Before dealing with special points to be considered while conducting audit of different categories of enterprises or organi­sations, the following common matters con­cerning some of the important categories of organisations should be borne in mind and carefully considered:

Category, Documents and Special PointsCategory, Documents and Special Points

Category, Documents and Special Points

The special points that usually arise and should call for an auditor’s particular atten­tion and proper consideration in course of audit of important classes or categories of enterprises are enumerated below:

1. Administers/Executors/Trustees:

ADVERTISEMENTS:

(a) Carefully study succession documents like probate of will, succession certifi­cate, letter of administration and/or trust deed, as the case may be, with particular reference to provisions or instructions regarding management and disposal of property/estate; meeting debts, liabilities and expenses; investment of moneys of the estate/trust; duties and powers of execu­tors/trustees; distribution of estate/property/moneys among successors/legatees/beneficiaries.

(b) Gather relevant information as far as practicable from solicitors, bankers, brokers, accountants of the deceased person or the trust regarding the latter’s affairs.

(c) Carefully go through books of ac­count, bank pass book or statement, tax returns/assessment orders, corre­spondence and other papers.

(d) Verify whether all assets and liabili­ties of estate/trust have been taken into account.

ADVERTISEMENTS:

(e) Carefully vouch and examine all trans­actions/dealings of executors/trus­tees; check whether any purchase of investment is made in the personal names of executors/trustees.

(f) Check sales(s) of investments/prop­erty with broker’s sale note(s), ac­counts/certificates of solicitors or estate/property agents/dealers.

(g) Verify collection of sale proceeds of investment/property and deposit thereof into bank account and also expenses incurred and commission charged.

(h) Scrutinise all receipts of rent, interest and/or dividends with counterfoils of receipts and interest/dividend warrants.

ADVERTISEMENTS:

(i) Carefully check all payments to lega­tees/beneficiaries with counterfoils of cheques, bank pass book or state­ment, receipts obtained, correspond­ence etc. Ensure that settlement of residual estate/property to succes­sors/legatees/beneficiaries has been duly effected.

(j) See that remuneration, if any, payable of executors/trustees is in conformity with relevant provisions of succes­sion documents or trust deed—as the case may be.

2. Airlines/Shipping Companies/Corporations/Carriers:

(a) Carefully go through the relevant statutes constituting the enterprise, prospectus, if any, memorandum and articles of association, and important provisions thereof.

(b) Carefully verify cost of each aircraft/ship/carrier.

ADVERTISEMENTS:

(c) See that a ledger account is kept for every aircraft/ship/carrier.

(d) Ensure that separate accounts are prepared for each flight/voyage/trip, regular or chartered.

(e) Examine the existing systems of ac­counting, internal control and inter­nal audit as to their adequacy and effectiveness.

(f) Check depreciation charged or pro­vided on aircraft/vessels carriers and other fixed assets.

ADVERTISEMENTS:

(g) Conduct valuation and verification of aircraft/vessels carriers and other as­sets.

(h) Carefully examine important docu­ments relating to each flight/voy­age/trip like bill of lading, charter party and other documents.

(i) Check provision for materials and supplies for each flight/voyage/trip and closing stock thereof.

(j) Examine membership of international associations like IATA and note terms and conditions thereof.

ADVERTISEMENTS:

(k) Carefully verify transactions in for­eign exchange, where applicable.

(l) Check the amount of fares/freight with list of passengers, counterfoils of tickets, bill of lading, charter party, tariffs etc.

(m) Carefully examine the “Flight/Voy­age Trip Account” to ensure that all incomes and expenses for the flight/ voyage/trip have been duly ac­counted for.

(n) Examine insurance policies covering aircraft/vessels/carriers and other as­sets and also for each flight/voyage/ trip and check premium paid therefor.

ADVERTISEMENTS:

(o) Check refund of proportionate pre­mium in case of cancellation of any flight/voyage/trip and amounts of insurance claims received, if any.

(p) Verify payments made to pilot/cap­tain, other crew and other classes of employees by way of salaries/wages, allowances etc. as per contracts or terms of employment.

(q) Check amount of airport/port duty, tax, levy, demurrage etc.

(r) Verify amounts of commission paid to agents as per contracts.

(s) Verify allocation of expenditure un­der capital and revenue and appro­priate heads.

3. Attorneys/Solicitors:

(a) Examine important documents con­cerning membership of Bar Associa­tion/Council, authority to practice, deed of partnership, if any, contracts, rules and regulations and note im­portant terms and conditions.

ADVERTISEMENTS:

(b) Examine adequacy and efficacy of accounting, internal control and in­ternal audit systems.

(c) See that moneys and cash records including petty cash are kept sepa­rately for the firm and each client.

(d) Examine copies of bills sent to clients and check receipts of money from them.

(e) Carefully check outstanding against clients’ bills and advances made by them, if any.

(f) See that any money received for an­ticipated expenses to be incurred on behalf of clients are properly ac­counted for and recorded.

(g) Check payment of fees to lawyers/counsels/’advocates engaged on be­half of clients against bills received from the former and debit thereof to clients’ accounts.

(h) Check whether premia or fees re­ceived from trainees/articled clerks are distributed over the period of training/ article-ship.

(i) Vouch all entries in cash book and petty cash book with appropriate sup­porting vouchers, receipts, bank state­ments/pass books and bank recon­ciliation statements. Pay special at­tention to vouchers for expenses in­curred for clients.

(j) Carefully verify the Income and Expenditure Account and the Balance Sheet.

4. Auctioneers/Estate or Property Agents or Dealers/Surveyors:

(a) Go through documents regarding formation/constitution of the enter­prise like certificate of incorporation, memorandum and articles of Asso­ciation, deed of partnership etc. and note important points.

(b) Obtain certified list of properties, separately for those leased out, let out and/or allowed to be used rent- free by employees or others.

(c) Carefully examine all lease/tenancy agreements and note important terms and conditions including tenure, rates of rent receivable, purchase and sell­ing or letting out properties on behalf of clients.

(d) Enquire into systems of accounting, internal controls and internal audit and look for loopholes or deficiencies therein, specially with reference to collecting rent and incurring expendi­ture on behalf of clients.

(e) Examine separate clients’ bank ac­counts, clients’ ledger for large amounts received from clients as deposits or from auctions and/or moneys held on behalf of clients.

(f) Check general bank account to see if the credit balance is adequate to take care of clients’ ledger balances.

(g) See properly passed bills for adver­tisement and other expenses incurred on behalf of clients and whether such expenses are charged to clients’ ac­counts.

(h) Vouch petty cash book.

(i) Carefully vouch all receipts and pay­ments including those from or on behalf of clients, with special refer­ence to fees and commissions. See that outstanding fees and commis­sions are accounted for and that unexpended expenditure for clients are shown as liability to them.

(j) Obtain a certified schedule of fees and commission receivable from clients.

5. Banking Company/Financial Institution:

(a) Go through Banking Regulation Act, 1949, statutes/Acts of Parliament or State formation/constitution docu­ment, articles of association, rules and regulations, approval/authorisation of Reserve Bank of India (RBI) etc. and note important points therefrom, spe­cially re: management, accounts and statutory forms, investment, audits.

