{"id":15091,"date":"2023-03-07T12:18:38","date_gmt":"2023-03-07T06:48:38","guid":{"rendered":"https:\/\/gstguntur.com\/?p=15091"},"modified":"2023-03-10T14:36:02","modified_gmt":"2023-03-10T09:06:02","slug":"audit-of-different-types-of-entities-ca-inter-audit-notes","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/audit-of-different-types-of-entities-ca-inter-audit-notes\/","title":{"rendered":"Audit of Different Types of Entities \u2013 CA Inter Audit Notes"},"content":{"rendered":"<p>Audit of Different Types of Entities \u2013 <a href=\"https:\/\/gstguntur.com\/ca-inter-audit-notes\/\">CA Inter Auditing Notes<\/a>\u00a0is designed strictly as per the latest syllabus and exam pattern.<\/p>\n<h2>Audit of Different Types of Entities \u2013 CA Inter Auditing Notes<\/h2>\n<p>Question 1.<br \/>\nExplain in detail the duties of Comptroller and Auditor General of India.<br \/>\n[May 03 (8 Marks), Nov. 12 (10 Marks), RTP-May 19, Nov. 19]<br \/>\nAnswer:<br \/>\nDuties of Comptroller and Auditor General:<br \/>\n1. Compilation and submission of Accounts: The C &amp; AG should compile the accounts pertaining to annual receipts and disbursements of the Union or State or Union Territory, and submit these to the President or Governor or Administrator.<\/p>\n<p>2. Rendering Assistance in Accounts Maintenance: The C &amp; AG should provide such information to the Union or State or Union Territory, as they may require from time to time and render such assistance for preparing annual F.S. as they reasonably ask for.<\/p>\n<p>3. Auditing and Reporting: The C &amp; AG should audit and report on:<\/p>\n<ul>\n<li>All the expenditures from Consolidated Fund of India\/State\/Union Territory having a Legislative Assembly and to determine whether the monies disbursed were legally available for and applicable to the purpose for which they are applied.<\/li>\n<li>All the transactions of Union or State pertaining to Contingency Funds and Public Accounts.<\/li>\n<li>All Trading, Manufacturing, Profit &amp; Loss A\/cs &amp; Balance Sheets &amp; other subsidiary accounts kept in any department of a Union or State.<\/li>\n<\/ul>\n<p>4. Audit of Receipts and Expenditure of substantially financed entities: Where any body or authority is substantially financed by grant or loans from the Consolidated Fund of India\/State\/ Union Territory, the CAG shall audit and report on all receipts and expenditure of that body or authority.<\/p>\n<p>5. Audit of Grants or Loans: Where any grant or loan is given for any specific purpose from the Consolidated Fund of India\/State\/Union Territory to any authority or body, not being a foreign State or international organisation, the CAG shall scrutinise the procedures by which the sanctioning authority satisfies itself as to the fulfillment of the conditions subject to which such grants or loans were given.<\/p>\n<p>6. Audit of Receipts of Union or States: CAG shall audit all receipts which are payable into the Consolidated Fund of India\/State\/Union Territory and satisfy himself that the rules and procedures in that behalf are designed to secure an effective check on the assessment, collection &amp; proper allocation of revenue and are being duly observed.<\/p>\n<p>7. Audit of Accounts of Stores and Stock: The CAG shall have authority to audit and report on the accounts of stores and stock kept in any office or department of the Union\/State.<\/p>\n<p>8. Audit of Govt. Companies and Corporations: The duties and powers of the CAG in relation to the audit of the accounts of government companies shall be performed and exercised by him in accordance with the provisions of the Companies Act, 2013.<\/p>\n<p>Question 2.<br \/>\nWrite short note on: Audit of Expenditure in Government Audit. [May 07 (5 Marks), May 11 (4 Marks)]<br \/>\nOr<br \/>\nWrite short note on: Basic Standards set for audit of Government Expenditure. [Nov. 13 (4 Marks)]<br \/>\nOr<br \/>\nAn audit of Expenditure is one of the major components of Government Audit. In the context of &#8216;Government Expenditure Audit\u2019, write in brief, what do you understand by:<br \/>\n(i) Audit against Rules and Orders<br \/>\n(ii) Audit of Sanctions<br \/>\n(iii) Audit against Provision of Funds<br \/>\n(iv) Propriety Audit<br \/>\n(v) Performance Audit. [RTP-May 18]<br \/>\nOr<br \/>\nWrite basis standards set for Expenditure Audit of Government. [Nov. 18 (5 Marks)]<br \/>\nOr<br \/>\nAudit of government expenditure is one of the major components of government audit conducted by the office of C&amp;AG. The basic standards set for audit of expenditure are to ensure that there is provision of funds authorised by competent authority fixing the limits within which expenditure can be incurred. Explain those standards. [RTP-Nov. 19]<br \/>\nAnswer:<br \/>\nBasic Standards for audit of government expenditure:<br \/>\nExpenditure audit is conducted to observe the following standards:<br \/>\n1. Expenditure incurred conforms to the relevant provisions of the statutory enactments and is also in accordance with the financial rule and regulation. This is called audit against rules and orders.<\/p>\n<p>2. There is proper sanction either special or general accorded by the competent authority for all expenditure. This is known as audit of sanctions.<\/p>\n<p>3. There are provisions or budget of funds out of which expenditure can be met. This is called audit against provisions of fund.<\/p>\n<p>4. The expenditure is incurred with due regard to broad and general principle of propriety. This is called propriety audit.<\/p>\n<p>5. That the programmes, schemes and projects where large expenditure has been incurred are being run economically and yielding results. This is known as performance audit.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 3.<br \/>\nWhat are the focus points in doing propriety audits by C &amp; AG as regards government expenditure? [Nov. 11 (8 Marks)]<br \/>\nOr<br \/>\nWrite short note on: Propriety Audit. [Nov. 17 (4 Marks)]<br \/>\nOr<br \/>\nAudit against the propriety seeks to ensure that expenditure confirms to certain principles. Explain. [MTP-Oct. 19]<br \/>\nAnswer:<br \/>\nPropriety Audit: Propriety Audit stands for verification of transactions on the tests of public interest, commonly accepted customs and standards of conduct.<\/p>\n<p>Emphasis\/Scope: Instead of too much dependence on documents, vouchers and evidence, it shifts the emphasis to the substance of the transactions and looks into the appropriateness thereof on a consideration of financial prudence, public interest and prevention of wasteful expenditure.<\/p>\n<p>Thus, propriety audit is concerned with scrutiny of executive actions and decisions bearing on financial and profit and loss situation of the company with special regard to public interest and commonly accepted customs, and standards of conduct.<\/p>\n<p>Principles (Focus Points) of Propriety Audit:<\/p>\n<ul>\n<li>Expenditure is not prima facie more than the occasion demands.<\/li>\n<li>Every official exercise the same degree of vigilance in respect of expenditure as a person of ordinary prudence would exercise in respect of his own money.<\/li>\n<li>The authority exercises its power of sanctioning expenditure to pass an order which will not directly or indirectly accrue to its own advantage.<\/li>\n<li>Funds are not utilised for benefit of a particular person\/group of persons.<\/li>\n<li>Apart from the agreed remuneration, no other avenue is kept open to indirectly benefit the management personnel, employees and others.<\/li>\n<li>Wastages are avoided in expenditure.<\/li>\n<li>The expenditure should bring out optimum, enduring benefits instead of mere frittering away the public money on meeting day to day needs repeatedly.<\/li>\n<\/ul>\n<p>Question 4.<br \/>\nWith reference to Government Audit, what do you understand by &#8220;Audit of Commercial Accounts&#8221;? [May 05 (8 Marks)]<br \/>\nAnswer:<br \/>\nAudit of Commercial Accounts:<br \/>\nEntities engaged in commercial activities can be classified as:<\/p>\n<ul>\n<li>Departmental enterprises engaged in commercial and trading operations, which are governed by the same regulations as other Government departments such as defence factories, mines, etc.<\/li>\n<li>Statutory corporations created by specific statutes such as LIC, Air India, etc.<\/li>\n<li>Government companies, set up under the Companies Act, 2013.<\/li>\n<\/ul>\n<p>Auditing aspects<br \/>\n1. Departmental enterprises: The audit of departmental entities is done in the same manner as any Government department, where commercial accounts are kept,<\/p>\n<p>2. Statutory Corporations: Audit of statutory corporations depends on the nature of the statute governing the corporation.<\/p>\n<p>3. Government Companies: In respect of government companies, the provisions of Companies Act, 2013 are applicable.<\/p>\n<ul>\n<li>As per Sec. 139(7) and 139(5) of the Companies Act, 2013 the statutory auditor of a Government company shall be appointed or re-appointed by the GAG.<\/li>\n<li>The audit is done by qualified Chartered Accountants and the audit is done on similar lines with the audits of limited companies.<\/li>\n<li>In addition to report under section 143, the auditors have to give report on the specific matters as contained in the directives of the C&amp;AG.<\/li>\n<li>The auditor aforesaid shall submit a copy of his audit report to the CAG who shall have the right to comment upon, or supplement, the audit report in such manner as he may think fit.<\/li>\n<\/ul>\n<p>Question 5.<br \/>\nWhat are the powers of C&amp;AG in relation to the accounts of Government Companies audited by the statutory auditors? [Nov 05 (8 Marks)]<br \/>\nor<br \/>\nIn case of government companies, CAG has a right to issue directions to auditor and do supplemen\u00actary audit. Explain. [May 07 (8 Marks)]<br \/>\nor<br \/>\nWrite short notes on the following: Power of CAG u\/s 143(6) &amp; 143(7) in relation to audit of Gov\u00acernment Company. [Nov 07 (5 Marks)]<br \/>\nAnswer:<br \/>\nPowers of CAG in the Audit of a Government company:<br \/>\nRole of C&amp;AG is prescribed under sub-sections (5), (6) and (7) of section 143 of the Companies Act, 2013.<br \/>\n(a) Directions to Auditor &#8211; Sec. 143(5): In the case of a Government company, the CAG shall appoint the auditor and direct such auditor the manner in which the accounts of the Government company are required to be audited.<\/p>\n<p>(b) Supplementary Audit &#8211; Sec. 143(6): The CAG shall within 60 days from the date of receipt of the audit report have a right to,<\/p>\n<ul>\n<li>conduct a supplementary audit of the financial statement of the company by such person or persons as he may authorize in this behalf; and<\/li>\n<li>Comment upon or supplement such audit report:<\/li>\n<\/ul>\n<p>(c) Test Audit &#8211; Sec. 143(7): The CAG may, in case of government company, if he considers necessary, by an order, cause test audit to be conducted of the accounts of such company and the provisions of section 19A of the CAG (Duties, Powers and Conditions of Service) Act, 1971, shall apply to the report of such test audit.<\/p>\n<p>Question 6.