A STUDY ON AUDITING PROCEDURES IN SRVC & COMPANY

CHARTERED ACCOUNTANTS
 ACKNOWLEDGEMENT

I take this responsibility to express my profound and sincere gratitude to MBA COLLEGE OF
ENGINEERING THALASSERY for providing me with the opportunity to explore the
corridors of the corporate world and gather invaluable knowledge and practical experience via
internship project.

I take the privilege of offering a deep sense of gratitude and indebtedness to MR MUHSIN for
providing me their able guidance and inspiration to complete the internship project report

I express my sincere gratitude to Mr. SISHIL RAMAKRISHNAN (CA) sir who guided me
how to carry on with the project. His able guidance and support have been constant source of
knowledge and motivation for me.

I wish to give my sincere regards to my respected teachers who guided me to build a concrete
platform before sending me on training so that I can land out firmly in all respects.

My parents blessing and cooperation from entire family and friends had been my strength to
complete this study

ATHUL PRAKASH
 EXECUTIVE SUMMARY

This report titled “A STUDY ON AUDIT PROCEDURES IN SRVC & COMPANY”- A

project report on SRVC & COMPANY is the outcome of summer project. Such programs
facilitate us to apply our understanding of the theoretical knowledge in the practical field.
This report contains the details of the audit practice followed by SRVC & COMPANY.

SRVC & COMPANY-as my first experience to professional world SRVC & COMPANY has
established a close working relationship with many consulting firms for providing services to
clients all INDIA. In this way SRVC & COMPANY has enriched its professional base for
serving the clients interest in best manner.

In these six weeks of internship program I was allocated in the SRVC & COMPANY as an
audit assistant, accountant and field credit investigator. I have worked in this report followed
by the knowledge that I have gained from working, trainings and my personal experiences.

The first part of the report consists a study background of the project. The second part of the
report contains of organizations profile of SRVC & COMPANY. In this third part I have tried
to discuss about literature review of the audit procedure in india and in the sub division of the
third part about the audit procedures followed by SRVC & COMPANY in detail. In the
fourth part the clients audit procedure & I have introduced my learning in the sixth part.
Followed by this in the next section I have tried my best to include my recommendations
from my point of view to carry out audit engagement in SRVC & COMPANY and to
minimize such problems. In part eight, I have drawn an overall conclusion.
SL NO CHAPTER NAME PAGE NO

1 INTRODUCTION

INTRODUCTION
STATEMENT OF THE PROBLEM
SIGNIFICANCE AND SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER SCHEME
2 REVIEW OF LITERATURE

3 INDUSTRY PROFILE & THEORETICAL FRAME WORK

4 DATA ANALYSIS AND INTERPRETATION

5 FINDINGS, SUGGESTIONS AND CONCLUSION

BIBILIOGRAPHY
APPENDICES
 INTRODUCTION

In today’s world academic education is not adequate to enable a student to compete with
confidence and reach his/her goal without having experience with the outside world. In order
to have an idea and gain experience, we the students of MBA, COLLEGE OF ENGINEERING
THALASSERY have to undertake a six weeks internship program at any organization.

As a part of my summer project, the six weeks internship program gave me the opportunity to
have a practical knowledge on auditing procedure. The assignment was how a chartered
accountancy firm performs an audit and also to gain knowledge and practical experience on
how audit work is performed in corporations, companies and banks and non-profit
organizations.

To face more complex and challenging business world in the challenging business areas,
practical knowledge is essential to expand our theoretical base. To gather this practical
knowledge, we were forwarded with different organizations. I have choosen SRVC &
COMPANY a prominent chartered accountancy firm in Kannur.

This study gave me more opportunity to observe and perform real world knowledge about the
auditing procedure, which is followed by the chartered accountancy firm. In the internship
period I could relate the theoretical knowledge of auditing to practical exposure.

Audit procedures are the techniques, processes, and methods that auditors use to obtain reliable
audit evidence, which enables them to gain a sound judgment about an organization’s financial
status. Audit procedures are conducted to help determine whether or not a company’s financial
statement is credible and factual. The regular implementation of these procedures helps
establish a business’s financial reputation and strengthen its trustworthiness in the eyes of its
customers, the market, and potential investors.

CLASSIFICATIONS OF AUDITING

Classification testing- Audit procedures are used to decide whether transactions were
classified correctly in the accounting records.
Completeness testing-Audit procedures can test to see if any transactions are missing from
the accounting records.
Cutoff testing-Audit procedures are used to determine whether transactions have been
recorded within the correct reporting period.
Occurrence testing-Audit procedures can be constructed to determine whether the
transactions that a client is claiming have actually occurred.
Existence testing-Audit procedures are used to determine whether assets exist.
Rights and obligations testing-Audit procedures can be followed to see if a client actually
owns all of its assets.

Audit procedure steps involve:

1. AUDIT PLAN
The business of the entity, its policy, plans and procedures. Its hierarchical structure. The
statutory and regulatory framework within which it operates. The existing accounting and
internal control system. The prevalent
management information system. The entity’s risk perception and risk management plan.
2. Audit Program
An audit programme is a set of instructions which are to be followed by the auditor for the
proper execution of an audit.
3. Audit Sampling
Sampling refers to selection of a portion (sample) of the total (population), on a certain basis
so that the portion is representative of the total.
4. Audit Working Paper
Audit working papers include those papers and documents, which consist of details about
accounts, which are under audit.
5. Audit Files
Preparing files and keeping them safe is an important task of audit office because entire work,
present as well as future, depends upon these files.
6. Audit Evidence
The primary objective of internal audit is to enable the auditor express his opinion on the
efficacy and performance of the systems, procedures and controls and the financial, cost and
other statements generated by the entity.
6. Analytical Procedures
The internal auditor carries out the analytical procedures initially to understand the
functioning of the entity, its environment and the risk of material misstatement in the
information on which the audit procedures will be carried out and based on this
understanding he plans the nature and extent and timing of the audit procedures.

Origin of the Report:

The internship program is mandatory requirement for the student who are graduating from
the MBA program under the faculty of Department of management science college of
engineering Thalassery. In the internship program I was engaged in a host firm named,SRVC
& COMPANY CHARTERED ACCOUNTANTS for six weeks period. I have learned how
an audit is conducted. I also learned about the auditing procedures followed by SRVC &
COMPANY and how engagement is done in case of concurrent audit
STATEMENT OF THE PROBLEM

This study is conducted to know how auditing procedures are done in SRVC & COMPANY
CHARTERED ACCOUNTANTS KANNUR .how they perform it in efficient manner.

PURPOSE OF THE STUDY

A STUDY ON AUDITING PROCEDURES IN SRVC & COMPANY CHARTERED

ACCOUNTANTS is important to know how auditing procedures are done in chartered
accounting firms auditing procedures are the techniques, processes and methods that auditors
use to obtain reliable audit evidence, which enables them to gain a sound judgement about an
organizations and banks financial status. Auditing procedures are conducted to help
determine whether or not a company’s financial statement is credible and factual.

OBJECTIVES OF THE STUDY

• To have an overall idea about the audit procedures of SRVC & COMPANY
• To gain practical knowledge and experience on how SRVC & COMPANY performs an
audit and how audit work is performed in corporations, companie’s ,banks etc.
• To identify about how to accumulate and process evidences to make an audit report.

SCOPE OF STUDY:
• I have been assigned in SRVC & COMPANY CHARTERED ACCOUNTANTS that
gave me tremendous scope to familiarize with the audit procedure of the organization.
Major parts of scope are point out below:
• Background of the host organization and also their position.
• Audit procedure, which is followed by the organization for performing anyaudit.
• Nature and importance of it has depicted in this study.
• Audit methodology of the firm, which is followed by the organization for performing any
audit.
• Audit administration of the firm, which is followed by the organization for performing
METHODOLOGY OF COLLECTION OF INFORMATION

In order to prepare the assigned project I have collected necessary information from two
types of source as follows:

1) Primary sources of information.

2) Secondary sources of information

PRIMARY SOURCE OF INFORMATION

1) I have collected primary information by working as auditing assistant with auditor.

2) Discussing with audit manager, audit staff, chartered accountant and articled students

SECONDARY SOURCES OF INFORMATION

1) I have also collected secondary information like annual audit report, management
audit report, accounting systems & auditing working papers.
2) The information was obtained from various corresponding files of the firm.

1.5 RESEARCH METHODOLOGY

Research is a systematic method of finding solutions to problems. It is essentially an

investigation, a recording and an analysis of evidence for the purpose of gaining knowledge.

According to Clifford Woody, "research comprises of defining and redefining problem,

formulating hypothesis or suggested solutions, collecting, organizing and evaluating data,

reaching conclusions, testing conclusion to determine whether they fit the formulated

hypothesis.

1.5.1 RESEARCH DESIGN

The type of research chosen for the study is descriptive research. In descriptive research various
parameters will be chosen and analyzing the variations between these parameters. This study
was done with an objective to find out the motivation level of the employees.

SAMPLING DESIGN

A sample design is a definite plan for obtaining a sample from a given population. It refers to
the technique or the procedure the researcher would adopt in selecting items for the sample.
Sample design also leads to a procedure to tell the number of items to be included in the sample
i.e., the size of the sample. Hence, sample design is determined before the collection of data.
Among various types of sample design technique, the researcher should choose that samples
which are reliable and appropriate for his research study.

SAMPLING TECHNIQUE

By convenience sampling method, a sample of 50 respondents was selected. A convenience

sample is obtained by selecting convenient sampling units. The method of convenience
sampling is also called chunk. A chunk refers to that fraction of the population being
investigated which is selected neither by probability nor by judgment but by convenience.

STATISTICAL TOOL FOR DATA ANALYSIS

Different statistical tools used for the data analysis are;

• TABULAR REPRESENTATIONS

It is the statistical tool used to present data in rows and columns

• CHARTS
Charts are another statistical tool used to present data in graphs and diagrams.

PERCENTAGE ANALYSIS

This is a univariate analysis where the percentage of a particular factor with different
categories are calculated, in order to help one get their fair idea regarding the sample and
thereby that of population. The following is the formula:

Percentage of respondant = no of respondents x 100

Total no of respondants
LIMITATIONS OF THE STUDY

The study is conducted with an objective to make a through study of external audit procedure.
I have availed many facilities and faced some obstacles during my study. These obstacles
may be termed as limitation of the study. These limitations are as follows:

1) Scheduled time span was not sufficient to cover all information

2) As an independent audit firm the datas are more confidential and client data are highly
confidential it is not disclosed. lack of data is not adequate for this study

3) To some extend the exact audit procedure is not followed due to time and other
constraints.

4) As the internship was the first practical experience, it was not possible for me to know
all and everything of auditing.

1.7 CHAPTERISATION

Chapter 1: Introduction

First chapter deals with introduction of the study, statement of the problem, objective of the

study, research methodology, scope of the study, chapterisation.

Chapter 2: Literature review

Second chapter deals with literature review and reference.

Chapter 3: Introduction to the company

Third chapter include industrial profile, company profile, department profile and product

profile.
Chapter 4: Data analysis and Interpretation

This chapter deals with analysis of the data and discussion associated with that.

Chapter 5: Summary

This chapter deals with findings, suggestions, conclusions.

 CHAPTER 2

REVIEW OF LITERATURE
 REVIEW OF LITERATURE

APPELBAUM, D.A., KOGAN, A. AND VASARHELYI, M.A. (2018),

There is an increasing recognition in the public audit profession that the emergence of big data
as well as the growing use of business analytics by audit clients has brought new opportunities
and challenges. That is, should more complex business analytics beyond the customary
analytical procedures be used in the engagement and if so, where? Which techniques appear to
be most promising? This paper starts the process of addressing these questions by examining
extant external audit research. 301 papers are identified that discuss some use of analytical
procedures in the public audit engagement. These papers are then categorized by technique,
engagement phase, and other attributes to facilitate understanding. This analysis of the
literature is categorized into an External Audit Analytics (EAA) framework, the objective of
which is to identify gaps, to provide motivation for new research, and to classify and outline
the main topics addressed in this literature. Specifically, this synthesis organizes audit research,
thereby offering guidelines regarding possible future research about approaches for more
complex and data driven analytics in the engagement.

