Escolar Documentos
Profissional Documentos
Cultura Documentos
A PROJECT
ON
SUBMITTED TO
UNIVERSITY OF MUMBAI
FOR SEMESTER-IV OF
MASTER OF COMMERCE
BY
YEAR- 2013-2014
ADVANCE AUDITING 2013-2014
Submitted by me for semester-IV during the academic year 2013-2014, is based on actual
work carried out by me under the guidance and supervision of MR. GAJANAN
WADER.
I further state that this work is original and not submitted anywhere else for any
examination.
Signature of Student
EVALUATION CERTIFICATE
This is to certify that the undersigned have assessed and evaluated the project on
This project is original to the best of our knowledge and has been accepted for internal
assessment.
External Examiner
(Out of 10 Marks)
Presentation
(Out of 10 Marks)
1. Introduction 1
2. Feature Of Company 2
14. Conclusion 31
ADVANCE AUDITING 2013-2014
INTRODUCTION
Industrial has revolution led to the emergence of large scale business organizations.
These organization require big investments and the risk involved is very high. Limited
resources and unlimited liability of partners are two important limitations of partnerships
of partnerships in undertaking big business. Joint Stock Company form of business
organization has become extremely popular as it provides a solution to(2) overcome the
limitations of partnership business. The Multinational companies like Coca-Cola and,
General Motors have their investors and customers spread throughout the world. The
giant Indian Companies may include the names like Reliance, Talco Bajaj Auto, Infosys
Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen and Tubro
etc.
Meaning of Company
Section 3 (1) (i) of the Companies Act, 1956 defines a company as a company formed
and registered under this Act or an existing company. Section 3(1) (ii) Of the act states
that an existing company means a company formed and registered under any of the
previous companies laws. This definition does not reveal the distinctive characteristics
of a company . According to Chief Justice Marshall of USA, A company is a person,
artificial, invisible, intangible, and existing only in the contemplation of the law. Being a
mere creature of law, it possesses only those properties which the character of its
creation of its creation confers upon it either expressly or as incidental to its very
existence.
FEATURES OF A COMPANY
1. Incorporated association.
A company is created when it is registered under the Companies Act. It comes into
being from the date mentioned in the certificate of incorporation. It may be noted in
this connection that Section 11 provides that an association of more than ten
persons carrying on business in banking or an association or more than twenty
persons carrying on any other type of business must be registered under the
Companies Act and is deemed to be an illegal association, if it is not so registered.
For forming a public company at least seven persons and for a private company at
least two persons are persons are required. These persons will subscribe their
names to the Memorandum of association and also comply with other legal
requirements of the Act in respect of registration to form and incorporate a company,
with or without limited liability [Sec 12 (1)].
But for many purposes, a company is a legal person like a natural person. It has the
right to acquire and dispose of the property, to enter into contract with third parties in
its own name, and can sue and be sued in its own name.
However, it is not a citizen as it cannot enjoy the rights under the Constitution of
India or Citizenship Act. In State Trading Corporation of India v C.T.O (1963 SCJ
705), it was held that neither the provisions of the Constitution nor the Citizenship
ADVANCE AUDITING 2013-2014
Act apply to it. It should be noted that though a company does not possess
fundamental rights, yet it is person in the eyes of law. It can enter into contracts with
its Directors, its members, and outsiders.
5. Common Seal.
As was pointed out earlier, a company being an artificial person has no body similar
to natural person and as such it cannot sign documents for itself. It acts through
natural person who are called its directors. But having a legal personality, it can be
bound by only those documents which bear its signature. Therefore, the law has
provided for the use of common seal, with the name of the company engraved on it,
as a substitute for its signature. Any document bearing the common seal of the
company will be legally binding on the company. A company may have its own
regulations in its Articles of Association for the manner of affixing the common seal
to a document. If the Articles are silent, the provisions of Table-A (the model set of
articles appended to the Companies Act) will apply. As per regulation 84 of Table-A
the seal of the company shall not be affixed to any instrument except by the
authority of a resolution of the Board or a Committee of the Board authorized by it in
that behalf, and except in the presence of at least two directors and of the secretary
or such other person as the Board may appoint for the purpose, and those two
directors and the secretary or other person aforesaid shall sign every instrument to
which the seal of the company is so affixed in their presence.
