Page 198 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes 3. Minutes of the directors meetings

4. Prospectus
5. Share application form
6. Letters of allotment
7. Letters of refund
8. Share registers

9. Cash book
10. Ledger accounts.

10.6 Audit of Investments

The procedures that are adopted by the auditor for auditing investments include: evaluating
features of investments which have an impact on the audit procedures and the important aspects
of audit of investments:
1. Internal Control Evaluation: Control over acquisition, accretion and disposal of
investments, safeguarding of investments, controls in respect of title of investments,
information controls.
2. Verification of Transactions: Authority to invest, legal requirements, supporting
documents, terms of sale or purchase (ex or cum dividend/interest), rights issues, bonus
issues.
3. Physical Verification: Responsibility of auditor, use of depository/custodial services by
the client, scripless trading, timing of physical examination, investments held by others,
investments not held in the name of the client vis a vis legal requirements, procedure in
finance/chit fund/nidhi companies etc., immovable properties held as investments.
4. Examination of Valuation or Disclosures: Valuation and disclosure of investments vis a
vis, compliance with Accounting Standard (AS) 13 and statutory requirements, method of
valuation.
5. Analytical Procedures: Comparison of various ratios.
6. Management Representations
7. Documentation by the auditor.

Notes The legal requirements, including disclosure norms, relating to investments under
certain prominent statutes, illustrative letter of confirmation for investments held by
banks, and management representation letter for investments.

10.7 Audit Procedures for Fixed Assets

Financial statement audits are performed to provide reasonable assurance that an entity’s financial
statements are fairly presented in accordance with generally accepted accounting principles. To
obtain this assurance, auditors examine material account balances. The fixed asset balance,
which deals with assets that can’t easily be converted into cash, is a common material account
balance on an entity’s financial statements. It is audited through procedures that confirm the
existence and valuation of the reported account balance.

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