu1 b9t/
9!th1----------------t
ltr)ls-o!2ille
169
 t
t
170 ,4ud i I ir g t tn t! :1.s.s
u r rrn c e ( . h a p .i J I
t 0 uuQrr NruilIS i l e s i i a i i a r r < i i r , s l ) e cp i l uj cr J ) ( ) s ic( r i r rtr) r g r a r r u
r ircll [() iiir\ blilv cti,,:i t
urril !ouns t h a n a f o r e i c r r s l u t c ( ) r i r r t r : r n r r t i o n aol r g a n i z a l i , n . o r ! r . r , . f i l r r - "
( ' o n s t r li d : r t c i lF u i i dr ' 1I'n c il l r r 'S ta te r ' It n i o n - Ic r r i t o n , . I
To uudit rcc(ipts F I e s h a l l a i r d i ta l l r e c c i P t ' P a ra b l c i r r t o t h c ( . o r r s r i l i t l a t cFt lr r n do l I
rll ttttiott or slules I r r d i a ,S
/ t a t e ' l Jr r i o nl - e r r i t o n .
71t uutlit H c s l r ; r l l r r r < llil(r ei r c c o u n l 1s , 1i l . 1 g ; : r r r t :l l t r c l .k r ' p r i r r : r r r 1r , l l i c e , r l
I
tt((()tttrts 0J
strlres utttl stock
c l e p a r l r n c r tr lt{ ' i l r eu n i o r r( ) t 's t i t l r .
c
7'o audil ( ' A ( i s l r t r l l( ' \ ( r c i s cs u c l r
1 , , ) \ \ ' ( , ra' )n ( l t r l r 5 g 1 1s, u. r . l lr l u t i ( ) sx . s! ) e r1 ! l (
t
tt<'t:otttttsof p r o r . ' i s i o t rosf t l r eC ' o r r r p a r r i eAse t . 1 9 5 6i n r e l a t i o r rt o t h t l ( i r ) v t - : r r r r i r r r r ' !
Gttvernntenl cotttPatti.: 1 r 1( 1 r 1 ' J r r r 1 ; 1 1 i 1 r 1 1 ' ' .
t
(,'orrtpttniesond
t
Corporuliotts
To uurtil und t ' A i ; s l r a l la u c l iat r r t rl L ' l ) r ) r t t
report (l) A l l e x p e n d i t u r ef i o r n C o r r s o l i d a t e dl . - u n do l ' l n d i C S t a I e / U n i c ' r r C
1-erritory.
( 2 ) A l l t r a n s a c t i o nosf t , J r r i o r S r t a t r ' r e l a t i n gt o t h c ' { , ' c r n t i n g e n c r t
F ' u r r d sa n d [ ' u b l i ca c c o u l r t s . '
(3) All
'l'rading,
M a n u f h c t u r i n g ,P r o f i t a n d [ - o s sa c c o u n ta n d B a l a n c c
C
Sheet and othersubsidiary accountskept in any deparlmentcf ihc
lJnion/ State.
t
: -
Pou'ers of ( a ) He can inspect n i o l . n r r i r t u r r d c r t l r e c o n t r o l o f t l r c l j n i c r r , r r -I , t r t r C
""i' "in
Comptroller & Government.
Auditor General (b) Ile may lequire that any accounts.booi<s, papers arrd otlrer docrrrnenls.which are C
Scc.619(3)and (4) rcievantto tlre transactionsunderautlit, lre sent to specifiedplaces. t
(c) He can put such questions.as he nrayconsider necessary,to the person i'r,:har:le"
(d) He can call for sucl-rinforrnationas he nray require for the preparation of any'account
t
or report. t
(e) Supplementary Audit
CAG rna1.corrnrent upon or supplernentthe report submitted bv tlrc professional
I
auditor. I
. C A C m a y i s s u e d i r e c t i v e st o t h e a u d i t o r s i n r e g a r dt o t h e p e r l i r r r r r a n coef t h e i r
function. I
' so authorized rnaywell be the atrclitorof the cornpany.
Persor.r I
. arrilit reportrnay be specified by CAG.
The form and content of supplenrent:rry
. SupplementaryAuditor rna)'concentratclltore on efficienc-vaspects
q
a
The personso authorizedis lravirrgsatne powers as auditor. t
a
Horvever, the directors are not required to conrment on any adverserentark
containedin the supplementaryaudit report.
I
Sutrmission of , !-le shall submit his reporl relatingto the accounts of the Union or States to the President/ I
Accounts : Cotet-nor who rvill subsequentlylay them before the ParliamerrVstateL,egislature.
!
,l
I
T
I
q

