Group Members

508 Mansi
Chudasama
513 Gunjan Gada
524 Jay Mehta
533 Shraddha
Parekh
548 Dhruvi Shah
553 Heena Sharma

pg. 1

ACKNOWLEDGEMENT
Through this acknowledgement, we express our sincere
gratitude to all those people who have been associated
with this assignment and have helped us with it and made
it a worthwhile experience.
We owe a great many thanks to a great many people who
helped and supported us while making the project.
We extend our thanks to the various people who have
shared their opinions and experiences through which we
received the required information crucial for our report.
Our deepest thanks to our teacher, Prof. Poonam Popat ,
the Guide of the project for guiding and correcting various
documents with attention and care. She has taken pain to
go through the project and make necessary correction as
and when needed.
Thanks and appreciation to the library of Nagindas
Khandwala College, for their support. We would also thank
our Institution without whom this project would have been
a distant reality..
We also thank to our colleagues for helping us whenever
we needed their help. Finally, we express our thanks again
to our PROFFESSOR who gave us this opportunity to learn
the subject in a practical approach.

pg. 2

Special Audit.
Introduction:
Auditor besides for audit of corporate or tax audit, may be required to conduct
audit of accounts of entities like educational institutions, cinema halls etc. Audit of
these entities special skills and competence because nature of activities
undertaken by such entities is different from the activities normally undertaken by
trading or manufacturing units. Operation of this institutions have their special
features which have to be taken into account by the auditor in drawing up the audit
programme. Auditor should prepare a detailed audit programme, evaluate the
effectiveness of the internal controls and accordingly determine the nature, timings
& extent of audit required.
Audit of Educational Institutions Schools/ Colleges
Audit of books of educational institutions like school, college, universities etc. or
other such institutions which are engaged in the educational field is known as audit
of educational institutions. Auditor should check income and expenditure account
and balance sheet of such institutes in order to verify and report the true and
fairness of results presented by income statements and financial position presented
by the balance sheet. Generally, the methods and procedures for vouching and
auditing are same even though an auditor of educational institution should perform
following tasks:
Preliminaries:
Gain knowledge regarding applicable status like the societies registration
Act 1860 or relevant Trust Act, Governments rules/ regulations concerning
grants etc.
The auditor should go through the University Act. Trust deeds and should
note the rules and regulations relating to accounts. The governing body
may pass resolutions from time to time in respect to accounts.
Note important provisions of the applicable state education Act.
Examine minute books of meetings of board of trustee, government
bodies, management, committee & note important decisions affecting
accounts, e.g. delegation of financial powers, acquisition & disposal of fixed
assets and investment etc.
Auditor should obtain a copy of budget or financial statements to study of
different heads of income and expenditure.
pg. 3

 Auditor should thoroughly assess the strength of internal check to

determine the extent of audit.
Obtain organizational charts specifying authorities & responsibilities of
persons mainly related to finance & A/c department.
Obtain list of functionaries who are authorized to sanction or execute
any financial transaction.
Examine past audit reports and take note of qualification and observations.
Are there proper controls over letting out of school premises/ equipment/
other facilities on a temporary basis? Many institutions let out premises during
after school hours or vacations. There should be a fixed rate structure for this
purpose. Also the authorities who can take the decisions in this regard should
be clearly laid down.
Receipts:
1. Fees:
Auditor should verify that the fee structure is prescribed by any governing
body or appropriate authority?
Changes in fee structure are made only by government body or
appropriate authority.
In case grant is received from government/ UGC is the fee structure strictly
in accordance with conditions prescribed by govt. / UGC.
Auditor should verify the receipts of monthly fees from students, from
counterfoils or carbon copy of the receipts. He should also see
whether cash received has been banked daily or not. Other charges from
the students such as examination fees, laboratory fees, fines etc. should
be carefully verified.
Fees register is maintained properly.
Examine the reconciliation between fees received and fees receivable.
Adjustment entries for prepaid and outstanding fees should be
carefully examined.
The concession of fees and other charges should be duly authorized by the
proper authority. Any charges becoming irrecoverable should be written
of only after proper authority has recommended.
Examine whether fee concession and waiver of fees have been given to
students as per rules and duly authorized.
2. Donation:
Donation and endowment should be verified with counterfoils of receipts
issued to the donors and review the accounting treatment according to their
nature & purpose (donation related to corpus, special or general fund)
pg. 4

