E auditing

E audit is also called as computer auditing which uses computer records to

complete auditing . An e-audit is a systematic, independent, and documented
process to obtain evidence through electronic means to determine the extent of
conformity to the audit criteria. E audit is also called as remote audit.
Conducting an e-audit has many benefits including saving time, reduce the
travel to remote regions, less paper required and, witnessing and tracking the
audit in real-time.
Advantages of Electronic Audit :

Easy accessibility:
Companies that opt for a paperless audit can provide increased accessibility to
financial documents and statements for auditing personnel. Increased
accessibility can decrease the amount of time required by accounting and
financial staff to provide documents to auditors; depending on security
requirements, accessibility may allow auditors to conduct their review from
outside the business facility.”

Witness & Track The Audit in Real-Time

The auditor and their team is able to track the process in real-time; similar to
the way in which they sit with an assessor

Electronic documents:
Physical documents are difficult to secure than electronic documents. Physical
documents can be copied, lost or stolen whereas electronic documents can be
maintained as password protected and digitally secured,

Less Paper work:

E-audits bring down the sheer amount of paper wasted in manuals and process
documents that span into hundreds of papers. There are the environmental
concerns, which is great if you’re being certified to an Environmental
Management Quality System like ISO 14001, which show to an assessor that
the company is taking the wastage of paper and printer cartridges into
consideration with the organisation’s take on its business plan and internal
processes. There’s also the benefit of error reduction, eliminating travel costs –
on the part of the assessment body – as well as a rapid turnaround time.

Disadvantages of E audits:
 An auditor cannot physically observe the process of accounting in
computerized system.
 An auditor cannot ensure that the procedure followed in processing is proper.
 The procedure may be changed by intervention or by malicious codes.
 Remote audit entirely depends on circumstances to align the fitness of
things. For example, e-audit is not suitable when conducting audits at floor
factories, warehouses of a manufacturing company, and an audit of the
welding process of a steel producer.
 Time consumed to reconnect and resolve network problems. Other
disruptions during e-audit are unreliable network connection, interviews,
or meetings interruptions. Make sure that tangible and intended shreds of
evidence are available to review.
 Loss of direct interaction with auditees is one primary concern in remote
audits. It breaks the potentiality to read their body language required to
explore issues and additional audit tracks during the onsite audit.

Procedure to Conduct Remote /E audit

A remote audit can be adopted at any phase of the certification process, here
are three simple steps involved in remote audit:

1. Planning

We need to determine the best audit strategy for the company. To

ensure that audit is effective, proposed plan has to be discussed with
peers and consider scheme-specific requirements and the company’s IT
infrastructure.

Once the approach and strategies are confirmed, one need to schedule a
date to begin your company's comprehensive audit planning process.
This includes validating the final audit plan and deciding what
technology and audit methodologies to use.

2. Conducting e-audit

A successful remote audit requires good network connectivity- both

voice and video, to ensure smooth communication between client and
the auditor. Once the link is set up, audit evidence will be acquired
through interviews, document and record reviews (through screen
sharing), and process and activity observation (via video sharing). To
support the audit key findings and conclusions, all evidence will be
assessed and reported - the only difference is that it will be done
remotely.
 3. Audit Reporting
4. Remote audit reports will include details about the remote auditing
methodologies utilized and the audit's success in fulfilling the stated
objectives, in addition to a conventional on-site audit report.

Specialised Audit

Audit of books of educational institutions i.e. Schools, Colleges, Universities ,

hotels, insurance and banking companies, cinema theatres are included in the
term specialised audit.

Audit of Eucational Institutions :

 Study of the trust deed or regulations.

 Examine the previous financial statements and noting of provisions
applicable.
 Evaluation of internal control system. Examine the minute of the meeting
and resolution.
 Verification of students fee register
 . Authorization for fee concessions and verification of cashbook with
respect of counterfoils of receipts and payments.
 Examination of capital fund regarding admission fee , free education and
concessions .
 Confirmation of fines for late payment or absence, Check hostel dues
recovery.
 Verification of rental income or expenses. Examine the bank pass book of
different nature. Verification of investment register and also ask about
any interest and dividend from investment if any.
 Verify grants from any local bodies or Government with reference to
memo or sanction letter.
 Reporting of any arrears due and vouch counterfoils of receipts taken
from donors.
 Confirmation of any deposits and caution money and its treatment.
 Examination of expenses for library books and sports equipments.
 Checking of acknowledgement letter if any with regards to scholarship.
Examination of payments with respect to prizes if any.
 Examine the salary register.
 Verify the Provident Fund Register.-Check annual report with accurate
supporting documents.
 Vouching of all establishment expenses-Vouch payment for electricity
and water bill.
 Examination of payment for hostel maintenance and any other
miscellaneous expenses.
 Inspection of facilities given to students under any schemes associated
with Government- Verification of Fixed Assets Register. Verify
ownership and existence of Fixed Assets .
 Confirmation of statutory compliance i.e. P.F., Income Tax etc.
 Verification of separate statements of accounts for different funds.
Checking of calculation of salary payable and deductions.

Audit of Banking Companies:

The accounts and audit of banking companies are governed by the

Banking Regulation Act, 1949, Banking Companies (Acquisition and
Transfer of Undertaking) Act of 1970 and 1980 as also the Companies
Act 2013 to the extent the provisions of the latter not inconsistent with
those of the former.

