Discuss those points which an auditor should kept in mind while auditing the sugar mill

AUDIT OF SUGAR MILL :-
The auditor should give special attention to the following points while auditing the sugar mill or company :

1. Internal Check :-
Auditor should examine the system of internal control in the mill. He should know that this system is working efficiently or not.

2. Payments To The Farmers :-
Auditor should vouch the supply of payments made to the farmers against the supply of sugar cane. He should see that payment procedure is perfect.

3. Vouching :-
Auditor should vouch all the receipts and payments of the mill carefully.

4. Cash And Bank Balance :-
Auditor should check the cash in hand and bank balance with the bank statements. Pass book entries should be reconciled with the cash book.

5. Purchase And Sale Journal :-
Auditor should examine the sales and purchase journals with the invoices and other documents.

6. Expenses Of Dead Season :-
Dead season expenses must be verified by the auditor and it should be checked that these are properly recorded in the books of accounts.

7. Allocation :-
Auditor should verify that proper allocation is made between capital and revenue or not.

8. Contingent Liabilities :-
Auditor should verify that such liabilities are written on the foot notes under the balance sheet.

9. Payment To The Workers :-
Auditor should verify tat wages ans salaries are paid according the wages sheet and salary book.

10. Depreciation :-
Auditor should check that proper depreciation has been provided to the fixed assets like building and machinery.

11. Verify The Excise Duty :-
Auditor should verify the accounts of excise duty on the manufactured goods of the sugar company.

12. Checking Of Outstanding :-
Auditor should the outstanding income and expenditure of the company. He should verify that these are recorded in the books of accounts.

13. Loans :-
Auditor should verify all the loans advanced to the company with terms and condition he should verify that loan was taken for the company interest. It was used properly.

14. Checking Of Stock :-
Auditor should examine the records of the stock very carefully.

15. Carriage System :-
Auditor should check the out ward carriage system of sugar. He should see that this system is effective or not.

Explain the special points that an auditor should kept in mind while examining the accounts of a textile mill

AUDIT OF TEXTILE MILL :-
Auditor should keep in mind the following points while auditing the accounts of a Textile Mill :

1. Checking Of Internal Control :-
While auditing the textile mill, auditor should examine the internal control system to find that it is working efficiently or not.

2. Verify The Legal Documents :-
Auditor should verify all the legal document likes articles and memorandum of the company. he should see that all the decisions are made according the documents.

3. Examine The Minutes :-
Auditor should also examine the minutes of the meetings carefully to know the real position.

4. Balance Sheet Examination :-
Auditor should verify the balance sheet and check that all assets and liabilities shown are correct. These are actually owned by the business or not.

5. Examination the Outstanding Balance :-
Auditor should verify that outstanding assets and liabilities in the books of accounts have been recorded or not.

6. Cash And Bank Balance :-
Auditor should verify the cash in hand with the cash book. He should also confirm the bank balance directly from the bank. He should also see that pass book entries are compared with the cash book or not.

7. Verified The Fixed Assets :-
Auditor should check the schedule of fixed assets and previously audited working papers.

8. Damage Stock Checking :-
Auditor should verify that damage stock items are written down to their realizable value or not.

9. Stock Valuation :-
Auditor should obtain the schedule of all types of stock in hand. He should see that stock in hand has been properly valued as shown in the balance sheet.

10. Physical Test Check :-
Auditor should apply the physical test to check the various items of the store for their physical verification.

11. Adequate Depreciation :-
Auditor should examine that a sufficient depreciation is provided for the fixed assets.

12. Vouching :-
Receipts and payments vouching should be carefully examined. In this regard auditor should check all the documentary evidences.

13. Proper Allocation :-
Auditor should verify that proper allocation between capital and revenue has been made.

14. Checking Of Raw Material :-
Auditor should obtain all types of raw material inventory and compare it with the ledger and check figures of raw material schedule are correct.

Explain the procedure of verification in the following cases 1. Profit and loss account 2. Balance sheet

VERIFICATION OF PROFIT AND LOSS ACCOUNT :-
The auditor should keep in view the following points, while verifying the profit and loss account :

1. Verify Transfer Of Profit :-
In the trade account gross profit must be checked by the auditor. This profit must be transferred to the credit side profit and loss account. If there is a loss then the same amount should be transferred to debit side of profit and loss account. The figures on both side should remain the same.

2. Verify Expenses :-
There are two types of expenses, current year and coming year expenses. The current year expenses should be treated as revenue and coming year should be treated as liability.

3. Matching Of Revenue :-
Those items appearing in profit and loss account should be verified as revenue nature. To determine the net profit revenue expenses must match with the revenue income.

4. Items Disclosed :-
The auditor should verify all the record and check that all the items have been properly disclosed for the shareholders or not.

5. Income Not Received :-
Sometimes income becomes due but it is not yet received. The auditor should verify such income. It should be also credited to profit and loss account.

6. Advance Received :-
Sometimes advance amount is received but it is not earned. The auditor must verify that is should be deducted from income in P/L account.

7. Previous Year Adjustment :-
It should be verified by the auditor that previous year adjustment has been made or not. Those items which were not recorded in previous year can be stated in current year P/L account.

8. Income On Investment :-
It should be verified by the auditor. It must be in recorded P/L account. The sale of securities at increased prices and interest due can be recorded as income.

9. Expected Loss :-
The fall in the value of investment and stock are called expected losses. The auditor should verify that these have been recorded in P/L account or not.

10. Expected Profit :-
The market price of assets may go up and expected profit may increase. The auditor should verify that such income may not be recorded as actual income unless it is realized.


VERIFICATION OF BALANCE SHEET :-
Following items must be verified by the auditor :

1. Assets :-
The assets shown in the trial balance can be verified by the auditor. In the balance sheet same value assets should be shifted. The differences in two balances should be verified.

2. Liabilities :-
The liabilities shown in the trial balance must be shifted to the balance sheet. Auditor should check that same amount has been shifted or not.

3. Purchase Of Fixed Assets :-
All the fixed assets purchased by the management must be stated in the balance sheet. The auditor should verify the value and price of such assets from the agent certificate or bill of vendors.