<br \/>\nWrite short note on: Powers of C &amp; AG in connection with the performance of his duties. [Nov. 09 (5 Marks), Nov. 14 (4 Marks)]<br \/>\nOr<br \/>\nDiscuss the power of C &amp; AG in Government audit. [May 19 (3 Marks)]<br \/>\nOr<br \/>\nThe C&amp;AG Act gives powers to the C&amp;AG in connection with the performance of his duties. Explain. [MTP-May 20]<br \/>\nAnswer:<br \/>\nPowers of C &amp; AG in connection with the performance of his duties:<br \/>\nThe Comptroller and Auditor General&#8217;s (Duties, Powers and Conditions of Service) Act, 1971 gives<br \/>\nthe following powers to the C&amp;AG in connection with the performance of his duties:<\/p>\n<ul>\n<li>Inspection: To inspect any office of accounts under the control of the Union\/State including office responsible for the creation of the initial or subsidiary accounts.<\/li>\n<li>Transmission: To require that any accounts, books, papers and other documents which deal with or are otherwise relevant to the transactions under audit, be sent to specified places.<\/li>\n<li>Inquiry: To put such questions or make such observations as he may consider necessary to the preparation of any account or report which it is his duty to prepare.<\/li>\n<\/ul>\n<p>Question 7.<br \/>\nAudit of the accounts of stores and inventories has been developed as a part of expenditure audit with reference to the duties and responsibilities entrusted to C&amp;AG. Discuss.<br \/>\nAnswer:<br \/>\nAudit of Stores and inventories:<br \/>\nAudit of the accounts of stores and inventories has been developed as a part of expenditure audit with reference to the duties and responsibilities entrusted to C&amp;AG. Audit procedure of stores include the followings:<\/p>\n<ul>\n<li>Regulations governing purchase, receipts, issues, custody, sales, write-off and stock taking etc. are reviewed.<\/li>\n<li>Purchases are audited according to the rules prescribed for audit of expenditure.<\/li>\n<li>Ensure that prices paid are reasonable. Cases of uneconomical purchases of stores should be brought to the notice of concerned authority.<\/li>\n<li>The system of accounting for stores should also be reviewed and sure that the balance of stocks and stores in hand is within reasonable limits.<\/li>\n<li>Valuation of stocks should be seen carefully so that value accounts tally with the physical accounts.<\/li>\n<li>The sanction for write-offs is to be scrutinised.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 8.<br \/>\nThe Comptroller and Auditor General shall be responsible for compiling the accounts of the Union and of each State from the initial and subsidiary accounts rendered to the audit and accounts offices under his control by treasuries, offices or departments responsible for the keeping of such account. Explain. [MTP-Oct. 20]<br \/>\nAnswer:<br \/>\nC&amp;AG responsibility for compiling the accounts of the Union and State:<br \/>\nThe C&amp;AG shall be responsible for compiling the accounts of the Union and of each State from the initial and subsidiary accounts rendered to the audit and accounts offices under his control by treasuries, offices or departments responsible for the keeping of such account.<\/p>\n<p>The C&amp;AG shall, from the accounts compiled by him prepare in each accounts, showing under the respective heads, the annual receipts and disbursements for the purpose of the Union, of each State and of each Union Territory having a Legislative Assembly, and shall submit those accounts to the President or the Governor of a State or Administrator of the Union Territory having a Legislative Assembly, as the case may be, on or before such dates as he may, with the concurrence of the Government concerned, determine.<\/p>\n<p>The C&amp;AG Act of 1971 has provisions for relieving him of this responsibility to give information and render assistance to the Union and States. The C&amp;AG shall, insofar as the accounts, for the compilation or keeping of which he is responsible, enable him so to do, give to the Union Government, to the State Government or to the Governments of Union Territories having Legislative Assemblies, as the case may be, such information as they may, from time to time, require and render such assistance in the preparation of the annual financial statements as they may reasonably ask for.<\/p>\n<p>Question 9.<br \/>\nAudit against rules and orders aims to ensure that the expenditure conforms to the relevant pro\u00acvisions of the Constitution and of the laws and rules made thereunder. The job of audit is to see that these rules, regulations and orders are applied properly by the subordinate authorities. It is, however, not the function of audit to prescribe what such rules, regulations and orders shall be. Analyse and Explain [RTP-Nov. 20]<br \/>\nOr<br \/>\nWhat is the function of audit while examining various rules, regulations and orders with regard to Audit against Rules &amp; Orders by C&amp;AG? [Nov. 20 (3 Marks)]<br \/>\nAnswer:<br \/>\nAudit against Rules and orders:<br \/>\nAuditor is required to carry out examination of the various rules, regulations and orders issued by the executive authorities to see that:<br \/>\n(a) they are not inconsistent with any provisions of the Constitution or any laws made thereunder;<br \/>\n(b) they are consistent with the essential requirements of audit and accounts as determined by the CAG.<br \/>\n(c) they do not come in conflict with the orders of, or rules made by, any higher authority; and<br \/>\n(d) in case they have not been separately approved by competent authority, the issuing authority possesses the necessary rule-making power.<\/p>\n<p>Question 10.<br \/>\nThe auditor of a Govt. Company has to ensure that each item of expenditure is covered by a sanction, either general or special, of the competent authority. Explain. [RTP-Nov. 20]<br \/>\nAnswer:<br \/>\nAudit of Sanctions:<br \/>\nThe auditor has to ensure that each item of expenditure is covered by sanction, either general or special from the competent authority. The audit of sanction is directed both in respect of ensuring that:<br \/>\n(a) The expenditure is properly covered by a sanction and<br \/>\n(b) To satisfy that the authority sanctioning it, is competent for the purpose by virtue of powers vested by constitution.<\/p>\n<p>Question 11.<br \/>\nThe audit of receipts of government is not as old as audit of expenditure but with the rapid growth of public enterprises audit of receipts tax or non-tax has come to stay. Discuss audit of receipts with respect to Government Audit. [Nov. 20 (4 Marks)]<br \/>\nAnswer:<br \/>\nAudit of Receipts:<br \/>\nBasic principle of audit of receipts is to look at the general than on the particular, though individual cases of assessment, demand, collection, refund, etc. are important within the area of test check.<\/p>\n<p>Audit of receipts includes checking:<\/p>\n<ul>\n<li>whether all revenues due to government have been correctly assessed, realised and credited to government account by the designated authorities;<\/li>\n<li>whether adequate regulations and procedures have been framed by the concerned department\/ agency to secure an effective check on assessment and collection;<\/li>\n<li>whether regulations and procedures are actually being carried out;<\/li>\n<li>whether adequate checks are imposed to ensure the prompt detection and investigation of irregularities, double refunds, forged refund vouchers or other loss of revenue through fraud or wilful Omission or negligence to levy or collect taxes or to issue refunds; and<\/li>\n<li>review of systems and procedures to see that the internal procedures adequately secure correct and regular accounting of demand collections and refunds and to suggest improvement.<\/li>\n<\/ul>\n<p>Question 12.<br \/>\nDescribe the salient features of Financial Administration of Local Bodies. [Nov. 04 (8 marks)]<br \/>\nAnswer:<br \/>\nSalient Features of Financial administration of Local Bodies:<br \/>\nFinancial administration of local bodies comprises of following:<br \/>\n1. Budgetary Procedure: The objective of local bodies budgetary procedure are<\/p>\n<ul>\n<li>financial accountability,<\/li>\n<li>control of expenditure, and<\/li>\n<li>to ensure that funds are raised and money is spent in accordance with the rules and regulations.<\/li>\n<\/ul>\n<p>2. Expenditure Control<\/p>\n<ul>\n<li>In the local body legislative powers are vested in the Council whereas executive powers are delegated to the officers, e.g., Commissioners.<\/li>\n<li>All matters of regular revenue and expenditures are generally delegated to the executive wing.<\/li>\n<li>For special situations like, reduction in property taxes, refund of security deposits, etc., sanction from the legislative wing is necessary.<\/li>\n<\/ul>\n<p>3. Accounting System: The accounting system is characterised by<br \/>\n(a) accounts are usually kept under Cash System.<br \/>\n(b) subsidiary and statistical registers for taxes, assets, cheques etc.,<br \/>\n(c) separate vouchers for each type of transaction,<br \/>\n(d) compulsory monthly bank reconciliation,<br \/>\n(e) submission of summary reports on periodical basis to authorities at regional &amp; state level.<\/p>\n<p>Question 13.<br \/>\nDraft an Audit programme for conducting audit of accounts of a local body. [May 10 (5 Marks), May 16 (6 Marks)]<br \/>\nOr<br \/>\nState the background of &#8220;Local Bodies&#8221;. Draft an audit programme for audit of local bodies. [May 14 (8 Marks)]<br \/>\nAnswer:<br \/>\nAudit Programme for conducting audit of accounts of local bodies:<br \/>\n(a) Ensure validity of appointment.<\/p>\n<p>(b) Determine Objectives of Audit w.r.t.<\/p>\n<ul>\n<li>Reporting on True and fairness of financial statements.<\/li>\n<li>Strengths and weakness of Financial Control.<\/li>\n<li>Adherence to legal and administrative requirements.<\/li>\n<\/ul>\n<p>(c) Perform Audit w.r.t. following:<\/p>\n<ul>\n<li>Audit against Rules and Orders<\/li>\n<li>Audit against Sanctions.<\/li>\n<li>Audit against provision of funds.<\/li>\n<li>Propriety Audit and performance audit.<\/li>\n<li>Audit of Receipts and Revenue.<\/li>\n<\/ul>\n<p>(d) Frame the conclusion and Issue the Report<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 14.<br \/>\nState the important objectives of local body\u2019s audit. [May 15, May 17, May 18 (4 Marks)]<br \/>\nAnswer:<br \/>\nImportant Objectives of local body\u2019s audit:<br \/>\n(a) Reporting on the fairness of the content and presentation of financial statements;<br \/>\n(b) Reporting upon the strengths and weaknesses of systems of financial control;<br \/>\n(c) Reporting on the adherence to legal and\/or administrative requirements; .<br \/>\n(d) Reporting upon whether value is being fully received on money spent; and detection and prevention of error, fraud and misuse of resources<\/p>\n<p>Question 15.<br \/>\nExplain the different types of revenue grants which local bodies may receive. [Nov. 20 (3 Marks)]<br \/>\nAnswer:<br \/>\nDifferent types of revenue grants:<br \/>\nLocal bodies may receive different types of grants from the State administration as well. Broadly,<br \/>\nthe revenue grants are of three categories:<br \/>\n(a) General purpose grants: These are primarily intended to substantially bridge the gap between the needs and resources of the local bodies.<br \/>\n(b) Specific purpose grants: These grants which are tied to the provision of certain services or<br \/>\nperformance of certain tasks.<br \/>\n(c) Statutory and compensatory grants: These grants, under various enactments, are given to local bodies as compensation on account of loss of any revenue on taking over a tax by State government from local government.<\/p>\n<p>Question 16.