Audit SJC Institute

Nature, Scope and Significance of Auditing
NATURE, SCOPE AND SIGNIFICANCE OF AUDITING

MEANING FEATURES EVOLUTION
→ Derived from latin word audire ⇒ to listen • Evaluation and verification of RRA of Audit Statutory Audit ⇒ 1913
evidence
te
→ SA 200 Cost Audit ⇒ 1965
→ Systematic and independent examination • Analytical, critical and investigative review Tax Audit ⇒ 1984
of • Financial and non-financial information
itu
financial information • Standards for evalutation of information SCOPE
• Competent, qualified and independent auditor Determined by-
of profit oriented
or not • Ensures reliability of information and assertions • Terms of engagement
st
any entity any size • Relevant legislation
for • Pronouncements of ICAI
In
any legal form
expression of an opinion
ASPECTS TO BE COVERED IN AUDITING [ACER] 

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↓ ↓ ↓ ↓
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Accounting and Compliance with generally accepted Examination of books, Reporting

Internal Control AS and Statutory regulations records
(develop understanding) (FS should be prepared in compliance) (checking arithmetical (communication
accuracy) of audit findings)
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CMA Inter Auditing Summary |1

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OBJECTIVES OF AUDITING QUALITIES OF AN AUDITOR INHERENT LIMITATIONS OF AUDIT

SA 200 [DIL Se Human and Honest]  Test Nature of audit
→ To obtain reasonable assurance • Sound knowledge of various Disciplines
Persuasive Audit Evidence
→ whether FS are free from MMS (law, economics, mathematics, finance etc.)
Inherent limitations of Internal
• Integrity, Objectivity and Independence
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→ FS prepared as per AFRF
Control
→ Report on FS • Knowledge of general principles of Law
Use of Materiality
(Eg., Companies Act, GST, Labour laws etc.)
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→ Communicate as per SAs
Objectives • Basic Human qualities
(Eg., Discipline, Trustworthy etc.)
Primary Secondary • Honesty
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Opinion on True Detailed checking if • Special features of entity
and Fair view MS is suspected (Eg., Co-operative society, Insurance company etc.)
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SIGNIFICANCE OF AUDIT
point of view
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Legal Internal Control External Affairs
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• Filing of ITR • Discovering Errors and Frauds • Settlement of accounts

• Borrowing externally • Moral check • Valuation of goodwill
• Insurance claim statement • Advice to management • Future Trends
• Sales Tax Payment • Uniformity in accounts
• Action against bankruptcy
2 |CMA Inter Auditing Summary

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ADVANTAGES OF AUDIT
↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓
Protection of Moral check Alert and vigilant More reliable Settlement of Detection of Corporate Financial
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shareholders' on employees employees accounts accounts and wastages restructuring assistance
interest disputes (eg., mergers,etc.)
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BASIC PRINCIPLES GOVERNING AN AUDIT [APIC SCORED] 
↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓
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Integrity, Confidentiality Skills and Work performed Documentation Planning Audit A/C system Audit
Objectivity, Competence by Others Evidence and IC Conclusion
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Independence and Reporting
AUDIT V/S INVESTIGATION
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BASIS AUDIT INVESTIGATION
Meaning Independent examination to ascertain True and Fair View Independent examination to ascertain any fact for special purpose
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Scope Wide Narrow

Evidence Persuasive Conclusive
Periodicity Routine (normally annually) Non-routine
Approach Non-suspicious Suspicious
Procedures Generally accepted audit procedures Extended audit procedures

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ACCOUNTING AND AUDITING
Accounting

RELATIONSHIP
Auditing
Analyze events and transactions ⇒ Review client's IC System
 Basis
Meaning

DIFFERENCE
Accounting
Collection, classification

Auditing
Analytical and Critical
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Record and Summarize ⇒ Evaluate and obtain evidence and summarization examination
Make FS Assertions ⇒ Determine Fairness Timing On Occurence After occurence(postmortem)
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Prepare FS ⇒ Prepare Audit Report Measure Monetary Opinion
To Shareholders ⇒ To Client Responsibility Management Independent Person
Accounting is first ⇒ Auditing follows End Product Compilation of records Audit Report
Independence For/under management Independent
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Statndards Accounting standards Standards on Auditing
(AS, Ind AS) (SAs)
In
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Types of Audits
TYPES OF AUDITS
EXTERNAL V/S INTERNAL AUDIT
BASIS EXTERNAL AUDIT INTERNAL AUDIT
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Appointing authority Owners i.e., shareholders Management
Scope of work Determined by particular statute Defined by management
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Concerned with Truthness and fairness of F.S. Compliance with policies and procedures
Reporting to outsiders Yes No
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TYPES OF AUDITS
based on
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↓ ↓ ↓ ↓ ↓ ↓
Functional Independence Organisational Objectives Scope Timing
Classification Or Interference Structure
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AS PER FUNCTIONAL CLASSIFICATION
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Statutory Audit of Companies or LLPs Statutory Cost Audit

→ of financial information → of cost records, statements etc.

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Types of Audits
AS PER INDEPENDENCE/ INTERFERENCE
Statutory Special Audits Statutory Audits Internal Audit
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• Appointed by Government/ • Appointed by Company / BOD/ Owners • Appointed by Management
regulatory authorities
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• To report on specific issues • Matters to be reported determined by statute • Defined by mutual agreement
• Report to appropriate authorities • Reporting authority- as per statute • Reporting authority- Management
• Generally of Investigative nature • Statutory financial audits, Cost audits, • Highest level of client interference
Tax audits etc.
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• Least interference of clients • High degree of interference
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C AS PER SCOPE
Complete Audit Partial Audit Detailed Audit

• Scope not confined to specific limits • Scope restricted to specific aspects • Audit in depth
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• Check all possible aspects • Not allowed to obtain other info. • Checking selected transactions in depth
• Covers accounting, operational • Example- To check Cash Sales • From recording till disposal (all stages)
administrative and all other areas during Diwali

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Types of Audits
AS PER ORGANISATIONAL STRUCTURE
Voluntary Audits Statutory Audits Government Audit

(Proprietorship, Partnership, LLPs) (Companies, Banks, etc.) (Govt. Cos.,Corporations,Departments)
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→ No Statutory requirement → Law or statute mandates audit → Objective, systematic examination
→ Voluntary Audit due to advantages → Reporting authority, manner prescribed of a public entity
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→ Appointed by shareholders → CAG has supreme authority
Advantages of Audit
for Companies ⇒ Companies Act,2013 Types
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Sole Proprietor Partnership Firms Insurance Companies ⇒ IRDA Guidelines
• Evaluates IC system • Easy Financial Banks ⇒ RBI Guidelines, Transaction Efficiency-
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• Increases FS reliabilty assistance Banking Regulation Act,1949 Audit Performance
Audit
• Timely finalization • Settlement of accounts Advantages Expenditure
• Moral check • Settlement of goodwill • Timely tax assessment • Against rules and orders
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• Easy financial • Protecting interest of • Settlement of disputes • Of Sanctions
assistance minor/sleeping partners • Financial assistance • Against Provision of funds
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• Settling trade and • Sale consideration • Of Financial Propriety

labour disputes • Valuation of business Receipts
• Proper distribution of profits
• Statutory compliances

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Types of Audits
VOLUNTARY V/S STATUTORY AUDIT

BASIS VOLUNTARY AUDIT STATUTORY AUDIT
Appointing authority Management Prescribed by law
Object Review of IC Truthness and Fairness
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Approach Proprietary Compliance
Scope decided by Management Statute
Report to Management Shareholders
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STATUTORY V/S GOVERNMENT AUDIT
BASIS STATUTORY AUDIT GOVERNMENT AUDIT
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Applicability Companies, Co-operatives, Banks etc. Government Cos., Departments, Corporations
Appointing authority Shareholders,Management CAG
In
Managing Committee
Report to Owners or Mangement CAG
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Types of Audits
AS PER TIMING
Continuous Audit Annual Audit Detailed Audit Balance Sheet Audit
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→ On going Audit → At the end of accounting year → Between two annual audits → Reviews and critically
→ 100% transactions → After accounts are closed → Specific objective examines FS
Features Procedure/ Advantages Use of Interim Audit → Verifying original
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• Throughout the year • No interruption with regular functioning • Early detection of errors & entries
• Regular or irregular intervals • One session in continuity frauds Objectives
• 100% testing • Statistical sampling • Publishing interim records • May rely on IC
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• Technology • Low Possibility of tampering accounts • Moral check • IC strong/ weak
• Surprise checks Limitations/ Precautions/Demerits • Timely completion of records Procedure
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• Advance notice about errors • Errors found at year end • Areas of sampling
Necessity • Delayed presentation of FS • Compliance & Substantive
• Inadequate IC • Reduced possibility to detect frauds • Analytical Review
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• Many transactions and errors • Evaluation of IC
• Management interested in • Scrutiny of books
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periodic statements • Compliance with laws

Advantages Advantages
• Early detection of frauds and errors • No changes in accounts
• Timely completion of finalization • No interruption
• Quick rectification • No loose links
• Guidance of client This file belongs only to student who has purchased it from SJC Institute.
• Cost effectiveness
• Moral check
• Relieves statutory auditor CMA Inter Auditing Summary |5
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Types of Audits
AS PER OBJECTIVES
Independent Financial Social Audit Environmental audit Propriety audit

Audit
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→ Conducted by qualified auditor(CA) → Measuring understanding, → Examination of interaction → Public interest
→ Opinion on truthness and fairness reporting & improving b/w business & environment → Financial
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of FS → Organisation's performance Scope and Object propriety
→ Meeting social & ethical • All emissions → Essential of
Internal Audit objectives • Legal constraints Govt. Audits
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→ Independent appraisal activity → Eg., CSR Audits • Effects on surroundings → No personal
→ Control and functioning Objectives • Public perception interest
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→ Overall governance and • Assessing societal needs • Expert opinion on hazards → No wasteful
Strategic risk management • Spreading awareness • Risks expenditure
→ Suggest improvements • Increasing CSR Efficiency • Measures to control risks
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→ Conducted by staff or independent • Scrutiny of policy decisions Different Steps
professional (CA/CMA/Others) Advantages Pre audit
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• Encourage Community participation ⇓
Forensic audit • Shared responsibility Site activities
→ Examination of legalities • Environmental protection ⇓
→ To detect frauds • Customer satisfaction Post audit
→ Techniques of propriety, • Develops human resources
regularity and investigative audits This file belongs only to student who has purchased it from SJC Institute.