4. Closing Stock :-
At the end of the year stock in trade is given in the balance sheet. It should be confirmed by the auditor that this stock is not inflated. The cost or net realizable value which is lowest should be considered.

5. Assets Placement :-
The auditor should verify that assets have been placed in the balance sheet or not. He should also check that requirements of law have been followed or not.

6. Liabilities Placement :-
It should be also verified by the auditor that liabilities have been placed in the balance sheet or not.

7. Lease Agreement :-
Under the lease agreement assets are purchased by the owners. Finance lease asset is recorded in the balance sheet. The auditor should verify the lease agreement to know the type of asset.

8. Verify Cash :-
There are two types of cash. Cash in bank and cash in hand. The auditor can check the cash at bank by checking the cash book. He should also verify the cash in hand and it should tally with the cash book.

9. Security For Loan :-
The auditor can verify the security given against the loan. He can confirm from the lender about such assets. He can also confirm the assets physically.

10. Outstanding Liabilities :-
These should be verified by the auditor. The exact amount should be placed in the balance sheet. He should also verify the contingent liabilities.

11. Unsecured Loans :-
The auditor should verify these loans which are obtained without security. These are obtained on personal security. These are stated separately in the balance sheet.

12. Secured Loans :-
In the balance sheet these loans are stated as liability. The agreement may be mortgage deed or pledge.

13. Report :-
In case of complete satisfaction auditor submits the report.

How would you verify the following items, 1. Work in progress 2. Commission on shares 3. Underwriting commission 4. Contingent liabilities

VERIFICATION OF CAPITAL WORK IN PROGRESS :-
Auditor should take the following steps while verifying it :

1. Auditor should verify the valuation of work with invoices job cards and work orders.

2. He should check the basis of charging the labour and over heads.

3. He should obtain the progress report from the work incharge or engineer.

4. He should also verify the subsequent installation and completion with the certificate of architect.


VERIFICATION OF COMMISSION ON SHARES :-
Following steps should be taken by the auditor while verifying it :

1. Auditor should examine that legal requirement were compiled if the commission was paid from the capital money.

2. Legal documents of (MSA) should be examined by the auditor carefully to know about any restriction in this regard.

3. He should check die underwriting agreements.

4. He should vouch the amount of commission with the underwriters receipt.

5. Auditor should also examine the minutes of the directors.

6. If commission was given in the shape of shares auditor should see that contract was filed with the register or not.

7. Auditor should also check that amount of commission should be shown as a separate item on the balance sheet.


VERIFICATION OF UNDERWRITING COMMISSION :-
It can be verified by the auditor kept in view the following topics :

1. Auditor should verify the terms of understanding commission from the prospectus articles of association and the agreement with the underwriters.

2. He should check that paid commission is shown separately on the balance sheet.

3. Auditor should check the calculation of amount and receipts of commission paid.

4. If shares are allotted in the shape of commission then auditor should verify the relevant entries.

5. He should examine that commission of the underwriters should remain within the limits laid down by the controller of capital issues.


VERIFICATION OF CONTINGENT LIABILITIES :-
The above liabilities can be verified by the auditor keeping in view the following points :

1. Auditor should see that unknown and known such liabilities are brought into account on the dale of balance sheet.

2. He should verify that such liabilities are shown on the balance sheet have of fool notes.

3. Auditor should obtain certificate from the responsible officer that all known liabilities been taken into account.

4. He should also check that sufficiently reserve has been allocated for such liability which is likely to result in a loss being sustained.

How would you verify the following items, 1. Trade creditors 2. Loans 3. Debtors 4. Stock in trade

VERIFICATION OF TRADE CREDITORS :-
Auditor shall verify the trade creditors of the following way :

1. The auditor will check the accounts of the creditors and will compare the it with the purchase ledger.

2. He will compare the accounts with the invoices, receipts, credit notes and the statements.

3. He will verify their balances and will trace them to the list of creditors.

4. Auditor will check the addition in list.

5. He will find the differences if any between figures of the creditors statement and the balance of ledger.

6. For the confirmation of balances auditor may send the balance statements to the creditors.

7. Auditor will also check the entries of the goods inward book and compare it with the purchase ledger.


VERIFICATION OF LOANS :-
Auditor should check the agreement documents for getting loan. In case of bank loans and over draft auditor should examine the agreement with bank. Following procedure should be followed by the auditor :

1. To find out the borrowing powers of the firm auditor should examine the legal documents of the company.

2. Auditor should check the resolution of directors of the company for obtaining the loan.

3. Examine the rate of interest, repayment plan and duration.

4. Confirmation of loan should also be checked by the auditor.

5. He should prepare the movement of accounts during the year.

6. He should also verify the interest paid and payable.


VERIFICATION OF TRADE DEBTORS or DEBTORS or BOOK DEBTOR :-
Auditor will adopt the following procedure for the verification of debtors :

1. Postings in debtor's ledger should be verified by the auditor from the other records.

2. While auditing the book debts auditor should ask the debtors to send the debt statements directly to him.

3. Auditor should obtain a certificate directly from the bank regarding the balances.

4. He may examine the bank ledger by himself.

5. The object of the auditor should be to satisfy himself about the bonafied debts shown in the balance sheet.

6. He should also verify that all bad debts are written off by the authorized person.

7. He should obtain the list over due accounts.

8. Auditor should compare the ledger accounts with the list of sundry debtors balances.

9. Auditor should note down all the undue advances and allowances given and enquire about them.


VERIFICATION OF STOCK IN TRADE :-
Auditor can verify the stock by taking the following steps :

1. Auditor should ensure that issue of stock sheets has been properly controlled.

2. He should verify that all the stock sheets have been signed and counter signed.

3. Auditor should test the stock sheets with the record if continuous stock records are maintained.

4. Auditor should take the copy of those instructions which are given to the staff about the method of stock taking.

5. Auditor should demand the originals if final stock shares are supplied. These can be tested by the auditor to find the differences.

