How to do Statutory Audit of Manufacturing Companies??
It is important that we understand the need for a statutory audit to be carried out.
In case of a company, the owners of the
company are the shareholders. However, they do not run or manage the day to day
affairs of the company. This is done by the board of directors and the
management of the company.
The shareholders cannot vouch or verify each transaction of the books of accounts. They only have right for obtaining financial statements.
Thus, they need the financial statement should be reliable & free from misstatements. Therefore, the shareholders needs assurance that the accounts maintained and published by the company are authentic and genuine.
Therefore, the law requires that an independent auditor
to conduct a statutory audit.
The independent auditor has full authority to check the financial records of the company and publish his findings via an auditor’s report. The entity has to provide all information, explanations, records & reports as & when required by the auditor. If the auditor does not get information, he has the right to specify the same in his audit report.
As a statutory auditor, he has to ensure compliance with auditing standards while performing the audit. The statutory Auditor needs to work independently i.e. without getting influenced by any factor.
The shareholders and owners of the
enterprise can then be assured of the authenticity and reliability of the
financial statements.
Other stakeholders such as Creditors, Employees, potential investors, Governments, Banks etc. also benefit from the statutory audit. They too can base their decisions on these accounts, since they are authentic.
During a financial audit, reports of a company with respect to revenue or benefits, returns on investment, expenditures, and other things can be included in the audit process. Often, a variety of these elements are used when determining a cumulative ratio.
The objective of a financial audit is often to assess whether funds have been properly handled and that all records and filings required are accurate.
Undergoing a statutory audit is not an implicit indication of misconduct. Instead, it is also a formality intended to help discourage crimes, such as misappropriating funds by ensuring a professional third party routinely scrutinizes various documents.
For non-corporate entities,
the audit is generally not mandatory. Reason is that, their information is not publicly available & not required to be reported to general public. However, financial institutions may ask the entities to get their records audited by an independent person. Also, potential investors may require the private entity to get the accounts audited by a person appointed by such individual.
For manufacturers,
a Statutory Audit for is nearly like the audit of other business enterprise, except for the additional procedures around the company’s inventory balances. Statutory Auditors are expected to get reasonable assertion that a company’s financial reports do not have material misstatement, whether it was caused by fraud or error.
Contents
- Analysis of Definition of Audit
- Advantage
of Statutory Audit
- Disadvantage of Statutory Audit
- Audit Plan and Schedule
- The Audit and Verification
- Discussion and feedback
- The Audit Report
- Conclusion
1. Analysis of Definition of Audit
of any entity - that entity may be profit oriented or not and irrespective of its size or legal form. e.g.
- Profit Oriented - Audit of entity engaged in business
- Not for Profit Oriented - Audit of NGO
The objective of audit is to express an opinion on the financial statements.
whether the financial statements give a true & fair view of the company &
whether the same are free from material misstatements whether arising due to fraud or error during the year.
Explanation
The word
“Statutory” means something which is required to be done by a statute. The law
governing the entity is called statute. So, the word “Statutory audit” means an
audit required under law.
The
statutory audit is performed by an individual auditor or a firm of auditors,
who are eligible for appointment as auditor in the company.
The primary objective of the Statutory Audit is to ensure that the financial statement (such as balance sheet, profit & loss Account etc.) provides a true & fair view of the company financial state of affairs on the date of the Balance Sheet.
As per the
company’s Act it is mandatory for all the Registered companies to get their
books of Accounts audited by the practicing Chartered Accountants.
The Statutory audit and auditors are governed under the Companies Act, 2013, and Companies (Audit and Auditors) Rules, 2014. The sections 139 to 147 of the Act specify the method of appointing an auditor, the eligibility of a statutory auditor and the duties and responsibilities of such an auditor.
Some important points with respect to the
auditor are,
A statutory auditor has the right to access all of the company’s
financial books, records, and information. These should be made available to
him at all times. He also has the right to seek any further information he
thinks is necessary for his audit
He has the duty to write an auditor’s report. In this, he must state if
the financial statements of the company give a true and fair representation of
their financial position and affairs.
If he is writing a qualified report, i.e. the statements are not true
and fair, he must clearly state his reasons for the same.
In case the auditor uncovers any fraud during his audit he must report
it immediately to the Central Government authorities.
While auditing and providing the Audit Report he must follow the Auditing Standards as per the ICAI guidelines.
The Company Auditor's Report Order (CARO), 2016 requires an auditor to report on various aspects of the company, such as fixed assets, inventories, internal audit standards, internal controls, statutory dues, among others.
