stock broking firm

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Pooja Chopda (Querist)
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06 October 2008 Hi..I have an assignment of internal audit of a stock broking concern. Pls help me as to how to proceed. What are the areas where I need to pay more attention.

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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06 October 2008 The following additional points need to be considered while doing the audit of a company dealing in shares besides the routine audit steps and techniques:

1. Income from transactions involving deliveries should be separated from the Jobbing, Arbitrage or derivative transactions.
2. Quantitative details for delivery transactions may be given only.
3. Margins may be confirmed from the broker and exchange, if a corporate member of any of the exchanges.
4 If a corporate member broker, the report under SCRA is also to be given. In such a case the books and records as required under SCRA are to be verified.
5. Contract Notes and DP Statements may also be verified.
6. Profit and Loss from transactions in F&O Segment with open interest needs to be adjusted in accordance with the Guidance Note isued by ICAI in this regard.
7. A suitable Inventory Valuation Accounting Policy shuld be adopted by such client which is consistently applied by such company as AS-2 is not applicable in such a case.

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