Audit on compay- company audit

ADVANCE AUDITING 2013-2014

A PROJECT

ON

“Project Report on Company Audit of Tirtharoop Electricals Pvt. Ltd”

In the subject Advance Auditing

SUBMITTED TO

UNIVERSITY OF MUMBAI

FOR SEMESTER-IV OF

MASTER OF COMMERCE

BY

SUNITA KUMARI YADAV

MCOM PART-II AND ROLL NO- 3601

UNDER THE GUIDANCE OF

MR. GAJANAN WADER

YEAR- 2013-2014


DECLARATION BY THE STUDENT

I, SUNITA KUMARI YADAV student of M COM PART-II Roll Number 3601

hereby declare that the project for the Paper Advance Auditing titled,


Submitted by me for semester-IV during the academic year 2013-2014, is based on actual

work carried out by me under the guidance and supervision of MR. GAJANAN

WADER.

I further state that this work is original and not submitted anywhere else for any

examination.

Signature of Student

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated the project on


Submitted by SUNITA KUMARI YADAV Student of M COM Part-II.

This project is original to the best of our knowledge and has been accepted for internal

assessment.

Internal Examiner External Examiner vice Principle


PILLAI’S COLLEGE OF ARTS, COMMERCE & SCIENCE

Internal Assessment: Project 40 Marks

Name of Student Class Division Roll

Number.

First Name: SUNITA KUMARI

M COM

Father’s Name: BBS PART II 3601

Surname: YADAV

Subject: Advance Auditing

Topic for the Project:


Mark Awarded Signature

DOCUMENTATION

Internal Examiner

(Out of 10 Marks)

External Examiner

(Out of 10 Marks)

Presentation

(Out of 10 Marks)

Viva and Interaction

(Out of 10 Marks)

TOTAL MARKS (Out of 40)


CHAPTER NO. TOPIC PAGE

NO.

1. Introduction 1

2. Feature Of Company 2

3. Accounting Records And Financial Statement Maintained By The Company

4

4. Disclosure Of Accounting Policies 5

5. Meaning, Define And Difference In Audit Report And Audit Certificate

8

6. Type Of Audit Report 9

7. Essentials Of Good Audit Report 11

8. About Company And Annual Report 14

9. Profit And Loss A/C And Balance Sheet 19

10. Generally Accepted Auditing Standards 21

11. Accounting Standards (Currently Applicable And Used In Company Or Not)

24

12. Account Scrutinized From Balance Sheet And Profit And Loss Account

25

13. Draft Of An Audit Report 27

14. Conclusion 31


INTRODUCTION

Industrial has revolution led to the emergence of large scale business organizations.

These organization require big investments and the risk involved is very high. Limited

resources and unlimited liability of partners are two important limitations of partnerships

of partnerships in undertaking big business. Joint Stock Company form of business

organization has become extremely popular as it provides a solution to(2) overcome the

limitations of partnership business. The Multinational companies like Coca-Cola and,

General Motors have their investors and customers spread throughout the world. The

giant Indian Companies may include the names like Reliance, Talco Bajaj Auto, Infosys

Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen and Tubro

etc.

Meaning of Company

Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company formed

and registered under this Act or an existing company”. Section 3(1) (ii) Of the act states

that “an existing company means a company formed and registered under any of the

previous companies laws”. This definition does not reveal the distinctive characteristics

of a company . According to Chief Justice Marshall of USA, “A company is a person,

artificial, invisible, intangible, and existing only in the contemplation of the law. Being a

mere creature of law, it possesses only those properties which the character of its

creation of its creation confers upon it either expressly or as incidental to its very

existence”.

Another comprehensive and clear definition of a company is given by Lord Justice

Lindley, “A company is meant an association of many persons who contribute money or

money’s worth to a common stock and employs it in some trade or business, and who

share the profit and loss (as the case may be) arising there from. The proportion of

capital to which each member is entitled is his share. Shares are always transferable

although the right to transfer them is often more or less restricted”.