2. Advantage of Statutory Audit
Some of the advantages are:
The Audit Report specifies the responsibilities of the management and the management also ensures that due & sufficient care has been taken in presenting the financial statements.
The Audit Report also comments on the effectiveness of the internal controls of the entity. In case of deficiencies in the internal controls, the auditor has to specify its impact on the opinion of the auditor.
Organization becomes more active in complying with the norms & regulations applicable to it.
It enhances the reporting quality of the company.
It reduces the likeliness of probable chances of occurrence of financial
frauds on the company by its officers or employees.
The credibility of the financial statements is enhanced due to independent
examination. Thus, it enhances the confidence for the readers.
The financial statements become more authentic to the reader of financial statements.
3. Disadvantage of Statutory Audit
Some of the disadvantages are:
There are inherent limitations to a statutory audit. Statutory auditor
cannot verify the 100% records of an entity given the time, money &
resource constraints at his end.
He cannot give assurance that the financial statements are true &
correct in all respects. The audit is done on a materiality basis, which means
99% of things are checked through substantive audit procedures.
In case of frauds within the entity are discovered, the entity is first held liable to the consequences & then the auditor. Also, the auditor can be relieved if he proves that he has done his job appropriate following the relevant audit procedures in place. Secondly, it’s not his job to detect frauds.
Audit opinion is subjective in nature & vary from one person to
another. So, it may happen that a company gets a clean report in one year &
a modified opinion in the next year due to a change of auditor & change in
his judgements.
The normal operations of the entity may get disrupted due to time allocated for solving audit queries. Hence, big firms normally have a separate team to help the auditor.
4. Audit Plan and schedule
As an Auditor, it is necessary to have an in depth understanding of the company or business being audited. An in depth study can help us deal with possible issues and complications early. It gets easier for us when we understand the company more. The auditor should request information on the company up front. This information could for example be locations, market share, the history of the company, marketing, operations comprising services, products, processing, accounts, financial statements, stocks and shares. The statutory audit checklist should be developed as part of the preparation process.
The Auditor should draft a list of the assignments of the tasks along
with the names of the individuals responsible for it.
5. The
Audit and
Understanding of Organization and its environment
Refer Internal auditors report
Make sure that all discrepancies reported by internal auditor has been sorted out by management and accounts staff.
Previous year Statutory auditors report and study their finding in audit.
whether corrective actions suggested have been implemented in the current year or not.
whether there are any changes w.r.t accounting policies, process, software etc. and reasons of changes
understanding of the procedure followed by accounts department, get working papers etc.
MOA, AOA
Auditor generally gather for reference purposes the previous years’ working papers. The audit team will carefully inspect and study the company’s financial statements and accounting systems. The depth of the assessment depends on the internal control valuation. If the control report is adequate, further testing is restricted and if not, a more in-depth analysis is done.
The audit examination may be put under broad subheadings centered on statutory records and requirements.
The entire Audit procedures works around four main areas
- Internal Control Verification
- Statutory Requirements
- Statutory Compliance
- Other Verification and Documentation
A. Internal Control verification: -
Check the Internal controls, just to ascertain whether weak internal controls are materially affecting financial statements. Provision of separate report on internal control, wherever applicable: -
– Check processing pattern of company / firm from purchase order placed by company to actual delivery to its customer.
– If there are too much reversal of accounting entries, then company’s internal controls in book keeping are weak, higher chances of accounting error.
– Procedure followed by company to confirm balances due to / from parties.
– Control on cash inflow and outflow.
– Whether the company is complying with other statutes such as Labour laws, MSME Act, etc., wherever it required to.
B. Statutory Requirements: -
1. Opening Balances:-
Verification of Opening Balances of Ledgers from the Trial Balance and Balance Sheet of the Previous Year or Previous Quarter which is audited. This is most important to ensure that the last audited Balance Sheet Figures have been kept intact and that we do not need to match the figures of previous year. And resolution of differences if any, if Opening Balances does not tally with the Balance sheet.
2. Vouching/Verification:-
It is during Vouching that we can track the major frauds or the major variances.
Vouching means not just the arithmetical accuracy of Invoices with the Books of Accounts but also the process of recording the entries in the books of Accounts.
Properly vouching provide us the whole idea about how the books of accounts have been maintained.
