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$ollo%in& are the 'uilt in controls(

Authorization.

're!numbering. Segregation of duties.

)here se&re&ation of duty is not possi'le(

Small entity usually has no segregation of duty. The ma&or reason being the cost.

!ONTRO* O+,E!TI-E(

n control ob&ecti%es# we are taling about controlling:

Sales income (goods *ser%ice).

Sale return. Customer claim. Recei%able amount. 'ro%ision * write off.

1. Customer order should be authori/ed# controlled(should be sold) * recorded(doubleentry should be +assed) for +rom+t e,ecution.

Seller recei%e order. Customer +urchase order.

Goods * ser%ices are only su++lied to customer ha%ing good credit rating.#. Goods shi++ed (goods) * wor com+leted (ser%ices) should be controlled to ensure:

n%oice issued- raised. Re%enue recorded.

0. Goods return * customer claim be controlled to determine: iability of goods return Claims recei%ed

. n%oices issued (sale income be recorded) * credit notes (sales return be recorded) are: Checed for accuracy. Authorized before entered.

Credit notes are only to be gi%en for %alid reasons.2. Sales in%oices are:

Subse/uently +aid by customer. dentified doubtful amount lie +ro%ision * write off.

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!ONTRO* "RO!ED3RE(

ORDER(

1. 0o sale-su++ly should be made beyond credit limit. f credit limit e,ceeds# sent the caseto credit de+artment.

#. Correct +rices /uoted to customers.0. 1rder recei%ed is recorded on +re!numbered document (lie cash recei+t boo).. 2uties must be segregated between:

Credit control. n%oicing. n%entory dis+atch.

2. 1rder should is authorized by: Authority. 3ey +ersonnel.

4. Authorized sale order is used to generate 42is+atch note5. 0o goods to be issuedwithout issue of dis+atch note by warehouse.

DI"AT!5(

1. Chec regularly that dis+atch note is in%oiced.#. 2is+atch notes are authorized before goods left warehouse. $%ery document is

authorized.

0. $,amination of Goods 1utwards as to: 6uality. 6uantity. Condition.

. Recording of Goods 1utwards.2. Agreement of Goods 1utwards to:

Customer order. 2is+atch note. n%oices.

4. 're!numbered the dis+atch note so as to maintain: Sales in%oice. Customer order.

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IN-OI!ING 6 !REDIT NOTE(

1. Sales in%oice is: Authorized by res+onsible officer. 7atch with:

Authorize order. 2is+atch note.

7atching gi%es assurance that /uality * /uantity as ordered by customer id recorded *

rates are same.

n%oice will be sent by:

8a,ed. Courier. $mail.

'ostal. Real time.

#. n%oice * credit notes be entered in: 2ay boo. Sale ledger. Sale ledger control account.

$ntry in sale ledger control account will be:

Sale ledger control account 999

Sale income 999

0. n%oice * credit notes be checed for: 'rices. (Sales +rice !! trade discount sales ta,) Casts. (Total be checed by inde+endent +ersons lie auditor) Calculations. (/uantity ; rate)

. Cancelled in%oice co+ies are retained. t should not be discarded or sent to bin.2. 2is+atch notes be cancelled (against cancelled in%oice) * signed by res+onsible officer.4. Credit note (sales return document) be authorized by inde+endent +erson not being:

2is+atcher. Sales ledger +ersonnel.

7. 2istinguish in%oice between: 2ifferent sales

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RET3RN(

1. Chec for damage. f goods are damaged due to our fault# acce+t the res+onsibility *raise the document.

#. ssue credit note against goods return.DE+TOR(

1. Regular +re+aration * checing of debtor by inde+endent +erson.#. 2ebtor ledger +ersonnel should be inde+endent from cash recei+t.0. Regular sending statement of due amount.. Send letter for o%er due collection. $ntity should ha%e a +olicy of legal course of action.2. 'rocedure should e,ist for follow u+ of o%erdue debt highlighted by:

Regular customer statement. Aging list.

+AD DE+T(

1. Authority for bad debt write off should be in written form. $%ery one should not begi%en this authority.

#. =se of: Court action. >rite off bad debt.