FEATURES OF A COMPANY

The main characteristics of a company are:

1. Incorporated association.

A company is created when it is registered under the Companies Act. It comes into

being from the date mentioned in the certificate of incorporation. It may be noted in

this connection that Section 11 provides that an association of more than ten

persons carrying on business in banking or an association or more than twenty

persons carrying on any other type of business must be registered under the

Companies Act and is deemed to be an illegal association, if it is not so registered.

For forming a public company at least seven persons and for a private company at

least two persons are persons are required. These persons will subscribe their

names to the Memorandum of association and also comply with other legal

requirements of the Act in respect of registration to form and incorporate a company,

with or without limited liability [Sec 12 (1)].

2. Artificial legal person.

A company is an artificial person. Negatively speaking, it is not a natural person. It

exists in the eyes of the law and cannot act on its own. It has to act through a board

of directors elected by shareholders. It was rightly pointed out in Bates V Standard

Land Co. that : “The board of directors are the brains and the only brains of the

company, which is the body and the company can and does act only through them”.

But for many purposes, a company is a legal person like a natural person. It has the

right to acquire and dispose of the property, to enter into contract with third parties in

its own name, and can sue and be sued in its own name.

However, it is not a citizen as it cannot enjoy the rights under the Constitution of

India or Citizenship Act. In State Trading Corporation of India v C.T.O (1963 SCJ

705), it was held that neither the provisions of the Constitution nor the Citizenship


Act apply to it. It should be noted that though a company does not possess

fundamental rights, yet it is person in the eyes of law. It can enter into contracts with

its Directors, its members, and outsiders.

3. Separate Legal Entity :

A company has a legal distinct entity and is independent of its members. The

creditors of the company can recover their money only from the company and the

property of the company. They cannot sue individual members. Similarly, the

company is not in any way liable for the individual debts of its members. The

property of the company is to be used for the benefit of the company and nor for (5)

the personal benefit of the shareholders. On the same grounds, a member cannot

claim any ownership rights in the assets of the company either individually or jointly

during the existence of the company or in its winding up. At the same time the

members of the company can enter into contracts with the company in the same

manner as any other individual can. Separate legal entity of the company is also

recognized by the Income Tax Act. Where a company is required to pay Income-tax

on its profits and when these profits are distributed to shareholders in the form of

dividend, the

4. Perpetual Existence.

A company is a stable form of business organization. Its life does not depend upon

the death, insolvency or retirement of any or all shareholder (s) or director (s). Law

creates it and law alone can dissolve it. Members may come and go but the

company can go on forever. “During the war all the member of one private company,

while in general meeting, were killed by a bomb. But the company survived; not even

a hydrogen bomb could have destroyed i”. The company may be compared with a

flowing river where the water keeps on changing continuously; still the identity of the

river remains the same. Thus, a company has a perpetual existence, irrespective of

changes in its membership.


5. Common Seal.

As was pointed out earlier, a company being an artificial person has no body similar

to natural person and as such it cannot sign documents for itself. It acts through

natural person who are called its directors. But having a legal personality, it can be

bound by only those documents which bear its signature. Therefore, the law has

provided for the use of common seal, with the name of the company engraved on it,

as a substitute for its signature. Any document bearing the common seal of the

company will be legally binding on the company. A company may have its own

regulations in its Articles of Association for the manner of affixing the common seal

to a document. If the Articles are silent, the provisions of Table-A (the model set of

articles appended to the Companies Act) will apply. As per regulation 84 of Table-A

the seal of the company shall not be affixed to any instrument except by the

authority of a resolution of the Board or a Committee of the Board authorized by it in

that behalf, and except in the presence of at least two directors and of the secretary

or such other person as the Board may appoint for the purpose, and those two

directors and the secretary or other person aforesaid shall sign every instrument to

which the seal of the company is so affixed in their presence.

6. Limited Liability :

A company may be company limited by shares or a company limited by guarantee.

