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Audit of Hospital

Index

Sr. No. Particulars Page No.

1. Introduction 2-4

2. Types of Audit 5-7

3. Internal Audit Checklist for Audit of Hospital 8-23

4. Ten points to be in the audit of Income and

Expenditure of a hospital

24

5. Special audit points to be considered by the auditor

during the audit of a Hospital

25-26

6. Bibliography 27

Introduction:

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An audit is the examination of the financial report of an organisation - as presented in the

annual report - by someone independent of that organisation. The financial report includes a

balance sheet, an income statement, a statement of changes in equity, a cash flow statement,

and notes comprising a summary of significant accounting policies and other explanatory notes.

The purpose of an audit is to form a view on whether the information presented in the financial

report, taken as a whole, reflects the financial position of the organisation at a given date, for

example:

Are details of what is owned and what the organisation owes properly recorded in the

balance sheet?

Are profits or losses properly assessed?

When examining the financial report, auditors must follow auditing standards which are set by

a government body. Once auditors have completed their work, they write an audit report,

explaining what they have done and giving an opinion drawn from their work. Generally, all

listed companies and limited liability companies are subject to an audit each year. Other

organisations may require or request an audit depending on their structure and ownership.

Audit other information provided to the members of the organisation, for example, the

directors' report.

Check every figure in the financial report – audits are based on selective testing only.

Judge the appropriateness of the organisation's business activities or strategies or

decisions made by the directors.

Look at every transaction carried out by the organisation.

Test the adequacy of all of the organisation's internal controls.

Comment to shareholders on the quality of directors and management, the quality of

corporate governance or the quality of the organisation's risk management procedures

and controls.

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Predict the future – The audit relates to a specific past accounting period. It does not

judge what may happen in the future, and so cannot provide assurance that the

organisation will continue in business indefinitely.

Be there all the time – The audit is carried out during a defined timeframe, and auditors

are not at the organisation all the time. The prime purpose of the audit is to form an

opinion on the information in the financial report taken as a whole, and not to identify

all possible irregularities. This means that although auditors are on the look-out for signs

of potential material fraud, it is not possible to be certain that frauds will be identified.

The organisation's management prepares the financial report. It must be prepared in

accordance with legal requirements and financial reporting standards.

The organisation's directors approve the financial report.

Auditors start their examination by gaining an understanding of the organisation's

activities, and considering the economic and industry issues that might have affected

the business during the reporting period.

For each major activity listed in the financial report, auditors identify and assess any

risks which could have a significant impact on the financial position or financial

performance, and also some of the measures (called internal controls) that the

organisation has put in place to mitigate those risks.

Based on the risks and controls identified, auditors consider what management does has

done to ensure the financial report is accurate, and examine supporting evidence.

Auditors then make a judgement as to whether the financial report taken as a whole

presents a true and fair view of the financial results and position of the organisation and

its cash flows, and is in compliance with financial reporting standards and, if applicable,

the Corporations Act.

Finally, auditors prepare an audit report setting out their opinion, for the organisation's

shareholders or members.

Auditors discuss the scope of the audit work with the organisation – the directors or

management may request that additional procedures be performed. Auditors maintain

independence from management and directors so that tests and judgments are made

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objectively. Auditors determine the type and extent of the audit procedures they will perform,

depending on the risks and controls they have identified. The procedures may include:

asking a range of questions - from formal written questions, to informal oral questions -

of a range of individuals at the organization.

Examining financial and accounting records, other documents, and tangible items such

as plant and equipment

making judgments on significant estimates or assumptions that management made

when they prepared the financial report

obtaining written confirmations of certain matters, for eg, asking a debtor to confirm the

amount of their debt with the organization.

testing some of the organisation's internal controls

watching certain processes or procedures being performed

Type of Audits:

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Internal Audit - Internal auditing is an independent, objective assurance and consulting activity

designed to add value and improve an organization's operations. It helps an organization

accomplish its objectives by bringing a systematic, disciplined approach to evaluate and

improve the effectiveness of risk management, control, and governance processes. Internal auditing

is a catalyst for improving an organization's governance, risk management and management

controls by providing insight and recommendations based on analyses and assessments of data

and business processes. With commitment to integrity and accountability, internal auditing

provides value to governing bodies and senior management as an objective source of independent

advice. Professionals called internal auditors are employed by organizations to perform the

internal auditing activity.