PHILIPPE DE MOOR & IGNACE DE BEELDE

This review of the literature on environmental auditing and the potential role of accountants
distinguishes between compliance audits and audits of the environmental management
system. After an extensive introduction to the concept, this review focuses on the similarities
and differences between an environmental audit and a financial statement audit. The general
approach to both types of audits is similar, except that environmental audits are largely
unregulated. Both audits place an emphasis on the evaluation of control systems, which is an
argument in favor of external auditors playing a role in environmental audits. Another
argument for including external accountants is their code of ethics. However, these
professionals seem to be reluctant to enter the field of environmental auditing. It is argued
that this reluctance is because of a lack of generally accepted principles for conducting
environmental audits. If external accountants are engaged in environmental auditing, they
should be part of multidisciplinary teams that also include scientists and engineers to avoid a
too strong focus on procedures. Rather than treating these audits as totally different, it is
proposed that there be a move towards integrated, or even universal, audits.

CAROL E. BROWN,JEFFREY A. WONG;AMELIA A. BALDWIN

A growing body of literature related to continuous auditing topics has developed. Advances in
information technology and web‐based applications are making monitoring and control of
operations through continuous auditing increasingly important. The objective of this paper is
to describe, summarize, and provide a framework for classifying the contributions of the
diverse literature addressing the topic of continuous auditing. This paper was intended to
provide researchers and practitioners with a background in continuous auditing topics. Our
broad view of the literature is also designed to discover areas holding the potential for future
research. Research streams are divided into five major categories: demand factors, theory and
guidance, enabling technologies, applications, and impacts. Over 80 papers have been
identified that relate to these areas. Many more articles exist, especially in the area of enabling
technologies. However, the focus of our paper is the literature most closely related to
continuous auditing.

RICHARD FISHER, PETER OYELERE, FAWZI LASWAD

The use of the Internet for financial reporting creates unique opportunities and challenges for
the auditing profession. This exploratory study identifies the key audit implications of Internet
financial reporting through a comprehensive review of the academic and professional literature.
Further, the study analyses the contents of all listed company Websites in New Zealand to
assess the nature and extent of current audit‐related Web practices. The relatively high degree
of similarity between New Zealand's auditing standards and those of other jurisdictions (e.g.
International Standards of Auditing and auditing standards in countries such as the UK,
Australia and the USA) contributes towards the international generalisability of the content
analysis. The literature review highlighted issues relating to the auditor's role and
responsibilities, the audit report, and audit procedures. The results of the content analysis of
auditor Web‐related practices reveal several significant concerns for the auditing profession in
relation to the presentation, context, and content of the audit report in a Web‐based
environment.

Jana Schmitz,Giulia Leoni

Blockchain is a distributed ledger technology expected to have significant impacts on the

accounting and auditing profession. This study, applicable and timely for both accounting and
auditing scholars and practitioners, explores blockchain technology and its main implications
for the accounting and auditing profession. The research question addressed in this study is:
What are the major themes emerging from academic research and professional reports and
websites debating blockchain technology in the accounting and auditing context? A literature
review of academic literature and professional reports and websites is performed to identify a
taxonomy of emerging themes. The study finds that the most discussed themes in scholarly
works and professional sources are governance, transparency and trust issues in the
blockchain ecosystem, blockchain-enabled continuous audits, smart contract applications and
the paradigmatic shift in accountants' and auditors' roles. Based on these four themes, practical
implications for accountants and auditors on how to approach the blockchain development are
provided. Moreover, this study offers suggestions for future research on accounting and
auditing in the blockchain era.

Roger Debreceny, Sook‐Leng Lee, Willy Neo, Jocelyn Shuling Toh

Computer assisted audit techniques (CAATs) encompass a range of computerized techniques

that internal and external auditors use to facilitate their audit objectives. One of the most
important CAATs is generalized audit software (GAS), which is a class of packaged software
that allows auditors to interrogate a variety of databases, application software and other sources
and then conduct analyzes and audit routines on the extracted or live data. This study seeks to
evaluate the nature and extent of the utilization of CAATs in financial institutions. In particular,
the study establishes the extent and nature of use of GAS by bank internal auditors and their
external auditors. The study is conducted with large local and international commercial banks
in Singapore, a major financial center. Given the limited research on GAS in general and in the
financial services sector in particular, the study uses exploratory qualitative research.

James L. Bierstaker, Priscilla Burnaby, Jay Thibodeau

In the future, paperless audits will become commonplace as audit clients increasingly shift to
paperless systems and audit software is developed that allows auditors to complete most
procedures on‐line. To audit on‐line systems, auditors will have to incorporate on‐line audit
software as their primary audit tool and gather evidence electronically. Assesses the current
impact of technology on the audit process, and discusses the future implications of
technological trends for the auditing profession. More specifically, provides a summary of how
information technology has impacted audit planning, testing, and documentation.

DISTINCTION BETWEEN AUDITING AND ACCOUNTING:

Many financial statements users and members of the general public confuse auditing with
accounting. The confusion results because most auditing is concerned with accounting
information, and many auditors have considerable expertise in accounting matters. Although
auditing and accounting are related, they are distinct from each other.

Accounting and Auditing Contrast

(Larry F. Konarth, “Auditing: A Risk Analysis Approach”)

Accounting involves collecting, summarizing, reporting, and interpreting financial data.

Accounting is the process of recording, classifying, and summarizing economic events ina
logical manner for the purpose of providing financial information for decision making .The
function of accounting, to an entity and a society as a whole, is to provide certaintypes of
quantitative information that management and others can use to make decisions. Recording
oftransactions and preparation of financial Evaluation of financial statements

AccountingAuditing

GAAP (the link)

 CHAPTER 3

THEORETICAL FRAMEWORK

&

INTRODUCTION TO THE COMPANY

What Is Accounting?

Accounting involves carrying out the fundamental tasks of preparing, analyzing, and verifying
financial documents in order to provide information to clients. Accountants and auditors help
to ensure that businesses are run efficiently, public records are kept accurately, and taxes are
paid properly and on time. Accounting also provides the opportunity to analyze and influence
corporate strategies, evaluate new business opportunities, and develop a wide set of business
skills.

Accounting definition
Accounting is much more than number crunching. It’s the strategic practice of formally
recording, analyzing, and communicating information about financial transactions. It’s
consultative, data-driven work that impacts every corner of the modern business world.
Accounting duties
Accounting professionals play an important role in financial decision-making. They
demonstrate a unique skill set that can address a variety of tasks that are integral to a
functioning business. Typical accounting duties include:
• Payroll
• Tax reporting
• Preparing and analyzing financial documentation
• Property inventory recording
• Producing and ensuring proper records
• Identification of financial waste
• Prevention of financial criminal activity
• Financial planning
Accounting skills

COMMUNICATION
If you can go beyond the numbers to extract insight and clearly explain meaning from data,
your communication skills will set you apart. For example, one of your accounting duties
may include taking a complex set of charts and turning it into a conversation any department
can understand.
LEADERSHIP
Developing your leadership skills will help you grow from within. When you take initiative
on projects and speak up about your contributions, it demonstrates your investment in an
organization as well as your capacity to lead others toward success.

DECISION-MAKING
Building strong decision-making skills requires a certain level of confidence and knowledge.
When you know your company’s current standing and financial goals, you can make
informed decisions and help move the company in a positive direction.

STRATEGIC THINKING
Ramping up your strategic thinking skills is key to delivering value in the business world. It
requires the ability to see how disparate pieces of information fit together, quickly analyze all
factors, and make the best decisions to help move businesses forward.

TECHNOLOGY
From new accounting tools to state-of-the-art devices, technology is rapidly changing the
field. Accounting professionals who are skilled in the latest software and keep up with
financial tech trends will have a competitive advantage in the workforce.
 BUDGETING AND FINANCIAL ANALYSI S
Having a solid finance background can position you to take on greater professional
responsibilities and apply your skills in projection and data-driven modeling.
Types of accounting
Governmental accounting
Just about every level of government, from small municipalities to the Office of the
President, relies on a government accountant to keep track of public spending.

Government accounting focuses on the valid expenditure and collection of monies as

originally authorized.
These accountants provide expertise in the following areas:
• Appropriations
• Budgeting
• Taxes
• Special fees
• Fines and penalties
• Grants
• Reimbursements
While the federal government, and most specifically the Treasury branch, is the biggest
employer of government accountants, state governments and hundreds of counties and cities
also hire accounting professionals.
Private accounting
Private accountants are employed by a single company or organization to handle all internal
financial matters. The work of a private accountant is usually audited by an external
accounting firm.
Internal auditing
Auditors spend a significant amount of time examining financial and accounting records.
They also look at the context of how those records were generated, with analysis that closely
examines the programmatic operations of an organization.

Internal auditors are regularly involved in:

• Setting the tone of compliance with company policies
• Conducting fiduciary duties
• Taking decisive action when corrections are required
• Following up on identified issues
Forensic auditing

Forensic auditors have specialized training on how to spot fraud and its motivating causes so
they can provide investigators with the critical evidence they need to pursue cases. This field
has grown tremendously because of recent advances in technology, resulting in many new
professional opportunities.
Financial accounting

Financial accountants are tasked with recording and aggregating financial transactions to
produce detailed financial statements. The purpose of this area of accounting is to distribute
financial information to external users of the information, such as creditors, lenders, and
investors.
Managerial accounting

Individuals who specialize in this area can gain a broad understanding of financial
management of budgets, marketing, operations, information systems management, and more.
Actuaries
Another specialization of managerial accounting involves actuarial data. Actuaries analyze an
organization's financial data and use their knowledge of mathematics and statistics to
estimate risks and returns.
Public accounting

Public accountants — better known as Certified Public Accountants or CPAs — work with
businesses of all sizes. Many CPAs and CPA firms contract with clients to provide a range of
services, such as:
• Public auditing (third-party certified examinations)
• Payroll services
• Tax filing and reporting
• General accounting processing

If a company is publicly traded, it will more than likely contract the services of a CPA to
prepare and file its financial statements. CPAs also help organizations remain in compliance
with government regulations.
WHAT IS AUDIT ?
“An Audit is an examination of such record to establish their reliability and responsibility of
statement drawn from them.”
Definition:-
“An audit may be said to be such an examination of the book of accounts and voucher of a
business which will enable the auditor to satisfy himself that the Balance sheet is properly
drawn up , so as to give a true and fair view of the state of affair of business and whether the
profit or loss for Account gives a true and fair view of the profit or loss for the financial period
according to the best of his information and explanation given to him and as shown by the
books: and if not , in what respect he is not satisfied.”
FUNCTIONS OF AUDIT
Following are the important functions of Audit:

1.Study the Accounting System

It is the basic function of auditing. In order to determine the nature, timing and extent of the
audit procedures auditor should study the accounting system.

2. Internal Control System

It is a process which determines that management policies are carried out according the
accounting principles. This system is very useful to safeguard the interest of the enterprise.
The auditor determines the effectiveness of this system.

3. Vouching
This function is essential to determine the accuracy of accounting record. Through audit those
documents can be checked which support and prove the business transactions. All entries in
books of accounts are made on the basis of relevant vouchers

. 4. Verification of Asset
It is the function of auditing that it should verify the assets of the business. It is concerned
with the determination of value, ownership and possession of business asset. The auditor can
check the existence of asset.

5. Legal Requirement
It is the function of auditing to verify that statements are prepared under the legal
requirements or not. There are various laws like company and income tax ordinance which
are introduced by the govt.
6. Liabilities Verification
The liabilities of the business can be verified from the books of accounts. The auditor can
write a letter to the creditors for the verification of liabilities. The auditor must receive the
certificate from the management in this regard.

