CLASSIFICATION OF AUDIT

• CLASSIFICATION OF AUDITS
• AUDITING / CONTEMPORARY AUDITING/AUDITING AND ASSURANCE

  CLASSIFICATION OF AUDITS

   ON THE BASIS OF SCOPE

1.       GENERAL

2.       SPECIFIC

   ON THE BASIS OF NATURE OF ACTIVITY

1.       COMMERCIAL

2.       NON COMMERCIAL

   ON THE BASIS OF FORM OF ORGANIZATION

1.       PRIVATE

2.       GOVT

   ON THE BASIS  OF WHO CONDUCTS THE AUDIT

1.       INTERNAL AUDIT

2.       EXTERNAL AUDIT

   ON  THE BASIS OF LEGAL NECESSITY

1.       STATUTORY AUDIT

2.       NON STATUTORY AUDIT

   ON THE METHOD OF EXAMINATION

1.       CONTINUOUS AUDIT

2.       ANNUAL AUDIT

   TYPES OF AUDIT

  PRIVATE AUDIT

   CONDUCTED AT THE DESIRE OF OWNERS.

   NOT STATUTORY AUDIT

1.       AUDIT OF SOLE TRADER’S ACCOUNTS

2.       AUDIT OF ACCOUNT OF PARTNERSHIP FIRMS

3.       AUDIT OF ACCOUNT OF INDIVIDUALS

4.       AUDIT OF INSTITUTIONS NOT COVERED BY STATUTORY AUDIT

   AUDIT OF SOLE TRADER’S ACCOUNT

1.       DECISION TAKEN BY OWNER

2.       SCOPE OF THE AUDIT AND APPOINTMENT OF AUDITOR

3.       AGREEMENT IN WRITTEN FORM

   ADVANATAGES:

1.       PROPER ACCOUNTS

2.       AWARENESS OF FRAUD

3.       RELIABLE

4.       BASIS FOR SETTLEMENT OF ACCOUNT

   AUDIT OF ACCOUNT OF PARTNERSHIP
FIRMS

1.       PARTNERSHIP DEED ON MUTUAL AGREEMENT PROVIDE FOR AUDIT OF FINANCIAL STATEMENT.

2.       RIGHTS,DUTIES AND LIABILITIES OF THE AUDITOR ARE DEFINED IN THE MUTUAL AGREEMENT.

3.       WRITTEN FORM THE NATURE AND SCOPE OF AUDIT WORK

 IN CASE THE PARTNERSHIP DEED IS SILENT THEN THESE PROVISION OF PARTNERSHIP WILL APPLY

1.       SHARING OF PROFIT AND LOSS EQUALLY

2.       NO SALARY

3.       INTEREST ON CAPITAL WILL BE PAYABLE OUT OF PROFIT ONLY

4.       LOAN INTEREST WILL BE AT 6%

5.       USE THE PROPERTY FOR THE BUSINESS ONLY

6.       ADMISSION OF NEW PARTNER WITH THE CONSENT

7.       ADMISSION OF MINOR ONLY FOR PROFIT

   PARTNERSHIP FIRMS

   GOOD WILL  BE CONSIDERED AS ASSET AT THE TIME OF SETTLEMENT OF ACCOUNT ON DISSOLUTION

   ON DISSOLUTION THE FOLLOWING ORDER:-

1.       OUT OF PROFITS

2.       OUT OF CAPITAL

3.       BY THE PARTNERS INDIVIDUALLY IN THE PROFIT SHARING RATIO

   ON DISSOLUTION OF THE FIRM,ITS ASSETS INCLUDING ANY SUM CONTRIBUTED BY THE PARTNERS TO MAKE UP DEFICIENCY,SHALL BE APPLIED IN THE FOLLOWING ORDER:-

1.       PAYING DEBT TO OUTSIDERS

2.       PAYING OFF PROPORTINATELY TO PARTNERS THEIR LOAN

3.       TOWARD THEIR CAPITAL

4.       BALANCE IN PROFIT SHARING RATION

   PRIVATE AUDIT

1. AUDIT OF ACCOUNT OF INDIVIDUALS
2. AUDIT OF INSTITUTIONS NOT COVERED BY STATUTORY AUDIT
3. GOVERNMENT AUDIT

   AUDIT OF GOVT OFFICES AND DEPARTMENT CONDUCTED BY AUDIT AND ACCOUNTS DEPARTMENT. WORKS INDEPENDENTLY AND IT IS HEADED BY COMPTROLLER AND AUDITOR GENERAL OF INDIA

   WORKING ACCORDING TO GOVT RULES AND REGULATIONS.

