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1) AS AN AUDITOR,HOW WILL U VOUCH FOLLWING

Income Cash sales :

The auditor should take the folowimg steps to vouch cash sales 1.internal check :Examine the system of internal check 2.daily cash summary : Test check the salesmans daily cash summary with the carbon copies of cash memos and see that they are properly enterted. 3.Proper entry : See that the total of daily cash sales as per salesmans abstract is properly enterned on the receipt side of cash book.they are deposited into banks,check the same with counterfoil of pay-in-slip books and bank pass books. 4.Cancelled cash memo : see that the original is also attached to the carbon copy if any cash memo is cancelled 5.Authority for discount : See that discount and allowance are properly allowed by a proper authority. 6.Difference in cash memo and cash book : Dates of cash memos and the dates on which receipts are recorded in the cash book should be the same. Any difference should be enquired into. 7.reconciliation : Test check the reconciliation between sales and stocks. 8.Posting : Test check the posting from cash book into ledger. 9.Sales of fixed assets : Ensure that sale of fixed assets is not included in sales. 10.Sales of scrap : See that sale of scrap is recorded separately. 11.Automatic cash register : If automatic cash register is employed, the daily totals entered in the cash book should be checked with the till rolls.

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Bad debts recovered :

1.Proof of collection : Amount received directly from debtors should be verified by checking carbon copy of the receipt issued.Examine the court degree notice from bankruptcy trustee.Letter from collecting agency etc. 2.Proper entry : See that the entry properly recorded as chances of defalcation are many if such debts were alredy writtern off bad in the earlier year. 3.Order of official Receiver : Where the amount is received from official receiver,examine the correspondence and copy of the order of official receiver. 4.Disclosure : See that it is separately shown on the credit side of profit and loss account,it should not be credited to the account of the debtor,it should be disclosed separately if it is material. 5.Correspondence : Check correspondence regarding the amount paid,number of instalments and the balance due. 6.Amount writtern off : See that the amount not receivable has been writtern off by. 7.Competent authority : See that these debts were originally writtern off by a competent authority. 8.Entry in the cash book : See that full amount received is recorded in the cash book. 9.Bank statement : Confirm that the cheque received from debtors is honored.

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EXPENSE
Cash purchases
1.Internal check :Ensure that the system of internal control is adequate and reliable. 2.Document : Vouch the entries for cash purchase with reference to the cash memos,Goods inward register,stores records etc.and see that correct and proper entries are made for the same in the cash book. 3.Authority : See that such purchases have been duly authorized and they are pertaining to the business and not for personal use. 4.Recording of discount : Where discount is allowed ,see that only the amount is paid and recorded in the cash book. 5.Certification by responsible officer : If dublicate cash memo is produced in the place of original one , ensure that is not in support og bough entry for cash purchases .further ,it should be duly authorized and certified as genuine by some responsible official. 6.Account head : See that correct account head is given distinguishing between purchases of raw material or stores or stationery etc. 7.Posting : Test check the posting of material amounts in the ladger and see that the item is correctly posted. 8.Disclosure : The auditor should see that the item purchases is disclosed properly. Detail regarding imported items are disclosed separately.

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PURCHASE RETURN 1.Internal check : Examine the system of internal check as regard purchase return. 2.Proper debit note : See that proper debit nit is issued to the suppliers or credit not is received from them. 3.Recording or debit note in the register : See that debit note is properly recorded in the debit note register. 4.Entries in the book : See that entries in the purchase return book. 5.Posting : Test check posting from purchase return book. 6.Debit note of first and last month : Examine the debit notes issued in the first and the last month of the year. 7.Disclosure : The returns need not be discloed separately.

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Assets
Loose tools :
Loose tools at the end of the year should be checked by the auditor as follows: 1. Cost of tools: the auditor should see that cost of loose tools is properly determined and certified bt the chief engineer. 2. Certificaton of the values : if the loose tools are manufacturer by the organization the authorized officer should certify the values of such tools. 3. Physical verification : he should physically verify these tools or obtain a list of tools duly certified by the responsible. 4. Proper valuation : Ensure that closing stock of tools is valued at cost. See that the valuation is done on the basis which is consistent taking into account obsolescence damage,brokerage etc. 5.Disclosure : See that loose tools are disclosed in the balance sheet on asset side under the head current assets

Spare parts : The auditor should take the following steps : 1.Inventory :
Obtain a list of inventory of spares along with the details of date of acquisition,copy of invoice and cost records.

2.Cost of purchase :
Find out the cost of purchase on the basis of date of acquisition and market price.

3.Valuation :
Analyse the method of valuation and see that there is a consistency in valuation.

4.Not usable :
Obtain a list of spares not used damaged
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5.Disclosure :
Verify disclosure of spare parts in the financial statements under current assets.