6. Auditor should also ensure that a physical check has been made at least once during the year.

7. He should verify that stock in transit is received before the closing date.

8. Cut off should also be checked by the auditor.

How would you verify the following items, 1. Plant and machinery 2. Patent trade mark and copyright 3. Cash at bank 4. Cash in hand

VERIFICATION OF PLANT AND MACHINERY :-
Auditor will verify the plant and machinery in the following way :

1. Auditor should vouch the purchase of a plant with the receipts and invoices.

2. It should also be checked that all the expenditure on this account is a capital charge.

3. If the plant is erected by the client own men then auditor should check that allocations of plant has been made correctly.

4. Auditor should check the schedule of the plant and machinery which should be certified by th engineer.

5. Auditor should also do the physical checking of the machinery if possible.

6. Auditor should also verify that sufficient amount of depreciation is provided for this asset or not.


VERIFICATION OF PATENT TRADE MARK AND COPYRIGHT :-
Auditor should verify the patents, trademark and copyright with the help of relevant documents. He should examine the schedules and check that all these are certified by the responsible officer or not. If any agreements made it should also be checked by the auditor. Auditor should also check that renewal fees have been charged or not.


VERIFICATION OF CASH AT BANK :-
Cash at bank can be verified by the auditor in the following ways :

1. Auditor should examine the bank pass book.

2. He should compare the pass book with the cash book.

3. He should obtain a certificate directly from the bank.

4. Verify the cash balance with the bank reconciliation statement.

5. Auditor should verify the cash in fixed deposit by examining the deposit receipts. He may also get the certificate from the bank in this respect.


VERIFICATION OF CASH IN HAND :-
There are two methods to verify the cash in hand.

1. First Method :- On the date of balance sheet auditor should count cash in hand and compare it with the balance sheet. All the cash should be produced at once at the same time. Because one cash may not be counter balanced by the other. If auditor can not attend immediately on that particular date then he may visit on a subsequent date. He should count the cash in hand and vouch the petty cash by comparing it with the books of account.

2. Second Method :- According to this method auditor should ask his client to deposit the whole cash in hand into the bank on a closing date. On the following day cheque should be drawn for cash by the client to reopen the cash accounts.

Effective Check :- Auditor should pay a surprise visit during the year and check the balances.

How would you verify the following items, 1 Goodwill 2. Motor vehicles 3. Preliminary expenses 4. Work in process

VERIFICATION OF GOODWILL :-
Goodwill is also an asset of the company. When any firm or company is purchased good will is also included in the purchase. To verify the value of goodwill auditor has to examine the purchase agreement. Auditor should find out from the purchase agreement that the amount of this asst is correct. Good will usually appear in the balance sheet at cost. There is no legal compulsion to write it. If company likes to write off then auditor should see that the amount written off is according the resolution of the board. Important point about goodwill is that it does not depreciate by use.


VERIFICATION OF MOTOR VEHICLES :-
While verifying the motor vehicles auditor will see the following items :

1. Auditor should check the cost of motor vehicles by the purchase documents.

2. He should examine the registration book of the motor vehicle.

3. He should verify the insurance policy of the vehicle.

4. He should make the physical checking of the vehicles.

5. He should compare the registration number with the motor vehicles.

6. He should also see that asset is fully depreciated.


VERIFICATION OF PRELIMINARY EXPENSES :-
Auditor should examine all the legal documents before verifying these expenses. He should also verify that all those items which are included in these expenses should have concern with the promotion of the company.

Following items must be checked by the auditor :

1. Auditor should check the preparation cost of legal documents.

2. Auditor should check those legal and professional charges which are spent on the formation and promotion of the company.

3. Auditor should verify the cost of preparation of all the basic agreements.

4. He should also check the amount of stamp duty and fees paid on the authorized capital.

5. Auditor should also check that cost of registration is according the legal requirements.


VERIFICATION OF WORK IN PROCESS :-
First of all auditor should inquire various information's about the whole system. He should ask about the system of stock checking and price entering. It will be very helpful for the auditor in finding out the exact basis upon which the work in process has been valued. At the beginning auditor should find out the basis of valuation and at the end of the year it should also check that the work in progress is supervised by the responsible officer and it is also checked at each step by the independent person.

How would you verify the following items, 1. Land and building 2. Freehold land and building 3. Leasehold and land building 4. Investment

LAND AND BUILDING VERIFICATION :-
In case of land and building auditor should verify the title deeds. If the auditor is doubtful about it then may refer the matter to the solicitors of the company. If the property is mortgaged then he should take the certificate from the mortgagee to that effect.
To verify the value of land cost price should be considered by the auditor. To know the original cost of the property auditor should verify the deed of transfer. In case of building valuation builders receipts and depreciation should be considered.


VERIFICATION OF FREEHOLD LAND AND BUILDING :-
Auditor should verify the title deeds first of all. He should check that building is in the name of the client. He should vouch the addition made during the year in the building or land. If any land or building is sold during the year auditor should vouch such sales. He should also verify that profit or loss on such sale is recorded correctly. He should also check the depreciation of the property.


VERIFICATION OF LEASEHOLD AND LAND BUILDING :-
Auditor should verify the the leasehold property by verifying the lease terms. Auditor should note down the conditions of lease and check the property physically if possible. He should also verify the amount of debt received against the mortgage property and the duration period. Lease rental should be debited to the revenue account. Auditor must verify the last receipt of the rent payment. In case of lease building repair depreciation etc. Should be debited to revenue account.


INVESTMENT VERIFICATION :-
Shares, bonds, debentures, certificates, allotment letters, scrip and government securities are included in investment.
Auditor should verify the shares and debentures that these are made on the names of the clients. He should examine all the securities with the investment register to know that these are in order. Auditor must pay proper attention on all the allocation between revenue and expenditure if the shares are purchased cum dividend. If the shares are newly issued then auditor should examine the allotment letter and receipts payments. In case of certificates auditor should check that these are made in the name of the client. These are properly signed and sealed.
Auditor should check that the investments have been correctly valued. He should also vouch the interest and dividend on investment.

Discuss that procedure which should be adopted by the auditor to verify the share capital or As an auditor how will you verify the share capital of newly established firm

Auditor will take the following steps while checking the share capital issued in a newly established firm :

1. Checking Of Authorized Capital :-
To find but the authorized capital, legal documents should be checked by the auditor. He should also see the classes of shares into which the capital is divided. He should also examine that issued capital does not exceed the authorized capital.

