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Chaptt l" *rV*uehirtg

' , 1 ' ! ' l c , l ' l oN\ , ' l i u c l r i r , tl : lr ng

l .? .3 .. 1 .5 .o .

! , t , . ' I rr c( l

Vouchinq lneans t l ic act of cxart t i t t i t rg otrchers .e. docrrr r rcntarv vic lencrsnsupport J- t r rnsact iou.I t is r rsccl o el tsur . : l rat ar iotrs ransact i i t t ts t r r the per ior l r re la i r ly ant i r r - r l rrecordedn t l re booksof accott t t ts.V r ' r r c l r ei : p rope l r da tc t l .I t i s n c l i e r r t ' s an reI t is dul l , aut l ror ised.Vouclrer s conrplete n al l respects.It clearly slrows naturr) ndantourttof recciptsan dpa)'Itlelts.After exarnination,vouclter houlclbe starnpediinitiated.

:.', OF CASH TRANSACTIONSt j ( , r fs i t t | ; t ' i { l l t ll S

(o) n"ti"t" iit" : ', I.C. system .i : r

(f) Disclosure infinalAccounts

: coul l t lng nacnlnes.. . Ensure that I.C. system periodically , econcile tire physicalassets;' rvith their balancesn books.:{b ) Ensrrre , . Recordof transactions hould be checked n details.: correctness of , . Cltcck whetherentries have been nrade n books o{';tictiutttai ; per, book keeping . consistent ccountinupolicy.

. records : r J'hus.differenterrors can be detected.' ' :{c) Otrsen'ance Special attention lrouldbe given to follorving:I of Accounting : - Distinctionbetrveen apital & revenue xpeltditure/receipts"pr inciples r AccrualBasis f account ing.t, t ' Method of DePreciatiott., ' ' Writins off of flctitit 'rusassets-, - A

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,612.A ut l i rg tttrd A ssin 'unce

'l r:i;tls of caslt book alrci lcilgers shr'rulilbetr ri t it t cti rrtarrtraiiy')

c l ie :cke t l ( i r l case lv l r t : rc i rcro l ln t ' i ! !

] . l r i s i s requ i r cd todc tcc t l i a t r c i sc loneb l , t r ve r to ta l l i r t g /under to ta l l i r r g .Sprccialatlentiotlshoultl rc gii le r o crasld/alterecligrrres,Bl{S is pr"p"r", l b1'c l ier t t taf 'atper iodicalnterval 'Ar .rc l i t t r rl rould eepa rccor

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i r - : " r i . r l i h L t D e n $ c sArrihr;l rcation

tt '

I ! . , : e " , . r . t l t i enCSS.tIliils .+l lBI 's permission.rt

Srrn

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\ITaICJ

667.!glveg!!5!llge3-!ExPenses

1 c{rntrlct details.1,r l i s l o - ' ' l { vc r i i semen(sv.

rrelated with clients iv, luthor isat ion.l,

( receiPts* "q' t'tslt trook.,

< entrl in A/crt,. r,is exps.

I8" nci@3ag@s-!glinel! erpglgggAulhorisation-"v

As Per objectsvI)ocuments--v

v Cash book.t, Accounting.l,,.A5-26.1,

Write off-t

Au d tirtgowl,'1 ; uronc C h a P . 6I . cl-,ccl i o;tra;t ', r il l i. i ' -r "isingalcricY2. obtain complete is t cf advertisettlents. reclia"vise .e -new:lpal)ci

I V el cl. Check that hese elate o client'sbusir.ressrt ly'4. Exanrineauthorisation l paymentntade'5. Check receipt or amoutrtpaid'6. -lrace entry in tlre caslribank ook'1 Check relevartt osting n relevatttaccount-

. 8. Examine that outstanding advertisement e.\per]Ses av c be':l: sltt' lwn as: l iabi t i tY.. q Check- ha t advances ai d w'r't ' samear e show'nas assels'

; li1 .',:; r:

