Chapttl" *r

V*uehirtg
',1'!'lc,l'loN

\,'liuclrir ,tlr:lrn ing V o u c h i n q l n e a n s t l i c a c t o f c x a r t t i t t i t r gv o t r c h e r si . e . d o c r r r r r c n t a r e v v i c l e n c r si n

s u p p o r to J -a t r r n s a c t i o u .
I t i s r r s c c lt o e l t s u r . :t l r a t r a r i o t r s l r a n s a c t i i t t t sf t r r t h e p e r i o r l r r e l a i r l y a n t i t r r - r l r
r e c o r d e di n t l r e b o o k so f a c c o t t t t t s .
!, t,.'' I rrrc(l l. V r ' r r c l rrei : p r o p er l r d a t c t l .
?. I t i s i n c l i e r r t ' sn a n r e.
3. It is dull, autlrorised.
.1. V o u c l r e ri s c o n r p l e t ei n a l l r e s p e c t s .
5. It clearly slrows naturr)and antourttof recciptsand pa)'Itletlts.
o. After exarnination, voucltershoulclbe starnpediinitiated.

:.',. OF CASH TRANSACTIONS

: ' Auditor shouldthoroughly sttrdyl.C. syslenr or,'ercashlransactiotts
(o) n"ti"t" iit"
I.C. system . C a r e l i r l l ye x a m i n et h e a u t l r o r i s a t i o lne v e l s .
tj(,rfsitt|;t'i{llt llS ,
i:r
Check rvhcther any rnechanical equipntertt is r-ts{,ii,iit'; r.;aslt
: c o u l l t l n gl n a c n l n e s .
. Ensure that I.C. system periodically,reconcile tire physicalassets;
.
' rvith their balancesin books.
:
, . Record of transactionsshould be checkedin details.
{b) Ensrrre
: correctness of , . Cltcck whetherentries have been nrade in books o{';tictiutttai; per
, book keeping . consistentaccountinupolicy.
. records : r J'hus. differenterrors can be detected.
'' :
{c) Otrsen'ance Special attentionslrould be given to follorving:
I of Accounting - : Distinction betrveencapital & revenueexpeltditure/receipts"
principles r A c c r u a l B a s i so f a c c o u n t i n g .
t, t '
Method of DePreciatiott.
, ' '
Writins off of flctitit'rusassets-
- A < l j u s t m e nol f o u t s t i r r r c l i nAgs s e t s& L i a b i l i t i c s '
,
{d) E,vi6encc of - A u d i t o r s h o L r l c lc h c c k d o c u r n e n t a r y e v i d e n c , . : ' i t r j ! i 1 ! p { r . ,i - i f
: Tr:rnsaction transactiotls.
' f r o r e g ; P a y e e ' sr e c e i p t s ,s u p p l i e r ' si n v o i c c t - ' t c '
; ' :rsthesc
: Auditor should get as maly extemaIevidetrcesas il1;l'si]rlc
i ilre lnore reliablethatr internal evidences.
i...-

{e) Validitl' of , - FIe shouldcheck legal provisions,if any.

. Transactions I r Refer to internalrules & regulations.
: : ' Check copy ofcontract, lcasedeed,agency contract etc.
(f) Disclosure in . Auditor shouldcheck grouping of differerrt items.
final . Eg: Directorsrernunerationshould not be clubbed with empioyee's
Accounts salary.
. For this , he should see relevant legalreqrrirentetttsl'ilsc-
I r l, .r\i.- 1 11,'tr' j.rt \i1,-;' 61\\'rn ili I t' n''i n\4 i
. . t, .! ' \, { ) \r l ru l. ,} ' r t l 'rl r ' 1 6 3 .- . t r i ,
') \
\ , . - , u C Li *q U \, (
I I \
t l.l
, ' , . ! i n , ) ; \ r , r ti r'..!
\
 \

I
A utli t i trg tttrd A ssin'unce I
,61 'l be c l i e : c k e t l ( i r l c a s e l v l r t : r c i r c r o l l n t ' i ! !
2. ('ustittg oI' r:i;tls of caslt book alrci lcilgers shr'rulil dI
'l trtrii t ttit!ttcti rrtarrtraiiy')
ot:rlling
a
].lrisisrequircdtodctcctliatrcisclonebl,trvertotallirtg/undertotallirrg. el
I

I
Sprccialatlentiotl shoultl lrc giilerr to crasld/alterecl
ligrrres,
interval'
B l { S i s p r " p " r " , l b 1 ' c l i e r t ts t a f1 ' a tp e r i o d i c a l
a
3. f]:rnk
r ec o t t c i l i l t t i o n a
A r . r c l i t t rsrl r o u l dk e e pa r c c o r < lo i i t i n h i s
u'orkingpaperllle' |I
st:l tellrttrts I
Sileciirlattelltionshouldbegilerlto\,earettt|tratrsltctitrtrs. f
betrvcencash book & birrtkirt;i'l1"
c|ifTercrrce
a
i:,itsttrcatrcrtrtgenuinettcsstll itetltscreatittg
f
f
6.3 ATJI)ITOF }'A}'N{ E,NTS
bv suppliers'
!
l. Clieci iiashtnutros issrrecl
1 . Purglgrsgj-Pgdi
{ lrslxmenro
2. Goods ittu;ortl DooA slrould be chccked' t
in barlk statctnclll
.t J. l1-payments ltave beetr madethrough cheque ' traccentry
,+. Special attention is given to purchases
made near the bslunce shpet dute a: f
,goods inrval'd book goodsrnigltt not been received'
+ for future purchases hsvc n(ll h')'r''
C
5 Ilnsure that advances paid to supplier
tllass book includcclin current .vear'spurchases' C
o
p u r c h l s c s n e a r B / sd a t e C
v i
. Advances to suPPliers -eiimi"i
i"t puy*t"ii' p'i''pttty
; IlirYnEnt for
r. ""tii"tii"a'
"ir,., the amountpaid to the seller'
C
2. Vouch receipt for
Acq-uilition of
"\ssets
(.Authorisation 3. Trace the entry for payment in the bank
statement' t
v 4 . C h e c k c a p i t a l i s a t i o n e n t r y r n a d e i n t h e b o o k s o f a c c o u n t . S p e cbeen
to check whethersame has
i a l a taddetl
tetrttonill I
' lleceiPts ' , b" given to..inri"ttotion.hurg", paid,"
. tn the cost of fixed assets' I
v js.ct'""tthatnorlrralrepairsetc.havebeentreatedaSrevenueexpetrses&not
rBank Statentents
. debit"d to asset account' I
v .6.lncaseofnroveableproperty,checkwhet|rerinvoicehasbeerrnradeir''
'l)ntry in AssetAccount ,,, client's name-
t
+ it is duly registered in client's
J i", u"*"r,"ble property, examine rvhether I
'l-,-) .l'it'.: ,' . Revenue ExPenses : name.
r.i.
? v.? \" v I
i'tr^)'\i;I '
ille of clicnt
0rv:'\'1 \ 1 "l
I. E,xanrinetlrt: paynrent for repairs
wrttr ieference to estinrate submittcii bi' I
3. RcP-ag!.-to-A$9!g
contractor.
Estinrate if any'
contractor' I
2. Examinereceiptsissuedby maintenalrce
v I
l Tracerelevantentry in cashbook'
rteceiPt A Checktheerrtryirr.RepairsAJc'toensure^thatallrevenueexpenditurei
v connection l.ravebeetr properly accorrnted
for' I
Cash Book the life of asset have not beert
5. Ensure that heavy repairs' which increases I
v shown as repairs but treatedas capital
expenditure'
Re Pair A/c I
v
I
Capital ExPs.
I
{