In the case of purchases verification whether the GST has been accounted separately GST input tax credit account.
whether invoices numbers are being properly recorded or not so that not even a single invoice is not booked twice.
whether the invoice date matches with the entry date or not and
whether the Invoice is being booked in correct head or not.
whether the Invoices produced are original or fake invoices.
whether TDS are being deducted or not
whether Goods and Services tax (GST) have been booked or not and other Statutory Dues Liability that may arise are properly accounted or not.
There can be high probability that there is mistake in booking the prepaid amount or the Annual Maintenance Contracts (AMC), so, we should look after most of the prepaid calculations and AMCs Invoices .
If non material mistakes are observed, then those can be recorded and brought to the knowledge of management which in turn will correct it but if material mistake is noticed with particular head or Particular Vendor then we need to check all the Invoices of that vendor or head.
3. Checking of the Fixed Assets Register:-
whether proper recording of Fixed Assets have been done or not (i.e. the date of purchase, the date of put to use) .
if any Assets is being purchased
check all the additions made to fixed assets in that period with all the invoices and supporting and other necessary details like whether the trail run expenses have been capitalized or not, along with workings for capitalization of assets
if vehicles have been purchased whether the insurance made before bringing the vehicle on road whether that have been capitalized or not.
whether revenue expenditure like repair or maintenance have been capitalized, if capitalized they need to be reversed since revenue expenditure can’t be capitalized.
Whether the certificate has been obtained from the vendor regarding life and warranty of assets.
the physical verification of the fixed assets.
if any Assets is being sold
check the detailed note on the assets disposed off during the year, whether the management consent was taken before the disposal and also state the reason for disposal.
whether the assets were sold in profit or loss and
whether the proper accounting has been done or not.
whether there was capital gain and if yes has tax been paid on capital gain or not.
Verify deprecation workings on assets as per company act and income tax act after considering additions & deletions of assets.
Where fixed asset has been acquired from outside India and the rate of exchange changes after acquisition, the increase/decrease in the liability of the company for repayment of the whole or part of the money borrowed in any foreign currency for acquisition is adjusted in the cost of the asset.
preparation and documentation of list of assets not accounted in books along with value and state location of such assets.
4. Checking the Cash and Bank Balances:-
check the Balances of each bank
check the Bank Reconciliation statement (BRS)
details of subsequent dates of clearance of cheques pending in BRS at the year end. check the clearing dates of the Cheques from the bank statement of another month and those cheques which are older than 3 months they need to be reversed on the same date on which they were firstly made.
whether there are Fixed Deposits (FD) in Books
reconcile the amount with the FD’s Statement and
whether the interest earned in FDs are properly booked or not and
whether TDS as deducted by the banks or financial Institutions are appearing in 26 AS or not.
statements of interest workings.
Also confirm that are there any new bank accounts opened during the period if so produce copies of Board Resolution authorizing the same. Provide the list of stale cheques standing in books.
Whether the unsigned cheques books is crossed or kept in the lock by taking proper consent from management..
Cash inflow or outflow: -
– Company / firm has not paid cash in excess of Rs. 10,000.00
– Company / firm has not received cash in excess of Rs.2,00,000.00 in violation of section 269ST of Income Tax Act, 1961
– If the company / firm received cash in excess of Rs. 50,000.00, in certain cases, it has to receive PAN number of payer.
list of payments made in cash for more than Rs. 10,000/-
If any Petty cash account is maintained than provide reconciliation statement for it, if there is any deviation than state the reason for same. .
5. Payment of Statutory Dues:
Statutory dues are the dues which are compulsory to pay to the Government.
Generally, every industry has Statutory Dues Like: Employees Provident Fund(EPF), Employees' state Insurance Corporation(ESI), Income Tax, TDS, TCS, GST, Municipal taxes Payment and other similar kinds of payments of statutory fees.
check whether these statutory dues are being regularly paid or not and
if
paid if these payments are on due date or not and
if these are on due dates
whether proper returns are being filed or not as required by laws.
Statutory payments are to be checked in details and deviations even of small amount are to be corrected.
– If the company pays dividend to its shareholder than liability of Dividend Distribution Tax arise. Check payment as per prescribed rate and also to ascertain interest paid, if delay.
– Provident Fund, ESIC, Gratuity, Bonus and Leave encashment: -
To ascertain the applicability of provisions of various acts and if there is any variation, then to report in Audit report.
6. Checking of Loan / advances granted or taken: -.
– Loan / Advances are to be checked with due care, whether the same are permitted by Companies Act, 2013 and income tax Act, 1961.
