Audit Program for In depth Scrutiny of Ledgers

Debtors Scrutiny

Prepare the bill-wise outstanding entries, along-with the remarks of receipts during the subsequent audit period.Obtain the Auditee’s response, for debtors outstanding of more than 90 days.Verify if there have been any mutual settlement, identify  the bad debts, if any.Check whether discount allowed is properly recorded.Incase of sales return, verify the proper reversal of VAT, if necessary and its inventory accountingCheck that the balance shown by the Debtors Ledger Trial balance agrees with the balance shown by the Debtors control account in the General Ledger Trial balance.Check the Age-wise analysis of Sundry Debtors and comment upon it.Check the Debtors Accounts that are stuck up for long and are doubtful of recovery.Check the debtors accounts where legal cases have been filed / are to be filed and ascertain the progress in the legal cases.

Creditors Scrutiny

During Creditors scrutiny, verify if there are any long outstanding bills.Obtain the Auditee’s response, for Creditors outstanding of more than 90 days.Verify if there have been any mutual settlement.Check whether discount received is correctly recorded.Check the accounting entry for purchase return.Check the period for which the amount is outstanding.Ascertain the reasons for the outstanding amount.Check whether the amount has actually paid after the date of balance sheet date .Check the Age-wise analysis of Sundry Debtors and comment upon it.

Scrutiny of Fixed Assets and Depreciation

Check the Bills for any new purchases which were made during the year.Check whether the rates for depreciation are proper and also whether it has been correctly calculated. Schedule II is applicable to companies incorporated under Companies Act.Whether the asset has been capitalized properly.Fixed assets are properly recorded at cost/valuation.Ensure appropriate authority for acquisition.Whether the Fixed Assets purchased are tagged giving an appropriate reference number.Whether the asset has been entered in the fixed asset register

Fixed Deposits

Reconcile the amount with FD certificate.Ask for 16-A & check whether TDS have been correctly deducted by bank.Reconcile the TDS deducted with 26AS statement.Collect Form 16-A for your record.

Secured loans/Term loans/Cash Credit.

Obtain the Statement of Accounts from the financier Bank/ InstitutionObtain interest certificate as to compare with the balance in the Books.If the loans are obtained from Directors/ Shareholders, obtain certificate that the same is not given out of borrowed funds.Balance, Additions, Repayment, interest credited, Tax Deducted and any otherAdjustments, so as to agree with the total opening and total closing balance and maximum outstanding during the year.

Also Check Relevant Parts of This article :- 

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Director’s Account Scrutiny

Check the transactions that have taken place through the directors personal account.Verify the calculation of directors remuneration including the amount of the TDS Deducted.See that the personal expenses have been debited to drawings accounts

Scrutiny of Other Assets

Investigate about how the closing balances have been obtained.Check the Bills for any new purchases which were made during the year.

Investments

Details of Investments at the Year endCheck the income accrued on the InvestmentsDisclosure requirements under Schedule III.

Inventory

Check the Method of Valuation of the Closing Stock.Reconcile the physical / book items of inventory showing opening balances, purchases , issued for consumption/sales , short & excess and closing Stock with the Excise Records..trace the deviations if any from the method of valuation of Stock, purchases, sale according to section 145A of the Income Tax Act.According to the provisions of the said section all duties, cess, taxes and levies are to be Included at the first instance in the said items including provisions for excise duty on closing stock of finished goods.Check the Compliance of the Accounting Standard -2 ” Valuation of Inventories.“It may be noted that the said Accounting Standard ignores the CENVAT adjustments and only exclusive method is permissible.Sheet of physical verification conducted by the management to be obtained.

Loans and Advances Given

Prepare the Chart of Loans and advances given showing the opening balance, additions, repayment , interest charged , TDS deducted and other adjustments made during the year..Check the Compliances as per Para 8(B) above.Obtain the details of Due from directors with maximum outstanding during the yearEnsure proper disclosure is made w. r. t. security aspects.

Provision for Taxation

Ensure the taxation provided according to the taxation Laws applicable at the date of balance Sheet Ensure that provision for tax is made in accordance with the AS-22. ” Deferred Tax”Ensure that Provisions u/s 115JB MAT is also considered.

Other Incomes

Interest Income correlate the same with TDS receivable for the year.Insurance Claims received.Commission Income

Obtain the documentary evidence, Agreements, and calculation of commission and their recognition in the Accounts. Recommended Articles

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