This refers to expenditure essentially of a revenue nature which, instead of being charged off as and when it is incurred, is accumulated in an account appropriately headed to indicate its nature and the balance in the account is written off over a period of years during which its benefit is expected to accrue to […]
MISCELLANEOUS EXPENDITURE Read Post »
In a Balance Sheet all the under mentioned cash balance are included under the above head : cash balance in hand; petty cash balance in hand; balances of stamps in hand; cash in transit; cash at branches; and cash with agents; The first three of the above mentioned are verified by actual count. The cash
These should be verified by reference to bank reconciliation statement, and the balance certificates received from banks. If a Bank Reconciliation statement includes a large number of uncleared items as on the date of the Balance Sheet, the auditor should verify that the items were subsequently collected. On the other hand, where a cheque issued
In general the procedure outlined in regard to debtors is also applicable in the case of loans (and advances). Apart from verification of the balances of loans, the auditor should inspect loan agreements and acknowledgements of parties in respect of outstanding loans. A loan or an advance, if material, can be granted only if authorised
These include amounts recoverable either in cash or in kind for value to be received, e.g., rates, taxes and insurance. The auditor should obtain a list of all advances and compare them with balances in the ledger. He should ascertain that advances were made under proper authority and were being recovered regularly by agreed instalments.
If possible, the auditor should attend on the last day of the accounting period to inspect the bills in hand and agree their total with the balance in the Bills Receivable Account. If verification is postponed till some time after the existence of the bills which had matured in between the two dates should be
Because of the close relationship existing between a holding and subsidiary company, it is necessary for an auditor to find out that the debts shown as outstanding from the subsidiary are genuine and have resulted from transactions entered into in the normal course of business. Therefore, the balance outstanding should not only be confirmed with
Debt Due from Subsidiary Companies Read Post »
(1) Debts due in foreign currency : In the case of debts in a foreign currency, the auditor should find out by converting the amount into home currency whether it is more or less than the amount shown as recoverable. If there is any deficiency or appreciation, it should be appropriately adjusted in the Profit
Debts Requiring Special Consideration Read Post »
The auditor should satisfy himself that debtors, loans and advances have been disclosed properly in the financial statements. Where the relevant statute lays down any disclosure requirements in this behalf, the auditor should examine whether the same have been complied with. According to Part I of Schedule VI to the Companies Act, 1956, debts outstanding
In addition to the audit procedures discussed above, the following analytical review procedures may often be helpful as a means of obtaining audit evidence regarding the various assertions relating to debtors, loans and advances: comparison of closing balances of debtors, loans and advances with the corresponding figures for the previous year; comparison of the relationship
Analytical Review Procedures Read Post »
The verification of balances by direct communication with debtors is theoretically the best method of ascertaining whether the balances are genuine, accurately stated and undisputed, particularly where the internal control system is weak. The utility of this procedure depends to a large extent on receiving adequate response to confirmation requests. Therefore, in situations where the
Direct Confirmation Procedure Read Post »
The auditor should carry out an examination of the relevant records himself about the validity, accuracy and recoverability of the debtor balances. The extent of such examination would depend on the auditor’s evaluation of the efficacy of internal controls. The auditor should check the agreement of balances as shown in the schedules of debtors with
Examination of Records Read Post »
