Audit Programme

The Advisory Audit Programme for Statutory Audit of an Organization

Stage I Before Commencement of the audit: 1. 2. Open a new file by giving the current file number for a particular client. The file should contain the following: Brief History including activities, associate concerns, locations, present directors etc. Last year audited Balance Sheet. Trial Balance of the proposed audit period. Bank Reconciliation Statements for all banks. Interim/ Internal audit report, if any. Last year management report. The auditor is advised to go through all the documents carefully to equip.

3.

Stage II 1.

At the time of Commencement of the audit Enquire for any change (Addition/ Deletion) in terms of activities, location, associate concerns etc and update the brief history of the client. Also ensure, that the changes are properly recorded in the respective documents and informed to concerned authorities Ensure, the print outs of the final books of accounts of the previous year with proper closing entries. (Tallied with the Audited Balance Sheet) Check opening balances with the audited balance sheet including Qty/value of stock statement. Check BRS and verify the balances from bankbook and bank statements. Also see and mark the clearance dates of pending entries in BRS. Reverse the entries in case of stale /cancelled cheques. Ensure completeness of accounts by applying test checks. Examine the system of revenue/ expenses recognition and its correctness as per AS 9. Request the Client to provide the documents specified below: Bank balance Confirmation certificate. Certificate of interest paid/received during the financial year in case of all Term Loans and Fixed Deposits with closing balance. Balance confirmation from major debtors/creditors. Quantitative details of inventory. (As per Format enclosed).

2. 3. 4.

5. 6. 7.

Stock Sheet

Debtors for more than six months with further classification of Good, Bad or doubtful.

Audit Programme
Photocopy of TDS certificates & Advance Tax. Copies of Sales Tax/Service tax/TDS/Excise returns. Copies of Challan for Employee Contribution for PF/ESI. Payment proof (Challan) of statutory dues Payable. Details of Foreign Currency Transaction If any. Details of Contingent liabilities, if any.

Stage III During the audit 1. Check, examine and verify to see the level of implementation and effectiveness of procedures, Checks, Systems and controls, while capturing and recording the transactions in the books of accounts. Decide the size of SAMPLE for detailed vouching/ checking, on the basis of above observation of each area i.e. Cash, Bank, Purchase, Sales, Stores, Expenses, Fixed Assets, Payroll etc. Criteria for selection of sample should be recorded in audit file. Ensure timely payments to all enterprises registered under MSMED Act, 2006, as per contractual obligation.

2.

3.

MSMED_classification .pdf

MSMED2006.pdf

SalientFeaturesMSM EDAct.pdf

Vouching Examine vouchers w.r.t. Accounting heads, codes, date of transaction, amount, name of the party and so on. Check authorization, approvals, authenticity of supporting documents (Internal/ External) and propriety. Check, that the transaction falls within the audit period and supports are in proper name of the auditee. See and report, if any voucher remains unentered. See and report, if entries are passed in books directly, without vouchers. Revenue, Deferred and Capital expenditure is segregated properly and accounted for as per AS. Fixed assets/Investments, purchased if any, during the year should be examined w.r.t. Authority, Benefit, Ownership, Value and Existence. Year-end journal vouchers must be compulsorily examined/ scrutinized to ensure that the adjustment entries are properly recorded. Ensure that personal expenses of directors/owners are not debited in books.

Ledger Overview Identify non-routine accounts and examine the transactions. Identify party accounts, where no transaction has taken place during the year. Examine, whether any dispute/ litigation is pending or the balances need to be written off.

Audit Programme

Identify unusual transactions in parties accounts by looking at flow of transactions and examine them thoroughly to see their impact on profitability and/or presentation of final accounts. Repair and Maintenance accounts must be examined to see expenditure of capital nature, if any. Distinguish Loans/ Advances given and taken from normal Debtors/Creditors Accounts. Identify Debtors/ Advances, where recovery is bad/ doubtful. It can be done through ageing analysis. Examine expenditure accounts with a view to separate expenses of personal nature debited in the books. Examine all revenue and expenses accounts to ensure that income and expenditure of the audit period is only booked. It does not include Pre/ Post period items. Vehicle running and maintenance expenses must be examined to see that the expenses are related with only company owned vehicles. Telephone / mobile/ Electricity / Rent expenses etc should be properly reconciled with respect to Item/period. Identify all receivables and payables accounts (whether or not in the name of the parties) and check/reconcile the current status of the same. Verify all accounts written off during the year and satisfy yourself on reasons thereof. Check and scrutinize all credit entries in the expenses accounts and debit entries in the income accounts.