In company limited by shares, the liability of members is limited to the unpaid value

of the shares. For example, if the face value of a share in a company is Rs. 10 and a

member has already paid Rs. 7 per share, he can be called upon to pay not more

than Rs. 3 per share during the lifetime of the company. In a company limited by

guarantee the liability of members is limited to such amount as the member may

undertake to contribute to the assets of the company in the event of its being wound

up.


7. Transferable Shares.

In a public company, the shares are freely transferable. The right to transfer shares

is a statutory right and it cannot be taken away by a provision in the articles.

However, the articles shall prescribe the manner in which such transfer of shares will

be made and it may also contain bona fide and reasonable restrictions on the right of

members to transfer their shares. But absolute restrictions on the rights of members

to transfer their shares shall be ultra vires. However, in the case of a private

company, the articles shall restrict the right of member to transfer their shares in

companies with its statutory definition.

8. Separate Property :

As a company is a legal person distinct from its members, it is capable of owning,

enjoying and disposing of property in its own name. Although its capital and assets

are contributed by its shareholders, they are not the private and joint owners of its

property. The company is the real person in which all its property is vested and by

which it is controlled, managed and disposed of.

Accounting records and financial statement maintained by the company

Good record keeping is an important part of monitoring business performance. It

also makes it easier for small business owners to meet their taxation obligations.

Appropriate and up-to-date financial records provide the necessary information for

managing the business efficiently and making sound business decisions.

To help you maintain your daily financial records, you should consider:

Setting up either a manual or electronic record keeping system that suits your

needs,

Recording your business transactions accurately and promptly, How to keep

daily financial records

Preparing a summary account (including income and expenditure) at the end

of each month.


Maintaining good financial records starts with a good system and well-organized

business records. The system can be a simple one and does not need to be

complicated.

Disclosure of Accounting Policies

To ensure proper understanding of financial statements, it is necessary that all

significant accounting policies adopted in the preparation and presentation of

financial statements should be disclosed.

Such disclosure should formpart of the financial statements.

It would be helpful to the reader of financial statements if they are all disclosed as

such in one place instead of being scattered over several statements, schedules and

notes.

Examples of matters in respect of which disclosure of accounting policies

adopted will be required are contained in paragraph 14. This list of examples

is not, however, intended to be exhaustive.

Any change in an accounting policy which has a material effect should be

disclosed. The amount by which any item in the financial statements is

affected by such change should also be disclosed to the extent ascertainable.

Where such amount is not ascertainable, wholly or in part, the fact should be

indicated. If a change is made in the accounting policies which has no

material effect on the financial statements for the current period but which is

reasonably expected to have a material effect in later periods, the fact of such

change should be appropriately disclosed in the period in which the change is

adopted.

Disclosure of accounting policies or of changes therein cannot remedy a wrong or

inappropriate treatment of the item in the accounts.


Main Principles

All significant accounting policies adopted in the preparation and presentation of

financial statements should be disclosed.

The disclosure of the significant accounting policies as such should form part of the

financial statements and the significant accounting policies should normally be

disclosed in one place.

Any change in the accounting policies which has a material effecting the current

period or which is reasonably expected to have a material effect in later periods

should be disclosed. In the case of a change in accounting policies which has a

material effect in the current period, the amount by which any item in the financial

statements is affected by such change should also be disclosed to the extent

ascertainable. Where such amount is not ascertainable, wholly or in part, the fact

should be indicated.

If the fundamental accounting assumptions, viz. Going Concern, Consistency and

Accrual are followed in financial statements, specific disclosure is not required. If a

fundamental accounting assumption is not followed, the fact should be disclosed.


(Meaning and define of audit report and audit certificate)

Audit Report

An auditor, under Section 227 (2) of the Companies Act, 1956, is required to make a

report to the shareholders of the company whether the books of accounts examined by

him exhibit ‘true and fair’ view of the state of affairs of the business.