 OBJECTIVES OF GOVT AUDIT

1.       EVERY PAYMENT AS PER RULES

2.       SANCTIONED BY PROPER AUTHORITY

3.       TO VERIFY THE ALLOWANCES TO EMPLOYEES AS PER RULES

4.       TO CHECK THE EXISTENCE OF STOCK AND STORES AND THEIR PROPER VALUATION

5.       EXPENDITURE FOR THE PUBLIC INTEREST

6.       TO ENSURE STOCK TAKING REGULARLY

   INTERNAL AUDIT

   IS AN AUDIT CONDUCTED ON BEHALF OF THE MGMT OF AN ENTERPRISE WITH THE OBJECTIVE OF ASSISTING THE MGMT TO DISCHARGE ITS RESPONSIBILITY EFFECTIVELY

   EXAMINATION AND EVALUATION OF VARIOUS ACTIVITIES OF AN ENTERPRISE.

  REQUIRMENT OF INTERNAL AUDIT SEC 138

   SUCH CLASS OR CLASSES OF COMPANIES OR MAY BE PRESCRIBED SHALL BE REQUIRED TO HAVE INTERNAL AUDITOR

   THE CENTRAL GOVT MAY BY RULES PRESCRIBE THE MANNER AND INTERVALS IN WHICH THE INTERNAL AUDIT IS TO BE CONDUCTED

   INTERNAL AUDITING

   TWO ASPECTS:-

1.       OPERATIONAL AUDIT:-

2.       AUDIT OF VARIOUS ACTIVITIES

3.       COMPLIANCE WITH PROCEDURES

4.       REPORTING ON THE OPERATIONS OF VARIOUS DEPARTMENT

   MGMT OF AUDIT:- AUDIT OF AUTHORITY.PROPRIETY

   AS PER THE COMPANIES ( AUDITORS REPORT) ORDER 2003,

    THE  STATUTORY AUDITOR IS REQUIRED TO REPORT WHETHER THE INTERNAL AUDITING SYSTEM OF THE COMPANY IS ADEQUATE WITH SIZE AND NATURE OF THE BUSINESS OF THE COMPANY.

1. STATUTORY OR COMPULSORY AUDIT
2. COMPULSORY AUDIT DONE BY QUALIFIED CHARTERED ACCOUNTANT WHO ARE NOT CONNECTED WITH THE PREPARATION OF ACCOUNTS.
3. CONDUCTED TO KNOW  WHETHER BALANCE SHEET AND PROFIT AND LOSS ACCOUNT PRESENT A TRUE AND FAIR VIEW OF THE FINANCIAL POSITION AND WORKING RESULT

   AUDIT OF COMPANIES

1.       BANKING COMPANIES GOVERNED BY THE BANKING REGULATIONS ACT 1949

2.       CO OPERATIVE SOCIETIES REGISTERED UNDER THE CO OPERATIVE SOCIETIES ACT

3.       PUBLIC AND CHARITABLE TRUSTS REGISTERED UNDER INDIAN TRUST ACT

4.       ELECTRIC SUPPLY COMPANIES GOVERNED BY ELECTRICITY SUPPLY ACT 1948

   STATUTORY AUDIT

1.       SCOPE OF SUCH AN AUDIT CAN NOT BE RESTRICTED

2.       CONDUCTED BY PROFESSIONAL

3.       THE RIGHTS,DUTIES AND LIABILITIES OF THE AUDITORS ARE GOVERNED BY THE LAW.

   STATUTORY AUDIT

1.       AUDIT OF COMPANIES: UNDER COMPANIES ACT,AUDIT OF ACCOUNTS OF COMPANIES IS COMPULSORY. IS DONE BY INDEPENDENT AUDITOR WHO IS QUALIFIED CA  CAN BE APPOINTED AS AUDITOR. THE  COMPANIES ACT 2013 REGARDING APPOINTMENT,DUTIES,QUALIFICATIONS,POWERS AND LIABILITIES

2.       AUDIT OF ACCOUNTS OF TRUSTS:-

3.       AUDIT OF ACCOUNT OF COOPERATIVE SOCIETIES:-CO –OPERATIVES SOCIETIES ARE ESTABLISHED UNDER THE COOPERATIVES SOCIETIES ACT,1912. IT CONTAINS VARIOUS PROVISIONS FOR REGULATIONS AND WORKING OF THESE SOCIETIES, THE AUDITOR SHOULD HAVE EXPERT KNOWLEDGE AND COMPANIES ACT ARE NOT APPLICABLE TO COOPERATIVE SOCIETIES. THE REGISTRAR OF COOPERATIVE SOCIETIES SHALL AUDIT OR CAUSE TO BE AUDITED BY SOME PERSON AUTHORISED BY HIM

4.       AUDIT OF ACCOUNT OF OTHER INSTITUTION: OTHER CORPORATE BODIES LIKE BANKS,INSURANCE,COMPANIES,ELECTRICITY COMPANIES ETC FORMED UNDER THE SPECIAL ACTS OF THE PARLIAMENT SHALL GET THE ACCOUNT AUDITED AS PER THE PROVISIONS OF THE RESPECTIVE ACT.

