AUDITING

INTRODUCTION: -

The term audit is derived from a Latin word “audire” which means to hear authenticity
of accounts is assured with the help of the independent review. Audit is performed to ascertain
the validity and reliability of information. Examination of books and accounts with supporting
vouchers and documents to detect and prevent error, fraud is the primary function of
auditing.Auditor has to check the effectiveness of internal control systems for determining the
extent of checking out the audit. The auditor has to ascertain whether the persons are responsible
for the maintenance of accounts had adequately accounted for all the cash receipts and the
payment on behalf of this principle. In short, an audit implies an investigation and a report. The
process of checking and vouching continues until the study is completed and the auditor enables
himself to report under the terms of his appointment.

VERIFICATION OF AUDIT: -

1. DAYBOOK VERIFICATION: -

 A daybook, also known as journal, is used in accounting to track business transactions

that take place during the day. Depending on preference, it can used to record payments
and receipts, income and expenses, cash and credit purchases, or anything else that needs
to be recorded by day.

 It is essential for both accountants and management who want to keep accurate records
of their transactions. The information in a daybook can be used to prepare financial
statements at the end of each month, quarter, or year.
 Daybook is a book of original entry in which an accountant records transactions by date,
as they occur. This information is later transferred into a ledger from which the
information is summarized into a set of financial statements. Daybooks are only used in
a manual accounting environment, and not commonly found in a modern accounting
system.
  And finally, using closing balances of ledgers, profit and loss account and trialbalances
Balance sheets prepared.
 Nowadays Daybook entries are being recorded and processed using the help of
accounting software Tally, which has the limited columns and limited details on
explode. Also having filtering features with specific vouchers with limited content.

The specimen of the day book is attached as ANNEXURE-1

TYPES OF DAYBOOK: -

There are five types of day book such as,

 Sales Daybook

 Purchase Daybook

 Cash Daybook

 Inward Daybook

 Outward Daybook

1. SALES DAYBOOK: -

It is an important document which allows the business to track down the sales made on credit

daily. In other words, it is a subsidiary book maintained to record credit sale of goods. This

book is also named as sales day book, sold day book, sales journal or sale register. Only

sales voucher to be taken for sales day book. The format for sales day book is given below,
 Amoun
Date Particulars L. Invoi t`
F. ce
Details Total
No.
Date of sale Name of the Postin Detailed Net
customers and g calculations amount of
the details of referenc the
goods sold e invoice

Sales A/c Cr. Amt

In the Date column, the date of the credit sales will be recorded. Particular column

contains the name of the party to whom the goods have been sold as well as the details of

the goods sold i.e, quality, quantity, other description etc.. Ledger Folio(L.F) and invoice

no column caries the page number of the debtors account and the receipts number which

will be taken for reference. The amount of various items of goods sold is entered in the

Details column. It will also add the discount and packing charges too. And finally the

total amount of the items will be recorded in the Total column.

2. PURCHASE BOOK: -

Purchase day book is referred to as a book of original entry. In other words it is a type of

subsidiary book, which is used to record all business credit purchases only. This book does

not record the purchase of cash transactions and which are not meant for resale purchases.

Cash purchase transactions are recorded in the cash book. Balance is debited to purchase
account and supplier of goods is credited to individual amounts. This book is also named

as purchase journal, purchase book, invoice book etc. the format for the purchase book is

given below,

Date Particulars (Name of the Invoice No. L.F. Amount `

suppliers and details of Details Total
goods purchased)
(i) (ii) (iii) (iv) (v) (vi)

Purchase A/c Dr.

In the Date column, the date of the credit purchase will be recorded. Particular
column contains the name of the party to whom the goods have been purchased for
credit as well as the details of the goods purchased i.e, quality, quantity, other
description etc.. Ledger Folio(L.F) caries the page number of the creditors accounts.
Invoice number refers to the statement prepared by the seller of goods. It contains details
about the goods, its price and other expenses incurred. The invoice number is entered in this
column The amount of various items of goods sold is entered in the Details column.
It will also add the discount and packing charges too. And finally the total amount of
the items will be recorded in the Total column.

The specimen of the purchase daybook is attached as ANNEXURE-2

3. CASH BOOK: -

Cash book is the book in which only cash transactions are recorded in the chronological order. The
cash book is the book of original entry or prime entry as cash transactions are recordedfor the
first time in it. Cash transactions here may include bank transactions also. Cash receipts are
recorded on the debit side while cash payments are recorded on the credit side.
TYPES OF CASH BOOK: -

The main cash book may be of various types and following are the three most common types.

 Simple or single column cash book (only cash column)

 Cash book with cash and discount column (double column cash book)
 Cash book with cash, discount and bank columns (three column cash book).

