Custom Search

Sunday, 30 October 2011

Main qualities of a professional auditor

Following are the essential qualities of an auditor :

1. Professionally Competent :-
It is a basic quality of an auditor. He must have a complete and thorough knowledge of the accountancy. To understand the accounting details he can apply his knowledge and skill. It is only possible if he has a sound background in accountancy and he is professionally competent.

2. Honest :-
It is also very important quality of an auditor. Justice Hindley says "An auditor must be honest. He must not certify what he does not believe to be true and he must take a reasonable care and skill before he believes that what he certifies is true.

3. Auditing :-
An auditor's knowledge of auditing must be upto date. He must know the techniques of auditing. He must have the knowledge of other subjects relating to auditing.

4. Accounting Knowledge :-
The auditor should be at home in all the management accounting cost accounting and general accounting.

5. Knowledge Of Business Law :-
An auditor must possess a considerable knowledge of business law. He must be aware about his duties and rights given by law.

6. Knowledge Of Taxation Law :-
Various types taxes are imposed by the government on the business. For example in some countries Income tax, sales tax, gift tax is imposed. So if auditor has not a considerable knowledge about the taxation. He can not perform his services properly.

7. Computer Expert :-
The auditor must be able to operate the computer. Today the business organizations are using computers. If auditor does not know to use computer, he cannot work efficiently.

8. Knowledge Of management System :-
The auditor must have the knowledge of management information system. It helps him to understand the internal set up of the business concern and its operation.

9. Preparation Of Budget :-
The auditor must know that how the organization prepares the budget. If he does not know then it will be not possible for him to audit the various heads of the budget.

10. Intelligent :-
It is also important quality of an auditor that he should be intelligent. He must be able to understand the technical details of any business.

11. Qualification :-
For a professional auditor it is necessary that he should be charted accountant. According to companies ordinance it is essential qualification for auditor.

12. Tactful :-
In a particular situation auditor should deal tactfully. He should ask the questions in such a manner that it does not show about his ignorance or weakness.

13. Maintain Secrecy :-
The auditors nature of work is confidential. He should maintain secrecy from others about the affairs of his client.

14. Patience :-
There should be a quality of patience in the auditor. Before signing on any paper he should check the evidence and then sign it. He never checks the papers in hurry.

15. Critical Attitude :-
It is also very essential quality of the auditor. He should examine the statements critically. He should ask the various questions from the client and try to find contradictions.

16. Bold And Courageous :-
Auditor should be bold and courageous person. He should not be influenced by any authority. He should possess the courage to face the difference of opinion between him and client on any issue.

17. Courteous :-
It is an important quality which the auditor should possess. His attitude towards the staff of client should be very humble and polite. He should also stress on his own staff to be courteous with the client.

18. Independent :-
The auditor should be impartial. He should not have such relations with the organization which may affect his independence. He should give his opinion independently.

19. Common Sense :-
The auditor must have the quality of common sense and judgement. He may be able to assess the value of depreciation and bad debts.

Read more...

How you would audit 1. Audit of journal 2. Audit of bill receivable book 3. Audit of purchase book 4. Audit of sales book 5. Audit of balance sheet


AUDIT OF JOURNAL :-
All the extra ordinary transactions for which there are no special books of first entry are passed though the journals.

1. Complete Checking :- The entries of the journal should be checked thoroughly by the auditor. Each entry should be supported by the authorized voucher.

2. Verification Of Opening Entries :- Auditor should verify the opening entries with the last balance sheet.

3. Examination Of Documents :-
To vouch the allotment of shares and debentures auditor should inspect the application letter, prospectus minutes and contracts.

4. Adequate Depreciation :- Auditor should discuss in detail with the management that depreciation provided is adequate.

5. Adequate Reserve :- For the provision of bad debts auditor has to go through the accounts of debtors and satisfy himself that reserves are adequate.

6. Verify Purchase & Sale The Assets :- Auditor should verify the purchase and sale of assets by the contracts and correspondence.

7. Verify The Posting :- Auditor should also check the posting into the ledger after vouching the entry.

8. Other Verifications :- Closing entries should be verified in to the final accounts. Heavy discount which is unusual must be noted. Missing vouchers should also be noted.