   FEATURES OF STATUTORY AUDIT

1.       COMPULSORY AUDIT

2.       MUST BE COMPLETE AUDIT

3.       PROVIDE FOR THE NORMS REGARDING APPOINTMENT OD AUDITOR

4.       MUST BE QUALIFIED ACCOUNTANT

5.       MUST NOT BE DISQUALIFIED AS PER THE PROVISIONS OF THE LAW

6.       INDEPENDENT AUDITOR

7.       RIGHTS,DUTIES AND LIABILITIES OF THE STATUTORY AUDITORS ARE LAID IN THE STATUTE THEY CAN NOT BE ALTERED

8.       THE STATUTORY AUDITOR SERVE THE PURPOSE.

   ADVANTAGE

1.       TRUE AND FAIR VIEW OF THE FINANCIAL POSITION OF THE BUSINESS TO SHAREHOLDERS AND OTHER PERSONS

2.       PROTECTION OF SHAREHOLDERS FROM THE FRAUD COMMITTED BY DIRECTORS,PROMOTERS OR MANAGERS

3.       VERIFICATION OF FOLLOWING THE PROVISIONS OF THE COMPANIES ACT

4.       MORAL CHECK ON THE DUTIES OF MANAGEMENT

 CONTINUOUS AUDIT

1.       CONDUCTED THROUGHOUT THE YEAR OR AT THE REGULAR SHORT INTERVALS OF TIME

2.       AUDITOR VISITS HIS CLIENT REGULARLY AND EACH AND EVERY TRANSACTION IS CHECKED

•                       SUITABLE :

1.       WHERE PERIODICAL STATEMENTS ARE REQUIRED AFTER SHORT INTERVAL

2.       INTERNAL CHECK IS NOT EFFECTIVE

3.       BUSINESS AT LARGE SCALE AND NUMBER OF TRANSACTIONS TO BE CHECKED

4.       REQUIREMENTS OF AUDITED STATEMENTS IMMEDIATELY AFTER THE CLOSE OF THE FINANCIAL YEAR

5.       IN BANKS OR OTHER ORGANIZATION WHERE FINAL ACCOUNTS ARE PREPARED IMMEDIATELY AFTER THE LAST DAY OF THE FINANCIAL YEAR

 DEFINITION OF  CONTINUOUS AUDIT

•                       SPICER AND PEGLER,” A CONTINUOUS AUDIT IS ONE WHERE AUDITOR’S STAFF IS OCCUPIED CONTINUOUSLY ON THE ACCOUNTS THE WHOLE YEAR ROUND,OR WHERE THE AUDITOR ATTENDS THE INTERVAL FIXED OR OTHERWISE ,DURING THE CURRENCY OF THE FINANCIAL YEAR AND PERFORMS AN INTERIM AUDIT, SUCH AUDIT ARE ADOPTED WHERE WORK INVOLVED IS CONSIDERABLE AND HAVE MANY POINTS IN THEIR FAVOUR,ALTHOUGH THEY ARE SUBJECT TO CERTAIN DISADVANTAGES.

•                       R. C WILLIAMS,” A CONTINUOUS DETAILED AUDIT IS ONE WHERE THE AUDITOR OR HIS STAFF IS CONSTANTLY ENGAGED IN CHECKING ACCOUNTS DURING THE WHOLE PERIOD OR WHERE THE AUDITOR OR HIS STAFF ATTENDS AT REGULAR OR IRREGULAR INTERVAL DURING THE PERIOD.