I
 !1t
( i otc rnnr t'rtt Au{l i l.\ l!t

A ' i } ' I ' ! ' O FV A R I O U S I T E M S

g . o v c r t l t n c t l tc x p e n d i t t r r ' ,i:i.
, r r . a u d i t o r o x a n r i r r e st h e l i r l t l l n r e n t o f c o n c l i t i r - r rlrisr r i n c u r r i n g
i \ ' o l v c se x a n r i n a t i o no f l t r l l o u i n s : -
r a t A u t l i t o f r u l e s a n t lo r c l e r s
(lr/ ,\trdil of sartctions
( c ) A u d i t a g a i n s tp r o v i s i o no l ' l i r r r t l s
(d) Proprieryatrdit
ic) I'erfo1ntancc
lltlit
Auttit of '1. I t s o b - i e c t i r , c i s t o e l r s u r c u ' h e l h c r tel ixep e n i i i t t r r e i s i n a c c o r d a n c e r v i t h :
'tttles ancl' ( a ) r e l e r a r r tp r o v i s i o n so 1 ' t i r eC o r r s t i t u t i o na n d o f t h e l a ' " r ' sa t t d r t t l e s .
ilrders/tludil '
(l-,) tlrc rtrlqs.rcgtrlltions issuedbv CAG.
crl Regularity ,.
(c) tlre orcicrsof, or rules tnaclcbr'- any higher authoritt''
ond LegalitY i and
2 . l n t l r i s c o n n e c t i o n ,a u c l i t o rs l r o u l d h a v e s o u t t c lk n o r v l e d g e o l r u l c s
, .t x i ' l f { i ; f o l l o r v i r t g :
o r d c r su . r . 1 .
I,Ai '' i'*;' '
I (a) T5c porversto incur arrd sarrctionexpenditure tiorn the Consolidater-l
. .l'
, . ( Ftrncl/contingencyfund of India / State;
(b) I'lre rno<Je of presentatioltof claims agairtstgovertttnent.rvithdrarving
Inoncys frorn the ClorlstlliclatedFund, Contingency Fund and the
by'
flnancial rules prescribing tlte proccclure to be followed
govertttltent;and
'' l
r
.' . , t ' . ( c ) I { e g u l a t i n g t l . r e c o n d i t i o t r s o f s e r v i c e . p a l , a n d a | l o w a n c e s , a r r d
: pensions of govemment seryants'
: I "' b"'--'-----'-'

oj,, f. is to ensurewherherthe expenditure

iis ob-iecrive is:
,' au,iii
Soncliotts , (a) Properlycoveredby a sanction,eithergeneralor special'
t.
(b) Sarrctionecl by authoriry). to do so.
which is authoriz_ed
' Thusatrclitorsltouldconsiderfollorving:
, 2
(a) I-{e should lrave knorvleclgeof the sanctiotringporversof various
' autlrorities-
' i
;
(b)
\",
Hc shouldexaminervhetherall sanctionsare adequatelynotedin the
--_ _
., t - :
: . Prescribedregister'
on a
, : (c) For petty expencliture,the signature of the competent authority
i bill can be regarded a
as sanction'
. ' . ': :'.
' expenditure:
Au,iit ,rg,i;ii,il, Its objecrive is r. cnsure rvlrethcrr6e
has been
, provisiitr of , @) ls made for the purpose to rvlticlr the grant and appropriation
. funds providccl
: (b) Does rtot exceedthe appropri
' -. '
casesof improperor
pr:iirinty , i. alloiJi,,g io piopti"t" au<lit,tlre atrditor examinesthe
incurred as per
Auttit : wasteful experrditur" Lu"n thoue,ir the expenditure has been
. i t h e e x i s t i n g r u l e sa n d r e g u l a t i o r t s '
b vw gtr,t . , t r of
may satisryall the requirements regularaudit,but nraystill
i,ttt i z. A transacrion
*rt lltr'1t;
{,u1,r;t be highly rvasteful.
but may not
For e.g. a building may be constrttctedfor running a school
used for tlre same purpose,resulting in wasteful expenditure
 I
I
t't2 I t tti i / i ; t :: Lrnil -.!.\.\lrru ii, i