4. INWARD DAYBOOK: -

Inward daybook is also called as sales return or return inwards. It is a subsidiary book,
in which, details of return of goods sold for which cash is not immediately paid are recorded. goods
maybe returned by customers for the following reasons like Defect in the goods, Delay in
the dispatch of goods to the customers, Over-supply of goods, Goods not being in accordance
with the samples and specifications, Violation of the terms of the contract, etc. are recorded.

5.OUTWARD DAYBOOK: -
Outward daybook is also called as purchase return or return outwards. It is a subsidiary book in
which transactions relating to return of previously purchased goods to the suppliers, for which cash is
not immediately received arerecorded. Reasons like Goods may be defective, They might have been
damaged in transit, Quantities delivered may not agree with the invoice, they might have been received
quite late (off-season), They might not be as per the samples or specifications, There may be a breach
of agreement are recorded under this daybook

DAYBOOK -AUDIT POINTS: -

 Proper internal control has been placed in the company

 All the entries are supported by voucher
 All the voucher having reference number
 Internal control has been placed to avoid pre-dated entry or outdated entry.
MANUAL DAYBOOK -AUDIT POINTS: -

 Proper balance has been carried forward to the next day.

2. LEDGER POSTING VERIFICATION: -

 After the transactions are recorded in the journal, it is then posted in the principal
book called as ‘ledger’. The process of transferring the entries from journal to
respective ledger accounts is called ledger posting.
 In simple it is entering the information in the ledger from the journal for
individual records. The account debited is posted on the debit side and the account
credited is posted on the credit side of the same account.
 This process is carried throughout the year and at the end of the financial year where the
ledger accounts are closed and are totalled and balanced. This process is called the
balancing of the ledger accounts.
 Ledger posting is very important part of accounting system. As we know that toreach
to any financial result, we have to go through so many process. For example, first of
all, we must know to maintain proper account records. To maintain proper account
records, one must know proper accounting system.
 And proper accounting system includes following important steps to befollowed: -
 To prepare the vouchers.
 To enter the vouchers in to different type of day books.
 Posting the entries from day books to ledger.
 Totalling and balancing of ledgers.
 To prepare the trial balance
 To prepare Trading Account, Profit & Loss Account and Balance Sheets.

SOME IMPORTANT ASPECTS OF THE LEDGER INCLUDE:

 The information recorded in the ledger is stored permanently, so we caneasily check it

whenever necessary.
  Due to the proper arrangement of categories, it becomes easy to find the necessary
information from the ledger.

 Mathematical precision is attained in the data with the ledger.

 Ledger protects the data from being subjected to fraud and other malpractice as there is
proper organisation and appropriate space foreverything.

 The Double-Entry Accounting System is ledger helps us to have anabsolute account of the
organization.

LEDGER POSTING -AUDIT POINTS: -

 Whether all the entry of daybook has been posted in appropriate ledger with
voucher reference number.
 For balance sheet ledger opening balance has been brought down correctly.
 Whether accrued/due entry has been posted.
 Ensure any negative balance is appearing in the ledger if so, it is correct
(reversal entry).
The specimen of the bank ledger is attached as ANNEXURE-3

3. VOUCHER VERIFICATION: -

 A voucher is an internal document within a company that is issued by the accounts

payable (AP) department. It can be seen as a “memorandum” of theliabilities of the
company, and it is used to authorize a payment.

 In other words it is a backup document needed to initiate the procedure of

collecting and filing all other documents required to settle a liability.

 Verification of Vouchers report provides the Vouching facility to the Auditor by

displaying all the transactions. The Auditor has the flexibility to audit all the transactions
or apply the
 required sampling method and audit only the sampled transactions to form his opinion.
Following points need to be considered regarding voucher verification.

Accounting vouchers in Tally can be further classified as under.

 Sales Voucher

 Purchase Voucher

 Payment Voucher

 Receipt Voucher

 Contra Voucher

 Journal Voucher

 Credit Note Voucher

 Debit Note Voucher

Shortcut keys for voucher types in Tally ERP

VOUCHER VERIFICATION-AUDIT POINTS: -

 The invoice received from the supplier

 The data of the supplier to be paid (name, address, telephone number)
 The data for the payment (amount due, including a possible discount anddue date for

the payment)

 The initial purchase order made by the company

 The receipt that confirms that the company received the goods or theservices stated in the
invoice
 The general ledger accounts – needed for accounting reasons
 The signature of an authorized representative at the company (such as thehead of the
accounts payable department) that validate the purchase and the payment
 The proof of payment, which is included in the voucher documentation.

The specimen of the sales voucher is attached as ANNEXURE-4

The specimen of the payment voucher is attached as ANNEXURE-5.

4. DEPRECIATION CHARGES: -
Falling in the value of assets is referred to as depreciation. In other words, Depreciation is
defined as the wear and tear that is incurred on the asset as a result of usage, or time. Therefore,
under the accounting law, organizations are supposed to record this as an expense on the Income
Statement, and a reduced (carried down value) in the Balance Sheet.