 ADVANTAGES OF CONTINUOUS AUDIT

1.       COMPLETE CHECKING OF ALL THE RECORD

2.       PROPER PLANNING OF AUDIT WORK IN SYSTEMATIC MANNER

3.       PREPARATION OF INTERIM REPORTS

4.       EARLY DETECTION OF FRAUD AND ERRORS

5.       UP TO DATE ACCOUNTS

6.       VALUABLE SUGGESTIONS

7.       MORAL CHECK

DISADVANTAGES

1.       EXPENSIVE

2.       DISLOCATION OF ROUTINE WORK

3.       ALTERATION OF FIGURES

4.       MONOTONY

   ANNUAL OR PERIODICAL AUDIT

   MEANS WHEN THE AUDIT WORK IS CONDUCTED AFTER THE CLOSE OF FINANCIAL YEAR. THE AUDITOR VISITS THE CLIENT AND COMPLETE AUDIT IN ONE SITTING.AFTER THE ACCOUNTS ARE FINALIZED THE AUDITOR IS INVITED TO AUDIT THE ACCOUNTS.

   J.R BATLIBOI, A PERIODICAL AUDIT OR BALANCE SHEET AUDIT IS ONE WHERE THE AUDITOR ATTENDS ONLY AT THE END OF THE FINANCIAL PERIOD AND CERTIFIES THE FINAL STATEMENT OF ACCOUNTS AFTER SCRUTINIZING THE SAME WITH THE BOOKS OF ACCOUNT,VOUCHERS ABD DOCUMENTS.

   FEATURES

1.       AUDIT WORK STARTS AFTER THE CLOSE OF THE FINANCIAL YEAR

2.       AUDIT WORK IS DONE AND COMPLETED IN A CONTINUOUS SESSION

3.       VISIT THE CLIENT ONLY ONCE IN  YEAR AND KEEPS ON GOING TILL THE WORK IS COMPLETED

4.       SATISFCTORY RESULT IN CASE OF SMALL CONCERN

   ADVANATGES

1.       NO DISTURBANCE IN OFFICE WORK

2.       MINIMIZATION OF ALTERATION

3.       COMPLETE GRIP OVER THE AUDIT

4.       CAN BE FINISHED QUICKLY

5.       WORK ALLOCATION ACCORDING TO TIME SCHEDULE

   DIISADVANTAGES

1.       MAY NOT AVAILABLE IMMEDIATELY

2.       MAY NOT BE ABLE TO CHECK AND VERIFY ALL THE TRANSACTIONS

3.       NOT SUITABLE FOR BIG CONCERN

4.       DELAY IN AUDITOR’S REPORT

5.       MORE DEPENDENCE ON THE OPERATION OF MANAGEMENT

   PARTIAL AUDIT

   IS ASKED TO AUDIT CERTAIN CATEGORY OF TRANSACTION OR TRANSACTIONS MADE DURING  A PART OF THE PERIOD

   MAY BE ASKED TO AUDIT THE PAYMENT SIDE OF THE  CASH BOOK. IT IS MADE ONLY FOR A PARTICULAR PURPOSE

   BALANCE SHEET AUDIT

§RELATES TO THE VERIFICATION OF VARIOUS ITEMS OF BALANCE SHEET SUCH AS ASSETS,LIABILITIES,RESERVE AND SURPLUS.PROVISIONS AND PROFIT AND LOSS BALANCE

§PROCEDURE FOLLOWED IS BACKWARD PROCESS

§FIRST THE ITEM IS LOCATED IN BALANCE SHEET ,THEN IT IS LOCATED THE ORIGINAL RECORDS FOR THE PURPOSE OF VERIFICATION

§UNDER THIS AUDIT ,AUDITOR ASSUMES THAT THERE EXIST A RELIABLE SYSTEM OF INTERNAL CONTROL AND ALSO ASSUMED THAN AUDITOR IS HIGHLY SKILLED AND EXPERIENCED

§IN INDIA IT IS SIMILAR TO ANNUAL AUDIT IN INDIA

   MANAGEMENT ( EFFICIENCY AUDIT)

1.       TO EVALUATE VARIOUS MANAGEMENT FUNCTIONS AND PROCESSES

2.       A DETAILED AND CRITICAL REVIEW OF ALL THE OBJECTIVES,POLICIES,PROCEDURES AND FUNCTIONS OF MANAGEMENT IS MADE WITH A VIEW TO BRING ABOUT OVERALL IMPROVEMENT IN MANAGERIAL EFFICIENCY.