AUDIT OF BILLS PAYABLE BOOK :-
Auditor should check the following items :

1. Checking Of Postings :- Auditor should check the postings periodical totals to credit of bills payable in account. He should also check the postings to debit of personal accounts.

2. Verification Of Bills :- Those bills which are traced should be compared with cash book and these should be verified with the returned bills.

3. Check Addition :- Auditor should verify all the additions made in the payable book.


AUDIT OF PURCHASE BOOK :-
Auditor should pay special attention to the following points :

1. Examination Of Invoices :- Auditor should see that all the invoices should be in the name of the client. These are passed by the authorized person. He should also verify the dates and amount of invoices. Auditor should check that all the invoices are serially numbered and these numbers are also written in book of invoices. No Invoice should be entered twice.

2. Entry In Book :- Auditor should also find that all goods taken in stock are entered in the purchase book.

3. Checking Of Postings :- Auditor should check the postings of totals to debit of the purchase account.

4. Inspect The Additions :- Auditor should inspect the additions of the purchase book. Goods in transit should be brought in account. He should see that goods received on consignment are hot entered in the purchase book.


AUDIT OF SALES BOOK :-
Auditor should check the following items :

1. Verifications Of Invoices :- Auditor should verify the date, name and amount of the entries from the outward invoices. He should see that all invoices are duly signed by the authorized person. He should check that all the invoices are serially numbered and these numbers are also written in the sales book against their entries. He should also see that no sale invoice is omitted.

2. Checking Of Postings :- Auditor should check the postings to debit of personal accounts of the customers. Check the postings of totals to the credit of sales account. Goods returned should be entered with the approval.

3. Check Additions :- Auditor should check the additions of the sales book. He should see that sales of consignee are note included.

4. Take Note :- Auditor should take note of any unusual discount or allowance deducted.


AUDIT OF BALANCE SHEET :-
Auditor should audit the balance sheet in the following way :

1. Verify Balances :- Auditor should verify the balances of all the assets and liabilities fro the trial balance into the balance sheet. Each asset or liability should appear in its appropriate head.

2. Checking Of Sundry Lists :- Auditor should verify the lists of sundry debtors and creditors to find the debts and credits.

3. Cash And Bank Balances :- Auditor should check the cash in hand by actual counting. Bank balances should be verified with pass book and bank statement.

4. Verifications Of Loans :- Auditor should verify the loans borrowed with the documents. He should also check all the outstanding liabilities.

5. Case Of Mortgage :-
Balance sheet must disclose the fact if any asset is pledged or mortgaged. Auditor should verify it.

6. Verify The Final Accounts :- Auditor should not sign until he satisfies himself about the final accounts by discussing various points with his client.

7. Inspect The Payments To Staff :- Auditor should verify the loan given to staff with relative vouchers.

8. Inspection Of Investment :- Auditor should verify the investment by actual inspection or by the bank verification.

9. Checking Of Certificate :- Auditor should see the certificate and mode of valuation on the balance sheet.

10. Adequate Depreciation :- Auditor should verify that adequate depreciation is provided on assets in the balance sheet.

11. Checking Of Additions :- Auditor should examine the additions of fixed assets to check that these represent the real capital expenditure.

12. Inspection Of Title Deeds :- In case of landed properties auditor should check the title deeds.


AUDIT OF TRIAL BALANCE :-
Following points should be kept in view while auditing the accounts :

1. Examine Both Sides :- Auditor should examine both the sides of accounts while checking the balances and additions of all ledger accounts. It will ensure him that no items is left.

2. Checking Of Items :- Auditor should check the items from the trial balance into the trading and profit and loss account and the balance sheet.

3. Proper Inclusion :- Auditor should verify that there should be a proper inclusion of adjusting entries in the trial balance.

4. Check The Ledger Balances :- Auditor should check the ledger balances into the trial balance.

5. Verification Of Agreement :- Auditor should verify the agreement of the trial balances.


AUDIT OF TRADING AND LOSS PROFIT AND LOSS ACCOUNT :-

1. Consistent Account :- Auditor should examine that form of trading and profit and loss account should be consistent.

2. Checking Of Each Item :- Auditor should check the each item from the trial balance.

3. Comparison Of Profit :- Auditor should compare with previous years the percentage of gross and net profits on sales. If there is a big difference then he should require about it a comparison with previous year is very essential.