'i. A r r d i t o rs h o t r l r rt r . . ' t oe x a r n i r i s r 1 ; l - i i rf l r i a i r c i a l
m o r a l i r v t . . ' rl ,o . k i n g i r rr i : { h e
u' isdorn.tl i tir 1irIncssantl econr..; rrr.,.rrl' tr.ansact iclns.
I
- 5 . N o l r a r t ia r r t l l ' : r s tr u l c se u nI ' c l l , i , . ci i p r , . rr e g a r c l i n g
t h e 5 t l r r r d a r t lc: ;i f l r r a r r . i a i {
proprictl .
, 6 . l l e r e .t h e i r r r ci {l o r s l l r - r r iel d
(a)
'fhc
r ; r r r i i r rtcl u r t : I
L " , - : r L r t l r t r r i t i cl rst r e r n ; r , l c i l r e expencliture* i1h
| !/' :;arrredegrce tti
p r i i t l c t t c c\ \ ' o 1lli l c r e r . ri s e i n r c s p e cr {
, of-lris o* n nr{)licr.
-fltc
(b) c x P c r r c l i t , , tics t t r ' lp t . i t t l ; rl l r c i c i i i , ; r et h a nt i r e ( ) c c i t s i ( , . r 1 {
dcnranr-ls.
_(c) N o a u i l r o t . i t re \ c r u i : t . si [ , 1 - , , .g, 111o - f s a n c t i o n i n ge x p s l i d i l u r st o p a s s
i'
t'; / & '"ll{"- ilri (
'.o1 ' ' f ' : ' i . , . c r ( l c r . r ' i ' i r i c hu ' r l l d i r c c t l r t , r i r r d i r e c l i -avc c n l L . t oi t s l r r , r r ; r e . l r a n t a g t
] , ,'ftll,n.
,..t. ( d ) P r r b l i c l ' o r c ' i s n o t u t i r i s c c rr b r t i r c b e ' e f i t
of a lxr.ric'r.rDe'rri,r, {
f , r . L r ,lti r ' l ,
" / s e c t i o r ro l ' t l r ec o n l n u r iri r .
Pcrfirrrn:rrrce l. l l c r e ' a t r tilt t t r t-I i e s t o c r r s u rtch l t . l r r \ c r n n r c npt r o g r i n n n r ( l:rsa v e
a c l t i e r c ,ril , , t
, Audi(/Iiull d e s i r e do b . j e c t i ' e - as t t h e l c * ' e s t c o s r a r r dg i * e n t h e i n t e n < i r : i r
benetrrs.
S c o p cA r r r l i t 2. I ) e r f o r n r a r r crer u < i iitu c l u t l e e s f f i c i e' c 1 , , e c o n o r n ya.n d c l 1 ' c c t i ' en e s sa u d r r !
. l. Performa'cc audit is an .b.jccti'c exarninatio*
:,
L, i[ l.
operatiortal Jterfrrrnrance.It sr:cks tg i,jentify oppoilr.il;tie"- {.er qrr;rt:ri
ol the financial .rriri
t
t'{l
. 4.
econonlyarrd cffectivcness.
Efficicncy audit
c
I t e x a r n i n L sr v l r c l l r c r :
. The various sclremes/projects
t
: are executed,arrd
i i l'heir operations arecarriedout
in cfficienr manltcr.j!rr{1 t
. T h e y a r e y i e l d i n g t h ee x p e c t e d
,
. 5. E c o n o n r va r r d i t
results.
a
i I t e x a m i n e sr v l r e t h e r : t
The government has acqrrirecl the financial, lrrrrnan and ph,v:;rcai
:
! resourcesin an econonricalrnanner, and t
i r Tlte sarlctioningand spendirrgauthoriiv
haveobsel,ed er:orror'y.
; 6. Effectiveness autlit t
: I t e x a m i n e sw h e t h e r :
,
;
Progranrmesand projectsare performing well.
:
j *_. _9y".1flgrge19!9bj99!iyes
ar9bei1gaghieved. t
Audit of I' Auditorshouldascertain
whethertheinterna!
controlsou.r fri.trui., ."""ipt, un,Jlrru",,r
Storcs And stores are well designed.nd propeily carried..t d.ring the year. t
2. Ae shoulctbring to the notice of the governmentany deficienciesin the system
Stocks
3.
'l-he of control.
audit of purchaseof stores is conductedin tlre sarnc rnanneras aud!t gf expenriitur'tr
t
4. The auditor hasto ensure that trre pricespaid are reasorrabrc. t
5' C:rses of uneconomicalpurchasc of storesancl losses due to defective r-rrinferiorqiralit.v
. stores are specificallyexarnined.
of I
6.
7.
J'he certificatesof quality and quantirygiven by expert shouldbe exanrincr_|,
Accounts of receipts,issues and balancesare checked regardingaocuracy. correclness
t
ancl
reasonablenessof balancesin stocks. I
8 " Any excessor idlestocksshouldbe specifically rnentioned
in thereporr
9 . Auditor should ensuretheir existenceby attending physical verificatiorrof stock" I
t 0 . The valuation of the stocks is also examinedproperly.
q
!
d

