Types of audit

Interim audit
It will normally take place approximately three-quarters of the way through the
financial year.
The work on internal control system would be carried out in interim audit while
majority of balance sheet work during the final audit.
Final audit
The work will be carried out in a single phase commencing typically short time before
the year end and continuing into post balance sheet period.

Continous audit
Large companies sometimes carry out more than one interim audit .the audit staff will
either make several visits to client throughout year

Internal Check system

checks on day-to-day transactions which operate
continuously as a part of routine system whereby the work
of a one person is proved independently or is
complementary to the work of another
The object is prevention or early detection of fraud and
error
Internal check is a part of overall internal control system
A system of internal check in accounting implies
organization of a system of bookkeeping and management
of staff duties in such a manner that no one person can
completely carry through a transaction and record every
aspect thereof

General considerations in framing of

internal check
No single person should have an independent
control over any imp aspect of the business
The duties of members should be changed time
to time without any previous notice
Every member should be encouraged to go on a
leave at least once in a year
Persons having physical custody of assets must
not be permitted to have access to the books of
account
There should exist periodical inspection of assets

 Automatic cash register should be employed

Budgetary control should be there
Stock taking should be done by staff of others
sectors of organization
Financial and administrative powers should be
divided very judiciously among different
officers

Internal check with regard to purchase

a)
b)
c)
d)
e)

Purchase Requisition
Enquiry for purchase
Purchase order
Receipt of goods
Making the payment

Internal check with regard to sales

a)
b)
c)
d)
e)
f)

Independent sales department

Receipt of orders
Packing the goods
Preparation of Invoices
Checking of invoices
Despatching the goods

Internal check with regard to wages

a) Review the internal control system in preparation of
wages
b) Checck that payment sheets are checked by
responsible person before payment
c) Check deductions on account of PF, ESI, Income tax
d) Check names appearing in wages sheet
e) Check wages are paid in presence of senior officer
f) Check calculations of gross and net salaries
g) Check the employee acknowledge receipt of wages

Internal check in store department

Receipt:a) Verifying all receipts as to quality and quantity
b) Entering goods immediately in goods inward
c) Drawing quadruplicate goods received note
d) Transmitting the material in stock department
Storage:a) Keep track on ordering level
b) Good should be stored such that they are easily accessible, safe
from deterioration, occupy minimum space and segregated
between fast moving and slow moving
c) Also it should be ensured that goods are insured from fire and
theft

 Issues:Entry should be made on Stock card on Issue of

goods and balance should be reduced.

MEANING OF AUDIT
PLANNING
Audit planning refers to the planning
by the auditor to enable them to
conduct an effective audit in an
efficient and timely manner and
includes planning about
area,scope,depth of transactions to
be audited ,time to be devoted,
persons to be deployed for audit etc.

OBJECTIVES OF AUDITING
Audit planning involves establishing the
overall audit strategy for the engagement
developing an audit plan. Adequate planning
benefit the audit of financial statement in
several ways.
It help the auditor to devote appropriate
attention to important area of audit
It help the auditor to identify and resolved
potential audit

Planning helps the auditor to properly

organize and manage the auditor
engagement so that it is performed in an
effective and efficient manner
It assists, where applicable, in coordination of
work by auditors of companies and experts

FACTORS TO BE CONSIDERED
While planning his audit, the auditor should
consider the factors such as complexity of the
audit, the environment in which the enterprise
operates, his precious experience with the client
and knowledge of clients business.
The auditor should considered the following
factors while planning audit:
Complexity of audit
The environment in which the entity operates
Knowledge of client business

Test Checking
The term 'test checking' stands for the
method of auditing, where instead of a
complete examination of all the transactions
recorded in the books of accounts, only some
of the transactions are selected and verified.
Test checking means to select and examine a
representative sample from a large number of
similar items

Objectives of Test Checking

The basic objective of test checking is to draw
a valid conclusion by undertaking examination
of some transactions from the large number
of transac-tions and thereby save time and
cost.

Advantages of test checking

It is one of the best techniques of auditing
through which cost of audit can be reduced,
It can ensure the speed of audit work.
It can easily locate the deficient areas and thus
helps to come to the conclusion as to the
acceptability of financial records.
It is a labour saving device.
It acts as a guide to the auditor to arrive at a
conclusion regarding the true and fair view of the
state of affairs of the business

Disadvantages
It will prove inefficient where internal check and
control system are not operating or found
ineffective.
It is not suitable for small concerns.
It will bound to show incorrect result if the
samples are not proper representative of the
population.
It does not offer any consistency in selecting the
percentage of check that will be adopted
by all concerns.
By Prof Nishant Ghuge, KCES's IMR, Jalgaon

ROUTINE CHECKING:
Routine checking is a total process of accounting
control, which includes
Examination of the totalling and balancing of the
books of prime entry,
Examination of the posting from the primary
books to the ledger accounts,
Examination of totalling and balancing of the
ledger accounts and of the trial balance prepared
with those balances and
Overall examination of writing up the
transactions properly.

Advantages
It is the simplest form of audit work.
Detection of errors and frauds of simple nature can be
very easily detected.
The books of accounts can be thoroughly checked.
It is the basis of checking the final account as it helps in
checking castings and postings.
Arithmetical accuracy of all the transactions can be
confirmed by this method.
It offers an opportunity to train the new entrants to the
profession.

Disadvantages
It is not generally considered as an important part
of audit work where self-balancing system is
maintained.
As the audit staffs are engaged in same type of
work, the possibility of becoming monotonous is
there, in this system.
Negligence of work and lacking the advantage of
internal check system are frequent.
It fails to detect errors and frauds arising from the
fraudulent manipulation in accounting principles.

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