Should be authorized by +erson inde+endent of cash recei+t function.

TET O$ !ONTRO*(

'ur+ose of test:

Control +rocedure is a++lied. 1b&ecti%es are achie%ed.

1. Carry out Se/uence test chec (+re!no of doc) on: n%oices. Credit notes. 2is+atch order. 1rder sales.

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t ensures:

0o omission. 0o du+lication. All items are included.

#. $,istence of authorization +roof taen for: Acce+tance of order. (Credit worthiness chec) 2is+atch of goods. 'ricing * discount. >rite off of bad debt. Raising of:

n%oices.

Credit notes.f authorization e,ist# it?s o otherwise there is an element of danger.

0. Chec arithmetical accuracy of: n%oices. ('ricing-total-sales ta,-

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Test of control in the sales system will be based around:

@uying. (Authorizations) Goods nwards. (Custody) Accounting. (Recording)

Raise Re/uisition

'urchasing de+ttraises o+rder *

send co+y toaccounts de+tt

Recei%e Goods

Raise GoodsRecei%e 0ote

Accounts de+ttmatch GR0 to

in%oice

Record * accountfor in%oice

Send +ayments

Su++lier wille,tend credit in

the duture

!ONTRO*

O+,E!TI-E

!ONTRO*

"RO!ED3RE

TET O$

!ONTRO*

!arry on

"roduction

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Sends Sends

Re/uisition Re/uisition

if no stoc

5A MATERIA*

'urchase de+tt will ne%er buy goods on their own will. "e has to +urchase when he gets

re/uisition by:

Store. 1+eration. General 7anager.

!ONTRO* O+,E!TI-E(

1. 1rder goods * ser%ices under a++ro+riate: Authority. 'rocedure.

Authorized su++lier. Com+etiti%e +rices.

#. n%oices * related documents should be: 'ro+erly checed. A++ro%ed as being %alid.

@efore recognize them as creditors.

"ROD3!TION

MANAGER

TORE

MANAGER

"3R!5AE

MANAGER

I3ED

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0. ns+ect recei%ed goods * ser%ices for: 6uality. 6uantity. 2escri+tion.

. 0ecessary goods * ser%ices are ordered for: 'ro+er conduct of business o+erations. @y suitable su++lier.

There are two ty+es of +urchases:

Regular 'urchase. (dentify to B su++lier * gi%e order to them only). 1ccasional +urchase. (Call /uotation from outside entity * gi%e order).

2.

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2. Co+ies of order should be retained as a method of following u+ late deli%eries bysu++lier. This tells us which su++lies are recei%ed * which are +ending.

4. 're!set the: Re!order le%els. 7a,imum le%els. 7inimum le%els.

2anger le%els. 6uantities. ead times.

t should +referably be recorded in ad%ance in re/uisition note.

RE!EI"T O$ GOOD(

1. dentify Goods nward Area to deal with the recei+t of all goods. >hich gate to enter thegoods we +urchased * who will recei%e the goodsrecei%ing office.

Gate ee+er. Store n charge. ns+ection de+tt.

#. Chec goods for: 6uantity. 6uality. 2escri+tion.

Goods Recei%ed 0otes (nternal doc made by ins+ection de+tt)-Goods nward

0otes- Goods ns+ection 0otes should be:

Raised for all acce+ted goods. Signed by res+onsible officer.

0. Chec Goods Recei%ed 0otes against: 'urchase orders. 'rocedure should e,ist to notify the su++lier of:

=nder deli%ery. 1%er deli%ery.

Goods Recei%ed 0otes should be:

Se/uentially numbered. Checed +eriodically for com+leteness.IN-OI!E 6 !REDIT IN-OI!E(

'ayables figure de+ends on these notes.

n%oices recei%ed means we are recognizing liability against creditors.

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Sales ta, F (EE;F)

Creditor F

7. n%oice should be +ro+erly +osted to nominal ledger account. Coding should be checedinde+endently.

8. 7aintain batch control o%er +osting in%oice to : 0ominal ledger. 'urchase ledger. 'urchase day boo.

9. Goods return record: @e e+t. Chec to credit note recei%es by su++lier.

"3R!5AE *EDGER 6 3""*IER(

1. 7aintain: 'ayable ledger control account. Regular chec control account balance against +urchase ledger by

inde+endent +erson.