I
I

I
 L'::,:rt,,,,g- .{r5

i r -:" r i.rlih LtDe n$cs I. E n s u r ct h a t a l l i ) a v r n e r l t sw . r . t . t r a v c l l r a l e been autiroi-izedisanctiou,:rirv

Arrihr;l rcation' proper offlcial.
tt' 2. of payrncnts as p e r c l i e n t ' s i r r t c r r r a l r u l r : r i t r r r j
Check reasclrrat.'lencss
I ! . , : e " , . r . t l t i e n C S S. regulations.
.t 3. Voucli copies of tlre airiraihvavst i c k e t s a n d h o t e lt r i l l s .
Iliils . 4. Check rvhether perrnissionol- I{BI lras been obtained lbr cxpenditure in
+ foreign currenc\'.
llBI's permission. 5. B n s u r e r e a s o n a b l e n c s so f s u n c l r y e x p e n s c s s u c h a s d a i l v a l l o . v a n c e
rt
c o n \c \ : u l c c l u t t l t i p s e l c .
S r r n < l n ' c x p e n s e s(
,6. For travelling expenses clairned by directors, chcck r,tlretltr:rtfie5e ','irir':
v incurredby thcrn in the interestof tlre business.
Fo ,' ! i r c s : t o r s . - )i r i i ' r , ' Jf \
tt \-li':'
'
''i r
, " J ' Trircc relevant entn' in bank passbook.
Przssbook : 8 . Check posting irr travellingexpensesaccount.
:
.1, 9 . Compareamounl of travellingexpensesrvith the previous year's figurt;.r,rl,.i
'
i ti.j'! !ti aCCOUnt i n q u i r ei n t o a b n o r m a lc h a n g e si,f a n y .
+
ARP
r . r : r ; r t i r n .F l x n e n s e s : l. Various preiiminary expensesrelating to the formalion of art entify sueh ,.r::
llf !!r, ;igt'cenrent : registration fees, cost of printing of documents, legal fees etc., should be
v r checkedrvith referenceto bills and agreements.
Receipt | 2. Check receipt issuedby lawyer,accountantand printing house.
.1, . :. Exanrine resolution of BOD and the power in AOA, in case such exp*lirr':'
!ti:sriiution for , irl"utred by the promotershave been reimbursedto them.
reirnhursemetrt ',4.
Cross check the amount of preliminary expensesrvith that disclosec!in the
.l, prospectus.
Pnrspectus 5. prelirninaryexpenses
Checktlrat no expenseotherthan thoseconstituting are
o includedunderthis heade.g.brokerage,underwritingcornrnission.
{}nly preliminary exps.
; 6. Auditor should examinecompliancervith AS 26, rvith respectto acccltrlittrs
v , of preliminaryexpenses.
treatnrent
AS 26_-
'
r!9!
' . r,':1-,ttigt4nd_Sale |. on
E*"mirrc intenral .ont.oirlelating to *og", and salariesspecilicallv
folloiving areas:
lnternal control
. Attendance record of employees
a,
' Appointment, promotion and transfer of cmployees
Employee data .
. Disbursement of salariesand wages
v ' Custody of wage records
,,tritirmetical accuracy .
'
v .
Authorisation for disbursementof overtinte
Acknowledgements' Paytnentof advanceto staff
v . Control over dummy worknren
't)!.i1.
f)eductions ' ,2. Examine the etnployee data such aS name, wage rate, attcndancc nssil1:,1"
v i
Check the arithmetical accuracyof the payroll function.
E{rt[r6:demPloYee ' Examine the acknowledgementsby employees.
v :S. Check deductions w.r.t. TDS and Provident fund etc.
llummy workman , .6. Ensure that employees who have retired or otherwise left the senviet:of the
v i
.'7
enterprise , lrave not been included in the pavroll.
Bank statement Ensttrethat no dummy workman has been paiCwages"
v :8.
i
Check relevant entry in bank statement-
Unclaimed wages :9. Pay special attention to unclaimed\\'ages.
 \
I
ChaP.6 T
Aud itirtgowl,'1:;s uronce
66
7. !glveg!!5!llge3-!ExPenses' I . cl-,cclico;tra;t ',r;ill i.i '-r alcricY'
a
"ising 'I
1 c{rntrlct details obtain complete list cf advertisettlents. nreclia i.e- new:lpal)ci V elc €
.1, 2. "vise
r lisl o- ''l{vcriisemen(s l. Check that theserelate to client's ortly'
busir.ress I
v. Exanrineauthorisationol payment ntade'
rrelated with clients i
4.
C
v 5. Check receiptfor amoutrt paid'
J
, luthorisation -lrace
6. entry in tlre caslribankbook'
.l, tl
( receiPts 1. Check relevarttposting in relevatttaccount-
*"q e.\per]Seshavc be':l: sltt'lwn as
. 8. Examine that outstanding advertisement t
' t'tslt trook : liabititY.
.,
show'nas assels'
t
.q Check-that advancespaid w'r't' same are
< entrl in A/c
rt C
,. ;r,is,exps.
I C

;;, ;;;;"; a a"u"roon'entexpenses

t
8" nci@3ag ;l
;;;,".;,i",t,"u."
@s-!glinel! erpglggg i
1 .', Checkwhethertheseareexpensedasperobjectsofentity'sbusiness'
C
-"v
Aulhorisation :; r
C
Examinerelevantdocumentssuchasexpenditureonmaterialcanbevcruched
:
As Per objects
v A
by examiningsuppliersacknowledgement'
Traceentry in cashbook / bankstatement'
a
--v
I)ocuments in booksof accounts'
Ensureits properaccountinganddisclosure
a
v Cash book ,6. u'ith AS-26'
EnsurecomPliance I
.t a

, Accounting
I
EnsurethatroutineresearcltcosthasbeenwrittenofftoP&l''account"
.l, :9. Checkthatnofakeexpensehasbeendebitedtoresearch&develrrpmen
,. A5-26 expensesaccount' I
.1, I
Write off
-t I
F-ake exPenses i
I
9- Retirement gratuitv to I Examinetherelevantlega|applicabi|ityoranycontract.enteredintobetwee
to pay gratulty'
emDloYees I employer& employeeto checkrequirement I
legal aPPlicabilitl" of gratuity is valid and as per prevailing
,,-
Z. Ensurethat basisof computation
v laws,if any.
I
basis to numberof yearsof service
V ,1. Check computatiottof gratuity with reference {
renderedbY retiringemPloYees'
t:heck comPutation
' , 4 . Tracethe relevantpaymententry in bankstatement' I
"t
bank statements
:5' l f a n y i n s u r a n c e p o | i c y h a s b e e n t a k e n t o f u n d g r a t u i t y l i a b i l i t y . e n s u r e t h aI
v p."*iu* depositedhasbeentakento P&L Account' (
insurance PolicY employee who got gratuity in relevant
from
v 6. check acknorvledgernent
(
financialYear.
acknowledgement
a
EnsurecomPliance with AS-15 (

I
 i(l I. Check the agrecrnertteuteredinto *,ith tlre a,'ents.
.'', 'it 2. F,nsurethat sales and conrmissioncornputation ha.sbeen mad,.',:r. :;'
't i s p a i d o n l v t o a u l h o r i s e ral g e n t s .
a g r e e r n e natn d c o n r m i - . s i o n

.: '! i'l-i1 lii)n 3. E,xarninesalesreport sent bv the agent during relcvantyear-

,{. -Irace
\ v the entry' irr cash lnok / bank statement.

