December 26, 2021

If the trial balance of the General Ledger agrees to the inclusion of the balance in the total accounts governing the Bought Ledger and the Sales Ledger (instead of individual balances of accounts contained therein), it would not necessarily prove that the balances in the account of the Bought and Sales Ledgers are correct. For […]

Nature and Purpose: Since routine checks cannot be depended upon to disclose all the mistakes or manipulation that may exist in accounts, certain other procedures also have to be applied. These collectively are known as overall tests. As stated earlier, with the passage of tests, analytical procedures have acquired lot of significance as substantive audit

Until recently, test checks were applied only for confirming balances in a few nominal accounts; those of stocks and stores, amount of sale and other similar records relevant to trading transactions, which were voluminous but of similar nature. Now a days on account of increase in the size of business units, but more so due

The auditor should obtain a certificate from the client that all the liabilities which had accrued due till the close of the year have been taken into account and contingent liabilities, if any, have been fully disclosed. It should be verified that the liabilities have been appropriately grouped under different heads for the purpose of

The general make up of fixed asset account is: opening balance, additional adjustment of profit or loss on sale and on account of depreciation. Every entry which does not conform to this pattern should be inquired into it should be observed that expenses on current repairs have not been conversely those on additions to or

It is comparatively an easy matter to verify different forms of income earned by the client during the year in totality. In respect of some of the incomes which are collected regularly, e.g., rents on lockers in the case of Safe Deposit Vault, dividends on shares, subscription in case of clubs, advertisement revenue in case

The structure of each expense account should be thoroughly scrutinised and the distribution of the total expense over different methods comprised in the period under audit. Where there are significant variations between different months, the cause thereof should be ascertained. At times, it may be found that an expense account has a few credit entries.

There are two classes of outstanding assets the adjustment where of has to be examined; first, items accruing but not recorded in books and second, expenditure already incurred, a part or whole of which relates to a period subsequent to the date of the Balance Sheet. The following are some of the accounts in which

1. Purchases : In some instances, invoices relating to purchases of goods that have been taken into stock are received too late to be included in the Purchase Day Book of the closing month. As a result, those will be included in the accounts of the succeeding period. In such a case, a schedule of

1. Bought Ledger : The structure of every account in the Bought Ledger is : opening balance, credits on account of goods purchased and debits raised in respect of returns, allowances and discount receivable, advances paid against goods, payments and transfers. Usually, it is possible to link up each amount on one side of the

For studying the various avenues which are open to a ledger-keeper to commit a fraud, the auditor should find out whether the ledger-keeper extracts balances of customers and creditors from the ledgers and agrees their totals with their balances in the Total Accounts; also whether the balances when they have been extracted, are subsequently checked

General Considerations The audit of ledgers generally involves the undermentioned steps :  Testing the strength and quantity of internal check;  Tracing the opening balances from the previous year’s records;  Checking the postings from subsidiary books and, if they are kept on the self-balancing system, also tallying the totals of balances in subsidiary ledgers with those