#. 'ayable ledger record be e+t by +erson inde+endent of: Recei%ing goods. n%oice authorization. 'ayment routines.

0. Statement by su++lier should be checed against ledger account. $%ery su++lier sentstatement of account to customer. t is a reminder that we issued these in%oices to you

against which such amount is +ayable by you (recei%ables for us).

TET O$ !ONTRO*(

A most im+ortant test of controls is for auditors to chec that all invoicesare supportedby

authorized by purchase invoices* purchase orders. The officials who a++ro%e the in%oices

should be o+erating within laid!down authority limits.

Get sufficient a++ro+riate audit e%idence that control +rocedure is a++lied * control ob&ecti%es

are achie%ed.

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TET $OR(

$%idence of Se/uence Checs e.g !!B!H.

$%idence (signature) of a++ro%al. (by res+onsible+erson)

Adherence to authority limits. $.g. Ca+ital e,+ense I @oard of 2irectors. Stationery-raw material I 7anager.

NOTE('urchase order is made for +urchase for goods.

TET $OR(

$%idence of se/uence chec.

NOTE(Good recei%ed 0ote is made when ordered goods are recei%ed by us.

TET $OR(

$%idence of serial no.

$%idence of se/uence chec (grid stam+). $%idence of matching +urchase in%oice with

Good Recei%e 0ote * 'urchase order.

$%idence of chec: Casts (#!#;# -). Ta, treatment. $,tensions.

$%idence of account coding (same code forindi%idual * +ayables).

nitialing of in%oice grid for wor done.NOTE(Recognition of Account +ayable * 'urchases de+ends on it.

Control +rocedure is ado+ted by audit client. Test of control is ado+ted by auditor.

"3R!5AE

ORDER

GOODRE!EI-ED

NOTE

"3R!5AE

ORDER

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TET $OR(

$%idence of matching Credit 0otes to GoodReturn 0ote. (A doc which contain reasons *

no for goods returned)

NOTE(t cancels the affect of an in%oice. t is used when +urchased goods are

returned. >e get credit note by su++lier in return. 'urchase in%oice * credit

note is issued by su++lier. Credit note is recei%ed when su++lier is satisfied that

goods are actually faulted.

TET $OR(

$%idence for authorization * ad&ustments to+ayable ledger.

NOTE(t is a +urchase ledger which contains the indi%idual ledger of creditors.

7ain ledger I whose final balance is written in trial balance. Subsidiary edger I contains memorandum record.

TET $OR(

$%idence of re%iew of reconciliation of +urchaseledger listings.

$%idence of authorization of ad&ustments to+urchase ledger account.

NOTE(@alance sheet based on these accounts.

!REDIT

NOTE

"A

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0o cash control means great loss. Cash disa++ear anytime. Control o%er cash recei+t should +re%ent theft * fraud.

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@ig * systematic organizations recei%e cash-che/ue through debtor by:

'ostal mail. Courier ser%ice. $tc.

1. Safeguard against +ossible interce+tions between recei+t * o+ening of +ost by: =sing loced mail bo,. Restricting access to eys.

NOTE(1nly res+onsible +erson will o+en the en%elo+e.

#. 1+ening of +ost be su+er%ised by res+onsible officer. f %olume of mail is significant# atleast two +ersons be +resent be there when the mail is o+ened.

"RO+*EM(f any +erson o+ens the en%elo+e * no officer is +resent there *

che/ue is not crossed# then it will be stolen.

0o cross che/ue at all times is recei%ed.0. All che/ues * +ostal orders should be restricti%ely crossed 4A!!O3NT "A

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* baned immediately.

7. 'ost should be date stam+ed. 'ro%ide e%idence of when: Remittance is recei%ed. Can +eriodically be checed against date of baning.

Ado+t this +rocedure where: 0o cross che/ue. "ard cash recei%ed.

Cashier record cash on today date Show after one wee that cash is recei%e

today which is wrong.

Fth

June# EEK Fth

June# EEK

=se cash for (during E days):

'ersonal +ur+ose. @uying fi,ed de+osit certificate etc.