When it comes to Income statements, depreciation expense tends to be one of the most
significant expenses that are incurred by the company. Regardless of the fact that it is a non
cash expense, yet it has a massive impact on profitability.

Even with the Balance Sheet, depreciation tends to be a highly deterministic factor because it
directly impacts the value of the assets on the balance sheet. Since the carrying value of assets
can phenomenally change as a result of depreciation, it is highly likely to result in an
uninformed decision taken by the investor.

Therefore, auditing depreciation expense tends to be a highly important factor from the
perspective of the auditing partner, and hence, it should be audited in a proper manner.

CHARACTERSTICS OF DEPRECIATION:

 It is a measure of wear and tear thanks to consumption.

 It is a chronic and continuous decline in the value of an asset.
 The amount is scattered over the beneficial life of an asset.
 It represents a gradual deterioration in the value of asset due to use.

TYPES OF DEPRECIATION:

There are four types of depreciation and these include unit of production, the straight line,
falling balance, double-declining balance, the sum of the year’s digits, and declining balance.

STRAIGHT-LINE
The simplest approach to track depreciation is by using the straight-line method. It records an
equal depreciation expenditure every year for the duration of the asset’s useful life, up until
the point at which the entire asset has been depreciated to its savage value.

DECLINING BALANCE
A technique for accelerated depreciation is the diminishing balance approach. The machine
is depreciated using this approach at its annual straight-line depreciation percentage times
its remaining depreciable value. The carrying value of an asset is higher in earlier years;
therefore, the same percentage results in a higher in earlier expenditure amount in the early
years, which decreases each year.
DOUBLE-DECLINING BALANCE
Another technique for accelerated depreciation is the double-declining balance (DDB) method.
This rate is applied to the depreciable base, which is the asset’s book value, for the
remaining portion of the estimated life of the asset after multiplying the asset‘s useful life by
its reciprocal and by two. As a result, it is nearly twice as quick as the decreasing balance
approach.

DDB = (Net Book Value - Salvage Value) x (2 / Useful Life) x Depreciation Rate.

SUM-OF-THE-YEAR’S DIGITS (DYS)

Accelerated depreciation is also possible using the sum-of-the-year’s digits (SYD) approach.
Start by adding up all the asset’s projected lifespan digits.The basis of an asset with a five-year
life, for instance, would be 1+2+3+4+5=15. Or the sum of the numbers 1 through 5.5/15 of
the depreciable base would be written off in the first year of depreciation. Only 4/15 of
the depreciable base would be deducted in the second year. This continues until the final 1/15
of the base is depreciated in year five.

DEPRICIATION CHARGES -AUDIT POINTS: -

 Date of purchase of asset and date of put to use of the asset to be verified for calculation
of the depreciation
 Ensure whether installation has been completed to charge depreciation or considered
as work in progress.
 Ascertain useful life of the asset with the technical expert.
 Whether depreciation has been created according to account policy (straight line, declining
dep) of the company.
5. VERIFICATION OF ASSETS:

A verification process involves an investigation into the worth of the asset, its ownership and
title, and possession of or charges to the assets. It defines the verification of assets as a
procedure in which investigators use to verify the accuracy of the right-hand portion of the
balance sheet. It is considered to have three distinct goals:

 The evidence of the existing assets,

 The evaluation of assets and
 The legality of their acquisition.

Thus, verification of assets could be described as a method of verifying the existence of assets
listed in the account’s books through physical inspection as well as an examination of official
and legal documents before forming an expert opinion regarding the ownership, existence of
assets, their classification, and the value of assets belonging to an organization.

Verification of assets includes the following points:

(a) that the assets were in existence on the date of the balance sheet.

(b) that the assets had been acquired for the purpose of the business and under a proper authority.

(c) that the right of ownership of the assets vested in or belonged to the undertaking.

(d) that they were free from any lien or charge not disclosed in the balance sheet.

(e) that they had been correctly valued having regard to their physical condition and

(f) that their values are correctly disclosed in the balance sheet.

OBJECTIVES OF VERIFICATION

The following are important objects of verification:

(1) Correct valuation of the assets and liabilities.

(2) Certification of the arithmetical accuracy of the accounts books.

(3) Whether the Balance Sheet exhibits a true and fair financial position of the concern

(4) Finding out Existence of the Assets

(5) Finding out the Ownership and Title of the Assets

(6) Detection of Fraud and Irregularities

VERIFICATION OF LIABILITES:

Liabilities are legal obligations of the organization to third parties. It is in the form of Capital,
Debentures, Long term loans, payment to suppliers against goods andexpenses, contingent
liabilities etc. Verification of liabilities is as important as verification of assets. If liabilities are
not properly verified and valued, the Balance Sheet will not reveal a true and fair view of the
state of affairs of a business concern. The main objective of verifying liabilities is to ensure that
all the liabilities are properly disclosed, valued, classified and presented in the Balance Sheet.
The diagram given below shows the various types and classifications of liabilities.
VERIFICATION OF ASSETS AND LIABILITES AUDIT POINTS: -

 Ensure balance has been brought forward correctly.