;;;,".;,i",t,"u." ;; , ;;;;"; a a"u"roon'entexpensesCheckwhethertheseareexpensedasperobjectsofenti ty 'sbusiness'Examinerelevantdocumentssuchasexpenditureonmaterialcanbevcrucheby examining uppliers cknowledgement'Traceentry n cashbook / bankstatement'Ensurets proper ccountingnddisclosuren booksof accounts'Ensure omPliance'ith AS-26'Ensurethatroutineresearcl tcosthasbeenwri t tenofftoP&l ' 'account"C h e c k t h a t n o f a k e e x p e n s e h a s b e e n d e b i t e d t o r e s e a r c h & d e v e l r r p m eexpensesccount'

Examinetherelevantlega|appl icabi | i tyoranycontract.enteredintobetweeemployer& employeeo check equiremento paygratulty'Ensure hat basisof computation f gratuity s valid andas per prevail inglaws, f any.Checkcomputatiott f gratuitywith referenceo numberof yearsof servicerenderedY etiringemPloYees'Trace he relevant aymententry n bankstatement'l fany insurancepo| icyhasbeentakento fundgra tu i ty l iab i l i t y .ensure thp."*iu* deposited asbeen aken o P&L Account'check acknorvledgernentrom employee who got gratuity in relevantfinancialYear.Ensure omPliance ith AS-15

tlttCCt

IIIIIIII{II

I

A

, 6 .a

: 9 .

F-akeexPenses i9- Retirement gratuitv to IemDloYees IlegalaPPlicabilitl" Z.v ,,-

basisV ,1 .t:heck comPutation" t ' , 4 .bank statementsv :5 '

insurancePolicYvacknowledgement

6.a

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i ( l I . Check he agrecrnertt utered nto *,ith tlre a,'ents.2. F,nsurehat salesand conrmission ornputationha.s eenmad,.',r. :; '

agreernentnd conrmi- .s ions paidonlv to aulhor iser lgents.3. E,xarnineales eport sentbv the agent during relcvant ear-,{ . -Iracethe entry' rr cash nok / bank statement.5. Trace heerr t ry n ct lnt mission ccounl.6. Obtain acknorvledgernentro m agents.

vC-'ommission/co

. 4,r."|rr,trl,trrtii ltrnen_tI 1. t,e"{v -ql$-g.Ipens-es

. ' ' ' i t't. : ' ! i ' l - i 1 l i i ) nv

S;';lcs e1,ut1.t,( l : rsh hcok

32 liRvnrent of income tax

: . . : . . r , i s ! r : pg f ro l

author isat ion. . ' ,1 l r t n i t s.t

trunsfer rntry,nitts/*eiptsreirsonableness

O l1 i entry in A./cvbalance

i. Crr".r. fi" itrt".riutcontrolover his area, ts chancesf tntsap1,,'.p:;,r,rcash rehigh.2. Checkauthorisationevelof persons aving custody nd contl'ol ,;-v,;i

. , . i

i'i, I t'i'cash.

3. Check he limit of imprest vitha particular employee.4. Trace the transfer entry from cash book to petty caslr book io ascoriain

amount given to petty cashier.5. Check he relevant voucher,bi l ls, receipts n supportof the experiilir ' irt l6. Examinewhether the expenditure ave been duly approvedh1' ir ' ' ' '1F" : ' : irperson.Check its reasonableness .1 Traceentry itr to notninal account.8. Examinebalanceof pettycash n harrd.

' I ' \ ! ii ' . , ' '1 \ \ ' ! , ' \ t . . ' ' , t ' i \ l I

l. Ascertain he computation of taxable incotne as per provisions l-.1'ih

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-X^,'q'" "ll!8 {_ ___13.Custop duties, Rill of entry.l,

. Computat iorr

- AgentBill

l .

, t

-)-4 .5 .o .1 .8 .

