FORMATION & AUDIT OF NGO’s 23rd October, 2009 East Delhi CA CPE Study Circle NIRC of ICAI New...
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Transcript of FORMATION & AUDIT OF NGO’s 23rd October, 2009 East Delhi CA CPE Study Circle NIRC of ICAI New...
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FORMATION & AUDIT OF NGO’s
23rd October, 2009East Delhi CA CPE Study CircleNIRC of ICAINew Delhi
CA SUDHIR VARMAFCA; CIA (USA)
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Formation of NGO’s
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Constituents
1. Trust - Registered document
2. Society - Registrar of Societies
3. Company - Sec. 25 of the Companies Act, 1956
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Trust
1. No separate Act
2. Trust Deeds can be registered
3. Settler
4. Corpus
5. Trustees
6. Trust Deed
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Trust Deed
1. On a stamp paper as per stamp duty payable on the corpus amount.
2. Must clearly and broadly define objects
3. Strength of Board of Trustees
4. Powers of the Trustees / remuneration / benefits
5. Broad guidelines for management of trust
6. On dissolution
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Societies
Status
- Delhi / state
- All India
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Societies
1. In state level at least 7 promoters (not blood related)
2. In all India level at least 8 promoters from 8 different states of India
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Societies
1. Memorandum of Association
- name
- objects
- profits/benefits to promoters/board members
- dissolution clause
- subscribers
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Societies
1. Rules & Regulations
- define rules of membership
- define rules for elections
- define powers, duties and responsibilities of
the board and each office bearer
- define broad parameters of governance
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Societies
1. Registration
- covering letter in a file cover
- power of attorney
- affidavit from secretary / president
- NOC for registered office
- Memorandum of Association & Rules and
Regulations signed by each promoter on each
page
- proofs of addresses for all promoters
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Societies
1. Certificate of Registration
2. Certified copies from Registrar of
- Memorandum of Association
- Rules & Regulations
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Societies
1. Registrations
- PAN
- TAN
- u/s 12AA of Income Tax Act
- u/s 80G of Income Tax Act
- IEC code
- VAT
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Societies
1. Establish bank account
2. Deposit membership fee
3. Start members register
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Companies
1. Registration process as usual- apply for name of approval- apply for license to operate as a company
registered u/s 25 of the Companies Act 1956- after obtaining license submit papers for
incorporation- certificate of incorporation issued to mention that
the company is registered u/s 25 of the Companies Act 1956
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Audit of NGO’s
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Types of Audit
1. Transaction based audit2. System / Risk based audit3. Project based audit4. Donor based audit5. Efficiency audit6. Compliance / Statutory audit
- Income Tax - FCRA- Registering authority
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Engagement
1. Appointment by appropriate authority
2. Engagement letter
3. Scope of audit
4. Reporting requirements
5. Fee
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Audit approach
1. “Knowledge of business” objects ; activities
2. Audit objectives
3. Audit plan
4. Audit process
5. Resources
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Transaction based audit System / Risk based audit Compliance / Statutory audit (as usual)
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Project based audit
1. Understand activity under the project2. Budget for the project3. Separate bank account / books of accounts4. Direct revenues from the project
- grants - donations- revenue incomes
5. Direct project expenses – nature6. Allocation of expenses to projects7. Projects utilization certificates
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Donor based audit
1. Donor sanction letter
2. Terms & Conditions
3. Budget
4. Reporting requirements
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1. Corpus / Endowment fund
2. Unutilized Grants
3. Separate books of accounts for
- foreign grants
- local grants
- revenue
4. Accrual vs cash system of accounts
5. Receipts and payments accounts
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Efficiency audit
1. Donors / Governing body / Trustees
2. Verification of expenses beyond accounting
3. External help of specialists
4. Common sense / matured judgment
5. Team leaders
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Computerized Environment
1. Size of NGO / No. of transactions
2. Familiarity with software in use
3. Asses software controls
4. Use auditing softwares
5. Remain abreast with technology
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Statutory Compliances
1. Income Tax Act
2. FCRA / FEMA / RBI
3. Registration laws
4. Labour laws
5. VAT / Service Tax
6. Commercial laws
7. Protection laws
8. General laws
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Auditing and assurance standards
AAS1 Basic Principles Governing an AuditAAS2 Objectives and scope of the Audit
of Financial StatementsAAS3 DocumentationAAS4 The Auditor’s Responsibility to consider Fraud
and Error is an Audit of Financial StatementsAAS5 Audit EvidenceAAS6 Risk Assessments and Internal ControlAAS7 Relying Upon the work of an Internal AuditorAAS8 Audit PlanningAAS9 Using the Work of another Auditor
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Auditing and assurance standards
AAS10 Using the Work of an ExpertAAS11 Representations by ManagementAAS12 Responsibility of Joint AuditorsAAS13 Audit MaterialityAAS14 Analytical ProceduresAAS15 Audit SamplingAAS16 Going ConcernAAS17 Quality Control for Audit WorkAAS18 Auditing of Accounting EstimatesAAS19 Subsequent EventsAAS20 Knowledge of the Business
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Auditing and assurance standards
AAS21 Consideration of Laws and Regulations in an Audit of Financial Statements
AAS22 Initial Engagements – Opening BalancesAAS23 Related PartiesAAS24 Audit Considerations Relating to Entities Using
Service OrganizationsAAS25 ComparativesAAS26 Terms of Audit EngagementsAAS27 Communication of Audit Matters with Those
Charged with GovernanceAAS28 The Auditor’s report on Financial Statements
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Auditing and assurance standards
AAS29 Audit in a Computer information Systems Environment
AAS30 External ConfirmationsAAS31 Engagements to Compile Financial InformationAAS32 Engagements to Perform Agreed – Upon
Procedures Regarding Financial StatementsAAS33 Engagements to Review Financial StatementsAAS34 Audit Evidence – Additional Consideration for
Specific ItemsAAS35 The Examination of Prospective Financial
Information
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Q & AThank you
SUDHIR VARMA
FCA; CIA (USA)