 Ensure the proper document has been available for verification of addition during the year.
 Ensure proper application/document is available for the deletion of assets and liabilities.
 Closing balance has to be ensured with the confirmation. Though we physically verify the
assets and liabilities by confirmation.

The specimen of the verification of assets and liabilities is attaches as ANNEXURE-6.

6. VERIFICATION OF FINANCIAL STATEMENT: -

“Proving the truth “or “confirming” are the definitions of verification. Verification is a
step in the auditing process when the auditor confirms the existence of the assets and
liabilities listed in the statement of financial position. Verification is often carried out checking
for things existence, ownership, title, and possession, as well as an accurate value and the
presence of any liens on assets.

Thus, verification includes:

1. The existence of the asset and liabilities.

2. Legal ownership and possession of the assets.

3. Correct valuation and,

4. Ascertaining that the asset is free from any charge.

Verification might be carried out on-site or off-site throughout an audit procedure.Offsite

verification includes reviewing paperwork, official records, and images and interrogating
staff members who are in charge of or otherwise seen as trustworthy sources for the institution
under verification. On-site verification entails the verifying party visiting the facility in person
and learning all relevant information about it while they are there, at the location were the
facility is situated and operated.
VERIFICATION OF FINANCIAL STATEMENTS AUDIT POINTS: -

 It has been prepared according to schedule (3)2013.

 Whether all the material fact has to be disclosed.
 Whether financial statement has been prepared from the book of accounts/trial balance
also to ensure the grouping of financial statements.
 Ensure main financial statement has been compiled with schedule of financial statement.
 Comparative figure has to be given appropriately.

AUDITING MEANING:

Audit is the examination or inspection of various books of accounts by an auditor followed

by physical checking of inventory to make sure that all departments are following

documented system of recording transactions. It is done to ascertain the accuracy of

financial statements provided by the organization

AUDITING CONCEPTS/ASPECTS:

There are 3 types of aspects:

1) Accounting aspects
2) Auditing aspects
3) Legal aspects

Accounting aspects: Accounting aspects is the process of recording financial

transactions pertaining to a business. The accounting process includes summarizing,

analyzing, checking the date and reporting these transactions to oversight agencies, regulators,

and tax collection entities.

Auditing aspects: Audit is the examination or inspection of various books of accounts by an

auditor followed by physical checking of inventory to make sure that all departments are

following documented system of recording transactions. It is done mainly to validate and

approving the transactions.

Legal aspects: ' LEGAL AUDIT ' – the word itself speaks a lot about the process. 'Legal'

here means related to law and 'Audit' means inspection. In short, the process determines that

the company is properly following the overall guidelines and billing standards set by

the government of India.

NEED FOR AUDITING:

It is to ensure that financial information is represented fairly and accurately. Also, audits

are performed to ensure that financial statements are prepared in accordance with the

relevant accounting standards. Auditing is done mainly for:

 Internal control
 To present and validate financial statements
 True and fair view of financial statements
 Check financial data and records
 To ensure your business is compliant with regulations
 To evaluate the effectiveness of risk management policies & procedures.

STATUTORY AUDIT UNDER THE COMPANIES ACT 2013:

Section 143 of the Companies Act 2013 entails provisions regarding powers and duties

of auditors. The statutory auditor shall present a report to the company's shareholders on the

Books of accounts and financial documents examined by him.Statutory audit under Companies
Act 2013 states that it is compulsorily required for every business to have their accounts

audited every financial year (April 1 - March 31), regardless of their capital or turnover , need

for practicing certificate , a statutory auditor is a must required by law.

AUDITOR QUALIFICATION:

To become an Auditor, you need a degree in accounting, or a degree in a related field that

majors in accounting. Also a chartered accountant can play a role as an auditor and those who

are appointed for auditing work is known as an auditor.

TYPES OF AUDIT:

STATUTORY AUDITING:

A statutory audit is an independent assessment of the financial accounts of a company or

institution. The auditor's role is to report on whether the financial statements issued by

an organization are 'true and fair', and meet all relevant guidelines or legal requirements. Also

an statutory auditor is directly responsible to prepare report and present to shareholders of

the company. The statement and report prepared are for mostly for single year term.

Statutory auditor is also eligible to lend to bank with his reports.

CON-CURRENT AUDITING:

Concurrent audit is a systematic and timely examination of financial transactions on a regular

basis it takes place mainly during the time of transactions, the checking and verification

takes place. It needs to be constantly be verified with the external party.