7. Capital and Revenue:-

Auditing should make difference between capital and revenue items. The capital items are
compared to note the financial position of the business. The revenue items are compared to
determine the income. The income and expenses related to many years can be divided in
current and coming year.

8. Valuation of Liabilities:-
Through auditing value of liabilities can be checked from the books of accounts and other
papers. The auditor can also confirm the value from outside sources. The value of liabilities is
given in the balance sheet by the management but it is the function of auditing which
confirms this value.

9. Valuation of Asset:-
The management gives the value of assets and auditor can apply the accounting principles to
assess the value of assets. The auditor critically examines and takes help from the expert.

10. Reporting:-
Auditing important function is reporting. Auditor is an independent person and it is his duty
to submit his report in writing. If he is satisfied he can present clean report otherwise he can
give qualified report.
OBJECTIVE OF AUDIT
Basic objective of auditing is to prove true and fairness of results presented by profit and loss
account and financial position presented by balance sheet. Its objectives are classified into two
groups which are given below:
A. Primary Objectives of Audit
The main objectives of audit are known as primary objectives of audit. They are as follows:
I. Examining the system of internal check.
II. Checking arithmetical accuracy of books of accounts, verifying posting, costing, balancing
etc.
III. Verifying the authenticity and validity of transactions.
IV. Checking the proper distinction of capital and revenue nature of transactions.
V. Confirming the existence and value of assets and liabilities.
VI. Verifying whether all the statutory requirements are fulfilled or not.
VII. Proving true and fairness of operating results presented by income statement and financial
position presented by balance sheet.

B. Subsidiary Objectives of Audit

These are such objectives which are set up to help in attaining primary objectives. They are as
follows:
1. Detection and prevention of errors
2. Errors are those mistakes which are committed due to carelessness or negligence or lack of
knowledge or without having vested interest. Errors are of various types. Some of them are:
a. Errors of principle
b. Errors of omission
c. Errors of commission
d. Compensating errors
3. Detection and prevention of frauds

Frauds are those mistakes which are committed knowingly with some vested interest on the
direction of top level management. Such frauds are as follows:
a. Misappropriation of cash
b. Misappropriation of goods
c. Manipulation of accounts or falsification of accounts without any misappropriation
4. Under or over valuation of stock
Normally such frauds are committed by the top level executives of the business. So, the
explanation given to the auditor also remains false. So, an auditor should detect such frauds
using skill, knowledge and facts.

5. Other objectives

a. To provide information to income tax authority.

b. To satisfy the provision of company Act.
c. To have moral effect
SCOPE OF AUDIT
The Scope of an Audit are:
Legal Requirements.
Entity Aspects.
Reliable Information.
Proper Communication.
Evaluation.
Test.
Comparison.
Judgments.

1) Legal Requirements
The auditor can determine the scope of an audit of financial statements in accordance with
the requirements of legislation, regulations or relevant professional bodies.
The state can frame rules for determining the scope of audit work. In the same way,
professional bodies can make rules to conduct the audit.
2) Entity Aspects
The audit should be organized to cover all aspects of the entity as far as they are relevant to
the financial statements being audited.
A business entity has many areas of working. A small entity may have few functions while a
large concern has many functions. The auditor has the duty to go through all the functions of
the business.
The audit report should cover all functions so that the reader may know about all the working
of a concern.
3) Reliable Information
The auditor should obtain reasonable assurance as to whether the information contained in
the underlying accounting records and other source data is reliable and sufficient as the basis
for preparation of the financial statements.
The auditor can use various techniques to test the validity of data. All auditors while doing
the audit work usually apply the compliance test and substance test. The auditor can show
such information in the report.
5) Proper Communication The auditor should decide whether the relevant information is
properly communicated in the financial statements.
is an information system so facts and figures must be presented in that the reader can get
information about the business entity. The auditor can mention this fact in his report.
The principles of accounting can be applied to decide about the disclosure of financial
information in the statements.
5) Evaluation
The auditor assesses the reliability and sufficiency of the information contained in the
underlying accounting records and other source data by making a study and evaluation of
accounting system and internal controls to determine the nature, extent, and timing of other
auditing procedures.
6) Test
The auditing assesses the reliability and sufficiency of the information contained in the
underlying accounting records and other source data by carrying out other tests, inquiries and
other verification procedures of accounting transactions and account balances as he considers
appropriate in the particular circumstances.
There are compliance test and substantive test in order to examine the data. The vouching,
verification and valuation technique is also used.
7) Comparison
The auditor determines whether the relevant information is properly communicated by
comparing the financial statements with the underlying accounting records and other source
data to see whether they properly summarized the transactions and events recorded therein.
The auditor can compare the accounting records with financial statements in order to check
that the same has been processed for preparing the final accounts of a business concern.
8) Judgments
The auditor determines whether the relevant information is properly communicated by
considering the judgment that management has made in preparing the financial statements,
accordingly.
The auditor assesses the selection and consistent application of accounting policies, the
manner in which the information has been classified and the adequacy of disclosure.
SIGNIFICANCE
1) Knowledge of True Economic Position of Business :- Audit proves that statement of
profit and loss and balance sheet prepared by the organisation show true and fare view of it
and item shown their in truthful .It helpful in the determination of economic policy of the
organisation.

2) Helpful in computing various taxes:- The various tax authorities are able to compute the
tax payable by the organisation easily and correctly when the books of accounts of such
organisation are audited and appended by an Auditor’s Report .The amount of Sales- tax,
Income – tax, Wealth –tax, etc.

3) Comparative Study of Business: - A sole-trader can compare the accounts of current year
with the account of previous years and the and he can satisfactorily know the progress of his
business firm.

4) Increase in efficiency: - It keeps the employees of the organisation watchful land careful
and to perform their duties and responsibilities.

5) Protection to investor: - They are surrounded by two obstacle i.e., the act and Auditor.

6) End of corruption: - If Audit is not done the employees of the organisation can
misappropriates goods and cash being fear free.

7) Determination of tax liabilities.

8) Helpful in admitting partner.

9) Increase in the goodwill.

10) Helpful in case the business is managed by

Limitation
1) It is only test check- Since the number of transaction is very large it is almost impossible
for the auditor’s to check each and every transaction. Hence only test checking done by him it
is possible that fraud and errors may escape such test checking. He is merely watch dog and
not a blood hound.

2) Based on internal check and control- Efficiency and effectiveness of auditing is largely
depended upon an efficient internal check and internal control system

3) Lack of independence- The Auditor is appointed by shareholder i.e. the shareholder having
majority of share. As result Auditor is hardly independent and cannot fairly.

4) Postmortem technique- Auditing begins where Accounting end the Auditor may not be
able to discover systematic manipulation in the book of account at the preparatory stage.

5) Dependence on side information- If the person providing information have themselves

been the party to the manipulation of the book of accounts these information etc. may not be
reliable.

According To Organisation Structure of Business

Statutory Audit
Private Audit
Government Audit
Internal Audit
According to Practical Utility
Complete
Classes of Audit

According to the Organization Structure of the Business

1) Statutory audit

By statutory Audit we mean the compulsory Audit under statute or law the organization is
establish under specific statute are bound to get their account Audited.
It is legally compulsory for the following organisation to get their account audited:-
Company act, 1956, 2013, and 2017
Banking companies act, 1949
Insurance companies act, 1938
Local bodies and local authorities
Public and charitable trust act, 1950
Co-operative society act, 1912

2) Private Audit

It is also known as voluntary Audit. The right, duties, qualifications, remunerations and scope
of duties of the auditor determine by mutual agreement between the auditor and owner.
Sole proprietorship- The extent and the number of account to be audited is decided by the
owner of the business. The Auditors of determine on the basis of contract between the client
and auditor.
Partnership-Although it is not legally mandatory, yet most of the partnership concerns get their
account Audited. The term and condition of appointment and scope of auditor work is based
on mutual agreements. If there is no such agreement the provisions of Indian partnership act,
1932 shall apply. Audit of other individuals & institution-Sometimes an individual with large
income and expenditures gets his accounts audited. Some other institution like clubs and other
welfare societies also get their accounts audited.
3) Government audit

The audit of accounts of government departments and institute is known as government

audit.sec 2 (45) of the companies act 2013 state that government companies means any
copies in which not less than 51% of the paid up share capital is healed by the central
government or any others which is subsidiary of government companies as thus define.
Example:-
Heavy Electrical limited.

Fertiliser Ltd.

Hindustan Anti-Biotic Ltd.

4) Internal Audit

Internal Audit can be defined as “an independent, objective assurance and consulting activity
which involves a continuous and critical appraisal of the functioning of an entity designed to
add value and improve an organization's internal control system, risk assessment and
management mechanism and overall governance mechanism”.
The definition brings to the following points:
1. Independent and objective assurance.
2. Continuous and critical appraisal of the functioning.
3. To improve the effectiveness of the risk management, control and governance process.

Necessity of Internal Audit

The emergence of the corporate governance culture has witnessed paradigm shift in the way
today’s companies operate.
It is necessary that the systems are robust and flexible enough for the organizations to be
responsive and effective.
The audit function has changed to reflect this phenomenon over time during the 20th century,
the necessity of internalizing the audit function was felt to tackle the issues related to non-
compliance or non-adherence to the internal operating procedures.
It was essential to observe whether the operating processes and procedures in the organization
are efficient and effective.
In the current parlance, the need for the internal audit has become more comprehensive and has
definitely scoped beyond mere compliance.
The organizations of today look at the internal audit function to provide the assurance on the
following aspects of the business: ·
To comment on the accuracy and reliability of the financial and other information generated
within the organization·
To assess and suggest whether the internal policies & procedures and the external laws are
properly complied with·
To identify and assess the risks associated with the assets and comment whether they are
providing a fair return to the company·
To critically evaluate whether the operational resources are used efficiently and
economically.
When Internal Audit is carried out for the first time, the ground rule for Internal Audit needs
to be laid down, inter alia, including

The Internal Audit will primarily concentrate on flow of data and justification of basis
instead of vouching.
The materiality of cost and product under consideration would always be borne in mind
during Internal Audit process.
Objectivity in approach would be a consistent feature in Internal Audit.
Main thrust would always be on deviations and significance of deviations with impact of
the same on the performance of the organization.

OBJECTIVES AND PRINCIPLES OF INTERNAL AUDIT

Internal audit primarily serves the following objectives:
1. Reviewing compliance with
(a) The policies and plans of the entity being audited.
(b) The relevant statutory and regulatory requirements.
(c) The internal and external norms, guidelines, financial and cost accounting standards and
procedures.
2. Ascertaining to what extent the existing internal control system is being adhered to, assessing
the efficiency of the internal control system and suggesting improvement in the internal control
system.
3. Reviewing the management information system to ascertain the adequacy, relevance,
reliability and timeliness of the system and security of the information flowing through the
system.
4. Assessment of the risks confronting the entity and the effectiveness of the risk management
system to mitigate the risk and suggesting means for the improvement of the system. The
auditor may also identify risks and suggest ways to mitigate the same.
5. Ensuring optimum utilization of the resources of the entity which include both tangible
resources and intangible resource like time.
6. Providing a reasonable assurance that the financial statements and the cost statements are
free from material misstatement
7. Safeguarding the assets of the entity.
8. Timely identification of a liability of the entity, including contingent liability.

Basic Principles

1. Independence of the auditor is a primary requirement for any audit which aims at ensuring
that the outcome of the audit is not prejudiced. Accordingly it is more important for the auditor
to act professionally, maintaining the highest levels of ethics and competence and not to give
in to any interference in performing his duties.

2. Audit environment is determined by the nature of the organization, its internal control system
and the complexities of its activities.