S;';lcsre 1,ut1 5. T r a c et h e e r r t r yi n c t l n t m i s s i o na c c o u n l .
\ .t, 6. Obtain acknorvledgernentfrom agents.

F
\
(l:rsh hcok
v
A/c
C-'ommission
\ o
4,r."|rr,trl,trrtiiltrnen_t
b .
i.Crr".r.ifi" itrt".riutcontroloverthis area,its chances r,r,r. , . i
of tntsap1,,'.p:;
I 1. t,e"{tv -ql$-g.Ipens-es
h :..:.. r,is!r:pgfrol casharehigh.
2. Check authorisationlevel of personshaving custodyand contl'ol ',;-v,;i i'i, I t'i'

i+ authorisation
cash.
3. Check the limit of imprestrvith a particular employee.
i+ 4. Trace the transfer entry from cash book to petty caslr book io ascoriain
. . ',1
lrtnits
\J.,1'';':' amount given to petty cashier.
.t
5. Check the relevant voucher,bills, receipts in supportof the experiilir'i'rtl
b trunsfer trntry 'ir''' '1F"t:':iri
6. Examine whether the expenditurehave been duly approved h1'
person.Check its reasonableness.
\
,nitts/*eipts 1. Trace entry itrto notninal account.
\.,, 8. Examinebalance of petty cashin harrd.
reirsonableness ' I ' \!i
\ i'. ,'t' I
1\\'!,' \t.. ' ',t' i\l
i entry in A./c
\ O l1
\- v
balance
b.
=.- furi''rrrre
32 liRvnrent of income tax l. Ascertainthe computation of taxable incotne as per provisions l-.1'ih<;
Tax Act, for eg. Corttputationof depreciaticn as per Income fax .\ct'
taxable income '
\ 2. Check Assessmentorder or demandnotice issuedby the tax autltorities"
Examine receipted challan to check that amount shown therein is the s;triri;*:
b,., qt' ou*"]u nore{ 3.
/t shorvnin books of account.
,
t u^.u
t'li
't
b . r\.
4. Reconcilethe due dates and actual dates of payrnent.Enquire anv'delay in
i rcceipled challan
actualpayment (as per provisionsof CARO).
tl
5. Trace the relevant entriesmadein cash book.
dateofPaYment
lt , rtt 6. Trace entriesirr income tax paid account.
i t,r -
* 1. Check rvhether panel interestclrarged on delayedpayment of in.;t'rt't .",. !r:i!
F r*t" ut,uK\ been shown as expensesin P&L account-
): ".0*,,
5e entrY in A/c i
i
b.t
I

intglesl-"h1g:9,'
b

F
b
F
\

\
\
r-
 \

-X^,'q'"d"ll t
{ . h a p .b
!8 {_ ___ ' ' B i l t r ! siiir-i'" ltl en!tlre that gtltlcls ttirve been. ttl iirct irrrnorled
G
13.Custop duties l. f:xanrine
cluring the ;lear. T
, Rill of entry iltrtr ltas beren lno(i() :l:j lci iitt
.l, ,t
C I r e c k r v h e l h c r c a l c r l l r i ir { } l - !of r:ustont:. C
applicable rate in fi'rr':e -
. Computatiorr
-)- In casedut-vis paiil throtigh sonleclearint{agt)nt'
exarnlneagetll t r i l l C
- Agent Bill 4. Trace paytrtr:ntin cash llock/bank stateme11t'
C h c c k a c k r l o * l c d g e t n ! l i if r ( ) l l 1c u s l o l l la t t t l t t r r i l i t s '
t
5.
t{,
Bank Statentents
o.
-Irace
entry itt cttstotll dtrtl' paid account-
llrrttt
a
1. V e r i t \ , c l a i n r { o r r l t { - l , d r t t ' l ' h r ' r cb l f1 ' c h c c k i n g a c k n c . r r v l c t J g e r r t ' : t i r
'+Acklrou letlgenl€nt authority.
I
is pr,rlrc'lr
Bntry in Aic : 8. Incascofdisptrtci-cgardirtedrrr,"*payablc'clrcckrvlretherpriiYlsl{)li t
v rlade for the sarite.
Dury*Drarvback :
t
v
DisPutc t
it beconrespav'able''rn
:I Vi;;;i;; ; Excise d'1."' is levied on tttartuf'acturing,
t.i
fircisc dutv t
goui' froln goclorvn/factory of the manuftrcturer'
I',{'
\\" r"l""t"
\ ,\,lj rComputation
N^n{,'\t\ ,) "f "tcisable
.t CheckthecomputationofdutypaicltOcnsurethatrateapplieiiisaiFsl. C
, .nttun prevailing rates.
J- Check paymentw.r.t- du$ by examinirrg
r:lrallans' C
ufactu ri ng f, xP' il'iisureablr'.lt
t.-l\l[an .+- As it is levied on manuf-acturing,it is a martrtfitcturingexperlse^
.1,
correct accountingtreatment'
I
:
,Entry
v : ).
:
Trace the relevantentry irr the nominalaccount'
adjusted in the accounts'
a
Ensure that cENVAT credit has been correctly
CENVET CREDIT
"v
i6.
;1
:: Forexcisab|egoodsmanufactured,whichhaven,tbeenre|easedtilll]lSdate"
a
duty has beenmade'
Provisions check whetheiprovision for unpaidexcise I
,
v year with that of precedingyear'
i8 Compare exciseduty paicl in current
ARP I
Study the special Prcrvisionsi" frlOe
and AOA w.r.t paymentof dividcnd'if
ls. Pai'ment ellDividell! l. I
Vl any.
Provisions w.r.t dividend Examine Board resolution regarding
rate of dividend' I
v i
(Transfer of Profit to Reserve) Rules,
i.
Ensure that provisiorr of the Cornpanies I
Board Resolution 1975havebeenadheredto'
v 4. Study the Shareholder'sRegisterto ensure
that paymentis rnadc to all
I
Transfer to Reserve registeredshareholder'-
.t, !
I
5. Calculationof dividendshouldbechecked'
Shareholder'sregister the time limit prescribedunder {-he
I
Checkthatdividendhas beenpaidrvithin I
I : 6.
i ComPanies Act.
Calculations
v 1. Examineinstances of unclaimeddividenri'
Trace relevantentriesin bankstatement'
t
PaYmentwith in time 8.
v g.Forpaymentofdividendtonon-residentshareholders'ensurethaiRB
Unclaimed dividend hasbeenobtained'
permission
.t Tar has beenpaid'
10. CheckwhetherDividendDistribution
Bank Statement
v
PaYment to NRI
.,
Dividendn ttlfi,U.ltglTgl I --- -
(lha: I/otrc hing

I6, ^..r.r.t.." .,,r. r, ri.l l. B o a r c lr e s o l u t i o ni s r r e e d e di L

. A d i r c c t o r. o r

. l l i s r e l a t i v eo. r
tloa rrl l.lt:solrrtion
. A flrnr in rvhich directorirelativeis a paft11cr,or
.{r

' Privatccompal]) of rvltich directol is a trtetrttrer,

Appnrval ol CG
E,nterinto contrilct rvitlr tlrc contpatlv in cluestion. Atrdit,rt sliarrld
v clreckrvhetherresolutionhas been pas:;etl.