,l
{

q
I
 I
d
I
Chapter 14
t
Miscellaneous l
a
I
1 4 .I COM Pl LA'I'lON llN Gi\G ENtIIN'I
e
O t r j c c t i r . eo f . I o c o l l c c t . c i a s s i l l ' a t t ds t t t t t t t t a r i e sl i n a n c i a li r t l i r r r l l a t i o t t , t
Conrpilirtiolt . []i' r,rsing nccottrrliag erperlise.
Iirrgagcrucnt
t
Cornpulsor,l, . lntegtit\';
t
P r i n c i l r l e so f a
Corntlilution . Objectivit); t
I I t g l l g r ' 1 i s 1P' 1 . attd due care;
Professionalcornpetence C
. Confidcntiality;
C
. ['rofessionalcondtrct;atttl
.'fecl:nicalstandards.
C
'
C
Oplittnol Independe'trce

But if he's not indeperdelt, he slrould refer in Accolntattt's l{cport"

I
, lt
. Ilnsrrring correctness. cornpleteness and ieliabilitl' of financial tn
information gentrrateci C
Managenlent's
Rcsponsibilitl'
thc entity. C
. i \ 4 a i u t a i n i n gA c c o u n t i n gl l e c o r d s a n dI n t e r n a l C o n t r o l s .
t
' S e l e c t i n ga n d a p p l y i n ga p p r o p r i a t ea c c o u n t i n gp o l i c i e s '
t
' Establishing controlsfor saf'eguardingthe assetsand detectingfrauds.
. Ensttring conrpliancelvitlr larvs and regulation-
I
' Complete disclosureof all material anclrelevant information to the accountattt" I
Defining terms Accorrntsrrt slrould sendan engagenrentletter
listing the key terms of appoinfments to avt-rid I
n ri s r r r r l c r s l l t l tidr t q .
of eng:rgement I
a
l ' l t e a c c o t r t r l a nst h o r r l d-
Procedures Generul I
Proced urcs of businessand operations of theentrty
and evidences . Obtain tie generalknor.vleclge
I
' Be fanriliar .ivith Accoutrting principles and practices of industry in
wlrich entity operates. I
I
Understand form and content of financial statements I
Request managementrepresentlttionlefteron significant nlatters'
!
:!

l'74 !
I
I
I
I
I
(
 ,\"!i s<'t I I tt rrt ;;tis t75

It rocc,tlu rcs in l f i n l i i r n r a t i r i nl ) r o v i d e db v n r i i n a g e r n c nat p p e a r st o i r e

ercepti<ln:ri (i) irtcorcct -
c i r c u n r s l an c t s
( i i ) i n c o r ; r 1 ; i e t ct i-r
{iii) unsatis{ucton'.
J
t h e n a c c o u t t t a n st l r o u l d'
(i) obtairr N'lItl..
( i i ) p c r l i r r r nc o r n p l i a n c ep r o c e d u r e s .
( i i i ) v c r i f l , a r ) y n l a t t e r sa n d e x p l a n a t i o n s
J
l t e q u e s l l n a n a g e r n e nt ot p r o v i d c a d d i t i o n a i n f t i r r n a t i t ' n
J
I l- nrarragcrnentrelitseto p rov i cleadciititiniti irrfbrrrration
.f
! A c c o u n t a , , ts h o r r l d r v i t h d r a w f i ' o r r r e n g a g e r n e nitn f b r r r r i n ge n t i l y o f t h e

'f
!L (a) itle : "Accountant's Report orr Compilation of Un-zrrrditecl
[:inancialStatettrents"

i:.! ;. .; li (b) Addressee:addressedto the appointingauthority.