This is called 4TEEMING 6 *ADING = !A5IER >I $3N>ARI5. This hel+s in +re%enting cash

recei%ed on one day being baned later after few days * using cash for +ersonal +ur+oses.

oss to the com+any is that ban will charge high interest.!ONTRO* O-ER !A5 !O**E!TED +< A*EMAN 6 RE"REENTATI-E

1. Authority to collect cash should be clearly defined.#. Salesman * other re+resentati%e should be re/uired to remit cash * re+ort sales at

regular inter%als.

0. Res+onsible officer should follow u+ the salesman who has not yet submitted cash onreturn as re/uired.

. Collection should be recorded when recei%ed in: Rough cash boo. Co+ies of recei+t which should be gi%en to salesman or tra%elers.

2. Collector - re+resentati%e cash recei+t should be reconciled to e%entual baning(through +ay in sli+ (document use for de+osit of cash)- ban euro) which should be

made as +rom+tly as +ossible.

4. Res+onsible officer should chec salesman own recei+t boo (cash memo) with cashboo entries +eriodically (weely# after E days# as determined).

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7. f salesman held in%entory of goods (+resent in outlet-sent sales by going somewhere aswalls * o?more ice cream sales man do)# inde+endent reconciliation be made of

in%entory with: Sales Cash recei%ed.

0o of units to be sold EE

Sale unit KE (KE ; E KEE cash recei%ed)

3nsold unit 1:

!ONTRO* O-ER !A5 A*E

Cash sale * salesman sale is T)Odifferent things.

A cash sale-counter sale is lie de+artment store sale where mostly cash sale is done. A salesman sale-street %endor sale is tricycle sale by walls * o?more ice cream %endors.1. Cash sales be recorded at the +oint of sale is made. =sually this is by means of:

Cash till. Recei+ts.

$!cash register. =se of cash sale in%oice.

#. f cash sale in%oice-recei+t (memo) is issued# they should be +re!no. 7aintain registerfor cash sale boo * co+ies (counter foil) should be retained.

NOTE(Cash sale in%oice is not sim+le sale in%oice. Sim+le sale in%oice is against

credit sales.

0. Cash recei%ed be reconciled daily with either: Till roll.

n%oice total.Cash should be baned +rom+tly.

. 2aily baning be checed against: Till roll. n%oice total.

* difference should be in%estigated.

2. Res+onsible officer should sign the cancelled cash sale in%oice at transaction time. Allsuch in%oices should be checed +eriodically for se/uential numbering.

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!ONTRO* O-ER +AN>ING O$ RE!EI"T

1. Recei+t should be: @aned daily. @aned intact. (0o use of single ru+ee)

0o cash +ay out of cash recei+t. t allows control.

#. $ach day recei+t should be recorded +rom+tly in cash boo-boo of original entry-booof subsidiary entry-Journal * ledger.

0. Sale ledger +ersonnel should ha%e no access to:

Cash. 're+aration of +ay!in!sli+.

. 'eriodically a com+arison-reconciliation should be made between s+lit of cash *che/ue:

Recei%ed. (* recorded in cash boo) @aned. (* recorded in +ay!in!sli+)

!ONTRO* O-ER !5E?3E "A

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Small amount one man sign. arge amount two-three man sign.

REAON(f one o%erloo# other can detect it.8. 'rohibit:

Signing blan che/ue. Che/ue in fa%or of signatory.

NOTE(f signatory sign his name che/ue# it is a big control weaness.

9. Che/ue should be crossed 4A!!O3NT "A RE!ON!I*IATION

1. Reconciliation should be +re+ared on regular basis. At least monthly# /uarterly *annually.

Se+arate statement for se+arate ban.#. Res+onsible officer be inde+endent of recei+t * +ayment function.0. f reconciliation is made by inde+endent +erson# he should obtain ban statement

directly by ban * hold them until reconciliation is com+leted.

!ONTRO* O-ER "ETT< !A5

=se in organization where there is:

0o cash transaction. Cash de+osit in ban intact.

1. ay down formally: e%el of (ma, le%el) ocation of (where to +ut)

Cash float (=se for +etty cash balance).

