statutory audit
TRANSCRIPT
Statutory Audit
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Acceptance Checklist (Risk evaluation tool before accepting an Audit Assignment)Continuance Checklist (This checklist should be used each year to ensure that the audit risks have not changed adversely)Business understanding for Audit planningChecklist for a Audit Staff
Continuance Checklist (This checklist should be used each year to ensure that the audit risks have not changed adversely)
Acceptance Checklist
Client : Prepared by Reviewed byAudit Period :
S.No Identification of Risk / Problem areas Comments1
2
3 Reasons for change of auditors, if there is a change.4
5
6
7
8
Have we come across any integrity/adverse issues related to: - Reputation of the client - Reputation of the management - Business practices - Client litigation - Management litigation
Has the management frequently changed banks, attorneys orauditors?
Is there any indication of limitation on scope of auditimposed by the client?
Is there any indication of criminal activity by client e.g.money laundering, etc.?
Based on review of accounts: - Is there any qualification in the previous Auditors’ Reports or adverse note in the notes to accounts or accounting policies? - Is there any indication of an “aggressive” interpretation of any Accounting Standard?
Based on economic scenario and industry risks: - Is the industry in which the client operates facing an abnormalbusiness cycle, i.e. abnormal recession or boom? - Has there been any recent change in the Government policies or regulations in the concerned industry? - Are there any commercial risks which affect the acceptance?• Debt owed• Customer dependency
Loans or guarantees:Are there loans or guarantees, not within the ordinary course of business? - from the client to the firm, a partner or a potential member of the audit team? - from the firm, a partner or a potential member of the audit team to the client?
Overall Conclusion:Based on the comments as noted above, we conclude that the engagement can be accepted/not accepted
Engagement Partner’s Signature:Date
Continuance Checklist
Client : Prepared by Reviewed byAudit Period :
Sr.No. Identification of Risk / Problem areas Comments1
2
3
4
5
6
7
Do we continue to have the experience, knowledge and resources to service the client?
Are the circumstances of a nature to bring into doubt whether we should continue to act?
Is the industry in which the client operates facing an abnormalbusiness cycle, i.e. abnormal recession or boom?
Loans or guarantees:Are there loans or guarantees, not within the ordinary course of business? - from the client to the firm, a partner or a potential member of the audit team? - from the firm, a partner or a potential member of the audit team to the client?
Level of fee incomeAre there significant fees which have been outstanding for aprolonged period of time?
Control environmentDo the accounting or data processing departments appear to be inadequately staffed?
Organisation and management structureHas the client undergone rapid expansion?Has the client recently acquired other entities?
Overall ConclusionBased on the comments as noted above, we conclude that the engagement can be continued / not continued for the year.
Engagement Partner Signature:Date:
Business Understanding For Audit Planning
Client Name:Audit Period :
1 .................................. Private Limited was incorporated on ____________.
It is a wholly-owned subsidiary of ______________.
……………………… was established to carry the following activities
Activities relating to …………………………
Activities relating to …………………
Activities in ……………………………
Activities of a ……………………
…………………… operates from the following locations:
……………………
……………………
2
% Shareholding
3
Name of Employee Title Years with the Entity
4
Name of Director Whether independent? Director since
5 Information about members of the Audit Committee ( if such a committee does not exist, write “None”):
Name of Director Designation Member Since
6 Describe significant trends within the industry (e.g., growing, stable,or declining)
Pertinent information about key shareholders:
Name of Shareholder Ownership
InterestNo. of Shares(Rs. 10/- each)
Pertinent information about key management personnel:
Information about Members of the Board of Directors:
7 Describe the extent to which significant accounting applications are computerised
8 Are there geographically diverse operations?
9 Is the company effected by significant FOREX/ interest rate movements?
10Is there a history of qualified audit reports?
Checklist for a Audit Staff
Client Name:Audit Period :
Sr. Particulars Y / N / NA Remarks1 Opening Balance
1.2 Have you checked opening balances of:1. General ledger2. Debtors’ ledger3. Creditors’ ledger4. Cash Balance and Bank Balances5. Other Subsidiary ledgers
2 Vouching
2.1 Vouching includes the following:1
2 Sales
3 Purchases
4 Credit notes
5 Debit notes8
2.2 Have you checked correctness of1 Account head / account code2 Date3 Amount4 Name of Party5 Quantities and rates where applicable
2.3
2.4
3 Fixed Assets
1
Receipts and payments of Cash Book and Bank Book, including Petty Cash Book.
Any other book/register of prime entries, salary and wages register, special registerlike trip register, including ticket bookingregister, job register based on the nature ofbusiness.
Are the vouchers properly authorised andsupported by necessary external evidence and/or internal documentation?Does the transaction relate to the accounting year under audit?
Have you scrutinised repair accounts to ensure no items of capital nature are included therein?
2
3
4
4 Inventories1
2
3
4
5
5 Trade Receivables1
6 Cash and Cash Equivalents
1
2
7
8
9
10
11 Have adjustments been made for prepaid expenses?
Have you scrutinised additions to fixed assets toensure no items of revenue nature are capitalised?
Has expenditure prior to the asset being put to use been capitalised in accordance with AS-10?
Have you ensured that interest up to the date of use of asset has been capitalised in accordance with AS 16?
Has the list of physically verified inventories been co-related with the book records? Have you checked goods-in-transit with subsequent receipts?
Have you ensured that the cost of inventories includes all costs of bringing them to the presentlocation and condition?
Have you ensured that excise duty payable onFinished Goods is included in the valuation of stock and sales tax has been excluded?
Is there proper control over stock transfers? Have reconciliations been made?
Have you obtained a statement from the client explaining the manner of legal action taken for debtsthat have become bad?
Whether cash verification has been carried out during the audit? Whether all cash vouchers exceeding Rs.5,000 has been signed by authorized person.?
Compare salary paid with the payroll. Is there any fictitious employee on roll?
Whether debit balance of creditors shown under Loans & Advances?
Whether credit balance of debtors shown under current liabilities & provisions?
Whether Deposits are supported by documents such as rent agreement/FD Receipt etc.,?
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Is there any change in accounting procedures and internal control?
ABBREVIATIONS
AAS Auditing and Assurance Standards
AD Authorised Dealer
AGM Annual General Meeting
AS Accounting Standard
ASI Accounting Standard Interpretation
CARO Companies (Auditor’s Report) Order, 2003
CENVAT Central Value Added Tax
CFS Consolidated Financial Statement
CIF Cost, Insurance & Freight
CLB Company Law Board
CWIP Capital Work-in-Progress
DCA Department of Company Affairs
DTA Deferred Tax Assets
DTL Deferred Tax Liabilities
EPS
ESIC Employees State Insurance Corporation
FEMA Foreign Exchange Management Act
FOB
MAT Minimum Alternate Tax
MODVAT Modified Value Added Tax
NBFC Non Banking Financial Companies
PBIT Profit Before Interest and Tax
PBT Profit Before Tax
RSVI Revised Schedule VI
SEBI Securities & Exchange Board of India
SLM Straight Line Method
VRS Voluntary Retirement Scheme
WDV Written Down Value Method
WIP Work-in-Progress
Earnings Per Share
Free On Board