Which special points you as an auditor would consider in auditing the accounts of a Charitable Educational Institution? (16 Marks, JUNE 2001)
What are the special steps involved in conducting the audit of an Educational Institution?
Special steps to be taken the auditor while auditing the accounts of a Charitable Educational Institution are as under:
(1) The Trust Deed of the Charitable Educational Institution should be inspected to ascertain the provisions affecting accounts and the financial powers of the management.
(2) The auditor should go through the minutes of the meetings of the managing Committee in order to see that the resolution affecting accounts have been duly complied with.
(3) Examine receipts of donations etc. All donations received as shown in the Cash Book should be vouched with the corresponding counterfoil of receipts as also with the subscription and donations lists periodically published.
(4) Fees recovered should be verified with the Register of Students and also check from counterfoil of receipts into the Cash Book. Fees unrecovered, if any, have been written – off after due authorization the Managing Committee.
(5) Proper authority should be sent for free enrolment or those at reduced fees.
(6) Enquire into the system of recording of extra charges for diplomas, examination fees, laboratory fees etc. payable the students.
(7) Any failure of records to control adequately the collection of tuition fees, dormitory rents, boarding and other charges should be brought to the notice of the committee. Income from landed properties, if any, should be duly verified with the relevant records.
(8) Investments should be verified actual inspection or with banker’s certificate.
(9) All establishment expenses should be vouched in the usual way and if there is any unduly heavy expenditure under any head, the same should be properly enquired into.
(10) Any increase in the staff salaries should be duly sanctioned and minuted.
(11) Any capital expenditure, incurred during the period under audit, should be verified with the minutes of the Committee.
(12) Enquiry should be made into the system of buying of provision, food-stuffs, clothing and other equipment‟s for boarders and it should be seen whether there is proper internal check on the payment of such bills.
(13) Donation should be carefully verified with the announcements in the annual report, and in case of funds endowed for any specified purpose, the auditor should see that the income there from has been applied towards the purpose as required the donors. If the income from the finds endowed for specific purpose is not being applied towards the objects designated donors, the auditor must disclose the fact in his report.
(14) Properly certified inventories should be obtained in respect of furniture and other equipment and stocks of stationery, provision, etc.
(15) See that the accrued income in respect of outstanding fees and accrued interest on investments has been included as also outstanding liabilities for expenses incurred but not paid, in the annual accounts instead of the latter being presented on the cash basis.
(16) Income from properties, if any, should be duly verified from the relevant records.
(17) Grants from Government and other authorities, if any, should be verified and their utilization should be checked reference to the terms of the grant. Any money remaining unutilized within the period for which it was sanctioned or for a project which was not taken up should be separately disclosed as a liability.
(18) See that all outstanding assets and liabilities are duly brought into accounts and shown in the balance sheet.
(19) Building and other depreciable assets have been properly depreciated.
(20) Repayments of library or laboratory deposits should be properly checked to ensure that deduction in respect of loss of books, damage of books a breakage of laboratory equipment have been made.
(21) Whether the income of the Institution is exempt form income tax under Section 11 of the Income-Tax Act and, if so, whether the tax deducted at source from the dividend or interest income has been claimed from the taxation authorities.