The auditor submits his report to his client giving clear and concise information of the

result of audit performed by him. The fact or information contained in the auditor's report

is not available from any other source.

The statutory auditor of a company has to express his professional opinion about the

truth and fairness of the state of affairs of the company as shown by the Balance Sheet

and of the profit or loss as shown by the Profit and Loss Account in addition to other

information in his report.

Audit Certificate - Definition

The general purpose of an audit certificate is to give to the Commission

reasonable assurance that eligible costs (and, if relevant, the receipts) charged under

the project are calculated and claimed by the contractors in accordance with the

relevant legal and financial provisions of the FP6 legal texts, including contractual

provisions.

When an auditor certifies a financial statement, it implies that the contents of the

statement are reliable as the auditor has vouched for the exactness of the data. The

term ‘certificate’ is, therefore, used to mean confirmation of the truth and correctness of

something after a verification of certain exact facts. An auditor may therefore certify the

circulating figures of a newspaper or the value of imports and exports of a company.

The term ‘certificate’ should not be confused with the term ‘report'. While a certificate

affirms the truth and correctness of a fact, figure or a statement, a report is generally a

statement of facts or an expression of opinion regarding the truth and fairness of the

facts, figures and statements.


Difference between Audit Report & Audit Certificate

1. A report means simply an expression of opinions Whereas a Certificate means that

the person issuing or signing the certificate vouchsafes the truth of the statement

made by him

2. The Auditor Report is based on facts, estimates and assumptions whereas Auditor's

Certificate is based on actual facts

3. Auditor Report is not a guarantee of the absolute correctness & accuracy of the

books of accounts. But the auditor certificate serves as a guarantee of the absolute

correctness & accuracy of the books of accounts

4. If the Auditor Report is later on found to be wrong, he cannot be held responsible

since he has given merely his opinion on the state of affairs of the company. But if

the duly signed certificate is found as wrong, he will be held responsible.

Type of Audit Report

An audit report is an appraisal of a small business’s complete financial status.

Completed by an independent accounting professional, this document covers a

company’s assets and liabilities, and presents the auditor’s educated assessment of the

firm’s financial position and future. Audit reports are required by law if a company is

publicly traded or in an industry regulated by the Securities and Exchange Commission

(SEC). Companies seeking funding, as well as those looking to improve internal

controls, also find this information valuable. There are four types of audit reports.

1. Unqualified Opinion

Often called a clean opinion, an unqualified opinion is an audit report that is issued

when an auditor determines that each of the financial records provided by the small

business is free of any misrepresentations. In addition, an unqualified opinion indicates

that the financial records have been maintained in accordance with the standards

known as Generally Accepted Accounting Principles (GAAP). This is the best type of

report a business can receive.


Typically, an unqualified report consists of a title that includes the word “independent.”

This is done to illustrate that it was prepared by an unbiased third party. The title is

followed by the main body. Made up of three paragraphs, the main body highlights the

responsibilities of the auditor, the purpose of the audit and the auditor’s findings. The

auditor signs and dates the document, including his address.

2. Qualified Opinion

In situations when a company’s financial records have not been maintained in

accordance with GAAP but no misrepresentations are identified, an auditor will issue a

qualified opinion. The writing of a qualified opinion is extremely similar to that of an

unqualified opinion. A qualified opinion, however, will include an additional paragraph

that highlights the reason why the audit report is not unqualified.

3. Adverse Opinion

The worst type of financial report that can be issued to a business is an adverse

opinion. This indicates that the firm’s financial records do not conform to GAAP. In

addition, the financial records provided by the business have been grossly

misrepresented. Although this may occur by error, it is often an indication of fraud.

When this type of report is issued, a company must correct its financial statement and

have it re-audited, as investors, lenders and other requesting parties will generally not

accept it.

4. Disclaimer of Opinion

On some occasions, an auditor is unable to complete an accurate audit report. This may

occur for a variety of reasons, such as an absence of appropriate financial records.