(c) Identit'ication of the financial inforrnation stating that it is based on the infbrmatir.ri
provided by the nlaltagel.nellt.
(d) When relevant,a statementthat the accountantis not independentof the entity.
(e) A statementthat the lnanagemellt is responsiblefor:
. Completeness and accrrracy of data and cornpletc disclosure of all rnatcrial and
relcvant information to the accountant'-
Maintaining adequate accounting records and internal controls arrd selecting and
a p p l y i n g a p p r o p r i a t ea c c o u t r t i n gp o l i c i e s ;
Preparation and presentation of financial staternentsas per the applicable laws attd
regulations.if any;
the assetsof the entiry and preventing and detecting
Establishingcontrols to safegr,rard
frauds or other irregularities;
. Eltablishing controls lor ensuringthat the activities of the entity are carried out as per
the applicablelarvsand regulationsand prcventing and detectingitny nolt-colnpliarlce.
(t) A staternent that the eugirgernerltr.vasperlbrtrted in accordance tvith standard on
. compi lation engagernetrts.

: (g) A statetnentthat peither arr audit rrcira review has beerrcarried out and that accdrdingly
: no assuranceis expressedon the financiaIillforrnation-

: ttti A paragraph,when considered necessary,drawing attetrtionto the disclosure of material

departures from the identified financial reporting framework.
:
i (i) Date of report.
Place.
r0)
: (k) Accountant's signature.
 i76
_ __ __4(l!l::tn t| . 1s.st u.ttttt.e
:1i i
|4"2 1r

I r r v e s t i q a t i ( )irrrr i l t li e s s - l , s l . l t n l i {t .,
t t ( l t' r i ti t'rrI e-runri rtrrt i rtrt t r f - a c c o u n l s
s p e c i l r cp t t p o . \ ( . - l ' l r cs p e c i t i cp u r . f ) ( \ s c a r r d r c c o r c l so i . a b u s i n e s s
cnlr:riri, | .:
n l a i l r ee t a l t r a t i o rorl s t i i t eo l . a l f a i r s
g r a n tl o a n t o l r n a p p l i c u r r t ) . o i -c s t a b l i s l r i n go f a f a c t
1 e g :r , r , t r e t n ei ,r,

t--- -
I Investig:rtion
I
statencnt Itc.
u tesrablish
: s r a r ) r r sat tsspecific
- - i - - -iI - p e c r f r cffirct
i
J

I Bt,t".,t,r of engagemcnr

N'lorc

0 Evidences ['crsuas
ir e
7. Cit:r1s1x1
Purpose
C o r r fi d e n r i a l
8 . Approach No ioubtful approach
Doubtful approach
9 . Bv u,horn ChartererlAcccluntarX

r4.3 GUIDANCE NOTE ON REVISION OF

AUDIT REPORT
Revision-When Revisionof ALrc!itReportafterthe sa,n"
husU"",i;rrr.,"J
Revision-Why If Auditor'oecomes ;;ar;ui,",i to his Audit Reportttratfacts
";r;
that date rvlricir rtright nruf nuu* exi.;ri:dat
have affecteclhis Reporthadhe beerraware
i s s u a r r cocf A u d i t R e p o r t . of such factsat fimc crt

E;t[ Alparcrrt,,r ,ruke,,u.onf;,,ror,r,ntion

nuoutA.r, o.;;,,;.q;;";Jir"*"f
, oila"t. *t,
Revision-condition , Auditormay issuethe Revisc-d R"port."r.r.;"f ir,";";; ;;il..
6;, if n,a"ag,.,r,*nr
,ffi;1,:;:,i:il::',:";';;;,ff[lilJn:'ffjp'.."uiou,1',
i,;;;;il;;i;;";;;ff;i;,e
if ronug"nlent l n t h i s c a s e .a u c i i f o rn r a l :
d o e s n ' te n s u r e . Seeklegal advice;
Auditor ' Notil-r' tlre client that Audit report no
longerbc associatedlvith financiai
. st'r-crrerrr,
Notily regulatoryauthorities,
. Make appropriatestatelnenlat ACM:
ra
Conclude to withdraw from furtlrer engagement.
Time limit for In caseof clientU"lng.o,rrpn,rf,f," .""ir" l..p.., ,if iaCV.-*
revision For others' reviservithin reasonable"un time, but not later tlran issuanceof Aur{it
f o r i r r t r r r e t l i a t e lnyc x t a c c o t r n t i n gy e a r . Repcr.
 I fi sL:i'!i.tt e()us l'7'l

