Study financial statements of previous years to determine its profitability in

Study financial statements of previous years to

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Study financial statements of previous years to determine its profitability in the past. Compare the rate of return in the firm with the common rate of return in the said field. Examine Assets and Liabilities position of the firm. Study the provisions of Partnership Deed for composition of partners, profit sharing 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 to Advance Loan Main Purpose: Whenever a prospective borrower approaches the bank for a loan, the bank is primarily interested in knowing – o Purpose for which loan is required o Source from which it would be repaid o Security offered by the borrower Investigator should obtain knowledge on The loan proposal submitted by the borrower
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Purpose of loan and repayment schedule Creditworthiness and reputation of the Board of Directors Historical background and growth trend Growth and profit prospects of the company Existence of assets which are to be mortgaged for repayment of loan Examination of Profitability and State of Affairs Examine the validity and reasonableness of assumptions made in estimation of Profit After Tax. Make a trend analysis of profitability taking into account the amount of borrowings to be raised. Study the Cash Flow Statements of the Company to decide whether there has been consistent cash flow from Operating activities. Study various items of Balance Sheet Q.27) Steps for Audit under State level VAT 1. Knowledge of Business : The auditor and his team should familiarize themselves with the business of the Auditee. 2. Knowledge of VAT Laws and Allied Laws : The auditor and his team should have adequate knowledge of VAT Law, particularly definitions, procedures to be adopted, claiming of Input Tax Credit etc. 3. Accounting Records : The auditor should obtain a complete list of all the accounting records relating to sales, purchases, stocks etc. 4. Major Accounting Policies : The auditor should ascertain the major accounting policies with regard to sales, purchases and valuation of inventory. 5. Evaluation of Internal Control : The auditor should evaluate the internal control prevalent in entity with respect to sales, purchase, production and accounting. He must examine the adequacy and effectiveness of controls in order to plan nature and timing of audit procedures. Q.28) Corporate Governance and Audit Committee CORPORATE GOVERNANCE Corporate Governance is a system by which companies are directed and governed by the management in the best interest of stakeholders. They provide the guidelines as to how the company can be directed or controlled such that it can fulfill its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term.
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