When this happens, the auditor issues a disclaimer of opinion, stating that an opinion of

the firm’s financial status could not be determined.


ESSENTIALS OF GOOD AUDIT REPORT

The essentials of good audit report are as follows:

1. Title

An auditor report must have appropriate title, such as “Auditor’s Report”. It is helpful for

the reader to identify the auditor’s report. It is easy to distinguish it from other reports.

The management can issue any report about the business performance. The title o the

report is essential.

2. Addressee

The addressee may be shareholder or board of director of a company. The auditor can

audit financial statements of any business unit as per agreement. The report should be

appropriately addressed as required by engagement letter and legal requirements. The

report is usually addresses to the shareholders or the board of directors.

3. Identification

The audit report should identify the financial statement that have audited. The financial

statement may include trading profit and loss accounts, balance sheet and statement of

changes in financial position and sources and application of frauds statement. The

report should include the name of the entity. Moreover the data and period covered by

the financial statement are also stated in it.

4. Reference to Auditing Standards

The audit report should indicate the auditing standard or practice followed in conducting

the audit. The international auditing guidelines need assurance that the audit has been

conducted as per set standards.


5. Opinion

The auditor’s report should clearly state the auditor’s opinion on the presentation in the

financial statement of the entity’s financial position and the result of its operations. The

statement give a true and fair view is an auditor’s opinion. This opinion is usually based

on national standard or international accounting standards.

6. Signature

The audit report should be signed in the name of the audit firm, the personal name of

the auditor or both as appropriate.

7. Auditor’s Address

The address of auditor is stated in the audit report. The name of city is stated in the

report for information of the readers.

8. Date of Report

The report should be dated. It informs the reader that the auditor considered the effect

on the financial statements and in his report of events or transactions about which he

become aware the occurred up to that date.

Qualified audit reports

It is necessary to firstly identify the circumstances which can give rise to a qualification.

These are as follows:

Uncertainty arising from either a limitation upon the scope of the auditors work or an

inability to obtain any evidence regarding doubts which exist in relation to an unresolved

matter.

Disagreements arising from factual discrepancies, unsuitable accounting policies,

inadequate or misleading disclosures given in the financial statements or failure to

comply with an accounting standard or legislation. Some of these types of disagreement

should be resolved fairly easily with the client so that a qualification can be avoided, for


example a factual disagreement should lead to the financial statements being amended

to reflect the correct view. Other types of disagreement which are perhaps more

subjective will be much more difficult to resolve such as those relating to the suitability

of an accounting policy.

Secondly, it is necessary to decide upon the effect of the circumstances discussed

above.

These are classified as:

Those having a material but not fundamental effect upon the financial statements

those having a fundamental effect upon the financial statements.

Fundamental means that the matter is such as to seriously distort or undermine the

view which is given by the financial statements to the extent that they could mislead

user groups.

An except for qualification will be given when the matter is a material but not

fundamental uncertainty or disagreement. An example of an uncertainty could be the

destruction of a part of the clients accounting records leading to a limitation of scope

being imposed upon the auditors work because audit evidence is then unavailable. An

example of a disagreement under this heading could be a failure by a client to apply a

reasonable depreciation policy to a particular class of fixed assets, however in both of

these examples the effect is not pervasive to the view which the financial statements

give as a whole.


Tirtharoop Electricals Private Limited

About the Company:

Tirtharoop Electricals Private Limited, founded in 1987 promoted by Mr. Subhas

Gokhale, at 7,Yashodeep Apt,1356 B, Shivaji Road, Panvel , Navi Mumbai

,Maharashtra 410206. The Company is primarily engaged in providing Electrical project

designing with automation & related instrumentation. It undertakes Testing, Installation

& Commissioning of electrical fittings, erection, industrial fabrication, Supply of H.T. &

L.T. switchgear, upgrade systems for both HT & LV loads for various valued customers.