<br \/>\nState 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. 07 (5 Marks)]<br \/>\nAnswer:<br \/>\nExamination of Income and collection of fund of NGO:<br \/>\n1. Grants, donations and other contributions: Grants, donations and Contributions received should be properly checked with reference to donors letter, bank statements etc. and ensure that they are properly accounted and banked.<\/p>\n<p>2. Foreign Contributions: In respect of Foreign contribution, ensure that all such contributions are as per RBI Guidelines and be kept in separate bank account.<\/p>\n<p>3. Receipts from fund raising programs: In the case of fund raising programs, verify the internal control system, mode of receipt and the authority accountable.<\/p>\n<p>4. Membership Fees: Check the membership fees received from the membership register and ensure proper classification into entrance fees, annual fees and life membership fees.<\/p>\n<p>5. Subscriptions: Check the subscriptions from the subscription register and receipts issued.<\/p>\n<p>6. Interest and Dividend: Check the interests and dividends received and receivable with investments held during the year.<\/p>\n<p>Question 17.<br \/>\nWhat important points should an auditor keep in mind while checking receipt of income of a Non-Governmental Organization (N.G.O.)? * [Nov. 10 (4 Marks)]<br \/>\nAnswer:<br \/>\nExamination of Income and collection of fund of NGO:<br \/>\n(i) Grants, donations and other contributions: Grants, donations and Contributions received should be properly checked with reference to donors letter, bank statements etc. and ensure that they are properly accounted and banked.<\/p>\n<p>(ii) Foreign Contributions: In respect of Foreign contribution, ensure that all such contributions are as per RBI Guidelines and be kept in separate bank account.<\/p>\n<p>(iii) Receipts from fund raising programs: In the case of fund raising programs, verify the internal control system, mode of receipt and the authority accountable.<\/p>\n<p>(iv) Membership Fees: Check the membership fees received from the membership register and ensure proper classification into entrance fees, annual fees and life membership fees.<\/p>\n<p>(v) Subscriptions: Check the subscriptions from the subscription register and receipts issued.<\/p>\n<p>(vi) interest and Dividend: Check the interests and dividends received and receivable with investments held during the year.<\/p>\n<p>Question 18.<br \/>\nWhat are the points on which an auditor should concentrate while planning audit of an N.G.O.? [May 13 (8 Marks)]<br \/>\nOr<br \/>\nYou have been appointed as an auditor of an NGO, briefly state the points on which you would concentrate while planning the audit of such an organisation? [RTP-Nov. 18]<br \/>\nAnswer:<br \/>\nPoints to be concentrated while planning an audit of an NGO:<\/p>\n<ul>\n<li>Knowledge of the NGO&#8217;s work, its mission and vision, areas of operations &amp; environment in which it operates.<\/li>\n<li>Reviewing its legal form and its MOA, AOA, rules and Regulations.<\/li>\n<li>Reviewing the Organisation chart, Manuals relating to financial and administrative matters.<\/li>\n<li>Examination of minutes of meetings of the Managing Committee\/Governing Body to ascertain the impact of decisions on the financial records.<\/li>\n<li>Study the accounting system, procedures, internal controls and internal checks existing for the % NGO and verify their applicability.<\/li>\n<li>Updating knowledge of relevant statutes especially with regard to recent amendments, circulars, judicial decisions viz. Foreign Contribution (Regulation) Act, 1976, Societies Registration Act, 1860, Income Tax Act, 1961 etc. and the Rules related to the statutes.<\/li>\n<li>Setting of materiality levels for audit purposes.<\/li>\n<li>The nature and timing of reports or other communications.<\/li>\n<\/ul>\n<p>Question 19.<br \/>\nAn NGO operating in Delhi had collected large scale donations for Tsunami victims. The donations so collected were sent to different NGOs operating in Tamil Nadu for relief operations. This NGO operating in Delhi has appointed you to audit its accounts for the year in which it collected and remitted donations for Tsunami victims. Draft audit programme for audit of receipts of donations and remittance of the collected amount to different NGOs. Mention six points each, peculiar to the situation, which you will like to incorporate in your audit programme for audit of said receipts and remittances of donations. [MTP-March 18, Oct. 18, March 19]<br \/>\nAnswer:<br \/>\nAudit of Donation Receipts:<br \/>\n(i) Internal Control System: Examine internal control system particularly with reference to division of responsibilities in respect of authorised collection of donations, custody of receipt books and safe custody of money.<\/p>\n<p>(ii) Custody of Receipt Books: Examine the existence of system regarding issue of receipt books, whether unused receipt books are returned and the same are verified physically including checking of number of receipt books and sequence of numbering therein.<\/p>\n<p>(iii) Receipt of Cheques: Receipt Book should have carbon copy for duplicate receipt and signed by a responsible official. All details relating to date of cheque, bank\u2019s name, date, amount, etc. should be clearly stated.<\/p>\n<p>(iv) Bank Reconciliation: Reconciliation of bank statements with reference to all cash deposits not only with reference to date and amount but also with reference to receipt book.<\/p>\n<p>(v) Cash Receipts: Register of cash donations to be vouched more extensively. If addresses are available of donors who had given cash, the same may be cross-checked by asking entity to post thank you letters mentioning amount, date and receipt number.<\/p>\n<p>(vi) Foreign Contributions, if any, to receive special attention to compliance with applicable laws and regulations.<\/p>\n<p>Remittance of Donations to Different NGOs:<\/p>\n<ul>\n<li>Mode of Sending Remittance: Ensure that all remittances are made through account payee cheques. Remittances through Demand Draft need to be scrutinised thoroughly with reference to recipient.<\/li>\n<li>Confirming Receipt of Remittance: Ensure that all remittances are supported by receipts and acknowledgements.<\/li>\n<li>Identity: Verify address, Registration Number, etc. of recipient NGO.<\/li>\n<li>Direct Confirmation Procedure: Send confirmation letters to entities to whom donations have been paid.<\/li>\n<li>Donation Utilisation: Ensure that amount of donation is utilised for providing relief to Tsunami victims.<\/li>\n<li>NGOs&#8217; Selection: Check system for selecting NGO to whom donations have been sent.<\/li>\n<\/ul>\n<p>Question 20.<br \/>\nHow the audit is advantageous to Sole Trader? [May 06 (8 Marks)]<br \/>\nAnswer:<br \/>\nAdvantages of Audit to Sole Traders:<br \/>\nSole traders are not required to have their accounts audited under any law. But still some of the sole traders who have vast and varied expenditures, get their private accounts audited. In most of such cases the accountant prepares and finalizes the accounts as well as checks the accuracy of accounts.<\/p>\n<p>Benefits of audit to Sole Trader:<\/p>\n<ul>\n<li>The accounts department will become more efficient as they know that their work is to be checked by an independent person. In this way extent of fraud or misappropriation is reduced to a minimum.<\/li>\n<li>Audited accounts are generally accepted as correct by the Income Tax Department. It will help the individual to get an early assessment of his accounts.<\/li>\n<li>Audited accounts help the administrators and executors.<\/li>\n<li>The audited accounts can be presented, as an evidence, in the courts.<\/li>\n<li>It will help to secure compensation from insurance companies in the event of loss by fire, etc.<\/li>\n<li>It helps in borrowing money from banks.<\/li>\n<\/ul>\n<p>Question 21.<br \/>\nYou are approached by a partnership firm to list out the advantages that will accrue to them, if the accounts are audited. State five important advantages. [May 07 (5 Marks)]<br \/>\nOr<br \/>\nWhat are the advantages of the audit of the accounts of partnership firm. [May 15 (6 Marks), MTP-April 19]<br \/>\nAnswer:<br \/>\nAdvantages of Audit of Partnership Firms:<br \/>\nThe partnerships firms a re governed by the Indian Partnership Act, 1932. This Act does not contemplate audit of the partnership firm. However, it is in the interest of the partners that the accounts of the firm are regularly audited by an independent auditor. The provision for the same may be made in the partnership deed itself.<\/p>\n<p>Advantages of Audit of Partnership Firms:<\/p>\n<ul>\n<li>Audited accounts help in settling accounts between the partners reliably.<\/li>\n<li>Audited accounts provide a reliable evidence for computing the amount due to the retiring partner or representative of deceased partner.<\/li>\n<li>Acceptance of Audited accounts by the Government agencies for various purposes like Income tax authorities for computing the assessable income.<\/li>\n<li>Audited accounts are relied upon by banks for advancing loan.<\/li>\n<li>Audited accounts can be helpful in the negotiation for sale or admission of a new partner.<\/li>\n<li>It is an effective safeguard against any undue advantage being taken by a working partner as against the non-working partners<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 22.<br \/>\nMention important points which auditors will consider while conducting audit of accounts of a partnership firm. [May 13 (8 Marks), May 16 (6 Marks), RTP-May 19]<br \/>\nOr<br \/>\nThere are certain points which are required to consider specially in the audit of accounts of a partnership. Discuss any three points briefly. [Nov. 19 (3 Marks)]<br \/>\nAnswer:<br \/>\nPoints to be considered in Audit of Partnership Firms:<br \/>\n1. Confirming that the letter of appointment, signed by a partner, duly authorised, clearly states nature &amp; scope of audit contemplated by the partners, specially limitation, if any.<\/p>\n<p>2. Examine the partnership deed to ensure that it had been signed by all partners &amp; registered with the registrar of firms. Ascertain from the partnership deed about capital contribution, profit sharing ratios, interest on capital contribution, powers and responsibilities of the partners, etc.<\/p>\n<p>3. Study the minute book, if any, maintained to record the policy decision taken by partners specially the minutes relating to authorisation of extraordinary and capital expenditure, raising of loans, purchase of assets and other such matters which are not of a routine nature.<\/p>\n<p>4. Verifying that the business in which the partnership is engaged is authorised by the partnership agreement.<\/p>\n<p>5. Examining whether books of account appear to be reasonable and are considered adequate-in relation to the nature of the business of the partnership.<\/p>\n<p>6. Verifying that the profits\/losses have been divided among partners in agreed profit-sharing ratio.<\/p>\n<p>7. Confirming that a provision for the firm\u2019s tax payable by the partnership has been made in the accounts before arriving at the amount of profit divisible among the partners.<\/p>\n<p>8. Ensure that various requirements of legislations applicable to the partnership firm like Section 44AB of the Income-tax Act, 1961 have been complied with.<\/p>\n<p>Question 23.<br \/>\nWrite a short note on: Books of Account to be maintained by a Limited Liability Partnership.