1. How will you vouch collection from Debtor's?
- Check if there is a system of preparing "Ageing Schedule" of debtors, and regular follow up action is taken for collection on timely basis.
q. Here i did not understand "Ageing Schedule"..
- Examine cases of dishonour of cheques, if any, and see whether proper follow up action is taken in respect of such situations.
q. here what kind of follow up actions are taken?
2.In audit of sale proceeds of junk material, there's a point...Compare income of junk material in current year with that of preceding three years..
q. My question is what is the need for such comparision??
3. A co. makes purchases from other entities under the same management.
q. Here i did not understand : other entities under the same management.
4.How will you vouch verify Advance given to supplier.
- Obtain schedule of debit balances in creditor's account and pay particular attention to the age of balances. Also scrutinise the bought ledger.
q. here i did not understand the whole point .(above)
5. How will you vouch/verify Purchase return ?
- Examine in-depth to eliminate the possibility of fictitious purchse return for covering bogus purchases recorded earlier when such retun outwards are in substantial figure either at he start or at the end of the accounting year.
q. Here also i did not understand the whole point.
6.What do we mean by purchase requisition note ?
7.In one of the entities the Auditor finds that there is a sharp increase in GP ratio in the current year compared to previous year.
One of the possibility he verifies is : Increase in level of production , leading to economies of large scale production.
q. A question came in my mind was how will increase in level of production increase GP..I assumed that increase in production would increase in sales , which will increase GP, but at the same time increase in production will also result in increasing production costs, so how can GP increase ?? please clarify..
8.One of the liabilities for a co, is : Receipt of capital subsidy
q. What do we mean by Capital Subsidy ?
Please clarify the above mentioned doubts..
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