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Types of Audits
AS PER OBJECTIVES (CONTD.)
Information System Efficiency cum Performance Operational Audit
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Audit Audit
Evaluation of → Evaluation of financial and operational →Examination of operations and activities
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→ Asset safeguarding performance →Developed as a branch of Internal Auditing
→ Data integrity → Identification of opportunities Objectives
→ System efficiency → Removal of weaknesses • Control Structure(relationships b/w controls)
→ System effectiveness Scope • Adherence to prescribed procedures
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Due to 7 reasons → Economy audit ⇒ Resources procured at • Standards of efficiency and economy
• Evolutionary use of computers minimum cost • Checking Capacity utiliozation
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• Privacy → Efficiency audit ⇒ Relation b/w inputs Advantages
• High Value and outputs • First hand information
• High cost of errors → Effectiveness ⇒ Appraisal of performance • Large organisations (widespread control)
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• Computer abuse with reference to targeted • MIS reports to control managers
• Losing data resource objectives • Geographically vast entities
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• Misallocation of resources Approach

due to incorrect rules • Identification of topic
• Preliminary study
• Planning & execution
• IC Evaluation
• ofReporting
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Audit Engagement, Audit Documentation and Audit Report
AUDIT ENGAGEMENT, AUDIT DOCUMENTATION AND REPORT

Confirmation of appointment acceptance [Reference: SA 210]
AUDIT ENGAGEMENT LETTER - Signifies
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Documentation of Objectives and scope
Form and Content
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• Restriction of auditor's liability
• Inherent limitations of audit  Auditor's liability ko limit karne ke lie management responsibilty
• Management Responsibility ka Scope badhaya, Confirmation liya, Experts ko
• Objective & Scope use kiya, finally Report banake Fees collect kiya.
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• Management Confirmation
• Use of experts and internal auditors
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• Form of audit report
• Fees and billing arrangements
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AUDIT DOCUMENTATION [REFERENCE: SA 230]
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Audit Programme Audit Working Papers Audit Notebook

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 AUDIT PROGRAMME  AUDIT WORKING PAPERS  AUDIT NOTEBOOK

→ Detailed written plan → Records of → Bound book
→ Exact details of → Planning and Execution → Large variety of matters observed
→ Audit procedures to be performed for → Prepared by/for and retained by auditor during audit
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→ Verification of FS items → 3 purposes → Permanent record
aids in
→ Estimated time required Contents
Advantages  [SCARCE FUND]
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Planning Supervision Evidence • Entity's name
• Supervision and Control & performance & Review • Organisation structure
• Proper Allocation of resources • Key Managerial Personnel (KMPs)
• Fixing individual Responsibilities Form and Content depends on: • MOA and AOA provisions
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• Ready Checklist • Nature of engagement (internal/tax/cost audit) • Errors and frauds
• Evidence in event of charge • Nature of business( IT, FMCG etc.) • Special points
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• Following year plan • Nature of records(manual, computerized) • Matters requiring explanation
• Uniformity of work • Form of Audit Report (LFAR, SA 700) • Management representations
• No Negligence proved • Reliance on IC (strong,weak) • List of books
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• Delegation of Authority • Supervision of work • Accounting methods
Disadvantages  [DRUM] Types
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• Defence by inefficient staff

• Rigid programmes Permanent Current
• Unnecessary • Papers relevant for • Relating to single
• Mechanical > 1 year period
• Info. of continued significance • Current period

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PERMANENT AUDIT FILE CURRENT AUDIT FILE Note-

• Legal and organizational structure- MOA, AOA • Extracts of minutes of BMs Working papers are auditor's property
• Agreements, Deeds • Appointment acceptance letter Extracts can be provided at auditor's discretion
• Evaluation of Internal Controls • Management Representation letters Or when legal or professional obligation
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• Ratio and trend analysis • Analysis of transactions and balances
• Previous year audited FS • Audit Programmes
• Significant accounting policies • Audit conclusions
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AUDIT EVIDENCE [ REFERENCE: SA 500]
→ Facts and reasons (information)
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→ used by auditor SUFFICIENT AUDIT EVIDENCE APPROPRIATE
→ to evaluate assertions (Quantum) (Quality Relevance, Reliability)
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→ to enable expression of
→ Opinion
Factors influencing auditors judgment while obtaining audit evidence
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Item Related (4) Entity Related (4) Auditor Related(2)
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• Nature • Adequacy of Internal Control • Experience
• Materiality • Nature and Size • Results of auditing procedures
• Trend • Unusual influence
• Type of information • Financial position

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Need of audit evidence

→ Audit evidence provides the auditor with a reasonable assurance about assertions
→ While performing audit procedures we come acress assertions made by management
Assertions by management
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Substantive audit procedures [PV MORE] Compliance Audit Procedures [EEC]
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Existence Valuation Occurence Rights & Measurement Presentation Existence Effectiveness Continuity
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Obligations & Disclosure
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Methods of obtaining Audit Evidence
C [IO- ICAR]
Inspection Observation Inquiry and Confirmation Computation Analytical Review
[ Examining
][ witnessing procedures
][ seeking appropriate info.
][ checking arithmetical
][ studying significant
]
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documents etc. performed by others from knowledgable persons accuracy ratios & trends
Reliability of Audit Evidence

increases when
Obtained from Related controls Obtained directly Obtained in documentary Provided by

independent sources are This
effective by auditor
file belongs only to student who has purchased it from SJC Institute. form
original documents

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AUDIT PROCEDURES
→ Procedures (combination of various methods and techniques) used by auditor to obtain audit evidence.
TYPES OF AUDIT PROCEDURES
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Risk Assessment procedures(RAP) Other Procedures
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Compliance Procedures or Substantive Procedures
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Test of Controls (TOC)
Stage: Control testing stage Substantive testing stage
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Obtain evidence on: Operating effectiveness of controls Completeness, validity, accuracy of ABC
Techniques used: Observation, Inspection of IO-ICAR
evidence, Inquiry
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Test of Details (TOD) Analytical Procedures
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→ Study of relationships
between financial or
Vouching Verification non-financial variables
(classes of transactions) (Account Balances) Eg., Ratio Analysis,
→ Examination of P/L assertions → Examination of B/S assertions Trend Analysis etc.
→ Incomes and Expenses
This file belongs only to student who has→ Assetsit and
purchased liabilities
from SJC Institute.

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SOME IMPORTANT CONCEPTS
TRUE AND FAIR VIEW MATERIALITY SURPRISE CHECKS

Planning
→ Fundamental concept in auditing SA 320 → Moral check on employees
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→ Whether results and affairs of entity Performing → Deterrent effect
truly and fairly presented → Materiality of an item influences → Improves effectiveness
→ Subjective matter → Once in every audit
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economic decision of the user
→ Depends on Auditor's professional judgment → Relative term → Cash, Inventories, Investments
Schedule III disclosures → No item is material in all circumstances → Results communicate with
made [Section 129] Factors to be concerned for determining management
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materiality- → Adequate action
No material asset/ Individually (item wise) → Include in audit report if
In
liability omitted material
True and Proper Valuation In Aggregate (in totality)
Fair View
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Legal considerations
Exceptions separately
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Legal Definition
disclosed
Relative overall impact
Accounting policies
Qualitative
selected and applied
consistently Insignificant quantity but special context

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DISCLOSURE OF ACCOUNTING POLICIES

→ Specific accounting principles and methods → Selection of Accounting policies
→ Eg., SLM or WDV depreciation based on
→ Fundamental Accounting assumptions [CAG]
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Prudence Substance over form Materiality
Consistency Accrual Going Concern
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AUDIT RISK [AR]
Risk that auditor expresses an inappropriate audit opinion when FS are materially misstated
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Risk of Material Misstatement [RMM] Detection Risk [DR]
⇓
Auditor's procedures failed to
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Inherent Risk [IR] Control Risk [CR] detect a MS that existed
⇓ ⇓ [Eg., Because of use of
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Susceptibility of an item Controls will not be able sampling a MS could
to MS without considering related controls to prevent, detect or correct MS not be detected]
[Eg., Risk due to estimation in PBDD] [Eg., Controls for budget review failed]
 AR= RMM × DR  Note: RMM and DR are inversely related
∴ AR = IR × CR × DR

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Internal Check, Internal Control & Internal Audit
INTERNAL CHECK, INTERNAL CONTROL & INTERNAL AUDIT

Internal Control (Super System)
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Internal Check Internal Audit
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(Sub System) (Sub System)
PART A : INTERNAL CHECK
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Meaning Aims Internal Check/ Sample questionnaire for Cash & Bank
Fix Responsibility Control Questionnaire receipts
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Arrangement of
Staff duties Facts confirmation List of systematically (Note : Questions to be framed as - Is there , Are
& logically prepared there?)
No one employee Routine procedures
has exclusive right breakdown questions Detailed record
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over a transaction Reduced frauds & Effectiveness of Counterfoil of deposit slips
errors internal check Comparison of counterfoils with cash receipt records
No collusion
(adequacy &
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between employees Reconciliation
reasonableness)
Fraud is prevented Authorisation for opening new bank account
Meant for employees
of organisation Separate accounts for branches
Example : Encashing a
Issued at any time Physical cash verification
self cheque- attending
clerk, Clerk for Rotation of duties (Cashier's duty taken by others)
Collect information to
Verification, Cashier This file belongsevaluate weakness
only to student
Fair Cash book and Rough Cash book
who has purchased it from SJC Institute.