2. Checking Of Application Letter :-
Auditor should check the application letter with the share application and allotment book.

3. Checking Of Minutes :-
Auditor should also check the minutes of the board of directors meetings to see that all the allotments of shares are made accordingly.

4. Checking Of Various Things :-
Auditor has to check the various other things like underwriting commission, minimum subscription and brokerage with shares. For this purpose he will compare the provision of articles with similar statements in the prospectus.

5. Checking Of Cash Receipts :-
Auditor should check the cash received on application. He should compare it with the allotments shown on the cash book. Then he should compare the application and allotment book.

6. Comparison Of Pass Book :-
Auditor should compare the cash receipts with the cash book. He should also compare the cash book with the bank pass book that both are same.

7. Register Of Member Checking :-
Auditor should verify the posting of entries into the register of members from the application and allotment book.

8. Checking Of Contract :-
Auditor should check the company's contract with the vendors in regard to the fully paid shares. He should also check that facts are disclosed in the prospectus.

9. Checking Of Balance :-
Share ledger balance should be also checked by the auditor that its total agrees with total amount of share issued.

10. Vouching Of Journal Entries :-
Auditor should vouch the entries relating to share and also check the postings.

11. Receipts On Call Checking :-
Auditor should check the amount received on calls with receipt book, cash book and bank pass book.

12. Checking Of Paid Commission :-
If commission is paid then auditor should also check that it paid according the rules and legal requirement.

13. Checking Of Cash :-
Where the shares have been issued for cash, auditor should check that money has not been used before the issue of allotment letter.

14. Vouching Of Repayment :-
Auditor should vouch the refunded money. Auditor should see that if shares were not allotted then proper entries about refused money are made in the cash book, application and allotment book.

15. Checking Of Preparation :-
Auditor should check that balance sheet has been drawn according the companies act. It is prepared from the "F".

16. Verification Of Correction :-
The auditor should also verify that amount shown on the balance sheet is correct.

Explain the term verification and discuss the main techniques and objects of verification and Difference between vouching and verification

VERIFICATION :-
It means confirmation or proving the truth about the assets and liabilities appearing in the balance sheet. Auditor has not only to check the arithmetical accuracy of the account by vouching only.
H has also to verify the assets and liabilities appearing in the balance sheet to satisfy himself that these are correct. Auditor will also check that the existence of actual items and their actual possession held by the company concern.

VOUCHING :-
It means a careful examination of all original evidences to prove the accuracy of the entries in the books of account and to assure that no transaction has been omitted from the books. So vouching means to verify the transaction recorded in the book. Any how vouching refers to transaction and verification of the statement of an asset or liability.


OBJECTS OF VERIFICATION :-
The object of verification of asset is the satisfaction by the auditor as to its existence, proper disclosure, proper valuation, correct ownership on the balance sheet.


TECHNIQUES OF VERIFICATION :-
In the process of verification following techniques are used :

1. Existence Of Assets :-
The auditor should satisfy himself that such assets and liabilities which are shown on the balance sheet really exist on that date or not.

2. Proper Disclosure :-
The auditor should also satisfy himself that each item of assets and liability is being properly disclosed as required by the law.

3. Ownership Of Assets :-
This technique is used for establishing the ownership of assets and liabilities. Those assets which are shown on the balance sheet must be properly of the client.

4. Assets In Possession :-
The auditor should satisfy himself that such assets which are shown on the balance sheet were in the possession of the client at the date of the balance sheet.

5. Valuation Of Assets :-
Auditor should also satisfy himself that all those assets which are shown in the balance sheet are properly valued. There are different factors which determine the basic of valuation like, nature of business, object for which the assets are held and the nature of assets.

6. Valuation Of Liabilities :-
Auditor should also satisfy himself about the liabilities that these are properly valued which are shown on the balance sheet. Overstated or understand liabilities do not give a true picture about the financial position.

7. Correct Valuation :-
Auditor should pay special attention to this point. Because profit and loss account also depends upon the accuracy of valuation of assets and liabilities. Valuation upto object is that balance sheet should show a true and correct view about the financial position of a client firm.

8. Purchase By Proper Authority :-
The auditor should also satisfy himself that the purchase of any particular asset was made by the orders of empowered person. In this respect, auditor may check the legal document or resolutions of the directors and shareholders.

9. Business Motive :-
Auditor should also satisfy himself that all the assets were obtained for the business motive of the firm.

10. Checking Of Charges :-
Auditor should also examine that assets of the firm are free from mortgage and pledge.

Discuss the main advantages of verification or Discuss the role of verification to the business

ADVANTAGES OF VERIFICATION :-
Following are the important advantages of verification :

1. Check On Fraud :-
The chances of fraud reduces due to the verification. It saves the business from embezzlement. Due to this management is not allowed to misuse the assets foe their personal benefit.It is the also a moral pressure on employee.

2. Performance Evaluation :-
Verification is very useful in evaluation the performance of management. Auditor can give his remarks about the performance of management through verification and valuation. Keeping in view the remarks of the auditor management can improve its work.

3. Proper Use Of Assets :-
The assets are properly used for the business because due to the fear of verification,officer never misuse the assets. They know that verification will disclose the misuse.

4. Safety For Creditors :-
Verification is very useful for the creditors. The audited accounts provide satisfaction to the creditors and they supply the goods and services to the business on credit. In other words guidance and safety creditors.

5. Protection To The Lender :-
Proper verification removes the risk of loss. The lender can rely on the audit report of the auditor determines the ownership, value and possession.

6. Proper Valuation Of Assets :-
Verification is very useful for the assessment of assets value. There are two types of assets, fixed and floating. Both the assets are verified in different ways. The correct valuation is made by the auditor.

7. Proper Recording :-
Verification is very useful for the proper maintenance of record. Management knows that all the accounting information's will be verified by the auditor, so they keep the record properly.

8. Benefit For Public :-
The people can understand the exact financial position of business by the verification of the auditor. The auditor discloses the assets and liabilities in the general public which provides guidance to them.