The scope of internal auditing within an organization is broad and may involve topics such as an

organization's governance, risk management and management controls over:

efficiency/effectiveness of operations (including safeguarding of assets), the reliability of

financial and management reporting,and compliance with laws and regulations. Internal auditing

may also involve conducting proactive fraud audits to identify potentially fraudulent acts;

participating in fraud investigations under the direction of fraud investigation professionals, and

conducting post investigation fraud audits to identify control breakdowns and establish

financial loss.

Internal auditors are not responsible for the execution of company activities;

they advise management and the Board of Directors (or similar oversight body) regarding how to

better execute their responsibilities. As a result of their broad scope of involvement, internal

auditors may have a variety of higher educational and professional backgrounds.

The Institute of Internal Auditors (IIA) is the recognized international standard setting body for

the internal audit profession and awards the Certified Internal Auditor designation

internationally through rigorous written examination. Other designations are available in

certain countries.[5] In the United States the professional standards of the Institute of Internal

Auditors have been codified in several states' statutes pertaining to the practice of internal

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auditing in government (New York State, Texas, and Florida being three examples). There are

also a number of other international standard setting bodies.

Internal auditors work for government agencies (federal, state and local); for publicly traded

companies; and for non-profit companies across all industries. Internal auditing departments

are led by a Chief Audit Executive ("CAE") who generally reports to the Audit Committee of

the Board of Directors, with administrative reporting to the Chief Executive Officer (In the United

States this reporting relationship is required by law for publicly traded companies).

Statutory Audit - A statutory audit is a legally required review of the accuracy of a company's or

government's financial records. The purpose of a statutory audit is the same as the purpose of

any other type of audit: to determine whether an organization is providing a fair and accurate

representation of its financial position by examining information such as bank balances,

bookkeeping records and financial transactions.

The term statutory is used to denote the audit is required by statute. A statute is a law or

regulation enacted by the legislative branch of the organization’s associated government.

Statutes can be enacted at multiple levels, including federal, state or another municipality. In

business, statute can also refer to any rule set forth by the organization’s leadership team.

An audit is an examination of records held by an organization, business, government entity or

individual. Generally, this involves the analysis of various financial records but can also be

applied to other areas. During a financial audit, an organization’s records regarding income or

profit, investment returns, expenses and other items may all be included as part of the audit

process.

The purpose of a financial audit is often to determine if funds were handled properly and that

all required records and filings are accurate. At the beginning of an audit, the auditing entity

makes known what records will be required as part of the examination. The information is

gathered and supplied as requested, allowing the auditing entity to perform its analysis. If

inaccuracies are found, appropriate consequences may be levied.

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Internal Audit Checklist of a Hospital

Checklist for Accounts Department:

Checklist for Fixed Asset:

Check that a Fixed Assets Register is maintained and updated at all times (Manual /

Computerized)

Check that the Fixed Assets Register gives details of the fixed assets - Quantity / No /

Location / Identification Number / Depreciation / Rate / accumulated depreciation /

original cost / additions /deletions/ written down value.

Check that the identification number given on the fixed asset tallies with the number

given in the FA Register.

Check that for purchases as well as sale of fixed assets proper authorization has been

taken from the appropriate authorities

Check that the discrepancies observed on physical verification of fixed assets have been

correctly adjusted in the books of account after taking approval from the appropriate

authority.

Check the method and the procedure adopted for carrying out the physical verification

of fixed assets and ensure that verification was carried out as per the generally accepted

accounting practices and procedures.

Check that the physical verification sheets in respect of fixed assets are properly

prepared and duly signed by the persons responsible for carrying out the physical

verification. The name, designation of employees and the date of carrying out the

physical verification should also be clearly mentioned in the physical verification sheets.

Check that the physical verification of Fixed Assets is carried out by the Management at

least once in 3 years.

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Checklist for Accounts Department:

Cash Vouchers \ Bank Vouchers

Check authorization of Cash Vouchers \ Bank Vouchers by a responsible person.

Check supporting Bills / Invoices

Check the correctness of the accounting head – expense / income

Check for cash receipts signature /acknowledgement of cash recd.