{ ; 1 r l { } A N C EN, o 'rF l ON A T JDI' r oIi' sIiEP( } RToN RI!vtr SFtD

ACCOUN' I' So F
) : : i ' N ,\N [E SI}I]Ii
. OR E C IRCT]LA]' IONT' OSHAREIIOLDERS

t; : :i:Yr!Y \ \ ' l t e t ta r t t c l t ( l c Li llc ( ( ) u n l rsr c r ( - l i l l ) r ( r t , . ' Jb . t l r cb o r r t l 1 r l q . r 1 1 1 l r 1a1r1t t-ls, ,t l t r r t t , r - .r\ r r d i t o r sa l c

!!,i,{l N reqirestedtcl rnake a reportonoc aglirr orr lhe aniencleduccorrnts.

' A t t d i l o r s l t o r i l tcl t t s t r r{cl r l l . l l , . ( r l ) i cosl ' o r i g i i i a il i c c u u n l sa r r dr c P , r ritr r c r c t r r r r r c tt tl , l t i r r r

.-\uditui"s tluty
a t t c la c l e i l t t a t ed i s c l o s u r ec l l -l h c l o l - r e v i s i o nl r ) p c a r s i r s a s p e c i f i cn o t e i r r t h e a r r r e n d e d
itcct)unts.
' Ilorvc'u'er,it'notesto anterrclerl accountsdon't r:rtrrtairtanv note orr revision or if statutor_-r,
A u d i t o r d o e s r t o tc o n s i d e rs u c h a n o t ea s a d e c l u a t ei .t \ \ i l l b e h i s d u t y ' i o r , - ' f ' etro t h e f a c i
o f r c v i s i o n o f , A c c o u n t si r,r l r i s r c p o r l .

{[ , Re-openirrgor rcctificationof Accounts afterthey liai,e bcen adoptedat the AGNl. shouldnol
\s 1;i i
. be perrnitted in any circurnstances.

1,1 . 5 GUIDANCE NOTE ON PROPOSEDDIVIDEND

l'roposed It is ciivitlerrd hy RCiDp."ai"g

recornnrcrrcler.l b1 sharelrolclers
irrAGM.
"fltiotnt
,lir irlr"nd Mezrning ' It is a liability,whichis not presentat balance
sheetdate.

i t ; r { e ti $ r v As per scheduleVI of TheCompanies act'1956,it shouldbe shownas currentliabilityin

'.
t
ir'-ir
Balancesheet(evenif it rvasnot presentasliabilityat B/S date)

'', . ,1'r1l 4-!i 4 a Proposed dividendrepresentsan eventoccurring after balancesheetdate.

a However . it must be adjusted in accounts because there are statutory provisions
requiring the sarne-
r r r , ! i t s l r ' sd u t y Auditor should ensure that provision for proposed dividend has been made by the
c o r n p a n ya s p e rr e q u i r e n r e r r t s .
:
ir In case, proposeddividend lras not been acijusted in financial statements,he should
q u a l i f o h i s a u d i tr e p o r t . '

j't1: T'VPESOF AUDIT

i. rnu*pe"Jeni : Refer to ChapterI

;
Audit :
Z,Internal Audit i Refer to Chapter4

3. Cost Audit : Refer to Chapter 9

, 1 .G o v c r n m e n t Refer to Chapter l3
i
" ticEr

6" Continuous : Refer to Chapter 3

Aurlit ,
,.-._._i__
 a
e
t?8 luil i t in q un d tl ssurunc e
{ - h ; r t r I. i a
7. Ijiaiuir,r r gtrtiil \1,'l;li; ,\i;rl;i rs ,i,orl. i.,,,r1,ui".,ii.by lr*, ;.i, i"i,,ri"ii
I