(b) Carefully examine the systems of accounting, internal control and check­ing and internal audit and see whether they are adequate and efficient.

(c) Examine creation of sufficient reserves including secret reserve, if any, as allowed by Banking Regulation Act.

(d) Verify compliance with instructions or directions of Reserve Bank of India. (RBI), particularly in case of non- banking financial companies (NBFC) and compliance or conformity there­with.

(e) Properly vouch:

(i) All incomes like interest, com­mission, discount etc.

(ii) All expenses on account of inter­est, fees and commission, sala­ries/remuneration of managers and other employees etc.

(iii) Loans and advances, overdraft with mortgage/security docu­ments.

(f) Check thoroughly the cash book and bank reconciliation statement with RBI/bank statement/pass book.

(g) Go thorough branch audit reports, if any, or conduct such audit, which should conform with relevant laws, rules and regulations.

(h) Check preparation of final accounts in accordance with statutory pre­scribed forms.

(i) Check disclosure in balance sheet of all assets and liabilities including contingent liabilities, if any, and outstanding expenses and incomes.

(j) Carefully check operation of ATM counters, if any.

(k) Scrutinise agreements for mergers/amalgamations/tie-ups with other banking/insurance companies, domes­tic or foreign.

6. Branch Accounts:

(a) Examine the system of accounting in branches and incorporation thereof in head office accounts.

(b) Enquire into internal control and checking and internal audit systems regarding activities of different branches.

(c) In case of branches not visited, care­fully go through reports of branch auditors and scrutinise returns from branches certified by branch mana­gers. See that the said returns are properly incorporated in head office accounts.

(d) Find out whether important princi­ples and policies are followed in respect of branch accounting.

(e) See that closing stocks of goods and supplies from head office, irrespec­tive of the basis of charging out to branches, are taken at cost or market price, whichever is less.

(f) Check certified schedules of branch debtors and creditors.

(g) Ensure that all branch liabilities in­cluding contingent liabilities, if any, are taken into account. Check with certified lists of liabilities.

(h) Where branches maintain full set of books of account, ask for trial bal­ance, profit and loss account and balance sheet certified by branch managers.

(i) For foreign branches, if any, verify conversion into rupees of various items appearing in branch final ac­counts and treatment of difference in exchange. Ensure disclosure of the basis of conversion and actual effects thereof.

7. Builders and Contractors:

(a) Go through the different building assignments and other contracts being executed by client(s) and note impor­tant matters, points, with particular reference to money matters.

(b) Enquire about systems of accounting, internal check/control and internal audit and look for weaknesses therein, if any. Pay special attention to sys­tems of issue of equipment, materials and stores etc. to different contracts/jobs/sites. Visit some building/con­tract sites for this purpose.

(c) Examine the system of cost account­ing, if any, with special reference to materials and stores, wages and in­direct expenses or on cost/overhead. Check method of allocation to differ­ent contracts, jobs or projects.

(d) Compare cost or expenditure incurred under materials, labour and over­heads for different jobs/contracts as per cost records with financial ac­counting records and reconcile differ­ences between the two, if any.

(e) Where equipment are allocated to different contracts/jobs, check proper charging of depreciation thereto.

(f) Examine whether profit or loss is taken into account on the basis of completed contracts only or of ex­penditure incurred and income de­rived in respect of uncompleted or contracts or work-in-progress pay spe­cial attention to provisions of tax or other lows or guidelines of The In­stitute of Chartered Accountants of India.

(g) See that appropriate provision is made for any loss anticipated in respect of any contract.

(h) Check whether all work done by sub­contractors based on completed con­tracts or work-in-progress have been taken into account. Look into inclu­sion of all liabilities to sub-contrac­tors.

(i) Check wage payments with wage sheets, specially trying to find out fictitious payments, if any.

(j) Carefully check Provident Fund, ESI contributions etc. in respect of sub­contractors’ labour.

(k) Verify whether provisions of Contract Labour Law are being complied with.

(l) Go through architect’s certificates, completion certificates, handing over certificates, where available, or other evidence in respect of contracts/jobs, particularly for value of uncompleted contracts.

(m)See that separate accounts are main­tained for individual jobs/contracts and contract ledgers are kept.

(n) Check the basis of taking into account profit, if any, on incomplete contracts, which should be done on a conserva­tive basis and adequacy of provision for contingencies.

(o) If any equipment or materials are destroyed, damaged by fire or acci­dent or sold, appropriate adjustments should be made. Receipts from insur­ance claims should be taken into account. See that proper adjustments are made in profit or loss.

8. Charitable Institutions:

(a) Scrutinise status and constitution of the institution, organisation or under­taking by going through statute(s) like the Indian Trust Acts and Rules, Public Trust Act, (in some states) agreements, rules and regulations etc. with particular reference to objects of the body, accounts, forms of final accounts, audit etc.

(b) In case of a Government institution, go through important rules and regu­lations in respect thereof.

(c) Go through registration or approval of trust, if any, with rules and regu­lations, if any, by/of income tax authorities providing exemption from payment of tax on incomes of the institution, particularly in case of public charity or welfare. Carefully check refund of tax, if any, deducted at source.

(d) Examine accounting principles and methods followed, internal checking/control and internal audit systems, particularly in regard to receipts, expenditure, treatment of surplus or deficit etc.

(e) Obtain certified list(s) of donations, grants, legacies, subscriptions and verify the same with figures shown in accounts under corresponding heads.

(f) Check whether the operations/work­ing of the institution are commensu­rate with objectives, rules and regu­lations thereof.

(g) Carefully vouch:

(i) Receipts from donations, grants, subscriptions, legacies, interest and/or dividends on investment, rent/income from property etc.

(ii) Expenditure incurred under dif­ferent heads for working of the institution for public welfare or otherwise;

(iii) Capital expenditure for acquisi­tion of fixed and other assets.

(h) See that receipts and expenditure are duly allocated under capital and rev­enue heads.

(i) Go through decisions of the trustees or executive body on important matters concerning the institution.

(j) Ensure that no amount is spent for the interest of any trustee or member of executive body nor any benefits are received by or accrued to indi­vidual trustees or executive body members.

(k) See that all accrued incomes and out­standing expenditure are accounted for. Secure certified lists for such items.

(l) Check valuation of and verify differ­ent assets and liabilities by referring to certified lists thereof.

(m) See that Income and Expenditure Account and Balance Sheet are prop­erly drawn up.

9. Cinema/Theatre:

(a) Go through important documents like agreements or contracts with impre­sarios, distributors, agents, call-show organisers, producers, advertisers and/or advertising agents, convey­ance or deed of purchase (for owned premises) or lease deeds (for lease­hold ones); note important provisions thereof with reference to receipts and payments of rent, rates and taxes, commission and other important terms and conditions.

(b) Enquire into the systems of account­ing, internal control/check and inter­nal auditing with special reference to box-office collections (including ad­vance bookings), amusement tax, re­ceipts from and expenses of adver­tisements, income from and expense of restaurants/cafeteria/snack bars/bars, if any, wages and salary pay­ments etc.