{ .hap .bf :xanr ine 'Bi l t r !cluring he lear .

si i i r - i ' " l tl en! t l re that gt l t lc ls t t i rve been. tt l i i rct irrrnorled

CIreck rvhe lhcr ca lc r l l r i i { } l - !appl icable rate in fi ' rr ' :e

of r:ustont:. i l t r t r l tas beren lno( i() : l: j lc i i i t t

In casedut-vs paii l throtigh sonleclearint{agt)nt' exarnlne getl lTrace paytrtr:ntn cash lock/bankstateme 1t'Chcck ackr lo* lcdgetn! l i i r ( ) l l1 uslol l l t t t l t t r r i l i ts '-Irace entry tt cttstotl ldtrtl ' paid account-Ver i t \ , c la in r {o r r l t { - l , d r t t ' l ' h r ' r c l f1 ' chcck ing acknc . r r v l c t Jge r r t ' : t i rl r r t t tauthori ty.Incascofd isp t r tc i -cgard i r tedr r r , " *payab lc ' c l rcckrv l re therpr i iY ls l { ) l ir lade fo r th e sari te.

t r i l l

\tGTCCtaIttt

Bank Statententst { ,Acklrou letlgenlnt'+

Bntry in Aic :vDury*Drarvback :vDisPutc

fircisc dutv : IrComputat ion.t, .nttun

is pr,rlrc'lr

t . iI ' , { ' "\ , \ , l j \\N ^ n { , ' \ t \

Vi;;;i;; ; Excise d'1."' s leviedon tttartuf'acturing, t beconrespav'able 'r nr"l""t" "f "tcisable

goui' froln goclorvn/factoryof the manuftrcturer'C h e c k t h e c o m p u t a t i o n o f d u t y p a i c l t O c n s u r e t h a t r a t e a p p l i e i i i s a i F s l .prevailing ates.Check paymentw.r.t- du $ by examinirrg :lrallans'As it is leviedon manuf-acturing,t is a martrtfitcturingexperlse l' i isureablr'.ltcorrectaccounting reatment'Trace the relevantentry irr he nominalaccount'Ensure thatcENVAT credit hasbeencorrectly adjusted n the accounts'Fo rexc isab |egoodsmanu fac tu red ,wh ichhaven , tbeenre |eased t i l l l ] lSda te "check whetheiprovision fo r unpaidexcise duty has beenmade'Compareexciseduty paicl n current ear with that of preceding ear'

Study th e specialPrcrvisions " frlOe and AOA w.r.tpayment f dividcnd' f

.- \l[anufactu ri ng f, xP't .1,,Entryv

CENVET CREDIT"vProvisionsv

ARP

,)J -.+ -

:: ) .:i 6 .; 1::,i 8

t

I

II

ls. Pai'mentellDividell!V lProvisions w.r.t dividendv

Board ResolutionvTransfer to Reserve.t,

Shareholder'segisterICalculationsv

PaYmentwith in timevUnclaimed dividend.t

Bank StatementvPaYment o NRI.,

l .

ii .

any.ExamineBoardresolution regarding at e of dividend'Ensure that provisiorr of the Cornpanies Transfer of Profit to Reserve) Rules,1975have een dheredo'

4. Study th e Shareholder's egistero ensure that payment s rnadc to al lregisteredhareholder'-5. Calculation f dividendshould echecked'6. Check hatdividendha sbeenpaid vithin he time limitprescribednder{-heComPaniesct .1 Examinenstancesf unclaimedividenri '8. Trace elevant ntries n bankstatement'g . F o r p a y m e n t o f d i v i d e n d t o n o n - r e s i d e n t s h a r e h o l d e r s ' e n s u r e t h a i R

permissionasbeenobtained'10. Checkwhether ividendDistribution ar ha sbeenpaid'

IIIIIII:i

t

Dividendn ttlfi,U.ltglTgl I --- -

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( lha: I/otrchingBoarcl esolut ions rreededL. A dircctor or. l l is relat ive. r. A flrnr n rvhichdirectorirelative s a paft11cr, r' Privatccompal]) of rvltich directol s a trtetrttrer,

E,nternto contrilct rvitlr lrc contpatlv n clue tion.Atrdit,rtsliarrldclreck vhether esolutionhas beenpas:;etl.

