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Audit Check List

Audit Check List

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Published by: api-3714957 on Oct 14, 2008
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03/18/2014

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profit& loss-page1
NAME OF THE CLIENT :Director In Charge :PERIOD OF AUDIT :Senior In Charge :Audit team :SL NOPARTICULARSYES/NO/N.AREMARKSXIIPROFIT AND LOSS ACCOUNTOther Income
12.1N.A12.2N.A12.3
Sales
12.4What is the policy for accounting of salesa) in respect of sales within Indiab) in respect of exports12.512.612.712.812.912.10b) status of price revision requests by OE customers12.11a) in the manner of determination and acceptanceb) accounting policy and timing of accountingc) adjustment of sales tax12.12a) That goods delivered have been invoicedWhether the income from investments have been properlyaccounted & disclosed in the profit and loss account asrequired by AS-13 and The Companies Act, 1956?(Note the requirements of AS-13 by which interest incomereceived for pre-acquisition period is to be credited to thecost of investments)Whether the profit or loss on sale of investment has beenaccounted in accordance with Schedule VI to TheCompanies Act, 1956, and AS 13?Whether interest accrued on fixed deposits and othersecurities held as margins for Guarantees/LC’s availed?DOUBTFUL-interest onExport sales – Is compliance with FEMA and RBIrequirements checked?Have all discounts given been properly authorized? Is therea formal documented policy for giving discounts exists?How are the changes in prices authorized? And how are thealterations in rate master in the EDP system carried out?If changes are made in the rate master, is a dummytransaction run through immediately to check the workingof the system? If so, are the results of the checks filedseparately?Are the invoices in accordance with the trade terms agreedwith the customers? Does the marketing department carriesout any checking to ensure compliance?Are there any price revisions in the following cases beinga) status of price revisions by the company on OE customersSales rejections - what is the policy with regard to salesWhat are the cut-off procedures at the year end for ensuringthat the following procedures have been followed properly?b) That goods invoiced but not delivered have not beenincluded in closing stocksc) That all goods (as mentioned in Paragraph 9 above)rejected have been removed from sales
 
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12.13Is the sales tax assessments and status reports checked?12.14What is the procedure for issuing credit notes in the case of a) Rejections in the ordinary course of business12.1512.1612.1712.18
Points For Consideration Under AS 9: Revenue RecognitionDisclosure Requirements Under AS 9Points For Consideration Under AS 17-Segment Reporting
Identification of segments into primary and secondary segments depends on certain conditions.b) In the case of price revisions as per negotiations with OEWere the credit notes issued after the year-end to see if they relate to sales for the year under review?Do the company’s products carry warranty? If so how iswarranty accounted i.e. on the settlement basis or on thebasis of past experience for products with warrantiesoutstanding at the year-end.Is the credit control system including the approval of creditnotes satisfactory?Whether the company has an established a procedure fora) Related party transactions in accordance withb) Transactions with “Associated Enterprises” inaccordance with Section 92 of the Income Tax Act, 1961;c) Companies under the same management under section370 (1B) in accordance with The Companies Act, 1956.Revenue from sales and service transactions should be recognized when the following conditions1. In a transaction involving sale of goods performance should be regarded as achieved when thefollowing conditions are fulfilled.a. The seller of goods has transferred to the buyer the property in the goods for a price or allsignificant risks and rewards of ownership have been transferred to the buyer and the seller retainsno effective control of the goods transferred to a degree usually associated with ownership.b. No significant uncertainty exists regarding the amount of the consideration that will be derivedfrom the sale of the goods.2. In a transaction involving rendering of services performances should be measured either underthe completed service contract method or under the proportionate completion method whicheverrelates the revenue to work accomplished. Such performance should be regarded as being achievedwhen no significant uncertainty exists regarding the amount of the consideration that will bederived from rendering of the service.Disclose circumstances in which revenue recognition has been postponed pending significant This is a disclosure standard requiring the information in the financial statement to be segregatedinto business and geographic segments.A business segment is a distinguishable component of an enterprise providing a product or serviceor group of products or services that is subject to risks and returns that are different from otherA geographical segment is distinguishable component of an enterprise providing products orservices in a particular economic environment that is subject to risks and returns that are differentfrom components operating in other economic environments.
 
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Internal financial reporting system can be the basis for identifying the segments.A reportable segment arises if b. Segment result, whether profit or loss, is 10% or more of i. combined result of all segments in profit orii. combined result of all segments in loss whichever is greater in absolute amount; orc. Segment assets are 10% or more of all the assets of all the segments.Segment result is segment revenue less segment expensesSegment assets are those operating assets identified with activities of the segmentSegment liabilities are those identified with the segment arising out of its operations.When primary format is based on geographical segments, certain further disclosures are required.Disclosures are also required relating to intra-segment transfers and composition of the segment.Changes in accounting policies that have an effect on the segment reporting should be disclosed.Matrix form of presentation is allowed.
Points For Consideration Under AS 18: Related Party Disclosures
A reportable segment is business segment or a geographical segment identified on the basis of foregoing definitions for which segment information is required to be disclosed as per this standard.Dominant source and nature of risk and returns of an enterprise should govern whether its primaryreporting format will be business segments or geographical segments.a. Revenue from sales to external customers and from transactions with other segments exceeds10% of total revenues (external and internal) of all segments; orIf total external revenue attributable to reportable segments constitutes less than 75% of totalrevenues then additional segments should be identified till 75% level is reached.Segment revenue is the aggregate of revenue that are directly attributable to the segment,enterprises income that can be reasonably allocated to a segment, revenues arising fromtransactions with other segments but does not include extra ordinary items. Interest or dividendincome, profit on sale of investments, are not considered as part of segment unless the enterprise’sactivity are primarily of a financial nature.Segment expenses is the aggregate of expenses resulting from the operating activities of thesegment and enterprise expenses that can be reasonably allocated to the segment but does notinclude income tax, extra ordinary items and general administrative expenses of head office.Interest paid, Loss on sale of investments, are not considered as part of segment unless theenterprise’s activity are primarily of a financial natureUnder primary reporting format for each reportable segment the enterprise should disclose externaland internal segment revenue, segment result, amount of segment assets and liabilities, cost of fixed assets acquired, depreciation, amortization of assets and other non cash expenses.Reconciliation between information about reportable segments and information in financialstatements of the enterprise should be provided.Secondary segment information is required to be disclosed. This includes information aboutrevenues, assets and cost of fixed assets acquired.

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