3. Grants from Government:

Examine government grants received with reference to sanction letter and
ensure their purpose i.e. revenue related, special assets related, non
monetary etc. and it should be properly classified as revenue or capital
receipt. Auditor should vouch the grant-in-aid from the government carefully.
Any grant-in-aid or funds received for a particular purpose must be utilised
for the same.
4. Deposits:
Deposits received from students like security deposits, library deposits, and
lab. Deposits etc should not be mixed up with fees and should be separately
recorded in the books. Refund of such deposits should be checked with
reference to payment vouchers as the case may be and entries in deposit
register.
5. Interest due on Investments:
Verify whether interest due on investments has been received and it is
properly deposited in bank a/c or accounted for as accrued. Interest on Fixed
deposits should be checked with reference to fixed deposit certificate.
6. Fines:
Recovery on any fines should be checked with reference to receipt issued. In
case fines are waived, it should be done after proper authorization.
7. Other receipts:
Rent received for renting college auditoriums, college premises etc should
be checked with reference to available documentary evidence.
Any amt received for advertisement hoardings.
Any amt received for sponsorship of any events.
If the institution has boarding & lodging facility or hostel facility for
students, the auditor should verify the bills raise for the same & should
verify the entries in the boarding charges collection register & should also
verify the counterfoils of receipt issued & bank statement.

Payments:
Educational institutions include schools, colleges, training centers and
universities. The main activities of these types of institutions are more or less
similar to each other. As a result, the types of problems the auditor usually face
pg. 5

in conducting audit of these types of institutions are also same.On the basis of
the nature of the institutions, the activities and mode of maintenance of books
of accounts and records may also differ and the auditor will take into
consideration these deviations at the time of his audit.
The auditor should see that:
1.
2.
3.
4.
5.
6.
7.

There is proper procedure for purchase of any articles

The procedure of purchases sanctions the limits at different stages
There is a list of approved suppliers from whom the purchases are made
There is a proper authority to sanction the payments
The purchases are recorded properly in the relevant books of accounts
There is a proper control over the issue of various items
There is a proper distinction made between capital expenditure and
revenue expenditure in the accounts
The auditor should examine and verify the following points:

SALARY AND ALLOWANCES

The auditor should vouch the amount of salaries paid with the salary register
and see that they are signed by the employees. Any increment given to an
employee shall be duly sanctioned. He should also examine that all the salaries
and allowances are as per the terms and conditions of appointment of each
category of staff. The computation of gross salaries and deductions made on
account of P.F, Income Tax, recovery of advances etc. He should also trace all
the above entries in the bank statement.
FREESHIPS/SCHOLARSHIPS
The payment of scholarships should be verified with the receipt from students
and Scholarship Register. Disbursal of scholarships to students should be
verified with reference to:
1. Acknowledgements from the students who received them.
2. Eligibility criterion laid down by the institution or the donor has been
adhered.

Audit of assets and liabilities

Assets and liabilities are very important aspects of any institutes. Balance
sheet is prepared on the basis of them and an auditor should prove the true
pg. 6