3. The internal auditor should ensure confidentiality of the information received by him in the
course of the audit. The internal auditor is primarily responsible for expressing his opinion on
the areas subjected to audit and therefore he has to take sufficient care to be satisfied that he
can adequately rely on the work performed by other professionals/experts, before he uses the
work done by others in forming his opinion.
4. It also helps in current and future planning of the audit-work, supervision and review of the
audit functions.

5. Effective and timely conduct of any activity depends largely on the efficiency of the planning
which precedes the performance of the activity.

6. The final output of the internal audit is the audit report which shall be carefully drafted to
ensure lucid communication of the findings of the audit relating primarily to the shortcomings
of the internal control system, risk management system and the governance processes and the
measures required for correction and important.

According to practical utility

1) Complete Audit
An audit of both financial statements and the documents underlying them.
That is, a complete audit does not only look at financial statements to make sure they make
sense, it also makes sure that statements compare well with the documents used to create them.
Complete audits are less likely than other audits to contain errors.
2) Partial Audit
An audit which is conducted considering the particular area of accounting is known as partial
audit. Under partial audit, audit of whole account is not conducted. Audit of particular area
where the owner thinks essential to conduct audit will be conducted. Generally, transaction of
business is related to cash, debtor, creditor, stock etc. A business may conduct an audit of any
of these transactions.
An auditor should conduct audit of that transaction as per the scope determined by the
agreement. Method of conducting such audit is similar to other audit but an auditor should sign
the report clearing stating the 'partial audit'. If it is not done so, an auditor will be liable for the
loss which is caused due to using the report as complete audit.
Objectives of Partial Audit
Partial audit has following objectives:
a) To know whether the capital is fully mobilized or not.
b) To clarify the doubts where the owner has suspected.
c) To conduct final audit in less time and in less expenses because
Particular area of account is checked in detail.

3) Continuous Audit
Continuous audit is an internal process that examines accounting practices, risk controls,
compliance, information technology systems and business procedures on an ongoing basis.
Continuous audits are usually technology-driven and designed to automate error checking and
data verification in real time. A continuous audit driven system generates alarm triggers that
provide notice about anomalies and errors detected by the system.

4) Periodical Audit
Periodic audit is done at the close of the financial year at the time of preparing final accounts.
The auditor visits the client only once in a year and complete the examinations of all books and
accounts. It covers entire examination of books and completes verification of account. Periodic
audit is also known as final audit and complete Audit.
5) Interim Audit
An interim audit involves preliminary audit work that is conducted prior to the fiscal year-end
of a client. The interim audit tasks are conducted in order to compress the period needed to
complete the final audit. Doing so benefits the client, which can issue its audited financial
statements sooner. An interim audit also helps the auditors, who now have more time available
during their peak audit season to engage in activities for more clients.
An interim audit can also refer to a full audit that is conducted for an interim period, such as
for a quarter or half-year. This is a relatively uncommon event, since publicly held companies
only need to have a review conducted at quarterly intervals, not a full audit. Thus, the purpose
of Interim Audit may be:
6) Cost Audit
The terminology issued by the CIMA defines Cost Audit as “the verification of the correctness
of cost accounts and of the adherence to the cost accounting plan”.
ICWAI defines Statutory Cost Audit as a “system of audit introduced by the Government of
India for the review, examination and appraisal of the cost accounting records and added
information required to be maintained by the specified industries”.
Cost Audit is a critical review undertaken for the purpose of:
(a) Verification of the correctness of cost accounts, and
(b) Checking that Cost Accounting Plan is adhered to.
7) Tax Audit

A tax audit is an examination of an organization's or individual's tax return to verify that

financial information is being reported correctly. While the chances of being singled out for
closer scrutiny are statistically low, there are factors that could increase your odds of receiving
an audit notice. Fortunately, there are measures you can take now to minimize future problems.

8) Management Audit

A systematic assessment of methods and policies of an organization's management in the

administration and the use of resources, tactical and strategic planning, and employee and
organizational improvement.
The objectives of a management audit are
(1)To establish the current level of effectiveness,
(2) Suggest improvements, and
(3) Lay down standards for future performance. Management auditors (employees of the
company or independent consultants) do not appraise individual performance, but may
critically evaluate the senior executives as a management team

BASIC PRINCIPAL OF AUDITING

Integrity, Objectivity and Independence: The auditor should be honest and sincere in his
audit work. He must be fair and objective. He should also be independent.
Confidentiality: The auditor should keep the information obtained during audit,
confidential. He should not disclose such information to any third party. He should, keep his
eyes and ears open but his mouth shut.
Skill and Competence: The auditor should have adequate training, experience and
competence in auditing. He should have a professional qualification ( i.e. be a chartered
accountant) and practical experience. He should be aware of recent developments in the field
of auditing such as statement of ICAI, changes in company law, decisions of courts etc.
Working Papers: The auditor should maintain working papers of important matters to prove
that audit was conducted with due care according to the basic principles.
Planning: The auditor should plan his audit work. He should prepare an audit programmed
to complete the audit efficiently and in time.
 Audit Evidence: The report of the auditor should be base on evidence obtained in the course
of audit. The evidence may be obtained through vouching of transactions, verification of assets
and liabilities, ratio analysis etc.

evaluation of Accounting System and Internal Control: the auditor should ensure that the
accounting system is adequate. He should see that all the transaction have been properly
recorded. He should study and evaluate the internal controls.
Opinion and Report: The auditor should arrive at his opinion on the account based on the
audit evidence and submit his report. The opinion may be unqualified, qualified or adverse.
The audit report should clearly express his opinion. Law should require the content and form
of audit report

Advantages of Audit

) Access to the capital market: The public has to remain under the security exchanges and the
requirements given under it. Once the auditing is done the accounts that are audited are easily
accepted by the Government such as Central banks, public authorities. This carries greater
authority standards for the account to be authorized.

2) Lower capital cost: This has reduced information that is associated with the financial
statements that have lower interest rates and return on their investments. Sometimes this
activity provides facilitated settlements and claims of a partner. By performing the process of
auditing frauds and errors can be rectified on time.

3) Deterrent to fraud and inefficiency: Auditing that has been carried out has to be within
the claimed accounts department. In the event of loss, the property that will maintain a fund is
transferred. In case if the public has separate ownership plan then the claims have to be resolved
from the insurance claims.

4) Operational improvements: An independent auditor can be controlled and achieved

operating efficiency within the client’s organization. It has an influence on the staffs along with
the members of the client’s organization.

5) Gathering information about profit or loss: This gathering will help in discussing the
profit and loss of the company. Here employees can disclose their ideas upon which they are
lacking and how can they overcome those obstacles.
6) Confidentiality: During the process of the external audit, there is more private information
such as internal employee salary, CPF, etc. It may be significant for the person to learn about
the organization. It is because the auditor makes the consideration and conducts the meetings
that are to be held regarding the audit.

7) Settlement of claims: Settlement of claims demands the enhancement and better atmosphere
that are sequenced within the organization. For accessing and to influence moral values one
has to restrain themselves from performing fraudulent activities.

8) Reports: It produces the report of the truth and fairness of the reported audit. It involves
financial statements that are more
compatible when a person goes through the documents and reports of the audit.

9) Analytical procedures: It can neither help in prioritizing the changes and allocating them
with the resources are recorded in the work papers of audits. It also involves control
environment and appointment of analytical procedures of the system.

10) Settlement of claims: Some of the audited accounts that are explained are defined and
must fit into the claims so as to ensure the recent files. It determines the value of the business
so as to claim for the purpose of the other networks.

Disadvantage of Audit
1. Extra cost: Testing involves the extra cost to the organization which is considered as a
burden. It involves the disruptions of multiple cases. The auditor has to concentrate more even
though there are disruptions. Before the audit begins the auditor must get the attention of all
the staff members of the organization.
2. Evidence: Evidence that is identified is more pervasive than conclusive. The strength of
submission of audited accounts makes major changes in the accounts of the distribution of
profits.
3. Harassment of staves: Since the employees cannot express their own in terms of auditing,
these changes are calibrated and the employees will feel harassed due to the changes that are
caused. Even if they try to express their knowledge of new ideas, the organization may not
entertain the employees in these types of situations.
4. Unsuitable changes: The rules and regulations of business may vary from time to time. It
remains unstable when the program begins. It is obvious that the company’s policies may not
change periodically whereas the rules and regulations may.
5. Chances of fraud: Since the information delivered after the audit procedure is credential
then there become more chances of getting the situations where an individual will be forced to
commit the crime. It harasses the auditors to commit crime after the audit gets over.
6. Small concerns: Small-scale industries may usually proceed with transactions that are
usually completed within a shorter period of time. Thus, auditing is not too important.
iting is not too important.
7. Problems in remedial measures: Here the problem is created in remedial measures that are
enhanced by the detailed interface of the data of remedial measures. These remedial measures
are not included in the audit program.
8. Insufficient considerate: The education curve will be contented about the business and
insufficient relaxed networks and also offers systematic internal recruitment. These may
gravely obstruct the expense of all the employees.
9. Not guaranteed: Auditing cannot provide any data that are analyzed and prepared. It has
financial accounts for the data that are provided. It is disclosed based on the information and
explanations that are agreed on by the clients.
AUDIT PROCEDURE
 AUDIT PLAN
The audit plan is a comprehensive document which shall lay down the areas to be covered by
the audit, the manner in which the audit will be conducted, the extent of assessment or
verification to be done, the resources to be employed and the distribution of total available time
among different activities, so that the overall objective of the internal audit is fulfilled and the
audit is conducted in accordance with the terms of the audit engagement.
The audit planning shall begin with understanding:
1. The business of the entity, its policy, plans and procedures
2. Its hierarchical structure
3. The statutory and regulatory framework within which it operates
4. The existing accounting and internal control system
5. The prevalent management information system
6. The entity’s risk perception and risk management plan
7. The degree of complexity and materiality of the activities covered by the terms of audit
engagement.
The internal audit plan shall include:
1. The detailed program for review of different areas under audit
2. The audit procedures to be employed
3. The frequency and extent of the audit procedure
4. The criticality and complexity of specific areas requiring special attention
5. The significant risk associated with a specific area requiring special attention.

Audit Programme
An audit programme is a set of instructions which are to be followed by the auditor for the
proper execution of an audit. After the audit plan has been developed, a detailed audit
programme is formulated and written.
Objectives of Audit Programs
1. Audit program helps to check systematically the books of accounts which help to conduct
fair audit.
2. Audit program specifies the time period clearly, which helps to complete the work of audit
in less time.
3. Assistant should sign after the completion of work which specifies the responsibility and
accountability of staffs. It also helps to prove the completion of task.
4. Review of proposed scope of audit preparing proper plan.
5. Audit program shows the way to the new staffs to perform work of audit.

Advantages of Audit Programme

The following are the advantages of an audit programme

i. An audit programme helps to ensure that all the critical areas are covered during the audit
appropriately.
ii. It helps to distribute work among the members of the audit team and assistants as per their
level of competence and experience.
iii. An audit programme gives instructions to the audit team and decreases the scope for
misunderstanding.
iv. It helps to fix the responsibility for the work done amongst the audit team as the work done
can be traced back to the individual in the auditing staff.
v. It helps to assess the progress of work by ascertaining the part of the audit work that has
been completed against how much is left in order to complete the audit successfully.
vi. An audit programme serves as evidence against a charge of negligence.
vii. An audit programme also serves as an audit record that may come into use for future
references once the audit is completed successfully.