9. Guidance For Management :-
Verification is very useful for the management. It provides guidance to the management for the improvement of the business. It also indicates the financial requirements of business. The timely arrangement of finance protects the business.

10. Safety Of Assets :-
The auditor can inspect the rite of assets verify that these are existing or not. Due to verification these can not be destroyed. Auditor verifies that these are in safe hands or not.

11. Verification Of Profit :-
It is very helpful determining the true profit on business resources. The reasonable profit attracts the investors.

12. Liabilities Verification :-
The auditor verification of liabilities is very useful for the business owners. They must know the real value of their liabilities. If these are small then it is a good indicator for the business.

13. Business Position :-
Verification of assets and liabilities disclose the real position of the business. If assets value is greater than the liabilities then business will be stable otherwise not.

14. True Picture :-
After verification auditor gives the true picture of the business condition through financial statement. It is not possible for the auditor to give his opinion about the assets without verification.

Define the term verification and explain the procedure of verification

VERIFICATION :-
Verification means confirmation or proving the truth about the assets and liabilities appearing in the balance sheet.


PROCEDURE OF VERIFICATION :-
Following points are important in the procedure of verification :

1. Verify Assets Register :-
The assets register should be collected by the auditor from the company. It can be used to verify the sale and purchase assets. The entries in the register should be approved by officer of the company.

2. Schedule Of Assets :-
The auditor can collect the schedule if assets and can verify the various things like opening balance, addition and other information's relating to assets. The schedule must be signed by the officer.

3. Physical Verification :-
The auditor can go to that place and verify the asset where that is lying. Management helps the auditor for verification.

4. Verify The Custody :-
The custody of the assets can be verified by the auditor that these are the hands of relating incharge or not.

5. Addition Of Asset :-
The new assets purchase by the company must be recorded in the books of accounts. This addition must be verified by the auditor.

6. Disposal Of Assets :-
The auditor can verify the entry of asset which is sold during the year. It may be sold on profit or loss.

7. Transaction Approval :-
The auditor must verify that every transaction is made by the order of the competent authority or not. He should verify the signatures on every document.

8. Verify The Cost :-
The cost of asset should be verified by the auditor by checking the documents like vouchers and journal entries.

9. Verify The Internal Control :-
The auditor should verify that internal control system is applied or not. If it is applied then auditor should verify the effectiveness of this system.

10. Loan On Asset :-
The amount of loan taken against any asset as security must be verified by the auditor. It can be also verified from the lender.

11. Verify Disclosure :-
In case of disclosure auditor should verify that all disclosure requirements have been followed by the govt. laws or not.

12. Verify Title Deed :-
Auditor can verify the title deed to determine the real ownership of a business. In this regard various other papers like agreements and vouchers may be checked.

13. Verify Depreciation :-
The auditor can verify the depreciation amount of each asset re partly. The fixed asset depreciation is determined according to its working file.

14. External Verification :-
The auditor can verify the assets from lenders borrowers, banks and from the other parties related to the business.

15. Capital & Revenue :-
The auditor can distinguish the capital and revenue expenditure. The capital expenditure becomes the parts of asset with the revenue expenditure is transferred to profit and loss account.

16. Stock Valuation Certificate :-
It is duty of the management to provide this certificate. For the preparation of report the auditor may obtain this certificate from the officer incharge.

17. Verify Correspondence :-
The auditor can verify the correspondence made between the lawyers, borrowers and lenders. It is very useful for understanding the facts related to business activities.

18. Reply Of Management Raises :-
Auditor sometimes raises objection and asks to reply some questions in this regard. For the removal of these objections management submits its reply. This reply letter is very useful and becomes the past of the working paper.

How will you vouch the following, 1. Commission paid 2. Commission received 3. Payments to creditors 4. Bank account

1. VOUCHING OF COMMISSION PAID :-
It can be vouched by the auditor in the following way :

1. Checking Of Commission Book :-
Auditor can vouch the commission paid by checking the commission book. It will be initialed by those people who had received the amount.

2. Inspection Of Agreement :-
If the commission is paid according to percentage on sale then auditor will examine the agreement. It will explain the exact terms of calculation.

3. Calculation Of Commission :-
Auditor will check dial percentages is calculated on net sale after deducting the allowance bad debts and returns.

4. Checking Of Unusual Increase :-
Auditor will also examine that is there any unusual increase. If there is any increase then it is authorized or not.


2. VOUCHING OF COMMISSION RECEIVED :-
It is vouched by the auditor keeping in view the following points :

1. Checking Of Account :-
Auditor should check the commission account with the account of parties from whom commission is received.

2. Inspection Of Agreement :-
Regarding the rate of commission auditor should examine the agreement with parties.

3. Checking Of Counter Foil Receipts :-
Auditor should verify the counter foils of the receipts with the cash book.

4. General Checking :-
Auditor should make all types of calculations to check the accuracy of the amount.


3. VOUCHING OF PAYMENTS TO CREDITORS :-
Auditor should check the following things while vouching the payments to the creditors :

1. Checking Of Invoice :-
All the invoices should be checked by the auditor.

2. Checking Of Receipts :-
Auditor should also verify the receipts given by the payee.

3. Checking Of Account Statements :-
All the accounts statements of creditors must be verified. He can send these statements to the creditor for confirmation with the permission of his client.

4. Checking Of Creditors Name :-
Auditor should also verify the names of the creditors.

5. Checking Of Account Posting :-
Auditor should check that posting to the relevant account is correct or not.


4. VOUCHING OF BANK ACCOUNT :-
While vouching the bank account following steps should be taken by an auditor :

1. Comparison :-
Auditor should compare the bank statement with the cash book.

2. Checking Of Date And Other Particulars :-
Auditor should check the date of each entry and other particulars like figures for proper vouching.

3. Checking Of Credit Side Items :-
The items on the credit of cash book should appear on the debit side of the bank statement. It should be verified by the auditor.

4. Checking Of Statements :-
Auditor should examine the reconciliation statement and entries of a few weeks of the succeeding period.

How will you vouch the bill receivable book and bills payable book

VOUCHING OF BILL RECEIVABLE BOOK :-
While vouching the bill receivable book auditor should take the following steps :

1. Verification Of Balance :-
Auditor should verify the balance of the bills receivable with the bills in hand and the bills not over due.

