Audit And Assurances Services

What is an Internal Audit? Internal audits evaluate a company’s internal controls, including its corporate governance and accounting processes. These audits ensure compliance with laws and regulations and help to maintain accurate and timely financial reporting and data collection. Internal audits also provide management with the tools necessary to attain operational efficiency by identifying problems and correcting lapses before they are discovered in an external audit. KEY TAKEAWAYS • An internal audit offers risk management and evaluates the effectiveness of a company’s internal controls, corporate governance, and accounting processes.. • Internal audits provide management and board of directors with a value-added service where flaws in a process may be caught and corrected prior to external audits. • The Sarbanes-Oxley Act of 2002 holds management responsible for their financial statements by requiring senior corporate officers to certify in writing that the financials are accurately presented. Internal Audit Process Internal auditors generally identify a department, gather an understanding of the current internal control process, conduct fieldwork testing, follow up with department staff about identified issues, prepare an official audit report, review the audit report with management, and follow up with management and the board of directors as needed to ensure recommendations have been implemented. Internal Audit Checklist Either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. The Central Government may by Rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board. Applicability of internal audit in India – Companies that are required to appoint an internal auditor The appointment of internal auditor is compulsory for all listed companies and ‘producer companies’, irrespective of any criterion. According to Rule 13 of the Companies (Accounts) Rules, 2014, the following classes of companies are mandated to appoint an internal auditor or a firm of internal auditors: I. All listed companies II. Unlisted public companies that meet either of the below criteria: • Have a paid-up share capital of Rs. 50 crores or more during the immediately preceding financial year, or • Have a turnover of Rs. 200 crores or more during the immediately preceding financial year; or • Have outstanding loans or borrowings from banks or financial institutions with a balance exceeding Rs. 100 crores at any point of time during the immediately preceding financial year; or • Have outstanding deposits of Rs. 25 crores or more at any point of time during the immediately preceding financial year Private companies that meet either of the below criteria: • Have a turnover of Rs. 200 crores or more during the immediately preceding financial year; or • Have outstanding loans or borrowings from banks or financial institutions with a balance exceeding Rs. 100 crores at any point of time during the immediately preceding financial year • All the companies covered under any of the above conditions will need to comply with the requirements of section 138 and rules specified under the Companies (Accounts) Rules, 2014.

Statutory Audit

 A statutory audit is a legally required review of the accuracy of a company's or government's financial statements and records. An audit is an examination of records held by an organization, business, government entity, or individual, which involves the analysis of financial records or other areas.

What is a Statutory Audit?

A statutory audit is a mandatory audit of a company’s financial records by an external entity. This audit is mandated by statute or law that governs an organization’s principles and ethics.

In general, a statutory audit is conducted by examining bank accounts, financial statements, transactions, bookkeeping records, ledgers, and other critical documents that are submitted for tax purposes and Govt requirements.

But it can also include business operations-related documents such as invoices, purchase orders, bills, challans, and more.

Applicability of Statutory Audit:

As per Companies Act 2013 and Companies (Audit and Auditors) Rules, 2014, all public and private limited companies are mandated by law (or stature) to conduct a statutory audit of the financial documents and filings. In fact, the business turnover and the nature of the business of public and private limited companies don’t matter in the case of the statutory audit.

In the case of LLP (Limited Liability Partnership) firms, only these companies are mandated to perform the statutory audit:

Annual turnover crosses Rs 40 lakhs or

Capital contribution is more than Rs 25 lakhs

Given below are the important areas of consideration one has to look into while conducting the statutory audit of a company:

• Research the control environment of the organisation.
• Testing of Internal Controls.
• Audit of Balance Sheet.
• Audit of Profit & Loss Account.
• Audit of GST.
• Audit of TDS.

STOCK AUDIT

The process of auditing is done through a set of rules and regulations as per the companies' act 2013. It examines the financial statement of a company to determine the prepared statements to be true and fair in terms of company affairs.

Similarly, a stock audit is a process that refers to physical verification of the inventory which includes evaluation of inventory items based on the reference of the assignment.

The stock audit process is necessary to reduce the avoidable investment on stocks or inventory to ensure proper balance in the process. As high levels of stock result in overstocking which may result in the poor value of cash flows and financial losses.

