Auditing and Assurance revision question and answer

Briefly state the important matters to be considered the auditor in audit of a charitable institution.

Or
Discuss the special steps involved in carrying out the audit of a Charitable Institution.
Answer:
The following are the important matters on which the attention of the auditor should be made in the audit of Charitable Institutions.

1. General:
a) Study the constitution under which the charitable institution has been set up whether under the Society Registration Act, as a trust or as a company limited guarantee.
b) Verify whether it is managed as contemplated the law under which it has been set up.
c) Examine the system of internal check mainly relating to amounts collected.
d) Verify the income in detail and confirm that the amounts received have been deposited in the bank regularly and promptly.

2. Subscription and donations:
a) Ascertain the changes, if any, regarding the annual or life membership subscription fees during the year.
b) Ascertain that there is adequate internal control over the issue of official receipts, custody of unused receipt books, printing of receipt books etc.
c) Examine the system of internal check regarding money received from box collection, flag days, etc.
d) Ensure that there is proper system of control over collection and all collections are properly accounted.
e) Verify the total subscriptions and donation received with the published figures in the reports issued the charitable institution.

3. Legacies:

Verify the amount received with the correspondence in this regard and other available information.

4. Grants:

Verify the amount received with the relevant correspondence receipts and minute books and obtain a certificate from a responsible official showing the amount of grants received.

5. Investments Income:

Vouch the amount received with the dividend and interest counterfoils and calculation of interest on securities. In case of sale or purchase of investment, ensure appropriate dividend is received. Also, compare the dividend received with the list of investments to ensure that dividend has been received in respect of all investments.

6. Rents:

Examine the rent roll and tenancy agreement in respect of amount of rent and due dates. Also, vouch the rent receipts with rent roll cash book and counterfoils of receipt book.

7. Special Functions etc.:

Vouch gross receipts and payments in respect of any special functions and ensure that the proceeds of all tickets issued have been accounted for after making the allowance of return.

8. Income Tax refunds:

Verify the refund of tax deducted at source on dividend/interest form the Income Tax Authorities as charitable institutions are exempted from Income Tax.

9. Expenditure:
a) Vouch payment of grants and it is paid only for charitable purpose.
b) Verify the schedules of securities held and also inventories of properties held.

c) Ensure that the Trustees or any official are not benefited out of the institution
d) Conduct physical verification of securities and title deeds and movable properties.
e) Verify the cash and bank balances.
f) Ensure that any fund contributed for a special purpose has been utilized for the purpose.

(Visited 5 times, 1 visits today)
Share this on:

Leave a Reply

Your email address will not be published.