,,,,t"i"i".V uiiJi, I
?. For e il o{}mpanics.Bar.rkirrgconrparrics co-operative
, societies,ge{rerilriilj.r-rr",r'cr.
c . n r p : r r r i c s t. ^ r s t e t c . * , h c r e i t i s r c q u i r e da s p e r g o v e r i r i n g
statute.
e
I t c ; r r rb e c . n d u c t e do r l ' b , r 'p r . f c s s i o n a r r 'q u a r i f i e < J
I{isht- citrtits'f r\uditrr & sc.pc oi'Audit is deterrnined
p e r s o nf o r e . g .c A . a
asperlaw.
S c o p e c a n ' t l r e r e s l r i c t c cbl 1 ,c l i c r r t . I
'flx
8. ,\udit It is c.rrdtrctcd urrderser:tir-r.ie ,tg irf i,.,.urrl"iax i.t e
I t i s c o r l d u c l e dt o e r l s t r r oc o r r c c t n e s so f ' a c c o u n t s& c o u r p l i a n c e
I t c . . b e c c r r r d u c r e col r r r l ' b . r p r o f e s s i o . a i l y q u a r i f i e d
r v i t hl ' a x L a w s .
t
person r.e {lrllrir:r:,3
Accr-rrrntatrt.
C
I t i s t h t r s .a s p e c i a a
l u d i t g o v e r n e db y s t a t u t e .
I { e p o r t i s g i v e n t c lT a x A u t h o r i t i e s . t
fhcre is speciliedfonn of T'ar Audit Report. t
9. lnterinr Audit It refbrs to auclitbetrveentrvo annual Audits.
I t i s c c ' i n d u c t efdo r ' l n t c r i r n p r t r p o s e s .
C
f o r e x a n r p l ef o r p r o v i d i n g f c r ri r r t c r i md i v i d e n c l . C
It is not recluiredunder anv larv.
Generally, it is conducted by a CharteredAccountant.
C
It results irl quick detection of misstatement,thus it acts as good
il!(]rAi qlir,icklilrr C
employees.
Thcrefore. it is early rvarning signal. a
Horvever . it is not suitable for srnall orsanisation.
C
rt
1 0 .B a l a n c es h e e t
"'"ai,irii'ii"Joi,Jiii' i"i'i"ii,,irtr,"u.i""""ii,""i il;;;;;;ifi;J. C
Audit Follorving are examined: Fixed assets,current assets, balances of resr.:r.ves
rnd
provisions, capital, profit carned or loss suffered by the firm during the
other liabilities.
.yciu allrJ t
3. P&L iterns directly associatedwith Assets/Liabilitiesare also checked. For
example, t
adjustment w.r.t. bad debts.
4- Balance sheetaudit is rnost suitable fbr small organisationsor which have an
I
efficlenl
systenr of internalcontrol.
I
5. No statutorl, requirer.nents.
6. Nonnalh'. it is conductedby a Cllrarlered Accountarrt.
I
7 . I l o r v e v c rd u e t o l i n r i t c r sl c . p c i t p r o r i d e sl e s sa s s u r a r r cteo A u d i t o r .
I
I l. Concurrent l. It is a systern
or a,iJitp*""i"nt i" i"ig. u""tr ot,J.i."pti;;;iit largeL.,rancl,es
pi
Audit the banks. I
2. It is carried out continuously throughoutthe year to check effectivenessuf w,rlrki{iE
and internal control of banks and branchesof banks.
3 . Transaction are exarninedas and rwhenthey take place.
4- lt is thus conductedon a regular and continuousbasis.
It is a conrprehensiveand systematicaudit.
6 . It helps managementof bank to preventand detect irregularitieson an earlier b:xrr;
1
It may be done by independent cA. or internar staff of bank corcerne.1.

\.I
 ]vi i : t t-'l ! t t t t c r itt t t79

12, ( rprcr:rlrr.)nirl l . I t i s d c t l r r e d? ! sa n a u ( l i t i o l r ; r u r a g c r n e rtlot p r o v i t l c i t w i t h i n f o . , n a t i . , n* u p p r u i * t

o f r i *t i r i l i c s

2 . l t c r . r r e r sb o t l rt r n a n c i aal r r do p e r a t i o n aai s p e c o
t f tlrc entitvconcerned.

3 . I t i s c a r r i c d r r r r li n t h c s i l n r el T ) a n n elri k c i n t e r n a la u c i i t .