Check that all the relevant columns of the Cash/ bank vouchers have been properly

filled in.

Check that all the supporting to the Vouchers are crossed as cancelled after the

payment.

Check that payments are made only against original supporting.

Purchase Vouchers

Check authorization of Purchase Vouchers by a responsible person.

Check the Purchase Voucher with the supporting documents like Bill / Invoice and the

Goods Received Note(GRN).

Check whether the rates given in the purchase invoices are as per the purchase Orders

raised/amendments to the Purchase Orders/ approved by an appropriate authority.

Check whether payment has been made/Bill passed for rejected quantity of material as

per the GRR.

Check whether a proper accounting head - expense has been debited.

Check that all the relevant columns of the Purchase Vouchers have been properly filled

in.

Check that the PV is passed as per the terms given in the Purchase Orders.

Check that the purchase voucher is prepared only in respect of original Bills / Invoices.

Photocopies of invoices \ duplicate invoices should not be passed.

Check that the Bills / invoices are passed strictly as per the PO terms.

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Journal Vouchers

Check authorization of Journal Vouchers by a responsible person.

Check the Journal vouchers with supporting Bills / Invoices /documents.

Check that supporting documents are duly approved by an appropriate authority.

Check the correctness of the accounting head - debit / credit.

Check that all the relevant columns of the journal vouchers have been properly filled in.

In case of contractor’s bills check that bills submitted by the contractors are supported

by the Work Orders issued in advance to the contractors. No bill should be passed

unless supported by a/ WO and the value of the Bill should be in agreement with the

WO prepared. Check that the Work Orders are prepared in advance before the start of

the work.

Check that the bills of the contractors are duly approved and certified for payment by

the person responsible for getting the work done i.e the user. All the bills must have

“Approval” for payment in writing by the user on the face of the bill.

Check that all the supporting bills / invoices to a journal voucher are approved / certified

for payment by the User Department. The user Department should specifically put a

remark on the bill for approval\ payment.

In case of contract jobs relating to labour supply the bills are to be supported by

attendance sheets duly certified by the Time Office.

In case of transporters bills - check the bills with the agreed rates and receipted copies

of consignment notes.

Check the measurement books in case of bills for civil work and ensure that the

Measurement books are signed and checked by the Engineer in charge of the Work.

In case of running and final bills for civil work check that the civil engineer has checked

and verified the measurements and entries of all running and final bills are made in the

Measurement Books.

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Advance to Employees

Check the Trial balance in respect of Advance to employees to ascertain the amount

outstanding in the name of each employee. Find out the date since when the advance is

outstanding to be settled and make a list if employees advances that have not been

settled for a long period.

Ensure that no further advance is given to an employee unless the previous

outstanding advance is cleared by him.

Advance to an employee may be towards - Travel / Official work\ loan or a salary

advance. Ensure that the recovery is made from the salary of the employee when the

advance taken by the employee is not settled by him within a reasonable period.

Further check that the recovery of installments in respect of loan / salary advance is

made correctly on monthly basis from the salary of the employees.

Check and make a list of employees who have left the company and their full and final

settlements have not been made but debit balances are still appearing in their names in

the Advance to employees account.

Confirmation of Balances

Confirmation of balances with the banks \ Lending institutions should be obtained on a

monthly basis for the purpose of preparation of bank reconciliation statements.

Confirmation of balances with the Creditors / Debtors should be obtained on a

six monthly basis. The balances in the Creditors\ Debtors Ledger account should also be

reconciled with the balances as per the party’s books on a six monthly basis.

Debtors Ledger Trial Balance \ Debtors Ledger account

Check that the balance shown by the Debtors Ledger Trial balance agrees with the

balance shown by the Debtors control account in the General Ledger Trial balance.

Check the Age wise analysis of Sundry Debtors and comment upon it.

Check the Debtors Accounts that are stuck up for long and are doubtful of recovery.

Check the debtors accounts where legal cases have been filed / are to be filed and

ascertain the progress in the legal cases.

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Carry out a scrutiny of various Debtors Account in the debtors ledger and check for the

following :-

I. Match the Debit and Credit entries individually.

II. Give the breakup of the closing balance - Invoice wise.

III. Ensure that there are no such cases where the payments have been received for later

bills and the earlier invoiced are unpaid.

