Evaluating Going Concern Concept

The auditor is under obligation to consider appropriateness of going concern assumption

At the time of preparing the financial statements. The auditor may examine following indicators for the
purpose of risk assessment;

Negative net worth

Adverse key financial ratios
Operating losses
Inability to pay the creditors on due dates
Loss of key management without replacement
Labour problems/shortage of supplies
Government policy
Pending legal proceedings
Sickness
Audit of Wages and Salaries
While carrying out the audit of wages and salaries the auditor should examine the following;Firstly the pay roll/ wages sheet be compared with the employee wise records detailing basic
pay, allowances, leaves admissible/leave taken, annual increment etc. Emphasis should be given
towards the cases of new employees. Time records, /attendance sheets should also be seen.
Income tax deduction, provident fund and Employees State Insurance deduction should also be
taken care of. The returns submitted to authorities concerned should also be seen along with
the date of receipt.
It will be examined as to whether some act/rule/is to be complied with .The provisions made for
payment of minimum wages has been followed or not.
At the time of auditing the payments made to the senior management people the offer
documents/contract documents, provisions of perquisites, IT Rules, Service Tax rules, schemes
made by SEBI will also be considered.
Number of sanctioned posts, filled up posts, sanctions accorded at competent level should also
be looked into. The admissibility of daily wage and piece rate is also an important aspect.
The list of deceased, retired and employees who have left their jobs will be compared to find
out whether they are appearing in the pay roll or not.
In order find out the abnormal figures following exercises may be conducted;(a)Comparison of wage bill for the current month with that of same month in previous year
/current year and previous year
(b) Comparison of wages/salaries of current month with other months.
Comparison of wage bill of each department as indicated in (a) and (b) above.
(d)Calculating wages turnover ratio for current period with previous period /year.
(e) Calculation of wages/PF Contribution and ESI Contribution for the current period and
previous period /year.
(f) For the Bonus payment the agreement /award of competent authority be examined with the
actual bonus paid.
(g) The payment of retrial dues viz.provident fund, gratuity, pension group insurance be
examined to ensure that the payment has been made as per rules and/or the agreements
entered into. The provisions made for this purpose will be seen to ensure its adequacy.