4. Proper Allocation :- Auditor should check all the allocations and adjustments made in this account.

5. Proper Heads :- Auditor should verify that all items in this account should appear under its correct head. Capital and revenue items should be written in proper heads.

6. Profit and Loss Should Be Separate :- Profit or loss of any assets should be shown separately. Auditor should verify that no unearned profit should be brought in the accounts. He should check that all losses should be brought in it.

7. Unusual Item :- If any unusual item or source of gain is found auditor should note it and inquire about it.

Read more...

Thursday, 27 October 2011

Explain the special points to be noted by the auditor while auditing the accounts of club

Following points must be considered by the auditor :

1. Internal Check :-
Auditor should examine the internal check system of the club. He should see that proper control on the purchase is maintained. He should also check that all the purchase is supported by the invoices duly authorized.

2. Verify The Payments :-
Auditor should vouch all the payments made to the staff. He should also verify the purchase of crockery furniture etc.

3. Study The Constitution :-
Auditor should study the constitution of the club. He should examine the powers of the officials who are dealing with the bank accounts and other auditors.

4. Member Minute Book :-
Auditor should study a minute book of the meetings. He should also study the resolution passed by the members about the account transactions.

5. Vouching Of Fee :-
Auditor should vouch the admission fee received of cash with the counter foils and receipt.

6. Life Membership Fee :-
Auditor should verify that it is received according the rules of the club.

7. Cash and Bank Balance :-
Auditor should check the cash in hand by actual counting with the cash book. He should also verify the bank balance with pass book and bank certificate.

8. Verify The Liabilities :-
Auditor should check all the outstanding liabilities for expenses and see that these are properly recorded in the books.

9. Examine The Investment :-
Auditor should verify the investment made by the club and also see the basis of valuation.

10. Verify The Depreciation :-
Auditor should verify that adequate depreciation is provided for the assets or not?

11. Check The Supply System :-
Auditor should verify the system of supplying of foods refreshment etc to the members. He should also vouch the receipts of cash supplied against them.

12. Closing Stock :-
Auditor should verify that stock sheets about various items like cigarette are duly certified regarding its taking and valuation.

13. Proper Allocation :-
Auditor should examine that proper allocation made between capital and revenue expenditure and no wrong entry of revenue is entered in the capital.

14. Subscription Register :-
Auditor should obtain this register and compare it with the financial ledger to agree the total received subscription.

15. Verification Of Arrears :-
Auditor should check the list of subscription in arrears which is duly certified by the committee.

Read more...

Tuesday, 25 October 2011

Describe the special points requiring auditors attention while checking the accounts of news paper

While auditing the news paper account auditor should pay special attention to the following points :

1. Internal Check :-
Auditor should inspect the control system thoroughly. He should examine the receipts, payments and circulation of newspaper.

2. Unsold Newspapers System :-
Auditor should verify the system of unsold newspapers returned by the agents. He should also see that these are properly recorded or not?

3. Cash and Bank Balance :-
Auditor should verify the cash in hand by counting. He should also compare cash book with the bank statement.

4. Payment To The Employees :-
Auditor should check that wages and salaries are properly certified. He should also check the wages sheet.

5. Income Through Advertisement :-
Auditor should examine that income earned through advertisement is properly recorded in books.

6. Depreciation :-
Auditor should see that adequate depreciation is made for the fixed assets. He should also examine the basis on which depreciation is calculated.

7. Libel Action :-
Auditor should examine that necessary provisions are made in case of liable action pending against the newspaper.

8. Payments Verification :-
Auditor should carefully verify the payments made for the purchase of fixed assets payments made to the contributors should also be verified.

9. Investment Examination :-
Auditor should examine the investment made by the company. He should also verify the valuation of investment.

10. Verify The Outstanding Expenses :-
Auditor should verify all those expenses which are outstanding. He should see that these are properly recorded or not?

11. Verification Of Sold Items :-
Auditor should verify that if any old material and machine sold by the company was duly verified by the authorized person.

12. Prize Competition Provision :-
Auditor should check that if any prize competition is offered by the company, for this purpose proper provision is made in the books of account.

