The The businessbusiness concerns can be concerns can be classified into manufacturing, classified into manufacturing, financial and non profit financial and non profit organizations. The textile mills organizations. The textile mills and sugar mill are treated as and sugar mill are treated as manufactures of products for manufactures of products for consumers. The banks and consumers. The banks and insurance companies are insurance companies are financial institutions they financial institutions they provide variety of services to provide variety of services to the customers. Club is a non the customers. Club is a non profit concern. profit concern. 11:04 PM11:04 PM 11

The income statements and balance The income statements and balance sheets are prepared in different sheets are prepared in different ways . Many new institutions like ways . Many new institutions like textile mills, paper mills, newspaper , textile mills, paper mills, newspaper , companies, cinemas and hotels carry companies, cinemas and hotels carry on different nature of transaction that on different nature of transaction that arise due to routine working.arise due to routine working.

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The banks are registered under the The banks are registered under the companies ordinance 1984. The companies ordinance 1984. The working of banks as governed by working of banks as governed by banking companies ordinance banking companies ordinance 1962. Insurance companies act 1962. Insurance companies act 1938. The sugar mills and textile 1938. The sugar mills and textile mill are operating under companies mill are operating under companies ordinance 1984.ordinance 1984.

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COMMON POINTS of various concerns

What steps should be taken by What steps should be taken by an auditor while auditing an auditor while auditing ------------ concern? ------------ concern?

Or special points involved in Or special points involved in the audit of different concerns.the audit of different concerns.

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2.COPY OF RESOLUTION:the auditor should check that all those decisions that were decided are implemented and rules and regulations are followed in completion of accounts.3.PREVIOUS YEAR AUDIT REPORT:The auditor should check the previous audit report and if any qualification found he should pay special attention towards it.

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4.Verification of RECEIPTS:The auditor should check the receipts of cash from various sources. He should see that correct amount has been entered.

5.Verification of PAYMENTS:The auditor should check the payments

made to various parties. He must verify that all expenses made were for the business purposes.

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6.Verfication of CASH IN HAND:

The auditor should examine the cash in hand with the cash book and petty cash book. The actual cash must tally with

cash book figures.

7.BANK BALANCE:The auditor should verify the bank

balance with the certificates obtained from the banks and with the help of pass

book.

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8.CLOSING STOCK:8.CLOSING STOCK:The auditor should see that the stock in hand has been valued properly as shown in the balance sheet.

9.DEPRECIATION:The auditor should examine that what method and rate is applied for depreciation and either depreciation rate is applied in appropriate manner. He should also examine that is there any amount set aside for this purpose.

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10.SUNDRY DEBTORS:10.SUNDRY DEBTORS:The auditor should check the debtor’s The auditor should check the debtor’s name and addresses. He should write name and addresses. He should write letter for confirmation of the balance.letter for confirmation of the balance.

11.SUNDRY CREDITORS:11.SUNDRY CREDITORS:The auditor should verify the creditors of the business concerns and their balances too.

12.PROVISION FOR BAD DEBTS:The auditor must check that the proper provision has been made for bad and doubtful debts in the books of accounts.

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13.INVESTMENT:13.INVESTMENT:The auditor should verify the existence of investment. It may include shares, debentures, bonds and government securities. The investment should be valued at cost or market price whichever is lower.

14.CONTINGENT LIABILITIES:If there is any contingent liability a foot note must be given in the Balance Sheet indicating what they are. The auditor should also see that either mention liability is really contingent liability.

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15.SALES:The auditor should check the entries in the sales journal with the duplicate invoices. He should compare the invoices with the copy of the orders received.

16.PROVISION FOR TAXATION:The auditor should see that adequate provision has been made for the tax payable by the company or any other business organization.

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It can be stated in balance sheet or not. Eg preliminary exp.

Examination of Wages sheet;The auditor should examine the wages

sheets, overtime, sick and holiday pay. He can verify that employees who prepare

wages are not involved in payment of such wages.

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Allocation between CAPITAL Allocation between CAPITAL AND REVENUE itemsAND REVENUE items

• The auditor can examine that proper The auditor can examine that proper distinction has been made between distinction has been made between capital and revenue expenditure.capital and revenue expenditure.

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Officer properly approves every voucher.

UNUSUAL ITEMS; The nature of expenses must relate to

the business. Not included of personal expenses.

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14

Law has been followed in preparing the financial statements.

OUTSTADING EXPENSES;

LEGAL FORMALITIESLEGAL FORMALITIES;;Law has been followed in preparing the Law has been followed in preparing the

financial statements.financial statements.

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PREPAID EXPENSES;PREPAID EXPENSES;

• Such expenses must be allocated Such expenses must be allocated between two periods.between two periods.

• ACCRUED INCOME;ACCRUED INCOME;

• UNEARNED INCOME;UNEARNED INCOME;

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AGREEMENT;AGREEMENT;

The auditor can check the agreement The auditor can check the agreement between the parties. The between the parties. The terms and terms and conditionsconditions of such agreement should be of such agreement should be noted .The powers of management noted .The powers of management should be examined from company should be examined from company articles.articles.

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