6. Limited Liability :
A company may be company limited by shares or a company limited by guarantee.
In company limited by shares, the liability of members is limited to the unpaid value
of the shares. For example, if the face value of a share in a company is Rs. 10 and a
member has already paid Rs. 7 per share, he can be called upon to pay not more
than Rs. 3 per share during the lifetime of the company. In a company limited by
guarantee the liability of members is limited to such amount as the member may
undertake to contribute to the assets of the company in the event of its being wound
up.
ADVANCE AUDITING 2013-2014
7. Transferable Shares.
In a public company, the shares are freely transferable. The right to transfer shares
is a statutory right and it cannot be taken away by a provision in the articles.
However, the articles shall prescribe the manner in which such transfer of shares will
be made and it may also contain bona fide and reasonable restrictions on the right of
members to transfer their shares. But absolute restrictions on the rights of members
to transfer their shares shall be ultra vires. However, in the case of a private
company, the articles shall restrict the right of member to transfer their shares in
companies with its statutory definition.
8. Separate Property :
As a company is a legal person distinct from its members, it is capable of owning,
enjoying and disposing of property in its own name. Although its capital and assets
are contributed by its shareholders, they are not the private and joint owners of its
property. The company is the real person in which all its property is vested and by
which it is controlled, managed and disposed of.
Maintaining good financial records starts with a good system and well-organized
business records. The system can be a simple one and does not need to be
complicated.
Main Principles
Audit Report
An auditor, under Section 227 (2) of the Companies Act, 1956, is required to make a
report to the shareholders of the company whether the books of accounts examined by
him exhibit true and fair view of the state of affairs of the business.
The auditor submits his report to his client giving clear and concise information of the
result of audit performed by him. The fact or information contained in the auditor's report
is not available from any other source.
The statutory auditor of a company has to express his professional opinion about the
truth and fairness of the state of affairs of the company as shown by the Balance Sheet
and of the profit or loss as shown by the Profit and Loss Account in addition to other
information in his report.
When an auditor certifies a financial statement, it implies that the contents of the
statement are reliable as the auditor has vouched for the exactness of the data. The
term certificate is, therefore, used to mean confirmation of the truth and correctness of
something after a verification of certain exact facts. An auditor may therefore certify the
circulating figures of a newspaper or the value of imports and exports of a company.
The term certificate should not be confused with the term report'. While a certificate
affirms the truth and correctness of a fact, figure or a statement, a report is generally a
statement of facts or an expression of opinion regarding the truth and fairness of the
facts, figures and statements.
ADVANCE AUDITING 2013-2014
1. Unqualified Opinion
Often called a clean opinion, an unqualified opinion is an audit report that is issued
when an auditor determines that each of the financial records provided by the small
business is free of any misrepresentations. In addition, an unqualified opinion indicates
that the financial records have been maintained in accordance with the standards
known as Generally Accepted Accounting Principles (GAAP). This is the best type of
report a business can receive.
ADVANCE AUDITING 2013-2014
Typically, an unqualified report consists of a title that includes the word independent.
This is done to illustrate that it was prepared by an unbiased third party. The title is
followed by the main body. Made up of three paragraphs, the main body highlights the
responsibilities of the auditor, the purpose of the audit and the auditors findings. The
auditor signs and dates the document, including his address.
2. Qualified Opinion
3. Adverse Opinion
The worst type of financial report that can be issued to a business is an adverse
opinion. This indicates that the firms financial records do not conform to GAAP. In
addition, the financial records provided by the business have been grossly
misrepresented. Although this may occur by error, it is often an indication of fraud.