2. Verify The Posting :-
Auditor should verify the posting of bills receivable in the book.

3. Check The Proceeds :-
Auditor should trace the proceeds of matured and discounted bills which have been paid or discounted through cash book.

4. Checking Of Bank Certificate :-
Auditor should check the certificate obtained from the bank for the collections of bills sent to the bank.

5. General Checking :-
Auditor should check the casts, cross casts and carry forwards.

6. Tracing Of Contingent Liability :-
In respect of discounted receivable bills auditor should trace contingent liability.


VOUCHING OF BILLS PAYABLE BOOK :-
Following work will be performed by the auditor while vouching the bills payable book :

1. Checking Against Cash Book :-
Auditor should check the bills paid during the period and compare to with the cash book and bill returned.

2. Checking Of Bills Not Matured :-
Auditor should check the total bills not matured and should see also these should agree with the credit balance on the bills payable account in the ledger.

3. General Checking :-
Auditor should check the postings of the bill payable. He should also check the casts, cross casts and carry forwards.

How will you vouch the following, 1.Insurance premiums 2. Sales of investment 3. Directors fee 4. Postage 5. Rent 6. Traveling expenses of the directors

1. VOUCHING OF INSURANCE PREMIUMS :-
Auditor should give importance to the following steps while vouching the insurance premium :

1. Checking Of Policy :-
Auditor should check the insurance policy. He should check the receipt or the cover note of the new policy.

2. Related To Client :-
Auditor should also check that the insured property or goods belongs to the client or not.

3. Verify Names :-
Auditor should also check that the insurance policy stands in the name of his client.

4. Policy Lapsed :-
Auditor should also enquire that on whose authority the policy has been lapsed. He should also check the receipt of last premium paid.


2. VOUCHING OF SALES OF INVESTMENT :-
Auditor can vouch the sales of investment with the brokers sold note. In case of cum dividend sale auditor should check the proper allocation made between capital and revenue. Auditor should also check the articles of association and minutes of the board of directors meeting for sale authority.


3. VOUCHING OF DIRECTORS FEE :-
Auditor may vouch the directors fee in the following way :

1. Auditor should check the minutes of the board of directors meeting.

2. Auditor should also check the attendance of the directors in the meeting.

3. He should also check the articles of association.

4. Auditor should verify the amount of fees admissible for each meeting attendance.

5. Auditor should also check the receipt given by the directors.


4. VOUCHING OF POSTAGE :-
Vouching of postage is also very essential.
Following points should be considered in this case :

1. Cost of postage book should be checked.

2. Signed copies should be compared with the telegram receipts.

3. Letters or packet sent by air should be checked against cargo receipts.

4. Postal receipts should be checked with registered letters register.


5. VOUCHING OF RENT :-
Auditor should check the following items while vouching the rent :

1. Checking Of Agreement :-
Auditor should check the lease deed and agreement to know the due date, amount of rent payable. He should also check the other conditions like repair etc.

2. Checking Of Received Rent :-
Auditor should verify the amount of rent received. He should compare with the rent rolls or list of various properties.

3. Checking Of Counter Foils :-
If receipts are issued to the tenant then auditor should check the counter foils of the receipts.

4. Checking Of Agents Account :-
If rents are collected by agents, auditor should also check their accounts.

5. Checking Of Outstanding Rent :-
Auditor should pay proper attention to the outstanding rent and property.


6. VOUCHING OF TRAVELING EXPENSES OF THE DIRECTORS :-
The above expenses can be vouched by the auditor in the following way :

1. Checking Of Legal Documents :-
Auditor should check the articles of association or resolution of the directors to find the instructions about the traveling expenses of directors.

2. Checking Of Payment Vouchers :-
Auditor should check the payment of vouchers minutely to find that these are reasonable or not.

How you will vouch the cash sales and cash purchases

1. VOUCHING OF CASH SALES :-
Cash sales can be vouched by the auditor in the following way :

1. Internal Check :-
Auditor should evaluate the internal check and if it is proper system then he should rely on it.

2. Checking Of Memos :-
Auditor should check the cash sales memos and compare it with the daily summaries of salesman and cashier.

3. Entry In Cash Book :-
Auditor should also check the figures of the salesman and cashier summaries entry in the cash book.

4. Checking Of Cash Register :-
If cash register is used, auditor should check the total daily rolls with the entries in the cash book.

5. Checking Of Cash Book :-
Auditor should compare the cash book with the general ledger.

6. Checking Of Price Lists :-
Auditor should obtain and verify it price lists and other instructions by the authorize persons regarding the cash sales.

7. Guidance To Client :-
If internal check system is not effective than auditor should inform the client about the dangers of frauds. He should also suggest some measures.


2. VOUCHING OF CASH PURCHASES :-
While vouching the cash purchases auditor should take the following steps :

1. Auditor should compare the cash memos with goods received notes.

2. Cash memos should also be compared with the goods inward book.

3. Head of the account should also be checked.

How you will vouch the salaries and wages

1. VOUCHING OF SALARIES :-
While die salaries auditor should pay attention to the following points :

1. The auditor should check the salary book.

2. He should check the salaries actually paid during the year.

3. He should compare the salary book and cheque drawn for a particular month.

4. He should compare salary book with the cash book.

5. Auditor should see that sign of each employee are available on the book.

6. Auditor should also examine, terms and conditions of the officers employment.

7. Revenue receipts should also be checked by the auditor.

8. Auditor should also verify that all the deductions like income tax, and other funds have been credited in the irrespective accounts.

9. He should also check that unpaid salaries are taken into account for that period.

10. Auditor should also check that increment given to the employee was due or not.


2. VOUCHING OF WAGES :-
To vouch the wages following points must be considered :

1. Checking Of Internal System :-
Auditor should satisfy himself testing the system of internal check that internal control system is sufficient to provide a reasonable protection against errors.

2. Checking Of Calculations :-
Auditor should apply the test check to see that all the calculations are correct.

3. Checking Of Wages Sheet :-
Auditor should examine the time work wages and piece work wages thoroughly.

4. Computing System :-
Auditor should check that wages computing paying system is sound or not.

5. Nature Of Payment :-
The nature of payment in both the cases (time and piece of work) must be checked by the auditor that it is actually in practice or not.