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Checklist Cut-off Procedures Examination in depth :

Questionnaire set Definition : Need for specific demarcation Walkthrough Test
between transactions of two different periods. Process : Fixation of tolerable limit
Important aspects of Internal
check Example : ↓
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For audit staff Selecting few transactions
29/03/19 02/04/19
Yes ⇒ Satisfactory ↓
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Physical 100% verification with Audit trail
Answer Purchase
↓
No ⇒ Further invoice delivery of
examination goods Analyse results with tolerable limits
received
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When should purchase be recognised as an
Instructions for audit staff expense 2018-19 or 2019-20? ⇒ 2018-19
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Issued at commencement of audit Areas of Concern : Accounts, payable, Accounts
Serves as a guideline receivable, inventories, sales, purchases.
Cut-off points : Serial numbers in documents
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Test Checking v/s Statistical Sampling (Ref: SA 530- Audit Sampling)
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Basis of distinction Test Checking Statistical Sampling

Selection Selective Transactions Sample from large population
Technique No specific technique Scientific techniques, Random selection etc.
Subjective Depends on auditor's choice Depends on technique applied
Risk & Methods More risk Lesser risk

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PART B - INTERNAL CONTROL

Meaning Essentials Steps in Internal Control
Policies, Procedures & Methods Proper Internal Check Control Environment (tone at the
Designed, implemented and maintained by Proper Internal Audit top) → Entity's Risk Assessment
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Management & TCWG Division of Functional responsibility (Plan to prevent risks)→ Control
To achieve entity's objectives w.r.t - Proper authorization & assignment of Activities (Policies & Procedures)→
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duties Information & Communication
 Safeguarding of assets Adherence with management policies (At all levels) → Monitoring
 Prevention & detection of frauds & errors Review & authorization of transactions (Assessing performance)
 Adherence of Management policies
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 Reliability of financial reporting
 Efficiency & effectiveness of operations
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 Compliance with laws & regulations
Objectives of Internal Control

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Compliance Safeguarding Accurate Increased Efficiency Review Delegation

Reliance on Conformity Security Planning Resource Evaluation Authorization
systems with Utilization
accounting
principles

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Basic Elements Nature & Scope

Financial & organizational plans Essential prerequisite for efficient management
Competent personnel Extends beyond financial matters
Division of work
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Covers operational & administrative aspects
Separation of record keeping & operational responsibility Strong control environment includes tight budgetary control
Separation of custody of assets & accounting Control Environment depends on -
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Authorization Entity's organizational structure
Managerial supervision & review Functions of BOD
Management philosophy
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Management control system
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Types of Internal Controls
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Preventive Detective Corrective
Proactive controls Reactive controls Reactive controls
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Discourage frauds and Find errors & irregularities To correct errors & irregularities
errors Examples- Examples-
Examples- - Review of performance - Implementing missing controls
- Segregation of duties - Reconciliations - Improving existing controls
- Authorisations - Physical inventory verification
- Security of assets - Audits

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Evaluation of internal control by auditor
Understanding the System [  DRI] Testing of Internal Control
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Discussions with personnel
Reference to organizational charts, Manuals Procedural Test Examination in depth
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Inquiries
→ Checking compliance of → Examination of few
laid down procedures transactions end to end
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Techniques Used for Evaluation
Narrative Record Check List

In Flow Chart ICQ
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Advantages of Internal Controls
Efficiency Safeguard from Prevention of errors Employees'

Effectiveness misappropriations Satisfaction
& Economy This file belongs only to student who has purchased it from SJC Institute.

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Importance of internal controls
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Attainment Reliable Prevention of Effective Compliance
of goals & financial errors & frauds & Efficient with laws &
objectives Information operation regulations
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Limitations of internal controls
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Organizational Size of Unusual Transacitons Costly Abuse of power
In
Structure (dual organization (loss due to fire, cleverly (time and (Management
command, (Small org.) designed frauds) money) override of controls)
many lines of
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Collusion of two Obsolescence Human error Frequent follow-up
authority
or more people (due to (in implementing
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technology) controls)

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PART C - INTERNAL AUDIT

Meaning & Features Scope Need of Internal Audit
Independent appraisal activity Covers 5 areas (Review, Verify, Ensure)
Increased size and complexity
by staff/ independent professional and Reliability & integrity of financial and Compliance requirements
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Review of accounting, financial & other operating information Focus on risk management
operations & controls Compliance with laws, regulations, Unconventional business models
a service to the organization policies etc
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Intensive use of IT
analysis, appraisal & suggestions Safeguarding of assets Stringent norms by regulators
continuous effort for promoting effective Economic & efficient use of resources Competitive environment
internal control - Accomplishing established objectives &
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goals
Provisions of section 138 of companies act, 2013 read with Rule 13 of Companies
In
(account) Rules, 2014
Mandatory Internal Audit in -
1. Every listed company
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Paid up Share Turnover Outstanding loans Outstanding
Capital & borrowings deposits
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2. Unlisted public
companies
≥ 50 Cores ≥ 200 Crores ≥ 100 Crores ≥ 25 Crores
 LEARNING TECHNIQUE
3.Private companies - ≥ 200 Crores ≥ 100 Crores - 25 x 2 x 2 x 2

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Internal Audit - A management tool Functions of internal auditor

Compliance of CARO, 2016
Compliance of AS & policies
Appraisal Service to organization Other Duties
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Reliability of MIS
Efficiency of operations Appraise activities Policies fulfilment Social responsibilities
of others Reliable & complete Response to IC system
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Effectiveness of IC system
information errors
Suggest improvements
Assets safeguard Training officer
Adequacy, reliability,accuracy of
financial, operational data IC system External auditor's
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Management by system responsibility
Assistance in acquisition etc. Design Works in practice Compliance
In
Internal audit v/s Operational Audit
Basis of distinction Internal audit Operational audit
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Objective Compliance Process improvement
Area Financial Accounts Business
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Orientation Audit Efficiency & improvement

To check Transactions Processes
Focus Policies & procedures Risk management
Measure Cost unless wise budget Performance improvement
monitoring

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Advantages of Internal Audit
Management Statutory Auditor Organization & other Stakeholders
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Review of IC System Can reduce no. of tests Accurate & efficient Accounting System
Deviations in procedures Reliance on stock valuation Critical review of Business Performance
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MIS appraisal Timely completion of accounts Safeguarding of Assets
Suggestions for improvement Year end- contingent liabilities existence Means of improvements
Correction of FS Prevents error and frauds
Check on resource utilization
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Internal audit v/s Internal Control v/s Internal Check
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Basis of distinction Internal Audit Internal Control Internal Check
Way of Checking Each component is checked Automatically checked Doubly check
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Objective Evaluate IC System Adherence to policies, safeguarding Segregation of duties - No
assets exclusive control
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Point of time After occurrence Simultaneously with occurrence Continuously
Thrust Detect frauds & errors Fixing of responsibility Prevent errors
Cost Additional cost involved Costly in small business No additional cost
Report Ta management MIS Reports For senior

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VOUCHING
Voucher Vouching
Piece of substantiating evidence Examination of documentary evidences
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Written record of expenditure, disbursement, transaction Authority of transactions
Examples : Cash memo, Sale or purchase invoice, Essence or backbone of auditing
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delivery challan etc.
Types of vouchers
i) Original & collateral vouchers : Primary & supporting or copies (Sale invoice, Carbon Copy)
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ii) Internal & External vouchers : Inside or outside the company (Purchase Order, Purchase Invoice)
iii) Missing vouchers :
In
Voucher not found. E.g., Cash memos, journal vouchers, TDS Certificates, copies of resolutions
Reasons for missing vouchers -
Wrong or careless filing
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Unawareness of statutory requirement
Intention to hide/ misappropriation
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Auditor should cross verify with other documents

Issue appropriate report.

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Teaming & Lading / Lapping Audit of Receipts

Method of misappropriation of cash
Concealing cash shortages
Cash Sales Sale of Fixed Assets
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Recoveries from another customer
Example : Entity's IC over cash receipts Entity's IC (Authorisation)
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Cash sales bills Direct sales or through agent
Cust Cust Cust
A B C Summary book Sale value of asset
` 10,000 ` 15,000 ` 10,000 Carbon copy of cash memos Proper accounting
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0wn pocket Deposit in banks Profit or loss duly reflected
Cancelled cash memos
In
Cr. 10,000 Cr. 5,000 Cr. 10,000 .... So on
in A in B in B
C
Auditor's procedures
Cash means consecutively numbered

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Reconcile individual cash amounts

Reconcile rough & main cash book
Cash deposits in banks
Debtor's ledgers- Part payment
Confirmations
CMA Inter Auditing Summary | 11

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Audit of expenditure
Transactions with Directors Acquisition of assets
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Related party transactions-(Section 188) Authorization (Proper Authority)
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Disclosure of interest (Section 184) Ownership (Title deeds)
Remuneration of directors (Section 197) Existence (Physical verification)
Section 179
Capitalization (GST Audit, incidental expenses)
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VERIFICATION Objectives How to conduct verification
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True & Fair View Examine documentary evidences
Meaning
Existence Verify Opening balances
Enquiry into Value, Ownership, Ownership Verify Acquisitions
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Existence, Possession of assets & Valuation Verify Self constructed assets
liabilities
Arithmetical accuracy Check Written off fixed assets
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Proving the truth Detect frauds/errors Ensure Authorisation
Adequate IC Ascertain Omissions
Free from charge Examine Title deeds
Proper recording Conduct Physical Verifications
Verify Register of charges, loan agreements, repayment
This file belongs only to student who has purchased schedules
it from SJC Institute.