STOCK AND FIXED ASSET AUDITING:

Fixed asset auditing also known as stock auditing it mainly involves checking and reporting

the inventories and stock items of an organization.The process of verifying whether the

physical goods available at your store's warehouse match the results available at the stock

registry. It mainly takes place during the year end.

DUE DILIGENCE AUDITING:

A due diligence audit involves the examination of a business in order to evaluate its standing

as a business, and its financial performance. A due diligence audit is an internally conducted

audit of a company that seeks to ensure that the company is ready for sale. It is done as an

overall validation of the company for selling purpose or it is checked in case of buying of

other company.

TAX AUDITING:

A tax audit is an examination of your tax return by the internal revenue service to verify that

your income and deductions are accurate. If the turnover of the company is more than 2cr it

must be certified with chartered accountant provided with assessing officer to access the

data. Section 44AB of the Income Tax Act, 1961 deals with the Audit of the Accounts of a

certain category of persons carrying on a business or engaged in a profession.

APPOINTMENT OF AUDITOR:

An Auditor’s role in a company is to safeguard the interest of shareholders in a company.

The auditor is required by law to analyze the accounts kept by the directors and to tell them of
the company’s true financial status. The auditor will reveal the true financial position of a

company, which will help investors, shareholders, and stakeholders of a company, along with

that it will help directors in making future decisions related to the company.

APPOINTMENT OF AN AUDITOR UNDER COMPANIES ACT, 2013

The First Auditor of a business other than a government business must be appointed by the
Board within 30 days of its incorporation, according to section 139 of Companies Act, 2013. In
the event that the Board fails, an EGM (Extraordinary General Meeting) must be called within
90 days to appoint the First Auditor. The 90-day limit begins on the day of incorporation rather
than the expiration of the 30-day period.

Form ADT needs to file at the time of the First Auditor Appointment in a company. Once

the authorization of an Auditor has been obtained, the Board of Directors of the Company

can execute a resolution to appoint the Auditor. The auditor’s appointment must be reported to

the Registrar of Companies within 15 days of her or his appointment. From the conclusion of

that meeting until the conclusion of the company’s sixth AGM (Annual General Meeting), the

first auditor can serve. The corporation should, however, put the question of an

auditor’s appointment up for ratification by members at each Annual General Meeting (AGM).

IN AGM MEETING:

1) Appoint of audit
2) Appoint of board of directors
3) Dividend declaration
4) Financial statement approval
5) Remuneration fixation takes place
The 1st auditor will always be appointed by the board of directors in the EGM meeting and rest

all auditor are appointed in AGM meeting also a listed company need to change their auditor

every 5 years.

Appointment of auditor takes place by other means such as:

 Retirement
 Death
 Removal of board of directors
 Resignation

AUDITING PRACTICES IN THE FIRM:

The main auditing practice is consultancy services are provided to the organization. The

practice includes:

 Inspection: Auditors collect evidence by inspecting physical assets, records, or documents.

 Observation: Auditors observe the client’s business processes and operations to

identify deficiencies.

 External confirmation: Auditors may reach out to third parties to verify the client’s

financial information and accounting records.

 Recalculation: The auditors perform their own calculations to verify that the final

account balances match those reported by the client.

 Re-performance: Auditors may re-perform specific tasks or processes to identify

deficiencies and discover opportunities for further optimization.

 Analytical procedures: Auditors analyze the client’s financial records to find discrepancies.
 Inquiry: Auditors talk with the client’s senior management to gain a deeper understanding

of business processes for the auditing process. Inquiry alone, however, not considered
sufficient audit evidence to reduce the risk.

INTERPRETATION OF FINANCIAL STATEMENT:

Analysis and Interpretation refers to a systematic and critical examination of the

financial statements. It not only establishes cause and effect relationship among the various

items of the financial statements but also presents the financial data in a proper manner.

Ratio analysis can be done by analyzing the performance and comparing financial statement

1. GROSS PROFIT RATIO:

The Gross Margin Ratio, also known as the gross profit margin ratio, is a profitability ratio

that compares the gross margin of a company to its revenue. It shows how much profit a

company makes after paying off its Cost of Goods sold.

GROSS PROFIT RATIO: GROSS PROFIT/NET SALES*100.

2. NET PROFIT RATIO:

Net Profit Ratio, also referred to as the Net Profit Margin Ratio, is a profitability ratio that

measures the company's profits to the total amount of money brought into the business.

NET PROFIT RATIO: (Net Profit / Net Sales) × 100.

3. CURRENT RATIO:

The current ratio is also referred to as the working capital ratio. This ratio compares a

company’s current assets to its current liabilities, testing whether it sustainably balances
assets, financing, and liabilities. Current assets are those that can be converted into cash within

one year, while current liabilities are obligations expected to be paid within one year.

CURRENT RATIO: CURRENT ASSETS/CURRENT LIABILITY

4. DEBT-EQUITY RATIO:

The debt-to-equity ratio shows how much of a company is owned by creditors (people it

has borrowed money from) compared with how much shareholder equity is held by the

company. It is one of three calculations used to measure debt capacity—along with the

debt servicing ratio and the debt-to-total assets ratio.