13. Proper Attention :-
Auditor should verify that proper allocation between capital and revenue expenditure has been made. No any revenue item of capital can be included in revenue.

14. Issuance Of Paper :-
Auditor should check the system of paper issuing. He should know that how printing paper is issued to newspaper news agents and subscribers.

Read more...

Sunday, 16 October 2011

While auditing the accounts of insurance company which steps should be taken by the auditor

Following steps should be taken by the auditor while auditing the accounts of insurance company:

1. Internal Check Inspection :-
Generally internal check system insurance company is well organized that the bank. But auditor should examine the details of the internal check system.

2. Verify The Premium :-
Auditor should vouch the premium received with the insurance policy register. He should check the total outstanding premium from the books also.

3. Inspect The Claim Register :-
Auditor should compare the amount of claim with the claim register. He should also check the policies cancelled with the documentary evidences.

4. Cash Balances :-
Auditor should check the cash balances relating to the loans of the company. He should also verify the interest earned.

5. Examine The Final Accounts :-
Auditor should examine that the final activities of the insurance company have been prepared according the insurance act or not?

6. Verify The Payable Commission :-
Auditor should vouch the commission payable to agents. He should verify that this commission does not exceed the rates prescribed in the insurance act.

7. Examine The Investment :-
Auditor should examine all the investment made by the insurance company. Valuation of investment should also be checked.

8. Insurance Act 1938 Application :-
Auditor should also examine that all that prescribed legal requirements have been complied by the insurance company.

9. Checking Of Bonus :-
Auditor should vouch the bonus paid in the bonus register and agency register on closing balance.

10. Provision Of Depreciation :-
Auditor should also verify that sufficient depreciation is provided.

11. Examine Insurance Policies :-
Auditor should inspect the accounts re insured. He should also note the amount of reserves relating to the company loan.

12. Accrued Interest Checking :-
Auditor should verify the receipts interest, dividends and rent. He should of reserves relating to the company loans.

13. Allocation Of Surplus :-
Auditor should see that surplus is proper allocated to the shareholders policy holders.

14. Expenses Allocation :-
Auditor should examine that the management expenses are allocated correctly between the various accounts.

15. Deposits In State Bank :-
Auditor should also verify that the required amount is deposited in the state bank or not?

16. Balances Of Agency :-
Auditor should verify the balances of agency and branch to see that they are all recoverable.

17. Loans Against Policy :-
Auditor should verify those loans advanced to the policy holders against their policies. He should check the receipts and see that they are within the surrender value policy.

Read more...

Monday, 3 October 2011

As an auditor which points you should take into consideration during the audit of banking company

AUDIT OF BANK :-
Audit and accounts of bank are maintained according the corn panics ordinance 1962. Auditor should pay proper attention to the following points while auditing the accounts of bank :

1. Internal Check :-
Auditor has to rely on the internal check system of the bank. He should take the written statement about the well organized system of internal check.

2. Check The Bank Balance :-
Auditor should check the balances of various accounts like profit and loss account, fixed and current accounts with the schedules. The total of each account should agree with the relative schedule.

3. Verify The Loans And Advances :-
Auditor should verify the list of loans and advance with the ledgers. He should compare the total of each schedule with general ledger.

4. Balance With Other Banks :-
Auditor should obtain the certificate from the state bank for the balances with other banks.

5. Internal Audit Checking :-
Internal audit staff of the bank complete the audit of bank record thoroughly. Independent auditor should examine the audit work performed by the internal audit staff.

6. White The Cash In Hand :-
Auditor should check the cash in hand on the date of the balance sheet.

7. Interest Payable :-
Auditor should verify that all outstanding interest on various deposits has been provided or not?

8. Checking Of Foreign Currency :-
Auditor should check the foreign currency transactions and profit and loss created on it.

9. Verify The Bank Powers :-
In case of company transactions auditor should check that these are within the powers of the bank.

10. Verify Dividends :-
Auditor should verify the dividends paid. He should see that no dividend is paid until the intangible assets have been written off.

11. Examine The Secret Reserves :-
Auditor should;d verify that the entries affecting the secret reserves which may be in existence.

12. Inspection Of Securities :-
Auditor should examine the market values of securities held against the loan. He should also check that loans are covered by such securities or not?