IV. Give a breakup of the closing balance as above in (b) including the details of any debits

on account of debit notes raised on the parties.

V. Prepare a list of Debtors account showing closing credit balances.

VI. Tally each debit with a corresponding credit to locate any under payment / over

payment for any invoices.

Creditors Ledger Trial Balance/Creditors Ledger Account

Check that the balance shown by the Creditors Ledger Trial Balance agrees with the

balance shown by the Creditors control account in the General ledger trial balance.

Check the creditors account that are outstanding to be paid since long (unclaimed

Creditors) and that can be considered for a write back in the books of account.

Carry out a scrutiny of various Creditors account in the creditors ledger and check for

the following.

Match the Credit and Debit entries correspondingly.

Give the breakup of the closing balance – Invoice wise.

Ensure that there are no such cases when the payments have been made for later

invoices and the earlier bills are unpaid.

Give a break up of the closing balance as above in i (b) including the details of any

credits on account of credit notes raised on the party.

Prepare a list of creditors account showing closing debit balances alongwith the reasons

for debit balances. Comments or details should be taken from the auditee in respect of

every single debit balance.

Tally each credit with a corresponding debit to locate any over payment /under

payment for any invoice.

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Check all the Creditors Ledger Trial balance as given below for above details.

I. Suppliers

II. Contractors

III. Transporters

IV. Others

Outstanding Liabilities

Check that the outstanding liabilities pertaining to the earlier years have been adjusted

in the books of account.

Excise V/s Accounts Reconciliation

Ensure that a reconciliation statement is prepared on a monthly basis to reconcile the

modvat / Cenvat balance in the excise with the accounts balances.

Check if any old pending entry is appearing in the reconciliation statement.

Check the unreconciled / reconciled difference in the balances shown by the excise

records and the accounts records.

TDS

Check that all TDS deductions are deposited in time with the government - check the

monthly TDS statement and the actual date of deposit with the TDS challans.

Check whether the TDS Returns are submitted in time with the Government.

Check that the TDS deductions are made properly from all the payees wherever

applicable.

Budget V/s Actual - Expenses

Check the Budget V/s Actual position as on a particular date with the Budget statement

for all the expenses - Fixed / Variable overheads.

Check the Variances between the Budget / Actual figures.

Obtain comments on reasons for variances between the Budget V/s Actual.

Analyse the variances between Budget / Actual in terms of percentage.

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Scrutiny of Ledger Account - Expenses / Others

Check that in case of expenses the destination between Capital and Revenue

expenditure is properly made.

Check that proper account head has been used to debit the expenses.

Pick up a few entries from the ledger account and trace the entry to the Voucher and

the supporting bills / Invoices to ensure that the expense bills are properly approved /

authorized and accounted for.

General Ledger Trial Balance / Revenue ledger Trial Balance

Carry out a scrutiny of the General Ledger Trial balance/Revenue ledger Trial balance

and comment on accounts that need to be reconciled like inter office account / Inter

unit account etc.

In case of accounts like TDS Receivable / Interest Receivable/ Insurance claim Receivable

/ Margin money deposit with banks ask for the break up / detailed statements of

accounts and comment upon it.

In case of Creditors / Debtors account check that the amount as given in the General

ledger agree with the balance shown by the Creditors Ledger Trial balance/ Debtors

ledger Trial balance.

Check whether any special accounts like suspense account etc. are appearing in the trial

balance and carry out a scrutiny.

In case of other accounts carry out a review of the ledger of the account to locate any

irregularity / reconciliation matter

Checklist for Physical verification of cash

Carry out a surprise physical verification of cash.

Check that the physical cash balance tallies with the balance shown by the cash book.

Check that the cash book is up to date at all times.

Check that the cash in safe/cash in transit is within the insurance cover taken.

Check that fidelity insurance cover is taken in the names of persons who have the

custody of cash.

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Check that receipts are issued by the cashier at the time of receipt of cash from the

employees / others.

Check that signatures of the payee are taken by the cashier on the cash payment

Voucher at the time of making cash payment.

Checklist for Bank reconciliation

Check that Bank reconciliation statements in respect of all the bank accounts are

prepared on a monthly basis.