4 . I t l r c l p s l n a n a g c r l l c iiioi i d en t i i , v l v e a k n e sisn p r e s c n ts v s t e l n s .
'l
5. l r c a r - r d i t opr r o v i r l e s ' . i s g . e s t i o rat lss oi n h i s a t r c l i tr e p o r t -

6 . I t i s t r s u r r l l l ' d c - ,bnvc t c n n r o l ' c x p e n s f r o n tv a r i o u s f i e l d s .

l - 1 .i \ r , . . " . . $ c i i l { r n t
i..r'!i
l . l t i s a t r t l i to f n r a n a g e r n e tprct r f i r r m a n c e .
7 . l t i r r v o l l e s c x a r n i u r r l i o no 1 ' a l l a c t i v i t i e sf r o n t t o p t o b o t t o r n ,s p e c i a l l y to ensure
u l r c t l r c rg c n e r a m
l a n i r gn e l el r t i s l i r n c t i o n i n gs r n o o t l t l va n d s a t i s f a c t o r i l yo r not.

3. lt is pcrferrrncd f o r f i n c l i r r gu e a k n e s s e si n n t a t t a g e m e n tf u n c t i o n i n ga n d proriding
s u g l l es t i o u st o i n r p r o v et h c s i t r r a t i o n "

I . I t i s j u s t a r r o t h etro o l t o a s s i s tr l r a n a g e m e ni nt f u l f i l l i n g i t s o b j e c t i v e s .

2. Gerrerally. It is concluctedl'ry tearnof rnanagernentexperts.

3 . I t r r r a yb e u s c f u li n c a s eo f a i l i n g e n t i t i e s .

' r ;,l$ to errsure

l. lt is conductcd rvithCornpanies
compliance Act andotherformalities.
4ual' 2. It is requiredby SEBI.
arerequiredto get it done..
3. l,istedentities
It carr be conductedeitlrcr by a CharteredAccountant or Company Secretary.

lil r11&lental r. ii i'rtorr,", ;i i","ru.iio"between

i..,rin"r,unl ,u.rounaing..
""n,ni,ru,i;,r
lvsl! organisation,managelnent& equipmentsare functioning
2. It seeks to ensurehor.r.,
to protect ettvirottrnertt.

3. It is conducted by teanr ofexperts.

4. Measures for environmentprotectionare also suggested.

5. It acts as a good public rnoralitl''.

6. []lorvever. in India it is not ttrattdatory'.

i!{ {:UT-OFF PROCIIDURES

.,,. l}F, . oron" periodr.om tnl otherso tlratthe result

t; .";;;i" r.*r"g",i"rr of,transactiolr
ol'working of eachperiodcan be correctlyascertaincd.
The arrangementthat is rnade to ensuresuch separation is technically known as
'cut- offProcedure'.
,
.
.r lt is partof theinternalcheckof theorganization-
 i !uip. t{
180 Autliting and I ssttettt't'

-I'his .'t
' prurccdttreis gerleralll'appliectto transactionsafl-ectedby tlre corttintritv
Applic:ltiolt
bttsirresslikc salcs.purchaseartd stock'
been incltti-ie<l itr
. This proce<lttreensuresthat gotlds purchasedduring a yar have
purchase'
. inventory attd the liabilitl"ltas been provided itr the caseof credit
and credit has lree'l
. Sirnilarly gooclssolclhave becn excludeclfrom the inventories
taken f(lr the sales.
'fhe adequatelyenstrrcthat-
auditor satisficsby exaniinatiorrtlrat the cut-offprocedures
Autlitor's dutv
have in fact bcen
(i) goocls lturchasecl,property irt $liicli has passed to tlte client'
has been provided {br itt r'rsc r:f
inclutled in the inveni.',ri.i, arrd ihat tlre liability
creclitptrrchirse:atrd
has been lak'erlfor tlre
(ii)
' ' goocls solclhave been excltrdecift'om thc inventoriesand credit
"salcs; has berrr r-lq:brltrrj.
if the value of sales is to be received,the concernedparty

THEORETICAL QI-IESTIONS

'Cloncurretrtaudit provides a supplementarymanagementtool'' Comment'

98 Nor'

99 Ma1 D i s t i n g t r i s hb e t u ' e e nA u d i t i n g a n d l n v e s t i g a t i o n '

Had
a conrpany,only after he had issuedhis audit opi.ion'
00 Ma1" An au6itor becameaware of a matter regarding
ihe-audiireport, he would have issued *'rJifrltrent
'e become aware of the same prior ,o his i-ssuing
o p i n i r r l . C o n l n r e n l / s t a t yeo u r o p i r r i o n '

0'i Nor ('tlt off Procedures