Balance Sheet finalization is the most important work that needs to be done for Statutory Audit.
Here I have tried to cover all the important points that need to be taken care of before finalization of the balance sheet.
- Opening balances are correctly posted as per last year audited balance sheet.
- Reconcile Sale and Purchase data with GST Returns and also verify electronic credit and Cash Ledger Balance.
- No Negative cash balance throughout the year.
- Check Payment of Previous Year Expenses Payable.
- Check the entries for PF/ESIC and verify duly with the return and challans
- Transfer Whether Previous Year Prepaid Expense has been booked in the Current year under Relevant Expense Head at financial year-end.
- Check Provision for Audit Fee has been made. Further, Disallow 30% of the said amount if fails to deduct TDS under income tax computation. (Section 40(a)(ia).
- TDS/TCS Receivable should be matched with 26AS
- Check salary with Employment contracts.
- Reconcile All Bank Accounts
- Compare Gross Profit and Net Profit Ratio with last year, if you find major variation discuss with management (Reporting in tax Audit)
- Check whether stocks are shown on cost or NRV or not
- Depreciation Entries with a correct rate of depreciation.
- Check the cash purchase of Fixed Asset which should be no more than 10000 and check incidental expense related to the fixed asset which should be capitalized before being put to use.
- Check the Ledgers of secured and unsecured loan account according to section 269SS/269ST/269T Section which are related to loan/deposit payment/accept. Also, Confirm Loan Balances as on 31st March, 20xx. (Reporting in tax Audit)
- Check the cash expense entries with more than Rs. 10000 according to section 40A(3) (Reporting in tax Audit)
- Compare Expenses with Previous Year Expenses on the of turnover and if you find any major variation in any ledger then check again correctness and record the reason for the variation.
- Provision of outstanding and pre-paid expenses like Insurance Expenses that are properly bifurcated into Prepaid.
- Check All Debit Notes/Credit Notes Should Be Signed and booked into accounts.
- Confirmation of Secured Creditors. (Especially those with Debit Balance)
- Confirmation of Secured Debtors (Especially Those with Credit Balance)
- Clear out Suspense Account, if any.
- Confirm TDS on specific payments deducted and paid up to the due date of ITR.
- Check if personal expenses of Directors are debited to the profit and loss accounts.
- For Monthly expenses like electricity, telephone, etc. every month has been booked.
- Make Sure Deferred tax Asset/ Liabilities has been booked and Provision for tax has been made at year-end.
- Check provision for expenses has been made on an accrual basis at year-end like March month Salary
CAclubindia