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Importance
True & Fair View fo Balance Sheet
Valuation (understated/ overstated)
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Omissions (All assets & liabilities recorded)
Scope Techniques Advantages
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All account balances (assets & liabilities) Inspection (examining documents) Manipulation of Accounts 
Existence Observation (Witnessing process) Improper use of assets 
Authorisation Confirmation (Obtaining Proper recording & valuation 
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Right of ownership corroborating written evidences) True & Fair View 
Free from charge
In
Proper Valuation
Proper Disclosure
Special points while verification
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Tracing from ledger to Balance Sheet
Business purpose or not
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Proper classification & grouping

Actual existence or not
Owned by client or not
Overvalued or undervalued
Balances tallies with confirmations

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Audit of different undertakings
AUDIT OF DIFFERENT UNDERTAKINGS

MAJOR COMMON POINTS
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Constitution of the Appointment of Evaluate the Examine the Check the various Check various Verify assets
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organisation Subsequent Auditor Internal Control accounting policies receipts expenditures & liabilities
System followed
examine the
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Organisation Bye laws, rules Powers of Minute books of
In
Structure regulations members Managing Committee
or General Meeting
C
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A. EDUCATIONAL INSTITUTIONS B. HOSPITALS
1. General/ Preliminary 3. Expenditure/ Cash Outflow 1. General/ Preliminary 3. Expenditure/ Cash Outflow
Trust Deed, Regulations, Act, Donations Letter of appointment Capital & Revenue
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Legislature Capital expenditure Charter or Trust Deed expenditure
Minutes of meetings Establishment expenses Internal Check, Internal Controls Proper authorization
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Salaries under valid resolutions
2. Income/ Cash Inflow Issues of foodstuff, clothing, 2. Income/ Cash Inflow Internal check w.r.t.
Students' fees register equipments etc. Patients' bill register with purchase of medicines
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Comparing counterfoils bills issued Staff salaries
Admission fees → Capital 4. Assets & Liabilities Collections from patients,
In
Scholarships, Commissions Caution money & deposits- arrears, irrecoverable 4. Assets & Liabilities
Fines for late payments liability Interest/ dividend income Physical verification of
Hostel dues Investments representing Legacies & donations investments, inventories
C
Rental income endowment fund for prizes Subscription → budgeted & Depreciation
Endowments & legacies Provident fund actual
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Local authority grant Corpus donations
Dormitory rents Inventories - Food,
Stationery, Furniture
Refund of TDS

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C. TRUSTS D. MUNICIPALITIES AND PANCHAYATS

1. General/ Preliminary 4. Assets & Liabilities
Constitution - society/ trust/ company Physical verification of 1. Objectives
Interest of members investments inventories etc. Ensuring fairness and correctness
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Budget- Different heads of incomes & Corpus donations IC adequacy
expenses Value of money
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Internal check system Detect frauds & errors
2. Income/ Cash Inflow 2. Special points for audit
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Income deposited in bank Expenditure confirms provisions of law
Subscription & donation General/ special sanction
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Legacies received Provision of funds
Income from investments Economical expenditure
Rental income
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Income from concert
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3. Expenditure/ Cash Outflow
Expenditure relating to concert
Only for charitable purpose

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E. CO-OPERATIVE SOCIETIES
1. Meaning 3. Special Points
Voluntary association of persons Restriction on shareholding: Max. limit - 20% of no. of shares or `1000 value
Common economic benefits (Registered Society member-exception)
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Equitable contribution Restriction on loan: Loans only to members. Prior approval of Registrar for loans to
Co-operative Societies Act, 1912 other Co-operatives.
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Restriction on borrowing: Accept loans & deposits from members & non-members
2. Books of accounts Investment of funds
Cash Book  Central / State Co-operative banks
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Stock Register  Section 20 of Indian Trust Act
Register of assets & investments  Shares, securities etc. of other Co-operative banks
In
Register of Fixed deposits  Approved co-operative banks
Register for Sureties Profit Appropriation
25% profits before dividend distribution
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(ROC permission for less  but minimum 10% appropriation)
Charitable Purposes
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10% of N.P. (after t/f to Reserves)

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5. Audit of Co-operatives F. BANKS Balance with RBI

Qualification 1. Types of Banks - Confirmation certificates
- CA Commercial Banks (e.g., - Reconciliation
- Diploma in co-operative accounts ICICI) Balance with Other banks
- Auditor of Co-operative department of Regional Rural Banks - Reconciliation
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government Co-operative banks - Foreign currency A/c
General/ Preliminary Development banks translation
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- Bye-laws (e.g.,NABARD) Money at call & short
- Register of members Payment Banks (e.g., Airtel notice-
Payments)
- Internal check - Authorisation
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Incomes Small Finance banks (e.g.,
- No net off
Jana Small Finance)
- Cash receipts for share capital Fixed Assets
In
- Sales vouchers 2. Auditing Aspects - Accounting method
- Receipt of interest Advances - Ownership
Expenditure - Internal controls
- New assets acquired
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- Authorised by Managing Committee - Scrutinise ledger accounts
- Assets sold
- Payment for loans - Documentation - Revaluation
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- Establishment expenses - Overdue accounts - Section 9 : Disposal of non-
Special Points Cash in hand banking assets
- Overdue debts for 6m to 5 years - Internal control
- Overdue interest reserve account - Physical verification
- Writing off bad debts with prior authorisation of - Foreign currency translation
Committee (Sometimes auditor also)This file belongs only to student who has purchased it from SJC Institute.

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Borrowings - Signatures ↔ Specimen signature Treasury operation- Foreign

- Proper classification - Issued by branch ↔ Debit advice Exchange & derivatives
- From RBI - Confirmation from paying branch - Assess controls because of high risk in
innovative products
- Outside India - Manner of cancellation
Contingent liabilities - Appropriate risk assessment of
- Rate of interest & duration
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treasury operations
Deposit - Properly identified and valued
- Figures in F.S. are true & fair.
- Interest accrued but not due → not liability - Non fund based facilities to regular
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Reports to be given
- Window dressing in LFAR customers
Capital - Adequate internal controls - Audit report on true & fair view
- LCs, guarantees etc → Payment on basis - Unaudited branches info.

- Opening balance
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- SR for increasing authorised capital of documents - Additional matters - 30(3)
Reserves & Surplus - Substantive tests to establish completeness - Info & explanation
In
- Opening balance - Reasonableness of amount - Transactions within powers
- Addition/ deduction - Comfort letters issued by banks - Returns from branches
- Dividend Bills for collection - Other significant matter
C
- Foreign branch - Bills drawn on other branches - not - LFAR
Bills Payable included - Certificates
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- Drafts, mail transfers → printed forms - Register for outward bills
- Unused forms in proper custody - Subsequent collections
- Private code for decoding - Procedure for crediting party account

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Company Audit - I
COMPANY AUDIT - I
APPOINTMENT OF AUDITOR
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Appointment of Appointment of
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Subsequent Auditor First Auditor
Non-Government Government Non-Government Company Government
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Company – Sec. 139(1) Companies – Sec. 139(5) – Sec. 139(6) Companies – Sec. 139(7)
In
Non-Government Company Condition Details of condition Government
– Sec. 139(1) 1. Ratification Omitted Companies – Sec. 139(5)
Appointment will be at First 2. Written consent Before appointment company shall obtain By CAG
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AGM (a) Written consent ↓
till conclusion of 6th AGM; and (b) Certificate Within a period of 180 Days
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thereafter till conclusion of 3. Certificate → Certificate shall indicate ↓

every 6th AGM → criteria as provided u/s 141 satisfied From commencement
Subject to following conditions: 4. Intimation to → Inform auditor and ROC of financial year
ROC ↓
within 15 days of appointment.
→ Intimation to ROC in Form ADT-1 Tenure: till the conclusion
This file belongs only to student who has purchased it from SJC Institute. of next AGM

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Company Audit - I
Appointment of First Auditor
Non-Government Company – Sec. 139(6) Government Company – Sec. 139(7)
By Board of Directors by CAG
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↓ ↓
Within 30 days Within 60 days of registration of company
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↓ ↓
of registration of company If CAG fails
↓ ↓
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If Board fails, Board shall BOD will appoint within next 30 days
inform the members ↓
In
↓ If Board fails, Board shall inform the members
Members shall within 90 days ↓
↓ Members shall within 60 days
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at an EGM at an EGM
↓ ↓
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appoint the first auditor appoint the first auditor
↓ ↓
Tenure: till Tenure: till
conclusion of first AGM conclusion of first AGM
LEARNING TECHNIQUE: 30-90 LEARNING TECHNIQUE: 60-30-60

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Company Audit - I
ROTATION OF AUDITOR
Sec. 139(2) Rule 5: Prescribed Companies Sec. 139(3)
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Listed companies and Other prescribed Unlisted Public Companies Members may resolve the
companies Shall not appoint with PUSC ≥ ` 10 Crore following:
↓
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Private Companies with (a) Rotation of auditing
An individual as auditor for more than PUSC ≥ ` 50 Crore partner & his team at
one term of five consecutive years Companies not covered such interval as may be
↓ above if public borrowings prescribed.
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An Audit Firm as an auditor for more from banks and FI/ public (b) That audit shall be
than two terms of five consecutive deposits ≥ ` 50 Crore conducted by more than
In
years C one auditor: Joint Audit
Rule 6 – Manner of Rotation