b lrlrarrre i .rii:fest 2 M o r e o v e r .i f c o m p a n l ' . u , l . " i ' u . , 1h a sp a i c lL r pc a p i t a lo f R s i ' - i ( ) ' r ci - i i t r l ( ) l c

evcn prior approvalof CG is neededin adclitionto lloard Rescir.rl:crr
.1,
Irvery director,wlto is interested,
I Price
. Directly or indirectly

- In contractrvitlr the cornpanv

Then, he must disclosehis interestat board meeting

A
t- of price';ll:, r
As per CARO, Aud itor should check reasonableness

(l) For public company.certain requirementsof tlte cornpaniesaci li:rit: r<-'i-rt'

i :f ' :i,1i: 1| I .f il-ild.t{-Pa id
seen which are as follorvs;
!9_al-uggtqrs
(l) Specificprovisions are requiredfor retnuiterationas per

. Articles or

'
11GM
t:-'-9l"lio11
(ll) . It can be paid as
. Fee for attendingmeetings

' Monthlyiquarterly or annualsalary for rvholetime directr-'r

(lll) For directorqther than rvholetime director, approvalci' i.ri: i,. ..ri1tri"i,.i

{zt Thgs, Auditor should clreck tfte authorisatiol level to releaserih-r-rCt!r:!i.)llt

(3.) Auditor should seek the attendancerecord frorn the company"
\
(4) Check the confputation of director remuneration to ensure

compliancewith requirementof The Companies Act (sec309 & t98)

( s ) Elrsurethat proper disclosurehas beenmade in financial staternctlisrr'.r.1

same.
 \

t , l r r i i r "{ i
I
70 ll
{ - c r i l t r r rvrs' h i c l is l r o u l db e c o n s i r i c r e bd 1
P r o ' , i s i . n s 6 t ' t . t , t l p a r i i e SA . t a r c a s
18. Payntent con!rolle! bv
fhr. ('irmtr:rnilt itct' Audittr:
T
1956 l . u r r d e r s e c 2 2 7 ( l A ) ( e ) p r c ' s < l n aelx p e t r s e s
c h a r g e dt t ) r e v c l l t t es i t o r ' r Iiir r :i - e i i c t l ' . : i i 6
bY atrditors.
||
rrt
c o t n p a | l yr e c l u i r ec o l l S e l l t . -l.hf .a t c l t r t l d c r
2 . U r r c l e rS e c t i 0 n2 9 . ] ,B ( ) D o I a p t r b l i c
CM l'or follositr;'': C
{
. Selling,lertsing,r disprsirtg lrl , r i,:
.-\
. -,1t:e'"'l C
+ Whole / substantiallYrvholeol' t
t, o{'tlrecompany
+ Undertaking C
, R l l t i t l i r t g / l i i t ' i r t g t i r n e f < r r r e - p a y r t l e n t o f a n l ' d e b t r j t - i t - ' L r y r r ' l ti r e
j,-.lli. rir 11.vri 1.,,
rcceive bv rray of comptllt'rl-\ tv-l{!' !'r!')tl
\ ^,
'r .r'
. : ,
; '
; I \l
- Ittvtslingc()tlrl)cllsaliott
of anv
t
-{i.;.rl {;i i

-) or Propertlesof tl-reundertaking C
: Prerrrises
..----^
^r.-.-^^.,
of rnoneY;fif
. t
: "forrowing
', 1i'
pr1)I-a{!f'.."ri
, -) moneyalreadyborrowedtogetherwith ntrlneYl; t

( i r, ,1 .;;\,lKr' ,, ,,, beborrorved

" - -1, I' t d
.-) ,. , __.:,^-,^^-.t aggregated
onnrcaeted naicl up caoital & fiee serve:s
uo capital
of paid
-,,. :_,tii

:,rr:i
.
,. ,, . . r".,r.l
-) will exceed
a
-
1-f I
, 1""r::,:,:,"
-) or
\ - l l d r r t a t ' r v fund
t
: ir/
compirnv;'ltr I
tobusinessof
..|., 'i i\' ,i, I
,.
'_),' l:t-;.T:;i:'J:#'ili:,:d
' ; '{
'i <1
" ' '', ' r ' ,' ,' , ' 'r rr l'' ^ -) a h e x c e' e d s .
t r v h i cexceeds
m o u nrvhich I
11 i amount
profit during l lrnrnediatel-v
Rs'50,000 or 5o/oofaveragenot
i
; -> I
year ( rvhichever is grcaterl
, Precedingfinancial
.'-l
: l. UtiO"t section293A
I
i -+ A governn'rentcompanyor
I
I
lesstheri 'l tirr, lrt:i:'rl
i -> a company which is in existencefor
y.oo I
,
' -+ to anypoliticalpurpose
Cannotcontribute I
- ,
i ?ffi::ffi;1:?jJ;"iff:lj;*"rontsd'lrrins'
i --:L..+:^- +,, -orinn'ri {
"ietirn.:e
:4.HcweveraSpersectionzg3B,Boardcanmakecontributionternationai,ijett:riee
. fund rvithout anY restriction' (
F
F Il

AT ] D I ' I 'OFR E C T IIP T S

L'rsuchirt! tl

b tr.J

S ; .r[r'.:;
,;tl t olltrol
l. I , , x a r l i n el h e i n t e r r r a lc r r n t r c , o
levcl for rnakin{: c u s l r: ; a 1 , .&- - r
s
- lv e r r e c e i p t s l l o t n s a l c r [ ; x a r n i r r cr r u l h o r i s z r l i L ' l
e c e i v i n ga n r o u l l t t l t t r c l l l r r ' : .

s
I
+ '2. -l-cst
c h e c kt h e l e * b i i l s f i r r a s c e n a i t r i r tagc c u r i l c \ o t - r a t e .r r ] r ( ) u n t .d i s c t t r i n & t
,rruthorisalion S a l c s ' l ' a VV A I ' c t c
v : l. I n c a s c i r l a r g e u u n r t r c r o 1 ' c a s hs a l e sa r c a l - l e c t e d .c h c c k c a s l r s a l e s s u r r i r n a r v
\ Bills
*t'
: b o o k n r a i r r t a i n ebd1 t l r c c l i e n t . ; r , , l' - . r ' . ^ " ) \ I ' i \ i " , i '\ ' ,
:'
\ rr:tles sulllman'
r..:r.Eiir 4. [lxanrinecopieso1.c-es|tntctlr0S.,l.i'.r.tl4
t 'l'race
trorrk t h e r e l e v a n ct n t r l i r r c a s hb o o kr v i t l r r el c l u r r c ct o t l l t c o r r c a s l rl n c n t o s .
\
v :, b- .
I n c a s e ,d a i l Yc a s l r c o l l e c t i o n a r e b a n k e c io n n c \ t d a r ' .t r a c c i l r e s u r l r c i n t - ' u r , i i
{ . a r ; hn r * r t r o s
\ '+ :
statenrenton subsetltrentilar'.
-'llevenut:
J. Ilnsure that reventrehas been rccognisedas pt:r recluircrrrents of AS-!)
\ 'vt ; a s h l r o o k :
l
I{ecognition".