Check that the entries appearing in the Bank reconciliation statements are cleared in the

subsequent month.

Check for any old pending entry and inquire into the nature and details of such an

outstanding entry.

Check that entries relating to cheque issued but not presented for payment for more

than 6 months are reversed.

Check that all postdated cheque received are kept in safe custody until deposited.

Cheque that all cancelled cheques are kept properly in the cheque book.

Check the cheque signing authorization levels of management and ensure that the

cheques are signed according to the prescribed and delegated authority.

Check that cheque books / counter foils are kept in safe custody.

Checklist for Purchases:

Check whether an Approved Vendor list of suppliers / authorized dealers has been

prepared and is updated on a regular basis. The Approved Vendor list should carry all

the items of purchases - Raw Material / Engineering / Consumables / Packing material

etc. The approved vendor list can be Vendor - item / Item -Vendor wise.

Check whether a Purchase Manual has been prepared and approved. The Purchase

Manual should include policies / procedures / and all the matters relating to purchase

methodology.

Find out the Rate Variations over a period of time in respect of every item of purchases.

The purchase register whether prepared Manually / Computerized would indicate the

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item Code / Name of the item and purchases made of the item over a period of time at

varying / same rates with reference to the Purchase Order Number.

Reasons for purchases made at varying rates should be obtained. Rate Variations

without a proper justification should be reported.

A scrutiny of Purchase Orders should be carried out to ensure that comparative

statement of quotations is prepared and the order is placed on the lowest bidder after

considering factors like quality / delivery / payment terms / profile & competence of the

vendor.

Check whether the comparative statements of quotations are duly approved by an

appropriate authority and dated.

The comparative statements should be prepared on a landed cost criteria. All the costs

such as the basic price / taxes / duties/ insurance / P&F / freight & cartage / interest etc

should be indicated in the comparison and the final cost of comparison should be the

landed cost of the item.

Ensure that a proper justification (Technical / Commercial) is given in writing on the

comparative statement wherever the purchases are made from a source not being the

lowest bidder.

Ensure that a sufficient number (3 or 4) of quotations / offers are called from the

suppliers at the time of making a comparative statement.

In case of single offer / quotation cases obtain reason s for placing the order on specific

parties.

Ensure that in case of Repeat orders - fresh offers / quotations are called from the

competitive suppliers and a fresh comparative statement prepared. Further a Repeat

order should not be placed beyond 6 months from the date of the original purchase

order. A fresh order should be raised on the suppliers after 6 months have elapsed from

the date of the original PO.

Ensure that a justification note is put in writing on every comparative statement giving

reasons for awarding the PO to a supplier.

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Carry out a scrutiny of Indents / Purchase requisitions to ensure that the purchase

orders are placed as per the requirements given in the Indents.

Ensure that the quantity discounts / rebates offered by the suppliers as per the terms

given in the PO have been availed by the company.

Obtain a list of Indents pending for conversion into PO and comment upon the old

pending indents.

Obtain a list of POs pending for delivery of material and comment upon the old pending

PO where the due date of delivery of material has expired.

Ensure that the Purchase Orders have been signed / authorized by authorities as per the

financial limits given in the Purchase Manual / Policy. Deviations should be reported.

In case of amendments to the PO ensure that the amendments are duly approved by an

appropriate authority and reasons for the amendment (Rate / Quantity ) are given by

way of a Note.

Comment upon the possibilities of entering into 6 monthly / annual rate contracts with

the suppliers where the consumption trend or level is high.

Examine whether there is a system of standard costing or Budgetary Control in vogue in

the Purchase Department. Also, check the Monthly Purchase Variance Report wherein

all items above + 10% in value should be highlighted and reasons thereof.

Checklist for Goods:

Check that the plan for the dispatch of finished products is received by the Dispatch

section clearly indicating the Quantity/ location and the description of the material.

Examine the method and the procedure for the dispatch of material to ensure that the

dispatches are effected smoothly.

Check the dispatch report prepared as at the end of the day to ensure that the

dispatches planned for the day are in fact effected in totality.

Check the pending delivery / despatcher status for a particular period (on a day to day

basis). This information can be maintained in the form of a report.