6. Same Cash Paid And Drawn :-
It should be also checked by the auditor that amount paid should be same which is drawn.

7. Checking Of Names :-
Auditor should check that payment has been made to those, employees whose names are given. He should check that there should be no dummy worker in them.

8. Proper Signature :-
He should check that wages sheets should be properly authorized and signed by the reasonable officer.

9. Signature Verification :-
Auditor should verify, signature and thumb impressions of workers by using the test check. He can compare with previous month.

10. Unpaid Wages :-
He should check that all unpaid wages are taken into account or not.

11. Deductions :-
Auditor should also check that deductions like income tax are properly made in their relative heads.

How you will vouch the purchase book and sales book

1. VOUCHING OF PURCHASE BOOK :-
While vouching the purchase book auditor should pay special attention to the following points :

1. Internal Control Examination :-
The auditor should check the internal control system and decide that upto how much extent he can rely upon it.

2. Checking Of Invoices :-
The auditor should check the entries in the purchases day book with the invoice. He should pay his attention to the following points :

a. The date of invoice.

b. The name of the supplier.

c. The entry in the goods received register.

d. The account involved.

e. Initials of the checking authority.

3. Comparison With Order Book :-
Various entries of purchase book should be compared with the order book and good inwards book. In this way if there is any fictitious entry it will be traced out.

4. Checking Of Authority :-
The auditor should check that all the entries made in the book must be authorized by the responsible officer.

5. Vouchers Cancellation :-
As the voucher is passed it should be cancelled. The auditor should check it and vouch the purchase book with the credit memos, bill and invoices.

6. Over All Checking :-
The auditor should check the costs cross costs and carry forward of the purchase book.


2. VOUCHING OF SALES BOOK :-
Auditor should examine the following points while vouching the sales book.

1. Internal Checks System :-
Auditor should check the working of internal control and test the few entries.

2. Checking Of Invoices :-
a. Debtor's name.
b. date and amount.
c. The authority.
d. Trade discount.
e. Authority for gaining discount.

3. Duplicate Invoices :-
Auditor should check the entries in the sales book with the duplicate invoices.

4. Authority Checking :-
It should also be checked by the auditor that the invoice should be authorized by the responsible officer.

5. Comparison With Order Book :-
Auditor should compare the sales book with the order received book and goods outward book. It will show that no fictitious sale is made.

6. Verification Of Year :-
It should be also checked by the auditor that all the entries made in the sale book belongs to the year under audit.

7. Fixed Assets Sale :-
Auditor should check that if fixed assets are sold then these are recorded in the sales book. He should also check that these are posted in the sales account in the general ledger or not.

8. Dispatch Of Goods :-
Auditor should verify the sales invoices with the documentary evidence to ensure the dispatch of goods.

9. Over All Checking :-
The auditor should check the casts and carry forwards of the sales book.

How you will vouch the 1. Entertainment expenses 2. Telephone expenses 3. Custom duties 4. Income tax

1. VOUCHING OF ENTERTAINMENT EXPENSES :-
To entertain the customers manager spends the amount which is called entertainment expenditure. Following points must be considered by the auditor :

1. While vouching such expenditure auditor should responsible officer.

2. He should also examine the resolution and minutes books for this purpose.

3. Some times fixed allowance is sanctioned to the manager. Such permission should also be verified by the auditor.


2. VOUCHING OF TELEPHONE EXPENSES :-
To vouch the telephone expenses auditor should keep in view the following points :

1. Telephone Bill Checking :-
Telephone expenses can be compared with the telephone bill by the auditor. He should also check that telephone bills relate to the telephone number of client.

2. Checking Of Receipt :-
Auditor should check the period and receipt of the telephone bill also.

3. Trunk Calls Checking :-
Auditor should compare the amount of trunk calls against the trunk call register. It will ensure him that trunk bills were official or private.

4. Payment Of Private Calls :-
Auditor should check that the amount of private trunk calls has been recovered from the official or not.


3. VOUCHING OF CUSTOM DUTIES :-
Following steps must be taken by the auditor to vouch the custom duties :

1. Checking Of Receipt Bill :-
If custom duty is paid directly, in this case auditor should check the receipt bill of entry.

2. Checking Of Monthly Accounts :-
If any forwarding agent is engaged by the company then auditor should check the following documents :
a. Monthly accounts.
b. Bill of entry.
c. Wharfage receipts.

3. Checking Of Charges :-
It should also be checked by the auditor that all the charges have been treated correctly as capital or revenue expenditure.


4. VOUCHING OF INCOME TAX :-
While vouching income tax auditor should keep in view the following points :

1. Verify The Calculation :-
Auditor should check the calculations and amount of income tax paid. He should compare them with challans receipts. He should also check the assessment orders and demand notices.

2. Checking Of Names :-
Auditor should also verify the names of officers and their names of challan. He should also check the certificate given by the income tax advisor.

How you will vouch the dividend paid

Dividend Paid :-
To vouch the amount of paid dividend following steps should be taken :

1. Payment According To Right :-
First of all the auditor should check that dividend is paid according the right given in the legal documents.

2. Interim Dividend :-
In case of interim dividend auditor should check the articles of association to find that the directors were empower to pay this dividend or not.

3. Justification Of Payments :-
The auditor should also check this point that whether the profit disclosed by the interim accounts justify `the payments.

4. Resolution Examination :-
In case of final dividend auditor should check the resolution passed by the shareholders in the general meeting.

5. Checking Of Amounts :-
Auditor should check the amounts in the dividend book and compare it with the bank account.

6. Checking Of Dividend Book :-
Auditor should see that the total in the dividend book represents the correct percentage given on the share capital or not.

7. Checking Of Paid Income Tax :-
Auditor should examine the amount of income tax deposited in bank. He should also check the rate of income tax and receipts of challan.