Moreover. f companl ' .u, l . " i 'u. ,1 aspaicl rp api ta lof Rs i ' - i ( ) ' rc- i i r l ( ) lcevcn prior approvalof CG is needed n adclition o lloard Rescir.rl:crrIrvery director,wlto is interested,. Directly or indirectly- In contract vitlr he cornpanv

Then,he must disclosehis interestat boardmeetingAs pe r CARO, Au d tor shouldcheck easonableness f price'; l:, r

Fo r public company.certain requirements f tlt e cornpanies ci li:rit: r

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70

\IllT6||CCt

18.Payntent con!rol le! bvf h r . ( ' i r m t r : r n i l t i t c t '1956

t , l r r i i r " i

Pro' , is i .ns6t ' t . t , t lpar i ieS . t arc as {-cr i l t r rvsr 'h ic l i l rouldbe consir icred1Aud i t t r :l . urrder sec227( lA)(e) prc 's a company which is in existence or less heri l tirr, rt:i: 'rl I

, y.oo I' -+ Cannot ontributeo any oliticalpurpose Ii - ?ffi::ffi;1:?jJ;"iff:lj;*"rontsd'lrrins'i - - :L. .+ :^- + , , -or inn ' r i " ie t i rn. :e {:4.HcweveraSpersect ionzg3B,Boardcanmakecontr ibut ionternat ionai , i jet t : r iee. fund rvithout anYrestriction'

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I l L'rsuchirt! t ltr.J AT]DI ' I 'OFRECTIIPTS

r l t

5 .6 .7 .

; .r r'.:;, ; t l t o l l t r o l+, r ruthor isal ionv

Bil ls*t 'r . . : r .Ei irr:t les sul l lman't trorrkv

{ .ar ;hnr*r t ros'+t ;ash l rook'v

!| : r.s1..; i : . rur!ttCnt'+. A S - 9 i . : r l. \ . \ \ . ' v l l' \ \ , i r , \ ' l t ' . r i : ' ; t r t | /S dhtc. * j. i - ! i : r l t ' urrreccdsf

lrlq[.r, .tutttrials. fnternal controlv1&teecle'els.!

Production recordsa,ARP.l,

Rate"t,{ lash booko! {r1 oq y !qs !Le_9_t!94

l .I' 2 .

: l .::' 4 .: -, b .: J .:l. 9 ..

r r t

t i ': ':, l .: 2 .: 3 .1 4

I , ,xar l ine he interrralcrrntrc,- lver receipts lotn s alcr [ ;xarnir rc rulhor iszr l iL ' llevcl for rnakin{ : uslr ;a1, . - -sreceiving nroul l t l t t rc l l l r r ' : .- l -cstcheck he le* bi i ls f i r r ascenait r i r tgccur i lc\ ot- ate. r ] r ( )unt. isct t r intSa lcs ' l ' aV A I ' c t cIn casc r largeuunrtrcro1'cashsales rc al- lected. hcck caslrsales surr i rnarvbook nrair r ta ined1 t l rc cl ient . ; r , , '- . r ' .^ " ) \ I ' i \ i " , i ' ' ,[ l xan r inecop ieso1 .c -es | tn t c t l r 0S . , l . i ' . r . t l 4' l ' racethe elevant ntr l i r r cashbook v i t l r e clurrcc o t l l tc orrcaslr ncntos.In case,da i lYcas l rcol lect ion are bankeci n nc\ t dar ' . racc l re sur l rc n t- 'ur , i istatenrent n subsetltrentlar ' .Ilnsure hat reventrehas been rccognised s pt:r recluircrrrentsf AS-!) - ' l levenut:I {ecognit ion".Cash sales ur i r rg lre ycar shouldbe recognisedevcrt t 'ph1 ical 11'1 '11' t :q11gpt' is tock hasnot taken place.Tlr is point s spccial l ;* o be considcrcdwith respr{ j ito salesnear he balarrce lreet ate.

1 ) r ) .

Evaluatc the ir r tcrr r i t l ot t l ro l ; i ; . g; ; . - ' t ; t i ( ) r r . stor . rgc& t l isposal uf jurkmaterial.Check the records or sale & disposal f junk rnaterials.Check the production ccords o determinequantit-r' f junk material.Compare u;rits of junk materials n current )'ear rvitlr that of preccdinl; feri'years.Check the ratea1 vlr ich diff-erentun k nratcrials have beensoltl.Examinecorrespondingentry in cashbook.E,xarnine hether t h as been shownassales >r edrrced ionr cost o{-proiluc:t.

