M.K.Dandeker & Co.,

M.K.Dandeker & Co.,

TRIAL BALANCE(TB)

◦ Verify Opening Balance to ensure Closing balance of Previous year is correctly carried forward.

◦ Books of Accounts must be freezed before starting the verification.

VOUCHING

◦ It is an examination by the auditor of all documentary evidence which is available to support the genuineness of transactions entered in client’s records as to completeness, accuracy and validity of the data procured by the accounting system.

M.K.Dandeker & Co.,

Statistical Sampling Non Statistical Sampling

Random Sampling

Systematic Sampling

Monetary Unit Sampling

Haphazard Sampling

Block Sampling

All items within a population stand an equal chance of selection applied through random number tables or generators.

Number of sampling units in a population is divided by the sample size to give a sampling interval.

A type of value-weighted selection in which sample size, selection and evaluation results in a conclusion in monetary amounts.

Based on attribute sampling techniques and is often used in test of controls.

An acceptable alternative to random selection provided the auditors are satisfied that the sample is representative of the entire population

It requires care to guard against making a selection which is biased.

Sampling involves a selecting (block or blocks) of contiguous items from within a population

Rarely used in modern auditing

METHODS OF SELECTING SAMPLES FOR VOUCHING

M.K.Dandeker & Co.,

Payment of following statutory dues within time and as per rules ◦ PF

Whether required amount got deducted from employee salary and required amount got contributed by employer?

Whether the same has been paid within time?

Max basic salary & DA eligible for PF deduction is

Rs. 15000/-

Due Date : 15th of next month ◦ ESI

Whether employee and employer contributed towards ESI and the same has been deposited within time?

Due Date : 21st of next month ◦ TDS

Where the company is making payments, wherever tax need to deducted, whether the company is deducting tax and paying the same under right category within time?

If not, whether interest on non-deduction/non-payment/late deduction/late payment of tax been paid?

Due Date : 7th of next month ◦ Service Tax

Where company is providing service and collecting tax from clients, whether the amount collected has been deposited within time?

Due Date : 6th of the month following the quarter (other than companies) and for companies it is 6th of next month

M.K.Dandeker & Co.,

Meaning

Person responsible to deduct the tax while make payment/ entering contract (Source) to other party and remit back the same to statutory authority with in a due date.

Applicability

To all assessees other than Individual with restriction. In case of Individual subject to Person having Tax audit u/s 44 AB of Income Tax Act 1961.

Section Particulars Provision /

Applicability (Rs)

Percentage of

deduction

192 Salaries & wages Income of employee

exceeds basic

exemption limit

AS per Income

tax rate of

Individual

193 Interest of debentures Payment exceeds Rs

5,000/-

10%

194 Deemed Dividend No minimum Limit 10%

194A

Interest on securities by

bank

Payment exceeds Rs

10,000/-

10%

Interest on securities by

others

Payment exceeds Rs

5,000/-

10%

194B Winning from

lottery/puzzle/Game

Payment exceeds Rs

10,000/-

30%

194BB Winning from Horse race Payment exceeds Rs

5,000/-

30%

M.K.Dandeker & Co.,

Section Particulars Provision /

Applicability (Rs)

Percentage of

deduction

194C (1) Payment to Contractors Rs. 30000/- for single

payment Rs. 75000/-

for aggregate payment

during Financial Year

1% -Individual &

HUF

2% for others 194C (2) Payment to sub contractors

194 D Payment of Insurance

Commission

Payment exceeds Rs

20,000/-

10%

194EE Payment of NSS Deposits Payment exceeds Rs

25,000/-

20% (Individual –Nil)

194F Repurchase of units

by Mutual Funds / UTI

Payment exceeds Rs

1,000/-

20%

194 G Commission ons Sale

of Lottery tickets

Payment exceeds Rs

1,000/-

10%

194 H Commission or Brokerage Payment exceeds Rs

5,000/-

10%

194 I

Rent of Land, Building or

Furniture

Payment exceeds Rs

1,80,000/-

10 %

Rent of Plant & Machinery Payment exceeds Rs

1,80,000/-

2 %

194 J Professional / technical

services, royalty

Payment exceeds Rs

30,000/-

10 %

194 L Compensation on

acquisition of Capital Asset

Payment exceed Rs

1,00,000/-

10 %

194 LA Compensation on

acquisition of certain

immovable property

Payment exceed Rs

2,00,000/-

10%

M.K.Dandeker & Co.,

Numerous changes in the Act from the Companies Act, 1956.

Verify whether the company complies with the provisions based on the amended Act and within the time as specified in the Act.

