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How will auditor scrutinise the ledger account given and what will be his conclusion?

The very basic idea behind doing scrutinzatoin of accounts and ledger is to get audit evidence on whether the ledger is 

1. Complete for the

2. No material Misstatement

3. Is made following accounting standards and company policy

For this purpose auditor need to 

1. Where ever possible take/download/export ledger directly from the accounting software/system used by the company

2. If direct access to the accounting software is not available then get it exported in front of you.

3. If working on remote access basis, then take the ledger from the most authorized and responsible personal to maintain that ledger.

(Basic Idea is the source of information should be absolutely correct)

Once the ledger is received

1. Start with basics - Vouching is the basic and root step in any scrutiny, if ledger is small vouch for all the entries. (Tip - Vouching depends on manpower hour available with you so use your manpower hours wisely)

2. If ledger is big with many transaction, take good amount of sample for vouching like top amount items, lowest amount items, items on month end dates, and random samples.

3. For sampling make trend chart and study it. Take more samples where trend seems to be abnormal. (Example - If you are scrutinizing electricity expense, and you see in a month there is very less expense of electricity then raise the concern and ask whether all electricity related expenses are booked ?)

4. During vouching cover all aspects in detail i.e. authorization, approval matrix, signature, timely booking and booking as per accounting standards and policy.

Conclusion

Auditor may come across that 

1. some expenses are not booked, or 

2. treatment of some transaction is incorrect, or 

3. Expenses are booked without approval/budget.

These all will lead to increase the undertaking that whether he need more audit evidence about material misstatement and impact on financials. 

He can ask to make corrections in ledger for the items he have came across with or ask the personal responsible about rechecking all items for any other misstatement in the ledger.

He may come across with any fraud which might have happened and thus he should report as per statutory obligation and processes.

This all impact his nature timing and extent of checking ledger and other heads he is looking after.

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