1. For calculating period of 5 years / 10 years, period served prior to commencement of this Act, shall also be considered.
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2. Individual auditor / Audit Firm not eligible for appointment for a period of 5 years if it belongs to same network to whom retiring
auditor belong to.
3. Break in the term should be for a continuous period of 5 years.
4. Auditing partner retires from Firm and joins Other Firm, latter becomes ineligible

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Company Audit - I
1st Proviso Cooling Period Individual Auditor for 5 years after completing of tenure
Audit Firm for 5 years after completing of tenure
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2nd Proviso Common Partner Audit Firm having common partner with firm
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Whose tenure has just expired
Shall not be appointed as auditor of same company
For a period of five years
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3rd Proviso Company Comply with requirement of Sec. 139(2)
existing before Within a period not later 3 years from the date of commencement of this Act.
In
commencement of
this Act
4th Proviso Sec. 139(2) shall not Right of company to remove auditor
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prejudice the Right of auditor to resign.
SJ

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Company Audit - I
OTHER PROVISIONS OF SEC. 139
Filling of Casual Reappointment of Auditor No auditor Appointed at Recommendation of Audit
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vacancies – Sec. 139(8) – Sec. 139(9) AGM – Sec. 139(10) Committee – Sec. 139(11)
Retiring auditor may be reappointed if- If no Auditor appointed Where a company is required to
•Not disqualified under law ↓
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constitute an audit committee
•Not unwilling to continue AND at AGM (Sec. 177)
•No SR has been passed w.r.t. ↓ ↓
(a) Appointing someone else as auditor Existing auditor will continue All appointments including
st
(b) providing expressly that retiring filling casual vacancies
auditor shall not be reappointed.
In
↓
Shall be made only after
Non Govt. Co. – Sec. 139(8)(i) Govt. Co.- Sec. 139(8)(ii) considering the recommendations
of audit committee.
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Filled by → CAG → Within 30 days
Due to resignation Other Reasons ↓
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Filled by BOD Be filled by BOD If CAG fails

↓
↓ ↓
Filled by BOD
Within 30 days Within 30 days ↓
↓ Within next 30 days
Approval by members in GM
↓ This file belongs only to student who has purchased it from SJC Institute.
Convened within 3 months
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Company Audit - I
SEC. 140 – REMOVAL, RESIGNATION OF AUDITOR AND GIVING OF SPECIAL NOTICE
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Sec. 140(1) – Removal before expiry Sec. 140(4) – Removal at AGM
Sec. 140(5) – Removal by
Sec. 140(2) & (3) – Resignation Tribunal
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Sec. 140(1) – Removal before expiry Sec. 140(2) & (3) – Resignation
Requires Resigning auditor
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→ SR of Company & prior approval of CG → Shall file
in prescribed manner (Rule 7). → auditor → Within 30 days of resignation
In
concerned should be provided an opportunity → Form ADT-3
of being heard. → To Company & ROC
→ Application to CG in Form ADT-2. (Also to CAG – in case of Govt. Companies)
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→ Within 60 days of approval by CG, → Indicating the reasons and other facts
→ convene a general meeting relating to resignation.
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→ to pass SR Sec. 140(3): Fine for non compliance

Opportunity → Board Resolution Lower of Audit fees or ` 50,000
→ Application to CG → General Meeting Continuing Failure- `500 per day to `5 lakhs

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Company Audit - I
Sec. 140(4) – Removal at AGM Sec. 140(5) – Directions for change of Auditor
Special notice shall be required
→ to pass the SR at AGM that- Tribunal may, by order, direct the company to change its auditors
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a) Retiring Auditor shall not be re- → either suo motu or on an application made to it by C.G. or by any
appointed or, person concerned,
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b) To appoint as auditor any person → if it is satisfied that the auditor has acted in a fraudulent manner
other than retiring auditor. or abetted or colluded in any fraud.
→ Copy of notice to be sent immediately → If the application is made by the C.G. → Tribunal shall within 15
to concerned auditor. days of receipt of such application, make an order that
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→ Auditor has a right of representation • he shall not function as an auditor and
→ Copy of notice and representation • C.G. may appoint another auditor in his place.
In
needs to be sent to every person to
whom notice of AGM was given. → Such auditor shall be ineligible to be appointed as an auditor of any
company for a period of 5 years from the date of passing of the order
→ Auditor may demand for reading the
C
representation in meeting. and the auditor shall also be liable for action u/s 447.
→ Representation need not be sent or

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read out at meeting, if on application of

company or other person, Tribunal pass
such order.

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Company Audit - I
SEC. 141 – ELIGIBILITY, QUALIFICATIONS AND DISQUALIFICATIONS OF AUDITOR
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Sec. 141 (1) & 141 (2) – Sec. 141(3) - Persons not eligible Sec. 141(4) –
Eligibility to be appointed as Auditor for appointment & Rule 10 Vacation of office
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Sec. 141 (1) & 141 (2) – Eligibility to be appointed as Auditor Sec. 141 (4) Vacation of Office
Disqualifications incurred (Sec 141 triggered)
Eligible persons-
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→ Chartered Accountant After appointment
In
→ A Firm whereof Majority of Partners
→ Practicing in India Auditor to vacate office
→ are qualified
C
→ including LLP To be deemed as Casual Vacancy
→ Signing partner =CA
SJ

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Company Audit - I
Sec. 141 (3) Disqualifications
(a) Body Corporate other than LLP

(b) Officer or Employee of the company
(c) Partner/ Employee of Officer/ Employee of the company
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(d) (i) person/ is holding any security * or Company /
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relative/ interest in the subsidiary /
(ii) partner is indebted > ` 5 Lacs in the holding /
(iii) has given a guarantee in connection with indebtedness of 3rd person > ` 1 Lac in the associate, or
(PRP) subsidiary of same holding.
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*no disqualification if relative holds any security in the company of face value upto `1 Lac. (5 Companies)
(e) Person or firm having business relationship with Company / Subsidiary / Holding / (6 Companies)
In
Associate / Subsidiary of Such Holding or Associate Company
(f) A Person whose relative is a director or is in employment of the company as a
Director or KMP.
C
(g) A person who is in full time employment elsewhere
Or
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A person holding appointment as auditor or more than 20 companies other than OPC,
dormant companies, Small Companies and private companies having paid up capital < 100Cr.
(h) A person who has been convicted of an offence involving fraud and a period of 10 years
has not elapsed.
(i) Any person who directly or indirectly renders any service referred to in Sec. 144 to (3 Companies)
company or its
Sharing holding
or Copying of company ormanner
this file in any its subsidiary company.
is stricty prohibited and may lead to further consequences.

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Company Audit - I
POWERS / RIGHTS AND DUTIES OF COMPANY AUDITOR (SEC. 143)
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RIGHTS OF AUDITOR – Sec. 143(1) DUTIES of AUDITOR
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Right of Access Inquire into Propriety Matters – Sec. 143(1)
→ at all times 1. Loans and advances are properly secured and
→ to books of Account & Vouchers terms are prejudicial.
→ whether kept at Regd. Office or at any other place. 2. Book entries are prejudicial.
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3. Shares, debentures and other securities are sold
Right to Obtain Information at a price less than acquisition cost in case of
In
→ From the officers of the company non banking and non investment company.
→ As considers necessary 4. Loans and advances made are shown as deposits.
→ For performance of his duties 5. Personal expenses charged to revenue account.
C
6. Cash has actually been received on shares
allotted for cash, if not received, correct position
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shown in books and balance sheet.

That to the best of auditor information & knowledge,
the accounts & financial statements give a true
and fair view of the state of the company affairs
as at the end of its financial year & profit & loss
This file belongs only to student who has purchased it from and cash flow for the year.
SJC Institute.

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Company Audit - I
Reporting u/s 143(3)

1. Obtained all necessary information for the audit.
2. Proper books of accounts have been maintained.
3. Branch audit report has been received and manner of dealing with it.
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4. Balance Sheet and P & L Account agree with the books of accounts.
5. Financial statements comply with AS.
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6. Comments on financial transactions having any adverse effect on functioning of company.
7. Directors disqualified u/s 164(2).
8. Qualifications w.r.t. maintenance of accounts.
9. Adequacy and operative effectiveness of Internal Financial Controls with reference to FS
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10. Other matters as prescribed.
(Rule 11) Rule 11
In
1. Disclosure of impact of pending litigations on financial position.
2. Provisions for Material Forseeable losses on long term contracts made.
3. Any delay in transferring amounts to IEPF.
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Duties of Auditor of Govt. Cos. – Sec. 143(5)

CAG – direct the auditor the manners in which accounts are to
be audited. Auditor report shall include:
Directions issued by CAG.
Action taken thereon
Its impact onSharing
Accounts andfile
This F.S.belongs only to student who has purchased it from SJC Institute.
or Copying of this file in any manner is stricty prohibited and may lead to further consequences.

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Company Audit - I
Supplementary Audit – Sec. 143(6) Reporting u/s 143(12)

Within 60 days of days of receipt of Audit Report Fraud involving prescribed amount
CAG has a Right Committed by officers or employees
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To order for supplementary audit of FS Reported to CG in prescribed manner (Rule 13)
By such persons as authorized by him Frauds below prescribed amount
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Should be reported to Audit Committee or BOD
Test Audit – Sec. 143(7) Details of Such Frauds need to be disclosed in
CAG may If considers necessary Board’s report.
by an order Nature of Fraud with description Approx. amount involved
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cause test audit Parties involves Remedial action taken
of accounts of Govt. companies Rule 13
In
Fraud ≥ ` 1 Crore.
Sec. 143(8) Audit of Branch Accounts Reported to Audit Committee / BOD within 2 days
Seeking their reply within 45 days
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Sec. 143(9) Compliance with Auditing Standards If Reply
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Sec. 143(10) SAs in consultation with NFRA Received Not Received

Forward to CG Forward to CG
Sec. 143(11) CARO,2016 - Report, Reply of BOD/AC, - Report
Comments on Reply - Note that no reply recd.
This file belongs only to student who has Within

purchased 15 days
it from in ADT-4
SJC Institute.