Disadvantages of Audit Programme

The following are the disadvantages of Audit Programmes.

i. Rigidity: An audit programme does not possess the advantage of being flexible as the same
programme cannot be used for different types of organizations. Every business or entity has
the separate and unique issues that they face. Therefore, a single or same audit programme
cannot be laid down for every type of business.
ii. Decreases the Initiative of Efficient Staff: An audit programme does nothing to promote the
initiative of capable individuals. Assistants and team members would not be able to suggest
any improvement in the set plan.
iii. Mechanical Audit Work: An audit programme is considered mechanical that it ignores
various other aspects such as internal control.
iv. Overlooking New Areas: As time passes, new problems or issues may arise during the audit,
and they may be overlooked in the Audit Programme.
Inclusions in an Audit Programme
The following should be evaluated before the formulation of an audit programme.
The Appointment Letter and the appropriate resolution for the appointment.
The terms of the operation which includes the reports required and the manner of
determining the audit fee
The system of book keeping and the list of the books of account as maintained by the entity.
The particulars of the Directors, Promoters and their powers.
Names of the individuals who maintain the books of accounts and other authorized
individuals.
The Memorandum of Association, Articles of Association and Partnership Deed as
applicable.
Details of the business of the client and its accounting systems by assessing and reviewing
the information on the following:
o Nature of business of the entity
o Internal Control System as well as the Manager controls
The statement of profit and loss account, balance sheets, auditors’ and directors’ reports of
the prior year and the reports of the internal auditor.
Analytical review procedures to:
o Identify the areas of accounts which are essential due to their size.
o Highlight the unusual figures or relationships in the accounts.
o Design audit test that focuses on critical and unusual items.
o Obtain sufficient audit assurance to permit the reduction or maybe, the elimination of
thorough testing in certain areas.
The assessment of audit risk by using professional judgement and the audit procedures to
make sure that it is decreased to an acceptable low level.
The preliminary estimates of materiality for the audit as a whole.
The class of accounting transactions that are relevant and to make a decision on the type of
testing and samples.
Selection of representative samples.
Test of compliance in order to evaluate the reliability of critical controls.
Material weaknesses in the operation of the critical controls of management.
 The performance of the analytical review procedures, substantive tests of details to attain
sufficient, reliable and relevant audit evidence for each audit goal.
Fundamental accounting assumptions
Disclosure of the change in an accounting policy that would have a material effect.
The audit report from all the Branch Auditors and any reservation made by a branch auditor
which is appropriately dealt with in the finalisation of accounts.
The Working Papers that contain all the audit evidence and are cross-referenced.
Summary of the work done, issues, significant judgments and audit conclusions.
Review by a senior in charge of all the work done by assistants, audit programme followed
and the work performed as per the schedule.
Updation of the audit working papers along with the permanent records as well.
Review of the unadjusted errors in order to determine if the individual and aggregate effect
is material.
Compliance with the legal and regulatory requirements and with all mandatory accounting
standards as issued by the Institute.
Post balance sheet events
Formulation of the draft audit opinion.
Comparison of the budgeted time to actual time and the reasons for significant differences.
The evaluation forms of the complete staff.
Planning of the next year’s audit.

Audit Sampling
Sampling refers to selection of a portion (sample) of the total (population), on a certain basis
so that the portion is representative of the total. Therefore one has to be careful about deciding
on the size of the sample and the manner of selecting the items from the population to ensure
that the sample actually represents the characteristics of the population.
The selection can be done using both statistical and non-statistical methods.
The statistical methods are those which use the random number table or the theory of
probability for selection of a sample.
In case of test of controls where the auditor is trying to ascertain the effectiveness of the internal
control system, the auditor’s analysis of the nature and cause of error is more important than
the statistical analysis of mere presence or absence of error and therefore in such situation, non-
statistical sampling approach is preferred..
Now, in audit it is neither possible nor desirable to examine all the transactions or activities of
an entity within the time-frame of an audit.
Therefore the auditor has to decide upon samples from the classes of transactions covered by
the audit on which the audit procedures are applied to obtain sufficient appropriate audit
evidence that would enable the auditor to have reasonable assurance about the characteristics
of the class of transactions.
However, it is not necessary that selective verification will be done in respect of all classes of
transactions and the auditor might decide on examination of the total population in respect of
a particular type of transaction, where in his opinion there is a high risk of drawing an incorrect
conclusion based on selective verification and he requires a higher level of confidence about
that class of transactions.
The size of audit samples shall largely depend on the level of confidence the auditor has on the
efficacy and actual performance of the internal control system and the auditor’s acceptance of
the tolerable error (maximum possibility of the sample not representing the population) in
sampling.
In order to lower the sampling error and thus the risk of drawing an incorrect conclusion, size
of the sample should be bigger.
The internal auditor shall first decide upon what would be the appropriate population for
deriving a particular audit assurance and whether the population is complete.
For example to derive a assurance about the balances of debtors the complete list of sales
invoice, debit/credit notes and complete details of receipts from debtors shall constitute the
appropriate population.
The internal auditor may classify an appropriate population meant for a certain audit procedure
into various categories (or strata) based on
certain criteria (e.g. monetary value) and then decide on different sample size for different
categories

AUDIT WORKING PAPER

Audit working papers include those papers and documents, which consist of details about
accounts, which are under audit. They are the written, private materials, which an auditor
prepares for each audit. They describe the accounting information, which he obtained from his
client, the method of examination used, his conclusions and the financial statements
Objectives of Audit Working Papers
1. The working papers serve the auditor both as useful audit tool as well as a permanent record
of the audit work performed.
2. They are useful to the auditor to control the current year’s audit work.
3. They constitute a reliable guidance for planning the future audit assignments.
4. A review of the audit working papers gives an assurance that the audit work is both accurate
and complete

Contents of Audit Working Papers

AAS 3 states working papers should record the auditor’s plan, the nature, timing and extent of
the audit procedures performed; and the conclusions drawn from the evidence obtained.
Generally, audit working papers consist of the following details:
1. Schedule of debtors and creditors.
2. Trial Balance.
3. Certificate of officials regarding certain important matters like bad debts, valuation of stock,
unpaid expenses, accrued incomes, etc.
4. Statement of depreciation.
5. Correspondence between the auditor and the debtors, creditors, etc. of the client.
6. Investment Schedules.
7. Confirmation by the bank regarding the bank balances of the client.
8. Bank Reconciliation Statement.
9. Important extracts from the minute books such as agreement with vendors, hire purchasers,
selling agents, etc.
10. Detail of cash balance checked.
11. Adjustment entries.
12. Contingent liabilities certified by the management.
13. Draft financial accounts.
14. Details of clarifications made during the course of audit.
15. A copy of the auditor’s book.
16. Letters of representation.
17. Correspondence from legal advisors
18. Pertinent memoranda relating to the audit.
19. Data relating to the review of internal control.
20. Stock holder equity and the minutes.
21. Test of transactions.
AUDIT FILES
Preparing files and keeping them safe is an important task of audit office because entire work,
present as well as future, depends upon these files. The audit files can be of two types, namely:
(1) Permanent Audit Files.
(2) Current Audit Files.
A permanent audit file normally includes:
1) Information concerning the legal and organizational structure of the entity. In the case of a
company, this includes the Memorandum and Articles of Association. In the case of a statutory
corporation, this includes the Act and Regulations under which the corporation functions.
2) Extracts or copies of important legal documents, agreements and minutes relevant to the
audit.
3) A record of the study and the evaluation of the internal controls related to the accounting
system. This might be in the form of narrative descriptions, questionnaires or flow charts, or
some combination thereof.
4) Copies of audited financial statements for previous years.
5) Analysis of significant ratios and trends.
6) Copies of management letters issued by the auditor, if any. Record of communication with
the retiring auditor, if any, before acceptance of the appointment as auditor.
7) Notes regarding significant accounting policies.
8) Significant audit observations of earlier years.

The current file normally includes:

1) Correspondence relating to acceptance of annual reappointment.
2) Extracts of important matters in the minutes of Board Meetings and General Meetings as
relevant to audit.
3) Evidence of the planning process of the audit and audit programme.
4) Analysis of transactions and balances.
5) A record of the nature, timing and extent of auditing procedures performed, and the results
of such procedures.
6) Evidence that the work performed by assistants was supervised and reviewed.
7) Copies of communication with other auditors, experts and other third parties.
8) Letters of representation or confirmation received from the client.
9) Conclusions reached by the auditor concerning significant aspects of the audit, including the
manner in which exceptions and unusual matters, if any, disclosed by the auditor’s procedures
were resolved or treated.
10) Copies of the financial information being reported on and the related audit reports.

AUDIT EVIDENCE
The primary objective of internal audit is to enable the auditor express his opinion on the
efficacy and performance of the systems, procedures and controls and the financial, cost and
other statements generated by the entity.
For this purpose, the auditor carries out audit procedures to derive sufficient appropriate audit
evidence and draws conclusion there from which forms the basis of his opinion.
Now, “sufficiency” refers to the quantum of the audit evidence and “appropriateness” refers to
the relevance and reliability but what constitutes “sufficient appropriate audit evidence” depend
on the professional judgment of the auditor.
The internal auditor’s judgment as to “sufficient appropriate audit evidence” is influenced by
the nature and materiality of the item, nature and size of the business, efficacy and functioning
of the controls and his assessment of the risk of a material misstatement.
The source of the audit evidence which can be internal or external and in whose custody it is
being kept, decides the level of reliability of the evidence, to a great extent.
The main types of audit evidence in order of their reliability are:
(a) Documentary evidence originated from and held by third party.
(b) Documentary evidence originated from third party and held by the entity.
(c) Documentary evidence originated from the entity and held by third party.
(d) Documentary evidence originated from and held by the entity.
The internal auditor obtains the audit evidences through:
(a) Compliance procedures which are tests of control and are intended to obtain reasonable
assurance that the controls on which audit reliance are to be placed are in effect
(b) Substantive procedures which are performed to obtain satisfaction about the completeness,
validity and accuracy of the data on which the audit procedures are carried out.
The substantive procedures are of two types:
a) Tests of details of transactions and balances
b) Analysis of significant ratios and trends and resultant enquiry into unusual fluctuations and
items.

The internal auditor obtains evidence by performing one or more of the following procedures:
a) Inspection of records or tangible assets
b) Observation of a process or activity being performed by others
c) Inquiry whether formal written inquiry or informal oral inquiry, seeking relevant information
from competent persons whether within or outside the entity and confirmation received in
response to the inquiry
d) Checking the arithmetical accuracy of the records and doing independent calculations and
e) Analysis of significant ratios and trends and resultant enquiry into unusual fluctuations and
items.
INDUSTRY PROFILE
NATURE AND CHARACTERISTICS OF
THE INDUSTRY

Opting your own customers, working independently, furnishing the services in your area of the
specific field and the interest are some of the causes to initiate your own chartered
accountancy work. Towards the case in which more CAs come into practice, it is an
opportunity for you to build your own firm.

Nowadays, there is a craze of Chartered Accountants because Chartered Accountancy Practice

or CA Firm is among the professional practices that almost everyone are dreaming to do. CA’s
are the professionals who have more knowledge about taxation, accounting, audit and other
financial topics than us.

Practising or consulting in India has seen a hike. GST poses bigger service and business
opportunities for CAs this is because the major taxation revision of the country needs much
more companies to furnish the taxes and make sure that they comply with the taxation laws
and guidelines.

More and more opportunities for India come from the steady globalization in practice for CAs
in areas such a knowledge process outsourcing, IFRS compliance, and forensic accounting.
The older prospective areas consist of fiscal reporting, taxation, audit expertise, and insurance
advisory.

There are various opportunities for CAs to rise and enhance their operations as formidable as
the idea to make that. The same business needs patience planning and process like others. Thus
from where did, you begin?

Prior to starting practising, it is essential that you must do your research and find out yourself
that do you take on the point and render the same.

Many questions arise in the mind of the CAs about what to do, how to do it, and many more.
So to help you out with all the dilemmas we have brought up an article about the provisions
and requirements to set up the chartered accountant firm or chartered accountancy practice
in the Country.
CHARTERED ACCOUNTANT
Chartered accountant designation is worldwide, and it refers to professional accountants who
are qualified to take on a number of specific activities within the spectrum of accountancy.
Such tasks include auditing financial statements, filing of corporate tax returns, and financial
advising. While the name is seen around the globe, in the United States, the equivalent position
is known as a certified public accountant, or CPA. The professional body that governs this
group of accounting workers goes back to 1854 where it was founded in Britain. There are now
several associations that act as governing and accrediting bodies for these professionals, such
as the Canadian Institute of Chartered Accountants and the Institute of Chartered Accountants
in England and Wales.