When this type of report is issued, a company must correct its financial statement and
have it re-audited, as investors, lenders and other requesting parties will generally not
accept it.
4. Disclaimer of Opinion
On some occasions, an auditor is unable to complete an accurate audit report. This may
occur for a variety of reasons, such as an absence of appropriate financial records.
When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of
the firms financial status could not be determined.
ADVANCE AUDITING 2013-2014
1. Title
An auditor report must have appropriate title, such as Auditors Report. It is helpful for
the reader to identify the auditors report. It is easy to distinguish it from other reports.
The management can issue any report about the business performance. The title o the
report is essential.
2. Addressee
The addressee may be shareholder or board of director of a company. The auditor can
audit financial statements of any business unit as per agreement. The report should be
appropriately addressed as required by engagement letter and legal requirements. The
report is usually addresses to the shareholders or the board of directors.
3. Identification
The audit report should identify the financial statement that have audited. The financial
statement may include trading profit and loss accounts, balance sheet and statement of
changes in financial position and sources and application of frauds statement. The
report should include the name of the entity. Moreover the data and period covered by
the financial statement are also stated in it.
The audit report should indicate the auditing standard or practice followed in conducting
the audit. The international auditing guidelines need assurance that the audit has been
conducted as per set standards.
ADVANCE AUDITING 2013-2014
5. Opinion
The auditors report should clearly state the auditors opinion on the presentation in the
financial statement of the entitys financial position and the result of its operations. The
statement give a true and fair view is an auditors opinion. This opinion is usually based
on national standard or international accounting standards.
6. Signature
The audit report should be signed in the name of the audit firm, the personal name of
the auditor or both as appropriate.
7. Auditors Address
The address of auditor is stated in the audit report. The name of city is stated in the
report for information of the readers.
8. Date of Report
The report should be dated. It informs the reader that the auditor considered the effect
on the financial statements and in his report of events or transactions about which he
become aware the occurred up to that date.
It is necessary to firstly identify the circumstances which can give rise to a qualification.
Uncertainty arising from either a limitation upon the scope of the auditors work or an
inability to obtain any evidence regarding doubts which exist in relation to an unresolved
matter.
example a factual disagreement should lead to the financial statements being amended
to reflect the correct view. Other types of disagreement which are perhaps more
subjective will be much more difficult to resolve such as those relating to the suitability
of an accounting policy.
Those having a material but not fundamental effect upon the financial statements
those having a fundamental effect upon the financial statements.
Fundamental means that the matter is such as to seriously distort or undermine the
view which is given by the financial statements to the extent that they could mislead
user groups.
An except for qualification will be given when the matter is a material but not
fundamental uncertainty or disagreement. An example of an uncertainty could be the
destruction of a part of the clients accounting records leading to a limitation of scope
being imposed upon the auditors work because audit evidence is then unavailable. An
example of a disagreement under this heading could be a failure by a client to apply a
reasonable depreciation policy to a particular class of fixed assets, however in both of
these examples the effect is not pervasive to the view which the financial statements
give as a whole.
ADVANCE AUDITING 2013-2014
Being the Second Generation entrepreneur; Mr. Sachin Subhash Gokhale (Director)
son of Mr. Subhas Gokhale, aged 33 years holds a bachelor degree of Commerce and
Diploma in Electrical Engineering from DIESE, Pune. He is qualified Engineer with more
than 10 years of qualitative experience. He has proven track record of undertaking
valued engineering initiatives, establishing new set-ups, streamlining operations,
evolving cost reduction mechanism, producing engineering techniques and creating a
team work environment to enhance productivity with new initiatives and innovations
within the organizations. He is a dynamic young and enterprising youth with effective
communication skills with great presentation skills. He has the ability to convert adverse
business environment to a favorable business affair.