– Section 185, 186 and 73 to 76 of Companies Act, 2013 are necessarily to keep in mind while verifying the Loans and Advances.
while checking secured loans -
check the papers of Loans, loan
sanction letter, loan disbursement letter,
check the closing balance as
appearing in books with the Loan Repayment Schedule.
whether loans are
being paid as per repayment schedule or not.
whether there is any personal
guarantee of directors or any other employees, what are the assets those are
pledge and its papers.
a. Bank Statements and Bank Reconciliation Statements (BRS) for the loans availed for full year.
b. Produce Balance confirmations from the Bankers/Financial institutions.
c. Produce copies of sanction letters evidencing rate of interest being charged and the rate of interest as per sanction letters.
d. Produce interest workings/Reconciliations.
e. If any bank accounts have been closed during the year then please confirm, are there any charges created, if so please produce the relevant forms for satisfaction of charge filed with ROC..
Similarly, in case of Unsecured Loans -
check the rate
of interest and whether or not TDS is being Deducted or not.
a. Statement showing loans accepted and squared off during the year.
b. Please produce copies of documentation such as agreements with the parties evidencing the particulars of receipt of loans.
c. Rate of interest and other terms and conditions. d. Produce interest Working/Reconciliations
e. If payment is to be made in installments, then state whether there is any default in payment, or any penalties are born by in form of extra charges.
f. Verify ledger copies in the books of provider of loan, if there are any deviations then Reconciliations for such deviations .
Similarly, if
Company is granting loans -
check that it does not grant loans to directors or
shareholders as it may come under section 22(2) e deemed dividend.
7. Checking of Inventory
While checking inventory do check the Physical stock
the papers whether any claims stands against those goods or are they pledge in the banks for loans and all.
Taking management confirmation letter on Proper Physical Verification of Inventory at Regular Intervals if we haven’t checked it physically.
If the Industry is Manufacturing Unit or Consumption Based Unit or a Hotel
check Monthly Consumption in books with Stores.
Now the Question may arise what is the process?
The Process is simple,
as we use to find COGS (Cost of Goods Sold)
COGS = Opening Stock + Purchases – Closing Stock,
in the same way
Consumption =Opening Stock of that month + Purchases made in that Month - Closing Stock of that Month.
the physical verification of the Inventory.
8. Inventories: -
a. Produce closing stock valuation statements along with the details of cost and market value of inventories
b. Produce Reconciliation statements with Excise Records.
c. Produce copies of Quantitative details of daily production and sales.
d. Show the input and output ratio of raw materials
e. State the position of WIP as at the end of the year
f. Produces a detail note on the raw material purchased and used. Whether the raw material was returned during the year, if yes show in % of total inward and cost incurred in the return of raw material.
g. Whether the physical inventory was taken during the year, list out the discrepancies found, and what action was taken in this regard.
h. Whether the register is maintained at gate point for the proper control of inventory.
8. Ledger Scrutiny.
Determine the accountability of the books of accounts.
Apply analytical procedures.
check the nature of ledger and
whether the ledger which is having the same nature of balance or not.
Check comparatives of the last 6 months or a year and analyze the ledger.
9. Share capital
check any resolution pass for increase in share capital how many no. of share issued.
Verify whether the share capital changes are there and whether the changes are authorized under proper resolution.
whether there are any change in Shareholders pattern. If so, check certified copy of list of shareholders and their shareholding position as on beginning and at the end of the year.
Share Application Money
whether there is any receipt of Share Application Money during the year, if Yes, check copies of Share Application Forms evidencing the receipt of Share Application Money if any.
In case of companies other than investment companies or banking Companies
whether any of the shares, debentures or securities were sold at a price less than their purchase cost and Documentation of written explanation from management regarding justification for the same.
10. Current Liabilities and provisions: -
break-up of Sundry Creditors as
Creditors for Expenses and
Creditors for Goods
confirmation copies from the parties and ledger copies in the party books, if there are any deviations then also check Reconciliations for such deviations.
Check ledger copies and balance confirmations of related party transactions irrespective of the outstanding balance
Check detailed note on the nature of relationship with such related parties in the day to day business operations and agreements if any evidencing the price at which the transactions are settled.
Check detailed note on the Creditors Written- off during the year, and confirm was there any need to write-off?
Check list of parties to be written-off and reasons for such long outstanding.
Check detailed note on the Provision standing in the Books along with ledger copy, also confirm the nature of such provisions.