Ki ' I 'l .2 .3 .A

i 5 ., 6 .:, J .:. 8 .:, 9 .: 1 0 .

vRecords..t

, Calculation.t. Receipt'o

,{:onfirmationvAccrued rentoDisputedv

Cash booko-4.",trv-! 41q -

Study various erms & conditionsof agreetttettts ntered nt o rvith tenants.E,xarnineecords f propcrties et out.I lnsu.e thatcalculaticln f rent ha sbeen ttade as p er tcrrns.Check co py of rc'ceipts ssucd o tenant.Obtain confirmation rctm tcuants egardingall loutlt paidby thern.For ren t accnledbu t not received, heckproper nessof accounting rcerinri:ni.I f any outstandirrgent is underdispute,exarnine whetherprovision rrci:rir o bemade,frace relevant ntry in cash book.Check cor-rectnessf accountirlg reatnlcnt n nontinal account.Ensure hatTDS been properlv adjustnteni.

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1 ) ,4ttclirmgyl-,4,syt1t111-c,,--.:-- :L14. i'St r r r l . u t r t : l e : ' l n s o f con i r t i t ' l h r ' t \ \ ' r " ' r r i - i i . n t / 3 '1 t ! 11 ; 8 : t he p ' ' l b l i : h : l '

check 1-rer i t tc l ica l taternents receivetJ fronr publ ishcrs regarding tiutrtttt ;1hooks s t l l c l .Check r :o t l rp t t ta t io l l f r oYa l l \ t t t c l ls r t te tha t t i s as p t : te r l l ls 'l : xa l r t inc acknt l * ledgemet i t i ss t r cd to the pub i ishers '- l ' ra ic c t l t rv i r r cash book 'E,nsurcc{)r l-ect l iess f postin!l i tt tronritral A' ic- : (-r t l l l t 'Check atlirrstn'rent egarding rovaltv dtte bi i t not receivcd'

Study the ternls of contract 'r'ithprincipal'Clrcckcorrrputat ionf conrr l r ission'Usua l l yagen t (C I ien t )p rov i t - | espc r iod ica lsa |ess ta temer l t t op r inc ipa l ,hns t : r l i l t .which commission s calculated' Examine he statemel'rt s well 'Examine copy of receiptssstred'Trace cntry in cashbook& relevant account'Ensurecornpliancewith AS-9 "revenue recognition"'C h e c k a d j u s t m e n t w ' r . t a d v a n c e r e c e i r , e d e n s u r e t h a t i t h a s b e e n s h i t r v n a sf "Uifi,v aid not bookedas income irr tlre reiejvant ear'

Test check computationw'r't interest ncome'check du e clates or interest& dividend & comparewith actualdateof receipicheck relevaut entry n cashbook with copyof receipt issued'Ensure tha t f -u l | amoun to f in te res t /d i v idendhasbeen taken toP&Laccr tun t .Ensure tha tacc rued income in th i s respgc thasbeenaccoun ted fo ras l ' r e r ' \S9

\I!saItIttt!tIII(III{I(

I' I!ttY,tI*'!$sr'-t:-cil. ' l ' r . r r l : 15{.'

Periodical talenrt:nt'v , ConrPutat ion'o,\cknor'+'ledgentet.'

( ' lashbuok.i,i ' - t i t rY in atcl lu l l t.t''.1:tf u.:ri t'.-rylllt,1

5"Commissionreccived'['ermsvComPutat ion.t

Ileritxlical statemenl.t,RcceiPt+

t,ntry in a/cvAS-9vAdvance

I

Li .$ .1

t .2.3+ .

6.1

(6) Income from obtair rscheduleof investnrent&deposi tsmadefromthecl ientandana|ysei tinvestment /interest .& dividend iSchedule'r,\ir' 't;vL . . *t . . .r ,ComPutatton1.t

Datesvr ; . a ^ i - " ' r r ., - . . t , . . ,v:

CashbookvEntrYv

l .2.3 .4 .. l : ' , 1-, is() .