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Ensure that there is a proper system to weigh the finished goods for dispatch. The

weighbridges and the related equipment should always be properly maintained

(including calibration of weighing machines)

If the sales invoices are prepared at the despatch section check a few invoices spread

over a period to ensure that the invoices are prepared correctly as regards Rates / Excise

duty / Sales Tax etc. Ensure that a proper control is kept over the stationery of blank

invoices. The sales invoices should be authorized by a person duly authorized in writing

in this behalf. Check that the Freight consignment Notes are properly prepared.

Check that the consignment of finished goods once weighed and okayed at the despatch

section are checked for the necessary papers - Gate pass / Sales Invoice / Road permit /

Freight Consignment No, etc. at the exit gate by security or by a responsible person

deputed in the sales despatch section.

Verify the status of transporter wise trucks provided against the trucks ordered. Also,

ensure that penalty for not providing the trucks is charged without exception.

Check that all the trucks being dispatched are not being loaded less than the minimum

weight agreed for payment. If so, proper justification & approval should be reviewed.

Status of marine insurance, if any to be checked.

Check that all the transporters are approved transporters and their contract is approved

by authorized person from Head Office.

Check that entry for the incoming material is made at the entry gate register.

Ensure that the weighment / Counting of the incoming material is made properly and

correctly at the receiving section.

Check that stamp / acknowledgement of the receipt of the incoming material is made

on the back side of Freight Consignment Note. The remark should indicate the quantity

(weight / number of pieces etc.) of the material recorded at the receiving section along

with condition (ok / damaged / wet etc) in which material has been received.

The receiving section should maintain a record of all the incoming material received

consignment wise, clearly giving the date / No. of vehicle / Description of the material /

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Quantity etc. This record can be maintained in the form of MIS report prepared on a

daily basis.

Check the procedure for the clearance of RM for use in the production

Ensure that the procedure for quality testing of raw material / finished goods is well

documented in the form of a quality manual.

Ensure and check that the raw material / finished goods once rejected are not

subsequently cleared under deviation. In special cases ensure that the approval under

the deviation is duly approved.

Check the specification / laid down standards for the testing and clearance of the raw

material / finished goods and ensure that the actual test result conform to the laid

down specification.

Whenever there is a change in the laid down specification ensure that the change is

approved and authorized in writing by an appropriate authority and that the change is

incorporated in the manual of specification.

Check the time taken at the quality assurance to clear the sample received for testing.

The test sample of raw material and finished goods should be cleared within a short

time.

Check the management level to which the Head of Quality Assurance reports- As a

matter of fact in order to ensure that the quality assurance function as an independent

arm the quality assurance should report to the Head of the Organization / Unit.

Ensure that the testing samples accepted / rejected are segregated and kept separately

with proper and clear marking. Ensure that the sample do not get mixed up.

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Checklist for Excise

Ensure that the Modvat / Cenvat is claimed and credit is taken in the excise records

immediately after the receipt of the material. There should be no delay in taking the

credit of Modvat / Cenvat once the material has been received. Calculate the loss of

interest due to delay in Modvat / Cenvat claim.

Challans / invoices in respect of material sent for processing should be received back in

the plant within 6 months. Ensure that the material sent outside the factory for

processing is received back in the factory within 6 months from the date of despatch.

(180 days). (A delay beyond 180 days would result in a loss of Modvat / Cenvat to the

sender).

Check whether the statutory records PLA and RG - I are properly maintained.

Check whether the classification, declaration, Price declaration or MRP value,

declaration of marketing pattern, and discount structure are filed by 15th April every

financial year.

Check whether RT-12 returns have regularly been filed with the excise authority by

10th day of the following month accompanied by copies of PLA and TRG challan and

Cenvat monthly return. An acknowledgement should be obtained from the Excise

Department.

For export sales ensure that applications in Form AR4 and the original invoices have

been submitted to the excise authorities.

Credit on Capital goods is to be taken immediately in the same financial year upto 50%

of duty paid and the balance credit in any subsequent financial year provided capital

goods are still in possession and use of the manufacturer. Ensure that the above

provision is taken care of.

Further the cenvat credit is allowed even if the goods (Input / Capital) are acquired by

the manufacturer on lease, hire purchase or loan agreement from a financing company.

