Skip to main content

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.

Labels:

Comments

Post a Comment

Popular posts from this blog

Suggested answers November 2018 - Advance accounting Old Course IPCC

November 2018 Following are answers, a care is taken to answer them correctly, however, if any mistakes are identified by you, kindly share with me, I would love to hear them and will incorporate changes accordingly. Question Covered in post 1(a), 1(b), 1(c), 1(d), 2, 3(a),  3(b), 4, 5(a), 5(b),  6(b), 7(a), 7(b), 7(c),  7(d), 7(e) Question Pending 6(a) 1(a) (i) Annual lease rent = Rs. 32,500 (ii) Income = 26,000, 32,500, 39,000 (iii) Depreciation = Rs. 20,000, Rs. 25,000, Rs. 30,000 1(b) (i) Prior period Item adjustment Prior Period A/c Dr. To Salary Payable Salary payable A/c Dr To Cash Prior period item shall be disclosed separately (ii) Wages with retrospective effect It is not taken as error or omission in the preparation of Financial statements and hence this is not a prior period item, additional liability of Rs. 75,000 shall be included in current year Salary 1(c) (i) Present obligation as a r...
28 comments
Read more

Suggested answers – CA Inter EISSM November 2020

1(a) Data analytics initiatives support a wide variety of business use,  - Banking and credit card companies analyse withdrawal and spending patterns to prevent fraud and identity theft. - E commerce companies and marketing services providers do click stream analysis to identify website visitors who are more likely to buy a product. Mobile network operators examine customer data to forecast so they can take steps to prevent defections to business rivals - Healthcare organizations mine patient data to evaluate the effectiveness of treatments for cancer and other diseases. 1(b) Types of Mortgage Loan • Home Loan: This is a traditional mortgage where customer has an option of selecting fixed or variable rate of interest and is provided for the purchase of property. Top Up Loan: Here the customer already has an existing loan and is applying for additional amount either for refurbishment or renovation of the house. • Loans for Under Construction Property: In case of under construction p...
Post a Comment
Read more

Suggested answers May 2018 - Advance accounting Old Course IPCC

Finally, prepared a suggested answers for all the questions except Q2 and Q4, just go through it and let me know if you have different opinion or point to solve it. 1(a) Provision to be made for warranty under AS29  Amount At 31st March 2017 = 80,000 X 2% + 50,000 X 3%           3,100 At 31st March 2018 = 50,000 X 2% + 180000 X 3%           6,400 Amount to be debited to SPL for 31st March 2018 Balance of provision required as on 31st March 2018           6,400 Less opening balance         (3,100) Amount debited to SPL           3,300 No provision for 80,000 for 31St March 2018 because  warranty has lapsed 1(b) ...
1 comment
Read more