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Hie...Although u wont be asked any practical question on this in the exam .. but u should know this....see..u will find the theory in books i will take practial example..

Now see the quantum of activities...means what all activities done by branch ....

suppose...

goods produced by a branch in 2008-10 lakhs

2009-12 lakhs

2010-11 lakhs

so,average-10lakhs

goods sold and services rendered by branch- 2008-5 lakhs

2009-6 lakhs

2010-7 lakhs

average= 6 lakhs

expenditure of branch- capital as well as revenue(i hope u understand these terms,if u dont then please ask i will explain) 2008-20 lakhs

2009-6 lakhs

2010-10 lakhs

average- 12 lakhs

Step 2- now take the highest average of the above 3 points- that is 12 lakhs ...take it as "x"

Now, next 2 aspects to be seen- a) 2 lakhs

b)2% ofaverage turnover of the company including branch office- Suppose the average turnover of the company is 10 crores...so 2% will be 20 lakhs

Take the higher of a) and b)...that will be 20 lakhs...take it as "y"

Step 3- if x is less than y...branch audit is exempt...or else its not....

So here x 10 lakhs is less than y 20 lakhs..so branch audit is exempt........

Do ask if u have any further doubt..

Thanx.

Thank you very much for nice explanation.