How to start and conduct an audit in a manufacturing company

First of all, know the business of ur client in dept, like what they prdoduce, what is the selling price, the method of payments and recoveries from creditors and debtors, etc.

Read their Articles and Memorandum of Association thoroughly.

Then u verify the sales and purchase vouchers (as usual), and cash vouchers w.r.t. sec 40A(3) of Income Tax Act, 1961.

Verify their statutory dues and see that the same have been paid or not.

U can carry on the process audit also, like u can verify the cost sheets of various departments and products.

Then check the internal control system by examining the movemrnt of raw material from its entry into the premises to the final product that goes out of the gate (This way u can check for any leakages).

Check the actual expenses and incomes with the budgeted one's and comment on the differences.

Finally do various ratio analysis as described in the syllabus of CA.

Check for depreciation rates w.r.t. the Companies Act and Income Tax Act. (also Block of Assets method).

Verify the stock on any date u visit the client.

Check for various statutory requirements like the remuneration to director, the helding of meetings , their minutes, etc.

And Finally the most important one :-

Try to extract as much informationas needed by establishing a rapo with the client.

Pls tell me if i ma missing anything vital part since i cannot write everything.

ALL THE BEST...

U can also conduct a check on their computer systems, like the auditing through the computerlike using a audit package or pass an entry into the accounting software and track the final output of the same. U can also check for firewall and anti virus setings, genuine softwares, the user settings (like if 1 or more users are sharing password), the security arrangements (fire extinguishers, the smoke detecting signals), the metal detector (useful to check whether anyone takes material outside the premises illegally), the lisence of the armed guards and their weapons, etc.

Dear Rahul

Apart from what our friends have said above, look into their input/output ratios , wastage in raw materials, scrap sales , reconciliation finished goods like opg stock+ production -sales = Closing stock with physical count.  Cost per unit compared to prev FY and ask calarifications for any major variances .  Production to Sales T.O. Monthly production vs sales . Slow moving FG/WIP/Consumables/Spares. Customer returns, etc. If any of the equipments have not been put to use ascertain reasons to know if some maintenance provision is required.  Adequacy of insurance.

Rest other usual audit checks