The auditor's task is to check the statements during the process of examination. If he/she comes across with any fraud or discrepancy by the management of the company, then the auditor should mention those in his report. The auditor cannot perform an audit on assumption that management of the company might have committed fraud.

The main reasons for executing the audit are to correct the discrepancies that are present in the stock record when verified with the physical stock bypassing necessary adjustment entries. Following are the reasons why it is looking forward to performing a stock audit:

• To update the starting stock details.
• To identify the discrepancy between stock records also known as computed stock and physical stock.
• To update actual physical stock as a stock record.
• To ensure proper handling of stocks.

Objective

• The objective of conducting a stock audit is to ensure the security of funds that are lent by the bank, being safe and valued correctly.
• Inventory Audit also known as stock audit where the evaluation is done for raw materials that gets converted to finished goods. It is important to keep the information updated about the quantity and the quality of raw materials in stock.

Stock Audit Checklist

Inventory is one of the important field for any business where chances for fraud are more prone. So is, its department where thefts and damages occur more often.

That's why, it is good to have strong control over all the processes, checklists, and regular stock audit for efficient functioning. Following is the checklist for the audit of Inventory.

• Stock audit software is used to keep records of inventory, mostly it is integrated with accounts.
• The stock evaluation process, components of cost of inventory, method of valuation.
• Frequency of verifying of stock record with physical stock.
• Stock related MIS format and contents.
• Physical security of Stock, CCTV, Firefighting equipment.
• Insurance of stock.
• Categorization of inventory in the high, medium, and low-value stock.
• Inventory lying with third parties.
• Old stock, expired stock, stock near expiry dates, perishable inventory.
• Inventory levels, inventory age analysis.
• Inventories having duplicate codes in software.

Fixed Assets Audit

An audit involving counting of all fixed assets together with their monetary value evaluation is called a Fixed Asset Audit. It deals with building, maintaining and updating records of purchase such as date of purchase, receipts, serial no. of equipment, depreciating value and other relevant details.

What are fixed assets?

Fixed Assets are defined as the assets held to be used to produce or providing goods or services and are not held for sale in the ordinary course of business which is expected to be held in use for more than one accounting period

• Some of the examples are: 
• Buildings & Furniture 
• Machinery & Equipment
• Computer 
• Vehicles

In simple words, physical verification of above is called Fixed Assets Audit. We at MAG provide best Fixed assets auditing solutions in Delhi and across India.If you are looking for the service of Fixed Assets Audit in Delhi, you can feel free to approach us.

Audit Objective: 

• To ensure proper records relating to fixed assets are being maintained.
• To ensure that only capital expenses are being capitalised. 
• To validate the correctness, accuracy and completeness of depreciation calculated and compliance of Schedule II of Companies Act, 2013. 
• Compliance of relevant IND AS applicable and of disclosure requirements as per Schedule III of Companies Act,2013

Documents required from the client: 

• Details of internal policies and guidelines regarding fixed assets and their depreciation.
• Fixed asset register maintained by the client and the features of fixed assets’s budget. 
• Copies of supporting documents/ vouchers like purchase requisitions request for quotations, quotations, comparative statements, POs, invoices etc. for the samples selected. 
• Obtain the list of authorised people who can approve the purchase/disposal of fixed assets at different stages of the purchase or disposal processes. 
• Physical verification register of the fixed assets maintained by the client. 

Process of Verification: 

• Examine the internal policies of the client and analyse whether they are in line with the statutory requirements or not. 
• Verify whether the opening balances being reflected in Financials and FAR are same as the closing balances as per last year audited Financials. 
• Verify the FAR for its completeness, correctness and accuracy and its compliance in accordance with the Companies Act, 2013. (CARO 2016 requirements) 
• In case the assets are revalued, ensure that the entire class of such fixed assets are revalued. 
• Ensure revaluation increase/decrease is adjusted against the Revaluation Reserve/Profit & Loss Account. 
• Conduct the physical verification of fixed assets to ensure the following: 
• The physical existence of the asset. 
• Fixed assets are appropriately labelled with the respective asset number for identification. 
• Ensure that assets are in working condition.
• Details regarding the number of fixed Assets are adequately captured in FAR. 
• There prevail proper controls to restrict unauthorised access to fixed assets. 
• Physical verification of fixed assets is done at regular intervals by the management.
• Ensure relevant fixed assets auditing procedures 