and fairness of information provided by balance sheet. The auditor should verify
the assets and liabilities as follows:
ASSETS
Fixed assets
Fixed assets of an educational institution are land, building, furniture,
equipments, etc.
The following points are important in audit of fixed assets:
1. He should see that purchase of fixed assets is proper.
2. Fixed assets should be checked with fixed asset register maintained.
3. The opening balances of fixed assets should be verified from relevant
records.
e.g. schedule of fixed assets, ledger or register balances.
4. Verify payments made on account of purchase of fixed assets.
5. If fixed assets are purchase out of grants the terms and conditions are to
be verified.
For e.g.: Whether such assets have been separately recorded.
6. He should verify that any expenses related to fixed assets should be
capitalized to that asset only.
7. Examine whether depreciation has been properly charged on fixed assets
including those acquired out of grants.
8. The rates of depreciation may be based on managements assessment
regarding the useful lives of relevant assets.
9. Many institutions adopt the rates of depreciation applicable in the case of
companies.
Investments
Investments constitute a significant portion of the assets of an
organization. The investment are held under statutory requirement such as
Section 11(5) of the Income Tax Act, 1961 and may also be required to be
maintained in case of restricted funds as per the directions of the donor. The
investments could be short term or long term in nature. Short term investments
are normally made to deploy temporary surplus funds in view of the peculiar
fund flow position of an educational institution. The short term investments
may be classified as current assets and normally valued at market value. Long
term investments are generally for specific purpose.
The auditor should verify investments as follows:
pg. 7

1. Carry out a physical verification of investments.

2. Examine whether the legal requirements regarding acquisition of
investments have been complied with. For e.g.: in the case of public
trusts, investment can be made only in certain specified securities as per
the provisions of the Indian Trusts Act.
3. If some investments have been received by way of donations, verify them
with reference to communication with the donors.
Loans and advances
The auditor should verify loans and advances as follows:
1. Examine the transactions of loans and advances, purchases and sales, etc.
between the institution and any member of the governing body / board of
trustees.
2. Examine whether the transactions of loans and advances, purchases and
sales, etc. are in the interest of the institution.
3. Examine the possibility of doubtful recovery and verify total amount
outstanding in the books with copies of balance confirmation certificates
issued to the concerned person.
Cash in Hand and Cash at Bank
The auditor should verify cash in hand and cash at bank as follows:
1. Verify Cash in hand and cash at bank in the usual manner.
2. The auditor should review all the transactions very carefully.
3. If any bank account of the institution is held in the name of a trustees,
manager or other employee, he should ascertain the reasons for not
holding such account in the name of the institution and review the account
thoroughly.
4. The internal auditor should carry out physical verification of cash at the
year end.
5. The internal auditor should vouch the cash receipts and payments of the
institution.
LIABILITIES
Capital
The following points are important in audit of capital:
1. Capital should be verified with reference to the last years audited
statements.
pg. 8

2. The auditor should examine relevant documents, correspondence which

has led to increase in corpus during the year due to contribution by
trustees, members, etc. and donations in cash and in kind.
For e.g.: Fixed assets, Shares, etc.
Refund of security deposit
The following points are important in audit of refund of security deposit:
1. Verify security deposits received from the students during the year with
reference to the collection register and counterfoils of receipts issued for
payments.
2. The auditor should confirm that the deposits paid by the students on
admission have been shown as liability in the balance sheet and not
transferred to revenue, unless they are not refundable.
3. Verify the security deposit registers for receipts and payments and
ensures that the registers reconcile with the financial records.
4. Verify the details mentioned in the registers like students name, year of
receipt, total amount, cheque details, due date of payment, etc.
5. Verify payments made on account of refund of security and other deposits
to students leaving the institution with reference to acknowledgements
given by them. Verify that only net amount is being paid to the students.
Earmarked funds
Earmarked funds are the funds setting aside for special purposes or for
specific projects.
The auditor should examine the payments out of earmarked funds with
reference to the authority and assess whether requirements of the trust deed
and other rules and regulations with regard to earmarked funds have been
complied with.
Loans
Loans can be taken for construction of buildings, infrastructure facilities,
acquisition of plant and machinery, furniture, etc.
The following points are important in internal audit of loans and borrowings:
(1) The internal auditor should verify that the loans obtained are within the
borrowing powers of the institution and in accordance with the Memorandum
and Articles of Association of the institution.

pg. 9

(2) The internal auditor should examine the relevant records to evaluate the
validity and accuracy of the loans. The examination of minute books would
constitute an important source of audit evidence for the same.
(3) The internal auditor should examine the reconciliation of the book
balances with the statements of the lenders. Balance confirmation procedures
should also be adopted.
(4) The internal auditor should examine the documents, if any, evidencing
any charge created in respect of loans and borrowings.
(5) The internal auditor should examine whether the loan is classified as
secured only when the same is secured against any asset belonging to the
institution.

