Notes And Study Material for Exam Papers

Classification of investigation has following types 1. Evaluation investigation                     4. Analysis investigation 2. Review investigation              5. Special audit 3. Survey investigation              6. Statutory investigation 1. Evaluation Investigation: Evaluation investigation is conducted to determine the real worth of business proposed to be purchased or sold, or to determine the performance of machinery or efficiency of the personnel of an organization. In case of proposed purchase of business, the investigation relates to valuating the assets and liabilities and ascertaining the present earning potential and future prospects. In case of sale of business, net worth of business is determined. In case of evaluation of machin...

Investigation involves inquiry into facts behind the books and accounts, into the technical, financial and the economic position of the business or organisation. Investigation is an examination of books and records preliminary of financing or for any specified purpose, sometimes differing in scope from the ordinary audit. Investigation implies an examination of and record for some special purpose. Audit and Investigation distinguished 1.         Legal binding Audit of annual financial statements is compulsory under the Companies Ordinance, 1984. Investigation is not compulsory under Companies Ordinance but voluntary depending upon necessity. 2.         Object in view Audit is conducted to ascertain whether the financial statements show a true and fair view. Investigation is conducted with a particular object in view, viz to know financial position, earning capaci...

Sugar Manufacturing Company is a manufacturing company where raw material is converted into finished product. In addition to various other important considerations from audit point of view, some special consideration will receive attention on the part of an Auditor. They may be as under: 1-         Raw material is purchased in sufficient large quantities either from the farmers or contractors. In this behalf, various types of receipts issued to the farmers or contractors should be checked. Also the stock of goods should be physically checked in order to ensure the quality and quantity of raw material purchased. 2-         Sugar industry is a process industry and proper and strong cost accounting system is required. Necessary accounts pertaining to work-in-process, material, factory overhead and finished goods are to be properly maintained. Production record is to be properly maintained by the Facto...

Textile Mill is a manufacturing concern where raw-material is purchased and finished product in the form of yarn and cloth etc is obtained. From Auditor’s point view so many important aspects will require special consideration. These may be as under: 1-         System of internal check / internal control should be studied in order to ensure that it is satisfactory and is serving the best interest of the organization. 2-         Considerable amount is spent on the procuring raw cotton which is purchased either directly from farmers or contractors. Proper record in this behalf must be maintained. Quantity and quality of stock is to be checked and the rates etc, verified. 3-         Although an auditor is not supposed to be an expert to check the quality of raw material, but he is supposed to be pay special visits to the Mill to the quality of stock physically mai...

While auditing the accounts of a Cinema, the following points will receive special consideration on the part of an Auditor: 1-         Auditor will examine the working of the system of internal check in operation in the business particularly in relation to cash receipts and payments ad un-issued tickets. He will see that un-issued tickets are kept under proper control and the issued tickets are duly signed by a responsible officer of the business. 2-         Auditor will check the daily returns for the tickets sold for different shows. He will see that the collections are daily deposited into the bank. He can vouch receipts from tickets sold with the amount of entertainment tax paid. 3-         Auditor will check other sundry receipts from contracts to supply refreshments, receipts from advertisements, hire charges of opera glasses, space allotted for display o...

While auditing the accounts of a big hotel, auditor will pay his special attention to the following points: 1-         Examination of the system of internal check in operation in the business will be the first and the most important duty of the auditor. He will thoroughly enquire into the system of internal check with regard to cash receipts and the preparation of customer’s bills. 2-         Auditor will carry out complete checking of Cash Book and Pass Book. He may prepare Bank Reconciliation Statement to reconcile the amount of cash at bank as shown by both the books. 3-         Auditor will vouch all payments made from the Cash Book and Petty Cash Book. He will check the posting of cash transactions to their respective ledger accounts. 4-         Auditor will see that room rent receipts and bar receipts ar...

The primary object of such an audit is to give an idea to the advertisers about the effectiveness of their advertisements. In order to eliminate the effect of temporary factors contributing to sudden increase or decrease in circulation of a newspaper, it is always better to select short durations, say a month or a quarter of the year, for the purposes of investigation in the accounts of a newspaper. Auditor must remain on guard throughout his work against attempts made to show a false increase in the circulation of a newspaper by including the names of dummy subscribers. Leading advertisers in the country have set up an Audit Bureau, which has developed the procedure to be followed by auditors while conducting such audit. The audit programme for verifying the circulation of a newspaper will be on the following lines: 1-         Auditor will verify the number of copies printed from the printers voucher and the entry for the issue of newsp...