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Company Audit - I
OTHER PROVISIONS (SEC. 142, 144, 145, 146 & 147)
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Sec. 142 – Remuneration Sec. 144 – Auditor not to Sec. 145 – Signing of Sec. 146 –
of Auditors render certain services Audit Reports Attending of
Other Services that may be
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Authority to Fix remuneration General meetings
rendered Shall be in
Shall be General meeting or in such
As approved by the BOD accordance with All Notice & other
manner as may be determined therein.
May be BOD in case of first auditor if or Audit Committee. Sec. 141(2) communication of
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appointed by BOD Services that cannot be rendered general meetings shall
directly or indirectly to Co, Holding be forwarded to Auditor.
In
Elements of remuneration or Subsidiary Unless exempted auditor
Shall include all expenses incurred in Accounting & Book Keeping. shall attend either
connection with audit and any facility Internal Audit himself or through his
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extended to auditor. Design & Implementation of authorized representative
Does not include remuneration paid Financial Information System. any general meeting,
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for any other service. Actuarial Services. Auditor shall have right
Investment advisory. to be heard at such
Investment Banking meeting on part of
Outsourced Financial business which concerns
Management Services him as auditor.
This file belongs only to Other
student who Prescribed.
has purchased it from SJC Institute.

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Company Audit - I
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Sec. 147 – Punishment for
Contravention
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On the Company & Officer in default
– 147(1)
Violation of Sec. 139-146
Company – Fine from ` 25,000 to `
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5,00,000
Officer in default–Imprisonment upto 1
In
year or fine from ` 10,000 to ` 1 Lac
or both
On the Auditor – 147(2) If auditor convicted u/s 147(2)
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Violation of Sec. 139, 143, 144, 145. he shall be liable to
Fine from ₹25,000 to (₹5 Lacs or Refund the remuneration and Pay
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4 times the remuneration, whichever for damages

is less).
In case of Willful default –
Imprisonment upto 1 year and fine from
₹50,000 to (₹25 Lacs or 8 times the
remuneration, whichever is less).

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Company Audit - II
COMPANY AUDIT - II
BRANCH AUDIT [SECTION 143(8)] JOINT AUDIT [SA 299]
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 Who will be the auditor?  Meaning
Audit of one company conducted by more than one persons
Branch Located
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or firm.
Example : Auditors of Reliance Industries -
Joint Auditors ⇒ DTS and Associates
In India Outside India SRBC and Co. LLP
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⇓ ⇓  Advantages
Company Auditor Company Auditor → Sharing of expertise
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or, Other Qualified Auditor or, Other Qualified Auditor as → Lower workload
per laws of that country → Improved quality of service
→ Quality of performance
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Submits report to
 Branch Auditor Company Auditor → Timely completion of work
 Qualifications in report included in statutory report unless -  Disadvantages
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→ Objections are met → Superiority complex

→ Objections are immaterial → Costly
→ Information gets available → Lack of coordination
 Fraud Reporting → Liability uncertain
→ Branch auditor also responsible → Psychological Problem
→ and Work
may fixation difficult
Sharing or Copying of this file in any manner is stricty prohibited lead to further consequences.

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Company Audit - II
 Responsibility of Joint Auditors
Individual Joint and several
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Responsibility Responsibility
→ Work allocated → Work not divided
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→ Decisions regarding NTE of audit procedures
→ Matters brought to other notice
→ Compliance of FS with disclosure requirements
→ Compliance of audit report with statute
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AUDIT OF SHARES
Shares Alteration
In
Bonus Buyback Share Share Re-issue of
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Allotment of Share Shares Split Transfer Forfeited shares
Capital
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Share Allotment [Section 39]
→ Study of contract - how many shares, value, consideration → Examine Board minutes - Purpose of issue
→ Examine Prospectus - terms of issue, payment mode → Refund within 15 days if minimum subscription not received
→ Minimum Subscription → Return of allotment - ROC (PAS - 3)
→ Application money received or not → Check records of RTA with dematerialisation & electronic record
→ Application money ≥ 5% of nominal amount
This file
keeping
belongs only to student who has purchased it from SJC Institute.

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Company Audit - II
Alteration of Share Capital [Section 61] Buyback [Section 68]

→ Authorised by AOA → Authorised by AOA
→ Board meeting + OR in GM → Board meeting minutes + SR in GM [if >10% of PUSC+FR]
→ Alteration in MOA & AOA → No buyback from earlier issue of same kind
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→ Change in voting power → Maximum limit : ≤ 25% of PUSC+FR
→ Denomination > ` 1 → Debt-equity ratio after buyback ≤ 2:1
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→ Accounting entries → Fully paid up securities only
→ Register of members → SEBI regulations (if listed)
→ Time limits
Issue of Bonus Shares [Section 63] No buyback if same shares within 1 year from closure
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
→ Authorised by AOA  Buyback to complete within 1 year of BR/SR
→ Board meeting minutes + OR in GM No further issue of same kind within 6 months (except
In

→ Fully paid up bonus shares to members bonus)
→ Partly paid up made fully paid up → Buyback out of -
→ Issue not made by capitalising revaluation reserves  Free reserves
C
→ Any default in payment of interest or principal on fixed deposit  Securities Premium
→ Not to be issued in lieu of dividend  Proceeds of other securities
SJ
→ Declaration of solvency with SEBI & ROC (if more than 10%)
→ Register of shares
→ Physically destroy shares brought back within 7 days of last
date of completion
→ Return to SEBI & ROC within 30 days

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Company Audit - II
Share Split Share Transfer [Section 56]

→ Authorised by AOA → Inspection of AOA
→ Board meeting + OR in GM → Notification by transferor of lodgment of transfer
→ Alteration in MOA & AOA → No-objection from transferee in case of partly paid shares
te
→ Proper Accounting entries → Scrutiny of transfer forms
→ Register of Members → Proper stamp duty
itu
→ Signature comparison of transferor
Reissue of forfeited shares → Shares transfer journal
→ Authorised by AOA → Register of members
→ Vouch amount collected → Old certificate cancellation
st
→ Accounting entries on re allotment → Board minutes
→ (Amount received before + On forfeiture)≥ Par value → Register of Directors
In
→ Surplus credited to Capital Reserve
→ Partly paid reissued as fully paid : Issue at discount
C
SJ

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Company Audit - II
AUDIT OF DEBENTURES
Issue of Interest on Redemption of Debentures as

Debentures Debentures Debentures Collateral security
te
Issue of Debentures Interest on Debentures Redemption of Debentures Debentures as
itu
[Section 71] Collateral security
→ Redeemable debentures : → Acknowledgement of → Check Debenture Trust Deed → Approval by BOD
SR in GM debenture holders → Director's minute books
→ No voting rights → Reconcile total amount due → Bonds cancelled
st
→ Debenture redemption reserve and total amount paid → Accounting Treatment
for redeemable debentures → Separate item in
In
→ Debentures Trustee Statement of P/L
Offer to public
if
Offer > 500 members
C
→ Prospectus duly filed
→ Amount collected in Cash book
SJ
→ Debenture trust deed

→ Mortgage : Charge correctly
recorded
→ SEBI guidelines
→ Issued to vendors as Purchase
Consideration - contract Sharing or Copying
of this file in any manner is stricty prohibited and may lead to further consequences.

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Company Audit - II
AUDIT OF DIVISIBLE PROFITS AND DIVIDENDS

Declaration of Dividend [Section 123] Investor Education and Protection Fund (IEPF) [Section 125]
→ BOD recommends → Unpaid/ unclaimed dividend for 7 years transferred to IEPF
te
→ OR in GM → All shares on which dividend unpaid/ claimed
Profit for the year or previous years - transferred to IEPF
→ Source
itu
Money provided by CG or SG → Default : Fine on company ` 5L to ` 25L
→ In case of losses - as per prescribed rules Fine on officer ` 1L to ` 5L
→ Brought forward depreciation and losses to be adjusted
→ Transfer amount to separate bank A/c within 5 days Amounts credited
st
→ Non compliance with Section 73 & 74 ⇒ No dividend declaration → Grants by CG
In
→ Donation by CG, SG and others
Interim Dividend → Unpaid dividend account
→ During FY or anytime between closure of FY till date of GM → Interest or other income
→ In case of losses : → Matured Deposits
C
Rate of dividend ≤ Average of rate of last 3 FYs → Matured Debentures
→ All other provisions : Same as final dividend → Preference shares redemption amount unpaid/ unclaimed
SJ
for 7 years
Unpaid Dividend Assets [Section 124] → Sale proceeds of fractional shares on merger etc., unpaid
→ Transfer within 7 days if unpaid till 30 days of Date of for 7 years
Declaration; Issue list on website within 90 days
→ Default in transfer : Penal interest @12%

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Company Audit - II
Amounts utilised for CONTRIBUTION TO POLITICAL PARTY/ POLITICAL

→ Education, awareness and protection of investors PURPOSE [SECTION 182]
→ Refund of unclaimed dividends, matured deposits, matured Who can contribute?
te
debentures etc. → Company except
→ Reimbursement of legal expenses on class action suits a) Govt. Company
itu
→ Disgorged amount distribution to persons suffering losses due b) Company which has been in existence < 3 years
to wrong action of others
→ Any other purpose, as may be specified. → BR in BM
→ Proper disclosure in accounts
st
AUDIT OF ABRIDGED FINANCIAL STATEMENTS → Accounting entries
→ Compliance of Section 136 of Companies Act, 2013 → Permitted payments only
In
→ Subsequent events : Events occuring upto date of report → Compliance with Section 182
ACCOUNTS OF LIQUIDATION [SECTION 348] AUDIT OF INVENTORIES

