Auditing and Assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

What special considerations will you keep in mind while auditing the Income and Expenditure of Club? (16 Marks, December 2001)
Or
You are appointed as auditor of Big Star Club. State special consideration for audit of a club?

Answer

Clubs are social associations meant only for the members who are their main source of income and they generally manage the affairs of the clubs. The main objectives before an auditor are to see compliance with rules framed and proper accounting of the income and expenditures. Accordingly, he must carefully study the rules of the club. He shall also acquaint himself with the general activities of the club and current organizational set up including the present office bearers. Mainly, he must take up the following steps:
1. Vouch the membership fee or/and the entrance fee on the basis of the charter or Constitution and the Register of Members.
2. Vouch the annual subscription received comparing receipts with list of members.
 Subscription-in-arrears must be shown separately and properly treated.
 Subscription received in advance must be properly recorded.
 Check whether regular defaulters are allowed to enjoy all the facilities offered the club. He should also take note of steps taken to recover the arrears from the defaulters.
3. Vouch and verify that special donations are meant for specified purposes only.
4. Vouch in the usual way the income from canteen, if any, maintained the club.
5. Vouch specially the income from sales of liquor, cigars, snacks or refreshments or facilities like swimming or billiards.
6. If the club premises are let out for sports activities or social functions like marriages, income from rent or other charges must be vouched.
7. Check that a proper distinction is made between Capital and Revenue Expenditure.
8. See that heavy expenditure is spread over a number of years.
9. See that a proper system of charging depreciation is adopted the club.
10. See that all purchases are duly sanctioned the office bearers and that proper stock records are maintained for all the items.
11. Verify that all expenditures are made in connection with the general activities of the club only.
12. Verify assets like cash and bank balance, investments and stocks.
13. Verify liabilities such as outstanding expenses or loans taken.



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