<br \/>\nAnswer:<br \/>\nBooks of Account to be maintained by a LLP:<br \/>\nAs per Sec. 34 of LLP Act, 2008, LLP shall maintain such proper books of account as may be prescribed relating to its affairs for each year of its existence. Books may be maintained on cash basis or accrual basis and according to double entry system of accounting. Books shall be maintained at registered office for such period as may be prescribed.<\/p>\n<p>As per Rule 24 of LLP Rules, 2009, the books of account shall contain:<br \/>\n(a) particulars of all sums of money received and expended by the LLP and the matters in respect of which the receipt and expenditure takes place;<br \/>\n(b) a record of the assets and liabilities of the LLP;<br \/>\n(c) statements of cost of goods purchased, inventories, WIP, finished goods and cost of goods sold; and<br \/>\n(d) any other particulars which the partners may decide.<\/p>\n<p>The books of account which a LLP is required to keep shall be preserved for eight years from the date on which they are made.<\/p>\n<p>Question 24.<br \/>\nWrite a short note on: Statutory provisions as to Audit of Limited Liability partnerships.<br \/>\nAnswer:<br \/>\nStatutory Provisions as to Audit of LLP:<br \/>\nAs per Sec. 34 of LLP Act, 2008, accounts of LLP shall be audited in accordance with such rules as may be prescribed.<br \/>\nRule 24 of LLP Rules, 2009 provides the following in relation to audit:<\/p>\n<p>Requirement of Audit: A LLP whose turnover does not exceed, in any financial year, ? 40 Lacs, or whose contribution does not exceed ? 2 5 Lacs shall not be required to get its accounts audited. If partners of such LLP decide to get the accounts of such LLP audited, the accounts shall be audited in accordance with these rules.<\/p>\n<p>Eligibility for auditor: A person shall not be qualified for appointment as an auditor of a LLP unless he is a Chartered Accountant in practice.<\/p>\n<p>Period of Appointment: Auditor of a LLP shall be appointed for each financial year of the LLP for auditing its accounts.<\/p>\n<p>Appointment of auditor by designated partner: The designated partners may appoint an auditor:<br \/>\n(a) at any time for the first financial year but before the end of the first financial year,<br \/>\n(b) at least 30 days prior to the end of each financial year (other than the first financial year),<br \/>\n(c) to fill a casual vacancy in the office of auditor, including in the case when the turnover or contribution of a LLP exceeds the limits, or<br \/>\n(d) to fill up the vacancy caused by removal of an auditor.<\/p>\n<p>Appointment of auditor by partner: Partners may appoint an auditor where the designated partners have power to appoint and have failed to appoint.<\/p>\n<p>Tenure of Auditor: Auditor shall hold office in accordance with the terms of his or their<br \/>\nappointment and shall continue to hold such office till the period the new auditors are appointed, or they are re-appointed.<\/p>\n<p>Question 25.<br \/>\nList the benefits that arise to LLP from getting the accounts audited.<br \/>\nAnswer:<br \/>\nBenefits that arise to LLP from getting the accounts audited:<br \/>\n(a) Detection of errors &amp; frauds<br \/>\n(b) Verification of financial statements<br \/>\n(c) Resolving disputed among the partners in relation to accounting matters.<br \/>\n(d) Arranging finance from banks &amp; financial institutions.<br \/>\n(e) Improved management of the LLP<br \/>\n(f) Settlement of accounts between partners at the time of admission, death, retirement, insolvency, insanity, etc.<\/p>\n<p>Question 26.<br \/>\nBriefly describe the auditor\u2019s duty regarding audit of LLP.<br \/>\nAnswer:<br \/>\nAuditor&#8217;s duty regarding Audit of LLP:<br \/>\n(a) Auditor should obtain instructions in writing as to the work to be performed by him.<\/p>\n<p>(b) Auditor should read the LLP agreement &amp; note the following provisions<\/p>\n<ul>\n<li>Nature of the business of LLP<\/li>\n<li>Capital contributed by each partner<\/li>\n<li>Interest in respect of capital contributions<\/li>\n<li>Duration of partnership<\/li>\n<li>Drawings allowed to the partners<\/li>\n<li>Salaries, commission etc. payable to partners<\/li>\n<li>Rights &amp; duties of partners<\/li>\n<li>Method of settlement of accounts between partners at the time of admission, retirement, admission etc.<\/li>\n<li>Any loans advanced by the partners<\/li>\n<li>Profit sharing ratio<\/li>\n<\/ul>\n<p>(c) Auditor should report<br \/>\n(a] Whether the records reflects true and fair view<br \/>\n(b) Whether he obtains all information &amp; explanation<br \/>\n(c) whether any restriction\/limitation imposed upon him.<\/p>\n<p>(d) If minute book is being maintained, auditor shall refer it for any resolution passed regarding the accounts.<\/p>\n<p>Question 27.<br \/>\nMention any six points to be considered for good internal control for collection of tuition fees from students of college. [May 09 (6 Marks)<br \/>\nAnswer:<br \/>\nInternal control points for collection of tuition fees:<br \/>\n(a) There must be a clear-cut tuition fee structure approved by the college council.<br \/>\n(b) The challan or paying in slip should contain necessary fields for identifying the roll number of the student, class, and period for which fees is paid etc. The slips should have such number of counterfoils to cross check the remittance.<br \/>\n(c) The paying in slip when filled by the students, should be checked for its correctness as to applicable amount etc. by one clerk and the amount should be entered in a scroll. He must initial the slip which authorises the cashier to accept the fees as per slip.<br \/>\n(d) The cashier scroll and the authorising officer\/s scroll should be checked by an officer daily.<br \/>\n(e) All remittance should be banked each day. No amount should be allowed to be spared for meeting any type of expense.<br \/>\n(f) Alternatively, the fees may be directly remitted into bank and banker\u2019s daily remittance slip should be scrutinised by college officers.<br \/>\n(g) Arrears list should be periodically prepared from the students rolls. Any concession, remission of tuition fees should have approval of competent authority.<br \/>\n(h) Delayed remittance should carry fines or compensating charges for delay.<br \/>\n(i) When students are readmitted after removal for non-payment of fees, the admission should carry the permission of competent authority.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 28.<br \/>\nMention the eight important points which an auditor will consider while conducting the audit of educational institutions. [May 12 (8 Marks)]<br \/>\nOr<br \/>\nMention any eight important points which an auditor will consider while conducting the audit of a school. [Nov. 14 (8 Marks)]<br \/>\nAnswer:<br \/>\nSpecial Points in audit of Educational Institutions (School):<br \/>\n1. Examine the charters, trust deed, applicable Act etc. containing the rules and regulations. Particular attention should be given to those rules and regulations that have a bearing on the accounts.<br \/>\n2. The system of keeping the accounts should be ascertained and go through the proceedings of the minutes of the governing body, especially those relating to the accounts.<br \/>\n3. The auditor should obtain a copy of the budget sanctioned or the financial statement. This would enable him to acquaint himself with the different heads of income and expenditures of the institution.<br \/>\n4. The auditor should vouch all the receipts through students\u2019 monthly fees with the help of students&#8217; fees register or the carbon copies of the fees receipts along with the entries in the cash book and bank book.<br \/>\n5. The auditor should see that the fees received in advance have been properly dealt with.<br \/>\n6. Verify the grants received from the government.<br \/>\n7. Check whether the money has been utilised for the purpose for which it was received.<br \/>\n8. Examine whether the concessions granted to the students are duly authorised.<br \/>\n9. Donations received from different charitable bodies have been duly acknowledged and recorded properly in the accounts.<br \/>\n10. The auditor should vouch the incomes from the properties, buildings which sometimes are given on rent for public functions etc.<br \/>\n11. If the institution also provides hostel facilities, the hostel fees and deposits received from the students should be vouched with the counter foils of the receipts.<br \/>\n12. All the establishment expenses should be carefully vouched in detail and the capital expenses should be given particular attention.<br \/>\n13. The auditor should examine the stocks of furniture, equipments, stationery etc. very carefully.<br \/>\n14. The amount of salary paid to staff should be vouched thoroughly through the Salary Register. Check that the salary is given after taking the signatures of the personnel receiving the salary.<br \/>\n15. The auditor should see that all the assets and liabilities are brought into account. Physically verify the fixed assets.<br \/>\n16. The auditor should check the payments made on account of scholarships with reference to the Scholarship Register.<br \/>\n17. Verify the annual statements of accounts and while doing so see that separate statements of account have been prepared as regards different funds, for example, PF to the Staff, Building Fund etc.<\/p>\n<p>Question 29.<br \/>\nMention any 8 special points which you as an auditor would look into while auditing the books of account of Hospital. [May 11, Nov. 12, May 14 (8 Marks) MTP-March 18, Aug. 18, Oct. 18, March 19, RTP-May 19]<br \/>\nOr<br \/>\nYou have been appointed auditor of M\/s. Divine Children Hospital. Discuss any four important points that would attract your attention while audit. [Nov. 19 [4 Marks)]<br \/>\nAnswer:<br \/>\nSpecial Points in Audit of books of account of Hospital:<\/p>\n<ul>\n<li>Examine the letter of appointment to ascertain the scope of responsibilities.<\/li>\n<li>Study the Charter or Trust Deed under which the hospital has been set up and take a special note of the provisions affecting the accounts.<\/li>\n<li>Examine and evaluate the system of internal check and internal control and determine the nature, timing and the extent of audit procedures.<\/li>\n<li>Vouch the entries in the Patients\u2019 Bill Register with the copies of bill issued. Test check the selected bills to see that these have been correctly prepared taking into account the period of stay of each patient as recorded in the Attendance Schedule.<\/li>\n<li>Vouch the collection from patients with copies of bills and entries in Bills Register. Arrears of dues should be properly carried forward and where these are deemed to be irrecoverable, they should be written off under due authorisations.<\/li>\n<li>Interest and\/or dividend income should be vouched with reference to the Investment Register and Interest and Dividend warrants.<\/li>\n<li>In case of legacies and donations which are received for specific purposes, it should be ensured that any income therefrom is not applied for any other purposes.<\/li>\n<li>Where receipts of subscriptions show significant deviations from budgeted figures, it should be thoroughly inquired into and the matter be brought to the notice of the trustees or the Managing Committee.<\/li>\n<li>Governments grants or grants from local bodies should be verified with reference to the correspondence with the concerned authorities.