(c) Check whether all daily collections are promptly deposited into bank.

(d) See that unsold stocks of tickets of all classes and values are kept under custody of some responsible officer and that ticket books are issued to the box-office counter every day.

(e) Check unsold stock of programme books, if any, with printer’s bills and certificate of a responsible officer and see that unsold stock is kept in cus­tody of such an officer.

(f) Specially check collection of amuse­ment tax, to be separately recorded, and payment to Government taking into account unpaid amounts, if any.

(g) Pay special attention to cost of slides and receipts against slide projections and see that slides in stock are prop­erly accounted for.

(h) Carefully vouch all receipts and pay­ments by reference to relevant agree­ments/contracts, certified returns of tickets sold from different halls or box-offices, wages and salary sheets, acknowledgment receipts, printer’s bills etc.

(i) Verify stocks of unsold tickets and ticket books, slides, food and bever­ages (in case of restaurants/cafete­rias/snack bars).

(j) Check whether expenses are duly apportioned between capital and rev­enue in appropriate cases.

(k) Carefully check adjustments of ad­vance bookings, advances to produc­ers of stage shows and/or film dis­tributors etc.

(l) Check valuation of equipment like projectors, screens, curtains, decora­tion items, dresses and scenery (for theatres and call-shows), furniture, machinery and buildings etc. after providing for depreciation at appro­priate rates and with reference to certified schedules of such assets.

(m) See that all accrued incomes and outstanding expenses are duly pro­vided for.

10. Club:

(a) Ascertain the status and structure of the club by going through its docu­ment of constitution, rules and regu­lations etc. and note important points including objectives, management, functions etc.

(b) Examine accounting, internal control/ checking and internal audit systems covering activities of the club.

(c) Ascertain the powers/rights and du­ties/obligations of the managing/ex­ecutive committee or governing body

(d) Check the minute books of the com­mittees mentioned in (c) above and of general body of members for im­portant decisions taken.

(e) Go through agreements/contracts for letting out grounds, auditorium, equipment etc. to outside parties for sports and games, cultural functions, charity shows, music, dance and dra­matic performances, fairs and exhibi­tions and ascertain rates of rent or charges therefor.

(f) Ascertain the rate(s) of monthly/an­nual membership subscriptions/fees, life membership and/or entrance fees and whether the last two are capital­ised.

(g) Find out the charges to members and non-members for food and beverages supplied or provided.

(h) Get a certified list of grants and/or subsidies from government, donations and see that amounts thereof are properly utilised.

(i) Vouch all receipts/incomes and pay­ments expenses with agreements/con­tracts, acknowledgment receipts, cer­tified lists/schedules of subscriptions/ fees/ donations/grants/subsidies, in­vestments etc.

(j) See that all accrued incomes and outstanding expenses are fully ac­counted for.

(k) Check valuation of sports and other equipment, building, furniture and other fixed assets, stocks of food, bev­erages, drinking water, tickets, pro­grammes for functions, souvenirs, bill books etc. and verify the same by referring to certified schedules/lists thereof.

(l) Check whether appropriate deprecia­tion has been charged for fixed assets.

(m) Check exemption, if any, from income tax on income from voluntary contri­butions to the corpus and/or from property in case of charitable trusts, provided such income is utilised for charitable or religious purposes. Ex­amine the government approvals or order of exemption and note terms and conditions thereof, if any.

11. Cooperative Society:

(a) Study the State Co-operative Socie­ties Act and Rules framed there under, Certificate of Registration, bye- laws and regulations of the society.

(b) Examine critically the systems of accounting, internal control/check, in­ternal audit and guard against pos­sible loopholes therein.

(c) Go through certified list of members with shares held and the members’ ledger accounts.

(d) Study the management structure and rights and duties of managing com­mittee, office bearers and executives/officers. Obtain a certified list of members of the managing committee and responsible officers.

(e) Examine minute books of directors/managing committee and of general meetings of members and make notes of important decisions concerning functioning and operations of the society, budgets, accounts etc.

(f) See that the affairs of the society are conducted in conformity with the objects and bye-laws.

(g) Vouch the cash book with list of members’ shareholdings, counterfoils of receipts issued, demand notices for maintenance and/or other charges, dividends on investments, if any, acknowledgment receipts, bank state­ment/pass book, bank reconciliation statement, cash memos, sales state­ments, bills etc.

(h) Check postings from cash book to members’ and other ledger accounts.

(i) Go through government order or con­cerned resolutions of managing com­mittee and members regarding appointment and remuneration of auditor.

(j) Carefully check purchase/acquisition of fixed assets, investments etc. with relevant authority from managing committee or members.

(k) Ascertain borrowing powers and see that loans taken, if any, are in con­formity therewith.

(l) Check valuation of different assets and see that proper depreciation has been charged. Verify assets physically or with certified schedules.

(m) Obtain a certified schedule of liabili­ties.

(n) Check creation of statutory and other reserves in accordance with provi­sions of statute, bye-laws, regulations.

(o) Pay particular attention to transac­tion with concerned federation or/ apex society, if any.

12. Educational Institutions:

Educational institutions comprise schools, colleges, universities, professional institutes offering technical/technological/ engineering/medical/management/computer and other specialised courses.

More important special points to be considered by auditors of such bodies or institutions are briefly enumerated below:

(a) Carefully go through the founding documents constituting the institu­tion e.g., charter, Act/statute and rules, trust deeds and rules and regulations, internal rules and regulations etc. and make note of major terms and conditions, particularly relating to management, accounts and audit.

(b) Check approval of registration with and/or recognition by appropriate authorities like State Secondary/ Higher Secondary Boards, State or Central Governments, All India Coun­cil of Technical Education etc. and note important terms and conditions of approval/registration/recognition, particularly re: courses, admission norms including eligibility of stu­dents, fees, courses, syllabus, exami­nations etc.

(c) Obtain a list of and go through dif­ferent registers, schedules, viz.

(i) Admission registers for new stu­dents classified under different courses of studies, streams or subjects;

(ii) Students’ Register classified as above;

(iii) Master rolls;

(iv) Register of concessional fees, free studentships, fines, scholarships etc. approved/authorised by competent authorities;

(v) Endowment Register;

(vi) Grants/donations Register;

(vii) Fixed Assets Register/List;

(viii) Investment Register/List.

(d) Study the minute books of governing body or managing committee, admis­sion committee, disciplinary commit­tee, senate/court/syndicate, academic council etc. for important decisions.

(e) Carefully examine systems of account­ing, internal control/checking and internal audit vis-a-vis constitution, rules and regulations covering activi­ties of the institution, specially in respect of collection of various fees and charges, grant of concessional fees, free studentships, fines, disburse­ment/grant of scholarships, prizes etc.; refund of caution money, library/laboratory deposits, purchase of books and periodicals, linen for boarders, sports equipment, furniture, investments, fixed assets etc.

(f) Vouch the following:

(i) Receipts from admission fees, session charges, annual fees, cau­tion money, development or capi­tation fees, union fees, fines, deposits for library/laboratory/hostel/canteen/sports and games; excursions, grants, en­dowments and donations with different registers [mentioned under(c) above], tear-off portions of fee books, counterfoils or cop­ies of receipts granted, corre­spondence etc.