It is pioneer in providing Turnkey Solution for installation of all electrical equipments

right from the stage of Designing to Implementation electrical equipment. All the

necessary approvals for commencement of this business are in place.

Background of Key Management Personnel:

Being the Second Generation entrepreneur; Mr. Sachin Subhash Gokhale (Director)

son of Mr. Subhas Gokhale, aged 33 years holds a bachelor degree of Commerce and

Diploma in Electrical Engineering from DIESE, Pune. He is qualified Engineer with more

than 10 years of qualitative experience. He has proven track record of undertaking

valued engineering initiatives, establishing new set-ups, streamlining operations,

evolving cost reduction mechanism, producing engineering techniques and creating a

team work environment to enhance productivity with new initiatives and innovations

within the organizations. He is a dynamic young and enterprising youth with effective

communication skills with great presentation skills. He has the ability to convert adverse

business environment to a favorable business affair.


Mr. Vinay Dattatraya Bhave designated as (Head – Sales) aged 49 years, residing at

Flat 201, Kanak Residency, Plot No. 54, MCHS, Near Purohit Hospital, Old Panvel,

Dist. Raigad, Maharashtra-410206. He is a BTech.(Elec.) and holds Diploma in

Electrical Engineering from C.W.I.T., Pune . He is a qualified Engineer with more than

25 years of qualitative experience in industries like Orkay Polyester, Hikal etc. Expert at

planning and effecting preventive maintenance schedules of various machineries to

increase machine up time and equipment reliability. He is related to various Social

service organizations and is a Founder committee member of Friends of children

organization, a NGO working for poor students. A Member of Managing Committee of

Pen taluka Maternity & Children Welfare Center, a Charitable Hospital providing Medical

Assistance to Poor & Needy people. He is one of the Founder Managing committee

Member of “Sobatee” a NGO working for Betterment, Awareness, Education,

Environment, Medical Assistance etc for more than 6 years. He is highly influential with

regards to his contacts relating social welfare cause.

Mr. Vinit Vinayak Joshi designated as (Head - Admin & Logistic) aged 33 years is a

resident of At & Post – Palaspe, Tal. – Panvel, Dist. – Raigad Maharashtra-410206.

He holds a Master of Commerce degree and is Finance Management graduate. He is a

well known academician with more than 10 years of qualitative experience of in guiding

and training finance & accounts students. An expert team builder and player, has an

experience in different areas such as Accounts, Administration and Customer relations.

He is a visiting faculty for MBA at various colleges such as, Mumbai School of Business,

S. P. More College, Pillais College etc.


Key Deliverables by the Company:

Overseeing breakdown and preventive maintenance of Spinning, Polyester, Test

Rising, Knitting, Utility Plants and Diesel Generating Sets.

Executing Fault fining and rectification of faults in control circuits, power circuits or

in any type of electrical breakdown in various types of equipments, like Extruders,

(D.C.), Agitators, Chillers, Compressors, Pumps, Heaters, Lifts etc.

Responsible for:

- Erection of Machine Tools.

- Process re-engineering.

- Material Management.

- Cost reduction.

Monitoring switchyard, H.T. (22 KV) and L.T. substation.

Responsible for implementing preventive maintenance of switchyard, H.T. and L.T.

breakers, transformers, PCCs, MCCs, lead acid batteries, etc.

Overhauling motors in electrical workshop.

Major equipments handled:

- 22 KV switchyard and switchgear (MOCB, SF6 breakers).

- 9 nos. 2 MVA, 22 KV/433 transformers.

- DG sets (1100KVA No Break and Short Break generators with AMF).DC

Motors.

- LT Switchgear.




Generally Accepted Auditing Standards

The generally accepted auditing standards (GAAS) are the standards you use for

auditing private companies. GAAS come in three categories: general standards,

standards of fieldwork, and standards of reporting.