C
→ Proper books of accounts Features :
→ Liquidation accounts relating to realisation and disbursements → Nature : High turnover rate
SJ
→ True and fair view → Obsolescence & spoilage

→ Movable/ immovable
→ Location
→ Individual items - low value
Total inventory - high value
This file belongs only to student who has Stage ofit from
→purchased completion of WIP
SJC Institute.
→ Estimation of valuation
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Company Audit - II
Auditor's duties
→ Check Inventory records STATUTORY AUDITOR V/S INTERNAL AUDITOR
→ Obtain External confirmation from suppliers
→ Physical verification Basis of difference Statutory Auditor Internal Auditor
te
→ Controls over movement/ issues Appointing Authority Shareholders in GM BOD
→ Valuation and Disclosure as per AS-2 Scope As per companies As per mutual
Act agreement
itu
→ WIP Valuation
→ ABC Analysis Removal By Shareholders By BOD
→ Stock with third parties Remuneration fixed By Shareholders By BOD
→ Management representation
st
Audit Report To Shareholders To BOD
AUDIT OF PROPERTY, PLANT AND EQUIPMENT
In
→ Tangible items used for
- Production of goods and services
- held for > 1 year
C
→ Review of IC system
→ Compliance with AS-10/ Ind AS-16
SJ
→ Physical verification
→ Proper records maintained or not
→ Proper Depreciation
→ Acquisition / disposal of assets
→ Title deeds
→ Profit / loss on sale This file belongs only to student who has purchased it from SJC Institute.

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Company Audit - II
AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY RESPONSIBILITIES
te
Identifying Identifying Identifying Accurate & Complete Consolidation
itu
Components reportable segments related parties financial information Adjustments
Auditor's duties
st
→ All relevant subsidiaries, associates and JVs included (working papers or prior years, agreements)
→ Check if any entity has parent-subsidiary relation due to control in BOD (Minute books, Shareholders agreements)
In
→ Any entity excluded from consolidation
→ Compliance with Ind AS -27 & 28/ AS 21, 23, 27
→ Disclosure requirements
C
→ Impairment Losses, (if any)
→ Permanent consolidation adjustments -
SJ
 Capital Reserve/ Goodwill

 Minority interest
 Investments in associates
→ Intra group transactions (interest, indebtedness etc.)
→ Unrealised intra group profits
→ Harmonising accounting policies This file belongs only to student who has purchased it from SJC Institute.

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Cost Audit and Secretarial Audit
COST AUDIT AND SECRETARIAL AUDIT
te
COST RECORDS AND COST AUDIT (SECTION 148 OF COMPANIES ACT, 2013 &
COMPANIES (COST RECORDS AND AUDIT), RULES, 2014
itu
Cost Records Cost Audit
st
Sec. 148(1) Rule 3 of Companies (Cost Requirement Cost Auditor Cost Audit report
In
Records & Audit) Rules, 2014
C
SECRETARIAL AUDIT (SECTION 204)
Applicable to all (a) Listed Companies
SJ
(b) Unlisted Public Cos. with PUSC >= `50 crores or
Turnover >= ` 250 crores
Audit conducted by Company Secretary

Report in Form MR-3

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Cost Records
Sec. 148(1) Companies engaged in production of prescribed goods or providing prescribed services → particulars relating to →
te
Material, Labour or Other items of cost → Shall be included in the books of accounts
Rule 3 of Companies (Cost Records & Audit) Rules, 2014 :
itu
Companies including foreign companies → Engaged in → production of goods or providing services as specified (Table A and B products)
st
Regulated Sector (Table A) Non Regulated Sector (Table B)
♦ Telecommunication ♦ Iron
In
♦ Electricity ♦ Steel
During immediate preceding Having turnover ♦ Petroleum ♦ Rubber
←
financial year > `35 Crores ♦ Sugar ♦ Cement
C
↓ ♦ Drugs and Pharma ♦ etc.
shall include cost records in their books of accounts ♦ Fertilisers
SJ
Rule 5 : Every Company under these Rules shall In respect

of each of its Financial year
↓
Maintain Cost records in Form CRA - 1

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Cost Audit
Sec. 148(2) C.G. may be order → direct for the → audit of cost records of → companies
covered u/s 148(1) → having prescribed net worth or turnover → in a manner
Requirement → specified in that order
te
Rule 4 of Companies (Cost
itu
Records & Audit) Rules, 2014
Cost Records are required to be audited → If overall annual turnover → From
all products and services → In immediate preceding Financial Year → In case of
Regulated Sector Non Regulated Sector
st
AND
> ` 50 Crore > `100 Crore
Aggregate Turnover of Individual product or service ←
In
> `25 Crores > `35 Crores
C
Exemption – Rule 4(3)
Requirement of Cost Audit shall not apply to a company
SJ
↓
Whose revenue from exports in foreign exchange exceeds 75% of its total revenue or which is operating from SEZ. or Engaged in
generation of electricity for captive consumption

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Cost Auditor Sec. 148(3) → Cost Audit shall be conducted → by Cost Accountant → Appointed by BOD in prescribed
manner → No person appointed u/s 139 as an auditor → Shall be appointed as cost auditor
Rule 6 of Companies (Cost Records & Audit) Rules, 2014
te
Within 180 days of commencement of every financial year. → Before appointment written consent &
certificate be obtained. → Company Shall inform the cost auditor of his appointment. → Company Shall file
itu
a notice with CG in Form CRA-2 within 30 days of Board meeting or within 180 days of commencement of
FY whichever is earlier. → Tenure: 180 days of closure of FY or till submission of cost audit report. → Cost
statements shall be approved by BOD before being signed by any director on behalf of Board for submission
st
to cost auditor.
Sec. 148(5) & 148(6) → Cost Auditor shall submit his report to BOD → Company shall → within 30 days
In
Cost Audit
Report of date of receipt of report → furnish such report to CG → along with full information & explanation.
Rule 6 of Companies (Cost Records & Audit) Rules, 2014

C
Cost Auditor shall submit Cost Audit Report → in Form CRA-3.
Forward Duly Signed Report to BOD → Within 180 days from closure of FY.
SJ
Report along with information & explanation to → Shall be furnished to CG in Form CRA-4 in XBRL Format

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Company Audit - II
AUDITOR'S REPORT AND CERTIFICATE

MEANING  Going Concern (As per SA 570)
te
 Medium through which  Key Audit Matters (As per SA 701 for listed entities or L&R
 Auditor expresses opinion on FS requirement)
 Statement of observations gathered and conclusions reached  Management's Responsibilities (FS preparation, Designing IC,
itu
Assessing GC)
 Auditor's Responsibilities (General and Specific)+ Location
IMPORTANCE [WOFER ] of description (within the body, Appendix, Reference to a
st
 End Product and concluding part website)
 Auditor's Opinion on accounts & FS  Other Reporting Responsibilities (Other than reporting as per
In
 Work done by auditor SAs)
 Measure of Auditor's Responsibility  Signature (Personal name, on behalf of firm, MNO, Firm
 Indicator of real position of Financial Status registration no.)
C
 Address (Place of which report signed)
BASIC ELEMENT OF AUDIT REPORT  Date (Not earlier than date of SAAE, All events and
SJ
As per SA 700 the elements are - transactions upto the date considered)
 Title
 Addressee (based on circumstances, L&R)
 Auditor's Opinion (Entity's name, FS title, Notes, Period)
 Basis for opinion (SAs, Reference of responsibilities, Ethical
Req., SAAE) This file belongs only to student who has purchased it from SJC Institute.

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Company Audit - II
TYPES OF AUDIT REPORT & AUDIT OPINION
AUDITOR'S REPORT
te
Unmodified Report or Clear Modified Report but Modified Report and Modified
itu
Report Unmodified opinion opinion
st
Emphasis of Matter paragraph Other Matter Qualified Adverse Disclaimer of
(EOM) paragraph Opinion Opinion Opinion
(OM) (QO) (AO) (DO)
UNMODIFIED REPORT
Meaning
In Prerequisites to issue clear report
C
 FS give true and fare view as per FRF Auditions shall satisfy himself that -
 No significant reservations  Reasonable evidence is obtained
SJ
Implications  AS & GAAP followed consistently

 GAAP consistently applied  True and Fair View is reflected
 Statutory regulations complied  Classification does not hide a material fact
 Adequate presentation and disclosures  Format of FS is as per law
 Change in accounting principles disclosed  No MMS in FS
Sharing or Copying of this file in any Disclosures appropriately made
manner is stricty prohibited and may lead to further consequences.

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Company Audit - II
MODIFIED REPORT
Circumstances requiring Modified Report
Due to
te
itu
Limitation on Disagreement with Significant Uncertainty
Scope management
QO
QO AO
st
DO
DO QO
EOM
Modified Report but Unmodified Opinion

 When going concern unresolved but adequate disclosures
In Modified Report and Modified Opinion
1. Qualified Opinion
C
made  Opinion on truthness and fairness subject to certain
 Significant uncertainty dependent upon future events reservations
SJ
 EOM para does not affect auditor's opinion  Detailed reasons with quantitative impact on FS
 Audit opinion is not qualified in this respect  Express qualified opinion when :
 Matter adequately presented in FS • Unqualified opinion cannot be expressed
• Effect of MS is material but not pervasive
• Auditor unable to obtain SAAE and possible effect is
This file belongs only to student who has purchasedmaterial
it from SJCbut not pervasive
Institute.