(ii) Payments/disbursements of sti­pends, scholarships, prizes, wages and salaries, acquisition of assets, investments etc. with appropriate registers/lists, ac­knowledgment receipts, master roll, brokers’ notes, supply bills/invoices, order copies, corre­spondence etc.

(g) See that all advances/deposits re­ceived against libraries, laboratories, excursions, sports and games etc., are duly adjusted against expenses in­curred and that all accrued incomes and outstanding expenses are duly accounted for.

(h) Check valuation of all assets subject to proper depreciation and of stocks of hostel linen, edibles etc. based on realisable or replacement value.

(i) Verify assets by referring to con­cerned registers or certified sched­ules/lists.

(j) See that provident fund contributions and subscriptions and tax deducted at source and other statutory dues are duly deposited with appropriate authorities.

(k) Check separate statements of accounts for different funds e.g. provident/pension fund, scholarship/prizes fund, sports and games fund, hostel fund, endowment fund. See that in­vestments for these funds are made as per relevant rules and regulations.

13. Electricity/Gas/Power/Energy/Water/Companies/Undertakings— Public Utilities:

(a) Go through the governing Act/statute like the Indian Electricity Act, 1910, Electricity (Supply) Act, 1948, Renew­able Energy Act, State Regulatory Commission Act, 1998 and/or other relevant statutes, rules and regula­tions; note important provisions thereof, particularly those relating to financial functions, separate accounts for generation, distribution and sup­ply of power/energy/water, forms of final accounts, audit, management and administration etc.

(b) Check outstanding dues from con­sumers and provision, if any, for bad and doubtful debts.

(c) Enquire into the management struc­ture and obtain a list of major depart­mental functionaries with functions and responsibilities.

(d) Enquire into the effectiveness of the systems of accounting, internal con­trol/checks and internal audit re: wage payments, usage and stock of consumable stores, billing on consum­ers and collections against same etc.

(e) Test check consumers’ ledger accounts for debits on account of deposit(s) for:

(i) Meter.

(ii) Meter rent.

(iii) Rentals or hire charges for other equipment,

(iv) Consumption of energy and other items like government duty, fuel surcharge etc. and credits in regard to bills raised on consumers; see that credits in favour of consumers are duly authorised.

(f) Compare certified schedule of con­sumers’ ledger balances with the total of consumers’ accounts.

(g) Carefully go through agreements/ contracts with municipalities/local bodies for concessional rates of power supply.

(h) Vouch all receipts and payments with appropriate documentary evidence like registers/certified schedules, cop­ies/counterfoils of receipts issued, wage sheets, acknowledgment re­ceipts, agreements/contracts etc.

(i) See that proper adjustments have been made for rebates, bad/doubtful, debts, accrued incomes, outstanding expenses.

(j) Check proper allocations between revenue and capital,

(k) Check provision of adequate and proper depreciation on fixed and other assets.

(l) Check valuation of and verify assets with special reference to inventories of materials, stocks, components,

(m) Verify creation of statutory reserves,

(n) Check approval of tariffs by con­cerned regulatory commission or authority, if any.

(o) See that final accounts have been compiled in conformity with statu­tory formats, if any.

(p) Check whether copies of the final accounts have been duly submitted to the government and the regulatory authority.

14. Finance/Hire-Purchase/Leasing/Mutual Fund/Trust Companies:

(a) Examine the important provisions of founding documents like memoran­dum and articles of association, rules and regulations, approvals/authori­zation from Reserve Bank of India and/or Securities and Exchange Board of India (SEBI), if required; note those relating to management, accounts, audit etc.

(b) Obtain a list of directors/senior ex­ecutives with their respective func­tional areas, powers and duties.

(c) Check compliance with directions/regulations/guidelines/norms of Reserve Bank of India and/or SEBI, if any.

(d) Enquire into accounting, internal control and internal audit systems in operation and check their adequacy and efficacy.

(e) Go through hire-purchase/leasing agreements and note important terms and conditions thereof, particularly rate and amount of interest, transfer of ownership, accrual of depreciation benefits, security, EMI (Equated Monthly Instalment), if any.

(f) See that instalments of hire/leasing and interest are duly received, check­ing provisions for outstanding dues, if any.

(g) See that appropriate depreciation is accounted for on equipment leased out.

(h) Verify transfer of ownership of assets hired or leased out with appropriate certificates from hire-purchase or lessee.

(i) Carefully vouch all receipts and pay­ments and see that accrued incomes and outstanding expenses have been properly accounted for.

(j) Check final accounts or financial state­ments on conventional formats.

15. Hospitals/Nursing Homes/Health/Medicare Centre:

(a) Examine the status and constitution of the organisation by reference to Government notification, registration as a cooperative society, and approval as charitable trust, trust deeds, rules and regulations.

(b) Secure a list of directors/governing body/executive committee members, departmental heads etc. with their respective areas of functioning, rights, duties and responsibilities.

(c) Obtain a certified schedule of grants, donations, endowments, legacies, patient charges (indoor and outdoor) and see that collections are made accordingly.

(d) Examine systems of accounting, inter­nal control and internal auditing cov­ering all cash receipts and payments; purchases and allocation of medical/diagnostic equipment/instruments, purchase and supply of medicines, stores, dress and linen, food items, investment procedure, custody of medicines, stores, equipment, securi­ties etc.

(e) See that all equipment, instruments and other assets are duly maintained in good working order.

(f) Examine ownership of land and build­ings, outright or leasehold, and see that terms and conditions thereof are fully complied with.

(g) Carefully vouch all receipts and pay­ments with copies/counterfoils of re­ceipts issued, copies of bills raised on patients and bill register(s); counter­foils of interest and dividend war­rants, brokers’ notes, tenancy agree­ments, investment register; receipts obtained, copies of bills raised for supplies, wages and salary sheets/books.

(h) Compare receipts and payments under different heads with revenue and capital budgets and enquire into differences between the two.

(i) Check provisions for accrued incomes and outstanding expenses.

(j) Check allocations between capital and revenue.

(k) Check valuation of assets subject to provision for adequate depreciation and verify the assets by reference to certified schedules, assets register etc.

(l) Obtain certified schedules of debtors and creditors and check provision for bad and doubtful debts.

(m) Obtain certified schedule of liabilities including contingent liabilities.

(n) See that final accounts have been properly prepared and that prescribed forms, if any, have been used.

16. Hotels/Restaurants/Eateries:

(a) Scrutinise vital documents like agree­ment for sale/conveyance for land/ building or lease deed for leasehold property, registration/incorporation certificate, approvals/licences from local/municipal/environmental/other authorities, agreements with foreign/other hoteliers for collabora­tion, Department of Tourism, tour operators, travel agents, airlines etc. Note important terms and conditions thereof.

(b) Enquire into accounting, internal con­trol/checking and internal audit sys­tems with special reference to:

(i) Purchase, storing and issue of provisions, stores, wines, linen, crockery, equipment/gadgets for rooms, restaurants, health clubs, furniture etc.;

(ii) Payments for above items and collaborators’ royalty;

(iii) Collections from sales, room rent, meals, wines, beverages, billiards and other indoor games, etc.