Accrued incoine

Ar" ' r rLr I ' . l . , ' , , , . ' .f t i t . l i ) f \ \ . ' 1 ; " ; i r'lr' i ..1,^'I

I ^ . ,t) I r''r -;'' \ ' i : ' i ' ' I ' ' \ ' ' r ' \ ' 'q ' ' ' r ,; ,, if .,[

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l'oucitiit.g

i , l.tii{ rrt

Curnputat ion+Profit/ loss-*

AS- I3..t! , r ; . t t " l r

Lrl-Ule-ql-a$eE

Ia

' . l . \ ' , '

l .

l .3 .4 .5 .

: 6 .::l:ii1

i L .:: ?:!: A

:i 6 .

o f !Lct , ierv hc intcrnal ontrols ' , rcrSalc t ' i r tvestnicr i ts./ - i . : : :cr : ! ! r l, i : : ' , 's : t l i rc;r ' .s; ' c scl l l i l ; ; . ; ' . ig l t ; io.k ' . ; r . ,Lui . l rus n-rxdrrr i r rst ' , , i 'c i ' . : ;r1()te.. [ 'estchcck thc cornputat iorr l -anror .n] teceivccl n sale as slrown tr hroker 'sluote rs rvel l as net i . l l ( ) t l t t t fcccived fror t i l ' r . t ' i - ter i .e. l l ier ' l t : iJt i r . i . i1 '1;1fbrokera!!eand otherchargcs)( 'ornprr tcprol i t [oss s sl tout t i r r '&L Aic bi t l tc cl icr r t .Ensurecornpl iar tccvi thAS- l3 ' - , \ccourt t ingfbr l t i r est t t tct l t ' ' .'l race re cvant entrv n cash bor.'k 'bartk tatettlellt.

' A l rReview the ir r ternal ontrols over l l r is area ncl t r r l ing aut l r t i r is l l t t r , , fi ' , , - ' rrnaking he sale.If assethas beensold hrough agent,examine orrespondence 'ith him.Check th e arnount eceivedwith ref'erenceo cop)'of receipt ssued.Examine reasonablenessf price by enquiring l.renlanagement.Ensure that saleproceeds ave been ully accounted br.E,xanrinecomputationas regards profiVlosson sale an d ensure hat ;emebeen properly accounted or.

Exan-rine he ba ddebtsappearing n cl ient'saccounts- tr \ i ' \ ': r tr ,NfExamine that al l recoveriesagainst his havebeen slrorvn n books.Exermineackntirvledgementssucd o debtors.ln case receiptof bankruprtcl,dividends, heckcorrespondencewith officialreceiver.Note : when a debtor s sued or bankruptcy, ntity has to prove o thc ofl l i : ialreceiver that debt s due from him. Subsequetttly, ntouttt s received enerallyin parts, which is known as bankruptcydividend-Trace relevantentry in cash book.Ensure proper reatment n Proflt and lossaceountas income. lr A fll-:l ' i 'g

:1.5 .6 .

i ",Li' rF:;{l q lr t t ro l i*;:0,rt'rtrspondancetrt'( t ipv of rcceipt 'v

!tt,ar;onutrleness f ,pricevAccounting 'rl,

llrofiU loss on sale (i,lt--..-.-"llad--d*bts : l.

l{rr

i i a s

f'ec(rYcredBe ddebts.1,Recovery

vAeknowledgemcnt.1,rianhruptcy dividendo

CashbookvAlL treatment

" - ^ |I , ' , ' , - f \ l

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7t ,4 ti, t g cn i lss r.tri nc'e Cha1l. rExari i ! t tc i l tc reasott l i t r crr t :h t ' i ' f i t r r i l [ ]n. e

8/4/2019 23_chp_6

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l' r , t t t : t{. / 5l h l r r r . 't F ; : . . . ^ : - . * . . ' . . - " ' ' . . * - , . .t).:t r\ i-rt l l I OF SAI-E,AS