An auditor should pay attention to the following points while auditing the
accounts of bank. Considering a large number and complexity of business
transactions, it is practically impossible for an auditor of a bank to
perform a detailed audit. He has therefore to rely on the system of internal
control the details of which must be made available to him in writing. He
should particularly ascertain whether: (a) the duties of staff are frequently
changed: (b) there is an effective segregation of duties as to maintenance
of the ledger and the books and (c) all entries and transfers of funds of an
unusual nature are properly authorised.

1. The auditor should visit the bank at the close of business at the end
of the financial year to physically count the cash in hand, bank
notes, cheques, etc., forming part of the cash balances in hand at
that date.
2. If cash or securities have been deposited with the Reserve Bank or
any other bank, he should obtain a certificate from the bank
concerned.
3. He should examine the shares, securities, deeds, etc., representing
the investments of the bank and see that income received or
accruing in respect of the same has been duly accounted for.
4. Interest received or accruing on loans should be vouched by
reference to the agreement etc., with customers making due
allowance for the amount of interest deemed to be irrecoverable.
5. He should check the correctness of the calculation as to rebate on
bills discounted. The amount of rebate is taken credit of only at the
time of discounting of bills though it is earned over the period of
 maturity of the bills. It should therefore be seen that rebate
properly attributable to the subsequent period is duly carried
forward.
6. He should verify the income on account of commission in respect
of various services rendered to customers by reference to advices
sent to them.
7. He should take care to ascertain whether proper distinction has
been made between capital and revenue items of expenditure.
8. Interest credited to customers’ accounts should be verified by
reference to the balances in their accounts. Some banks follow the
practice of sending a statement to each of the customers at the date
of balancing of his account and requesting him to sign and return
the said statement as evidence of his agreement with the balance
stated therein. These statements should also be verified to confirm
the balances in individual accounts.
9. Expenses on account of salaries, rent for the business etc. should be
verified from the salary register, service contracts, rent deed etc.
10.He should examine that all the assets with the bank are verified for
their existence, value, title and possession.
11.He should examine all assets and liabilities written off specially
with a view to create a secret reserve.
12.He should see whether adequate provision for doubtful debts has
been made or not.

Audit of Insurance Companies:

It will not be possible for an auditor to check all the transactions of an Insurance
Company in detail and therefore, he has to depend upon the internal check and
control applied by the company to a great extent. Having enquired about them,
he should decide about the extent of the checking of the accounts. At the same
time, he must keep in mind the various provisions of the Insurance Act, 1938
and see that they are duly observed. Then he should process as follows:

1.Premium: An insurance company has its main source of income from the
receipt of premium from the policy holders of the company. The auditor should
vouch the premium received with the counterfoils of the receipt book, premium
register, copies of insurance policies, and premium account.
He should also ensure that the outstanding premium and the premium received
in advance in respect of risks commencing from the following year have been
properly recorded in the revenue account and disclosed separately under a
separate head in the balance sheet. He should vouch the premium paid/received
from other branches with extra care.

2.Investment: The auditor should ascertain the market and book value of
investments and see that the investments are shown at the lower of the two.
Investment lodged with the Reserve Bank should be verified with the Bank’s
Certificate. He should see the investment register and vouch the receipts of
interest and dividends with relevant documentary evidences. Dividend accrued
but not yet received should be credited to the revenue account.
3.Re-insurance: He should vouch the premium paid/receive on re-insurance
policies and the recoveries on account of re-insurance in the usual manner.
4.Claims: All claims paid during the year should be vouched by the claim
register, cash book, counterfoils of the cheque book, surveyor’s certificate,
correspondence, sanctions of the competent authorities and other documentary
evidences to find out the exact amount of claims.

Claims admitted but not yet paid on the date of the balance sheet should be
properly estimated and be shown as liability in the balance sheet.

5.Commission: The amount of commission paid or payable to the insurance

agents should be vouched with commission vouchers, acknowledgement of the
agents and agreements with the agents. The auditor should ensure that the
commission paid or payable to such agents is in accordance to the prescribed
limits. The commission which has not been paid to the agents must be checked
and be shown in the liability side of the balance sheet.
6.Expenses: Examine managements expenses carefully and see that provisions
of the Act are duly observed in this connection. See that such expenses have
been charged to Revenue Account only duly classified. Check that the common
expenses have been allocated between various departments (fire, accident,
marine and general). Ensure that such allocation is based on accounting
principles and made reasonably and equitably.
7.Branch and Agency: Scrutinise carefully the outstanding branch and agency
balances to determine that they are recoverable. Check that sufficient provision
has been made against all doubtful accounts.
8.Reserve: See that sufficient amount has been set aside for reserve for
unexpired risks. A reserve of 40% of the premium income is considered
sufficient.
9.Contingent liabilities: Make sure that all the contingent liabilities have been
duly ascertained and properly disclosed in the Balance Sheet as required.
10.Code of conduct: Check that the provisions of code of conduct have been
duly observed.
11.Annual Accounts: See that the annual accounts of the insurance company
has been prepared in accordance with the prescribed forms and regulations for
their preparations have been duly observed.
12.Loans and advances: See that no loans or temporary advances have been
made to any director, other officer of the company. manager, auditor or any
13.Qualified Auditors: See whether the accounts of the branches have been
audited by qualified auditors. If not, they should be checked by him carefully.