Keep in mind that the GAAS are the minimum standards you use for auditing private

companies. Additionally, the Public Company Accounting Oversight Board (PCAOB)

has adopted these standards for public (traded on the open market) companies. Each

audit engagement you work on may require you to perform audit work beyond what’s

specified in the GAAS in order to appropriately issue an opinion that a set of financial

statements is fairly presented. You need to use professional judgment and exercise due

care in following all standards.

General standards: The first three GAAS are general standards that address your

qualifications to be an auditor and the minimum standards for your work product:

As an auditor, you must have both adequate training and proficiency.

You are independent in both fact and appearance.

You exercise due professional care in performing your auditing tasks.

Standards of fieldwork: The next three GAAS govern how you actually do your job:

Your work is adequately planned, and all assistants are properly supervised.

You gain an understanding of the client and its environment, including internal

controls, to assess the risk of material misstatement in the financial statements

and to plan your audit.

The evidence you gather during the audit is appropriate and sufficient to evaluate

management’s assertions on the financial statements.


Standards of reporting: The last four GAAS concern information you must consider

prior to issuing your audit report:

You have to state whether the financial statements are prepared using generally

accepted accounting principles (GAAP).

Just as important is to report whether GAAP are consistently applied for all

financial accounting. Should this not be the case, you have to report any

departures.

You also have to make sure that disclosures — any additional information

needed to explain the numbers on the financial statements — are provided.

Lastly, you have to include your opinion as to whether the financial statements present

fairly in all material respects the financial position of the company under audit.


Accounting Standards (Currently Applicable and used in company or not)

Accounting Standards Y/N

AS 1 Disclosure of Accounting Policies Y

AS 2 Valuation of Inventories Y

AS 4 Contingencies and Events Occurring After the Balance Sheet Date Y

AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in

Accounting Policies Y

AS 6 Depreciation Accounting Y

AS 9 Revenue Recognition Y

AS

10 Accounting for Fixed Assets Y

AS

13 Accounting for Investments Y

AS

14 Accounting for Amalgamations Y

AS

15 Employee Benefits Y

AS

16 Borrowing Costs Y

AS

18 Related Party Disclosures Y

AS

20 Earnings Per Share Y

AS

22 Accounting for Taxes on Income Y

AS

26 Intangible Assets Y


AS-1 — DISCLOSURE OF ACCOUNTING POLICIES

Any change and financial impact of such change should be disclosed.

If fundamental assumptions (going concern, consistency and accrual) are not

followed, the fact to be disclosed. Going concern assumption is assessed for a

foreseeable period of one year

Accounting Policies adopted by the enterprise should represent true and fair view

of the state of affairs of the financial statements

Major considerations governing selection and application of accounting policies

are: i) Prudence, ii) Substance over form and iii) Materiality.

AS-2 — VALUATION OF INVENTORIES

The cost of inventories should comprise all costs of purchase, costs of conversion and

other costs incurred in bringing the inventories to their present location and condition.

Inventories are valued at lower of cost or net realisable value. Specific identification

method is required when goods are not ordinarily interchangeable.

AS-4 — CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE

SHEET DATE

The amount of a contingent loss should be provided for by a charge in the statement of

profit and loss if it is probable that future events will confirm that, after taking into

account any related probable recovery, an asset has been impaired or a liability has

been incurred as at the balance sheet date, and a reasonable estimate of the amount of

the resulting loss can be made.

Assets and liabilities should be adjusted for events occurring after the balance sheet

date that provide additional evidence to assist the estimation of amounts relating to

conditions existing at the balance sheet date or that indicate that the fundamental


accounting assumption of going concern (i.e., the continuance of existence or

substratum of the enterprise) is not appropriate.

AS-6 — DEPRECIATION ACCOUNTING

Allocate depreciable amount of a depreciable assets on systematic basis to each

accounting year over useful life of asset, useful life may be reviewed periodically.

Basis must be consistently followed and disclosed. Any change to be quantified and

disclosed.

Rates of depreciation should be disclosed.

A change in method followed be made only if required by the statute, compliance to

Accounting Standard, appropriate preparation or presentation of the financial statement.