11. Investments: -
Check the Investment papers
a. List of investments made during the year and amount invested.
b. Nature of investments whether it is a long term or short term, please provide management consent on nature of investments.
c. List of investments sold during the year.
d. Whether provisions are made in relation to interest receivable or dividend income
e. Provide the list in respect of date of investments made and date of maturity.
c) Deposits: -
Check copies of deposit receipts. corresponding agreements for such deposits and confirmation copies.
12. Current Assets: -
Sundry Debtors: -
Age-Wise analysis of Debtors
confirmation copies and account copies in the other parties ledger accounts
Reconciliation statements if there are any differences, state the reason for same.
Copies of agreements with the parties.
Confirm is there any need to write-off any balances outstanding if so the reasons for such provision.
13. Profit and Loss Account: -
Concentrate more on delivery dates and also on deliveries exceeding more than one month. That results delay in delivery.
In the case of direct expenses and indirect expenses concentrate on the agreements like rent, fees, royalty, lease rent, advertisement, other expenses.
In the case of preliminary expenses the treatment showing whether it is capitalized within five years
Minutes of the meeting should be verified showing the any resolutions for capitalization of expenses, managerial remuneration, loans, approving donations
In case of foreign agency commission expense change in foreign exchange fluctuation should be accounted properly
Any income from investment i.e. interest, dividend should be check bank account.
Verification of valuation of closing stock whether closing stock valuation
1. Sales and other income: -
a. Produce break-up for Sales & Other income.
b. Produce relevant agreements with the parties which are not covered above.
c. Produce Sales Reconciliation with Sales Tax/VAT Returns.
d. Produce interest workings and copies of dividend warrants if any included in other income along with workings for Dividend received.
e. Produce break-up of miscellaneous income along with detailed workings if any.
f. Provide detail note on sales return, stating reasons, amount of sales return and reason for the same.
g. Are there any discrepancies in issuing the invoice, state the reason for same?
h. Sales order pending in hand from more than 1 month.
2. Purchase and other Direct Expenses: -
a. Produce break-up for Manufacturing Expenses.
b. Produce relevant agreements with the parties which are not covered above.
c. Provide the list of Purchase orders which are pending from more than 1 month.
d. Whether the allocation for raw material is properly made in respective heads under purchase.
e. Whether the budget was prepared by the company for the current year, provide the details of deviations.
f. Whether the emergency purchases were made during the year, provide the detail for the same.
g. What is the mode for selection of suppliers, whether the new suppliers are added in preceding year, name of the person who makes purchases for the company?
h. Whether the company has made the contract for supply of goods, if yes, provide the agreement for the same, is there any change in terms of contract in preceding year?
i. Please provide a detailed note on the procedure followed by the Company for making purchase.
3. Manufacturing Expenses: -
a. Produce break-up for Manufacturing Expenses.
b. Provide the Trial balance of manufacturing Expenses.
c. Produce relevant agreements with the parties which are not covered above.
d. Provide the detail note on the Expenses incurred in current year as well as in preceding financial year under the head Manufacturing Expenses.
e. Provide the budget prepared for the current financial year for manufacturing expenses.
f. Whether the manufacturing work is on contract, if yes, please provide the copy of agreement.
g. Provide the number of workers working in factory premises, whether they are on contract, if yes, provide the contact note.
4. Administrative Expenses: -
a. Provide the Trial balance of Administrative Expenses.
b. Produce Rental agreements and ledger copy.
c. Produce donation receipts if any which are eligible for deduction U/s. 80G of Income Tax Act, 1961.
d. Provide the detail note on the Expenses incurred in the current year as well as in preceding financial year under the head Administrative Expenses.
e. Provide the list of assets placed in office premises.
f. Please provide the break-up of expenses incurred in cash and bank.
5. Finance Charges: -
a. Check break-up of Finance Charges along with detailed workings for interest charged.
b. Whether there is any default in making the payment of interest or other dues
C. Statutory compliances: -
Statutory Payments/ Dues and Returns
check the ledger copies for the Statutory dues such as TDS Payable, TCS Payable, Professional Tax Payable, Provident Fund Payable, ESI Payable, GST Payable, VAT Payable, Excise Duty Service Tax, Provision for Fringe Benefit Tax, Provision for Income Tax and any other applicable Statutory Dues
Check detailed statements for the above statutory dues having details of Month-wise credits/payable, Due date for the payment, Date of actual payment, delay if any etc.
if paid what were the rates and whether returns were being filed or not.
determine the amount of statutory liability depending upon the applicable statutory rates and
whether any input credit is being availed or not. If availed, then whether such input credit can be legally availed or not.
