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Audit Observations

Income and Expenditures Statement


For the month of May-17

During the course of audit, Income and Expenditure statement for the month of May-17
contains material discrepancies. The detail of these observations is as follows:-

1. Rebate Income:
FDPT is receiving rebate income from QICT Rs.500 per 20ft container and Rs.1000
per 40ft container against export consignment-by road.
During the audit, it is observed that accounts department did not account for rebate income
of Rs.1,007,500 from (July-16 to May-2017) and not reflect in the income and
expenditure statement for the same mentioned period. Although, FDPT received rebate
income amount Rs. 687,000 against July-16 to Oct-16 and Jan-17 to April-17.

Furthermore, Rs.106,500 rebate income for the month of May-17 not reflecting in
income and expenditure accounts of May-17 against same income. Details are as bellow:-

Details of Rebate Income

MONTH 40ft Rate Amount 20ft Rate Amount Total


Jul-16 97 1,000 97,000 91 500 45,500 142,500
AUG--16 60 1,000 60,000 61 500 30,500 90,500
SEP--16 39 1,000 39,000 50 500 25,000 64,000
Oct-16 42 1,000 42,000 62 500 31,000 73,000
Nov-16 54 1,000 54,000 65 500 32,500 86,500
Dec-16 41 1,000 41,000 59 500 29,500 70,500
Jan-17 49 1,000 49,000 62 500 31,000 80,000
Feb-17 77 1,000 77,000 59 500 29,500 106,500
Mar-17 70 1,000 70,000 63 500 31,500 101,500
Apr-17 61 1,000 61,000 50 500 25,000 86,000
May-17 81 1,000 81,000 51 500 25,500 106,500

Total:- 671 671,000 673 336,500 1,007,500

Recommendation:
Account department should be account for the rebate income monthly basis against export
containers which transport from FDPT to QICT.
2. Accrual Accounting:

During the course of audit, it is observed that accounts department did not account
for expenses Rs. 199,011/- according to the rule of accrual accounting. Due to this,
expenses are understated and income is overstated in the income and expenditure
statement for the month of May-17. Detail of these discrepancies is as follows:-

a. Storage and demurrage charges - Train Operation:-

During the audit, QICT deducted payment of Rs. 46,530 against storage and
demurrage charges against train operation.

FDPT acquire services from QICT against Khawaja Steel, latterly party and QICT
both refused the claim of FDPT. Accounts department did not account for above
mentioned expenses and same are not reflecting in income and expenditure statement
for the month of May-17. Details of these charges are as follows:-

Date QICT Inv Party Amount


12.05.17 QITI0000433499 KHAWAJA STEEL 13,140
12.05.17 QITI0000433500 KHAWAJA STEEL 8,390
16.05.17 QITI0000435316 KHAWAJA STEEL 25,000
46,530

b. Washing and Repairing charges - Train Operation:-

During the audit, it is observed that Washing and Repairing charges incurred
against train operation Rs. 47,000 and accounts department did not account for
these charges in income and expenses statement for the month of May-17 under
accrual basis. The detail of these expenses is as follows:-

Party BL NO Shipping Line No of Cont Per Cont Amount


IKRAM STEEL 710823138 SCL 18 2500 45000
BEST EXPORT MAIP3890 HSD 2 1000 2000

Total: 47,000
c. LOLO empty container charges - Train Operation:-

During the audit, it is observed that LOLO empty container charges incurred
against train operation Rs. 81,000 and accounts department did not account for
these charges in income and expenses statement for the month of May-17 under
accrual basis. The detail of these expenses is as follows:-

Shipping
Party BL NO No of Cont Per Cont Amount
Line
SUNDAL TRADING LHV1590022 CMA 1 2,625 2,625
ABM CORPORATION LHV1597837 CMA 1 2,625 2,625
ABM CORPORATION RTM0769150 CMA 1 2,625 2,625
ABM CORPORATION 706148484 APL 1 2,625 2,625
KBS STEEL HODO105456 CMA 10 2,100 21,000
IKRAM STEEL INDUSTRIES LHV1566300 CMA 10 2,100 21,000
MAZHAR STEEL MSCUU5837762 MSC 12 1,900 22,800
MAZHAR STEEL MSCUU5837762 MSC 3 1,900 5,700

Total: 81,000

d. Monitoring expenses- Train Operation:-

During the audit, it is observed that monitoring expenses incurred against


train operation-import Rs. 16,300 and accounts department did not account for
these charges in income and expenses statement for the month of May-17 under
accrual basis. The detail of these expenses is as follows:-

Date Particulars Amount


15.06.17 Paid Station master ,ASM, Station staff and etc. in KHI 10,400
15.06.17 Paid Station master, ASM, Station staff and supervisor. in KHI 5,900
Total :- 16,300

e. Administrative expenses KTO:-

During the audit it is observed that account department did not book
expenses of Rs. 8,181 in the month of May-17 according to accrual accounting
and same are not reflecting in Income and expenditure statement for the month
of May-17. Detail of these expenses is as follows:-

Ledger code Account Description Amount


63-04-0019 021-32446179 Phone bill ( KTO ) 3,577
63-04-0020 021-32442326 Phone bill ( KTO ) 614
63-04-0021 021-32442327 Phone bill ( KTO ) 655
63-04-0022 021-32442459 Phone bill ( KTO ) 647
63-04-0023 021-32442334 Phone bill ( KTO ) 656
63-04-0024 021-34730351 Phone bill ( KTO ) 2,032
Total :- 8,181
During the course of audit, it is observed that accounts department wrongly
account for expenses Rs. 102,785/- which were related to month of April-17.
Due to this, expenses are overstated and income is understated in income and
expenses statement for the month of May-17.

