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Auditors Lunch and conveyance head

VIBHOR (CA) (43 Points)

15 June 2009

I Want to ask that in which accounting head should the auditors lunch and conveyance should be debited?? whether it should be debited in the BUSINESS PROMOTION or STAFF WELFARE A/C??

Anyone who can help me do reply me please..

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12 Replies

pulkit gupta (CA final student) (160 Points)
Replied 15 June 2009

If the amt of expenses is small then It can be debited to Staff Welfare A/c. Otherwise to Audit Expenses a/c. In any case exp will not be debited to B/s Promotion A/c, as there is no kind of promotion.

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VIBHOR (CA) (43 Points)
Replied 15 June 2009

Thanx for your reply..I got what you told me but as such the audit is performed for 15-20 days and the per day lunch and conveyance reached to Rs. 200 or more then it should be dr to where ??according to me it should not dr. to the staff welfare a/c and conveyance a/c. Am I right?? And actually the company have NOT make any A/c head named "Audit Expenses" then should it be dr to BUSINESS PROMOTION a/c only??

please do reply..

Sunny (Articled Trainee) (44 Points)
Replied 15 June 2009

The Amt. spent on Auditors should be debited to Auditor's Exp. A/C. Debiting the exp. amt to Staff Welfare will attract FBT and as such it is not related to the staff of the company also. Same way it should not be debited to Business Promotion Exp. A/C also as that will also attract FBT and the auditor's exp is in no way related to Business Promotional activity.Hope I was able to clarify your doubt.

VIBHOR (CA) (43 Points)
Replied 15 June 2009

Thnxx sunny for solving my query..but the thing You told me I already discussed but the problem is that the company of whose Audit I am performing has NOT make any A/c head named -" Auditors Expenses" so where should the amount should be debited in this case??or SHOULD I ASKED THEM TO MAKE A NEW ACCOUNTING HEAD NAMED "AUDIT EXPENSE"??

please do reply..

RAMANJU (here to updating the knowledge) (485 Points)
Replied 15 June 2009

A Ledger a/c can be created for 'Auditor's Expenses' in the books and can be debited to this account.

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PRAVEEN KUMAR (MBA (Finance) B.Com.(P)) (3443 Points)
Replied 15 June 2009

Dear Vibhor,

as ur 6th sense is saying you was right

Dr. staff welfare and conveyance a/c

treat it as a normal office expenditure. if your management is keen to show in balance sheet or want to highlight the expenses incurred by auditors than only create this Auditor Expenses Head.

Otherwise there is no need. Auditor is "GOD" for "Bhagwaan" if you have to pay a little bit FBT on payment of Conveyance Chinta Mat Karo. as far as Staff welfare is concern if you show that meal is taken inside the office there is no FBT, this thing u might know also.

Thanks

Praveen

Aditya (81 Points)
Replied 16 June 2009

Reimbursement of Auditor's Lunch and Coveyance should be shown separately as "Reimbursement of Auditor's Expenses" and has to be disclosed separately. I don't understand how it can be staff welfare, since auditor is not a staff of the company (if he is so he is disqualified to be an auditor). Then it is not business promotion also , since no business is being promoted. Therefore, it has to be treated as part of audit costs and has to be disclosed separately. I recommend you to go through some of the leading company's annual report where auditor's remuneration has been disclosed very transparently as Audit Fees, Reimbursement of Expenses and Fees for other services. Having no head of account as Audit Expense is not an excuse, Creating a ledger a/c should not be a big problem.

Secondly, a few of them have quoted about FBT applicability. In my view whether it is FBT, IT, Central Excise, whatever be the nature of taxes, that should not drive us to do the accounts. Accounts are totally different and is independent. Accounts is driven by acccounting standards, policies and principles adopted. In my view, tax saving or applicability of taxes should not drive accounting. Go by the substance over form.

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ashwani kumar (account asssistant) (36 Points)
Replied 16 June 2009

hi aditya

as per me the all the expenses relating to audit should be dr.to audit a/c.In the company where compannies audit is compulsory

an a/c named audit exp & audit fee a/c is maintained.;

pulkit gupta (CA final student) (160 Points)
Replied 16 June 2009

If the amt of audit expense is small then it can be clubbed in staff welfare. we cannot open new A/c for each & every expense, materiality concept has to be considered. Als as per the Companies Act,1956, if the expenditure is more than Rs. 5000 or 1% of revenue then it needs to be disclosed seperately.

As far FBT is concerned, A/c Deptt. at the time of calculating FBT liability they segregate the expenditure on the basis on narration, FBT is not charged on the whole A/c.

I've faced this similar situation at the time of audit.

Kindly give advice based on some practical knowledge.

Vinay Chopra (CA ) (197 Points)
Replied 16 June 2009

hi,

According to me it shuld be debited to miscellaneous expenses or entertainment expenses.

thanks

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ajit sinha (CA) (51 Points)
Replied 17 June 2009

the entire discussion on the above matter can conclude with one of two point.

1.Either its included in the Audit fee and auditing expense head if the auditor agreed that this is not out of pocket.

2.Or to owner the materiality concept which Mr. pulkit already told you.

so to open a a/c called auditing expenses not restricted by any co./income tax law and you can convience the managment that we analise whats the exp come to audit to finalised the balance sheet.

after analise the entire thing you can make a good plan to complete the audit with in a restricted time . This is the time to control your overhead you can focus on each and every expect of expenses. Hope after that no further question raised by your management.

regard

ajit (C.A ) Final

deepak gupta (Student CA Final ) (189 Points)
Replied 24 June 2014

under which head Lunch expenses incurred by company should be accounted where lunch expenses is incurred for the employees of sister concern.

As per my views it should not come under staff wellfare as they are not employee of the company and with regard to businees promotion expenses head i am confused becoz there seem to be no business promotion...please clarify under which head i should account it,?????