Check copies of Quarterly TDS Returns, GST returns, check GST and Excise Duty Reconciliation statements, also check the Statement of Credit taken.
check the Workings for Provision for Income tax/MAT calculations.
Check quarter-wise workings for Fringe Benefit Tax (FBT).
Check payment of advance tax challans for income tax and FBT
Check the Property Tax paid challans
1. Goods & Services Tax: -
Output tax Liability: -
– Invoice series from new financial year should have been started from new series.
– Check whether the nature of tax levied is as per destination of goods.
– HSN / SAC wise recording of items is required for efficient book keeping. To report in ICFR, if not maintained.
– To ascertain whether tax deposited on liability arise under reverse charge mechanism (RCM).
– Reviewing E-way bills in relation to invoices issued, wherever required.
– Monitor the credit notes issued and their effect in GST returns. It is important to know the reason for issuing of credit note.
– In case of Zero rated supply, GST has been paid under Letter of Undertaking, Payment should be booked by debiting GST refundable.
Input Tax Credit: -
– Check whether invoice received in B2C or B2B.
– Check whether expense claimed eligible for input tax credit.
– Ensure that the invoice against which ITC claimed have been paid within 180 days from the date of invoice (aging clause).
– If Non – GST invoice received, then check the number and volume of invoices received from the same vendor during the year, if volume is high then confirm the applicability of GST on vendor.
– Reconcile monthly balance in E-ledger with books.
General verification: -
– Reconcile taxable outward supplies and tax liability thereon with GSTR 3B and GSTR – 1.
– Reconcile Input Tax Credit availed as per books with GSTR – 3B. Also to reconcile ITC with GSTR – 2A, this exercise should be done quarterly, otherwise to be reported in ICFR.
2. Tax deducted at Source: -
Tax payable: -
– Check whether tax deducted at source under respective head.
– Tax should be deducted on payment where advance paid to vendor.
– To reconcile the books with challans and returns.
Tax receivable: -
– Form 26AS to be match with Form 16A, Mandatory.
– Reconcile income and TDS thereon with 26AS.
3. ROC compliances: -
ROC compliances are necessary to know the default status of the company.
– Form ADT – 1 (For appointment of Auditor)
– Form AOC – 4 (Filling of statement of accounts)
– Form MGT – 7 (Filling of Annual Returns)
– Form MGT – 14 (Filling of resolution and agreement to ROC)
– Form CRA – 4 (Filling of cost auditor report, wherever applicable)
– INC – 22 (Director KYC)
– DPT – 3
– MSME compliance form.
MSME compliance are also required for tax audit purpose as the company have to provide interest for non-payment to suppliers, registered under Micro and Small categories, within 45 days.
STATUTORY COMPLIANCES
A. Collection and Remittance of CST & VAT or GST
B. Collection and Remittance of TCS.
C. Deduction and Remittance of TDS
D. Deduction and Remittance of Provident FUND & ESI
E. Deduction and Remittance of Professional Tax.
D. Other Verification and Documentation: -
a. Check copies of board & general body minutes.
confirm, are there any new charges created if so produce copies of relevant forms filed with the ROC.
confirm whether the statutory records are updated and also furnish the same for verification.
conclusive opinion should be formed w.r.t Completeness, existence, accuracy, valuation, ownership and Presentation (here in referred as CEAVOP) of the Transactions and Events, Assets, Liabilities, equities, Account Balances and Financial Statements.
Document the evidences obtained w.r.t CEAVOP.
Document the changes w.r.t accounting policies, process, software etc.
Document the copies of challans evidencing the payment of the statutory dues.
Document the sufficient and appropriate audit evidence with respect to procedural adherence.
6. Discussion and Feedback
Once audit is completed, consolidate all queries and prepare a draft report. Draft Report offer a chance for mutual view concerning the examination of the documents, the controls and the areas that require improvement or prompt action.
7. The Audit report
The concluding audit report is finally made after
thorough examination and understanding of the financial reports and after all
areas of concern have been adequately addressed. After all these, the audit
team then presents its examination report to the audit committee or company’s
board.
The advent of the yearly statutory audit should not function as a warning signal. Instead, it should become a part and parcel of a company’s organized function. The term ‘auditing’ is synonymous with the word counseling. A trouble-free and accurate audit can be certified with knowledge of the procedure, preparedness and proper organization.
Concluding the corrective action steps
Evaluating business viability
Reporting and closure.
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