MANAGEMENT AUDIT

Introduction

Management audits can provide us with the organization with numerous advantages and executive-level supervision. The variations are growing more frequent and more abrupt as the market is getting more dynamic. Thus, it is of utmost importance to periodically evaluate and assess the efficacy, performance, productivity, profitability and competitiveness of the concerned business. Management Audit services endeavours to offer detailed, comprehensive, unbiased, credible and precise evaluations on the effectiveness, performance, competitiveness, diligence and ability of the organization to respond to macro-environmental changes. It attempts to evaluate the performance of various management processes and functions. It examines, reviews and appraises the various policies and actions of different levels of the management on the basis of certain objective standards.

Management evaluations by an unbiased third party can ensure a real, genuine, authentic and equal review, analysis and interpretation of the status quo. Due to the individual assessment about his/her strengths and weaknesses, the executive manager can ascertain a verified basis for their career and personal and mental development.

The management assessments offer real information on the quality and ability of the company. They serve the chance of accurate and inevitable comparisons over layout and consistency (benchmarking) with other firms. In many different phases, management audits act as an unaffiliated framework for decision-making to delegate and develop executive managers 'identities.

Areas of application:

Merger and restructuring processes concentrate on how positions should be filled in general.

Drawing up vital management statements following differences in the strategy.

Benchmarking / due diligence analysis is done basically for the determination of the company's position among competitors who are also compared with best practice.

Advise the surrounding organization mechanisms of growth and succession planning.

Due diligence

Due diligence is an investigation, audit, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before entering into a proposed transaction with another party.

Due diligence is the process of examining the details of a transaction to make sure it’s legal, and to fully apprise both the buyer and seller of as many facts in the deal as possible. When the deal satisfies both aspects of due diligence, the two parties can finalize and correctly price the transaction. It’s a process of verifying, investigating, and auditing a potential deal or investment opportunity to corroborate facts, financial information, and other pertinent data.

People and organizations perform due diligence in many areas, including the sales of securities, IPOs, private equity funding, and real estate. Financial advisors commonly practice due diligence as well. The most widespread use, and the main topic of this article, is in mergers and acquisitions (M&A).

What Is Due Diligence in Business?

In business, due diligence is the process of making sure every aspect of a transaction is in order before it moves forward. When a company considers issuing an IPO, potential investors perform due diligence on that company to make sure it’s worth the investment. The term is sometimes used in the hiring process to verify that a candidate has the experience they claim.

Due diligence in M&A can include not only looking at obvious details like financial stability, sales, real estate, and intellectual property, but also pending litigation, labor relations, environmental problems, and relationships with third parties.

Why Due Diligence Is Important

• The process of due diligence serves numerous functions that benefit both buyers and sellers in a merger or acquisition. These benefits include the following:
• Allows a buyer to confirm financial, contract, customer, and other pertinent information about the seller
• Paints a fuller picture of the scope of the transaction, including discovery of previously unknown problems and assets
• Leads to more accurate pricing (the initial offer could rise or fall, depending on what due diligence uncovers) because decisions are better informed
• Permits the buyer to back out of a deal if due diligence uncovers problems that are too big or complex to address
• Creates greater awareness, clearer expectations, and increased comfort for the buyer and seller of what’s expected of them to close the deal
• Reduces the knowledge gap between buyer and seller, leading to better (and better-informed) decisions

How Long Does Due Diligence Take?

While the LOI will delineate a time frame for due diligence, the general consensus is 30-60 days, but each merger or acquisition is different. Due diligence might run longer or shorter; the benchmark time frame exists to ensure that the due diligence process doesn’t become a sprawling, unending monster with no end in sight.

Consider the following when setting a timeline:

• The complexity of the deal (e.g., how many subsidiaries does the acquired company have?)
• What business (industry and vertical) is the acquired company in?
• How large is the target company?
• What kind of merger or acquisition is it
• Are any international properties involved in the deal?
• The legal portion of the process can take 10-20 percent of your time and effort, and other portions take up the remaining 80-90 percent.