ADVANCE AUDITING 2013-2014
Mr. Vinay Dattatraya Bhave designated as (Head Sales) aged 49 years, residing at
Flat 201, Kanak Residency, Plot No. 54, MCHS, Near Purohit Hospital, Old Panvel,
Dist. Raigad, Maharashtra-410206. He is a BTech.(Elec.) and holds Diploma in
Electrical Engineering from C.W.I.T., Pune . He is a qualified Engineer with more than
25 years of qualitative experience in industries like Orkay Polyester, Hikal etc. Expert at
planning and effecting preventive maintenance schedules of various machineries to
increase machine up time and equipment reliability. He is related to various Social
service organizations and is a Founder committee member of Friends of children
organization, a NGO working for poor students. A Member of Managing Committee of
Pen taluka Maternity & Children Welfare Center, a Charitable Hospital providing Medical
Assistance to Poor & Needy people. He is one of the Founder Managing committee
Member of Sobatee a NGO working for Betterment, Awareness, Education,
Environment, Medical Assistance etc for more than 6 years. He is highly influential with
regards to his contacts relating social welfare cause.
Mr. Vinit Vinayak Joshi designated as (Head - Admin & Logistic) aged 33 years is a
resident of At & Post Palaspe, Tal. Panvel, Dist. Raigad Maharashtra-410206.
He holds a Master of Commerce degree and is Finance Management graduate. He is a
well known academician with more than 10 years of qualitative experience of in guiding
and training finance & accounts students. An expert team builder and player, has an
experience in different areas such as Accounts, Administration and Customer relations.
He is a visiting faculty for MBA at various colleges such as, Mumbai School of Business,
S. P. More College, Pillais College etc.
ADVANCE AUDITING 2013-2014
The generally accepted auditing standards (GAAS) are the standards you use for
auditing private companies. GAAS come in three categories: general standards,
standards of fieldwork, and standards of reporting.
Keep in mind that the GAAS are the minimum standards you use for auditing private
companies. Additionally, the Public Company Accounting Oversight Board (PCAOB)
has adopted these standards for public (traded on the open market) companies. Each
audit engagement you work on may require you to perform audit work beyond whats
specified in the GAAS in order to appropriately issue an opinion that a set of financial
statements is fairly presented. You need to use professional judgment and exercise due
care in following all standards.
General standards: The first three GAAS are general standards that address your
qualifications to be an auditor and the minimum standards for your work product:
Standards of fieldwork: The next three GAAS govern how you actually do your job:
Your work is adequately planned, and all assistants are properly supervised.
You gain an understanding of the client and its environment, including internal
controls, to assess the risk of material misstatement in the financial statements
and to plan your audit.
The evidence you gather during the audit is appropriate and sufficient to evaluate
managements assertions on the financial statements.
ADVANCE AUDITING 2013-2014
Standards of reporting: The last four GAAS concern information you must consider
prior to issuing your audit report:
You have to state whether the financial statements are prepared using generally
accepted accounting principles (GAAP).
Just as important is to report whether GAAP are consistently applied for all
financial accounting. Should this not be the case, you have to report any
departures.
You also have to make sure that disclosures any additional information
needed to explain the numbers on the financial statements are provided.
Lastly, you have to include your opinion as to whether the financial statements present
fairly in all material respects the financial position of the company under audit.
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AS 2 Valuation of Inventories Y
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Y
Accounting Policies
AS 6 Depreciation Accounting Y
AS 9 Revenue Recognition Y
AS Employee Benefits Y
15
AS Borrowing Costs Y
16
AS Intangible Assets Y
26
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Accounting Policies adopted by the enterprise should represent true and fair view
of the state of affairs of the financial statements
The cost of inventories should comprise all costs of purchase, costs of conversion and
other costs incurred in bringing the inventories to their present location and condition.
Inventories are valued at lower of cost or net realisable value. Specific identification
method is required when goods are not ordinarily interchangeable.
The amount of a contingent loss should be provided for by a charge in the statement of
profit and loss if it is probable that future events will confirm that, after taking into
account any related probable recovery, an asset has been impaired or a liability has
been incurred as at the balance sheet date, and a reasonable estimate of the amount of
the resulting loss can be made.