(c) Check whether all cash receipts are banked promptly.

(d) Check the system of accounting for occupancy by going through booking register, billing of customers, stocks of provisions, stores and other con­sumable items, wines, beverages, linen, equipment etc. Ask for certified schedules.

(e) Carefully examine the guests’/visi­tors’ ledger with summary and postings in personal ledger and cash book.

(f) Vouch:

(i) Receipts from visitors (including casual visitors) for room rent and services given to them from restaurants, coffee shops and for use of books, health club, bil­liards and games etc. with bills raised, copies of receipts issued, summary etc.;

(ii) Advances/caution money, if any, from visitors and adjustment thereof against bills and receipts granted;

(iii) Grants/subsidies/donations/legacies received from govern­ment or other authorities; verify their proper utilisation;

(iv) All payments for royalties, pur­chases, salaries and wages etc. with invoices, receipts obtained, salary/wage sheets etc.;

(v) All unusual items should be en­quired into.

(g) See that expenditure are allocated between capital and revenue, that all capital expenditure as well as receipts and payments are within respective budget limits and/or duly author­ised. Any material deviation from the budgeted figures should be pointed out and be ratified by competent authority.

(h) Check valuation of assets subject to provision for adequate depreciation and see that unusable or unserviceable furniture and fittings, equipment etc. are written-off.

(i) Verify inventory/stock of provisions and stores, library books, sports and health equipment with certified stock sheets, investments with brokers’ notes, certified lists, solicitors’/banks’ certificates, investment register etc.

(j) See that caution money or advance payments by clients are duly adjusted.

(k) Verify cash and bank balances.

(l) See that annual financial statements are properly drawn up.

17. Industrial Enterprise:

(a) Peruse vital documents e.g. certificate of incorporation, memorandum and articles of association, prospectus (in case of company), partnership deed and certificate of registration, if any, (for partnerships); material contracts/agreements; environmental and other clearances or government approvals etc. Note important points thereof concerning objects, lines of business, management functions and responsi­bilities, accounts and audit etc.

(b) Go through collaboration agreement, if any, and note important provisions regarding know-how and design, processes, royalty, equity participa­tion, repatriation of capital and divi­dend etc. Verify the extent of technol­ogy absorption, R&D and develop­ment of new technology.

(c) Obtain a duly certified list of all senior technical, engineering admin­istrative and managerial personnel with their signatures/initials.

(d) Enquire into systems of accounting (financial and cost), internal check­ing/control and internal audit cover­ing

(i) Delivery/receipt, storing and issue of materials, spares and components, stores etc.;

(ii) Handling and processing of pur­chase and sales invoices/bills;

(iii) All receipts and payments in cash;

(iv) Annual or continuous stock tak­ing or inventory;

(v) Royalty, dividend repatriation, if any, to foreign collaboration;

(vi) production recording with par­ticular reference to materials, fuel, stores etc. consumed, wages and overheads allocated to different jobs, loss/wastage/rejection etc.;

(vii) Purchases, use, returns and stocks of packages and empties involving considerable value;

(viii) All wages/salary payments.

(e) Examine quality assurance/control systems with particular reference to ISO-9000, ISO-9002-2000 series or simi­lar other certification and periodical quality audits for continued mainte­nance of standards or norms set for all aspects of processing and produc­tion.

(f) Carefully vouch all receipts and pay­ments including cash sales, sale of scrap materials, unserviceable stores, tools and equipment etc., wage/sal­ary payments and allocation thereof to different jobs, royalty, dividend repatriation etc. with relevant docu­ments.

(g) Check whether different categories of assets and inventory have been prop­erly valued after taking into account depreciation at appropriate rates, cost or market price of inventory items, whichever is less.

(h) Verify the assets including invest­ments by referring to assets registers, certified schedules, brokers’ notes, solicitors’/bankers’ certificates etc. Check the procedure of stock taking and test-check some items of inven­tory.

(i) Obtain certified schedule of liabilities and satisfy yourselves that all liabili­ties have been taken into account, paying special attention to:

(i) Statutory liabilities under provi­dent fund/gratuity/pension or superannuation schemes, excise duty, ESI contributions, sales tax, income tax etc., and

(ii) Contingent liabilities.

(j) See that proper allocations of ex­penditure have been made between capital and revenue, where necessary.

(k) In case of foreign collaboration, check transactions in foreign exchange and see that differences in exchange, if any, are duly provided for.

(l) Ensure that final accounts are pre­pared in conformity with formats as per statutory or other applicable rules and regulations.

18. Insurance Companies:

(a) Go through relevant statute(s) like the Insurance Act, the Life Insurance Corporation of India Act, General Insurance Corporation Act and Rules and/or joint venture agreements between Indian and other partners in life/general insurance (including pension and other funds), regulations of Insurance Regulatory Authority, memorandum and articles of associa­tion (for companies registered under the Companies Act). Note important provisions thereof, specially those relating to management, objects and functions, tariff/premia rates, re: insurance, accounts and formats for final accounts, audit etc.

(b) Secure certified lists of all senior authorised officials, their respective areas of functioning, signatures or initials.

(c) Examine the systems of accounting, internal control and checking and internal audit encompassing, inter alia, the following, viz.

(i) Collection of and accounting for premia for different classes of products/services;

(ii) Other receipts including re-in­surance claims;

(iii) All payments made or expenses incurred on account of commis­sion to agents/representatives, re-insurance premia, settled re­insurance claims, capital expendi­ture, printing and stationery, payments to foreign partners, if any, etc.;

(iv) Maintenance of stocks of printed or other forms and stationery items etc.

(d) See that all operations are carried out in accordance with specific and/or general insurance norms, relevant regulations etc.

(e) Check all insurance claims received and settled against policies issued and re-insurance claims lodged and real­ised.

(f) Check valuation of assets, subject to provision for depreciation at appro­priate rate(s), and verify the assets with assets register, certified sched­ules, solicitors’/bankers’ certificates (in case of securities kept under their custody).

(g) Verify cash and bank balance physi­cally and/or by reference to bank statements/pass book and balance certificates, bank reconciliation state­ments etc.

(h) Carefully check all investments with bankers’ notes/bills, investment register, acknowledgment receipts for payments made, custodians’ certificates as mentioned under (f) above.

(i) Vouch all receipts, payments, pur­chases etc. with reference to requisite documentary evidence.

(j) See that all liabilities including contin­gent liabilities, e.g. for disputed claims or reserve therefor, are adequately accounted for.

(k) See that annual financial statements are prepared in conformity with statu­tory formats or generally accepted forms.

19. Library/Reading Room:

(a) Study relevant documents for consti­tution, objects, management structure of the organisation and rules and regulations.

(b) Examine terms and conditions of grants/subsidies/donations from gov­ernment, local bodies and others and see that the same are duly complied with.