. t ' ' - . '' : t : : l t l t ' o l s.t

; , i i r c l ' i s t l i < l t iv: i : r lurr i of grl0dsv

. ; l l ! . t r : ,nv i . r i cq.t. , r i i : i , t r; r f ( ; i . r { l t l [C.ti i ou r (8 documcnts.t

p(,st ! l rgvi f r ( r r f d iscounto

confirmation I{;,r1.$.,ott Sale orRglg;tl_U4sis'.{}ption with buyerv

ltequires approvalo' \4cmcrandunr da y

bookvFlntry in accounts

vl ' rc)vision..1,status. ._v

included in closingstock

l .? .3 .4 .5 .6 .1 .8 .9 .

Aui i i t r - r s l r t ru ld xaur incirc intcrr ral on{rol \ 'stdni n th is area.l :xarnir rculrcther ales as rr :er t tt t thor ised; -a re: ; r ; t t t ts ib lef l rc ia l .Ensurc hat goods re hoscu,hic l r arc t tormal lv leal t n b1'cl ient .i \ r r r l or slr t . ru ldxarr t itc copieso ' sa es nr 'o iccs.[ i r rsurc hlr teach temof salcsactLral lvelate-srr he vear conccrtred.e.erar tr i t tecrrt oll prr.rccdures.I - ,x l r rninelrc sotr rce r lct t t t rc:r t1ssir lcs rdcrs. alr :s r- r ' " t t ices)ener: i tedi th inthe organiz.at iot t[ ]xar .r r i r rcrr t ry n SaleS cc()uI i t s \ \e! l aS n ci tstr ) t t ic. i iCCoUrl t0 el lSr l rel l ( ] i l 'cL)rrect c-rstirrg.Author i ty for grant i r rgpecialdiscottr t ls hould . 'e : ra inined"Conf i r r r rat ion iorn hc custonrers hot l ld e obtained.

t !

I t rneans lratcustomerbiryer) has he opl iorrei l l ter to accept he goodsor toretum them rvith n a specified period of t ime.Thus, it perlains o salespending approval rom cusiomer'Th e auditor should heck Memorandum day Book"Exarnine u,hether n the receipt of acceptancerom the customer'properentrieshave been tnade n salesbook and customer's ccount.The auditor should check that a provision for sales retums has been madeagailst al l the transactions br rvhich the customer ha s the option to return thegoods as on balance lreetdate.Clreck the status f goods sent on approval.All such goodsshould be irrclLrded n closing stock. However' theseshould beshorvn as sales f :-. (loods havebeen forrnally accepted y customers;or. The time period for returning the goods has expired or rvhere no time

limit hasbeen ixed, a reasonableime period has elapsed-

l .

2.aJ .

4 .5

6.l .

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s rg J,:!l!,:lg::::!.L!i1.,,"!1'--- -:Lltl'l11r Goodr on NO.I-E: l t rc icr , , , . r goor is i r ; t i ar t : :u i r l h, t l rc pr incipel i t h is agent- o be sir ld at\ * L# : - - - - : : - ' : - l _ ' . r i l r ' i n ! ' " . t r t . d{$lfglt::'.:ltltrl\tl- r' ' r"!rr

Jr "I . c t ' I t l l " t i r : t i n r ' o i ccs

. I - l t e pc rs t l r l r r ' i . . . i r l t t s i g l r s t l r e goo i i s i s r . : a ! i ed c t l ns igno r and l l r e o t l e to r vhon t the goo t i s l1 i i i t ( o l l s r l l t r t ' ' t l : t l r l l e ' l c c ' t t s i g r t t ' cv r rr, nreirt salc book shoulcl be checked lvith copies o1'\rc,rrrnt,rrcs I tu: l; l : ; , , , :1,, i ' l : . . : : : ] : : l i l , ,c(\. \ ; ! . ' ,ccvSa lepr ice2 ' : ; * : l : l i ' : l ; : ,1 ' l i : " ' ' " t l i ca ls ra te rner t l s i 'e ' 'Accor tn tSa les 'havebeenrece.J, I . l l rc .rcc, , t r ' t salcsslroulcl e vcr i f led to check sale pr icc of goodssold and