3.       ONLY SUCH PERSONS SHOULD BE APPOINTED AS MGMT AUDITORS WHO ARE HAVING  A GOOD KNOWLEDGE AND EXPERIENCE OF MANAGEMENT TECHNIQUES

   STEPS OF MANAGEMENT AUDIT

1.       REVIEWING OF OPERATIVES OBJECTIVES

2.       ON THE BASIS OF OVERALL OBJECTIVES,THE GOALS AND PLANS FOR DIFFERENT DEPARTMENTS ARE DEVELOPED

3.       EXAMINING THE RELEVANCE OF ORGANIZATIONAL STRUCTURE

4.       REVIEW THE PERFORMANCE OF EACH FUNCTION AND DEPARTMENT OF THE MANAGEMENT BY COMPARING WITH THE OBJECTIVES

5.       REPORT SHOULD BE PREPARED SUGGESTING IMPROVES CAUSE OF ACTION

   OBJECTIVES OF MANAGEMENT AUDIT

1.       TO ENSURE THAT SOUND OBJECTIVES ARE SET BY THE MANAGEMENT

2.       REVEALING ANY IRREGULARITY OR DEFECT

3.       ENSURING OBJECTIVES OF MANAGEMENT

4.       HELP VARIOUS LEVEL OF MANAGEMENT IN EFFECTIVE DISCHARGE OF THEIR DUTIES

5.       TO ASSIST MANAGEMENT IN ACHIEVING COORDINATION AMONG VARIOUS DEPARTMENTS

6.       HELPS TO ACHIEVE EFFICIENCY OF MANAGEMENT

7.       TO ASSIST THE MANAGEMENT IN GOOD RELATIONS WITH THE EMPLOYEES

8.       EVALUATION OF PERFORMANCE

9.       TO RECOMMEND CHANGES IN THE POLICIES AND PROCEDURES FOR A BETTER FUTURE

   ADVANTAGE

1.       HELPS MANAGEMENT IN PREPARATION OF PLANS,OBJECTIVES AND POLICIES AND THEIR EFFICIENT ACHIEVEMENT

2.       HELPS MANAGEMENT IN TAKING VITAL DECISIONS FOR MAXIMIZING PROFITS

3.       HELPS IN EVALUATION

4.       PREPARATION OF BUDGETS AND RESOURCE MANAGEMENT

5.       HELP IN TRAINING OF PERSONNEL AND MARKETING POLICIES

   CRITICISM

1.       VAGUE CONCEPT

2.       HESITATION BY MGMT IN TAKING ACTIONS

3.       MORE FOCUS ON KEEPING UP TO DATE AND NOT IMPROVING

   PERFORMANCE AUDIT AND PROPRIETY AUDIT

§DETERMINE WHETHER THE VARIOUS ACTIVITIES OF THE ORGANIZATION ARE BEING CARRIED EFFICIENTLY OR NOT

§AIMED AT ENSURING AN EFFECTIVE CONTROL IN THE ORGANIZATION

§EXAMINES THE RELATION BETWEEN PRODUCTION,SALES AND PROFITS

§EXAMINATION OF THE FOLLOWING:-

1.       VALIDITY OF THE APPROPRIATIONS

2.       NO LEAKAGE OF THE REVENUE

3.       NO WASTAGE OF THE FUNDS

4.       COMPLIANCE WITH LEGAL REQUIREMENTS

5.       SAFETY OF THE ASSETS

   OCCASIONAL AUDIT

   CONDUCTED AS A SPECIAL EVENT NORMALLY IN THOSE ORGANIZATION WHERE ROUTINE AUDITS TAKING PLACE

   LIKE IN CASE OF AT TIME OF NEW ADMISSION OF NEW PARTNER OR WHERE GOVERNMENT ORDERS A SPECIAL AUDIT TO INVESTIGATE INTO CERTAIN MATTER

   STANDARD AUDIT

   A COMPLETE CHECK AND ANALYSIS OF CERTAIN ITEMS

   CONTINGENT UPON EFFECTIVE CHECK

   AN APPROPRIATE TEST CHECK ON REMAINING ITEMS

   THE WHOLE OF THE WORK BEING IN ACCORDANCE WITH GENERAL AUDIT STANDARDS QUITE ADEQUATE TO JUTIFY AN UNQUALIFIED OPINION

   SAMPLE CHECKING

   AUDIT IN DEPTH

1.       TYPES OF SAMPLE CHECKING

2.       SELECTED TRANSACTIONS ARE SUBJECT TO DETAILED STEP WISE VERIFICATION

•                       LIKE IN CASE OF PURCHASE:

