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All type of audits like bank audit, company audit, internal audit, statutory audit requires to some extend applying of same principles of audits and audit techniques.   


As observed, 80% of  the work of audit in a CA Firm has repetition from year to year, only 20% of new assignments of audit which will be definitely  handled by the Senior partners in the first year. This makes the work of the staff easier that they can refer the previous year files and study them, jot down the points raised and not appearing in the audit report and raised and appear in the audit report. This also helps in studying the business activity of  the company, management, internal control, regulatory provisions applicable to the  company, business  trend, audit  techniques, procedures, applied in the previous year. Preparing a short notes on the previous year audit will help in deciding the direction for  this year audit and to decide the changes if any to be required in the current year audit.          


It is important to jot down the transaction flow in the accounts of the company we audit. A transaction flow contains the order of the transaction in particular sequence with serial order. To explain this further, let us see the transaction flow of cash transactions.

Serial Order.

First  Supporting Invoice/Bill of transaction entered.
Second   Preparation of Cash Voucher for the supporting.
Third Entry on the Cash Voucher in Petty Cash Book.
Fourth  Entry of all petty cash in the main /cash Book.
Fifth Posting in the respective ledger account.
Sixth Posting of Total ledger balance in the P/L Account.


As we already, know, checking of supporting, recipient  signature, amount, prepared by, and Authorized by, Date pertain  to the period of  audit Name of recipient and payer, Stamp whenever required, checking of all this called as vouching and rest of  checking to  respective books and ledger called postings. Both together vouching and posting called verification.

While  dong audit,  you have to begin with the first transaction flow and  end with the sixth  i.e. last transaction flow. It is very helpful to write down the transaction flow of each type of transaction and then start audit of the same.


The consistency check  is  also part of audit. The Revenue and Expenditures heads follow a consistent trend of transactions. For Example, An Electricity bill will come every month so we know there are electric bill payment transaction every month. It may be possible that, the bill is due every month but two or more bills paid at a time. As such number of transaction for payment may very than the bill due transactions. But bills entry has to come at least once in a month. The average bill amount is also form a part of consistency check. The movement this consistency not followed an Audit  Query raised. This may be called as odd man out Audit query in consistency checks. Such type of checks can be applied on major revenue, and expenditure items.    


These checks are applied for overall comparison of the trend and consistent feature. These type of checks  helps in confirming the variances in the nature of revenue or expenditure heads by comparing total amount with some feature attributable to particular revenue or expenditure head.

The example of this w.r.t Depreciation on fixed assets can be given as follows:           

If the amount of Total Depreciation increased during the year substantially, then,    


1. The value of  gross assets increased.

2. Depreciation rates increased.

3. Depreciation is provided on block of assets for the first time starting from this year. 

4. Assets purchased at the last quarter of the previous year and depreciation on these assets for full year in the current year.

5. Mistake on classification of assets or blocks in either previous or current year.     

All this can be checked from the totaled of such assets than going to individual assets account.      

Another example is, if Deposits in a branch in creased there should be corresponding increase in the interest paid on deposits. If total advances increased revenue from  the interest on advances will  definitely show increase trend.


Audit now a days also requires to be done with eyes, ears, and  behavior pattern of the auditee and their  staff.  It is always better to check man behind the work than the work itself. To assure you about the man behind the work will required to wide open your eyes, ears so than  you can hear a wrong  drop of a  pin also about the person, and his in consistent movements  with your eyes. After watching this it is  your skill plays to  find out the reasons  behind  such behavior.


By: CA Satish Badve 


Published by

CA Satish Badve
(Professional Practice)
Category Audit   Report

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