In cases of extension, revaluation or exchange fluctuation, depreciation to be provided

on adjusted figure prospectively over the residual useful life of the asset.

AS-10 — ACCOUNTING FOR FIXED ASSETS

The cost of a fixed asset should comprise its purchase price and any attributable

cost of bringing the asset to its working condition for its intended use.

Self-constructed asset shall be accounted at cost.

In case of exchange of asset, fair value of asset acquired or the net book value of asset

given up whichever is more clearly evident shall be considered.

Revaluation is permitted provided it is done for the entire class of assets. The basis of

revaluation should be disclosed.

Increase in value on revaluation shall be credited to Revaluation Reserve while the

decrease should be charged to Profit and Loss Account.


Account scrutinized from balance sheet and profit and loss account-

Scrutiny: Scrutinizing the accounts generally and, in particular, examining the composition of

final balances; and ascertaining the extent of clearance of the balances brought forward from the

previous year particularly those relating to receivables and payables, sale or disposal of fixed

assets and of inventories.

Debtor ledger: -

These ledger accounts of customers are opened to whom trader has sold the goods, so its

other name is also sale account ledger. Because all credit sale’s amount can be checked from

the amount due from debtors in this ledger. It is also one place where we can find each

debtor’s closing balance.

The objectives of studying audit of debtors ledger is -

1. To know about ledger (debtors).

2. To verify that there are no errors and frauds in this ledger.

3. To confirm that company has prepared debtors ledger without any errors and frauds and it

is doubt free ledger.

It is broad in its applicability as it covers all short-term and long term employee benefits. For

example, annual paid leave (though not en cashable), long-term service rewards, subsidised

goods or services, etc. are also covered.


DRAFT OF AN AUDIT REPORT

INDEPENDENT AUDITOR’S REPORT

To,

The Members

M/s. Tirtharoop Electricals Pvt. Ltd.

Maharashtra – 410 206

Report on Financial Statements: 1. We have audited the accompanying Financial Statements of M/s. Tirtharoop Electricals

Private Limited (“the Company”) which comprise the Balance Sheet as at 31st March 2013 and Statement of Profit and Loss for the year ended on that date, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements: 2. Management is responsible for the preparation of these Financial Statements that give

true and fair view of the financial position and financial performance of the Company in accordance with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility: 3. Our responsibility is to express an opinion on these financial statements based on our

audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The Procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to

provide a basis for our Audit opinion.

ADVANCE AUDITING 2013-2014 Opinion: 6. In our opinion, and to the best of our information and according to the explanations

given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the Balance Sheet, of the state of affairs of the company as at 31st

March, 2013; and

(b) in the case of Statement of Profit and Loss, of the Profit for the year ended on that date.

Report on Other Legal and Regulatory Requirements:

7. As required by section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purpose of the audit. b. In our opinion, proper books of account as required by law have been kept by the

company so far as appears from our examination of those books.

c. The Balance Sheet and Statement of Profit and Loss dealt with by this report are in agreement with the books of account;

d. In our opinion, the Balance Sheet and Statement of Profit and Loss comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956;

e. On the basis of written representations received from the directors as on 31st March, 2013 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

For XXX CHARTERED ACCOUNTANTS

Place : Mumbai MR. A Date : 31/08/2013 (Proprietor)

Membership No. 132564


CONCLUSION

The project concluded that, given the complexity and development of Company, the

overall level of compliances with the standards and codes is of high order. This project

gives the correct ideas about how the major areas can be found by way of effective

auditing system i.e. errors, frauds, manipulations etc. form this auditor get the clear idea

show to recommend on the position. Project also contain that how to conduct of audit of

the company, what are the various procedure through which audit of company should

be done. Form auditing point of view, there is proper follow up of work done in every

organization there no misconduct of transactions is taken places for that purpose the

auditing is very important aspect in today’s scenario form company and point of view.