Due to this violation of accrual accounting, income and expenditure


statement for the May-17 is not presenting true and fare view. Detail of these
discrepancies is as follows:-

f. Monitoring expenses- Train Operation:-

Following expenses are related to month of April-17 which were not account
for in income and expenses statement of April-17 and same are reflecting in
income and expenditure statement for the month of May-17 which are
unjustified. The detail of these expenses is as follows:-

Date Particulars Amount


13.05.17 Station Master ( Mr.Amir) against month of Apr-17 6,000
13.05.17 Mr.Javaid and Mr.Pervaiz against month of Apr-17 9,200
Total :- 15,200

g. Agent Commission - Train Operation- Import:-

Following expenses are related to month of April-17 which were not account
for in income and expenses statement of April-17 and same are reflecting in
income and expenditure statement for the month of May-17 which are
unjustified. The detail of these expenses is as follows:-

Date Particulars Amount


09.05.17 Rebate against import container khawja steel for month of Apr-17 48,000
Total :- 48,000

h. Administrative expenses KTO:-

Following administrative expenses were related to month of April-17 which


not account for in income and expenses statement of April-17 and same are
reflecting in income and expenditure statement for the month of May-17 which
are unjustified. The detail of these expenses is as follows:-

Ledger code Account Description Amount


63-04-0001 Entertainment ( KTO ) 7,028
63-04-0002 Printing & stationery ( KTO ) 8,075
63-04-0003 Water and sewerage ( KTO ) 888
63-04-0005 Postage and courier ( KTO ) 3,113
63-04-0008 Misc expenses ( KTO ) 7,696
63-04-0016 R & M KHG 8656 (BIKE ) 450
63-04-0018 R & M PASSO Car ( KTO ) 2,000
Ledger code Account Description Amount
63-04-0019 021-32446179 Phone bill ( KTO ) 3,577
63-04-0020 021-32442326 Phone bill ( KTO ) 596
63-04-0021 021-32442327 Phone bill ( KTO ) 656
63-04-0022 021-32442459 Phone bill ( KTO ) 647
63-04-0023 021-32442334 Phone bill ( KTO ) 646
63-04-0024 021-34730351 Phone bill ( KTO ) 2,023
63-04-0027 New paper and periodicals ( KTO ) 1,190
63-04-0029 KHG-8656 Fuel expenses 1,000
Total :- 39,585

Recommendation:

The accrual concept in accounting means that expenses and revenues are
recorded in the period they occur, whether or not cash is involved. The benefit of
the accrual approach is that financial statements reflect all the expenses
associated with the reported revenues for an accounting period.

Accounts department should be followed the accrual concept and present the
true and fair view of financial statements. i.e income and expenses statements,
Balance sheet.

3. General Observation:
1) SAPT Advance:

FDPT was paid advance for SAPT in Miss Hina Account (KTO). Before
opening of let pass account, ledger balance is negative (CR) Rs.16,531 as on
19.06.17.

It shows that this ledger balance Rs16,531 is payable to SAPT. Meanwhile,


Miss Hina, she has closing balance of Rs 37,447 against SAPT. It shows that
account department did not properly book invoices of SAPT (approximately Rs.
53,978).

Recommendation:
Accounts Department KTO and H.O should be properly reconciled this
account and present the fair position of SAPT.

2) Cash In Hand KTO:

During the audit, it is observed that Cash in hand KTO shows balance of Rs.
DR 929,223 and un-posted voucher Rs. 365,308. So net adjusted balance is Rs.
563,915 as on 06 July, 2017. It is enough balance to meet the KTO expenses. It
shows that accounts department is not timely account for expenses of KTO.
There are many chances of cash embezzlement and other financial risk. In this
regard, it has informed several times to Accounts department, Higher
Management.
Recommendation:
It is strongly recommended that accounts department KTO should dispatch
petty detail to H.O so transactions timely account for in accounts.

3) Premier Mercantile Service:

FDPT paid amount of Rs.123,500 to Premier mercantile service pvt ltd as on


03.10.16 against shipment of Captain chemical but there is no expense book
against this advance.

Recommendation:
Accounts department should be account for expenses against advance
immediately

4) Segregation of Account:

a. Accounts department booked Rs.3,000 in Misc expenses and same is show in


Income and expenditure statement of May-17, although it speed money against "
Ameen ittifaq Rice " and related to train operation for the month of Apr-17.

b. Accounts department booked Rs.1,341,500 against account head of "Local


Haulage Import-FSD which are unjustified, due to this reason expenditure
are not showing in their relevant heads. Actual segregation of this amount is
as follow:-

Sr# Account Description Amount


1 Local Haulage import-FSD 1,276,000
2 Local Haulage Empty container return to Karachi 32,500
3 Washing and Repearing Charges 25,000
4 Local Haulage export-FSD 8,000
Total :- 1,341,500

c. Accounts department booked income of Rs.15,900 against insurance


charges in income and expenditure statement for the month of May-17
although this income is shifting income.

Recommendation:
Accounts department should be account for expenses in their relevant head
of account which make it easy to identify and analysis the expenses of
concerned head for improvement of profitability.

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