i !|: r.s1..
'+ !;i:.rtur!ttCnt .9. C a s h s a l e sd u r i r r gt l r e y c a r s h o u l db e r e c o g n i s e de v c r t i t ' p h 1s i c a l 1 1 ' 1 ' 1 1 ' t : qr1' i1 g p t
. s t o c k h a s n o t t a k e n p l a c e . T l r i s p o i n t i s s p c c i a l l ; *l o b e c o n s i d c r c dw i t h r e s p r { j i
ri rti
.' A to salesnearthe balarrceslreetdate.
\ vS - 9 i.:rl ti' rlt 1)r).
' \. \\ . \ \ . ll :'
b -
, i r , \ ' l t ' . r i : ' ; t r t | / S d h t c :,
.
*j

.i !i:rlt' Iurrreccds of l. E v a l u a t c t h e i r r t c r r r i t lc o t t l r o l ; i ; . g ; ; . - ' t ; t i ( ) r r . s t o r . r g c& t l i s p o s a l u f j u r k

i,' lrlq[.r,r.tutttrials material.

i . fnternal control :2. Check the recordsfor sale & disposalofjunk rnaterials.
v : 3. Check the production rccords to determinequantit-r'of junk material.
b 1&teecle'els
.!
14 Compare u;rits of junk materials in current )'ear rvitlr that of preccdinl; feri'
years.
\ Production records
a, 5. Check the ratea1rvlrich diff-erentjunk nratcrials have beensoltl.
\ ARP 6. Examine correspondingentry in cashbook.
.l,
7. E,xarninewhether it has been shownas sales r>rredrrcedfionr cost o{-proiluc:t.
\ Rate

\ "t,
{ lash book

\
o
! {r1coqry{!qs !Le_9_t!94
l. Study variousterms & conditions of agreetttetttsenteredinto rvith tenants.
\
2. E,xarninerecordsof propcrties let out.
\
Ki'I' v
Records
3. Ilnsu.e that calculaticlnof rent has beentttade as per tcrrns.

F
I
..t
i 5.
A Check copy of rc'ceiptsissucdto tenant.
Obtain confirmation lrctm tcuantsregardingallloutlt paid by thern.
, Calculation
Fr
I
.t ,6.
:
For rent accnledbut not received,checkproper ness of accountingtrcerinri:ni.
. Receipt
'o
b , J.
:
If any outstandirrgrent is under dispute,exarnine whetherprovision rrci:rirlo be
made,

F ,{:onfirmation
v
Accrued rent
.8.
:
,9.
frace relevantentry in cash book.
of accountirlgtreatnlcntin nontinal account.
Check cor-rectness
b o : 10. Ensure that TDS been properlv adjustnteni.
b Disputed
v
ID
I
Cash book
o
b
l
!! 41q--
-4.",trv-
b
I
b
b
\

\
 \
I
t111-c,,- :L14. i' !
qyl-,4,syt1t
,4ttclirmg -.:--
1)

I' I!ttY,tI*' I S t r r r l . ut t r t : l e : ' l n s o f c o n i r t i t ' l

hr't\\'r"'rr i-ii.nt /3'1t!11; 8: the p''lbli:h:l' s
!$sr'-t:-cil
.'l'r.rrl:15
check 1-rerittclicalstaternents
receivetJ fronr publishcrs regarding tiutrtttt;1 a
hooks stllcl.
{.'
c l l s r t t e t h a t i t i s a s p t :r t e r l l l s '
I
Periodicalstalenrt:nt C h e c k r : o t l r p t t t a t i o l lo f r o Y a l l \ t t t
'v l:xalrtinc ackntl*ledgemetit isstrcd
to the pubiishers' t
L
'o
, ConrPutation
i.
-l'raic
ctltrv irr cashbook' I
tronritral A'ic-:(-rtlllt'
nt
,\cknor'+'ledgente $. E,nsurc c{)rl-ectliessof postin!l itt t
.' dtte biit not receivcd'
1 Check atlirrstn'rentregarding rovaltv
('lash buok t
.i,
i'-titrY in atcllullt
t
.t !
''.1:t
f u.:ri t'.-rylllt,1
t
5"Commission t. Study the ternls of contractr'r'ith
principal' e
reccived nf conrrlrission'
C l r c c kc o r r r p u t a t i oo I
'['erms 2.
v 3 U s u a l l y a g e n t ( C I i e n t ) p r o v i t - | e s p c r i o d i c a l s a | e s s t a t e m e r l t t o p r i n c i p a l , h n s t : r l i l tI.
the statemel'rtas well'
ComPutation which commission is calculated' Examine
.t +. Examine copy of receiptsisstred'
I
Ileritxlical statemenl account'
.t, Trace cntry in cashbook & relevant (
recognition"'
RcceiPt 6. Ensure cornpliancewith AS-9 "revenue I
+ 1 Checkadjustmentw'r.tadvancereceir,edensurethatithasbeenshitrvnas
t,ntry in a/c f i"Uifi,v aid not booked as income
irr tlre reiejvantyear' I
v
AS-9 I
v {
Advance
(6) Income from l. obtairrscheduleofinvestnrent&depositsmadefromtheclientandana|yseit I
investment /interest . Test check computationw'r't interest
income'
2. (
& dividend i & compare with actual dateof receipi
'ir''t; 3 .
Schedule'r,\ check due clatesfor interest& dividend
I
vL with copy of receipt issued'
4. check relevaut entry in cash book
.. *t ...rl,. -l,.:i' , 1
ComPutattonl1 s Ensurethatf-ul|amountofinterest/dividendhasbeentakentoP&Laccrtunt.
.t
Dates (). Ensurethataccruedincomeinthisrespgcthasbeenaccountedforasl'rer'\S9
v
r; . a^ i-"' rr .
, - . .t,..,

v:
Cashbook
v
EntrY
v
Accrued incoine

'. l. ,',,,.'.
,; .,, f if .,[ Ar"'rrLr I f t i t . l i'l) f \ \ . ' 1 ; " ; i r
I ^.,
'\ ' i:'i'' I''\''r'\''q'''r
t) I r''r'-;'
r'i
I
i..1,^'
 l'oucitiit.g

of I ! L c t , i e r vt h c i n t c r n a cl o n t r o l sr ' , r c r S a l co t ' i r t v e s t n i c r i t s .
a / - i . : : : c r : ! ! r, l i : : ' , ' s : t l i r c ; r 'a. ;s' c s c l l l i l ; ; . ; ' . i g l t ; i o . k ' . ; r . , L u i . i l r u s n - r x d r r r i !rtr's, , i ' c i ' . : ;
r1()te.
i .,l .['est
c h c c k t h c c o r n p u t a t i o ror l - a n r o r . n ]rte c e i v c c o l n s a l e a s s l r o w ni t r h r o k e r ' s
.t l u o t e i r s r v e l l a s n e t i . l l ( ) t l t t t f c c c i v e d f r o r t i l ' r . t ' i - t e r( i . e . l l i e r ' l t : i J t i r . i . i 1 ' 1' 1; f
ii{ r
brokera!!e and otherchargcs)

rt :1. ( ' o r n p r r t cp r o l i t / [ o s sa s s l t o u t t i r r [ ' & L A i c b i t l t c c l i c r r t .

Curnputation ' - , \ c c o u r t t i n gf b r l t i r e s t t t t c t l t ' ' .

