Page 180 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 9.2.5 Auditor Duty as regards Wages

1. He should see whether the internal check system as detailed above is satisfactory and
there is no loophole for any fraud.
2. He should check the casts of the wages sheets or wages book.
3. He should check the total of wages payable with the amount of cash or
cheque.
4. He should check the name of some of the workers as mentioned the wages sheets with the
job cards.
5. He should also see that the wages sheets are properly initialed or signed by all the persons
responsible for the preparation of the wages sheet.

6. He should pay a surprise visit on the day of payment of wages.
7. He should compare the sanctioned strength of the workers with the wages sheet.
8. Wages sheets of the previous months should be compared with the current month.
9. Leave register should be examined.

9.2.6 Examine the System of Employment of Casual Labour

1. Capital Expenditure: The duty of an auditor in this connection is to see that the payment
is in order, that it is dully authorized and that the money spent has been properly
capitalized. Such expenditure requires special attention. The agreement for the purchase
of property or the lease deed should be examined. Invoice of the supplier should be
examined.
2. Loans: He should examine the receipt given by the borrower and the loan agreement,
Pro-Note or bill of exchange. He should read carefully terms of loan regarding the rate of
interest, the dates on which interest has to pay and the date of repayment of the loan. He
should make inquiry whether his client is authorized to advance loans.

3. Salaries: Salaries book should be examined. He should see that the total for the salaries
book for a particular month agrees with the cheque drawn for salaries or the item in the
cash book under the cash column.
4. Travelling Allowance: He should the rules and regulations regarding the payment of
travelling allowance. Calculation should be made. If there are so such rules, he should
recommend to the management to frame rules. He should examine the vouchers which
should be counteragent by a responsible official.

5. Insurance of Premiums: In case of new policy, the cover note or the receipt from the
insurance company and the policy itself should be examined. In case of renewal, the
renewal receipt for the premium should be examined.
6. Bill Payable: Returned bills duly cancelled should be examined. It would be a sufficient
evidence of the amount having been paid. Reference may be made to the Bank pass and
Bills payable Books.

7. Freight, Carriage and Custom Duties: The statements of account regarding the payment of
freight and carriage, submitted by the shippers, clearing or forwarding agents, together
with the receipts issued by them, should be examined to see that the payments has been
duly made and accounted for.

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