DEBT – EQUITY RATIO: Total Liabilities / Shareholder's Equity. Liabilities

AUDITORS REPORT:

Management is responsible for the preparation of the financial statements. Management

also accepts responsibility for necessary internal controls to enable the preparation of

financial statements that are free from material misstatement, whether due to fraud or error.

The purpose of an audit is to enhance the degree of confidence of intended users of the

financial statements. The aforesaid purpose is achieved by the expression of an

independent reporting by the auditor as to whether the financial statements exhibit a true and

fair view of the affairs of the entity.After auditing is done the auditor should submit the report

to their shareholders. An auditor's report is a written letter from the auditor containing their

opinion on whether a company's financial statements comply with generally accepted

accounting principles (GAAP) and are free from material misstatement.

The format for appointment of auditor (ADT-1) is attached as ANNEXURE-7

The format for removal of auditor (ADT-2) is attached as ANNEXURE-8

The format for resignation of auditor (ADT-3) is attached as ANNEXURE-9

TYPES OF AUDITORS REPORT:

1) CLEAN REPORT:

A clean report is one that states that the financial statements of the company fully comply

with GAAP and are free of any material misstatement. It indicates that the auditors are

satisfied with the company's financial reporting and that they comply with the governing

principles and laws applicable.

2) QUALIFIED REPORT:

A qualified opinion indicates that there was either a scope limitation, an issue discovered in

the audit of the financials that were not pervasive, or an inadequate footnote disclosure. A

qualified opinion is an auditor's opinion that the financials are fairly presented, with the

exception of a specified area.

3) ADVERSE REPORT:

An adverse audit report usually indicates that financial reports contain gross misstatements

and have the potential for fraud. Adverse opinions send out a high alert that the company's

records haven't been prepared according to GAAP. Hence, the auditor concludes that
the qualification of the audit report is not adequate to disclose the misleading nature of the

financial statements.

4) DISCLAIMER REPORT:

When an auditor issues a disclaimer of opinion report, it means that they are distancing

themselves from providing any opinion at all related to the financial statements. Some of

the reasons that auditors may issue a disclaimer of opinion are because they felt like the

company limited their ability to conduct a thorough audit or they couldn’t get

satisfactory explanations for their questions that is information is not provided to give

conclusion.
Annexure 1(daybook):