8. Checking Of Unpaid Dividend :-
Auditor should trace out the unpaid amount of dividend from the unpaid register.

9. Checking Of Costs :-
Auditor should check the cost, cross costs and carry forwards the dividend book.

10. Checking Of Dividend Book :-
Auditor should check die dividend book with returned endorsed dividend warrants.

During the audit of balance sheet and journals what steps will be taken by the auditor or How balance sheet and journals are audited

TRIAL BALANCE :-
The statement of balance extracted from ledger accounts is called trial balance. Its object is to see the arithmetical accuracy of the transaction and to check the comprehensive balance of all the accounts ledgers.

The auditor should check the following things in the trial balance :

1. Check that both sides of trial balance are equal in the trial balance.

2. Verify that all balance have been accurately recorded in the trial balance.

3. Examine that all the amount has been recorded in proper head.

4. Check that all the adjustment entries have been properly included in the trial balance.

5. Verify that all the balance of ledger account is have been transferred.


JOURNALS :-
Those transactions which could not be recorded in any other book of prime entry are passed through the journals. Journal is basically used for recording, opening adjusting and closing.

Following journal entries could be vouched :

1. Closing entries.

2. Opening entries.

3. Entries relating to the dishonour of bills.

4. Entries relating to the consignments.

5. Adjusting entries.

6. Liabilities taken over from the vendor.

7. The acquisition of different assets.

Explain the main or various objects of vouching

VOUCHING :-
Vouching refers to the inspection of documentary evidence supporting the transactions.

OBJECTS OF VOUCHING

1. Proper Evidence :-
The object of vouching is to see that proper evidence is signatures and stamps show that documents has been checked properly.

2. Accurate Amount :-
The object of vouching is to check that correct amount has been recorded in the entry or not. Vouching is very useful in this regard.

3. Checking Of Date :-
The date of vouchers should relate to the accounting period. The object of vouching is the checking of the right period.

4. Proper Authority :-
The object of vouching is to note that every transaction is made on behalf of the proper authority. No any transaction is acceptable without the signatures of the relevant officer.

5. Business Purchase :-
The purpose of vouching is to check that purchases relate to the business or not. If purchases are made for private purpose, these cannot be recovered as business purchase.

6. Proper Posting :-
Auditor can check the vouchers that postings of totals from journals to ledger are properly made or not. These are complete and correct.

7. Accuracy :-
The checking of arithmetical accuracy of books of accounts. The basic purpose of vouching to confirm the accuracy of books accounts. Auditor checks the totals, sub totals and posting.

8. Checking Of Fraud :-
The purpose of vouching to check that any payment is made by fraud. By vouching the entries frauds can be disclosed.

9. Checking Of Cash Book :-
The object of vouching is to check the correct receipts and payments. Auditor can check and determine that cash book is correct or not.

10. Casting Or Totals :-
The object of vouching is to check totals. Auditor calculate the totals and compares them with the books of accounts.

11. Cash In Hand :-
The object of vouching is to check that the cash shown in hand figures are correct or not. Auditor can count the cash and compare it with the cash book. To determine the accuracy test checking can be applied.

12. Capital And Revenue :-
The object of vouching is to examine the difference between revenue and capital expenses. The expenses related to one year are as revenue while others are called capital.

13. Checking Of Error :-
The purpose of vouching is to check that there is error in the books of accounts or not. The error can be detected by vouching. These can be due to negligence or over work.

14. Preparation Of Report :-
The object of vouching is to form an opinion for the issuance of report. After the examination auditor issues the report. It may be good or qualified.

What is the object of vouching the cash book or How the cash book is vouched

OBJECTS OF CASH BOOK VOUCHING :-
Following are the important objects of cash book vouching :

1. To ensure that all the receipts and payments have been properly recorded.

2. To verify about the cash in hand and at the bank.

3. To know that all receipts are accounted for.

4. To verify that no fraudulent have been made.


VOUCHING THE RECEIPTS SIDE EXAMINATION OF INTERNAL SYSTEM :-
In case of receipts side the auditor has to depend upon the internal checks and external documentary evidence. He should pay special attention on the weak points of the internal check system.

1. Compare Counter Foil With Cash Book :-
The auditor check the received cash with the counter foil. He should also verify that unused receipt books are kept under, lock and key or not.

2. Sales Of Assets :-
The auditor should check the money receive from the sale of assets and vouch it with reference to the correspondence of contract and other reliable evidence.

3. Terms Of Discount :-
Auditor should verify about the terms and conditions on which discounts are given to the debtors. He should also test a few items on their base.

4. Receipt Of Interest :-
Auditor should also verify that all the due interests on loan have been received or not.

5. Receipt Of Rent :-
Rent received should be vouched with the rent agreement and counter foil receipts.

6. Cash Sale :-
In this regard auditor should compare the daily sale statement of cashier and salesman with the bank statement.

7. Verify Commissions :-
Auditor should check the account of commission with the accounts of the parties from whom commission has been received. The rate of commission and agreement must be checked.

8. Profit From Investment :-
Auditor should touched the profit from the investment with the counter of dividend warrants and financial journals.


VOUCHING THE PAYMENT SIDE EXAMINATION OF INTERNAL SYSTEM

1. Checking Of Internal System :-
With reference to cash payments, auditor should examine the internal check system and keep in view the weak points while auditing

2. Inspection Of Wages :-
The auditor should inspect the certified wage sheet ans also test a few items for his satisfaction. He should also compare the appointment order and contract with the salaries.

3. Petty Cash Checking :-
Auditor should check the petty cash in hand and verify the balance of petty cash with cash book.

4. Checking Of Payable Bill :-
The auditor should examine these bills with the returned. If these are paid through bank then pass book should be checked.

5. Checking Of Revenue And Expenditure :-
The auditor should verify that proper allocation has been made between capita, revenue and expenditure.

6. Creditor's Payments :-
Auditor should also examine the record and documentary evidence about the payments made to the creditors.

7. Detection Of Any Missing Entry :-
Auditor should very careful in examining the various payments. He should detect the missing or irregular entry by proper checking of vouchers.

8. Checking Of Other Payments :-
Various other payments such as director's fee, commission and traveling allowances must be carefully by two auditor.

9. Checking Of Names And Dates :-
Auditor should check the name of the payees in the cash book against their entries. He should also note that dates on vouchers.