The credit is not allowed if the manufacturer claims depreciation under Section 32 of

the Income Tax Act on the amount of duty paid. Check whether the above provisions

have been considered while considering the Modat / Cenvat Credit.

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The Excise law / rules should be referred from time to time as the provisions change

every year.

Ensure that full Credit for Modvat / Cenvat / PLA has been taken by 20th of every

month in respect of duty debited for despatches made during 10/15th day of the

month and full credit is taken by the 5th of the next month in respect of duty debited

for despatches made between 16th to 30/31st of the month. Ensure that there is no

lapse on this account and that the duty credited is equivalent to the duty debited on

fortnightly basis.

Ensure that Cenvat account debit should be limited to the Credit balance available on

the 15th day and the last day of the month respectively.

Checklist for Insurance Expenses:

Check whether the Insurance policies taken by the company cover the following assets

at all the locations (factories, offices, branches etc.)

Plant & Machinery, Furniture / Fixtures, Electrical installation, Office equipment’s etc.

Buildings / Warehouses etc.

Inventories / Stocks in transit/Cash/Vehicles/Any other.

Ensure that the value of Assets insured is adequate.

Ensure that all the risks are covered in the policy.

Check whether the loss of profits policy has been taken by the company.

Ensure that the additions / deletions to the fixed assets during a particular accounting

year are fully taken care of in the policy.

Check whether the insurance premium amount has been properly negotiated. Ensure

that competitive rates of 2-3 insurance companies were taken into consideration while

finalizing the premium payable. For this purpose, all necessary precautions should be

taken to reduce the level of premium.

Obtain a list of all the insurance claims pending for settlement as on a particular date

and comment upon the old pending cases.

Obtain a list / statement of all the Insurance policies and ensure that all the assets of the

company are fully insured.

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Ensure that the value of assets / fixed assets declared by the company is proper and

that the assets are not under covered.

Ensure that maximum discounts / rebates were availed by the company at the time of

finalizing the insurance policies / premium.

Check whether insurance policies in respect of group Gratuity / Medical /

Superannuation / accident etc. are obtained at the best rates. Comparative

statements / comparative data should be checked.

Ensure that the Insurance policies are renewed in time i.e. before the expiry of the

period of validity.

Check the list of fixed assets / assets filed with the insurance company to ensure that all

the Fixed assets / assets are covered by the insurance policies.

Ensure that all the policies are obtained for the uniform period matching with the

accounting year of the company.

Check whether the terms and conditions given in the insurance policy are complied with

by the company.

Checklist for Personnel & Time Office

Obtain a list of sanctioned strength - Department wise and compare with the actual

strength of the employees. Note the variation and comment upon the cases where the

actual strength of the employees is more than the sanctioned strength. Check approval

for the extra man power deployed.

Review the personnel service files of employees kept by the Personnel Department to

check whether –

all the copies of certificates / testimonials have been taken from the employees at the

time of joining.

Nomination in case of Gratuity / Pension / PF / superannuation etc. have been collected

from the employees

all the other documents like increment letters / promotion letters etc. are properly filed

in the service files.

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Copies of appointment advice / appointment letters / confirmation letters etc. are kept

in the service files.

Obtain a list of all the pending legal cases being handled by the Personnel Department.

Check the status of all the legal cases including the date of next hearing. Comment

upon the speedy settlement of the legal cases. For keeping an effective control over the

legal cases the Personnel Department should prepare a status report of pending legal

cases on a monthly basis.

Ensure that the Personnel Department is taking due care in case of contract labour

employed by it to ensure that legal and statutory obligation like FPS / PF / ESI are taken

care of. The Personnel Department should maintain proper attendance record in respect

of the contract labour and should obtain copies of monthly PF / ESI challans from the

contractor.

Check that the various licenses like the Factory license / license under the Contract

labour (abolition + regulation) act 1970 / license for storage of inflammable and

hazardous chemicals etc. are renewed in time.

Ensure that the various provisions of industrial and labor laws

Like the Apprentices Act / Factories Act / Payment of wages Act

Minimum wages Act etc. are duly taken care of.

Ensure that proper attendance / leave records are maintained by the Personnel

Department is respect of all the workmen / staff / officers/ managers / higher

management.

