How will you do the audit of payroll or employee benefit expenses?
● Summarise the pay register on a month wise basis.
● Perform the analysis of month wise variance of gross pay and inquire reasons for major changes which are not substantiated by change in head count or payscale.
● Perform head count reconciliation procedure to match the number of employees each month i.e. (Opening employees + New joiners – leavers = Closing employees).
● Verified the total net payable amount in salary sheet from the respective months bank statement to ensure payout.
● TOD of the new joiners and leavers including recalculation of their salary and FnF.
● Recalculate the PF deducted and PF contributed by the employer as per the PF act and verify the payment of the same via challans for all months.
● Recalculated the ESIC deducted and ESIC contributed by the employer as per the ESIC act and verify the payment of the same via challans for all months.
What are the criteria to define a reportable segment as per IND AS 108?
An entity should report separately information about an operating segment that meets any of the following quantitative thresholds:
● Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external, of all operating segments.
● The absolute amount of its reported profit or loss is 10% or more of the greater, in absolute amount, of (i) the combined reported profit of all operating segments that did not report a loss and (ii) the combined reported loss of all operating segments that reported a loss.
● Its assets are 10% or more of the combined assets of all operating segments. Operating segments that do not meet any of the quantitative thresholds may be considered reportable and separately disclosed, if management believes that information about the segment would be useful to users of the financial statements.
What are the audit procedures for unusual Journal entries testing?
● Journal entries made to unrelated, unusual, or seldom-used accounts.
● Journal entries made by individuals who typically do not make journal entries.
● Journal entries containing consistent ending numbers (“999”).
● Journal entries with line items containing specific wording.
● Unbalanced journal entries.
● Journals recorded at the end of the period or as post-closing entries that have little or no explanation or description.
● Journal entries over performance materiality.
● Journal entries posted on weekends/holiday.
What are the audit procedures for Cash and Cash Equivalents testing?
● List of all bank accounts should be obtained from client
● Independent Bank Confirmations are sent to all banks (with whom the client holds an account) to ensure the existence & valuation of the balance at year end.
● Reconciling of balance as per books with the Bank confirmation and bank statement to ensure the accuracy of books of account.
● Reconciling that all accounts confirmed by the bank are adequately shown in books of accounts to ensure the completeness.
● Audit of the items standing in bank reconciliation statements.
● Management certificate for cash in hand.
What are the audit procedures for Property, Plant & Equipment testing?
● Reconciling the FAR (Fixed assets register) and GL to ensure the accuracy of the books of accounts.
● Recalculation of the depreciation as per useful life (prescribed in Schedule II of Companies Act, 2013 or as per management estimate) and scrap value.
● TOD of Additions and disposals to ensure the completeness of the FAR.
● Existence is an essential audit assertion to be tested for PPE with the help of physical verification of assets.
● The compliance of Ind AS 16 Property, Plant and Equipment to ensure the disclosure requirements.
What are the audit procedures for Account Receivables testing?
● Ledgers, Agreements and other related supporting documents are obtained from the client to ensure the completeness & accuracy transaction
● Perform ageing analysis and check whether there is any need for making provision for doubtful debts for long outstanding balances.
● Independent external Confirmations are sent to the customers and their response are noted to ensure the existence and accuracy of balances.
● Alternate procedures for confirmation replies not received have to be performed – payments should be checked for transactions subsequently settled and proof of service/ proof of delivery should be checked for transactions not settled to ensure that Trade receivables have been correctly recorded.
● Perform sampling to select the customers for test of details to ensure completeness and accuracy of transaction.
● Obtain the PO, invoices and proof of delivery for the above samples from client & match it from GL.
