To audit balance sheet is one of major work of auditor. In balance sheet auditing, he has to check and to verify different assets and liabilities. Following are main steps of Balance Sheet Audit.
1st Step : Audit of Current Assets
First of all CA has to audit current assets and sees whether these are correct or not.
a) Cash and Bank Balance Audit
CA has to check cash balance with its physical existence. For checking bank balance, he has to take the help of bank statement. If there difference cash book and bank statement balance, he should check bank reconciliation statement of company to know the real reasons behind this. If there is any error in it, he should note which will be the part of audit report.
b) Account Receivable Audit
CA also check account receivables. He has to see bad debts account and provision for doubtful debt account and its accounting treatment in balance sheet.
2nd Step : Fixed Assets Audit
In this audit, CA must check the depreciation on each asset. Asset's sale value and its profit or loss and balance value which has been shown in balance sheet.
3rd Step : Investment Audit
In investment audit, he should audit the source of these investment. He also should check different investment schemes.
4th Step : Audit of Liabilities
Auditor should check the solvency ability of company by liabilities audit. He should audit account payable, bank loans, outstanding liabilities. His eye should be total payment to creditors and what is recorded in the books. If he examines the difference between both. It may be mistake or fraud and it should be noted. He also examines any misconduct of accounting department relating to paying liabilities. He also tries to know the reasons of delay in the payment of interest, long term loan and other outstanding expenses.
Related : How to Reconcile Balance Sheet
1st Step : Audit of Current Assets
First of all CA has to audit current assets and sees whether these are correct or not.
a) Cash and Bank Balance Audit
CA has to check cash balance with its physical existence. For checking bank balance, he has to take the help of bank statement. If there difference cash book and bank statement balance, he should check bank reconciliation statement of company to know the real reasons behind this. If there is any error in it, he should note which will be the part of audit report.
b) Account Receivable Audit
CA also check account receivables. He has to see bad debts account and provision for doubtful debt account and its accounting treatment in balance sheet.
2nd Step : Fixed Assets Audit
In this audit, CA must check the depreciation on each asset. Asset's sale value and its profit or loss and balance value which has been shown in balance sheet.
3rd Step : Investment Audit
In investment audit, he should audit the source of these investment. He also should check different investment schemes.
4th Step : Audit of Liabilities
Auditor should check the solvency ability of company by liabilities audit. He should audit account payable, bank loans, outstanding liabilities. His eye should be total payment to creditors and what is recorded in the books. If he examines the difference between both. It may be mistake or fraud and it should be noted. He also examines any misconduct of accounting department relating to paying liabilities. He also tries to know the reasons of delay in the payment of interest, long term loan and other outstanding expenses.
Related : How to Reconcile Balance Sheet
A sample of auditing balance sheet
ReplyDelete