<\/li>\n<li>Clear distinction should be made between the items of capital and revenue nature.<\/li>\n<li>The capital expenditure should be incurred under proper authorisation by a valid resolution of the trustees or the Managing Committee.<\/li>\n<li>Check the system of internal check as regards purchases and issue of stores, medicines etc.<\/li>\n<li>Examine that the appointment of the staff, payment of salaries etc. are duly authorised.<\/li>\n<li>Physically verify the investments, fixed assets and inventories.<\/li>\n<li>Check that adequate depreciation has been provided on all the depreciable assets.<\/li>\n<\/ul>\n<p>Question 30.<br \/>\nWhat steps would you take into consideration in auditing the receipts from patients of a Hospital? [Nov. 17 (6 Marks)]<br \/>\nAnswer:<br \/>\nSteps to be considered while auditing the receipts from patients of a hospital:<br \/>\n(a) Examine and evaluate the system of internal control w.r.t. raising bills, maintaining records of patients, etc.<br \/>\n(b) Vouch the Register of patients with copies of bills issued to them.<br \/>\n(c) Verify bills for a selected period with the patients\u2019 attendance record to see that the bills have been correctly prepared.<br \/>\n(d) Ensure that bills have been issued to all patients from whom an amount was recoverable according to the rules of the hospital.<br \/>\n(e) Vouch the collection from patients with copies of bills and entries in Bills Register.<br \/>\n(f) Arrears of dues should be properly carried forward and where these are deemed to be irrecoverable, they should be written off under due authorisations.<\/p>\n<p>Question 31.<br \/>\nIn the case of audit of a charitable institution, what attentions should be paid by auditor regarding audit of expenditure items? [Nov. 19 (4 Marks)]<br \/>\nAnswer:<br \/>\nAudit of Expenditure items in case of Charitable Institution:<br \/>\n1. If any grant is being allowed to any person, verify whether the grant have been paid only for a charitable purpose or purposes falling within the purview of the objects for which the charitable institution has been set up and that no trustee, director or member of the Managing Committee has benefited there from either directly or indirectly.<\/p>\n<p>2. Verify the schedules of securities held, as well as inventories of properties both movable and immovable by inspecting the securities and title deeds of property and by physical verification of the movable properties on a test basis.<\/p>\n<p>3. Verifying the cash and bank balances.<\/p>\n<p>4. Ascertaining that any funds contributed for a special purpose have been utilised for the purpose.<\/p>\n<p>Question 32.<br \/>\nHow will you vouch\/verify the following investments income in the case of charitable institution. [RTP-Nov. 20]<br \/>\nAnswer:<br \/>\nInvestment Income in the case of Charitable Institution:<\/p>\n<ul>\n<li>Vouching the amounts received with the dividend and interest counterfoils.<\/li>\n<li>Checking the calculations of interest received on securities bearing fixed.<\/li>\n<li>Checking that the appropriate dividend has been received where any investment has been sold ex-dividend or purchased cum-dividend.<\/li>\n<li>Comparing the amounts of dividend received with schedule of investments making special enquiries into any investments held for which no dividend has been received.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 33.<br \/>\nMention any 8 special points which you as an auditor would look into while auditing the books of account of Cinema. [May 11 (8 Marks)]<br \/>\nAnswer:<br \/>\nSteps involved in audit of Cinema Hall:<br \/>\n1. Preliminary Engagement activities<\/p>\n<ul>\n<li>Study carefully the documents relating to the setting up of the organisation such as MOA and AOA, etc. and note down the provisions relating to accounts.<\/li>\n<li>Examine the letter of appointment to ascertain the scope of responsibilities.<\/li>\n<li>Obtain an Understanding of Entity and its environment and determine the risk of material misstatements.<\/li>\n<li>Determine the responses to assessed risk of material misstatements.<\/li>\n<\/ul>\n<p>2. Evaluation of Internal Control: to verify<\/p>\n<ul>\n<li>that entrance to the cinema hall is only through printed tickets;<\/li>\n<li>tickets are serially numbered and bound into books;<\/li>\n<li>that the number of tickets issues for each show and class are different;<\/li>\n<li>that for advance booking a separate series of tickets is issued and<\/li>\n<li>stock of tickets is kept in proper custody.<\/li>\n<li>that Cash collected is deposited in banks partly on the same day and rest on the next day &#8211; depending upon the banking facility available<\/li>\n<\/ul>\n<p>3. Substantive Procedures (Vouching and Verification)<\/p>\n<ul>\n<li>Verify the income from advertisements and slides showed before the show.<\/li>\n<li>Vouch the expenditure incurred on publicity of picture, maintenance of hall, electricity expenses etc.<\/li>\n<li>Vouch recoveries of advertisement expenses etc. from film distributors.<\/li>\n<li>Vouch payment of film hire with reference to agreement with distributor or producer.<\/li>\n<li>Verify the basis of other incomes earned like restaurant, vehicle parking and display windows etc.<\/li>\n<li>Confirm that depreciation on machinery and furniture has been charged at an appropriate rate.<\/li>\n<\/ul>\n<p>4. Others (System Audit)<\/p>\n<ul>\n<li>If tickets are issued through computer-audit the system to ensure its reliability and authenticity of data generated by it.<\/li>\n<li>System should provide that at the end of each show a proper statement should be prepared and cash collected be tallied.<\/li>\n<\/ul>\n<p>Question 34.<br \/>\nMention any eight important points which an auditor will consider while conducting audit of club? [Nov. 13 (8 Marks)]<br \/>\nAnswer:<br \/>\nSteps in auditing the accounts of a club:<br \/>\n1. Preliminary Engagement Activities<\/p>\n<ul>\n<li>Study carefully the documents relating to the setting up of the organisation such as MOA and AOA, etc. and note down the provisions relating to accounts.<\/li>\n<li>Examine the letter of appointment to ascertain the scope of responsibilities.<\/li>\n<li>Obtain an Understanding of Entity and its environment and determine the risk of material misstatements.<\/li>\n<li>Determine the responses to assessed risk of material misstatements.<\/li>\n<\/ul>\n<p>2. Substantive Procedures (Tests of Details)<br \/>\nA. Receipts<\/p>\n<ul>\n<li>Vouch the receipt on account of entrance fees with members\u2019 applications, counterfoils issued\/minutes of the Managing Committee.<\/li>\n<li>Vouch member\u2019s subscriptions with the counterfoils of receipt issued to them.<\/li>\n<li>Reconcile the amount of total subscriptions due with the amount collected and that outstanding.<\/li>\n<li>Ensure that arrears of subscriptions for the previous year have been correctly brought over and arrears for the year under audit and subscriptions received in advance have been correctly adjusted.<\/li>\n<li>Verify the internal check as regards members being charged with the price of foodstuffs and drinks provided to them and their guests, as well as, with the fees chargeable for the special services rendered, such as billiards, tennis, etc.<\/li>\n<li>Trace debits for a selected period from subsidiary registers maintained in respect of supplies and services, to members to confirm that the account of every member has been debited with amounts recoverable from him.<\/li>\n<\/ul>\n<p>B. Payments<\/p>\n<ul>\n<li>Vouch purchase of sports items, furniture, crockery, etc. and trace their entries into the respective stock registers.<\/li>\n<li>Vouch purchases of foodstuffs, cigars, wines, etc., and test their sale price so as to confirm that the normal rates of gross profit have been earned on their sales. The stock of unsold provisions and stores, at the end of year, should be verified physically and its valuation checked.<\/li>\n<\/ul>\n<p>C. Assets<\/p>\n<ul>\n<li>Check the stock of furniture, sports material and other assets physically with the respective stock registers or inventories prepared at the end of the year.<\/li>\n<li>Inspect the share scrips and bonds in respect of investments, check their current values for disclosure in final accounts; also ascertain that the arrangements for their safe custody are satisfactory.<\/li>\n<\/ul>\n<p>D. Others<br \/>\nExamine the financial powers of the secretary and, if these have been exceeded, report specific care for confirmation by the Managing Committee.<\/p>\n<p>Question 35.<br \/>\nCine Screen Multiplex Ltd. is operating cinemas in different locations in Mumbai and has appointed you as an internal auditor. What are the areas that need to be verified in relation to receipts from sale of Tickets? [MTP-May 20]<br \/>\nAnswer:<br \/>\nVerification points in receipts from sale of tickets:<\/p>\n<ul>\n<li>Verify that entrance to the cinema-hall during show is only through printed tickets;<\/li>\n<li>Verify that they are serially numbered and bound into books;<\/li>\n<li>Verify that the number of tickets issued for each show and class, are different though the numbers of the same class for the show on the same day, each week, run serially;<\/li>\n<li>Verify that for advance booking a separate series of tickets is issued;<\/li>\n<li>Verify that the inventory of tickets is kept in the custody of a responsible official.<\/li>\n<li>Confirm that at the end of show, a statement of tickets sold is prepared and cash collected is agreed with it.<\/li>\n<li>Verify that a record is kept of the \u2019free passes&#8217; and that these are issued under proper authority.<\/li>\n<li>Reconcile the amount of Entertainment Tax collected with the total number of tickets issued for each class.<\/li>\n<li>Vouch the entries in the Cash Book in respect of cash collected on sale of tickets for different shows on a reference to Daily Statements which have been test checked as aforementioned with record of tickets issued for the different shows held.<\/li>\n<\/ul>\n<p>Question 36.<br \/>\nWhat procedure may be adopted by an auditor, while auditing leasing transactions entered into by the leasing company? [Nov. 13 (8 Marks)]<br \/>\nAnswer:<br \/>\nAudit procedure for examination of hire purchase transactions:<br \/>\n1. Examine the MOA and AOA of the hire purchasing company to see whether is it is one of the object and within its powers to let the goods on hire.<\/p>\n<p>2. Examine the letter of appointment to ascertain the scope of responsibilities.<\/p>\n<p>3. Ensure that adequate resolution has been passed authorizing a particular director to execute the hire purchase agreement.<\/p>\n<p>4. The hire purchase agreement should be in writing and be signed by all the parties viz. the owner, the hirer.<\/p>\n<p>5. Hire purchase agreement should clearly specify the following:<\/p>\n<ul>\n<li>the hire purchase price of the goods;<\/li>\n<li>the cash price of the goods;<\/li>\n<li>the date of commencement of the hire purchase agreement;<\/li>\n<li>the number of instalments by which the hire purchase price is to be paid, the amount of those instalments, the due date etc.;<\/li>\n<li>the description of goods involved in the hire purchase agreement;<\/li>\n<li>procedures to be followed in case of default by the hire purchaser.