Major changes

◦ Appointment and Terms of Auditor

◦ Loan to Director

◦ Loan and Investment by Company

◦ Corporate Social Responsibility

◦ Depreciation – Schedule II

◦ Acceptance of Deposit

M.K.Dandeker & Co.,

Term:

◦ One Consecutive term of 5 Years (Sole Practitioner)

◦ Two Consecutive Term of 5 Years (Firm)

Term is applicable for ◦ Listed companies

◦ Unlisted public companies having paid up capital of Rs. 10 crores or more

◦ All Private companies having paid up capital of Rs. 20 crores or more

◦ Companies not covered above but having public borrowings from banks or financial institutions of Rs. 50 crores or more

M.K.Dandeker & Co.,

Internal Audit

◦ Prescribed companies to appoint Internal Auditor

◦ He shall either be a Chartered Accountant or Cost Accountant or such other personnel decided by the Board

Prescribed companies : ◦ Listed Companies

◦ Unlisted Public Companies having

Paid up capital of Rs. 50 crores or more

Turnover of Rs. 200 crores or more

Outstanding loans or borrowings from bank or financial institutions exceeding 100 crores or more

Outstanding deposits of Rs. 25 crores or more

Contd.,

M.K.Dandeker & Co.,

Private companies

Turnover of Rs. 200 crores or more

Outstanding loans or borrowings from bank or financial institutions exceeding 100 crores or more

M.K.Dandeker & Co.,

No company shall provide loan to director or any other person in whom such director is interested

However

◦ It shall not apply to giving of loan to Managing Director or Whole Time Director as a part of conditions of service extended by it to all its employees or

◦ Pursuant to any scheme approved by the members by a special resolution

M.K.Dandeker & Co.,

No company shall

◦ give any loan to any person or body corporate

◦ Give guarantee or provide security in connection with the loan

◦ Acquire by way of subscription or purchase of securities of body corporate

Exceeding 60% of paid-up capital, free reserves and securities premium account or 100% of free reserves and securities premium account.

However if the above limit exceeds company to obtain approval from Board and by special resolution at the general meeting; and public financial institution, wherever necessary

M.K.Dandeker & Co.,

Company having

◦ Net worth - Rupees 500 crores or more

◦ Turnover – Rupees 1000 crores or more

◦ Net profit – Rupees 5 crores or more

Shall formulate CSR Committee

Such CSR committee

◦ Formulate and recommend to the Board CSR Policy

◦ Recommend the amount of expenditure (At least 2% of average net profits of 3 immediately preceding financial year)

◦ Monitor CSR policy

Company shall give preference to local areas and areas around it where it operates

M.K.Dandeker & Co.,

Schedule II requires depreciating assets over its useful lives.

Useful lives shall not be longer than the specified lives of the asset

as given in Part C of the Act and residual value shall not exceed 5%

of the Cost of the Asset.

Provides method to amortize intangible assets

M.K.Dandeker & Co.,

No company shall invite, accept or renew deposits from public.

However, where a public company having net worth of not less than Rs. 100 crores or

turnover of not less than Rs. 500 crores and

obtained prior consent at general meeting by a special resolution and

Filed above resolution with Registrar.

The above restriction not applicable to banking company, non-banking financial company and such other company Central Government, after consultation with RBI, may specify

A company may, subject to passing of resolution in general meeting and subject to rules prescribed in consultation with RBI may accept deposits from members.

M.K.Dandeker & Co.,

Management prepares financial statement based on Schedule III

Check for

◦ Provision entry (Depreciation, Bad Debts, Gratuity, Leave Encashment)

In case of Gratuity check for base data

Whether assumptions of actuary consistent with that of company

◦ Compliance with Accounting Standard

◦ Relevant Disclosure in Notes to Accounts

M.K.Dandeker & Co.,

Types of Audit Report

◦ Unmodified

Financial Statements prepared are true and fair

◦ Modified

Qualified

Adverse

Disclaimer

CARO

M.K.Dandeker & Co.,

Qualified:

Auditor having obtained sufficient appropriate audit evidence concludes misstatements are material but not pervasive or auditor could not obtain sufficient appropriate audit evidence but the auditor concludes possible effects on misstatements could be material but not pervasive

Adverse:

Auditor having obtained sufficient appropriate audit evidence concludes misstatements are material and pervasive

Disclaimer:

Auditor could not obtain sufficient appropriate audit evidence but the auditor concludes possible effects on misstatements could be material and pervasive

M.K.Dandeker & Co.,

As per CARO 5, Auditor’s report of such companies to include an annexure which shall include statement on following matters : ◦ Fixed Assets

◦ Inventory

◦ Loans and Advances

◦ Internal control

◦ Deposits

◦ Cost Accounting Records

◦ Statutory Dues

◦ Loss making companies

◦ Repayment of dues

◦ Guarantees given

◦ Use of funds

◦ Fraud

M.K.Dandeker & Co.,

It shall be applicable to all companies other than

◦ A Banking Company

◦ An Insurance Company

◦ One Person Company

◦ A Private Limited company

Paid up capital not more than Rs. 50 Lakhs

Loan outstanding not exceeding Rs. 25 Lakhs from any Bank or Financial Institutions

Turnover not exceeding Rs. 5 crores

M.K.Dandeker & Co.,

Eligibility Letter

Appointment Letter

Letter of Engagement

Trial Balance

Vouching Sample list (Along with method used for Sampling)

BRS and Bank Confirmation

Cash Balance Certificate

Variance Analysis

Management Representation Letter

List of Related Party

Other Confirmations (debtors/creditors/related party)

Copy of Minutes (if required)

Actuarial Valuation Report

Declaration by Directors for as disqualified

M.K.Dandeker & Co.,