Audit of Cinema Halls

Preliminaries:
1. Legal status :
Ascertain the legal status of the cinema hall i.e., whether it is a trust,
partnership firm or a company
2. Examination:
Examine
trust
deed,
partnership
deed,
articles
of
association/memorandum of association and note the important provisions
affecting accounts
3. Board meetings
Examine the minute of board meetings to note decisions that can affect
audit work
pg. 10

4. Efectiveness of internal control system:

Evaluate the effectiveness of internal control in operations so as to
determine the extent of audit procedures to be performed
5. Past audit:
Study past audit report to get the information about the past performance
of the cinema hall and to make necessary comparisons.
6. List of functionaries:
Obtain list of books of accounts and a list of authorized officials.

Internal control system

Entrance to cinema hall:
Verify entrance to cinema hall during the show is only through printed
tickets
Verify tickets:
Verify that the tickets are serially numbered and bound into books.
Advance booking:
For advance booking a separate series of ticket is issue.
Number of tickets
Verify that the number of tickets issued for each show and class are
different.
Statement of tickets sold:
Confirm that at the end of show, a statement of ticket sold is prepared and
cash collected is agreed with it
Responsible official:
Check that the stock of tickets is kept in the custody of a responsible
official.
Free passes
Verify that a record is kept of the Free passes and that these are issued
under proper authority
Random sampling:
pg. 11

Examine a random sample of daily collection sheets with reference to the

ticket books and trace them to the entries in the cash book
Canteen:
Examine the system of control of canteen, beverage counter, etc, run by
the enterprise itself
Letting out:
Examine that there is adequate check on the letting out of shops, offices
and other space in the cinema compound, e.g., is there a fixed rate
structure, are contracts in this behalf entered into only on basis of proper
authorization, etc
Hire charges: Examine whether there are proper control on hire charges,
sharing of proceeds, etc. with distributers. Examine whether written
contracts are entered into with the distributers
Reliability :
If tickets are issued through computer audit the system to ensure its
reliability and authenticity of data generated by it

INCOMES
1. Ticket sales.
Verify That the entrance to the cinema hall during show is only through the
printed tickets;
That they are serially numbered and bound into books;
That the number of tickets issued for each show and class, are
different through the numbers of the same class for the show on the
same day, each week run serially;
That for advance booking separate series of ticket is issued;
And that the stock of tickets is kept in the custody of a responsible
official
Confirm that at the end of show, a statement of tickets sod is
prepared and cash collected is agreed with it and the unsold tickets
on hand.
Verify that a record is kept of the free passes issued.
Verify that free passes are issued under proper authority.
Vouch the entries in the cash book in respect of cash collected on
sale of tickets for different show with daily statements.
pg. 12

 Test check daily statements with record of tickets issued for the
different show held.

2. Entertainment tax
Reconcile the amount of entertainment tax collected with the total number
of tickets issued for each class.

3. Advertisement income
Verify the charges collected for advertisements slides and shorts by
reference to the Register of slides and shorts exhibited kept at the cinema
as well with the agreements, entered into with advertisers in this regard.

4. Food and beverages

The arrangement for collection of the share in the restaurant income
should be entered into either as a fixed sum or a fixed percentage of the
taking receivable annually. In case the restaurant is run by the cinema, its
accounts should be checked. The audit should cover sale of various items
of foodstuffs, cold drinks etc.

