auditing

assignment-2
submitted to
keerti Mam
submitted by
bhavna pathak
Q1).DIFFERENCE BETWEEN INTERNAL CHECK AND
INTERNAL CONTROL SYSTEM?
DIFFERENCE
 S.NO BASIS INTERNAL INTERNAL
CHECK CONTROL
1

1 MEANING A SYSTEM OF IT CONSIST OF

ALLOCATION OF ALL methods and
RESPONSIBILTY,DIVISION procedure
OF WORK METHODS OF
adopted to assist
RECORDING
achiving the
TRANSECTION WHERBY
WORK OF EMPLOYE IS
objective of
CHECKED continuously by efficient conduct
others. of buisness
2 scope It operates in routine to Internal control
double check every system work of
part of transaction at one person is
time of occurance and checked by other
recording same
3 objective Its objective is to ensure Its object to ensure
that no one employe has adherence to
exclusion control over any management
transaction or group of polices
transaction and their safeguarding .
4 Point of Methods of recording In internal
time teansaction are devised control system
where work of employe checking is done
is check continuously simuntosly with
by corerelating with conduct of
work of others work.every
transaction is
checked as soon
as it is entered
5 report The summary of day to Internal control
day transaction work as provide for built
report to senior in mis report
6 Thrust of The thrust of internal The thrust of
system check system is to internal control
prevent errors lies on fixing of
responsibility
and division of
work to avoid
duplication

Q2).difference between verification and valuation?

s.no basis verification valuation

1 meaning Verification Valuation certifies

establish ownership correctness of value of
and acquisition of asset and liabilty
assest
2 evidence The tittle deed The certificate by the
recipt of payment owner or directors or
constitutes exports is the
documentary documentary evidence
evidence for for valuation.
verification

3 work Verification is final Valuation is the initial

work work and it need to be
verified subsequently

4 personel Verification is the

work of auditor
5 checking The auditor is Critical examination of
required to verify value of asset and
wheather value comparative analysis
asascertained is of different assest
fair or not

6 view Verification Testing the exact value

includes apart from of an asset on the basis
valueation of utility

7 time Verification is made Valuation is made

end of year whole year

Q3).difference between vouching and verification

s.no comparison vouching Verification

1 meaning Vouching means the

accuracy of Verification
transaction recorded means a process
in books of account substantive the
 validity of asset
2 basis Documentary Observation and
evidence documentary
evidence

3 examination Items of profit and

loss Items of balance
sheet
4 Carried out Audit clerks
by

auditor
5 Time Year round At the end of
horizon financial year

Q4).explain the verification of goodwill and

current assets?
Verification of goodwill
Goodwill is an intangible asset. Its value depends on the
earning capacity of the business. According to Accounting
Standard 10, the accounting for goodwill should be recorded
 in the books only when some consideration in money or
money’s worth has been paid for it. While verifying goodwill,
the auditor should keep the following points in
consideration:

 Examine the method of valuation of goodwill.

 If the business has been purchased, the agreement
regarding purchases of business should be studied.
 In case of partnership firm, the partnership deed should
be studied.
 Unless goodwill has been purchased, it should not been
shown in the Balance Sheet.
 The method of writing off goodwill should be studied.
 If no arrangement has been made regarding writing off
goodwill then it should be shown in the Balance Sheet at
the cost price.
 If the auditor has any suspicion about goodwill, he
should clearly mention about this doubt in his report.
Verification of asset
Verification of asset consist of following points
That each asset is correctly ststed in balance
sheet
That each asset actually exist on the date of
balance sheet and are property of company
That each asset is correctly valued according to
generally accepted valuation principles.
That asset are free from any charge except that
disclosed on the balance sheet
That no liabilities on Date of balance sheet have
been omitted.
Q5),explain the verification of debentures and
underwriting commision
The Companies (Amendment) Act 2000, has
introduced various provisions to safeguard
the interest of the debenture holders. The
amendment requires the company to create
redemption reserve and security. It also
compels the company to create a debenture
Trust deed and appoint the debenture
trustees. The Act also spells out the duties of
the debenture trustees. Their requirements
are in addition to the restrictions imposed by
SEBI on issue of debentures. The debenture
trustees shall apply due care and diligence in
administering the debentures trust.
The directors may issue debentures by
exercising their power — as authorized by the
Memorandum and Articles of Association.
The terms of the issue of the securities are
printed on the debenture bond. The charges
are registered with the Registrar of
Companies.
The balances shown in the ledger
account are to be verified with Register
of Debentures maintained for different
classes of debentures.
Underwriting commission is the
compensation that an underwriter receives
for placing a new issue with investors. It is
the fee which an investment banker charges
for underwriting a security issue. It cannot be
paid to any person on shares or debentures
which are not offered to the public for
subscription. Underwriting commission will
not be payable on amounts taken up by the
promoters group, employees, directors, their
friends and business associates.