December 24, 2021

Insurance claims may be in respect of fixed assets or current assets. While vouching the receipts of insurance claims, the auditor should examine a copy of the insurance claim lodged with the insurance company. Correspondence with the insurance company and the insurance agent should also be seen. Counterfoils of the receipts issued to the insurance […]

The auditor should examine the separate ledger accounts kept for each investment or loan given. Then dates on which dividends or interest payments generally fall due should also be noted. The counterfoil of dividend warrants should be seen. These should be tallied with the records of investment. Where investments are sold ex-dividend, it should be

The auditor should see the relevant contract and examine the important provisions relating to the conditions of payment of royalty. In particular, the rate of royalty, mode of calculation and the due dates should be noted. The periodical statements received from the publisher and the calculation of the royalty should be checked. If there is

In this case also, as in the case of sale of investments, the authority for sale is most important. It is, therefore, a matter which should receive the attention of the auditor. Another important aspect which requires consideration is the basis of sale, whether by auction or by negotiation, for determining that the asset was

The amount collected in respect of bills receivable are verified by reference to Bills Receivable Book. When bills are purchased, a provision for the amount of the discount, not earned till the close of the year is made in the accounts, in the case of bank. If the bills have been discounted, the contingent liability

Primarily, the authority under which a loan has been raised should be verified. An unauthorised loan cannot be treated as a liability of the concern. The copy of the loan agreement should be referred to find out the rate of interest, the terms of repayment and the conditions as to security agreed to by the

Only the person who is authorised to purchase an investment can sell an investment. Thus, in the case of a company, an investment can be sold only by the Board of Directors and in the case of a trust by the trustees acting together. The normal method of selling investment is through Stock Broker, either

When a debtor has been sued for bankruptcy it is necessary to prove that the debt is due from him to the Official Receiver or Assignee before any amount can be recovered from his estate. The amounts of claim admitted are received subsequently, usually in parts, which are referred to, somewhat euphemistically, as dividends. For

Before proceeding to vouch rental receipts, copies of bills issued to tenants should be test checked by reference to copies of tenancy agreements and bills of charges paid by the landlord on behalf of the tenants, i.e., house tax, water tax, electricity consumed, etc. The entries in the Rental Register in respect of rents accrued

If the investments are many, the client generally would have an Investment Register. In such a case, the dividend income is first vouched by reference to the counterfoils of Dividend Warrants and the interest on securities by reference to the tax-deduction certificates, issued by the Reserve Bank. Afterwards the amounts collected are traced into the

Receipt of cash from the customers against price of good sold are checked with the counterfoils of receipt issued to them. At the same time, it is also verified that there is a system of internal check in operation which acts as a safeguard against amounts collected being misappropriated. One of the common devices for

Primarily, the system of internal check should be examined with the objective of finding out loopholes therein, if any, whereby cash sales could be misappropriated. Further, the practice followed in the manner cash memos are issued should be ascertained. Because in case, cash memos are issued not only for cash sales but also for credit