Confirmations/ Reconciliation/ Verification and Valuation: Inter branch/ Inter unit Accounts, Reconciliation. Inter Company accounts reconciliation of all associate concerns. Confirmation of balances as on the year- end from all major Debtors/ Suppliers/ Creditors. Certificate from Bank in respect of bank balance as on 31st March should be obtained in respect of all accounts. Confirmation of balance/ interest paid/ repayments made, should be taken from bank or financial institutions in respect of term loans etc. as on 31st march. Reconciliation of Sales/ Income figures from the Vat/ Excise/ Service Tax Returns filed with respective departments. Reconcile the figures of salaries/ wages with PF records and returns. Report of Physical Verification of Fixed Assets carried out if any, by the management. Alternatively, a certificate should be taken. Also check the additions/ deletions made during the period and ensure the requirements of AS 10 are complied with. Also, ensure that fixed assets records are maintained properly. Report of Physical Verification of inventory carried out if any, by the management. Alternatively, a certificate should be taken. Also, ensure that the stock records are properly maintained to record all receipts/issues/shortages etc.

Audit Programme

Valuation of Inventory as per AS 2 be taken and checked. Also, verify the Stock Statement submitted if any, to the bank and/or other authorities. Also, comment on change of valuation method, if any as compared to last year. Valuation of Investments as per AS 13 to be taken and checked. Valuation and accounting of Retirement Benefits (Bonus, Gratuity, Leave salary and other superannuation etc) to be examined as per AS 15. See and examine if any Impairment of assets exists (AS28) See and examine related party transaction from reporting point of view AS 18.

Provisions/ Prepaid Check, that appropriate provisions have been created in the books of accounts for various expenses/ liabilities. Check and separate-out the expenses paid but relates to next year as Pre-paid expenses. Examine the basis, calculations and documents relating thereto. Review the transactions of next financial year till the date of audit with a view to identify the impact on Balance Sheet in respect of Provisions, Contingent Liabilities and so on.

Legal Compliances Check, Verify and ensure that the process set up by the client for making various legal compliances i.e. VAT, Excise, Service Tax, TDS, PF, ESI is proper. TDS Ensure deduction on all payments and /or credits at applicable rates. Ensure deposition of TDS deducted and Returns filed on timely basis. Check TDS certificates are issued timely. Check TDS calculations on salaries to employees. All benefits, perquisites and payments to employees and their relatives must be considered for this purpose. Similar checks are to be applied in ensuring compliances of all applicable laws including labor laws.

Ratio Analysis Compare G.P. / N.P. ratio of last two years and record the reasons of variations, if any. Compare Direct/ Indirect expenses with previous year and record reasons of major variations, if any. Examine the matching concept for all individual heads of income/expenses.

Audit Programme
Calculate the ratio of cash expenses/payments v/s income/sales.

Other Specific Areas See and check MOA object clause for any addition of business activity during the year. Ensure that all statutory records including minutes book, Resolutions prescribed under the Companies Act, are maintained properly. Obtain a certificate that no legal cases are filed or pending against/ from the company. Otherwise, examine the status of legal cases and disputes with a view to find out definite/ contingent liability. Find out, if any guarantee is given by the company. If yes, the details thereof to be obtained. Source and the method of Introduction of Capital, if any, need to be examined and documented. Any loans taken/ repaid during the period should be checked with respect to mode and documentation. Check and examine the agreements/ contracts entered into, if any, during the year to see their implications on accounts. Check if any insurance claim is filed/ settled during the year. If yes, see the proper accounting impact thereof. Investments made during the year if any, should be examined with respect to ownership/ documentation/ purpose. Check, if any foreign currency transaction has taken place during the year. If yes, see the accounting implications of AS-11 thereof. Check applicability of Excise Act. .If yes, then, Excise register like RG23 Part-II and PLA and accounting of the same should be thoroughly checked. Check applicability of Service Tax.If yes, \then, the tax deposited should be tallied with the returns.

Reporting Requirements See the applicability of CARO. If Applicable, reply against each point should be taken/ derived from the records after proper verification. As per annexure enclosed.
Checklist for CARO.doc

See the applicability of TAX AUDIT. If applicable, reply to each point should be taken/ derived from the records after proper verification. See the requirements of SCHEDULE VI. If applicable, the information/ documents should be collected and verified from the records, accordingly. See the requirements of ACCOUNTING STANDARDS and ensure its implementation by the management. As per annexure enclosed.

Audit Programme

Accounting Standard.doc

4.

Draft a Management Report giving detailed observations of audit. Discuss with the audit partner and then issue the same to the companys management. As per format attached.

5.

Punching of final trial balance (signed by audit partner) in the pre-defined format in consultation with audit coordinator. Obtain Management Representation/ Reply letter and then draft a final report. Set of documents required for Audit purpose and Income Tax purpose should be segregated and placed in respective files, before completion of the audit.

6.

7.