#. There should be recstricted access to cash float.0. Cash should be secretly held with:

Safe custody.

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oced drawer.>ith restricted access to eys.

. All e,+enses should re/uire a %oucher signed by res+onsible officer (not the +ettycashier).

2. =se im+rest system to reimburse the float. .e. at any time the total cash ; %alue ofauthorized %oucher not reimburse (to+ u+) e/uals the set of amount.

4.

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0. Test for e%idence of arithmetical chec on cash +ayment record including cash boo.. $,amine e%idence of authority for current:

2irect debits. Standing orders.

+AN> RE!ON!I*IATION

1. $,amine e%idence of regular ban reconciliation. (=sually monthly)#. $,amine e%idence of inde+endent chec of ban reconciliation. $.g. signatures.0. $,amine e%idence of follow u+ of outstanding items on ban reconciliation. Gi%e

attention to old outstanding reconciling item that should be written bac lie un!

+resented che/ue.

"ETT< !A5

1. Test +etty cash %ouchers for a++ro%al.#. Test cancellation of +aid +etty %ouchers.0. Test e%idence of arithmetical accuracy on +etty cash record.. $,amine e%idence of inde+endent chec of +etty cash balance.

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n%entory fraud means fraudulent financial re+orting. Closely connected with sales * +urchase system. Some com+anies# +articularly smaller ones# rely on the in%entory count

taing +lace at or near the balance sheet date * in this case# the auditor will

use a substanti%e a++roach to an audit.

1ther com+anies# +articularly large ones# ha%e %ery good day to day controlso%er in%entory than others * ha%e com+le, system of +er+etual in%entory in

+lace which means that an annual year end count is not necessary. "owe%er#

in order to rely on such system# the auditor must confirm that the controls

o%er the system are strong * o+erating effecti%ely.!ONTRO* O+,E!TI-E(

Althou&h inventory records vary client to client the controls are same.1. Authorization * +urchase +rocedure.

e%els of in%entoryM

Store le%el. t includes: 8actory-+roduction related in%entory. 1ffice su++ly in%entory. ($.g. stationery) Shi++ing su++lies in%entory.

>or sho+ le%el. >are house-Godown le%el. (8G in%entory)

#. Control o%er goods inward. (GR0)0. n%entory record su++orted by +hysical in%entory counts.. Ade/uate ste+s should be taen to identify all in%entories for which +ro%ision may be

needed on ground that their 0R< (@ased n +rudence conce+t) is below cost.

2.

n%entory le%el should be controlled so that material is a%ailable when re/uired but thatin%entory is not unnecessary large.

n%entory le%el means:

Re!order le%el. 7a,imum le%el.

7inimum le%el. 2anger le%el.

=nnecessary large in%entory:

ncrease storage cost. n%estment blocage.

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4. Control o%er: 2is+atches. Goods outwards to:

>arehouse. >orsho+. Customer.

>hen in%entory location is changed# it should be documented.

!ONTRO* "RO!ED3RE(

A"RO-A* 6 !ONTRO* O$ DO!3MENT

1. ssue by stoc be made only on +ro+erly authorize documents.#. Re%iew the:

2amage in%entory. Slow mo%ing-not used in%entory. 1bsolete-out of fashion- out of date in%entory.

Any write off be authorized.

ARIT5MET!A* A!!3RA!' as +er com+letion method.0. =se standard cost. Re%iew it to ensure that it relate to actual cost being incurred.. ' is directly com+arable to no of unit made. Chec be +eriodically made of

actual unit against >' record.

!ONTRO* A!!O3NT

Main led&er u'sidiary led&er

1ne main account many accounts

7aintain total in%entory record * integrate it with main account system. f so# reconcilewith detail in%entory record * discre+ancies in%estigated.

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!OM"ARION O$ AET TO RE!ORD

1. n%entory le%el should be +eriodically checed against record by +erson inde+endent ofstore +ersonnel * material difference be in%estigated.

0o +er+etual in%entory record full in%entory count once a year#. 7inimum# ma,imum * re!order stoc le%el should be:

're!determined. Regularly re%iewed for ade/uacy.

