December 24, 2021

The function of audit in respect of cash receipts being much the same as that in the case of cash payments, the procedure stated at the beginning of this Chapter should be applied for their verification. But the internal check in respect of cash receipts should be closer and stricter, primarily because these have to […]

 Examine the basis on which the gratuity payable to employees is worked out. The liability for gratuity may either be worked out on actuarial rules or agreement or on the presumption that all employees retire on the balance sheet date.  Ensure that the basis of computing gratuity is valid. Verify computation of liability of gratuity

 Examine special provisions, if any, in the Memorandum and Articles of Association regarding payment of dividends.  See that in declaring dividends, provisions of the Companies (Transfer of Profits to Reserves) Rules, 1975 have been complied with.  Examine the Board’s minutes regarding rate of dividends.  Examine the company’s procedure for payment of dividends including unclaimed dividends

The advertisement expenses will be vouched in the following manner :  Ascertain the nature of advertisement expenses to ensure that the same have been charged properly.  Obtain the complete list of advertisement, mediawise, i.e., newspapers, slides, hoardings, magazines, television, radio, etc. showing the dates, exact location, timings, etc., along with the amounts paid in respect

Note : Students should study carefully from the Spicer and Pegler’s book the system of internal check that should exist in respect of payments made from petty cash. Payments from petty cash should be verified as follows :  Trace the amounts advanced to the petty cashier for meeting petty office expenses from the Cash Book

Payments on account of salaries and wages need to be vouched carefully, since amounts which were either not due or in excess of those due may have been paid by the client. The evidence in support of such payments generally is internal. It can, therefore, be relied upon only if it has been produced in

The expenditure incidental to the creation and floating of a company includes stamp duties, registration fees, legal costs, accountant’s fees, cost of printing, etc. The contracts relating to preliminary expenses should be examined. If preliminary expenses incurred by promoters have been reimbursed to them by the company, the resolution of the Board of Directors and

Since the line demarcating repairs from renewals is slender, usually it is not a simple matter to determine the amount of the expenditure, if any, included as charges for repairs, which should be considered as that incurred for renewal of an asset and added to its cost. It may sometimes be possible to determine this

Travelling expenses are normally payable to staff according to rules approved by directors or partners. Where no rules exist, the auditor should recommend that these be framed for controlling the expenditure. In the absence of T.A. Rules, the expenditure should be vouched on the basis of actual expenditure incurred. A voucher should be demanded for

The audit procedures for custom duties are listed below: Examine Cash Book: Examine the payment of custom duties in the cash book with reference to bill of entry.  Examine the Bill of Entry: ¾ Check the amount of custom duty was calculated correctly, i.e., in accordance with the applicable rate for dutiable goods. ¾ If

Payment on account of income-tax and other taxes consequent upon a regular assessment should be verified by reference to the copy of the assessment order, assessment form, notice of demand and the receipted challan. Payments or advance payments of income-tax should also be verified with the notice of demand and the receipted challan acknowledging the

Normally, every item of expenditure has to be written off in the year in which it is incurred. But, considering the requirement of AS 10 and AS 26, the expenses relating to tangible and intangible assets can be capitalized if recognition criteria are met. It may be noted that with the issuance of AS 26,