Check the leave / attendance record of employees (register /

punch card/ computerized attendance printouts) to ensure that there are no

irregularities. Comment on the irregularities. if any, observed.

Examine the agreement with the Union and ensure that the terms and conditions as

agreed to by the parties to the agreement are duty complied with. Examples: Incentive

scheme, loan / advance scheme, facilities, attendance procedure, leave procedure,

festival advance , canteen / tea, transport ,uniform, production etc. Further check the

various schemes linked to production / output to ensure that the payment under

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various incentive schemes are made strictly as per the laid down productivity linked /

incentive scheme.

Ensure that the system installed at various locations to mark the attendance(in/out) are

working properly and are giving consistent results.

Check the record relating to attendance / leave including a cross verification of data and

ensure that the methods and procedure for recording of attendance / leave are sound

and sufficient internal controls exist. Point out the lacunae / weakness in the internal

control system.

In case of productivity linked schemes ensure that there is a proper system to record

and measure the quantity / quality / output of each employee.

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Ten points to be in the audit of Income and Expenditure of a hospital:

I. Verify the register of patients with duplicate copy of bills and patient’s admission record

to see that bills have been property and correctly prepared for all the services, tests and

treatments.

II. Check cash collections from patients by tracing the receipt issued into cash book.

III. Check receipt of interest. rent, dividend etc. with receipt counterfoil into cash book and

bank book and ensure that all such income has been duly accounted for.

IV. Check collection of subscription, donations from the receipt issued, correspondence

etc., into cash book.

V. Verify that all grants from government and other bodies have been duly accounted for

and have been applied in the manner as. specified.

VI. Verify all recurring nature of revenue expenditure, with necessary evidence like bill,

authority, period etc.

VII. Examine the internal check as regards the receipt and issue of stores, medicines, linen

etc., to ensure that these have been properly recorded and issued/consumed only on

proper authorization.

VIII. See that depreciation has been written off in respect of all the assets at appropriate rate

and method as in the earlier year.

IX. Verify the receipts from supply of food and canteen receipts and compare the same

with previous year as regards number of patients.

X. Ensure that all outstanding liabilities have been adequately provided for and similarly all

accrued incomes and receipts have been duly accounted for.

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Special audit points to be considered by the auditor during the audit of a

Hospital:

I. Vouch the Register of patients with copies of bills issued to them. Verify bills for a

selected period with the patients' attendance record to see that the bills have been

correctly prepared. Also, see that bills have been issued to all patients from whom an

amount was recoverable according to the rules of the hospital.

II. Check cash collections as entered in the Cash Book with the receipts, counterfoils and

other evidence for example, copies of patient’s bills, counterfoils of dividend and other

interest warrants, copies of rent bills, etc.

III. See by reference to the property and Investment Register that all income that should

have been received by way of rent on properties, dividends, and interest on securities

settled on the hospital, has been collected.

IV. Ascertain that legacies and donations received for a specific purpose have been applied

in the manner agreed upon.

V. Trace all collections of subscription and donations from the Cash Book to the respective

Registers. Reconcile the total subscriptions due (as shown by the Subscription Register

and the amount collected and that still outstanding).

VI. Vouch all purchases and expenses and verify that the capital expenditure was incurred

only with the prior sanction of the Trustees or the Managing Committee and that

appointments and increments to staff have been duly authorized.

VII. Verify that grants, if any, received from Government or local authority has been duly

accounted for. Also, that refund in respect of taxes deducted at source has been

claimed.

VIII. Compare the totals of various items of expenditure and income with the amount

budgeted for them and report to the Trustees or the Managing Committee significant

variations which have taken place.

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IX. Examine the internal check all regards the receipt and issue of stores; medicines, linen,

apparatus, nothing, instruments, etc. So as to ensure that purchases have been properly

corded in the Stock Register and that issues have been made only against proper

authorization.

X. See that depreciation has been written off against all the assets at the appropriate rates.

XI. Inspect the bonds, share scrips, title deeds of properties and compare their particulars

with those entered in the property and Investment Registers.

XII. Obtain inventories, especially of stocks and stores as at the end of the year and check a

percentage of the items physically; also, compare their total values with respective

ledger balance.

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Bibliography

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http://resource.cdn.icai.org/30846ipcc_may-nov14-it_vol1_cp-4.pdf