AE TO AET 6 RE!ORD

1. Se+arate center should be identified where goods are held.#. "eld stoc at location safe by:

2amage. Theft.

0. Good deli%ered by su++lier be +ass by good nward section to store * hence be: Recorded. Checed as recei%e.

. All stoc line should be: dentified. "eld together.

n a bin which is mared with all rele%ant info as to:

Size. 1rigin. Grade. Title.

TET O$ !ONTRO*(

1. 1bser%e: 'hysical security of in%entory. $n%ironment where it is held.

#. Test +rocedure for record of in%entory mo%ement in * out of stoc.0. Test authorization for ad&ustment to stoc record.. Test authorization for:

>rite off. Scra++ing of stoc.

2. Test control o%er recording of in%entory mo%ement belonging to third +arty.

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4. Teat +rocedure for authorization for in%entory mo%ement. $.g use of goods recei%es *dis+atch note.

7. ns+ect reconciliation of stoc count to stoc record.8. Chec se/uence of:

Goods recei%e note. 2is+atch note.

8or com+leteness.

9. Access ade/uacy of in%entory count +rocedure * attend count to ensure they arecarried out.

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'ayroll means wages * salaries. 1ne of the most im+ortant systems. 3ey +ayroll controls:

2ocumentation * authorization of staff changes. Calculation of wages * salaries. 'ayment of wages. Authorization of deductions.

>hy +ayroll is to be outsourced: 7aintaining inde+endence. 0o one getting the salary information of other one internally. ess fraud chance. $.g. ufone * mobilin outsource their +ayroll.

t is gi%en to em+loyee as: >ages.

Time rate. 'rice rate.

Salary. (7onthly * annually) 'ermanently

!ONTRO* O+,E!TI-E(

1. 'ayment should be made to client?s authorized em+loyees. Authorized em+loyee?s means who wor for the entity.

#. 'ayment should be made at authorized rate of +ay.0. 'ayment should be made in accordance with wor +erformed. $.g.

Time. 1ut+ut. Commission on sales.

Attendance related information is to be collected by:

Cloc card. Swa+ card. @iometric de%ice lie thumb im+ression# retina etc. 8or biometric

de%ices# 8alse Acce+tance * Re&ection rate must be low.

Register.

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. 'ayroll * +ayroll deductions be made accurately. $.g.2eductions may be:

Statutory. Ta,. Social security. nsurance. 'ro%ident fund.

0on!statutory.2. 'ayment should be made to correct em+loyee. A%oid ghost em+loyees (em+loyee not

e,ist but getting salary).

4. 'ro+erly record liabilities to ta, authorities for: Ta, Social security.

iabilities means:

2eductions. 'ayroll +ayables.

!ONTRO* "RO!ED3RE(

A""RO-A* 6 !ONTRO* O$ DO!3MENT

1. >ritten authorization to: $m+loy an em+loyee. 2ismiss an em+loyee.

#. Change in rate of +ay should be authorized in writing by official outside wages de+tt."R-'ersonnel de+tt will ha%e right to decide the wage rate.

0. 1%ertime wor should be authorized in ad%ance by: 7anager. Su+er%isor.

. nde+endent official should: Re%iew +ayroll Sign it.

2. >age che/ue should be signed by two signatories * agreed with signed +ayroll.4. >here weely +ay relates to hour at wor# cloc card should be used. There should

be su+er%ision on:

Cloc card. Smart card. Timing de%ice.

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'articularly when em+loyees are clocing on * off.

!*O!> !ARD(chec on in * out time of em+loyee. MART !ARD(swa+ the card.

7. >here +iece rate system o+erates# +ayment should be made for wor of ana++ro+riate /uality which has been:

ns+ected. A++ro%ed.

$.g n 'aistan# shoe factory use +iece rate for soul +asting worer. Su+er%isor

will su+er%ise it.

8. 'ersonnel record should be e+t inde+endently of +ayroll de+tt for each em+loyeegi%ing details of:

$ngagement. Retirement. 2ismissal. Resignation. Rate of +ay. "oliday.

S+ecimen signature of an em+loyee.

9. >age su+er%isor be a++ointed who +erform some authorization duties listed abo%e.ARIT5EMETI!A* A!!3RA!here a++ro+riate# +ayroll should be +re+ared by: Cloc card. Job card.

