AUDIT OF TRUSTS/SOCIETIES

TRIVEDI ALI & COMPANY

Chartered Accountants
Applicable Acts

 Bombay Public Trust Act 1950,

 Societies Registration Act, 1860
 Income Tax Act,
 Foreign Contribution Regulation Act
Peculiar Types of TRUSTS\
SOCIETIES

 Educational Insitutions
 Universities
 Schools/Colleges
 Religious Institutions
 Formed for promotion of Education, Science,
Literature, Arts, Music, Agriculture,
Industries,Social Welfare, and Unions
Registration:

 Under BPT Act,1950

 Under Societies Registration Act
 Under Section 25 of Companies Act,
Documents:

 Memorandum of Association
 Bye Laws
 Declarations
 Affadavits
 Etc.
Status on Registration:

 Legal Entity
 Can Sue & be Sued
Accounts and Audit

 Trust/Society required to get the accounts audited.

 Maintenance of Books:
 Cash Book
 Receipt Books - Sources ?
 Vouchers
 Sales Purchases details
 Details of all assets and liabilities
 Details of assets acquired under a gift or will or in kind
 Entries in the books to be made at the time of
happening of the event
Audit - Report.

 Proforma of Income & Expenditure Account

 Proforma of Balance Sheet
 Proforma of Receipts and Payments Account
 Proforma of Form IXC
 Filing of the Financial Statement
 Payment of Contribution
 Audit Report under The BPT Act/Societies Act
 Audit Report/Certificate under FCRA-Separate Books
 Audit Report under Income Tax Act.
Audit Plan:

 List of Books of Account

 Verification of Accounting Package
 Assessement of Internal Control Procedures
 Details of Area of Operation
 Verification of receipts- Duplicate Carbon Copies
 Verification of Vouchers/Expenses- Direction received fro other
authorities
 Verification of Cash Balances
 Verification of Fixed Assets
 Verification of other properties
 Verification of Investments – Specified Financial Institutions
 Verification of consolidated accounts
 Verification of Minutes Book
 Verification of Status of any pending suits
Audit Procedure:

 Questionnaire.
 Study of Memorandum and Bye Laws- Powers of
Trustees/GB
 Study of Objects- Main and Other Objects
 List of Trustees for the period under audit
 Suspense accounts
 Comparative analysis of expenses and income
 Surprise verification of Cash Balance
 Physical Verification of Stocks
 Minutes and Notice Book.
 Verification of Change reports and other documents
Assessement:

 Applicable sections-10 (21 to 25),11,12,12A,13 & 164

 10(21) Scientific research Association-Income
 10(22B) News Agency- Income
 10(23A) ICAI,IMA,BCI,IIArch.
 10(23AA) Regimental Fund
 10(23AAA) –Funds established for its members
 10(23AAB)-Fund setup by LIC for pension etc.
 10(23B) Income of Khadi & Village Industries
 10(23BB) Income of Board for Dev. of Khadi & Village Industries
 ……………….upto 10(23G)
 Charitable purpose/Religious purpose
 Charitable purpose for any particular caste- No exemption if
created after 1/4/1962
 Religious trust for particular community is eligible for exemption
Assessement:

 Applicable sections-10 (21 to 25),11,12,12A,13 & 164

 10(21) Scientific research Association-Income
 10(22B) News Agency- Income
 10(23A) ICAI,IMA,BCI,IIArch.
 10(23AA) Regimental Fund
 10(23AAA) –Funds established for its members
 10(23AAB)-Fund setup by LIC for pension etc.
 10(23B) Income of Khadi & Village Industries
 10(23BB) Income of Board for Dev. of Khadi & Village Industries
 ……………….upto 10(23G)
 Charitable purpose/Religious purpose
 Charitable purpose for any particular caste- No exemption if
created after 1/4/1962
 Religious trust for particular community is eligible for exemption
Cont………
 Sec 11. Income from property held under a trust and applied to the
extent accumulation is not exceeding 15%.
 11(2). To the extent not applied is accumulated and specified to the AO
 Invested in specified savings
 11(3) a. Applied for other purposes other than charitable or religious
 b. Ceases to remain invested
 c. not utilised for the purpose for which spefied
 d. paid to other trusts regd u/s 12AA
 11(3A) Where income cannot be applied and the AO may on application
allow.
 11(4) Income from property held under a trust –business undertaking.
 11(4A) provisions of sub section 2,3 3A, 4 shall not apply where the
business is not incidental to the attainment of main objectives.
 11(5 Form & Mode of investment
 12.All voluntary contributions recd by a trust created wholly for
charitable or religious purposes shall be deemed to be income
derived from property held under a trust. Value of services shall
be income derived from property held under a trust
 12A Conditions for applicability of section11 and 12
 12AA registration
 13 1. Income applied not for benefit of public
 Income applied for particular religious community or caste
 Income applied for the benefit of persons referred to in
sub sec 3
 investment other than in specified manner 11(5)
 Investment in shares other than public sector cos.
 13 2. Income deemed to have been applied for the benefit of
persons referred to in 13.(3)
 13 3 List of persons
Disallowance & Allowance of
Expenditure -
 Charitable purpose:
 Relief of poor, education medical relief
and the advancement of any other object
of general public utility
 Promotion of Education, Science,
Literature, Arts, Music, Agriculture,
Industries,Social Welfare, and Unions.
 Promotion of education need not be for
poor and may extend to rich.
Incomes exempt -

 To the extent applied and does not fall

short of 85%
Audit under FCRA
 Foreign Contribution
 Meaning
 Books of Account
 Bank Account
 Local Funds
 In Kind
 Foreign Hospitality
 FC 3
 Audit Certificate