\tTsII|CC|tttlCCCI

IIIIIII

, ! i tvnr t : ! l i [comrnission 6. Ve if_vl rc la l ,ntent t 'colnrnissions.*".onl,,u,,on , i ' :::ll'i; i[:.lillXl'::::J:::il]rration betweenhegoodsent'oodsordnd{' g. i.,,r,,r" t l iat no profit is b,:,okecl n goodsremaining n the lrandsof consignee t

lliffercnce betn'ccn :t "os t& invo iccPr i t c, 4 .\y

Commissiontl,, 5

No profit on stock inhand(4 ) Packages an dEmnties

Returnable 1 2.l,

IVlclnorand llr systemrt

Stock vithcuslotncr.[,

' provisionfor loss

g);pCt lSi) rr rctr r rc i l v l l ie c

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| | t l t t - i ! t t l ( 77l "' ir;"...-!:Y u i t i t ; ; { } F P U R C I I A S E S. --.. :, i:ll; l c r : l * t r t l l s\& -

i u1 ! i , i r r i sa t i { } n 'I'+ /

I ' rv e t : lsc invoicevRel:rtes tl vear',

gl1lr; rv.r.{- g

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; r i , .1u l tg utr l,1.ss r ut ' Ch:1il:- r{b) Fa-etors'hiclrdccreascircgrossprortl :

t [ ' r ' , - " ' . , r , . { ? ' , , . ' l ; \ \ ' ., a . . ' J - ' , z : ._ .Mr . . l f , ' : " - t U (

{ n \ . t * \ v ' { . * , , ( i r t l r , , ' { r /

II

-)

L) '" 'er aluat ionoi- t l ie ipcrr ing tock.Unr lervir l t rat i r :n f 'c losingstock.Change in basis o1- aluat iono{ 'c lo:singstock. For exarnplewhere the cir ' l i rn i rstock *as valuedat costor rnarkct atc *hichever was lolver , ,a lu ing he openingstockat t l renrarket r icewlr ich s highcr thancost .Antotr t t tof 'got tc ls t r rc l rasecln the previous car.which rvere phvsical ly eceivcdin t l r is car . inclr r t ledn the purchases f current ear.Rcversii l of the fictitious sale erttriesrecorded n the orevior.ls ear to bor.rsftr eprol i ts.Excessivcprovision macle br wagesand other directexpenses"Fai lure o accourr tbr goodssoldFai lure o takecledi t for the amountof an i r rsurancelairn n respectofgood: d, . r l rin transit ol clcstroyed y the fire.

III

tItItt

4 .56 .1 .It .

5.8 VOUCHTNGOF LEDGERS Summaryof procedureq

l Bought edgertr.r,, L"':.r

2" Sales edger

; - ; ; ; ; ; ; ;

l. Ilxamine the internalcontrol system n this area" .I (2. Trace he balancesofcreditors' account.3 . ob ta in con f inna t ionro r r c rec l i t o r s . 7 f ;1 r ' 11 r ' 1 i11n 'd l rD r44. Examine various transactions f purclrases nd purchase eturns.*) I.,,.1f'p no tc .r < ' J5. Examine ransferentriesarnong edger o ensure heir correctness.6. Examineaccounts, ravingdebit balanceas t utay be due o advancesgiven to suppliers"

. l . Exanr ine l te nternal ontrolsystem n this area. X L:: 2. Trace he balanccof debtors' account. DeLtl'r n\ le, ;. OUtulnconfirn.ration rtxr debtors. trt*"1"'t'rl {or'\ t *-'i6\istn, 4. Exarninevarious ransactions f salesand sales "tu.r,r.-t C-lx*$,t nC ,l.e.ra \ev' ,!5'., cJ, 5. Assesshe adequacy'of a{debts provision-i 6. Exanrineaccoulrtshavirrgcredit balance .c uhen advanceha s beenreceived ront; cr-tstomers.:: l. Exarninewhether balances i'ontcashbook an