what is the procedure to vouch indirect expenses in case of statutory audit?
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Vouching indirect expenses
Replies (1)
Hi Harry follow the following checklist...
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Operating Expenses
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Work Done
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Sr.No.
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Particulars
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Y
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N
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NA
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1.
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Operating expenses includes the following
- Administrative Expenses
- Selling & Distribution Expenses
- Financial Expenses
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2.
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Understand the requirement of Schedule VI of the companies act in respect of Operating expenses
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3
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Whether company is having documented list of Authorized personnel who sanction expenses & their individual amount of sanctioning the limits
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4
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Identify the nature of expenses such as revenue & capital & ensure that expenses are properly booked. Check that capital expenditure is not treated as revenue expenditure.
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5
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Verify the Cut off entries to ensure that all the expenses are properly recorded in the current financial period.
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6
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Verify the following Four Potential Errors: -
- Completeness –(transaction are not recorded)
- Recording – (transaction are recorded in accurately)
- Cut off – (transactions are recorded in accounts in the wrong period.)
- Validity –(recorded transaction are not valid)
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7
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Verify the necessary provisions are made during the closing of accounts & ensure that are correct.
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8
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Understand the provision policy of the company for Operating expenses. Normally the provisions are based on actual & estimated basis.
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9.
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Apply the “Analytical Testing” method for verifying the expenses & based on that derived the expected figures & compare with the actual figures recorded in the financial statement.
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10.
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Enquire about major expenses made during the year & take the appropriate reasoning for the same & justify the same.
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11.
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Verify if any “Related Party” transaction made during the year & ensure that are presented in the financial statement.
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12.
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Verify the accounting entries passed in the books
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13.
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Ensure that Operating expenses balances are reasonably stated in the financial statement.
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