(c) Verify systems of accounting, internal control/checking and internal audit with special reference to

(i) Receipts from entrance fees, membership fees/subscription, deposits against books, fines for delay in returning books, sale or disposal of old newspapers, periodicals, soiled or damaged books etc.;

(ii) Payments for purchase/acquisition of books, periodicals and newspapers, property, furniture and fittings, rent, rates and taxes for the library premises, other administrative expenses;

(d) Obtain a certified list of general mem­bers, members of the executive com­mittee with areas of functions and responsibilities, librarian(s) and senior staff with their signatures/ initials.

(e) Vouch all receipts, payments, capital expenditure with supporting records/documents like membership register, copies or counterfoils of receipts granted, bills or demand notices is­sued, proper authorisation for capital expenditure, acknowledgments re­ceived, cheque counterfoils, bank statements etc.

(f) Check whether all accrued incomes and outstanding expenses have been duly provided for.

(g) Compare items of income and ex­penditure with budgets and enquire into variations therefrom, if any, and reasons therefor.

(h) Check whether entrance fees and other non-recurring receipts are capi­talised and any funds have been created therefor.

(i) Check valuation of all assets after deducting adequate depreciation and verify the same physically and/or with reference to requisite documents like assets register, certified sched­ules, independent certificates from custodians (in case of investments), capital expenditure budgets.

(j) Check creation of reserves and re­serve funds, if any.

(k) See whether the Income and Ex­penditure Account and the Balance Sheet are prepared according to rules and regulations and/or generally accepted formats.

20. Mining Companies/Enterprises:

(a) Go through enactments, lease, sub­lease and other agreements with special reference to royalties, short- workings, minimum rent, cess, royalty receivable from sub-leases.

(b) Check whether terms and conditions of recoupment of short workings from future surplus are duly taken into account and is recouped or written-off.

(c) Study special contracts for supply of coal, other minerals or products, particularly to bulk consumers like power plants, railways, steel compa­nies etc. and see that conditions thereof are complied with.

(d) Examine systems of accounting, inter­nal control/checking and internal auditing with special reference to cost of production vis-a-vis expenses as per financial records for expenses on account of materials and stores, wages and overheads. Compare current year’s figures with those of previous years.

(e) Verify sales of products with selling agents’ invoices, accounts.

(f) Vouch all receipts and payments with copies of bills/invoices and receipts issued, cost statements, production records, receipted wages sheets, agree­ments with manager and senior staff for salaries paid, acknowledgment receipts, sales agents’ bills, lease deeds, exise duty statements etc.

(g) Carefully check capital expenditure on payment of leasehold premium, sinking of pits or excavation of open cast mines, railway sidings, wagons, ropeways, underground tram/trolley lines, tipplers, power house, under­ground haulting fixtures, buildings, plant and machinery etc. Also com­pare with capital budget or proper authorisation.

(h) Check whether instalment payments have been duly made for assets ac­quired under hire-purchase/leasing agreements.

(i) Check proper allocation between capital and revenue wherever neces­sary, appropriate authorisation by the mining engineer and the mine manager.

(j) See that proper and adequate depre­ciation has been provided for in re­spect of fixed assets like buildings, plant and machinery, railway siding, tram/trolley lines and tubs, lighting fixtures, wagons, ropeways etc.

(k) Verify the fixed assets, if possible physically, or by reference to certified schedules and/or assets registers.

(l) Verify stocks of coal/minerals and/ or other products with reference to certified stock sheets; check some items of stocks physically.

(m) Ensure that all accrued incomes and outstanding expenses have been ac­counted for.

(n) Obtain a certified schedule of all liabilities including contingent liabilities.

(o) Check the forms of annual financial statements vis-a-vis statutory or con­ventional formats.

(p) See that safety measures are main­tained as per directives from Director General of Mines Safety.

21. Newspapers/Periodicals:

(a) Study the constitution structure, management, rules and regulations by reference to registration/licensing documents, memorandum and arti­cles of association or deed of partner­ship, terms and conditions of mem­bership of Indian Newspapers Society, approvals from appropriate authori­ties, accreditations from Government or other authorities, etc.

(b) Study agreements with distributors/agents, advertisement agents, jour­nalists’ associations etc.

(c) Compare subscriptions and circula­tion with report of the Audit Bureau of Circulation (ABC) and see that all free distributions as voucher copies to advertisers, specimen copies dona­tions, to libraries, if any, are accounted for.

(d) Examine systems of accounting, in­ternal control/checks and internal audit relating, inter alia, to:

(i) Charging to and returns of un­sold copies from distributors/agents and entries thereof in their ledger accounts;

(ii) Issue and stocks of newsprint/paper/printing ink (when not printed by outside printers), consumable stores, blocks etc.;

(iii) Adjustment of advances received from advertisers, advertisement agents, agents/distributors and provisions for unadjusted ad­vances, if any;

(iv) Payments for royalties to au­thors of books, contribution of articles, write-ups, reports etc., in papers, magazines, etc.;

(v) Wages and salary payments.

(e) Obtain from management certificate of consumption of various items vis- a-vis volume of production.

(f) Carefully scrutinise the establishment account for heavy cost of advertise­ment, promotion and establishment of a newspaper or periodical and check the precise method of treat­ment of this account. Find out whether such expenditure is treated as de­ferred expenses, amortised and written-off over a reasonable period.

(g) See that adequate provision is made for defamation/damages, if any, for any article(s) published in the paper/periodicals or any books published.

(h) Vouch all receipts and payments with relevant documentary evidence.

(i) See that all accrued incomes, prepaid and outstanding expenses are duly accounted for and disclosed in the balance sheet.

(j) Check proper valuation of all assets including stocks and see that appro­priate depreciation has been provided for.

(k) Verify stocks, fixed assets, investments physically or by reference to docu­ments, certificates (internal or exter­nal).

(l) Check formats of annual financial statements in compliance with statu­tory provisions or conventional methods.

22. Partnerships:

(a) Go through the deed of partnership, registration certificate (if registered for important provisions regarding relationship between and functions of partners, capital contribution, loans, drawings, interest on loans and draw­ings, salary, if any, profit/loss shar­ing, admission, retirement, dissolu­tion of partnership, goodwill etc.

(b) Ascertain objects and nature of busi­ness of the firm.

(c) Obtain a list of partners and senior officials with their signatures/initials.

(d) Examine systems of accounting, in­ternal control and internal audit.

(e) See whether there is any managing or senior partner and whether any sal­ary is payable to him and/or any other partner.

(f) Carefully check goodwill, if any, raised in the books of account and see that goodwill is written-off over a reason­able period. Check credit of goodwill to partners’ accounts.

(g) Carefully vouch all receipts and pay­ments under different heads with relevant documents/ vouchers/au­thorisations.

(h) Obtain certified schedules of all as­sets and liabilities, check their valu­ation and verify them appropriately.

(i) Check Partners’ Ledger.

(j) Check preparation of final accounts, partners’ accounts, goodwill account etc. as per conventional norms.

23. Plantations:

(a) Verify purchase/acquisition of tea/coffee/rubber/spices/cashew nuts/fruits/other estates by referring to title deeds/conveyances/lease deeds and see that there is no default in complying with terms and conditions thereof.