<\/li>\n<\/ul>\n<p>6. Check whether the payments are being received regularly as per the agreement. Where the payments are received in cash check the counterfoils issued to the hirer. In most of the cases, post dated cheques are taken from the hire purchaser. In such cases, the auditor should see that these cheques are kept in proper custody, are marked as account payee, and duly presented on the due dates.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 37.<br \/>\nDefine the different types of lease agreements as per Accounting Standard\/Ind-AS. [May 19 (4 Marks)]<br \/>\nAnswer:<br \/>\nDifferent Types of Lease Agreements:<br \/>\nAs per AS-19\/Ind-AS 17 lease arrangements could be of 2 types i.e.<br \/>\n1. Finance Lease and<br \/>\n2. Operating Lease.<br \/>\n(a) Finance Lease: An arrangement with the following attributes qualifies as a Finance Lease:<\/p>\n<ul>\n<li>The lease arrangement transfers ownership of the asset to the lessee at the end of the lease term;<\/li>\n<li>The lessee has the option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised;<\/li>\n<li>The lease term is for the major part of the economic life of the asset even if title is not transferred;<\/li>\n<li>At the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; and<\/li>\n<li>The leased assets are of such a specialized nature that only the lessee can use them without major modifications.<\/li>\n<\/ul>\n<p>(b) Operating Lease: An arrangement that does not transfer substantially all the risks and rewards incidental to ownership qualifies as an Operating Lease. In other words, an operating lease is a lease arrangement &#8220;Other than finance lease\u201d.<\/p>\n<p>Question 38.<br \/>\nWhat special steps will you take into consideration in auditing the accounts of a hotel. [May 05 (10 Marks)]<br \/>\nOr<br \/>\nWhat are the six important points that will attract your attention in the case of audit of a hotel. [Nov. 09 (5 Marks)]<br \/>\nAnswer:<br \/>\nSteps in Auditing the accounts of a hotel:<br \/>\nA. Preliminary Engagement activities<\/p>\n<ul>\n<li>Study carefully the documents relating to the setting up of the organisation such as MOA and AOA, etc. and note down the provisions relating to accounts.<\/li>\n<li>Examine the letter of appointment to ascertain the scope of responsibilities.<\/li>\n<li>Obtain an Understanding of Entity and its environment and determine the risk of material misstatements.<\/li>\n<li>Determine the responses to assessed risk of material misstatements.<\/li>\n<\/ul>\n<p>B. Substantive Procedures (Tests of Details)<br \/>\n1. Revenue Receipts (Income)<\/p>\n<ul>\n<li>Vouch the receipts from sale of foodstuffs, cold drinks etc. from the copies of cash memos and the summary of daily takings prepared by the cashier.<\/li>\n<li>Examine the Visitors Ledger and the daily totals thereof should be vouched with the Cash Book and Impersonal Ledger.<\/li>\n<li>Receipts on account of boarding and lodging should be checked with individual customer&#8217;s accounts as also the number of days the rooms were occupied.<\/li>\n<li>Receipts on account of holding of marriages, receptions, conferences, seminars etc. should be checked with the agreements and correspondence with the parties concerned and the counterfoils of money receipts.<\/li>\n<li>Check the adequacy of internal check as regards charging the members for foodstuffs, etc. supplied to them and their guests.<\/li>\n<\/ul>\n<p>2. Revenue Payments (Expenses)<\/p>\n<ul>\n<li>Where commission is paid to travel agents or booking agents, the same should be verified with reference to the agreement entered into on this behalf.<\/li>\n<li>Examine the procedures relating to purchases and issue of foodstuffs, crockery etc. All the purchases should be properly authorised and be accounted for in the Stock Registers.<\/li>\n<li>Vouch the expenditure on purchase of magazines and journals with the bills supplied by the vendors.<\/li>\n<li>Salaries and yearly increments to staff should be verified by reference to service contracts, salary registers, etc.<\/li>\n<li>Expenditure on repairs and maintenance should be vouched with the bills or receipts submitted by the people involved for the work.<\/li>\n<\/ul>\n<p>3. Capital Items (Assets and Liabilities)<\/p>\n<ul>\n<li>Physically verify the investments, fixed assets and inventories.<\/li>\n<li>Check that adequate depreciation has been provided on all the depreciable assets.<\/li>\n<\/ul>\n<p>4. Others<br \/>\nWhere the hotel also operates a booth to facilitate conversion of foreign currency into Indian rupees the auditor should ensure the compliance with the provision of FEMA, 1999.<\/p>\n<p>Question 39.<br \/>\nWrite short note on: Restriction on shareholding in a Co-operative Society.<br \/>\nAnswer:<br \/>\nRestrictions on shareholdings:<br \/>\nSection 5 of the Co-operative Societies Act, 1912 provides that in the case of a society where the liability of a member of the society is limited, no member of a society other than a registered society can hold such portion of the share capital of the society as would exceed a maximum of twenty per cent of the total number of shares or of the value of shareholding to \u20b9 1,000.<\/p>\n<p>The auditor of a co-operative society will be concerned with this provision so as to watch any breach relating to holding of shares.<\/p>\n<p>Question 40.<br \/>\nWrite short note on: Restrictions on investments of funds of a central co-operative society.<br \/>\nAnswer:<br \/>\nInvestment of funds:<br \/>\nAccording to Section 32 of the Central Act the modes of investment of funds of a society may be stated as follows. A society may invest its funds in any one or more of the following:<br \/>\n(a) In the Central or State Co-operative Bank.<br \/>\n(b) In any of the securities specified in Section 20 of the Indian Trusts Act, 1882.<br \/>\n(c) In the shares, securities, bonds or debentures of any other society with limited liability.<br \/>\n(d) In any co-operative bank, other than a Central or State co-operative bank, as approved by the Registrar on specified terms and conditions.<br \/>\n(e) In any other moneys permitted by the Central or State Government.<\/p>\n<p>Question 41.<br \/>\nMention the duties of Auditor of Co-operative Societies in regard to the following:<br \/>\n(i) Overdue interest.<br \/>\n(ii) Compliance with provisions of Co-operative Act and Rules thereunder.<br \/>\n(iii) Special Report to Registrar of Co-operative Societies.<br \/>\nAnswer:<br \/>\nDuties of Auditor of Co-operative Societies:<br \/>\n1. Overdue Interest: Overdue interest should be excluded from interest outstanding and accrued due while calculating profit.<\/p>\n<p>2. Adherence to Co-operative Principles: The auditor will have to ascertain in general, how far the objects, for which the co-operative organisation is set up, have been achieved in the course of its working. The assessment is not necessarily in terms of profits, but in terms of extending benefits to members who have formed the society. While auditing the expenses, the auditor should see that they are economically incurred and there is no wastage of funds. The principles of propriety audit should be followed for the purpose.<\/p>\n<p>3. Special report to the Registrar: During the course of audit, if the auditor notices that there are some serious irregularities in the working of the society, he may report these special matters to the Registrar, drawing his specific attention to the points. The Registrar on receipt of such a special report may take necessary action against the society.<\/p>\n<p>Circumstances in which special report is required:<\/p>\n<ul>\n<li>If any grant is being allowed to any person, verify whether the grant have been paid only for a charitable purpose or purposes falling within the purview of the objects for which the charitable institution has been set up and that no trustee, director or member of the Managing Committee has benefited there from either directly or indirectly.<\/li>\n<li>Verify the schedules of securities held, as well as inventories of properties both movable and immovable by inspecting the securities and title deeds of property and by physical verification of the movable properties on a test basis.<\/li>\n<li>Verifying the cash and bank balances.<\/li>\n<li>Ascertaining that any funds contributed for a special purpose have been utilised for the purpose.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 42.<br \/>\nUnder what circumstances, an auditor is required to submit a special report to the registrar of Co-operative Societies?<br \/>\nAnswer:<br \/>\nSpecial report to the Registrar:<br \/>\nDuring the course of audit, if the auditor notices that there are some serious irregularities in the working of the society, he may report these special matters to the Registrar. The Registrar on receipt of such a special report may take necessary action against the society.<\/p>\n<p>Circumstances in which special report is required:<\/p>\n<ul>\n<li>Personal profiteering by members of managing committee in transactions of the society, which are detrimental to the interest of the society.<\/li>\n<li>Detection of fraud relating to expenses, purchases, property and stores of the society.<\/li>\n<li>Mis-management (decisions of management against co-operative principles).<\/li>\n<li>In the case of urban co-operative banks, disproportionate advances to vested interest groups, such as relatives of management, and deliberate negligence about the recovery thereof. Cases of reckless advancing, where the management is negligent about taking adequate security and proper safeguards for judging the creditworthiness of the party.<\/li>\n<\/ul>\n<p>Question 43.<br \/>\n&#8220;Examination of overdue debts, audit classification of society, and reporting the infringements of provisions of the Act are the special features of audit of a co-operative society.\u201d Do you agree?<br \/>\nAnswer:<br \/>\nSpecial Features of Audit of a co-operative society:<br \/>\n1. Examination of Overdue debts:<br \/>\nOverdue debts for a period from six months to five years and more than five years will have to be classified and shall have to be reported by an auditor. A further analysis of these overdue debts from the viewpoint of chances of recovery will have to be made, and they will have to be classified as good or bad. The auditor will have to ascertain whether proper provisions for doubtful debts is made and whether the same is satisfactory.<\/p>\n<p>2. Audit Classification of the Society:<br \/>\nAfter a judgment of an overall performance of the society, the auditor has to award a class to the society. This judgment is to be based on the criteria specified by the Registrar. It may be noted here that if the management of the society is not satisfied about the award of audit class, it can make an appeal to the Registrar, and the Registrar may direct to review the audit classification.<\/p>\n<p>3. Reporting on Infringements of provisions of the Act:<br \/>\nAuditor of a cooperative society is required to point out the infringement with the provisions of Cooperative Societies Act and Rules and bye-laws. The financial implications of such infringements should be properly assessed by the auditor and they should be reported.<\/p>\n<p>Question 44.<br \/>\nAuditor of a cooperative society has to submit his audit report in the prescribed form specified by the Registrar or as given in the related Rules. State the matters to be covered in the audit report.