HISTORY OF CHARTERED ACCOUNTANT

Chartered accountants were the first accountants to form a professional accounting body,
initially established in Scotland in 1854. The Edinburgh Society of Accountants (1854), the
Glasgow Institute of Accountants and Actuaries (1854) and the Aberdeen Society of
Accountants (1867) were each granted a royal charter almost from their inception. The title is
an internationally recognised professional designation; the certified public
accountant designation is generally equivalent to it. Women were able to become chartered
accountants only following the Sex Disqualification (Removal) Act 1919 after which, in
1920, Mary Harris Smith was recognised by the Institute of Chartered Accountants in England
and Wales and became the first woman chartered accountant in the world.

Chartered accountants work in all fields of business and finance, including auditing, taxation,
financial and general management. Some are engaged in public practice work , others work in
the private sector and some are employed by government bodies

Chartered accountants' institutes require members to undertake a minimum level of continuing

professional development to stay professionally competitive. They facilitate special interest
groups (for instance, entertainment and media, or insolvency and restructuring) which lead in
their fields. They provide support to members by offering advisory services, technical helplines

and technical libraries. They also offer opportunities for professional networking, career and
business development.

Chartered Accountants Worldwide comprises 15 institutes with over 1.8 million Chartered
Accountants and students in 190 countries.
HISTORY OF CHARTERED ACCOUNTANTS IN INDIA

Long ago, when our country was under the rule of British East India Company, an act came
into the effect which stipulated several books that were required to maintain by a registered
Company under The Companies Act, 1913. The requirement of an auditor was also there to
maintain these books. The auditors have need of a Certificate from the local government to act
as an auditor, as the basic qualification. The Unrestricted Certificate holder person had the
freedom to act as an auditor throughout the country, but a Restricted Certificate bearer could
only act within the allotted province or language specified in the certificate.

Further, in 1918 a diploma course started in Bombay, referred as Government Diploma in

Accounting (GDA). In this diploma course, desired candidate required to do articleship of three
years and had to pass the examination, qualified candidates were rewarded by the unrestricted
certificate. Afterwards, the issue of restricted certificates had also been ended in 1920.

In the year 1930, after the Society of Auditors founded in Madras, the government of India
decided to keep records of members practising as an auditor, the mentioned record or register
called Register of Accountants and the person whose name was enlisted in the register alias as
a Registered Accountant.

After two years in 1932, an Accountancy board was developed called as Indian Accountancy
Board to advise the Governor General in Council of India on the points of Accountancy and
the required conduct along with qualification standards of the auditors. The Indian
Accountancy Board held its first examination in the year 1933 and GDAs has been exempted
from taking the test of auditors, in the same year. Before GDA has been completely abolished
in 1943, the first final examination of the auditors has been taken by the Accountancy Board.

In independent India, a step to form an expert committee that recommended to start an

autonomous association of accountants to the regulate the profession of auditors was taken.
The Government of India after accepting the report of the expert committee passed
the Chartered Accountant Act in 1949 just before India became a Republic country. However,
the Chartered Accountant Act came into effect in 1 July 1949 and the Institute of Chartered
Accountants of India introduced. Related to the same, as per the section 3 of this act, the ICAI
is founded as a body corporate with perpetual succession and a common seal.

he Charter word from the professional designation, Chartered Accountant is a controversial

term, cause Charter refers to royal charter in many countries. However many titles were
suggested at the time passing Chartered Accountant Act, used for the same profession in other
countries, like Registered Accountants.

At the same, many accountants has registered themselves as a member of the Institute of
Chartered Accountants in England & Wales and other societies of Chartered Accountants and
continue to practising as Chartered Accountants. After so much debate in the Indian
Constituent Assembly, the Registered Accountants has been replaced with Chartered
Accountants and came into effect on 1 July 1949 and 1st July celebrated as Chartered
Accountants day every year.

INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ( ICAI)

The Institute of Chartered Accountants of India (ICAI) is the world's second and India's
largest professional accounting body under the ownership of Ministry of Corporate
Affairs, Government of India. It was established on 1 July 1949 as a statutory body under
the Chartered Accountants Act, 1949 enacted by the Parliament for promotion, development
and regulation of the profession of Chartered Accountancy in India.[5]

In India, accounting standards and auditing standards are recommended by the National
Financial Reporting Authority (NFRA) to the Government of India which sets the Standards
on Auditing (SAs) to be followed in the audit of financial statements in India. The other
reputed accounting research bodies in India are the Institute of Cost Accountants of India
(ICMAI) and University of Delhi, University of Calicut and University of Mumbai.

Members of the Institute are known as ICAI Chartered Accountants or ICAI

Accountants (either Fellow or Associate). However, the word chartered does not refer to or
flow from any Royal Charter. ICAI Chartered Accountants are subject to a published Code of
Ethics and professional standards, violation of which is subject to disciplinary action. Only a
member of ICAI can be appointed as statutory auditor of a company under the Companies Act,
2013. The management of the institute is vested with its council with the president acting as its
Chief Executive Authority. A person can become a member of ICAI and become a financial
(i.e. statutory) auditor of Indian Companies. The professional membership organization is
known for its non-profit service. ICAI has entered into mutual recognition agreements with
other professional accounting bodies worldwide for reciprocal membership recognition. ICAI
is one of the founder members of the International Federation of Accountants (IFAC), South
Asian Federation of Accountants (SAFA), and Confederation of Asian and Pacific
Accountants (CAPA). ICAI was formerly the provisional jurisdiction for XBRL
International in India. In 2010, it promoted eXtensible Business Reporting Language (XBRL)
India as a section 8 Company to take over this responsibility from it. Now, eXtensible Business
Reporting Language (XBRL) India is an established jurisdiction of XBRL International Inc.

The Institute of Chartered Accountants of India was established under the Chartered
Accountants Act, 1949 passed by the Parliament of India with the objective of regulating the
accountancy profession in India. ICAI is the second largest professional accounting body in
the world in terms of number of membership and number of students after the AICPA. It
prescribes the qualifications for a Chartered Accountant, conducts the requisite examinations
and grants Certificate of Practice.

WHAT DOES A CHARTERED ACCOUNTANT DO?

You can work in many different sectors, but you are likely to perform a similar set of duties
whatever the industry vertical. Here is a list of critical responsibilities of chartered accountants:

Accountancy and auditing

From basic bookkeeping to complex financial analysis, accounting is one of your

responsibilities. Additionally, you may also work on audits. Given your CA expertise, auditing
is one of the most valuable services you provide.

When you run an audit, you go through the accounts within financial statements presented to
your clients. You check that they are based on the proper accounting guidelines and represent
the actual state of the funds belonging to this client. Auditing is entrusted to CAs because this
requires your specialised education, training, judgement and financial skills.

Management consultancy

Chartered accountants are often asked to serve in a consultative role, helping businesses utilise
resources efficiently. As a management consultant, you can provide consulting services like:

Designing, developing and implementing systems for budgetary control and cost accounting,
and computer programs for accounting and commercial activities
 • Developing Management Information Systems (MIS) and Accounting Information
Systems (AIS)
• Consulting on complicated financial matters like international tax laws, collaborations
and mergers, along with corporate law
• Evaluating the prospects of new business ventures like expansion, project launches and
amalgamations
• Advising management teams on practical organisational skills, such as delegation
strategies and planning of work
• Analysing existing systems for operational control, financial planning and resource
utilisation and suggesting improvements
• Taking responsibility for the effective use of business capital and making sure that
working capital has an effective return in terms of productivity
• Helping with decisions on matters like product ranges and pricing
• Assisting in interactions with government bodies
• Serving as registrars on matters of share transfers and other securities
• Tax management
• Businesses, individual clients and other institutions often need a chartered accountant's
extensive knowledge and expertise when dealing with taxation. As a CA, you have
extensive training on the various statutory taxes. Your clients need the services of
someone who has a clear understanding of current tax information.
• Tax assessment is an integral part of finance management. Chartered accountants help
clients file their tax returns, represent their clients in interactions with income tax
authorities and generally provide advice on all tax-related matters.

Cost accountancy

As a CA, your training means that you can offer professional advice to companies on matters
related to production. Whether the company provides a product or a service, your guidance can
help them calculate the production costs accurately during various stages of operation. You can
guide the management team with cost control strategies and the right selling price for their
products or services.

Settlements and estates

You might serve as executor of a will or trust to administrate a settlement or an estate. In a role
like this, you may work closely with a solicitor or lawyer. Sometimes, a solicitor or lawyer
working on trust or estate settlements might bring you in to assist with the accounting side of
the work.

Serving on boards of directors

Most companies understand and value the advantages of having a chartered accountant occupy
a seat on their board of directors. CAs with years of experience are often chosen for this role.
Once you have built some experience in senior positions within the industry, you could be
asked to serve as the director of a company.

Serving as secretary of an organisation

Well-structured companies may prefer to hire a CA in the role of secretary among the
management. Often, groups of companies may also choose to appoint you in a secretarial role.
Your main responsibility is to assist the board of directors in areas like finance, administration,
accounting, and taxation.

Arbitration duties

You may also play the part of an arbitrator in issues of dispute settlement. For example, if a
business fails and declares bankruptcy, you can help prepare statements of affairs. You can
also serve as a company's trustee in case of bankruptcy or under a deed of arrangement.

Investigative duties

Your expertise can be a valuable asset to companies that want a clear picture of their financial
position. For instance, companies may want to perform investigative duties when:

Selling a business

Acquiring a business

Finding new financial opportunities for a business

Companies may also hire you to boost efficiency within management or analyse why profits
are up or down.
 FIRM’S PROFILE

SRVC & COMPANY CHARTERED ACCOUNTANTS

Introduction

S R V C & Company, a set of young and seasoned Chartered Accountants having wide
experience in Corporate consultancy, Audit and assurance services, Transaction advisory with
presence in Kannur, Kozhikode and Bengaluru. We are committed to cater quality deliverables
with utmost care and adhering to strict ethical standards and confidentiality.

• Auditing & Assurance Services

• Business Plan & MIS Reporting
• CFO Services & Business Valuations
• Tax & Corporate Compliances

Organization Website srvcandcompany.com

S R V C and Company industries Bookkeeping

Headquarters Location Yogasala Road, Cannanore, Kerala, IN

S R V C and Company Employees Size 1-10 employees

Founded 2017

Who Are We?

We, a bunch of Chartered Accountants and to-be ones willing to serve you, so that you will be
free from all the compliance issues and left to do the best thing you are famous for – i.e. to do
business or provide services.

Our partners, having joined the bandwagon with rich experience in banking, international and
traditional auditing and transaction advisory services provide you a one stop for all your
business needs such as audit and assurance, direct and indirect taxation, international taxation,
corporate law, management consultancy, CFO services, matters relating to FEMA, mergers
and acquisitions, and other allied areas.

We strongly believe that there is no single solution for all the problems. For us every client is
a valuable one and the professional services needs to be tailored to match each client’s needs
in the most efficient & cost-effective way and we at SRVC are committed for the same.

Our multi-faceted practice is driven by the need to be seen by each client as valued and trusted
advisors rather than an external agency that stay within the letter of the law. We are committed
to delivering a range of professional solutions tailored to match each client’s needs in the most
efficient & cost-effective way.

Our Vision
To be a reputed professional body providing complete solution to all finance, accounting and
tax matters. We will be with you as an ever dependent companion, providing assistance and
advice so that your smile remain intact.

Our Mission

Providing auditing and assurance services, CFO services, taxation services and business
consultancy services to the clients across all sectors. We also assist in incorporation of
entities under the existing statutes in India and providing book keeping and payroll
management.