1.       REQUISITION SLIP

2.       CLEARANCE OF AUTHORIZING OFFICER

3.       QUOTATION OR TENDERS SUBMITTED BY THE SUPPLIER

4.       PURCHASE ORDERS

5.       GOODS RECEIVED NOTE

6.       INSPECTION NOTE

7.       ENTRIES IN THE BIN CARD AND STORE LEDGER

   POST AND VOUCH AUDIT

1.       INVOLVES VERIFICATION OF ALL INDIVIDUAL TRANSACTIONS

2.       EXAMINATION OF TRANSACTION FROM BOOKS OF ORIGINAL ENTRY AND POSTING IN THE LEDGER

3.       USES DIFFERENT TYPES OF TICKS FOR EACH ASPECT OF EXAMINATION LIKE POSTING,TOTALING,BALANCING ETC

4.       SUITABLE IN SMALL ORGANIZATION ,NOT SUITABLE TO LARGE ORGANIZATION

   OPERATIONAL AUDIT

1.       AIMED AT IMPROVING THE ORGANIZATION

2.       HELPS THE MANAGEMENT IN FOLLOWING WAYS:-

a)       SUGGESTIONS FOR THE IMPROVEMENT OF PROFITABILITY OF THE ORGANIZATION

b)       OTHER OBJECTIVES OF BUSINESS SUCH AS WORKER’S SATISFACTION,IMPROVEMENT IN COMPANY’S IMAGE

   INTERIM AUDIT

1.       WHEN AN AUDIT IS CONDUCTED BETWEEN TWO ANNUAL AUDITS ,SUCH AUDIT IS KNOWN AS INTERIM AUDIT

2.       INVOLVE COMPLETE CHECKING OF ACCOUNTS FOR A PART OF THE YEAR

3.       CONDUCTED TO ENABLE THE BOD TO DECLARE INTERIM DIVIDEND

   BENEFITS

1.       TO KNOW THE PERFORMANCE UP TO CERTAIN PART OF THE YEAR

2.       EARLY DETECTION OF ERRORS AND FRAUDS

3.       HELPING THE AUDITOR IN FINAL AUDIT

4.       HELPS WHEN PUBLICATION OF INTERIM FIGURES BECOMES NECESSARY

   DISADVANTAGE

1.       FIGURES AND ACCOUNTS AUDITED DURING AN INTERIM AUDIT MAY BE ALTERED

2.       WORK LOAD OF ACCOUNTS STAFF

   COST AUDIT

1.       FIRST TIME INTRODUCED IN 1965 IN INDIA WHEN CENTRAL GOVERNMENT ADDED CLAUSE d  TO SECTION 209 AND 233B TO SECTION 233 OF THE COMPANIES ACT

2.       IS AN EFFECTIVE MEANS OF THE CONTROL IN THE HANDS OF MANAGEMENT AND IT IS A CHECK ON BEHALF OF THE SHAREHOLDERS OF THE CONSUMERS AND THE GOVERNMENT

3.       IN THE PRESENT DAY INDUSTRIAL SET UP EVERY INDUSTRIALISTS IS CONSCIOUS ABOUT THE COST OF PRODUCTION

4.       TO HAVE A FULL CONTROL ON THE RECORDS OF COSTS AND COSTS VARIATIONS THE SERVICES OF QUALIFIED ACCOUNTANTS HAVE BECOME NECESSARY

   DEFINITION OF COST AUDIT

   INSTITUTE COSTS AND WORKS ACCOUNTANTS OF LONDON ,” COST AUDIT IS THE VERIFICATION OF THE CORRECTNESS OF THE COST ACCOUNTS AND ADHERENCE TO THE COST ACCOUNTING PLANS

   J. G TICKHE,” COST AUDIT WOULD APPARENTLY MEAN AN EXAMINATION OF COST BOOKS,COST ACCOUNTS,COST STATEMENTS AND SUBSIDIARY AND PRIME DOCUMENTS WITH A VIEW  TO SATISFY THE AUDITOR THAT THESE REPRESENTS A FAIR AND TRUE VIEW OF THE COST OF PRODUCTION. THIS WILL NATURALLY MEANS AN EXAMINATION OF APPROPRIATENESS OF THE COST ACCOUNTING SYSTEM ADOPTED BY THE BUSINESS AND EFFECTIVENESS OF THE IMPLEMENTATION

   OBJECTIVES OF COST AUDIT

1.       TO DETECT ANY ERRORS OR FRAUDS

2.       COMPLIANCE OF COST ACCOUNTING PROCEDURES

3.       VERIFICATION OF THE COSTING DATA

4.       FULL CONTROL ON THE WORKING OF COSTING DEPARTMENTS

5.       EFFECTIVE INTERNAL COST AUDIT

6.       KEEPS A CHECK ON THE STAFF OF COST ACCOUNTING DEPARTMENT

7.       SUGGESTION FOR BRINGING EFFICIENCY IN THE USE OF MATERIALS ,LABOUR ETC

   TAX AUDIT

§THE FINANCIAL STATEMENTS ARE CERTIFIED BY THE AUDITOR FOR TRUTH AND FAIRNESS OF OPERATING RESULTS AND FINANCIAL POSITION OF THE BUSINESS

§MEANT FOR GENERAL PURPOSE

§UNDER INCOME TAX ACT,PROFITS SHOWS BY PROFITS AND LOSS ACCOUNT HAVE TO BE ADJUSTED AS PER THE PROVISIONS OF THE ACT

§PROFITS FOR ACCOUNTING ARE ASCERTAINED AS PER ACCOUNTING POLICIES AND STANDARDS BUT PROFITS FOR TAX PURPOSE ARE COMPUTED AS PER THE PROVISIONS AND RULES OF INCOME TAX  ACT.

