Page 84 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
• Mechanical Device: Mechanical devices should be used, wherever practicable to prevent loss or
misappropriation of cash.
• No Single Person Complete Control: No single person should have complete control over any
important aspect of the business operation. (Every employee's action should come under the review of
another person.)
• Distribution of Power with Periodic Review: The financial and administrative powers should be
distributed very judiciously among different officers and the manner in which those are actually exercised
should be reviewed periodically.
• Asset Custody— Book Maintenance Separation : Persons having physical custody of assets must not be
permitted to have access to the books of accounts.
(Start of the Year Point)
• Budgetary Control: Budgetary control should be exercised, and wide deviations observed should be
reconciled
(During the Year Point)
• Rotation: Staff duties should be rotated from time to time so that members do not perform the same
function for a considerable length of time.
• Compulsory Leave: Every member of the staff should be encouraged to go on leave at least once a year.
• Periodical Review of Accounting Records: Procedures should be laid down for periodical verification
and testing of different sections of accounting records to ensure that they are accurate.

(End of the Year Point)
• Independent Stock Taking
o Inventory taking at the end of the year should ideally be conducted when trading activities
suspended.
o Staff from different sections of the organization should be involved in the inventory taking process.
o The scope of statutory audit is constrained by time and cost limitations.
It is increasingly acknowledged that a system of internal check is essential for an effective audit, particularly in
large organizations.
Internal Audit -
Definition: Internal audit is an independent appraisal function within an organization that examines and
evaluates its activities as a service to the organization.
Management Determines Scope: The management determines the scope of the internal audit.
SA 610 :- It gives activities which are generally included in scope of internal auditor. They are related to Activities
related to governance, Activities related to risk management, Activities related to internal control system,
students can refer SA 610 portion and use same points here.

(CNO-MRI.500) Review of The System of Internal Controls (Shortcut – Review runs Per Match at MCC)
Review Timing:
- Point of review is based on auditor's judgement.
- Size and complexity of operations influence timing.
- Intervals for comprehensive reviews suggested at 3 years.
- Ideally, review undertaken before finalizing audit program.
Purpose:
- Assesses reliance on the internal control system.
- Identifies areas of weakness.
- Adjusts audit procedures based on control evaluation.
- Advises client on found inadequacies.
- Notes findings for future reference and client communication.

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