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Liabilities
Loans Borrowed :
1.power to borrow money : Examine the partnership deed or memorandum ans articles of association to find out the power of the client to borrow money. 2.Validity : examine the loan agreement and correspondent relating to loans. 3.Entries : Check the cash received along with the receipt issued and check up the same in the cash book. 4.Scrutinith the of agreement : Scrutinise the agreement made with the bank in cash of opverdraft. 5.Security : Enquire into the details of the security given against loans in case the loans is secured.Ensure that such a fact has been disclosed in the balance sheet. 6.In the interest of the company : Find out the reason of borrowing and see that it is in the interest of the client. 7.Registration of mortage loan agreement : See that the mortgage is registered with the registrar of companies under section 125 of the companies act 1956.Ensure that entry is made in made in the register of mortagages. 8.Payment made : verify the payment of interest and instalments with the receipt issued by the lender and confirm that they are paid in accordance with the time schedule mentioned in loan agreement.

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DEBENTURES
1.Powers : Examine the provisions regarding the powers of the company to issue debentures as contained in morandum and articles of association. 2.Terms of debentures : Examine the terms of debentures issue as contained in trust deed and ensure that the same have been properly complied with. 3.Verify : Verify cash received on this account with the help of cash book entries. 4.interest : Verify whether the interest on debentures is paid properly ar regulae intervals. 5.Evidence : Confirm redemption of debentures on the basis of minutes of board of director, counterfoils of the cheques books, bank pass book and cash book, returned debentures certificates etc. 6.Collateral Security : issues of debentures as a collateral security should be Disclosed in the balance sheet properly. 7. Proper disclosure : Confirm whether the debentures are secured or unsecured and see that the same is disclosed properly. 8.Board resolution : The auditor should see that there is a proper board resolution passed regarding issue of debentures.

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2) AS AN AUDITOR ,HOW WILL YOU AUDIT THE FOLLOWING

Hospital
1. Legal staus : ascertain the legal stauts of the hospital. 2. Minutes book : examine the minutes books of meetins board of trustee / management committee. 3. List of books : obtain a list of books of accounts and that of other register and records 4. Preview audit : exmine the previous audit reports and note the qualifications and other important observations. 5. Grants : verify that grants received from government or local authorities have been duly accounted for 6. Charges : check a sample of bills where concessional charges have been levied and examine whether the charges are asa per rules of hospitals and whether the necessary approvals have been obtained 7. Ratios : calculates occupancy ratio of man-days,costs of various tests to income realized thereform and compare them with preceding years ratio.

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PARTNERSHIP FIRM
A sole proprietorship as one man business is characterized by limited financial resources limited managerial capability, unlimited liability for the obligations of the business etc. to mention a few. When the business expands, there is need for more financial resources an greater managerial capability to manage it apart from the increased risk to be shouldered.

The sole proprietorship is no match to meet the above requirements. To overcome sue situations, partnership form of business has been evolved. Further, a wealthy entrepreneur without managerial skill may associate with a person with managerial capacity but lacking financial resources to carry on some business by pooling their capital and skill. This possibility also leads to formation of partnership business.

Meaning and Definitions of Partnership:

The partnership business is governed by the rules contained in the Indian Partners Act, 1932. Section 4 of the Partnership Act defines partnership as "the relations between persons who have agreed to share the profits of a business carried on by all or any of the acting for all."

The analysis of the definition reveals that at least two persons need to associated to carry on partnership business. The persons must associate to undertake certain business with the motive to share the profit. The relationship must be contractual and there must be principal-agent relationship between or among the persons.

L. H. Haney has defined partnership as "the relationship between persons who a, to carry on a business in common with a view to private gain." This definition puts emphasis on sharing of gains by carrying on a business through agreement.

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From the above definitions it can be concluded that partnership is an association of two or more persons to share the profits of a business carried on by all the persons or any of them acting for all. The persons who form themselves into a partnership are individual called 'partners' and collectively known as the 'partnership firm' or 'firm'. The name in which the business is carried on is called the 'firm name'. However, law does not recognise the firm as a separate entity distinct from the partners composing the firm.

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TAX AUDIT Accountant

As per section 44 AB (I) the term accountant has been defined as,accountant shall have the same meaning as in explanation below subsection (2) of section 288. Accountanting to section 288 (2) Accountant means a chartered accountant within the meaning of accountant act 1949 and includes in relation to any state,any person,who by virtue of the provisions of subsection (2) of section 266 of the companies act 1956,is entitled to be act as an auditor of companies registered in that state.

Who is an Accountany ? Scope of auditors role under income tax act : The role of the auditor under income tax act is summarized into :
a) Conduct of tax audit under section 44 AB b) Certification for claiming various deduction under the income tax act. c) Conducting selective audit under sec.142 (2A) d) Giving tax advice and tax planning consultancy.

