Verification of retirement gratuity
Answer
Examine the basis on which payable to employees is worked out. The liability for gratuity may either be worked on actuarial rules or agreement or the presumption that all employees retire on the balance sheet date.
Verify computation of liability of gratuity on the aggregate basis.
Check the amount of gratuity paid to employees who retired during the year with reference to number of years of services rendered by them.
See that the annual premium has been charged to profit and loss account in cash the concern has taken a policy from the insurance companies.
Ensure that the basis of computing gratuity is valid.
Ensure that the accounting treatment is in accordance with NSA 26 ” Accounting and Reporting by Retirement Benefits Plans”