TEAM MEMBERS

Sishil R, B.Com, FCA, ISA (ICAI)

An Ex- Banker, Sishil, heads the Corporate Taxation and Consultancy Wing of the firm. He is
the Partner – in – Charge of Head office kannur. Qualified in 2013, he had a 4 year stint as
Credit Manager with Federal Bank, handling MSME and Large Corporate proposals. Currently
he also acts as business consultant for various firms in India and abroad.

Sajith P R, B.Com, ACA

Sajith P R is the Managing Partner of the Firm. Qualified in the year 2016, he is in charge of
the Kannur Branch and heads the Taxation Wing. He is having rich experience in Middle
East Operations, having warred as a Qualified Assistant with M/s Morison Menon, Chartered
Accountants Abu Dhabhi.

Shijith V C, BBA, ACA, ISA (ICAI)

Qualified in the year 2014, Shijith, is the Partner in Charge of Vadakara Branch and heads the
Indirect Taxation wing. He is having rich experience in Transfer Pricing and NRI taxation,
having worked with ASA & Associates LLP, Bangalore. He has cleared GST Certificate
Course conduced by ICAI.

SERVICES

Audit & Assurance Services

Assurance services (as defined by the AICPA) is an independent professional service, typically
provided by Certified Public Accountants, with the goal of improving the information or the
context of the information so that decision makers can make more informed, and presumably
better decisions.

Special Purpose Audits

We conduct special purpose reviews wherein we check on management or regulator specified

areas viz. Compliance Audit, Revenue Audit, Information Technology Systems Audit, etc and
other certifications.

Financial Statement Audit

Statutory and Tax Audits are carried out as per the prevailing statutes to ensure that the financial
statements present a true and fair view of financial positions and operational results.

Internal Audit

Assisting you in streamlining the existing process flow, control procedures and executions and
conduct SWOT analysis for improvement and will hold your hand through the implementation
process.

IFRS / Ind - AS
We carry out reviews and provide an impact analysis of reporting under International Financial
Reporting Standards (IFRS), Indian Accounting Standards (Ind - AS) or US GAAP. We also
ensure that reporting requirements are adequately met.

BUSINESS CONSULTANCY
A business consultant (from Latin consultare, "to discuss") is a professional who provides
professional or expert advice or service in a particular area such as security (electronic or
physical), management, accountancy, law, human resources, marketing (and public relations),
financial control, engineering, science, ...

Financial Accounts

We ensure that accounts are maintained in accordance with generally accepted accounting
principles with due considerations to IFRS, Ind AS. Our teams will assist you to prepare and
reports the financial on periodical basis and rectify and control the potential issues.

Trade mark / Patent Registration

We assist you in obtaining trademark registration for your name / brand and patent for your
product / process.

Corporate Advisory

We provide timely advice to clients who are intending to set up new enterprises in India. Our
team helps you in matters relating to Labour laws, FEMA Regulations, Company Law , Direct
and Indirect Taxation etc.

Business Set Up Services

We assist you in establishing a factory / enterprise in India. We manage the entire process from
identifying an ideal location, key service providers/contractors, to procuring necessary
clearances from government bodies.

Business / Project Plan

A Business / Project idea in its budding stage needs proper care. We help you in the same by
preparing a detailed Plan, documented with the help of market survey, enabling you to present
the same before potential investors.
CFO Services

We offer assistance in management of the financial aspects of the firm as your CFO does to
your firm. Services such as Virtual CFO, interim CFO and Full Time CFO services are
available based on your needs and requirements.

Payroll Preparation/Maintenance

Proper assistance and support on payroll preparation & timely disbursement of salary after
considering all legal compliances.

Incorporation

We assist in Company / LLP incorporation and Partnership Firm Registration.

Return Filing

Monthly / Periodical returns with respect to TDS / GST and other returns with respect to Labour
Laws and existing statutes are undertaken.

STATUTORY & TAX COMPLIANCES

Tax planning & tax advisory

We will assist to avoid unnecessary tax burden with proper tax planning. We provides services
in the areas of Transfer Pricing, Cross boarder Taxation, Advance rulings etc.

Direct Tax

Tax Audits, Appeals & Revisions, ITR Filing, TDS Filings & advisory, Tax Advisory, PAN &
TAN Services, NRI Services, FEMA Compliances.

Indirect Tax

Tax Audits, Appeals & Revisions, GST Filings, Import refunds facilitation, GST registration
& deregistration.

ABROAD SERVICES

We offer Firm / LLC Registration, VAT Registration, business consultancy and Audit with
respect to entities situated in United Arab Emirates (UAE)
 AUDITING PROCEDURES FOLLOWED BY SRVC & COMPANY

INCASE OF BANK VERIFICATION DETAILS INCLUDES

PRODUCT VERIFICATION %

DEPOSITS 100%

1 Savings Account

a)Savings Bank individual

b)Savings Bank institutional

c)SB Junior

d)Basic savings A/c

2 Fixed Deposit

a)FD individual

b)FD institutional

3 Recurring Deposit

4 Daily deposit

5 Day Deposit

6 Current A/C

LOANS & ADVANCES 100%

1 FD loan

2 Gold Loan

a)GL 1 month

b)GL 3 month

c)GL 6 month

d)NM GL 1 month
 e)NM GL 3 month

f)NM GL 6 month

g)Karshika Vayipa (12 M)

3 DD loan

4 Daily deposit Loan

5 RD Loan

6 RI Loan

7 Secured Loan

8 Secured LT loan

9 Urban Padippura Housing Loan

10 Dual Pay Housing Loan

11 Employees Housing Loan

OTHER VERIFICATION SUPPORTING DOCUMENTS

1 Physical Cash 100% Coinwar & ledger report

2 Physical Gold 100% Outstanding report

3 Physical Key Verification 100%

4 Stock verification 100% Stock Register

5 Fixed assets verification 100% Register

6 Bank Reconciliation 100% Ledger & statement

7 HO Reconciliation 100% Ledger & statement

8 Key Movement Register 100% Register

9 Locker Register 100% Register

10 Cash Limit 100% Coinwar

 11 Vouchers- 7 Vouchers/ Month

ENGAGEMENT PROCEDURES

Before discussing the Audit Procedures followed by SRVC & COMPANY, I try to focus on
the engagement procedures through which ACNABIN is engaged/ recruited by the client
to perform the audit. SRVC & COMPANY faces three kinds of situations in engagement
process:

Engagement with new client.

Engagement with existing client.

Directly appointed by the client. Before starting the audit work, some letters are exchanged
between SRVC & COMPANY and clients.

In case of new client:

4 (four) letters are exchanged between SRVC & COMPANY and client including acceptance
letter of appointment at the time of involving with the new client. Following stages are followed
by both SRVC & COMPANY and client:

STAGE – 1: Client requires for technical and financial proposal from the SRVC &
COMPANY

Client generally gives circular with the newspaper or directly wants proposal for auditfrom the
audit firm. In case of direct offer they request to the audit firm to submit a quotation for the
cost of conducting audit of the client. They also mention the specific date to confirm the
decision taken by the audit firm and completion date for audits. The client firm mentions here
the key areas of the audit in the form of attachment. It assures that if SRVC & COMPANY
audits client’s firm, they will supply the formal terms of reference/ audit mandates to govern
the conduct of audit.

STAGE – 2: The technical and financial proposal is sent by SRVC & COMPANY to the client

After reviewing the client letter or paper’s circular, audit firm drafts a proposal letter to the
client. The proposal letter contains technical and financial proposal for carrying out the subject
of audit. SRVC & COMPANY estimates its personnel costs after considering the mandates to
be utilized and using the minimum hourly rate of fees as prescribed by The Instituted of
Chartered Accountants. The firm also mentions that as it is an estimate, the cost may vary with
variation in number of mandates estimated to

STAGE – 3: Acceptance by the client on the basis of proposal of SRVC & COMPANY –
A letter of contract
After receiving proposal letters from various audit firms, client then selects the one which his
favorable to them, and it appoints the audit firm for audit purpose. From the technical and
financial proposal of the SRVC & COMPANY the client company understands the nature of
the audit (such as independent, external) to assess the organization’s internal control systemin
administering the audited matter.
STAGE – 4: A letter is sent by SRVC & COMPANY to the client confirming to work with
the client – Confirmation Letter
After receiving the acceptance letter from the client SRVC & COMPANY provides
confirmation letter describing the firm’s willingness to work with the client.

In case of last year’s client

Three letters are exchanged between the SRVC & COMPANY and client:i.

Willingness letter for reappointment

:
In this letter SRVC & COMPANY wants to audit this year. It can request to increase audit fee
or change some other conditions.

ii.

Client sends appointment letter.iii.

SRVC & COMPANY accept this appointment.

In case of directly appointed by the client

If the client is interested to work with SRVC & COMPANY, then it directly sends an
appointmentletter to the firm which includes all terms and conditions. If all terms and
conditions are favorable to the SRVC & COMPANY then it accepts the appointment and sends
a letter to the client.
DATA ANALYSIS & INTERPRETATION
1.GENDER OF RESPONDANTS

NO OF
GENDER RESPONDANTS PERCENTAGE (%)

MALE 32 64

FEMALE 18 36

TOTAL 50 100

GENDER

36%

MALE
64%
FEMALE

INTERPRETATION
From the above table it is interpreted that 64% of the respondents are male and the rest
36% are female.
2.AGE OF RESPONDANTS

AGE
(IN NO OF
YEARS) RESPONDANTS PERCENTAGE %
18-30 40 80
31-40 8 16
41-50 2 4
ABOVE
50 0 0
TOTAL 50 100

AGE

90

80

70

60

50

40

30

20

10

0
18-30 31-40 41-50 ABOVE 50

NO OF RESPONDANTS PERCENTAGE %

INTERPRETATION
From the above table it shows the 80% of the respondent are in the age group 18-30 years, 16%

of the respondents belong to the age group 31-40 years. And 4% of respondants are in 41-50
age group, there is no people working above 50years. It infers that majority i.e.80% of the
respondents age is between 18-30 years.
3.EDUCATIONAL QUALIFICATION OF RESPONDANTS

QUALIFICATION NO OF RESPONDANTS PERCENTAGE %

SSLC 2 4

PLUS TWO 10 20

DEGREE 30 60
PG 8 16

OTHERS 0 0
TOTAL 50 100

QUALIFICATION

60

30

20
16
2 4 10 8 0 0

SSLC PLUS TWO DEGREE PG OTHERS

NO OF RESPONDANTS PERCENTAGE %

INTERPRETATION
From the above table it is interpreted that the qualification of the respondents 60% of they are

under graduates 20% of the respondents are plus two and 16%of them are post graduates.

Majority respondents have degree qualification.

4.WORK EXPERIENCE

WORK NO OF
EXPERIENCE RESPONDANTS PERCENTAGE (%)

0-5 40 80

6-10 5 10

11-15 4 8

ABOVE 15 1 2

TOTAL 50 100

WORK EXPERIENCE

8% 2%
10%

80%

0-5 6-10 11-15 ABOVE 15

INTERPRETATION
The above table shows that 80% of the respondents have below 5 yrs experience. 10%
of the respondents are 6-10 yrs. experience Maximum score 5*50-250
Medium score = 3*50 = 150
Minimum score = 1*50 50
5. HOW LONG HAVE YOU BEIGN WORKING IN THE ORGANISATION ?

YEARS NO OF RESPONDANTS PERCENTAGE

0-5 45 90
6-10 5 10
11-15 0 0
ABOVE 15 0 0
TOTAL 50 100

90

45

5 0 0 10 0 0

NO OF RESPONDANTS PERCENTAGE

0-5 6-10 11-15 ABOVE 15

INTERPRETATION

The above table shows that 90% of the respondants have 0-5 years experience with the
organization.10% of the respondants have 6-10 years and no respondants have an experience
above 11 years.
6. Does your organization have GST registration ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 0 0

NO 50 100

TOTAL 50 100

PERCENTAGE

NO 100

YES 0

0 10 20 30 40 50 60 70 80 90 100

PERCENTAGE

INTERPRETATION
In this table shows that the entire respondents have GST registration
7.Which ERP software is used for auditing purposes ?