Conduct tax audit Tax auditor

A tax auditor has ato be a chartered accountant even if statutory audit has been conducted by a person other than a chartered accountant.section 44 AB does not stipulate that only the statutory auditor appointed under the companies act or other similar statute should perform the tax audit.Hence tax audit can be performed either by the statutory auditor or by any other chartered accountant in practice.

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Who is tax auditor ? Firm of chartered accountants

Through the section refers to the accountant to the accounts being audited by an accountant which means a chartered accountant the statement of audit can be done by a firm of chartered accountant. In such a case,the name of the partner should be mentioned along with membership number below the signature.

Communication with previous auditor

The tax auditor who is accepting the assignment must communicate with the member who had done tax audit in the earlier year as specified by the chartered accountant act.

Letter of appointment As per section 44 AB, the auditor must obtain from the assesse a letter of appointment for conducting the audit. The letter of appointment must be signed by the assesse who signs the return of income. Statement of particulars
The tax auditor should get the statement of particulars authenticated by the assesse before fe proceeds to verify the same.

Repot
The tax auditor has to submit the report to the assesse. (Explain the role of tax auditor under the income tax act)

Compulsory tax audit

Section 44 AB provides for compulsory audit of accounts of a person carrying on profession.
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As per the provision,following persons required to get the accountant audited before a specified date.
i) ii) Every person carrying on business where total sales,turnover or gross receipts exceed RS.40,00,000 in any previous year. Every person carriying on profession where his gross receipts exceed RS.10,00,000 in any previous year.

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Performance audit
Performance audit aims to ascertain that government programs have achived the desired objectives at the lowest cost and given the intended benefits.performance audit include effcirncy,economy and effectivess. 1.efficiency audit : It looks into whether : The various schemes / projects are executed, and Their operations are carried out in an economical and efficient manner, and They are yielding the expected results. 2.economy audit : It looks into whether : The government has acquired the fianancial human and physical resoures in an economical manners,and The sanctioning authority and spending authority have observedeconomy

3.Effectiveness audit : It is an appraisal of the performance of programme , scheme projects with refrence to the overall targeted objectives as well as efficiency of the means adopted for the attainment of objectives.

4.performance audit may : a) assess whether the objectives and the means provided are proper, consistent suitable or relevant to the policy. b)assess the effectiveness of public sector programmes. C) assess whether social and economic impacts of a policy are due to the policy, D) identify factors inhibiting satisfactory performance or goal fulfulmet.

5) private v / s public sector

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Performance evalution of a private sector undertaking is not difficult as the objectives are very clear.in the case public sector, the objectives may not be quite clear.it covers various asapects for example,maximission of net welfare in absens of are not quantifiable,it gives tremendous scope for interpreations,hense performance audit become challenges.

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DUTIES & POWER OF COMPTROLLER & AUDIT

The c & ag of india has to perform the following duties:
1. To compile and submit accounts: The comptroller and auditor general of indian shall compile the accounts relating to the annual receipts and disbusements of the union / state / union territory. He shall submit those accounts to the president / governor / administrator. He shall give to union / state / union territory, such information asa they may,from time to time,reqire and remder such assistance in the preparation of the annual financial statement asa they reasonably ask for. 2. To audit receipts and expenditure : The C & AG shall audit and report on all receipts and expenditure of any body authority, which has been substantially financed from the consolidated fund of india / state / union territory. For this purpose a body or authority shall be treated asa substantially financed if the amount of grant or loan in one year is : i) ii) Greater than INR 25 lakhs ,and Such amount is greater is greater than 75% of the total expenditure of that total expenditure of that body or authority.

3. To audit grants and loans : This applies to any specific purpose loan or grant,given from the consolidated fund of india / state / union territory, to any body other than a foreign state or international organization.comptroller and auditor general shall scrutinize the procedures by which the sanctioning authority satisfies him as to the fulfilment of the conditions giving such grants or loans. 4. To audit receipts of union or states : Comptroller and auditor general shall audit all receipts payble in to consolidated fund of india / states /union territory. He shall satisfy himself that rules and procedure are designed to secur any effective check on the assessment,collection and proper allocation of revenue and are being duly observed. 5. To audit accounts of stores and stock : The comptroller and auditor general shall have the authority to audit and report on the accounts of stores and stock kept in any office or department of the union or state.
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POWER OF COMPTROLLER & AUDITOR GENERAL

1.Inspection : To inspects any officer of accounts under the control of the union or a state government including officers responsible for the creation of the initial or subsidiary accounts. 2.Transfer : To require that any accounts,books,papers and other documents which deal with or are otherwise relevant to the transactions under audit,be sent to specified places. 3.Inquiry : To put such questions or make such observations as he may consider necessary to the person on change of the official and to cell for such information as he may for the prepration of any report which is his duty to prepare. 4.Sample : To apply such checks as he may deem fit.

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