13. Inspection Of Reserve Fund :-
Auditor should check that 20% of the profit amount is transferred to the reserve fund until it becomes equal to the paid up capital of the bank.

14. Verify The Bank Liability :-
Auditor should also verify the bank liability in respect of acceptance and endorsement on behalf of the customers.

15. Verify The Travelers Cheques :-
Auditor should count all the travelers cheques in hand and verify with the register of vouchers.

16. Inspect The Bad Debts :-
Auditor should verify all the bad debts written off and doubtful debts provided for in the books of accounts.

17. Verify The Breach Return :-
Auditor should examine that branch return is duly certified and properly incorporated in the books available in head office.

18. Inspection Of Investment :-
Auditor should examine the investment of the bank. The schedule investment must be show the book value and the market price on the day of the balance sheet.

Read more...

Saturday, 1 October 2011

As an auditor, how would you audit the accounts of cinema

AUDIT OF CINEMA :-
Auditor should consider the following points while auditing the accounts of cinema :

1. Internal Control :-
Auditor should examine the internal check system of the cinema. He should check the daily receipts of the cinema. He should check the daily receipts of tickets for reserved and unreserved seats. He should verify the sold tickets with their counter foils.

2. Verify The Taxes :-
Auditor should examine that taxes imposed on the tickets are duly deposited in the state bank or not?

3. Cash And Bank Balance :-
Auditor should verify the cash in hand by actual inspection with the cash.

4. Verify Agreements :-
Auditor should examine the purchaser hire and other agreements regarding the films.

5. Advertisement :-
Auditor should vouch the receipts on account of advertisement.

6. Verify The Traveling Expenses :-
Auditor should check the traveling expenses if it is a touring cinema. Such expenses receipts should be certified by the manager.

7. Checking Of Payments :-
Auditor should vouch the wages, salaries, gas, electricity charges.

8. Outstanding Liabilities :-
Auditor should examine the outstanding liabilities like posters and advertising expenses recorded in the books or not?

9. Examine Advances :-
Auditor should vouch the advances paid to the film producers and distributors for the hire contract. He should also see that these are recoverable or not?

10. Allocation :-
Auditor should verify that allocation of expenditure between capital and revenue is made correct. He should vouch the operating expenses.

11. Valuation :-
Auditor should verify the value of unexpired purchased film. He should be very careful in case of valuation.

12. Checking Of Canteen :-
Auditor should verify the closing stock of canteen also if it is conducted by the cinema.

Read more...

Discuss those points which should be considered by the auditor while auditing the accounts of a hotel

AUDIT OF HOTEL :-
Following points must be considered by the auditor in the case of hotel audit :

1. Internal Check :-
Auditor should examine that internal check system is effective to not? He should pay special attention to ordering receipts and payments etc.

2. Checking Of Receipts :-
Auditor should check the receipts from the visitors and compare them with the cash book. He should also check the cash receipts and the accounting of cashier and waiters.

3. Verify Purchase :-
Auditor should verify the purchase of capital items, food stuff and consumable items.

4. Checking Of Valuation Method :-
Auditor should examine the accuracy of the method of stock valuation.

5. Verifying The Issuing System :-
Various items like eggs, tea, meat, fish, soap, bed sheets, and tooth picks are issued to the different employees. Auditor should check the system of issuing such items.

6. Verify Depreciation :-
Auditor should verify that adequate depreciation have been provided for the furniture, plant and crockery.

7. Payment To Employees :-
He should examine that salaries and wages are paid according the wage sheet and salary book.

8. Verify Invoices :-
Auditor should verify the purchase invoices and see that pro[per allocation has been made between capital and revenue expenditure.

9. Cash And Bank Balance :-
Auditor should count the cash in hand physically and verify the bank balance with the bank statement.

10. Outstanding Balances :-
Auditor should check the outstanding balances of the hotel.

11. Financial Control :-
Auditor should also check that over the stocks and stores effective financial control system is applied or not?

12. Visitor's Ledger :-
He should examine the visitor's ledgers book and total schedule balances should be compared with the total visitors accounts.

Read more...

Google+ Followers

  © Blogger template Blue Surfing by Trade Cycle 2014

Back to TOP