* sam+le checed for accuracy against rate of +ay.

#. 'ayroll detail should be checed for accurate calculation of deductions. Ta,. Social security. 'ension. Trade union subscri+tion.

!ONTRO* A!!O3NT

1. Account should be maintained in res+ect of each deduction showing amount +aid+eriodically to:

nland Re%enue. Trade union. Social security.

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0: ATAUSH SHAFI ( Forward your suggestions & feedback at: ataushshafi@gai!"co

#. 1%erall analytical chec should be carried out to highlight ma&or discre+ancies. $.g. Chec against budget. Chec against +ersonnel record. Change in amount +aid o%er +eriod of time.

0. 7anagement should e,ercise o%erall: Re%iew. Control.

A!!E TO AET 6 RE!ORD BDI+3REMENTC

MAIN "OINT(

Cash disbursement in small entity is 13. @ig entity should not gi%e hard cash as salary. Reasons being:

Ris of theft - robbery due to large withdrawal by ban. 'ayroll sheet is difficult for ban to handle * crediting salaries

to em+loyee account.

+A! B+AN> A3TOMATI! !*EARING

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0# ATAUSH SHAFI ( Forward your suggestions & feedback at: ataushshafi@gai!"co

@an balance means:

2e+osit balance. 1%erdraft balance-running finance. Regular loan account balance.

Account ty+es:

8i,ed -Time de+osit. 2emand de+osit-Current account- '* sharing account.

>e can withdraw cash anytime we want.-ERI$I!ATION "OINT(

1. Agree balance with: Cash @oo-@an boo. General ledger. @an statement.

#. n case of difference between ban boo * ban statement# obtain reconciliation forban account.

>e mae reconciliation when ban * cash boo disagree. MA>ERE!ON!I*IATION )5EN !A5 6 +AN> TAEMENT AGREE. The

reason being:

@alance can agree if there is mistae. 7istae in debit * creditside can nullify the mistae.

f balance agrees# chec: =n+resented -outstanding che/ue. =ncollected che/ue.

0. Chec that =n+resented -outstanding che/ue ha%e been cleared with ban statementsubse/uent to year end.

t %erifies that no bogus che/ue is issued.. Chec that uncollected che/ue has been realised with ban statement subse/uent to

year end.

t %erifies that no bogus che/ue is collected.

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2. Scrutinize the subse/uent ban statement for dishonored che/ue on order to detectworthless che/ue de+osited to conceal shortage.

4. n%estigate any significant reconciling item of an unusual nature. There are only three reconciling item in ban statement inclosing date:

=n+resented -outstanding che/ue. =ncollected che/ue. @an mistae.

7. n%estigate about outstanding stale (outdated) che/ue. t should be re%ersed in cashboo.

8. 1btain direct ban confirmation.

etter to ban by auditor asing to confirm: @an balance. Allied matters.

t includes:

1. 8ull account title.#. $,act balance.0. Account closed during the +eriod.. nterest charged during the +eriod. Chec that the whole interest is debited to

'* account.

2. 2etail of security * charges.4. 2etail of in%estment * documents held with:

@an. Self.

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7a&or +rocedure usually achie%ed by direct contact with customers. SA FEF External Confirmationco%ers confirmation of recei%able. Confirmation is essentially an act of client. Confirmation satisfy these assertions w.r.t debtors:

$,istence. Right. 1bligation. Accuracy.

1. 1btain confirmation by debtor. 0ormally +ositi%e confirmation is taen for: 2ebtors. Creditor. @an balance.

#.

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($,cess cash recei%ed from debtor is refunded. 0ormally we

recei%e cash by debtor).

4. Re%iew +ost year end credit notes. Credit notes are gi%en normally against salereturn.

7. $n/uire into debtor balance cleared by &ournal entry after year end.8. Consider:

=n+ro%ided claim. (0o +ro%ision against debtor) $n/uiries. Re%iew corres+ondence.

9. 8or +ro%ision for rebates: Consider ade/uacy. Chec bases. Chec calculations.