(b) Examine the constitution, manage­ment structure, objects, rules and regu­lations for conduct of business. See that estates are unencumbered.

(c) See that directions of Tea/Coffee/Rubber/other Board(s) are complied with.

(d) Enquire into the systems of account­ing, internal control/checking and internal auditing covering different aspects of operations.

(e) See that:

(i) All expenditure on purchase/acquisition of property, build­ings, plant and machinery, cost of installation, clearing of plan­tation areas are capitalised; and

(ii) Expenses of maintenance or upkeep of plant and machinery, buildings, cultivation, manufac­turing and/or processing, pack­ing etc. are charged to revenue account.

(f) Check whether general or common expenses are proportionately allocated between plantation areas bearing and not bearing crops/fruits.

(g) Verify quantity of production with certified production report; quantity of sales with cash book, selling agents’ returns and sales reports from own sales staff and closing stock with stock sheets certified by estate manager(s).

(h) Vouch properly all receipts and pay­ments, particularly payment of wages, ensuring that no fictitious wage pay­ments have been made, commission/brokerage to agents/brokers.

(i) See that periodical returns from es­tates/branches are duly incorporated in head office accounts and that in case of any foreign estate(s) differ­ence in exchange, if any, is duly accounted for on conversion of for­eign exchange into home currency.

(j) Verify closing stock in the estate with agents/brokers and stocks in transit, which should be valued at net price realised or market (realisable) price, whichever is lower, and compared with net sale proceeds, so as to show “crop profit/loss”.

(k) Carefully look out for frauds on customers by unscrupulous forestry/plantation companies.

24. Publishers:

(a) Ascertain the principal line(s) of business viz. publishing books/maga­zines/journals/periodicals and/or printing and binding thereof and/or bulk purchase and sale/distribution of other publications.

(b) Go through terms and conditions of agreements with;

(i) Authors/writers re: royalty, specimen/free copies etc.;

(ii) Printers (in case of outside print­ing);

(iii) Agents/distributors/stockiest (for own publications);

(iv) Other publishers;

(v) Advertisement agents.

(c) Check the production account (whether separately for each publica­tion or for all publications) with cost of production including cost of copy­right purchase, if any, newsprint/ paper, editing, typesetting, proofread­ing, printing, binding, advertising and publicity (spread over a period), etc.

(d) See that appropriate credits have been taken into account for value of bulk orders received, if any, sales less free/ complimentary/voucher copies, stocks of unsold books/periodicals, stores, blocks etc. after adjustment of accrued/prepaid/outstanding items, if any.

(e) Examine systems of accounting, in­ternal control and internal auditing in respect of all activities or opera­tions.

(f) Check provision for defamation/dam­ages, if any, for books/articles etc. published and distributed.

(g) Check approvals/registration/licens­ing from relevant authorities/agen­cies.

(h) Verify mandatory supply of copies of books to recognised libraries.

(i) Vouch with relevant documents:

(i) All receipts against subscription, sales/distribution/supply, ad­vertisements, sale of unusable/unserviceable scrap materials, assets; etc.,

(ii) All payments of royalty to au­thors, advertising and publicity expenses, cost of production, purchase/acquisition of copy­rights etc.

(j) Carefully check valuation of assets with special reference to depreciation and verify them with assets register(s), certified schedules, brokers’ notes, certificates from custodians, if any.

(k) Obtain certified schedule of liabilities including outstanding royalties, ad­vance receipts from advertisers not adjusted, contingent liabilities includ­ing damages/compensation against pending or anticipated defamation/ libel suits, legal expenses, etc.,

(l) Check proper display of assets and liabilities including accrued/prepaid/ outstanding items in the final ac­counts.

25. Retail Shops/Stores:

(a) Study the constitution, structure, lines of business, management, rules and regulations etc.

(b) Examine systems of accounting and internal control/checking with par­ticular reference to:

(i) Cash and credit sales and credit control;

(ii) Cash and credit purchases in­cluding authorisation(s) thereof;

(iii) Stock control including receipt, issue and stocks of different items handled including authori­sation thereof;

(iv) Inter-branch or inter-chain (for chain stores) transfers of stock and money; and

(v) Capital expenditure and authori­sation thereof.

(c) Carefully vouch:

(i) Cash sales with duplicate copies of salesmen’s cash memo books and cashier’s till/roll or daily summaries;

(ii) Credit sales with copies of deliv­ery orders, delivery challans and invoices issued to customers with special reference to trade discounts allowed, if any, and returns from customers With inward challans;

(iii) Purchases with cash memos, suppliers’ delivery challans, in­voices, trade discounts, outward returns with return notes/ challans, replacement vouchers.

(d) Test check postings from sales and purchase day books, inward and out­ward return day books and totals of the said day books to sales and purchase accounts and also in sales and purchase ledgers. Check balance.

(e) For imported goods check customs duty paid thereon and conversion of foreign currency into rupees and see that differences in exchange, if any, are duly accounted for.

(f) Obtain certified schedules of balances of customers and suppliers and see that bad and doubtful debts and liabilities are adequately provided for.

(g) In case of departmental stores and supermarkets, see that cost of pur­chases and overheads are allocated to different departments on a proper basis followed consistently.

(h) Compare the ratios of selling cost to sales and of gross profit on sales with those of previous year and enquire into marked (particularly adverse) variations.

(i) Obtain certified stock sheets and test check a portion thereof with stock ledger balances and physical stocks, paying special attention to losses due to shortages/wastages of stock; find out reasons for significant amounts, if any.

26. Road Transport Company/Corporation:

(a) Examine the constitution (private or public sector), registration certificates, licences or approvals from appropri­ate authorities, objects, memorandum and articles of association, rules and regulations, management/operations structure and functions etc.

(b) Check registration with Public Vehi­cles or Motor Vehicles Department for buses, trucks, light commercial vehicles etc. with blue books/regis­tration certificates, fitness certificates etc.

(c) Examine internal check/control sys­tems in regard to:

(i) Purchase/acquisition/hiring of buses, trucks and other vehicles;

(ii) Purchase, issue, storing and stocks of components and spare parts, batteries, petrol/diesel/CNG, tyres and tubes, accesso­ries etc.;

(iii) Insurance coverage for vehicles, stocks of stores, accidents in­volving passengers and vehicles (including third party risks), payment of compensation, realisation of claims from insurance companies etc.;

(iv) Repair and maintenance of vehi­cles from outside repairers or in house workshops;

(v) Capital expenditure for acquisi­tion of vehicles, workshop ma­chinery and tools and other as­sets and authorisation or sanc­tion thereof;

(vi) Expenses on repair and main­tenances, wages and salary (with special safeguards against ficti­tious payments) to drivers, con­ductors/helpers, cleaners, work­shop staff etc.