   TAX AUDIT

   SOME OF THE DIFFERENCE:-

1.       DIFFERENCE IN METHODS OF DEPRECIATION

2.       UNDER INCOME TAX CERTAIN CAPITAL EXPENDITURE MAY BE ALLOWED LIKE SCIENTIFIC RESEARCH EXPENDITURE

3.       UNDER INCOME TAX ,ONLY ACTUAL EXPENSES AND BAD DEBTS ARE ALLOWED,IN ACCOUNTING PPROVISIONS FOR SUCH ITEMS MAY BE TAKEN

4.       UNDER INCOME TAX CERTAIN PAYMENTS OF EXPENSES ARE ALLOWED ONLY IF TAX IS DEDUCTED AT SOURCE LIKE PAYMENT OF INTEREST,RENT,COMMISSION ETC

   SECRETARIAL AUDIT

1.       VERIFY WHETHER COMPANY HAS MADE COMPLIANCE OF THE PROVISIONS OF CORPORATE AND OTHER LAWS

2.       NON COMPLINACE WOULD ATTRACT RISK AND PENALITIES TO THE COMPANIES

3.       ENSURE VARIOUS PERSONS AND PERSONS AND BODIES THAT COMPANY HAS DISCIPLINED APPROACH TO FULFILL ITS OBLIGATIONS

4.       AS PER SECTION 204 OF THE COMPANIES ACT 2013,FOLLOWING COMPANIES ARE REUIRED TO OBTAIN SECRETARIAL AUDIT REPORT FROM INDEPENDENT COMPANY SECRETARY:

1.       EVERY LISTED COMPANY

2.       EVERY PUBLIC COMPANY WITH PAID UP CAPITAL OF RS 50 CRORE OR MORE

3.       EVERY PUBLIC COMPANY HAVING TURNOVER OF RS 250 CRORES OR MORE

4.       EVERY PRIVATE COMPANY WHICH IS SUBSIDIARY OF PRESCRIBED CLASS OF PUBLIC COMPANES

   SECRETARIAL AUDIT

§ APPOINTMENT OF SECRTARIAL AUDITOR HAVING QUALIFICATION AS COMPANY SECREATRY AND HAVING CERTIFICATE OF PRACTICE

§APPOINTED IN BOD MEETING AND COPY OF THE RESOLUTION HAS TO BE FILED WITH REGISTRATR OF THE COMPANIES WITH IN 30 DAYS

§SCOPE OF SECRETARIAL AUDIT:-

1.       COMPLIANCE OF COMPANIES ACT 2013 AND THERE UNDER SECUTIRIES CONTRACT ( REGULATIONS ) ACT 1956 AND RULES MAE THERE UNDER

2.       DEPOSITORY ACT 1996 AND RULES MADE THER UNDER

3.       FOREIGN EXCHANGE MANGEMENT ACT 1999

4.       REGULATIONS AND GUIDELINES PRESCRIBED UNDER SEBI ACT 1992

5.       REPORTING ON COMPLIANCE WITH LISTING AGREEMENTS AND OTHER APPLICABLE LAWS

6.       EXAMINING AND REPORTING WHETHER ADEQUATE SYSTEMS AND PROCESSES ARE IN PLACE COMPLIANCE GENERAL LAWS

   CONCURRENT AUDIT

§WHEN FINANCIAL TRANSACTIONS ARE EXAMINED AT THE TIME OF HAPPENING OR AS WHEN THESE TAKE PLACE IT IS CONCURRENT AUDIT

§USED IN BANKS AND IS APPLIED CONTINUOUS THROUGHOUT THE YEAR TO VERIFY THE EFFECIVENESS OF INTERNAL CENTRAL AND WORKING OF BANKS AND BRANCHES