5. E n s u r e c o r n p l i a r t crcv i t h A S - l 3
+ 6.
'l
race re lcvant entrv in cash bor.'k,'bartkstatettlellt.
Profit/ loss
-*
AS-I3
..t ' Alr
'. l. \', '
!,r;.tt"lr
i i ' , , - ' r l{rr
l. R e v i e w t h e i r r t e r n a cl o n t r o l s o v e r l l r i s a r e a i n c l t r r l i n g a u t l r t i r i s l l t t r , , f
Lrl-Ule-ql-a$eE r n a k i n gt h e s a l e .

l. If asset has beensold through agent, examinecorrespondence*'ith him.

i ",Li'rF:;{leqlrttrol i
* 3. to cop)'of receipt issued.
Check the arnountreceived with ref'erence

;:0,rt'rtrspondancet 4. of price by enquiringtl.renlanagement.

Examine reasonableness
rt' 5. Ensure that saleproceedshave been fully accountedfbr.
( tipv of rcceipt '
:6. E,xanrinecomputation as regards profiVloss on sale and ensurethat ;eme i i a s
v :
: been properly accountedfor.
,:
l
!tt,ar;onutrlenessof i

price i

v 1
'
Accounting
rl,
llrofiU loss on sale (
i' ':r ttr ',Nf
l. Exan-rinethe bad debtsappearing in client's accounts- tr\ \
i,lt--..-.-"llad--d*bts :
f'ec(rYcred iL. Examine that all recoveriesagainst this havebeen slrorvn in books. r
:
Bed debts :? Exermineackntirvledgementissucd to debtors.
:
.1, !
:A
ln case receiptof bankruprtcl,dividends,check correspondencewith official
Recoveryr receiver.
v Note : when a debtoris sued for bankruptcy,entity has to prove to thc oflli:ial
Aeknowledgemcnt receiver that debt is due from him. Subsequetttly,antouttt is receivedgenerally
.1, in parts, which is known as bankruptcy dividend-

rianhruptcy dividend Trace relevant entry in cash book.

'i'g "I - - f^\ l |
:
o i6. Ensure proper treatmentin Proflt and lossaceount as income. lr
A fll-:l ,',',

Cashbook
v
AlL treatment
 t
I
7t ,4 ti,i i t i ; tg cnid lss r.tritn c'e C h a 1 l .t r
t
(.10) Refirnd of l. Exarii!ttc iltc reasott litr crrt:h t'i'fitrril [ ] n . e < r ' - i r 9 . : . . ) l - . t , - ! ' , : c1 . , tp l : 1 i c , ' l l l l i c c l l l . l l t
gen er:lL. -_._in-sufj]l ncq bl: (' It-.

l[lllr:llJl,Lii!i(l l E , x a r n i r rier r : L ri ri r t c ep o l i c y d' o c u r n er r t s .

C
lit rr.iort
-) c ei t l r ( i l C l i n c l u d i n ga d v i c e b 1 ,G I C t o c l i e n t .
C h e i : kc o r r c s p o r r c l e nw C
v
I'oli(; docutttcttl
I C l r e c l <r e l c v a n tc r i i n i n c i r s hb o o k l b a n k s t a t e r n e n t t
u 5 l l l 1 g rgr rt r l r r ' i titi s p t " o i ) carc c o l | | | I i r ltlrl e n l r n e l l t .
C
C'orrcspondence
.t t
(':ish Lrook t
o t
Accountirrg

tlj) ..-lnqurancel l. C h c c k u ' l r c t l r e cl l a i r ni s r e c e i v c du . r . t f i x e d a s s e t so r c u r r e n ti l s s e t s !

. ' t . ri n t s 2. E x a n r i n et l r ec o p ; ' o f i n s u r a n c ec l a i r n l o d g e dw i t h t h e G I C . t
: J" E x a r n i n ec o r r c s p o n d e n cwe i t h G I C a n d a g e n t .
Nalure C
4. Check report of surveyorto ascertainthe valuation of krss.
v C
: receipt issuedto the insurancecornpan)'"
Check acknorvleclgelnent
tilaim lodgcd
.t, ' 6. Trace entry in cash book/ bank statement. C
('orrespondence. 1. If clairn received from GIC is less than actual loss suffered,ensurethal I
o dift-erencehas bcen debitedto P&L account.
Surweyor'sreport :
a
{,, t
,\ckrtowledgement
o I
Cashbook i
v, I
Loss taken to P&L
account t
f t2)lDtrequn!9d-E/R , l. Client usually prepare schedule of discounted bills receivable dishonoured.
dishonoured : Auditor should study it to knorv amount of bill etc. I
S c h e d u l e,
,
2. Check entry in bank statenrentto see that bank has debited account of client rvith I
o. appropriateamount.
I
Bankstatement. : :. Examine bank's advicew.r.t same.
v '4' Check that drawer has beendebited in client books. I
{}rnk advice r
v
5" Examine r,vlretherbank comnrission charged by bank lras been recoveretl from
drawee.
I
liebit entry \ 6. Check subsequentreceiptsfrorn parry, if any. !
v 'r II
I

Bank commission I r' fil I

v I
I
Subsequentrecovery i !.1:
I I
I
? : ' r ,l " , . ' II
Ii
{ l h l r r r .I ' l ' r , i t t i t i : t{ . /5
tF;: ...^:-.*..'.. - "''..*-,..

t).:t r\i-rtll I OF SAI-E,AS

.t''-.'
l. A u i i i t r - r s l r t r u l de x a u r i n ct i r c i n t c r r r a lc o n { r o ls \ ' s t d n ii n t h i s a r e a .
'
:t::ltlt'ols ?. l : x a r n i r r cu l r c t h e rs a l e sh a s i r r : e r tatt t t h o r i s e b
d ; - a r e : ; r ; t t t t s i b loef l r c i a l .

.t 3. E n s u r c t h a t g o o d sa r et h o s c u , h i c l r a r c t t o r m a l l vt l e a l t i n b 1 ' c l i e n t .

;,ii iircl'istl i<lti

4. i \ r r r li t o r s l r t . r u ledx a r r t ti c c o p i e s o l ' s al e s i n r ' o i c c s .

v 5. [ i r r s u r ct h l r t e a c hi t e m o f s a l c s a c t L r a l l vr e l a t e -t sr r t h e v e a r c o n c c r t r e d
i . e .e r a r t r i t t e
crrt oll prr.rccdures.
:i:rlurri of grl0ds
6. I - , x l r r n i n el l r c s o t r r c ed r l c t t t t r c : r t (1ssi r l c so r d c r s .s a l r : si r - r ' " t t i c e sq)e n e r : i t e d* i t h i n
v the organiz.atiott
. ; l l ! . t r :i ,n v i . r i c q 1. a c c ( ) u I i ta s \ \ e ! l a Si n c i t s t r ) t t i c .Si i i C C o U rtl0t e l l S r l r et l l ( ] i l '
[ ] x a r . r r i r recr r t r yi n S a l e S
.t cL)rrectpc-rstirrg.