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Company Audit - II
Features • Assets/ Liabilities not properly valued

 Clarity • Income/ expenditure not reflected fairly
 Explanations and Reasons • Info. required for fair presentation not disclosed
te
 Placement (Notes to be annexed) • Contravention of provisions of law affecting accounts
 Phrasing ("Subject to" or except that) • Contravention of MOA/ AOA
itu
 Vague statement to be avoided
 Violation of law I1. Disclaimer of Opinion
 Qualification of effect  Auditor unable to form an overall opinion due to inability to
 Notes-Report relationship obtain SAAE
st
 Draft Report  Possible effect of limitation on scope is material and pervasive
 May happen when
In
Situations calling for Qualification • Books are seized by authorities
 Unable to obtain information and explanation • Not possible for auditor to obtain information
• Absence of satisfactory documentation • Restriction on scope of work
C
• Absence of vouchers Piecemeal Opinion
• Destruction of books and records  Partial true & fair view
SJ
 Proper books of accounts not kept  Unable to express opinion on certain items
 B/S and P/L not in agreement with books  Divided opinion is issued
 Info. required by law not furnished
 Accounts do not disclose true & fair view
• Inappropriate accounting practices
• Changes in accounting principles notbelongs
This file reflected adequately
only to student who has purchased it from SJC Institute.

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Company Audit - II
I1I. Adverse on Negative Report Effect Material but not Material and pervasive
 Auditor concludes that he does not agree with affirmations in pervasive
FS Reservations On specific matters On truthness and fairness
te
 FS do not present true & fair view or items of FS
 Effect of disagreement is material and pervasive Phrasing Subject to certain Because of significance of
itu
reservations, FS give matters, FS do not present
Difference between Clean and Qualified Audit Report true & fair view true and fair view
Basis Clear Report Qualified Report

AUDITOR'S REPORT ON REVISED ACCOUNTS BEFORE
st
Meaning No reservation w.r.t Subject to certain
CIRCULATION TO SHAREHOLDERS
any matter reservations
 Management amends audited accounts
In
Phrasing FS give true and Subject to reservations, FS
 Requests statutory auditors to issue amended report
fair view give true and fair view
 Auditor's duties are :
Management No specific Bound to give explanation • Ensure copies of original accounts and report returned
C
Duty responsibility in Board Report
• Fact of revision of accounts disclosed in a Note
• If disclosure made, no need to refer to revision in the
SJ
Difference between Qualified and Adverse Report report also refer the fact of revision in report
Basis Qualified Report Adverse Report

REVISION OF AUDIT REPORT
Situation FS give true and FS do not present true
Situation calling revision of report
fair subject to and fair view
certain reservations  When auditor considers amendment unwarranted
This file belongs only to student who has  When auditor
purchased it from SJCadvises
Institute. amendment
but management refuses

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Company Audit - II
 When management agrees for revising FS but is unable to  Fundamental assumptions made
amend & agrees to circulate revised audit report  Clear title of certificate
 Use of general purpose statements
te
Auditor's duties  Carefully interprets law related matters
 Issue revised report & refer earlier report  Mention clearly figures used from audited FS
itu
 State reasons for revision  Mention addressee carefully
 If management neither revises FS nor agrees to circulate  Submit to specific authority/ person
amended report, auditor shall take action to prevent reliance
on original report
st
• Notify client
In
• Notify regulatory agencies
• Make statement at AGM
 Consider withdrawal from engagement
C
AUDIT CERTIFICATE
 Certificate for special purpose
SJ
 Declaration of subject matter by management

 On auditor's letterhead
 State the limitations
 Work of expert being used
 Manner of checking

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Company Audit - II
Difference between Audit Report and Certificate
Basis Audit Report Audit Certificate

Meaning Statement of facts to give clear picture of audit conclusions Written confirmation of accuracy of information
te
Opinion Contains Opinion Does not contain opinion
Basis Based on information obtained & books of accounts Based on particular data
itu
Guarantee Does not provide absolute guarantee Provides absolute guarantee
Coverage Covers entire accounts Covers only certain part
st
Responsibility Auditor not held responsible Auditor responsible
Suggestion May provide suggestions No such suggestions
In
Nature Based on vouching & verification Based on arithmetical accuracy
Scope Wide Narrow
Characteristics Opinion oriented Fact oriented
C
Format Prescribed No standard format
SJ
Addressee To members/ appointing authority To concerned persons

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Company Audit - II
COMPANIES (AUDITOR'S REPORT) ORDER, 2016

Applicability
 Applies to every company including foreign company
te
 Does not apply to
• Banking Company
itu
• Insurance Company
• Section 8 Company
• Small Company
• One person Company
st
• Private Company
In
- Not holding/ subsidiary of public company
- PUSC & RRS ≤ 1 crore
- Borrowings ≤ 1 crore
- Total Revenue ≤ 10 crores
C
 Not applicable to audit of CFS
SJ

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Company Audit - II
Reporting Requirements [Para 3] [FILLED-CS-DFF-MNRP-NN] 

Clause Subject Matter Report on Clause Subject Matter Report on
(i) Fixed Assets Proper Records, Physical (ix) Application of Funds Moneys utilized for purposes for
te
Verification, Title Deeds which raised ⇒Default Delays &
subsequent rectification
itu
(ii) Inventories Physical verification (x) Fraud Fraud on company or by company
⇒ Nature & amount
(iii) Loans granted Terms & Conditions, Repayment (xi) Managerial Compliance with Section 197 and
schedule, Amount overdue for > Remuneration Schedule V Default ⇒ Amount &
st
90 days and steps for recovery Steps for recovery
(iv) Loans, investments Compliance with Section 185 (xii) Nidhi companies Net owned funds to Deposits ⇒
In
and guarantees and 186 1:20 10% unencumbered deposits
(v) Deposits Compliance with Section 73 to (xiii) Related party Compliance with section 177 and
76 and order of Tribunal on RBI transactions 188 and required disclosures made
C
(vi) Cost Records Maintenance as per Section (xiv) Preferential allotment Compliance with Section 42
148(1) utilization for specified purpose
SJ
(vii) Statutory dues Undisputed dues ⇒ regularity & (xv) Non-cash transactions Compliance with Section 192
o/s for > 6m
Disputed dues ⇒ Amount
involved & forum
(viii) Dues Repayment Default ⇒ Period & Amount (xvi) NBFC Registration Registered u/s 45-1A of RBI Act,
1934 and Regn. No.

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Nature, Scope and Significance of Auditing

NATURE, SCOPE AND SIGNIFICANCE OF AUDITING

ASPECTS TO BE COVERED IN AUDITING [ACER] 

Accounting and Compliance with generally accepted Examination of books, Reporting

CMA Inter Auditing Summary |1

OBJECTIVES OF AUDITING QUALITIES OF AN AUDITOR INHERENT LIMITATIONS OF AUDIT

• Filing of ITR • Discovering Errors and Frauds • Settlement of accounts

2 |CMA Inter Auditing Summary

Scope Wide Narrow

CMA Inter Auditing Summary |3

ACCOUNTING AND AUDITING

4 |CMA Inter Auditing Summary

Statutory Audit of Companies or LLPs Statutory Cost Audit

CMA Inter Auditing Summary |1

AS PER INDEPENDENCE/ INTERFERENCE

Statutory Special Audits Statutory Audits Internal Audit

Complete Audit Partial Audit Detailed Audit

2 |CMA Inter Auditing Summary

AS PER ORGANISATIONAL STRUCTURE

Voluntary Audits Statutory Audits Government Audit

• Settling trade and • Sale consideration • Of Financial Propriety

CMA Inter Auditing Summary |3

VOLUNTARY V/S STATUTORY AUDIT

4 |CMA Inter Auditing Summary

Continuous Audit Annual Audit Detailed Audit Balance Sheet Audit

periodic statements • Compliance with laws

Independent Financial Social Audit Environmental audit Propriety audit

6 |CMA Inter Auditing Summary

AS PER OBJECTIVES (CONTD.)

Information System Efficiency cum Performance Operational Audit

• Misallocation of resources Approach

CMA Inter Auditing Summary |7

AUDIT ENGAGEMENT, AUDIT DOCUMENTATION AND REPORT

Audit Programme Audit Working Papers Audit Notebook

CMA Inter Auditing Summary |1

 AUDIT PROGRAMME  AUDIT WORKING PAPERS  AUDIT NOTEBOOK

• Defence by inefficient staff

2 |CMA Inter Auditing Summary

PERMANENT AUDIT FILE CURRENT AUDIT FILE Note-

CMA Inter Auditing Summary |3

Need of audit evidence

Inspection Observation Inquiry and Confirmation Computation Analytical Review

Reliability of Audit Evidence

Obtained from Related controls Obtained directly Obtained in documentary Provided by

4 |CMA Inter Auditing Summary

TYPES OF AUDIT PROCEDURES

CMA Inter Auditing Summary |5

SOME IMPORTANT CONCEPTS

TRUE AND FAIR VIEW MATERIALITY SURPRISE CHECKS

6 |CMA Inter Auditing Summary

DISCLOSURE OF ACCOUNTING POLICIES

Consistency Accrual Going Concern

CMA Inter Auditing Summary |7

INTERNAL CHECK, INTERNAL CONTROL & INTERNAL AUDIT

PART A : INTERNAL CHECK

CMA Inter Auditing Summary |1

Checklist Cut-off Procedures Examination in depth :

Basis of distinction Test Checking Statistical Sampling

2 |CMA Inter Auditing Summary

PART B - INTERNAL CONTROL

Objectives of Internal Control

Compliance Safeguarding Accurate Increased Efficiency Review Delegation

Auditor should cross verify with other documents

` 10,000 ` 15,000 ` 10,000 Carbon copy of cash memos Proper accounting

Cash means consecutively numbered

Reconcile individual cash amounts

Proper classification & grouping

5. Audit of Co-operatives F. BANKS Balance with RBI

Borrowings - Signatures ↔ Specimen signature Treasury operation- Foreign

thereafter till conclusion of 3. Certificate → Certificate shall indicate ↓