K. GOPAL RAO & CO

Debit Credit
Amount Amount
Inwards Qty Outwards
Qty
Day Book 100000.00
For 1-Apr-23 100000.00
Dr
Date Vch Debit Amount Credit 50000.00
No. Amount
Inwards Qty Outwards 50000.00 Dr
Qty
01-Apr- Icici Bank Contra 1 30000.00 15000.00
23
01-Apr- Cash Contra 2 50000.00 15000.00
23 Cr
01-Apr- Cash Contra 3 50000.00 50000.00
23
01-Apr- Vishal & Co Payment 1 15000.00 50000.00
23 Cr
01-Apr- Niraj Kapoor Payment 2 50000.00 85000.00
23
01-Apr- Sun Shine Traders Payment 3 35000.00 85000.00
23 Cr
01-Apr- Soundar Payment 4 15000.00 15000.00
23
01-Apr- Renuka Petty Cash Payment 5 35000.00 15000.00
23 Cr
01-Apr- Hyundai Showroom Payment 6 30000.00 50000.00
23
01-Apr- Icici Car Loan Payment 7 40000.00 50000.00
23 Cr
01-Apr- Anuj Tiles Payment 8 50000.00 600000.00
23
01-Apr- Motor Services Payment 9 20000.00 600000.00
23 Cr
01-Apr- Vasanth & Co Payment 10 40000.00 40000.00
23
01-Apr- Huayu Payment 11 30000.00 10000.00 Dr
23
01-Apr- Kiran Payment 12 30000.00 50000.00
23 Cr
01-Apr- Dhanalaksmi Payment 13 20000.00 65000.00
23
01-Apr- Gvn Plus Payment 14 50000.00 65000.00 Dr
23
01-Apr- Vsm Enterprise Receipt 1 38800.00 90000.00
23
01-Apr- Vels Traders Receipt 2 15000.00 90000.00 Dr
23
01-Apr- Anuj Tiles Receipt 3 30000.00 15000.00
23
01-Apr- Amul TOI Receipt 4 10000.00 15000.00 Dr
23
01-Apr- Vegas Receipt 5 50000.00 130000.00
23
01-Apr- Venkataraman Receipt 6 15000.00 130000.00
23 Dr
01-Apr- Sai Infoysis Receipt 7 30000.00 10000.00
23
01-Apr- East India Company Receipt 8 20000.00 10000.00 Dr
23
01-Apr- Giriaas Receipt 9 50000.00 50000.00
23
01-Apr- Kiran Receipt 10 60000.00 50000.00 Dr
23
01-Apr- Renuka Petty Cash Journal 1 44000.00 15000.00
23
01-Apr- Staff Expenses Journal 2 44000.00 15000.00 Dr
23
01-Apr- Air Conditioner Journal 3 60000.00 30000.00
 23
01-Apr- Hyundai Creta Journal 4 40000.00 30000.00 Dr
23
01-Apr- Hyundai Showroom Journal 5 60000.00 50000.00
23
01-Apr- Niraj Kapoor Credit Note 1 30000.00 50000.00
23 Cr
01-Apr- Sai Infoysis Debit Note 1 20000.00 50000.00
23
01-Apr- Sai Infoysis Performance 1 10000.00 50000.00
23 Invoice Cr
01-Apr- Vsm Enterprise Sales 1 38800.00 40000.00
23
01-Apr- Vels Traders Sales 2 15000.00 40000.00
23 Cr
01-Apr- Anuj Tiles Sales 3 27500.00 1200000.00
23
01-Apr- Amul TOI Sales 4 10000.00 1200000.00
23 Cr
01-Apr- Vegas Sales 5 50000.00 600000.00
23
01-Apr- Venkataraman Sales 6 15000.00 600000.00
23 Cr
01-Apr- Sai Infoysis Sales 7 20000.00 10000.00
23
01-Apr- East India Company Sales 8 20000.00 10000.00
23 Cr
01-Apr- Kiran Sales 9 30000.00 155000.00
23
01-Apr- Giriaas Sales 10 50000.00 155000.00
23 Cr
01-Apr- Priya & Co Service Invoice 1 30000.00 15000.00
23
01-Apr- Motor Services Service Invoice 2 30000.00 15000.00
23 Cr
01-Apr- Madhan Service Invoice 3 50000.00 130000.00
23
01-Apr- Vishal & Co Purchase 1 15000.00 130000.00
23 Cr
01-Apr- Niraj Kapoor Purchase 2 20000.00 10000.00
23
01-Apr- Sun Shine Traders Purchase 3 10000.00 10000.00
23 Cr
01-Apr- Soundar Purchase 4 15000.00 50000.00
23
01-Apr- Anuj Tiles Purchase 5 50000.00 50000.00
23 Cr
01-Apr- Motor Services Purchase 6 20000.00 15000.00
23
01-Apr- Vasanth & Co Purchase 7 45000.00 15000.00
23 Cr
01-Apr- Huayu Purchase 8 30000.00 20000.00
23
01-Apr- Dhanalaksmi Purchase 9 20000.00 20000.00
23 Cr
01-Apr- Gvn Plus Purchase 10 50000.00 10000.00
23
01-Apr- Realme Charger Manufacturing Unit 1 500 num 10000.00
23 Cr
01-Apr- Mouse for Pc Stock Journal 1 50 num 10000.00
23
Car Service 10000.00
Cr
01-Apr- Madhan Service Invoice 3 10000.00
23
Bills Payable 10000.00
Cr
01-Apr- Vishal & Co Purchase 1 15000.00
23
Insurance Expense 15000.00 Dr
01-Apr- Niraj Kapoor Purchase 2 100000.00
23
Godown Rent 100000.00
Dr
01-Apr- Sun Shine Traders Purchase 3 85000.00
23
 Purchase Ac 85000.00 Dr
01-Apr- Soundar Purchase 4 15000.00
23
Stationnary Expense 15000.00 Dr
01-Apr- Realme X3 Super Manufacturing 1 100 num
23 Zoom Unit
Realme X3 Super 100 num
Zoom
Realme X3 XSuper 100 num
Zoom
01-Apr- Air Conditionor Manufacturing 2 200 num
23 Unit
Air Conditionor 200 num
Air Conditionor 200 num

Annexure 2(purchase book):

K. GOPAL RAO & CO

Purchase Register
1-Apr-23 to 30-Apr-23

Date Particulars Vch Type Vch Debit Credit

No.
Amount Amount

01-Apr- Vishal & Co Purchase 1 15000.00

23
01-Apr- Niraj Kapoor Purchase 2 20000.00
23
01-Apr- Sun Shine Traders Purchase 3 10000.00
23
01-Apr- Soundar Purchase 4 15000.00
23
01-Apr- Anuj Tiles Purchase 5 50000.00
23
01-Apr- Motor Services Purchase 6 20000.00
23
01-Apr- Vasanth & Co Purchase 7 45000.00
23
01-Apr- Huayu Purchase 8 30000.00
23
01-Apr- Dhanalaksmi Purchase 9 20000.00
23
01-Apr- Gvn Plus Purchase 10 50000.00
23
Total: 275000.00
Annexure 3 (bank ledger):