<br \/>\nAnswer:<br \/>\nMatters to be reported in Audit Report:<br \/>\nThe audit report has to be submitted in the prescribed form specified by the Registrar or as given in the related Rules. According to the present prescribed form in some of the States, the auditor has to state:<br \/>\n(a) Whether he has obtained all the necessary information and explanations which to the best of his knowledge and belief were necessary for the purpose of audit.<br \/>\n(b) Whether in his opinion and to the best of his information and according to the explanations given to him, the said accounts give all the information required by the Act.<br \/>\n(c) Whether the Profit and Loss Account of the society gives a true and fair view of the Profit and Loss made by the society.<br \/>\n(d) Whether the Balance Sheet drawn up as at the end of the year gives a true and fair view of the state of affairs of the society as on the given date.<br \/>\n(e) Whether in his opinion, proper books of account as required by the Act, the Rules and the bye\u00aclaws of the society have been properly maintained.<br \/>\n(f) Whether the Balance Sheet and the Profit and Loss Account examined by him are in agreement with the books of account and returns of the society.<br \/>\nThe auditor will have to give qualifying observations, if any of the answers to the above mentioned<br \/>\nmatters are negative.<\/p>\n<p>Question 45.<br \/>\nAn auditor of a Co-operative Society governed by Cooperative Societies Act, 1912 is required to attach schedules giving certain information. Please list the information required to be given in the schedules.<br \/>\nAnswer:<br \/>\nSchedules forming part of Audit Report:<br \/>\nThe form of the audit report to be submitted by the auditor, as prescribed in various states, contains a number of matters which the auditor has to state or comment upon. In addition to that, the auditor will have to attach schedules to the report regarding the following information:<\/p>\n<ul>\n<li>All transactions which appear to be contrary to the provisions of the Act, the rules and bye-laws of the society.<\/li>\n<li>All sums, which ought to have been, but have not been brought into account by the society.<\/li>\n<li>Any material, or property belonging to society which appears to the auditor to be bad or doubtful of recovery.<\/li>\n<li>Any material irregularity or impropriety in expenditure or in the realisation or monies due to society.<\/li>\n<li>Any other matters specified by the Registrar in this behalf.<br \/>\nIn the case of nil report in any of the above matters, the auditor will have to give a nil report.<\/li>\n<\/ul>\n<p>Question 46.<br \/>\nState the requirements regarding the maintenance of books of account with respect to a multi-state co-operative society.<br \/>\nOr<br \/>\nWrite short note on: Aspects to be covered in the books of account to be maintained by a multi-co\u00acoperative society.<br \/>\nAnswer:<br \/>\nAspects to be covered in Books of Account:<br \/>\nAs per the Multi State Co-operative Society Rules, 2002, every multi state co-operative society shall keep books of account with respect to:<br \/>\n(a) all sum of money received &amp; expended<br \/>\n(b) all sales and purchases of goods.<br \/>\n(c) the assets and liabilities of the society.<br \/>\n(d) in the case of Multi State Co-operative Society engaged in production, processing and manufacturing, particulars relating to utilization of materials or labour or other term of cost as may be specified in the bye laws.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 47.<br \/>\nMulti-State Co-operative Societies Act, 2002 states that a person who is a Chartered Accountant within the meaning of the Chartered Accountants Act, 1949 can only be appointed as auditor of Multi-State co-operative society. Explain stating also the persons who are not eligible for appointment as auditors of a Multi-State co-operative society. [MTP-Aug. 18]<br \/>\nAnswer:<br \/>\nQualifications of Auditors of Multi-State Co-operative Societies:<br \/>\nSec. 72 of Multi-State Co-operative Societies Act, 2002, provides that a person who is a Chartered Accountant can only be appointed as auditor of a multi-state co-operative society. Following persons cannot be appointed as auditor:<br \/>\n(a) Body Corporate<br \/>\n(b) Officer\/Employee of Multi State Cooperative society<br \/>\n(c) Partner\/Employee of Officer\/Employee of Multi State Cooperative society<br \/>\n(d) A person who is indebted to multi state cooperative society or who has given guarantee in connection with a loan of third party to multi state cooperative society for an amount exceeding \u20b9 1,000.<\/p>\n<p>Question 48.<br \/>\nBriefly explain the provisions for qualification and appointment of Auditors under the Multi-State Co-operative Societies Act, 2002. [Nov. 18 (5 Marks)]<br \/>\nAnswer:<br \/>\nQualifications of Auditors of Multi-State Co-operative Societies:<br \/>\nSec. 72 of Multi-State Co-operative Societies Act, 2002, provides that a person who is a Chartered Accountant can only be appointed as auditor of a multi-state co-operative society. Following persons cannot be appointed as auditor:<br \/>\n(a) Body Corporate<br \/>\n(b) Officer\/Employee of Multi State Cooperative society<br \/>\n(c) Partner\/Employee of Officer\/Employee of Multi State Cooperative society<br \/>\n(d) A person who is indebted to multi state cooperative society or who has given guarantee in connection with a loan of third party to multi state cooperative society for an amount exceeding \u20b9 1,000.<\/p>\n<p>Appointment of Auditors of Multi-State Co-operative Societies:<br \/>\nSec. 70 of Multi-State Co-operative Societies Act, 2002, provides the provisions as to appointment of auditors of Multi-State Co-operative Societies. Accordingly,<\/p>\n<ul>\n<li>First Auditor of Multi-State Co-operative Societies shall be appointed by Board of Directors within one month of registration. If Board fails, company may appoint first auditor at General meeting. Auditor so appointed hold office till conclusion of first Annual General Meeting.<\/li>\n<li>Subsequent auditors are appointed at each Annual General Meeting. Auditor so appointed hold office till conclusion of next AGM.<\/li>\n<\/ul>\n<p>Question 49.<br \/>\nWrite short notes on: Powers and duties of an auditor of a Multi-State Cooperative Society.<br \/>\nAnswer:<br \/>\nPowers and Duties of Auditor of Multi-State Cooperative Society:<br \/>\nSection 73 of the Multi-State Cooperative Societies Act, 2002 provides the provisions relating to powers and duties of auditor.<\/p>\n<p>Powers of Auditor [Sec. 73(1)]:<\/p>\n<ul>\n<li>Every auditor shall have a right of access at all times to the books, accounts and vouchers of the Multi-State Co-operative Society whether kept at the head office or elsewhere.<\/li>\n<li>Every auditor shall be entitled to require from the officers or other employees of the Multi-State Co-operative Society such information and explanation as the auditor may think necessary for the performance of the duties as an auditor.<\/li>\n<\/ul>\n<p>Duties of Auditor [Sec. 73(2)]:<br \/>\n(A) To conduct Inquiry: The auditor shall make the following inquiries:<\/p>\n<ul>\n<li>Whether loans and advances made by the Multi-State Co-operative Society on the basis of security have been properly secured and whether the terms on which they have been made are not prejudicial to the interests of the Multi-State Co-operative or its members;<\/li>\n<li>Whether transactions of the Multi-State Co-operative Society which are represented merely by book entries are not prejudicial to the interest of the Multi-State Co-operative Society;<\/li>\n<li>Whether personal expenses have been charged to revenue account; and<\/li>\n<li>Where it is stated in the books and papers of the Multi-State Co-operative Society that any shares have been allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash has actually been so received, whether the position as stated in the account books and the balance sheet is correct, regular and not misleading.<\/li>\n<\/ul>\n<p>(B) Making Report: The auditor shall make a report over the following:<\/p>\n<ul>\n<li>On the accounts examined by him<\/li>\n<li>On every Balance Sheet and Profit and Loss Account and<\/li>\n<li>On every other document required to be part or annexed to the balance-sheet or profit and loss account,<br \/>\nwhich are laid before the society in general meeting during his tenure of office.<br \/>\nThe report shall state whether, in his opinion and to the best of his information and according to the explanations given to him, the said accounts give the information required by this Act in the manner<br \/>\nso required and give a true and fair view-<\/li>\n<\/ul>\n<p>(a) in the case of the balance-sheet, of the state of the multi-state cooperative society\u2019s affairs as at the end of its financial year; and<br \/>\n(b) in the case of the profit and loss account, of the profit or loss for its financial year.<\/p>\n<p>Question 50.<br \/>\nAs per Multi-state Co-operative Societies Act, 2002, the auditor shall make a report to the members of the Multi-State co-operative society on the accounts examined by him and on every balance-sheet and profit and loss account and on every other document required to be part of or annexed to the balance-sheet or profit and loss account. Explain. [RTP-May 20]<br \/>\nAnswer:<br \/>\nAuditor\u2019s Duties on Reporting of accounts and financial statements:<br \/>\nAs per Sec. 73(3) and 73(4) of Multi- state Co-operative Societies Act, 2002, the auditor shall make a report to the members of the Multi-State co-operative society on the accounts examined by him and on every balance-sheet and profit and loss account and on every other document required to be part of or annexed to the balance-sheet or profit and loss account, which are laid before the Multi-State co-operative society in general meeting during his tenure of office, and the report shall state whether, in his opinion and to the best of his information and according to the explanation given to him, the said account give the information required by this act in the manner so required, and give a true and fair view:<br \/>\n(a) In the case of the balance-sheet, of the state of the Multi-State co-operative society\u2019s affairs as at the end of its financial year; and<\/p>\n<p>(b) In the case of the profit and loss account, of the profit or loss for its financial year. The auditor\u2019s report shall also state:<br \/>\n(i) Whether he has obtained all the information and explanation which to the best of his knowledge and belief were necessary for the purpose of his audit.<\/p>\n<p>(ii) Whether, in his opinion, proper books of account have been kept by the Multi- State co\u00acoperative society so far as appears from his examination of these books and proper returns adequate for the purpose of his audit have been received from branches or offices of the Multi-State co-operative society not visited by him.<\/p>\n<p>(iii) Whether the report on the accounts of any branch office audited by a person other than the Multi-State co-operative society\u2019s auditor has been forwarded to him and how he has dealt with the same in preparing the auditor\u2019s report.<\/p>\n<p>(iv) Whether the Multi-State co-operative society&#8217;s balance sheet and profit and loss account dealt with by the report are in agreement with the books of account and return.