(d) Carefully vouch:

(i) Receipts of passenger fares, freight for cargo, advertising receipts with traffic registers, way bills, freight bills, advertise­ment contracts, agents’ returns, insurance compensation for ac­cidents with policies, etc.;

(ii) Payments against purchase/ac­quisition/hiring of vehicles with order copies, suppliers’ bills, leasing/hire-purchase agree­ments, hiring contracts etc. See that terms and conditions of payment are complied with and proper apportionment is made between principal and interest elements in each instalment payment;

(iii) Payments for purchase of tyres, tubes, batteries, components and spares with suppliers’ invoices, stock ledger accounts;

(iv) Payment of wages and salary of workmen and staff, and for repair and maintenance, inter alia, of workshop machinery;

(v) Payment of insurance premia with policies, insurance certifi­cate etc.

(e) See that separate registers are main­tained for different categories of vehicles (buses, trucks, commercial vehicles etc.) showing those in serv­ice and those condemned/discarded and/or sold.

(f) Examine valuation of fixed assets and costly components with particular reference to appropriate and adequate provision of depreciation. Obtain a certified schedule of such assets.

(g) Obtain certified inventory of stores components and spare parts, petrol/ diesel/CNG/LPG, batteries, tyres, tubes etc. Verify a representative sample of these items physically.

(h) See that all accrued/prepaid incomes and outstanding/prepaid expenses are correctly taken into account.

27. Share/Stock Brokers/Exchanges:

(a) Go through following documents and look into important provisions re: constitution, management structure and functions, regulation of transac­tions and listing of securities, ac­counts and audit etc.;

(i) Memorandum and articles of association, deed of partnership, certificate of incorporation/registration, approvals/authorisa­tion from Government and/or Securities and Exchange Board of India (SEBI);

(ii) Rules and regulations of stock exchanges of which the share/stock broker(s) is/are mem­bers);

(iii) Rules and regulations and/or guidelines of SEBI, particularly those relating to disclosure and investor protection;

(iv) Listing agreements (in case of stock exchanges).

(b) Carefully study the internal control/ checking and internal audit covering transactions/operations of brokers/ stock exchanges.

(c) Vouch expenses incurred and moneys received including cost of stamps, if any, and membership or other fees paid to SEBI (in case of a stock exchange) with bought and sold notes, bills, cash book entries. See that com­mission receivable or accrued is duly accounted for.

(d) See that moneys/funds received from clients are kept in separate bank accounts and that total of bank ac­count balances is reconciled with those shown by clients’ accounts in clients’ ledger.

(e) Obtain certified schedules of balances and test-check some of these with investment and clients’ and general ledger balances; specially debit bal­ances, if any. Carefully look into bal­ances carried forward over a long time without any further transactions.

(f) Verify securities, particularly those held on clients’ account with certifi­cates, if any, from bankers/others/solicitors holding the securities under pledge or in safe custody.

(g) Check jobbers’/clients’ ledger for accounts settled on each settlement date.

(h) Scrutinise the bought and sold com­mission and interest books and postings thereof to the general ledger.

(i) Check castings, postings and balanc­ing of accounts at periodical intervals and/or on settlement days.

(j) Scrutinise the dividend account; see that balance(s) carried forward tally with individual dividend outstand­ing.

(k) Carefully verify securities under fol­lowing heads, viz., those held:

(i) As investments on the firms’ account;

(ii) For delivery against tickets;

(iii) Deposited by clients against balances or loans; and

(iv) In safe custody or for realisation on clients’ behalf.

28. Travel Agents/Tour Operators:

(a) Study the formation documents like certificate of incorporation/registra­tion, memorandum and articles of association or deed of partnership etc. and note important points regarding constitution, management structure and functions, accounts and audit.

(b) Examine agreements/licences/ accreditations with/from airlines, rail­ways, road transport corporations, hotel chains, coach/bus/car rental companies etc. and note terms and conditions thereof—particularly com­mission receivable.

(c) Examine internal control/check and internal audit systems relating to:

(i) Receipt of requests for rail/air­lines tickets, vehicle rental, hotel bookings and cancellations thereof and actions taken thereon;

(ii) Receipt of advances/deposits from clients to meet expenses on their behalf and commission or/and adjustments thereof;

(iii) Raising bills for services rendered to clients including additional ser­vices, if any, and non-inclusion of services, if any, in any bill(s).

(d) Vouch the following with requisite documents/evidence/authority:

(i) Receipts of commission or other remuneration for services ren­dered to clients after taking into account rebates/discounts, if any;

(ii) Expenses incurred for clients and reimbursement thereof by or adjustments against advances/ deposits received from clients;

(iii) Collection and payment of travel tax, foreigners’ tax and any other levy imposed by the govern­ment, if any.

(e) Check personal ledger accounts of clients for bad debts and adequacy of provisions therefor.

(f) Check depreciation on own tourist coaches/buses/cars.

(g) Check postings, casting, balancing of cash book, personal and general ledg­ers.

(h) Verify:

(i) Accounts and deposits with air­lines, railways, other carriers, ports, other travel agents/tour operators with statements/con­firmation letters from them;

(ii) Letters of confirmation for deposits, from any government or other authority;

(iii) Confirmation of balances from debtors and creditors;

(iv) Stocks of unsold tickets;

(v) Registers/certified schedules of vehicles and other assets; and

(vi) Cash with bank statement, rec­onciliation statement, etc.

29. Wholesale Traders/Distributors/ Selling Agents:

(a) Study contracts/agreements with bulk purchasers or agents, retail outlets and note the important terms and conditions regarding trade discounts, commission on purchases and sales, allowances for shortages/differences in quantity/quality, loss/damage in transit, returns, goods on consign­ment or on sale or return, deposits or financing etc.

(b) Look into the internal control/check­ing systems covering:

(i) Purchases and sales;

(ii) Excise & customs duties, port, check-post or airport charges, sales tax, income tax, etc.

(iii) Allowances for quantity/quality differences, returns, goods on consignment or sale or return, etc.

(c) Ascertain the systems of accounting for or recording purchases and sales including duties, taxes, charges, dis­counts, commissions, returns etc.

(d) Vouch with relevant documents:

(i) Purchases and sales;

(ii) Allowances for discounts, quan­tity/quality differences, rejec­tions, returns etc.

(iii) Commission received and receiv­able.

(e) For foreign purchases and sales check conversion of foreign currency into rupees and see that difference in exchange, if any, is duly provided for. Also check forward exchange cover­age agreements, if any, with bankers or others.

(f) Ascertain stocks from opening stocks, purchases, sales, returns subject to adjustments for rejections, shortages, quantity or quality differences.

(g) Check stock records and see that stocks on consignment and on sale or return are separately accounted for and shown. Give special attention to purchases, sales, and returns in closing months.

(h) See that adjustments or provisions are made for all outstanding allow­ances, incomes, customs and excise duties, port charges, taxes.

(i) See that stock valuation is done on a consistent basis from year to year.

(j) Obtain certified stock sheets and test- check and verify some of the items physically.

(k) Check valuation of godowns and property; verify them and other as­sets. See that proper depreciation has been provided for.

(l) Compare gross profit on sales with that of previous year and enquire into any abnormal variation.

(m) Examine the period(s) for which debts are outstanding vis-a-vis credit terms and see that adequate provision is made for bad and doubtful debts in case(s) of long outstanding.

(n) See that claims on carriers, insurance and port authorities, customs, excise and taxation authorities are duly taken into account.

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