Audit of toll & octroi

This query is : Resolved

Guest

Guest (Querist)

06 August 2011 My Client is into toll & octroi,i would like to know how should i check revenue in such case as there are too many receipts and even want to know how to keep track of cash since the business majorly runs on cash. revenue is in cash & expenditure is also in cash,it becomes difficult to check the genuineness of the transaction

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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06 August 2011 The major expenses is Royalty which is paid in form of bankers cheque to the government and other expenses are minor expenses which are incurred in cash. Put a audit note that you have verified all expenses but it is not practical to verify all expenses are the nature of business demands that the expenses are to be incurred in cash

Guest

Guest (Querist)

10 August 2011 how can CASH be scrutinized in such a case....n even how to check the genuineness of exps as there can be cash embezzlement and also there can be some instances where revenue is not recorded.... how to check the loop-hole

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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15 July 2024 Auditing businesses that predominantly deal in cash, such as toll and octroi operations, presents challenges due to the high volume of transactions and the inherent risks of cash handling. Here are some approaches and techniques that can help you effectively scrutinize cash transactions, verify revenue, and ensure the genuineness of expenditures:

### Scrutinizing Cash Transactions and Revenue:

1. **Segregation of Duties**:
- Ensure that responsibilities for handling cash receipts, recording transactions, and reconciling accounts are segregated among different individuals. This reduces the risk of fraud and errors.

2. **Physical Verification**:
- Conduct periodic physical verifications of cash holdings and compare them with recorded cash balances. Discrepancies should be investigated promptly.

3. **Transaction Sampling**:
- Select a sample of cash receipts and expenditures for detailed scrutiny. Compare these with supporting documentation such as invoices, toll tickets, receipts, and ledger entries.

4. **Revenue Reconciliation**:
- Reconcile daily or periodic cash collections with the number of transactions recorded (e.g., toll tickets issued or vehicles passing through). Discrepancies may indicate unrecorded revenue.

5. **Bank Deposits**:
- Compare daily cash collections with bank deposits. Ensure that all collected cash is deposited intact into the bank account promptly. Any delays or discrepancies should be investigated.

6. **Cash Handling Policies**:
- Implement and enforce strict cash handling policies and procedures. These should include guidelines for receiving, counting, recording, and depositing cash.

### Genuineness of Expenditures:

1. **Expense Authorization**:
- Ensure that all cash disbursements are supported by proper authorization and documentation. This includes invoices, bills, receipts, and approval signatures.

2. **Vendor Verification**:
- Verify the authenticity of vendors and suppliers by conducting background checks and ensuring that payments are made to legitimate entities.

3. **Expense Matching**:
- Match expenses recorded in the books with supporting documents and ensure they relate to legitimate business activities.

4. **Expense Sampling**:
- Randomly select and scrutinize a sample of cash disbursements to verify the genuineness of expenses and the accuracy of recording.

5. **Surprise Audits**:
- Conduct surprise audits or spot checks periodically to detect any irregularities or unauthorized transactions.

### Additional Controls and Measures:

1. **Internal Controls**:
- Strengthen internal controls to mitigate risks associated with cash transactions. This may include dual controls for cash handling, regular reconciliations, and strict adherence to accounting policies.

2. **Training and Awareness**:
- Provide training to staff on the importance of accurate record-keeping, compliance with policies, and fraud prevention techniques.

3. **Use of Technology**:
- Implement cash management systems or software that can help automate and streamline cash handling processes, improving transparency and reducing manual errors.

4. **Professional Judgment**:
- Exercise professional skepticism and judgment while reviewing cash transactions and financial records. Look for inconsistencies or patterns that may indicate potential fraud or errors.

By implementing these strategies, you can enhance the effectiveness of your audit procedures and mitigate the risks associated with cash transactions in toll and octroi operations. It's crucial to maintain a diligent approach and conduct thorough investigations where discrepancies or concerns arise.

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