§PREVENT AND DETECT IRREGUALRITY

§MAY BE CONDUCTED BY INTERNAL AUDITOR OR INDEPENDENT AUDITOR

   CONCURRENT AUDIT IN BANKS

•                       CASH ABALANCES: OPENING CASH BALANCE IS AUTHORISED BY MANAGER AND CASHIER OF THE BANK,PHYSICAL VERIFICATION OF CASH IN HAND AND IN ATM ONCE IN MONTH AT RANDOM AND IF THERE IS ANY DISCREPENCY REPORTED BY THE AUDITOR

•                       LOAN AND ADVANCES:-SANCTION OF NEW LOANS AND ADVANCES MUST BE VERIFIED ALONG WITH DOCUMENTS REGISTER BY CREDIT MANAGER. FOLLOWING ARE THE IMPORATANT POINTS:

1.       KYC NORMS AND ACCOUNT OPENING FORM

2.       CREDIBILITY REPORT OF THE PARTY

3.       CHECKING OF THE DOCUMENTS SUBMITTED BY THE PARTY PROPER OR NOT

4.       CHECKING OF PRIMARY AND COLLATERAL SECURITY

5.       FULLFILLMENT OF REQUIRMENTS OF ATLEAST ONE GURANTOR AND HIS SIGNATURE

§DEPOSITS:ACCOUNT SHALL BE VERIFIED PARTICULARLY TRAIL OF THE TRANSACTION OF HIGH BALANCE ACCOUNT,PARTICUALRLY INTEREST CODE FED INTO THE SYSTEM AS WELL AS CHANGE IN THE INTEREST RATES FED

§SAFETY MEASURES: SAFETY OF BRANCH FROM LOCATION POINT OF VIEW,LOCKERS,COMPUTERS,ITS SOFTWARES ETC SHALL BE EVALUATED

§INCOME REDUCTION :-UNDERCHARGING OF VARIOUS FEES AND CHARGES AND WRONG INTEREST RATES FED IN THE SYSTEM

§REMITTANCES :-THE TRAIL OF REMITTANCE OF THE FACILITY SHOULD BE CHECKED WHEN THE REMITTANCE IS MADE TO FOREIGN COUNTRY

§KNOW YOUR CUSTOMER:-KYC IS THE PROCESS OF CUSTOMER IDENTIFICATION PROCESS IN RELATION TO IDENTITY AND ADDRESS PROOF OF CUSTOMER

§FOREIGN EXCHANGE TRANSACTION: RBI GUIDELINES

   AUDIT OF INVENTORIES

§INVENTORIES IN AN ORGANIZATION INCLUDE RAW MATERIALS,WORK IN PROGRESS,STORES AND SPARES AND LOOSE TOOLS.

1.       EVALUATION OF INTERNAL CONTROL SYSTEM AND CONTROL OVER RECEIPTS,ISSUES AND INVENTORY RECORDS

2.       SUFFICIENT APPROPRIATE UDIT EVIDENCE IN REGARD TO EXISTENCE OWNERSHIP AND VALUATION OF INVENTORIES

3.       EXAMINATION OF DETAILED  STOCK RECORD/STORE LEDGERS

4.       PHYSICAL VERIFICATION OF INVENTORIES IS MGMT ‘S RESPOSNSIBILTY

5.       THE THIRD PARTY CONFIRMATION OF STOCK HELD BY THIRD PARTY SHALL BE OBTAINED

6.       VALUATION OF INVENTORIES SHALL BE AS PER NORMALLY ACCEPTED ACCOUNTING PRINCIPLES

   AUDIT OF E COMMERCE TRANSACTIONS

§E COMMERCE MEANS CONDUCTING BUSINESS THROUGH COMPUTERISED NET WORK USING INTERNET. BUSINESS TRANSACTIONS TAKE PLACE AUTOMATICALLY AND QUICKLY THERBY REDUCING COST AND IMPROVE  DELIVER OF THE GOODS AND SERVICES.

§INSTEAD OF PAPER RECORDS,ELECTRONIC RECORS AMY BE USED FOR E COMMERCE TRANSACTIONS WHICH CAN BE EASILY ALTERED OR DESTROYED

§THE AUDITOR SHALL EVALUATE POLICIES OF THE ENTERPRISE FOR SECURITY OF EVIDENCE IN ELECTRONIC FORM TO AVOID UNATHORIZED ALTERATIONS OR CHANGES IN RECORDS

§FOR E COMMERCE TRANSACTIONS,NECESSARY TO APPLY AUDIT OR CONCURRENT AUDIT

§REEXAMINE THE TYPES OF ERRORS WHICH ARISE IN E COMMERCE TRANSACTIONS DUE TO DIFFERENT TYPES OF ACCOUNTING SYSTEM USED