5. Car parking charges.

The auditor must verify the car parking charges with the copy of the
receipt of the charges collected.
6. Receipt of rent
Verify the receipts of rent and other charges on account of letting out of
canteen , shops ,offices and other space in the cinema compound
7. Other Sundry receipts
Auditor will check other sundry receipts from , hire charges of opera
glasses, space allotted for display of goods etc, with the necessary
documentary evidence available.

pg. 13

EXPENSES
1. Advertisement expenses
The Auditor must vouch the expenditure for the advertisement, repairs
and maintenance. No part of such expenditure should be capitalized
except the expenditure on extensive redecoration and should be adjusted
as deferred revenue expenditure.
2. Depreciation
Confirm that depreciation on machinery and furniture has been charged at
an appropriate rate which are higher, as compared to those admissible in
the case of other businesses, in respect of similar assets.
3. Film hire payments
Vouch payments on account of film hire with bills of distributors and in the
process, the agreements concerned should be referred to.
4. Advances paid on distributors
Examine unadjusted balance out of advance paid to the distributors
against film hire contracts to see that they are good and recoverable. If
any film in respect of which an advances paid has already run, it should be
enquired as to why the advance has not been adjusted. The management
should be asked to make a provision in respect of advances that are
considered irrecoverable.
5. Salaries to staf
Auditor must vouch the payment made to the staff and check the salary
register and the signature in front of the name of the employees and if the
payment is made through check then he may verify the bank statement
also.

pg. 14

6. Insurance
The auditor may verify the insurance premium paid through the receipt of
premium, insurance documents and can also verify from the respective
insurance company.
7. Operating expenses: Auditor will carry out a thorough vouching of the
operating expenses paid. He will see that they have been properly
allocated between capital and revenue.
8. Renewal of license
The auditor must check the renewal of license and it can be verify through
the Challan .
9. Rent paid: if the cinema is on rental basis then the auditor must verify
the rent paid from agreements or contracts
10. Security charges:
The auditor must verify from the security agency the services of security
provided and charges paid to them through the register.

POINTS TO BE CONSIDERED BY AN AUDITOR BEFORE CONDUCT OF

AN AUDIT
Appointment: check out valid Appointment is there with compliance of sec
224 and sec 225 of company auditor
Understand legal structure of an entity and obtain its legal requirement
i.e. (it is a proprietary entity or partnership or Company)
Study last year audit to identify the points to be looked upon.
Obtain list of location where entity is operating.
Study its MOA/AOA.
Study internal control system for key functional areas.
Obtain copies of major contracts entered by entity.
pg. 15

 Refer minute book for major decision making affecting business

transaction.
He should obtain copies of books of accounts and trial balance for
effective audit.
He should obtain organization chart which include list of officers along with
Rule and Responsibility.
Auditor should have KNOWLEDGE of business.
He should consider whether theatre is eligible to get deduction under
section 80-IB(7) of income tax act 1961.

AUDIT OF ASSET AND LIABILITY OF CINEMA HALL

ASSETS:
Addition to Fixed assets (if any) and mode of purchase (grants, acquisition
under amalgamation, exchange of assets, against foreign currency loans hire
purchase, lease, tangible, intangible, etc.) Ensure that accounting for
historical cost is in conformity with AS-10 and depreciation charged is
adequate and has been properly disclosed as per AS-6.
Asset retired from active use (generally FURNITURE) should be valued at
realizable value, if lower than the WDV.
Work of art, decorative items valuation shall be supported by experts
opinion.
Auditor should verify the value of unexpired purchased film. He should be
very careful in case of valuation.

LIABILITIES:

pg. 16

 Share capital/Partners capital should be verified with reference to the

opening balance transfers and final balances. The auditor should examine
increase in capital during the year due to bonus issue to members/ Capital
introduced by partners.
Verify the content of current liabilities and provisions.
Auditor should verify the value of unexpired purchased film .He should be
very careful in case of valuation.

Bibliography
pg. 17

 Google
o www.oag-bvg.ge.ca
o My.safari.booksonline.com
o www.jesas.cam.ac.uk
Wikipedia
Some reference book like:
o B.n.tondon
o Taxmanns auditing assurance and
standards by Aruna Jha
o Fundamentals of auditing by Kamal
Gupta & Ashok Arora

pg. 18