1:.Consider whether results of cut off affect debtors.11.Calculate debtor day figure (analytical +rocedure) * com+are it +rior year. f

ratio is rising# discuss with directors how this affects:

@ad debts. 'ro%ision for doubtful debts.

1#.At the final stage of audit: 1btain most recent breadown of debtors. $stablish which year end balance remains uncollected.

10.8or uncollected items: Re%iew customer corres+ondence file for e%idence of:

'roblems. 2is+utes.

2iscuss findings with to+ management * directors.DE+TOR !ON$IRMATION *ETTER

@y debtor confirmation letter# auditor obtains information regarding:

1. Ade/uacy of internal control o%er: Sale. 2ebtor. Collection.

#. Accuracy of: Accounting record in general. Cut off +rocedure for @-S +ur+ose in +articular.

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0. rregularities lie: Teeming * lading. (Cash recei%ed but not recorded) 1%erdue balance. ncorrect balance. 0il balances. 1ld# un+aid accounts. Accounts settled by round sum +ayments. Accounts with credit balances.

The auditor form o+inion from abo%e information that:

1. Reliability of debtor balance.#. 6uantum * nature of dis+ute e,isting between:

Com+any. Customer.

7ethod of obtaining confirmation includes:

1. 'ositi%e.#. 0egati%e.

Timin&s( deally the confirmation should tae +lace immediately after the year end *

hence co%er the year end balances to be included in the balance sheet.

2ue to time constraint# carry out the confirmation prior to year end+ro%ided that confirmation

is no more than three monthsbefore the year end * internal controls are stron&.

+ad De'ts( Reco%erability of bad debts can be tested by a combination of methods.

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Stoc in trade: finished goods (which we ha%e to sell). Store * s+are:

Raw material. ndirect material. S+are +arts. Shi++ing su++ly. 1ffice su++ly.

1.

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2irect labor. 8actory o%erhead.

AS!E cost element: 2irect material. Con%ersion cost.

2irect labor. 8actory o%erhead.

9. Chec stoc %aluation. (C1ST 1R 0R< R=$) Stoc %aluation means %alue of stoc shown in @-S. t not means

881-81-A

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DIRE!TOR $EE(

0ot a +ayroll. 0ot a salary. 0ot disclose with normal salary.

1. $,amine Articles of Association to ascertain the mode of determining the rates of fee.#. $,amine minutes of meeting to endure that only fee rate greed are +aid to director.0. >here fee is +ayable as +er meeting attendance# e,amine attendance to ensure that

only attendance is +aid.

. $nsure that +ro+er recei+t is obtained by +ayee.2. Chec +ro+er disclosure in financial statements as +er:

AS-8RS. Com+anies 1rdinance# KNH.

INTERET ON *ONG TERM *OAN(

t includes: nterest on borrowing. nterest on debenture. nterest on ban loan. nterest on loan certificate. $tc.

1. nterest calculated on amount due for +eriod due.oan : Rs: EEEEE-!.

Taen on : July E# EEK

Lear ended on : 2ec B# EEK

nterest calculation will be as follows:

EEEEE ; E EEEE ; O- FEEE.

#. 1btain loan agreement * read its term * conditions. See:

Rate of return. Terms.

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Conditions. 2ate of re+ay.

0. Chec interest rate mentioned in the agreement. See:

Read agreement. nterest arte. Agreement.

. Chec accruals of interest in case of non!+ayment.2. Chec +ayment %oucher with ban ad%ice.4. $nsure:

Amount of interest. Rate of interest. Ca+italized as +er AS!B.

s +ro+erly disclosed.

DE"RI!IATION O$ $I;ED AET(

$,+ense. Shown in:

1+erating e,+ense in '* account. 'roduction cost in '* account.

1. Chec: 1-@ of asset cost. Accumulated de+reciation.

>ith last year audited financial statements.

#. $nsure de+reciation +olicy is: A++ro+riate. A++lied consistently.

7ethod of de+reciation as +er economic benefit +attern.Same benefit : straight line method.

Reduce benefit : written down %alue.

'ro+ortionate benefit : sum of year digit method.

=nit +roduce : unit of out+ut method.

'eriodic re%iew of:

2e+reciation method. =seful life.

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0.

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