CASH Payments Exceeding 20k !!

Hai,

My perspective :-

1) I will see which company iam auditing ( construction / garments / manufacturing)

2) if construction and garments are bearer cheque of Rs.20K . it is ok. because you cannot expect everybody has bank account. since they have to pay their wages on saturdays. So, construction and garments if we given it is ok.

3) if manufacturing companies gives cheques of Rs.20K through bearer cheque. I will ask them to made withdrawn entry.  I will ask to prepare 2 vouchers Rs.10K on 2days

Correct me if i am wrong.

Sorry Rajesh, I am not asking for precaution to be taken...

I am asking as a auditor, how you will audit this.....

Incorrect Reply....

I think.... Obtain certificate from management and rely on the same as no external evidence will be availbale for this.

It's possible through ledger scrutiny in case of small business concerns by highlighting the same in case if it is found. But in case of big companies and all it's impossible to go through all transactions and find it easily. So it's better to obtain a certificate from the management and rely upon the same.

@ Venkat, @ Shelsa - Not satisfactory Answer...

I Think just taking Management certificate will not get away from auditors responsibility....

& this Reply i am not Expecting....from You Guys .........

Incorrect Reply.....

Ok sir.. So sorry for that reply. It will be better to do concurrent audit in case there is huge cash transactions. The auditor should ensure that there is proper internal control as well as proper maintanence of book of accounts. So that he can go through the legders to ensure the same. He should go through all payment vouchers to ensure that no payment is made in cash exceeding 20000. All payments should be carefully scrutinised and if the same is found it should be highlighted in his audit report.

But sir my doubt is that if the transactions are made through dd by directly going to the bank how can we find it.?????

@ shelsa...My Question was When payment made by Cheque Bearer, then how auditor will catch that transaction......

Rule 6D Of The Income Tax Rules Rule Deals With, Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made by a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft.

the ACT says account payee cheque and not a bearer cheque isnt it?

Dear Ayush,

One should have to varify with Bank statement. Generally bank recoded the name of bearer in statement  in case of bearer payment. If it is individual, watch the transaction carefully with respective head. check the accounting entry and relation with bank entry.

In most cases, payment through bearer chq. and finding of such transaction depend on general intelligency/awarness depend on how you cross check the transaction with each other.

rgds

sathish

Satish & Sachin had Given some examples to track....

Rest all are Even not reading question properly, just replying.....