K. GOPAL RAO & CO

Cheque Printing
1-Apr-23 to 30-Apr-23

Date Particulars Bank Instrument Instrument Printed Amount

Name No. Date ?
01-Apr- Cash Icici Bank 01-Apr-23 No 30000.00
23
01-Apr- Vasanth & Co Iob Bank' 01-Apr-23 No 40000.00
23
01-Apr- Huayu Iob Bank' 01-Apr-23 No 30000.00
23
01-Apr- Kiran Iob Bank' 01-Apr-23 No 30000.00
23
01-Apr- Gvn Plus Icici Bank 01-Apr-23 No 50000.00
23
01-Apr- Niraj Kapoor Hdfc 01-Apr-23 No 50000.00
23 Bank
01-Apr- Sun Shine Traders Hdfc 01-Apr-23 No 35000.00
23 Bank
01-Apr- Renuka Petty Cash Icici Bank 01-Apr-23 No 35000.00
23
01-Apr- Hyundai Showroom Icici Bank 01-Apr-23 No 30000.00
23
01-Apr- Icici Car Loan Icici Bank 01-Apr-23 No 50000.00
23
01-Apr- Anuj Tiles Iob Bank' 01-Apr-23 No 50000.00
23
01-Apr- Motor Services Iob Bank' 01-Apr-23 No 20000.00
23
Grand Total 450000.00

Annexure 4( sales voucher):

K. GOPAL RAO & CO

Sales Register
1-Apr-23 to 30-Apr-23
Date Particulars Vch Type Vch Debit Credit
No.
Amount Amount
01-Apr- Sai Infoysis Performance 1 10000.00
23 Invoice
01-Apr- Vsm Enterprise Sales 1 38800.00
23
01-Apr- Vels Traders Sales 2 15000.00
23
01-Apr- Anuj Tiles Sales 3 27500.00
23
01-Apr- Amul TOI Sales 4 10000.00
23
01-Apr- Vegas Sales 5 50000.00
23
01-Apr- Venkataraman Sales 6 15000.00
23
01-Apr- Sai Infoysis Sales 7 20000.00
23
01-Apr- East India Company Sales 8 20000.00
23
01-Apr- Kiran Sales 9 30000.00
23
01-Apr- Giriaas Sales 10 50000.00
 23
01-Apr- Priya & Co Service Invoice 1 30000.00
23
01-Apr- Motor Services Service Invoice 2 30000.00
23
01-Apr- Madhan Service Invoice 3 50000.00
23
Total: 396300.0
0

Annexure 5( payment voucher):

K. GOPAL RAO & CO

Payment Register
1-Apr-23 to 30-Apr-23

Date Particulars Vch Type Vch Debit Credit

No.
Amount Amount

01-Apr- Vishal & Co Payment 1 15000.00

23
01-Apr- Niraj Kapoor Payment 2 50000.00
23
01-Apr- Sun Shine Traders Payment 3 35000.00
23
01-Apr- Soundar Payment 4 15000.00
23
01-Apr- Renuka Petty Cash Payment 5 35000.00
23
01-Apr- Hyundai Showroom Payment 6 30000.00
23
01-Apr- Icici Car Loan Payment 7 40000.00
23
01-Apr- Anuj Tiles Payment 8 50000.00
23
01-Apr- Motor Services Payment 9 20000.00
23
01-Apr- Vasanth & Co Payment 10 40000.00
23
01-Apr- Huayu Payment 11 30000.00
23
01-Apr- Kiran Payment 12 30000.00
23
01-Apr- Dhanalaksmi Payment 13 20000.00
23
01-Apr- Gvn Plus Payment 14 50000.00
23
Total: 460000.00
 Annexure 6(verification of assets and liabilities):

K. GOPAL RAO & CO

Balance Sheet
For 1-Apr-23

Liabilities

Capital Account

Gowthan Ac

Niraj Kapoor Capital Ac

Vikas Cap Ac Violin technology Violin technology

Loans (Liability) as at 1-Apr-23 as at 1-Apr-23

Icici Car Loan 1500000.00 Fixed Assets 660000.00 60000.00

Icici Credit Card 500000.00 Air Conditioner 50000.00
Current Liabilities 500000.00 Dio Scooty 150000.00
Duties & Taxes 500000.00 Electrical Fittings 10000.00
Sundry Creditors 60000.00 Furniture 100000.00 1960000.00
Bills Payable 50000.00 Hyundai Creta 300000.00
Current Assets 10000.00 Television 50000.00
Closing Stock 19200.00 Difference in opening 1750000.00
balances
Loans & Advances 21055000.00
(Asset)
Sundry Debtors -30800.00
Cash-in-Hand 50000.00
Bank Accounts 888000.00
Profit & Loss A/c -165000.00
Opening Balance -1000.00
Current Period 1490500.0 23075000.00
0
Total -217000.00

Total 2410000.00