NO OF
PARTICULARS RESPONDANTS PERCENTAGE (%)
TALLY
SOLUTIONS 40 80

ZOHO 0 0

SAP 5 10

OTHERS 5 10

TOTAL 50 100

80

40

0 0 5 10 5 10

TALLY SOLUTIONS ZOHO SAP OTHERS

NO OF RESPONDANTS PERCENTAGE (%)

INTERPRETATION
In this table shows that 80 % of the totak respondents are using tally software and no one is
using ZOHO software.10% of the respondents are using SAP software and other kinds of
ERP softwares.
8.WHICH CATEGORY OF CLIENTS ARE HIGHER IN THE ORGANISATION.

PARTICULARS NO OF RESPONDANTS PERCENTAGE

BUSINESS ORGANISATIONS 15 30

BANKS 15 30

INDIVITUALS 15 30

OTHERS 5 10

TOTAL 50 100

30 30 30

15 15 15

10

BUSINESS ORGANISATIONS BANKS INDIVITUALS OTHERS

NO OF RESPONDANTS PERCENTAGE

INTERPRETATION

In this table shows that 30% of th respondents are saying business organizations are higher.
other 30% of the clients are saying banks are higher and other 30% of the respondents are
saying individual clients.10% states that other clients are higher.
9.WHICH KIND OF AUDITING HIGH IN YOUR ORGANIZATION

PARTICULARS NO OF RESPONDANTS PERCENTAGE

CONCURRENT 45 90

STATUTORY 5 10

TOTAL 50 100

NO OF RESPONDANTS

10%

CONCURRENT
STATUTORY
90%

INTERPRETATION
In this table shows that 90% of thr auditing is concurrent auditing that is done on monthly
basis.And 10% of the of auditing is statutory auditing
10.WHAT IS YOUR OPINION REGARDING THE AUDITING PROCEDURES IN
SRVC & COMPANY

PARTICULARS NO OF RESPONDANTS PERCENTAGE

EXCELLENT 50 100

GOOD 0 0

AVERAGE 0 0

BELOW AVERAGE 0 0

TOTAL 50 100

CHART TITLE
NO OF RESPONDANTS PERCENTAGE

100

50

0 0 0

EXCELLENT GOOD AVERAGE BELOW AVERAGE

INTERPRETATION

In this table shows that all the respondents have the opinion EXCELLENT regarding the
auditing procedures in SRVC & COMPANY
11.DOES THE AUDITING PROCEDURES CAN BE TIMELY DONE

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 25 50

NO 25 50

TOTAL 50 100

PERCENTAGE
60

50
50 50
40

30

20

10

0
YES NO

PERCENTAGE

INTERPRETATION
In this table shows that the 50% of the respondants are saying it is timely done and the other
50% of the respondents are saying no auditing procedures cannot be time done
12.Do you follow systematic auditing procedure ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

AGREE 20 40

NUETRAL 20 40

DISAGREE 10 20

TOTAL 50 100

40 40

20 20 20

10

AGREE NUETRAL DISAGREE

NO OF RESPONDANTS PERCENTAGE
13.How many assistants needed to complete the auditing procedure ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

0-2 10 20

2-4 20 40

5-10 10 20

MORE THAN 10 10 20

TOTAL 50 100

45

40

35

30

25

20

15

10

0
0-2 2-4 5-10 MORE THAN 10

NO OF RESPONDANTS PERCENTAGE
14.How will the auditor communicate and follow up ?

PARTICULARS NO OF PARTICIPANTS PERCENTAGE

MANAGERS 25 50

STAFFS 0 0

FINANCE HEADS 25 50

OTHERS 0 0

TOTAL 50 100

NO OF PARTICIPANTS PERCENTAGE

60

50

40

30

20

10

0
MANAGERS STAFFS FINANCE HEADS OTHERS
15.Do you pay income TAX ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 40 80

NO 10 20

TOTAL 50 100

NO OF RESPONDANTS
45

40

35

30

25

20

15

10

0
YES NO

NO OF RESPONDANTS
16.Do you pay income tax ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 40 80

NO 10 20

TOTAL 50 100

NO OF RESPONDANTS

20%

YES
NO
80%
17.Is auditing procedures followed by to Indivituals and business
organizations are the same ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 10 20

NO 40 80

TOTAL 50 100

NO OF RESPONDANTS

20%

YES
NO
80%
18.Does the organization provide any allowances for going long distance
auditing ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 0 0

NO 50 100

TOTAL 50 100

120

100 100

80

60 NO OF RESPONDANTS
PERCENTAGE
50
40

20

0 0
YES NO
19.Is time becomes a problem for auditing ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 30 60

NO 20 40

TOTAL 50 100

Chart Title

60

50

40

30

20

10

0
YES NO

NO OF RESPONDANTS PERCENTAGE
20.Does concurrent auditing done monthly ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

1 MONTH 35 70

2 MONTH 15 30

3 MONTH 0 0

TOTAL 50 100

Chart Title

70

35
30

15
0 0

1 MONTH 2 MONTH 3 MONTH

No of respondants percentage
21.Does the changing auditing rules affect the auditing procedure ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 50 100

NO 0 0

TOTAL 50 100

Chart Title
120

100
100
80

60

40 50

20
0 0
0
YES NO

NO OF RESPONDANTS PERCENTAGE
22.How much remuneration do you charge on each audit ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

0-25000 25 50

26000-40000 15 30

50000-100000 10 20

ABOVE 100000 0 0

TOTAL 50 100

Chart Title

0
ABOVE 100000
0

20
50000-100000
10

30
26000-40000
15

50
0-25000
25

0 10 20 30 40 50 60

PERCENTAGE NO OF RESPONDANTS
23.Do you ask for feedback after each audit ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 50 100

NO 0 0

TOTAL 50 100

Chart Title
120

100
100

80

60

50
40

20

0 0
0
YES NO

NO OF RESPONDANTS PERCENTAGE
24. Do you have your own procedures for doing auditing to make it fast ?

PARTICULARS NO OF RESPONDANTS PERCENTAGE

YES 50 100

NO 0 0

TOTAL 50 100

Chart Title
120

100
100

80

60

40 50

20

0 0
0
YES NO

NO OF RESPONDANTS PERCENTAGE
 CHAPTER V
FINDINGS SUGGESTIONS & CONCLUSION
FINDINGS

• 64 % of the respondents are male

• In some situation lack of time management is there
• Some times proper auditing procedures are not followed because of lack of time
• Most of the clients are banks and business organizations
• 60% of the employees are degree holders
• Employee management is good
• Feedback is promoted from each client to make it better
• Average remuneration of each audit is between 25000 to 35000 rupees
• Concurrent auditing is more compared to statutory audit
• They provide GST FILLING, business consulting, CFO services and field credit
investigations.
• Minimum two assistants are needed to complete the audit
• Systematic audit procedures are followed
• Customer satisfaction has high value in this organization
• Employees are friendly with customer communication
• Tally ERP software is used mostly.
• Microsoft excel is used for all calculations
• All clients auditing information are stored with high confidentiality
• Give counselling and consultant services while auditing
•
SUGGESTIONS

• Maintaining all operations in timely manner can reduce last date rush
• By calling clients and
 CONCLUSION

In conclusion, the auditing procedures followed by an auditing firm are essential for ensuring
the accuracy and integrity of financial statements. These procedures involve a thorough
examination and analysis of an organization's financial records and internal controls, as well
as the testing of transactions and balances. Auditing firms must also adhere to professional
standards and guidelines set by regulatory bodies, such as the American Institute of Certified
Public Accountants (AICPA), to ensure the quality and consistency of their work. Overall, the
goal of auditing procedures is to provide assurance to stakeholders that the financial statements
are presented fairly and in accordance with generally accepted accounting principles (GAAP).
 A STUDY ON AUDITING PROCEDURES IN SRVC & COMPANY

QUESTIONARE

Dear respondent, I am, ATHUL PRAKASH 3rd semester MBA student of College of
Engineering, Thalassery. I am pursuing a project on the topic “A STUDY ON AUDITING
PROCEDURES IN SRVC & COMPANY CHARTERED ACCOUNTANTS” AS a part of our
course curriculum. Hence, kindly request you to spend a little time in helping us to know your
views. I am assuring you that the data collected will be used only for academic purpose.

PERSONAL DATA

NAME

1.GENDER

MALE

FEMALE

2.AGE

18-30

31-40

41-50

ABOVE 50

3. .EDUCATIONAL QUALIFICATION

SSLC

PLUSTWO

DEGREE

PG

OTHERS

4.WORK EXPERIENCE
 0-5 YRS

6-10 YRS

11-15 YRS

ABOVE 15 YRS

5.HOW LONG HAVE YOU BEEN WORKING WITH THIS ORGANISATION?

0-5 YRS

5-10 YRS

MORE THAN 10YRS

6.IS YOUR ORGANISATION REGISTERED UNDER GST ?

YES

NO

7.WHICH ERP SOFTWARE IS USED FOR AUDITING PURPUSES ?

TALLY SOLUTIONS

ZOHO

SAP

OTHERS

8.WHICH CATEGORY OF CLIENTS ARE HIGHER IN YOUR ORGANISATIONS ?

BUSINESS ORGANISATIONS

BANKS

INDIVITUALS

OTHERS

9.WHICH KIND OF AUDITING IS MORE IN YOUR ORGANISATION ?

CONCURRENT AUDITING

STATUTORY AUDITING
10.WHAT IS YOUR OPINION REGARDING THE AUDING PROCEDURES IN SRVC &
COMPANY?

EXCELLENT

GOOD

AVERAGE

BELOW AVERAGE

11.DOES THE AUDITING PROCEDURES CAN BE TIMELY DONE ?

YES

NO

12.DO YOU FOLLOW SYSTAMATIC PROCEDURE FOR DOING AUDITING

PROCEDURES ?

AGREE

NUETRAL

DISAGRE

13.HOW MANY ASSISTANTS NEEDED TO COMPLETE THE AUDITING

PROCEDURES ?

0-2

2-5

5-10

MORE THAN 10

14.HOW WILL THE AUDITOR COMMUNICATE AND FOLLOW-UP WITH

MANAGEMENT ABOUT ANY IDENTIFIED ISSUES OR CONCERNS DURING THE
AUDIT?

MANAGER

STAFFS

FINANCE HEADS
 OTHERS

15.DO YOU PAY INCOME TAX ?

YES

NO

16.DO YOU PROVIDE ANY ADVISORY SERVICES TO YOUR CLIENTS ?

YES

NO

17.IS AUDITING PROCEDURES FOLLOWED TO INDIVITUALS AND BUSINESS

ORGANISATIONS ARE THE SAME

YES

NO

18.DOES THE ORGANISATION PROVIDE ANY ALLOWANCES FOR GOING LONG

DISTANCE AUDING ?

YES

NO

19.IS TIME BECOMES A PROBLEM FOR AUDITING ?

YES

NO

20.DOES CONCURRENT AUDITING DONE MONTHLY ?

1 MONTH

2 MONTH

3 MONTH

21.DOES THE CHANGING AUDITING RULES AFFECT THE AUDITING

PROCEDURES ?

YES
 NO

22.HOW MUCH REMUNERATION DO YOU CHARGE ON EACH AUDITING ?

0-25000

26000-40000

50000-100000

MORE THAN 1LAKH

23.DO YOU ASK FOR THE FEEDBACK AFTER EACH AUDITING ?

YES

NO

24.DO YOU HAVE YOUR OWN PROCEDURES FOR DOING AUDITING TO MAKE IT
FAST ?

YES

NO