8. s p e c i a l d i s c o t t r t l s h o u l dl . ' ec : r a i n i n e d "
Authority for grantirrg
. ,r r i i : i , t r; r f ( ; i . t r { l t l [ C

.t 9. C o n f i r r r r a t i o nf i o r nt h c c u s t o n r e r ss h o t l l db e o b t a i n e d .

iiour(8 documcnts

.t
p(,st!lrg

v
i f r (r r r f d i s c o u n t

o
t!
confirmation I
'Sale or l. I t r n e a n s t l r a tc u s t o m e rl b i r y e r ) h a s t h e o p l i o r re i l l t e r t o a c c e p tf h e g o o d s o r t o
{;,r1.$.,ott
retum them rvith in a specified period of time.
Rglg;tl_U4sis'.
2. Thus, it perlainsto salespending approvalfrom cusiomer'
{}ption with buyer
v a
J. The auditor shouldcheck Memorandum day Book"

ltequires approval 4. Exarnine u,hetheron the receipt of acceptancefrom the customer'proper entries
have been tnadein salesbook and customer'saccount.
o
5 The auditor should check that a provision for sales retums has been made
'\4cmcrandunr day
agailst all the transactionsfbr rvhich the customer has the option to return the
book goods as on balanceslreetdate.
v 6. Clreck the statusof goods sent on approval.
Flntry in accounts
l. All such goods should be irrclLrdedin closing stock. However' these should be
v shorvn as salesif :-
l'rc)vision . (loods havebeen forrnally acceptedby customers; or
..1, . The time period for returning the goods has expired or rvhere no time
status. limit hasbeen fixed, a reasonabletime period has elapsed-
._
v
included in closing
stock
 \

t
s rg J,:!l!,:lg::::!.L!i1.,,"!1'--- -:Lltl'l T
h , t l r c p r i n c i p e l l i t h i s a g e n t -t o b e s i r l d a t
1
\ *1Lr # : - - - - : :G oodr on
-':-l_'.rilr'in!'".
N O . I - E : l t r c i c r , , ,i . r g o o r i s t i r ; t i a r t : : u i r l
r'' r"!rr Jr " t r t . d
.
s
{$lfglt::'.:ltltrl\tl-
I.ct'Itll"tir:t inr'oiccs
.I-lte
pcrstlrl rr'i... irlttsiglrs tlre gooiis is
r.:a!ied ctlnsignor and llre otle to rvhont the gootisl I
i i i t ( o l l s r l l t r t ' ' t li : t l r l l e ' l c c ' t t s i g r t t ' c
1
v
rI rr, nreirt salc book shoulcl be checked lvith copies
tu:l;l:;,,,:1,,i'l:..:::]::lil,, o1' I
S,rrcs
\rc,rrrnt
v
c(\.\;!.',cc |r
S a l e p r i c e 2 ' : ; * : l : l i ' : l ; : , 1 ' l i : " ' ' " t l i c a l s r a t e r n e r t l s i ' e ' ' A c c o r t n t S a l e s ' h a v e b e e n r e cCe
.J, .llrc t o c h e c k s a l e p r i c c o f g o o d ss o l d a n d
:
I . r c c , , t r ' t s a l c s s l r o u l c lb e v c r i f l e d C
lliffercnce betn'ccn g ) ; p C t l S i i)rrr c t r r r c ibl v l l i e c < ' r t i s i g r l e e '
t " o s t& i n v o i c cP r i t c
4. [ : n s r r r ct h : r f t l r e d i l t e r e D c cl r e l r v c e t rt l r e c o s t
& i n v o i c e p r i c e l r a sb e e n p r o p e r l l |r
\y,
arl.iusl,-'ilitt ltcctlttuls- t
Commission is as prrr the consignrnent
5 C ' l r e < ; kr r l t c t l t e r c o t n t r t i s s i o t td r r e t o c o n s r g l l e e
tl,,
a g , rcel l t el l t s . t
, ! i t v n r t : ! l io [ c o m r n i s s i o n V e r i f _ vt l r c l l a l , n t e not t ' c o l n r n i s s i o n s .
6.
sent'goods sordand
tl
between thegoods
*".onl,,u,,on , i' :::ll'i; i[:.lillXl'::::J:::il]rration C
{' in the lrands of consignee at
on goods remaining
g. i.,,r,,r" tliat no profit is b,:,okecl C
No profit on stock in : the Ycar e n c l '
hand
p r o d u c l i s s t r p p l i c d t o t h e c u s t o n l e ri s
C
and l. S o r r r c t i r r r c sr.h e c o n t a i r r c ri r r * l r i c l r a
(4) Packages
Emnties
returnableto tlte seller- C
if customers pay for the containers and
1 2 Ivlernorarrclasystem should be adopted C
Returnable iime as per agreement' At the..timeof issue'
returns thenr rvitlt in a stiprrlated when they
of containers and credited
.l, cristorner'saccorlntis clebiiedu'ith tlre cost I
areretttrned.strch,."t'''tn"OcontainersshouldbevalrredatcostorNRV'
IVlclnorandullr system ',1'hichevcris lor'ver' a
rt for returning them has not expired'should
3. corrrairrerslbr rvhich periotl specified a
Stock rvith cuslotncr betreatedasstockwitlrthecustomeralrdarecarriedforwardtonextaccounting
.[, year at depreciatedvalue along rvitlt stock
in hand of containers'
a
' provision for loss 4.Theatlditorshouldseetlrataprovisionhasbeerrmadeforcontainersnot I
returned b.vcttstomerswithin tirne'

e.^*ir" ;^i;; ,;i*;., t;"k ,;i,il ';f.;;; ;; copiesof creditnotesissuedto I

(5)Salesreturns l.
custotrtersand inrvardreturll tlotes'
Salesreturnbook
I
numbered' Missing credit note numbers
Errsure that credit notes are properly
v L
s h o u l d b e d u l l ' e n q u i r e di n t o ' I
Credit notes E n s u r e t h a t r e t u n r e d g o o d s a r e s e n t t o s t o r e s i m m e d i a t e l y . A l l i n w a r d r e t u r nI
3.
v notes should be enteredin irrventory records'
records suclr as Retum inward register I
I lt';ettiorY records ^ T'he auditor should also examine other
and Stores recorrls.
v I
entry for returnof goodsin customer'saccount
Examinecorresponding
Other documents I
v
I
lintrY in accounts
r ,;i rlcr
1'til I
Jrft\
Ir
:i,.r.,"t ' 1., 1""I
i - . '(' ,
'\ !11

t
rt Ar\
-oe-
\r re,c[ \c.n I 1,,5qI' L\''"L) f\

l ,
''.i1i i i r' "l
!'ii
' l, t '-. r
lai
l"' iir | | tltt- li!ttl( 77
;"....
uitit;; {}F PURCIIASES
-!:Y
. --.. :,li:ll A r r < l i i , l t s l r . r r r l rcl l l n t i r r c l i r c i r r t c r n a lc t i t t t t r . rsl v s l c , l t i n l i i i s i t r c a . A i : ; t r c x a r t l l n c
;l cr:l*trtlls , . ,1 r c t l r c ri i r es r rl l r i ' c t r e t : r rl t t l c c | i l t t e l t a t t t l t o r i s c r l .

