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Study financial statements of previous years to determine its profitability in thepast.Compare the rate of return in the firm with the common rate of return in the saidfield.Examine Assets and Liabilities position of the firm.Study the provisions of Partnership Deed for composition of partners, profitsharing ratio, capital contribution etc.Ascertain the reasons for the offer of admission to a new partner.Ascertain the manner of computation of goodwill.Q.26) Investigation on behalf of Bank/Financial Institutions proposing toAdvance LoanMain Purpose:Whenever a prospective borrower approaches the bank for a loan, the bank isprimarily interested in knowing –oPurpose for which loan is requiredoSource from which it would be repaidoSecurity offered by the borrowerInvestigator should obtain knowledge onThe loan proposal submitted by the borrower
Purpose of loan and repayment scheduleCreditworthiness and reputation of the Board of DirectorsHistorical background and growth trendGrowth and profit prospects of the companyExistence of assets which are to be mortgaged for repayment of loanExamination of Profitability and State of AffairsExamine the validity and reasonableness of assumptions made in estimation ofProfit After Tax.Make a trend analysis of profitability taking into account the amount ofborrowings to be raised.Study the Cash Flow Statements of the Company to decide whether there hasbeen consistent cash flow from Operating activities.Study various items of Balance SheetQ.27) Steps for Audit under State level VAT1.Knowledge of Business: The auditor and his team should familiarizethemselves with the business of the Auditee.2.Knowledge of VAT Laws and Allied Laws :The auditor and his team shouldhave adequate knowledge of VAT Law, particularly definitions, procedures to beadopted, claiming of Input Tax Credit etc.3.Accounting Records :The auditor should obtain a complete list of all theaccounting records relating to sales, purchases, stocks etc.4.Major Accounting Policies :The auditor should ascertain the majoraccounting policies with regard to sales, purchases and valuation of inventory.5.Evaluation of Internal Control :The auditor should evaluate the internalcontrol prevalent in entity with respect to sales, purchase, production andaccounting. He must examine the adequacy and effectiveness of controls in order to plannature and timing of audit procedures.Q.28) Corporate Governance and Audit CommitteeCORPORATE GOVERNANCECorporate Governance is a system by which companies are directed andgoverned by the management in the best interest of stakeholders.They provide the guidelines as to how the company can be directed orcontrolled such that it can fulfill its goals and objectives in a manner that addsto the value of the company and is also beneficial for all stakeholders in the longterm.