SPECIAL

AUDITING

AUDITING

According to the AAS-1 issued by the ICAI,

“An audit is an independent examination of

financial information of any entity, whether

profit oriented or not, and irrespective of its

size or legal form, when such an examination

is conducted with a view to expressing an

opinion thereon.”

WHAT IS SPECIAL AUDIT?

An audit other than the annual audit of

accounts of the company called in special

circumstances is known as Special Audit.

Section 233A empowers the Central

Government, in certain cases, to call for a

‘special audit’ of a company.

WHY SPECIAL AUDIT?

WHO SHALL CONDUCT SUCH AUDIT?

The audit may be conducted either by the

company’s auditor or another chartered

accountant who may or may not be engaged

in a practice, appointed by the Central

Government [Sections 233(1) & (2)].

POWERS AND DUTIES OF SUCH AUDITOR

The auditor so appointed shall have the

same powers and duties in the matter of

special audit as the statutory auditor of a

company has under section 227, except for

the fact that he must report to the Central

Government in place of the members of the

company.

SCOPE OF SPECIAL AUDITOR

The special auditor’s report must include, as

far as may be practicable, all the matters

required to be included in a normal auditor’s

report u/s 227 and

Where the Central Government so directs,

also a statement on any matters which may

be referred to him by that Government.

SCOPE(CONT….)

To facilitate the special auditor’s work, the

Central Government may serve an order on

any person directing him to furnish all

information that the special auditor may

need. Non-compliance with the order attracts

a fine upto Rs.5,000 [Section 233A(5)].

REPORT

On receipt of the report, the CentralGovernment may take necessary action underthe Companies Act,1956 or any other law.

If no action is taken within four months from thereceipt of the report, the Central Governmentmust send either a complete copy of the reportor relevant extracts from it and direct thecompany either to circulate the copy or extractsamong the members or to read it at the nextgeneral meeting [Section 233A(6)].

REMUNERATION & ITS RECOVERY

The expenses of or incidental to a specialaudit, including the remuneration of thespecial auditor as fixed by the CentralGovernment (and its decision in this regard isfinal), must be paid by the company.

If the company defaults in making thepayment, the amount can be recovered fromthe company as arrears of land revenue[Section 233A(6)].

AUDIT OF A HOSPITAL

GENERAL POINTS

The nature of the entity must be understood. Itmay be a sole proprietorship a partnership firmor a company. Auditor should make his auditprogrammed accordingly.

Auditor should study the minutes of themeetings of the board of directors. It will provideinformation regarding the decisions made by theentity.

He should study the internal control systempresent in the entity. It should be decided thatwhether reliance can be placed on it or not.

INCOME

The main source of income of hospital isreceipts from patients. The receipts of billsshould be checked with the cashbook entries.

Other source of receipts may be grants fromdifferent parties. These should be verified withtheir respective counterfoils andcorrespondence between the parties.

Other receipts may be form rents, interest ordividends. These may be checked with theirrespective vouchers.

PAYMENTS

All the purchase should be checked with their

respective purchase invoices.

Other items of expenditure should be

vouched with their respective supporting

papers.

Proper division between the capital and

revenue expenditure should be made.

ASSETS & LIABILITIES

Auditor should check the assets and liabilitiesappearing in the balance sheet on the date of thebalance sheet. It should be checked that they areshown at true value. Proper depreciation should beprovided on the assets.

Assets and liabilities should be actually physicallyverified by the auditor on the balance sheet date ifpossible.

It should be checked that the balance sheet andprofit and loss account have been drawn according tothe provisions of the act applicable to the businessentity.