<\/p>\n<p>(v) Where any of the matters referred to in Sec. 73(3) and 73(4) is answered in the negative or with a qualification, the auditor&#8217;s report shall state the reason for the answer.<\/p>\n<p>Question 51.<br \/>\nUnder which circumstances can the Central Government appoint the special auditor of a Multi-State Cooperative Society?<br \/>\nOr<br \/>\nCentral Govt, hold 55% of the paid up share Capital in Kisan Credit Co-operative Society, which is incurring huge losses. Advise when the Central Government can direct Special Audit under Section 77 of the Multi State Co-operative Society Act. [May 19 (3 Marks)]<br \/>\nAnswer:<br \/>\nCircumstances requiring Special Audit:<br \/>\nSec. 77 of Multi-State Cooperative Societies Act, 2002 empowers Central Government to pass an order for the special audit if they are of opinion<\/p>\n<ul>\n<li>that the affairs of any Multi-State co-operative society are not being managed in accordance with co-operative principles or prudent commercial practices or with sound business principles; or<\/li>\n<li>that any Multi-State co-operative society is being managed in a manner likely to cause serious injury or damage to the interests of the trade industry or business to which it pertains; or<\/li>\n<li>that the financial position of any Multi-State co-operative society is such as to endanger its solvency.<\/li>\n<\/ul>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 52.<br \/>\nMr. M, has served as an auditor in the Co-Operative Department of a Government, is appointed as a statutory auditor by a Co-Operative society that has receipts over \u20b9 3 crores during the financial year. He is not a chartered accountant. Mr. D, chartered accountant is appointed to conduct tax audit of the society u\/s 44AB of the Income-tax Act, 1961. Comment. [May 18 (4 Marks)]<br \/>\nAnswer:<br \/>\nTax Audit Report in case of Co-operative society:<br \/>\nProviso to Sec. 44AB of Income Tax Act, 1961 lays down that where the accounts of an assessee are required to be audited by or under any other law, it shall be sufficient compliance with the provisions of this section, if such person get the accounts of such organisation audited under such other law before the specified date and furnishes by that date, the report of the audit as required under such other law and a further report by an Accountant in the form prescribed under this section.<\/p>\n<p>The term &#8220;accountant&#8221; as defined under section 288 under the Income Tax Act, 1961 means a chartered accountant within the meaning of the Chartered Accountants Act, 1949, who holds a valid certificate of practice.<\/p>\n<p>Accordingly, the person who is not a Chartered Accountant as mentioned in the question, is eligible to act as auditor of Cooperative Society under the Cooperative Society Act, 1912. Tax audit u\/s 44AB of Income Tax Act, 1961 can be performed only be a Chartered Accountant.<\/p>\n<p>Question 53.<br \/>\nYou are appointed as an auditor of co-operative society. State the special features of the co-oper\u00acative audit to be borne in mind by the auditor, concerning,<br \/>\n(1) Audit classification of society.<br \/>\n(2) Discussion of draft audit report with the managing committee. [Nov. 20 (4 Marks)]<br \/>\nAnswer:<br \/>\nAudit of Co-operative Society:<br \/>\n(i) Audit Classification of Society:<\/p>\n<ul>\n<li>After a judgment of an overall performance of the society, the auditor has to award a class to the society. This judgment is to be based on the criteria specified by the Registrar.<\/li>\n<li>It may be noted here that if the management of the society is not satisfied about the award of audit class, it can make an appeal to the Registrar, and the Registrar may direct to review the audit classification.<\/li>\n<li>The auditor should be very careful, while making a decision about the class of society.<\/li>\n<\/ul>\n<p>(ii) Discussion of Draft report with the managing committee:<\/p>\n<ul>\n<li>On conclusion of the audit the auditor should ask the Secretary of the society to convene a meeting of the managing committee to discuss the draft audit report.<\/li>\n<li>The audit report should never be finalized without discussion with the managing committee.<\/li>\n<\/ul>\n<p><span style=\"color: #0000ff;\">Objective Type Questions (True\/False, Correct\/Incorrect)<\/span><\/p>\n<p>Question 1.<br \/>\nArticle 150 of the Constitution provides that the accounts of the Union and of the States shall be kept in such form as the Finance Minister may on the advice of the C&amp;AG prescribe. [MTP-May 20]<br \/>\nAnswer:<br \/>\nStatement is incorrect.<br \/>\nArticle 150 of the Constitution provides that the Accounts of the Union and the states will be maintained as per the description given, by the President on advice of C&amp;AG.<\/p>\n<p>Question 2.<br \/>\nAccording to \u2018propriety audit\u2019, the auditors try to bring out cases of improper, avoidable, or infruc- tuous expenditure even though the expenditure has been incurred in conformity with the existing rules and regulations.<br \/>\nAnswer:<br \/>\nStatement is correct.<br \/>\nInstead of too much dependence on documents, vouchers and evidence, propriety audit shifts the emphasis to the substance of the transactions and looks into the appropriateness thereof on a consideration of financial prudence, public interest and prevention of wasteful expenditure.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 3.<br \/>\nExpenditure incurred by the municipalities and corporations can be broadly classified under the following heads: (a) general administration and revenue collection,<br \/>\n(b) public health,<br \/>\n(c) public safety,<br \/>\n(d) education,<br \/>\n(e) public works, and<br \/>\n(f) others such as interest payments.<br \/>\nAnswer:<br \/>\nStatement is correct.<br \/>\nExpenditure incurred by the municipalities and corporations can be broadly classified under the following heads: (a) general administration and revenue collection,<br \/>\n(b) public health,<br \/>\n(c) public safety,<br \/>\n(d) education,<br \/>\n(e) public works, and<br \/>\n(f) others such as interest payments.<\/p>\n<p>Question 4.<br \/>\nNGOs may be defined as non-profit making organisations which raise funds from members, donors or contributors apart from receiving donation of time, energy and skills for achieving their social objectives.<br \/>\nAnswer:<br \/>\nStatement is correct.<br \/>\nNGO&#8217;s can be defined as non-profit organisations which raise funds from members or donors apart from receiving donation of time, energy &amp; skills for achieving their social objectives.<\/p>\n<p>Question 5.<br \/>\nComptroller and Auditor General of India can be removed by the Prime Minister of India on the recommendation of his Council of Ministers. [Nov. 09 (2 Marks)]<br \/>\nAnswer:<br \/>\nStatement is incorrect.<br \/>\nThe Comptroller and Auditor General of India cannot be removed by the Prime Minister of India on the recommendation of his Council of Ministers.<br \/>\nHe can be removed on the ground of proven misbehaviour or incapacity, when each House of Parliament decides to do so by majority of not less than 2\/3 of the members of the house present and voting.<\/p>\n<p>Question 6.<br \/>\nThe accounts of every LLP shall be audited in accordance with rule 24 of LLP Rules 2009. [May 19 (2 Marks)]<br \/>\nAnswer:<br \/>\nStatement is correct.<\/p>\n<ul>\n<li>Sec. 34 of LLP Act, 2008 states that Accounts of LLP shall be audited in accordance with such rules as may be prescribed.<\/li>\n<li>Rule 24 of LLP Rules, 2009 provides the detailed provisions in this regard, in accordance with which a LLP whose turnover does not exceed, in any financial year, Rs. 40 Lacs, or whose contribution does not exceed Rs. 25 Lacs shall not be required to get its accounts audited.<\/li>\n<\/ul>\n<p>Question 7.<br \/>\nLLP need not file a &#8220;Statement of Accounts and Solvency\u201d. [MTP-May 20]<br \/>\nAnswer:<br \/>\nStatement is incorrect.<\/p>\n<ul>\n<li>As per Sec. 34 of LLP Act, 2008, Statement of Account and Solvency shall be filed with the Registrar every year in such form and manner and accompanied by prescribed fees.<\/li>\n<li>As per Rule 24 of LLP Rules, 2009, Statement of Account and Solvency shall be filed in Form 8 with the Registrar, within a period of 30 days from the end of 6 months of the financial year to which the Statement of Account and Solvency relates.<\/li>\n<\/ul>\n<p>Question 8.<br \/>\nThe Constitution of India contains no specific provisions regarding the appointment, salary and duties and powers of the C&amp;AG. Moreover, the constitution does not guarantee the independence of the C&amp;AG of India. [RTP-Nov. 20]<br \/>\nAnswer:<br \/>\nStatement is incorrect.<br \/>\nThe Constitution of India contains specific provisions regarding the appointment, salary and duties and powers of the C&amp;AG. The constitution guarantees the independence of the C&amp;AG of India by prescribing that he shall be appointed by the President of India and shall not be removed from office except on the ground of proven mis-behaviour or incapacity.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/gstguntur.com\/wp-content\/uploads\/2021\/10\/GST-Guntur.png\" alt=\"Audit of Different Types of Entities \u2013 CA Inter Audit Notes\" width=\"123\" height=\"13\" \/><\/p>\n<p>Question 9.<br \/>\nEvery LLP is required to submit Statement of Account and Solvency in Form 8, which shall be filed within a period of sixty days from the end of three months of the financial year to which the State\u00acment of Account and Solvency relates. [Nov. 20 (2 Marks)]<br \/>\nAnswer:<br \/>\nStatement is incorrect.<br \/>\nAs per Sec, 34 of LLP Act, 2008, every LLP shall, within a period of six months from the end of each financial year, prepare a Statement of Account and Solvency for the said financial year in prescribed form, and such statement shall be signed by the designated partners of the LLP.<\/p>\n<p>As per Rule 24 of LLP Rules, 2009, Statement of Account and Solvency shall be filed in Form 8 with the Registrar, within a period of 30 days from the end of 6 months of the financial year to which the Statement of Account and Solvency relates.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Audit of Different Types of Entities \u2013 CA Inter Auditing Notes\u00a0is designed strictly as per the latest syllabus and exam pattern. Audit of Different Types of Entities \u2013 CA Inter Auditing Notes Question 1. Explain in detail the duties of Comptroller and Auditor General of India. [May 03 (8 Marks), Nov. 12 (10 Marks), RTP-May &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/gstguntur.com\/audit-of-different-types-of-entities-ca-inter-audit-notes\/\"> <span class=\"screen-reader-text\">Audit of Different Types of Entities \u2013 CA Inter Audit Notes<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[167],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15091"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=15091"}],"version-history":[{"count":5,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15091\/revisions"}],"predecessor-version":[{"id":15832,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/15091\/revisions\/15832"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=15091"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=15091"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=15091"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}