Audit of NGO – CA Inter Audit Questions bank

Audit of NGO – CA Inter Audit Questions bank is designed strictly as per the latest syllabus and exam pattern.

Audit of NGO – CA Inter Audit Question Bank

Question 1.
State any five special points which you, as an auditor, would look into while examining the Income and collection of fund by an NGO engaged In providing relief work for flood victims. (Nov 2007, 5 marks)
Answer:

Receipt of Donations
Aspects to be verified	Verification
1. Internal Control	Ensure that the internal control system exists particularly referring the division of responsibilities with respect to authorised collection of donations, custody of receipt books and safe custody of money.
2. Receipt Books Custody	Ensure that unused receipt books are returned and are verified physically including checking of number of receipt books and numbering sequence there in.
3. Receipt of Cheque	Ensure that receipt book has a carbon copy for duplicate receipt and signed by a responsible official and also all details pertaining to the date of cheque, bank’s name, date, amount etc. should be clearly indicated.
4. Re-conciliation of Bank Statement	Ensure reconciliation of bank statements with reference to ail cash deposits referring to the date, amount and also receipt book.
5. Receipt of Cash	Ensure that registers of cash donations have been vouched extensively.
6. Contributions from Abroad	Any contribution made from abroad should comply with the applicable laws and regulations.

Remittance of Donation

Aspects to be Verified	Verification
1. Mode of Remittance	All remittances are sent through A/c Payee Cheque. Remittances made through Demand Draft should also be scrutinized thoroughly with reference to recipient.
2. Confirmation of Receipt of Remittance	All remittances should have been supported by receipts and acknowledgements.
3. Identity	The recipient NGO is a genuine entity. The address, 80 G Registration No., etc. should be verified.
4. Procedure of Direct Confirmation	Ensure that confirmation letters have been sent to those entities to whom donations have been paid.
5. Use of Donation	Ensure that donation has been used for the purpose required i.e. to provide relief to Tsunami victims.
6. Selecting system for NGO	Ensure the system for selecting NGO to whom donations have been sent.

Question 2.
What important points should an auditor keep in mind while checking receipt of rncorne of a Non-Governmental Organization (N.G.O)? (Nov 2010, 4 marks)
Answer:
Audit of Income:
(i) Contributions and grants for projects and programmes:
Check:

• agreement with donor and grant letter – to ensure that money received has been accounted for.
• that all foreign contribution receipts – are deposited under Foreign Contribution (Regulation)Act 1976.

(ii) Receipt from fundraising programme:
Verify:

• the internal control system,
• who is the person responsible for the collection of funds,
• mode of payment,
• collections are counted and deposited in the bank daily.

(iii) Membership fees:
(a) Check

• the fees received with the membership register,
• that proper classification is made between, entrance fees, annual fees.
• life membership fees.

(b) Reconcile the fees received and fees to be received during the year.

(iv) Subscriptions:
(i) Check or compare

• the subscription register with receipt issued.
• receipt Issued with subscription rate schedule.

(ii) Reconcile – subscription received with printing and despatch of corresponding magazines circuLars periodicals

(v) Interests and Dividends:
Check interest received and receivable with investments held during the year.

Question 3.
What are the points on which an auditor should concentrate while planning audit of an N.G.O? (May 2013, 8 marks)
Answer:
Special points for planning of Audit:

1. The auditor must obtain knowledge about the client activities, recent amendments, etc.
2. The constitutional fórm and organ Isatlonal structure of the NGO should be carefully studied and reviewed.
3. Decisions taken by the board, committee, managing body etc. can be evaluated by an analysis of the respective minute books.
4. Study and verify the applicability of the accounting system, procedure, internal control and internal check.
5. Materiality levels should be determined.
6. Nature and timing of the various audit report and other communications must be set.
7. The expert’s opinion and his report can be involved.
8. The previous.. year’s audit report should be thoroughly studied.

Audit Programme: The sequential order of assets, liabilities, incomes and expenditures must be maintained to see that no material Item gets omitted.
1. Corpus fund:

• Vouch it with reference to letters from donors.
• Tally the interest income with the Investment register and physical investment In hand.

2. Reserves:

• Vouch Transfer of amount from projects programmes with donor letters and board resolutions.
• Transfer of gross value of asset from capital reserve to general reserve and adjustment during the years.

3. Ear-marked funds:
check – requirements of donor institutions, board resolutions of NGOs, – rules and regulations of the schemes of ear-marked funds.

4. Project Agency balances:
Vouch – the disbursement and expenditure as per agreement with donor for each of the balances.

5. Loans: Vouch – with loan agreement, – receipt – counter toll issued.

6. Fixed assets (PPE):

• Vouch – acquisition /sale/disposal depreciation.
• Verify – its approval by an appropriate authority
• Check – donor’s letter or agreement to, grant, and the title for immovable property.

7. Investments:

• Check the investment register and the investments physically; to ensure that the name of the NGO is included in it.
• Verify approval of the appropriate authority.
• Refer bank account – for the principal and interest amount of the investment.

8. Cash In hand:

• Verity, at the year-end, physically, the cash ri hand and the Imprest balance.
• Check that it tallies with the books of account.

9. Bank balance:

• Check the bank reconciliation statement (BRS)
•  Ascertain details for:
  old outstanding balances, unadjusted amounts

10. Stock In hand:
Verity and obtains certificate from management for its quantities and valuation.

11. Programme Project expense:
(i) Verity the agreement with the donor or contributor for the particular project or programme In order to find out the condition.
(ii) If it Involves contracts-then:

• check its conditions and,
• ensure that income tax is deducted, deposited and returned tiled.

12. Establishment expenses:

• Verity that the PF, Life insurance premium, ESI and their administrative charges are deducted, contributed and deposited in the prescribed time.
• Verify the office and other administrative expenses like postage, stationery, travelling etc.

Question 4.
State with reasons (in short) whether the following statement is correct or incorrect:
NGOs registered under the Companies Act, 2013 can maintain their books on either accrual or cash basis. (May 2017, 2 marks)
Answer:
Incorrect: For NGO’s registered u/s 8 of the Companies Act, 2013, maintenance of books under the accrual basis Is compulsory.

Question 5.
As an Auditor of NGO, how do you check/ verify at least four receipts of income during the year? (Jan 2021, 4 marks)