Assets and liabilities should be adjusted for events occurring after the balance sheet
date that provide additional evidence to assist the estimation of amounts relating to
conditions existing at the balance sheet date or that indicate that the fundamental
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Basis must be consistently followed and disclosed. Any change to be quantified and
disclosed.
The cost of a fixed asset should comprise its purchase price and any attributable
cost of bringing the asset to its working condition for its intended use.
In case of exchange of asset, fair value of asset acquired or the net book value of asset
given up whichever is more clearly evident shall be considered.
Revaluation is permitted provided it is done for the entire class of assets. The basis of
revaluation should be disclosed.
Account scrutinized from balance sheet and profit and loss account-
Scrutiny: Scrutinizing the accounts generally and, in particular, examining the composition of
final balances; and ascertaining the extent of clearance of the balances brought forward from the
previous year particularly those relating to receivables and payables, sale or disposal of fixed
assets and of inventories.
Debtor ledger: -
These ledger accounts of customers are opened to whom trader has sold the goods, so its
other name is also sale account ledger. Because all credit sales amount can be checked from
the amount due from debtors in this ledger. It is also one place where we can find each
debtors closing balance.
It is broad in its applicability as it covers all short-term and long term employee benefits. For
example, annual paid leave (though not en cashable), long-term service rewards, subsidised
goods or services, etc. are also covered.
ADVANCE AUDITING 2013-2014
To,
The Members
M/s. Tirtharoop Electricals Pvt. Ltd.
Maharashtra 410 206
2. Management is responsible for the preparation of these Financial Statements that give
true and fair view of the financial position and financial performance of the Company in
accordance with the Accounting Standards referred to in sub section (3C) of section 211
of the Companies Act, 1956 (the Act). This responsibility includes the design,
implementation and maintenance of internal control relevant to the preparation and
presentation of the financial statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
Auditors Responsibility:
4. An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The Procedures selected depend on the auditors
judgement, including the assessment of the risks of material misstatement of the
financial statement, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the companys preparation and fair
presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our Audit opinion.
ADVANCE AUDITING 2013-2014
Opinion:
6. In our opinion, and to the best of our information and according to the explanations
given to us, the financial statements give the information required by the Act in the
manner so required and give a true and fair view in conformity with the accounting
principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st
March, 2013; and
(b) in the case of Statement of Profit and Loss, of the Profit for the year ended on that
date.
a. We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purpose of the audit.
b. In our opinion, proper books of account as required by law have been kept by the
company so far as appears from our examination of those books.
c. The Balance Sheet and Statement of Profit and Loss dealt with by this report are in
agreement with the books of account;
d. In our opinion, the Balance Sheet and Statement of Profit and Loss comply with the
Accounting Standards referred to in sub section (3C) of section 211 of the Companies
Act, 1956;
e. On the basis of written representations received from the directors as on 31st March,
2013 and taken on record by the Board of Directors, none of the directors is
disqualified as on 31st March, 2013 from being appointed as a director in terms of
clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;
f. Since the Central Government has not issued any notification as to the rate at which
the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued
any Rules under the said section, prescribing the manner in which such cess is to be
paid, no cess is due and payable by the Company.
For XXX
CHARTERED ACCOUNTANTS
CONCLUSION
The project concluded that, given the complexity and development of Company, the
overall level of compliances with the standards and codes is of high order. This project
gives the correct ideas about how the major areas can be found by way of effective
auditing system i.e. errors, frauds, manipulations etc. form this auditor get the clear idea
show to recommend on the position. Project also contain that how to conduct of audit of
the company, what are the various procedure through which audit of company should
be done. Form auditing point of view, there is proper follow up of work done in every
organization there no misconduct of transactions is taken places for that purpose the
auditing is very important aspect in todays scenario form company and point of view.