\&-
a
E r a r r r i r r e r c i a t c c lp u r c l r a s c i r r i t , i , : c & p u t c h l r s eo r c l c r s . A l s o c h c c k * ' l r e t l i c r : t t l
irivoicc lrrs l:e,--n s e t t t t t l t h c c t i e r r t a t l t i s r r c r r t t l abl i l s i r r t : s sa r l d r e s s .
iu1!i,irrisati{}n'
'+/
I J I t s l r o r r l d b e c h e c k e d t h a t i t l i r i i : : u i t h i r r t h c p e r . i i - . itlr t t c l c ra l d i t -
4 E n s t r r e t l r r r t p t r r c h a s c s o t - c h p , i i l i i : t s s c t s l t r c t - c c t t r c l c t li l r . i t t t r r n a l l r t t c l t t t t i n
I'rv re lt:lsc invoice
pttrcltasc bci'tk.
v f a i r - \ l i ' r u i l l . t i r i i i i i i i t ' c l t a s cl t o o k i t n d l t o s t i n g s t o l e d g c r s s h c l u l d b c r
Clrslilrg.s..lr).1
Rel:rtesttl vear carclirllv clrcckcd.
',
6. [ ] 1 . s u r c t l t l t ( i o ( t ( ! s p r r l c l r u s c d r i r ' ct l t c a t r l l i , r t l t t : p t r r p o s c o f c l i e r r t i t t t t l n t r t l i r r
gl1lr; rv.r.{- g<iotls p e r s r - r l l a tl l : , c( l l ( l i r c c t o r : ;( r l ( - ) ! t l c c r s .
.t,
1. E x a n r i n e , e n t r f i n s a l e s a c c o u r r i a s r v e l l l t s i t t c t t s t t t t t i c r ' s a c c o t t t t tt o e r l s t t r e t l t e i r
!{}: l}{jt'si,irtll use correc1 J,'ostirlg.
C . o i r l r r n r a t i t t t tl i r t . t t s t r p p l i c r s l l o r r l d b c i l b t a i n e t l -
I

posting
rl,

\; ,v''! r ' u * d ii ' n l ; t I i o n

'E*u,1rin"
2. I'r lr"lrtse rcltrrns , l. puritlor" refurrt book t"itl, r.l-"."ttce to copies olclebir ttotes issued
: to suppliers.
I ! " r . r : h r : + s!e' e f u r n b o o k
:2. Enstrre that a debit tlote has ireen sentto the supplier or credit note from thc
.t
s u p p l i e r h a sb e e ni e c e i v e d .
Ilcirit notes 1: \\ 0^/, with storekeeper's
,1'trS9. j Quantity returnedas per the returrrnote lrlust be checked
tl' Cri retttrn outlvard register.
record and
Invcu{rtry records 4. Ilxamine correspoltclillg ctltr)' for ptrrchasereturn in supplicr'saccotltlt-
rt'
Entry in irccounts

i).? TOSSIB[,E REASONS WHEN THE RATE OF' GROSS

PROFIT ON SALES
ST{ARPLY INCREASES / DECREASES IN COMPARISON TO THE PREVIOUS
1'Y-AR
. .--. .",.
1

I,'rictons u'hich . 'l . [ J n d e r v a l u a t i o no f o p e n i n gs t o c k .

increasc gross . ,2. O v e r v a l t r a t i o no f c l o s i n gs t t ) c k .
profit
'
, q C h a n g e i n t l r e b a s i so f l ' a l t r a t i o no f c l o s i r r gs t o c k . E . g . w h e r e t h e o p e n i n g s t o c k
' r \ 1 , 3 \' ' , ' -
^\i \'t was valueci at cost or ntarkct rate rvlriclrevcrw:ts lower, valuing the closing stock
\',",\r,1'\ r) 9, at the ntarkct price lvhich is higher than cost'

,, rl(.\ lc\'lr'
. 4. Inclusicln of gootlsreceiveclon a consisnnrentbasis. in the closing stock'
i'e'
Treatment of goods sent ouI for sale on consigntnent basis as regular basis
ri
,t-ii\,!t f,'lt : ).
' .\, a f t e r a t l d i n gp r o f i t m a r g i r r .
\
'!
\l)i .jr\t't r\'"t" ti l'tt .1,
the
't\t] o wrong allocation oi expenses,e .g freight irrrvard nray be rvrongll' taken to
. ' (t , l,

.. \au J r ' , , , ' , , \1 i t r , '

profit and loss account.
No provision or under-provision in the expensesaccount included in the Trading
Account.
 I
I
;ri ,.1ucli t i ttg utrcl,1.ssur tut r't Ch:1il:- tr
I
{b) Fa-etors n'hiclr I L ) ' " 'rer a l u a t i o no i - t l i e t i p c r r i n gs t o c k .
dccreasciirc I
Unrlervirltratir:n
o f ' c l o s i n gs t o c k .
a
grossprortl :
L t [ ' r ' , - " ' . , r , . { ? ' , , . ' l ; \ \ ' . -) C h a n g e i n b a s i s o 1 -v a l u a t i o n o { ' c l o : s i n g s t o c k . F o r e x a r n p l e w h e r e t h e c i r ' l i r n i r C
s t o c k * a s v a l u e d a t c o s t o r r n a r k c tr a t c * h i c h e v e r w a s l o l v e r ,r , a l u i n gt h e o p e n i n g
-, a..'
J-',

_.Mr..lf,':"-t U (
z :.
s t o c k a t t l r e n r a r k e tp r i c e w l r i c h i s h i g h c r t h a n c o s t . e
b {n\.t* \v'{.*,,( irtlr,,'{r/ 4. A n t o t r t t to f ' g o t t c l sp t r r c l r a s e icnl t h e p r e v i o u sv c a r . w h i c h r v e r e p h v s i c a l l yr e c e i v c d t
i n t l r i s t c a r . i n c l r r t l e di n t h e p u r c h a s e so f c u r r e n ty e a r .

5 Rcversiil of the fictitious sale erttries recorded in the orevior.lsvear to bor.rsfitre

e
prolits. I
6. Excessivc provision maclefbr wages and other direct expenses"
C
1. F a i l u r et o a c c o u r r tl b r g o o d ss o l d .

It. F a i l u r e t o t a k e c l e d i t f o r t h e a m o u n t o f a n i r r s u r a n c cel a i r n i n r e s p e c t o fg o o d : d , . r l r
t
in transit ol clcstroyedby the fire. I
t
c
5.8 VOUCHTNGOF LEDGERS - Summaryof procedureq
t
l Bought ledger l. Ilxamine the internal control system in this area" .I (
t
,r
tr.r,,LL"':. 2. Trace the balancesofcreditors' account.
\ a
3 . o b t a i n c o n f i n n a t i o nf r o r r c r e c l i t o r s .
f7f;1r'11 r'
1i11n'dlrDr4
' J
a
4. Examine various transactionsof purclrasesand purchasereturns.*) I.,,.1f''p no tc .r<
I
5. Examine transferentries arnong ledger to ensuretheir correctness.

6. Examine accounts,lraving debit balanceas it utay be due to advancesgiven to suppliers"

I
I
2" Sales ledger . l . E x a n r i n et l t e i n t e r n a lc o n t r o l s y s t e mi n t h i s a r e a . X L
:
: 2. Trace the balancc of debtors' account. DeLtl'r n\ le
I
, ;. OUtulnconfirn.rationfrtxr debtors. trt*"1"'t'rl {or'\ t *-'i6\istn I
, 4. Exarninevarious transactionsof salesand sales,"tu.r,r.-t C-lx*$,t 'nC ,l.e.ra \ev' ,!5'., cJ
t
, 5 . A s s e s st h e a d e q u a c y ' o fb a { d e b t s p r o v i s i o n -
I
i 6. Exanrineaccoulrtshavirrgcredit balancei.c uhen advancehas been receivedfront
; cr-tstomers. I
:
;-;;;;;;; : l. Exarninewhether balancesfi'ont cash book an<lother subsidiarybooks have heen I
, transferred.
I
I 2. Examine all these books to ensureabout their correctness.
i

: 3. Trace the balanceof ledger accountsand examine their arithmetical accuracy"

t
. a. Anulyr" the balanceat the 1'ear-end. tI
:
, 5 . E n s u r ec o t n p l i a r r c eu ' i t l r r e c o g n i s e da c c o u n t i n gp r i n c i p l e s .
!
q
I
!