Monday, April 13, 2015

Special Points in Audit of Educational Institutions

Rights and Duties of the Auditor in case of audit of Educational Institution

The auditor of a Educational Institution has a right to examine the books and vouchers of the business to enable his to satisfy himself whether or not the balance sheet is drawn up, so as to exhibit a true or fair view of the state of affairs of the business, according to the best of his information and explanation given to him. To enable him to perform his duty, the auditor should take the following steps :
1.       Examine the Trust Deed, or Regulations in the case of school or college and note all the provisions affecting accounts.  In the case of a university, refer to the Act of Legislature and the Regulations framed thereunder.

2.       Read through the minutes of the meetings of the Managing Committee or Governing Body, noting resolutions affecting accounts to see that these have been duly complied with, specially the decisions as regards the operation of bank accounts and sanctioning of expenditure.

3.       Check names entered in the Students’ Fee Register for each month or term, with the respective class registers, showing names of students on rolls and test amount of fees charged; and verify that there operates a system of internal check which ensures that demands against the students are properly raised.

4.       Check fees received by comparing counterfoils of receipts granted with entries in the cash book and tracing the collections in the Fee Register to confirm that the revenue from this source has been duly accounted for.

5.       Total up the various columns of the Fees Register for each month or term to ascertain that fees paid in advance have been carried forward and the arrears that are irrecoverable have been written off under the sanction of an appropriate authority.

6.       Check admission fees with admission slips signed by the head of the institution and confirm that the amount had been credited to a Capital Fund, unless the Managing Committee has taken a decision to the contrary.

7.       See that free studentship and concessions have been granted by a person authorised to do so, having regard to the prescribed Rules.

8.       Confirm that fines for late payment or absence, etc., have either been collected or remitted under proper authority.

9.       Confirm that hostel dues were recovered before students’ accounts were closed and their deposits of caution money refunded.

10.   Verify rental income from landed property with the rent rolls, etc.

11.   Vouch income from endowments and legacies, as well as interest and dividends from investment; also inspect the securities in respect of investments held.

12.   Verify any Government or local authority grant with the relevant papers of grant.  If any expense has been disallowed for purposes of grant, ascertain the reasons and compliance thereof.

13.   Report any old heavy arrears on account of fees, dormitory rents, etc, to the Managing Committee.

14.   Confirm that caution money and other deposits paid by students on admission have been shown as liability in the balance sheet and not transferred to revenue.

15.   See that the investments representing endowment funds for prizes are kept separate and any income in excess of the prizes has been accumulated and invested along with the corpus.

16.   Verify that the Provident Fund money of the staff has been invested in appropriate securities.

17.   Vouch donations, if any, with the list published with the annual report.  If some donations were meant for any specific purpose, see that the money was utilised for the purpose.

18.   Vouch all capital expenditure in the usual way and verify the same with the sanction for the Committee as contained in the minute book.

19.   Vouch in the usual manner all establishment expenses and enquire into any unduly heavy expenditure under any head.

20.   See that increase in the salaries of the staff have been sanctioned and minuted by the Committee.

21.   Ascertain that the system ordering inspection on receipt and issue of provisions, foodstuffs, clothing and other equipment is efficient and all bills are duly authorised and passed before payment.

22.   Verify the inventories of furniture, stationery, clothing, provision and all equipment, etc.  These should be checked by reference to Stock Register and values applied to various items should be test checked.

23.   Confirm that the refund of taxes deducted from the income from investment (interest on securities, etc.) has been claimed and recovered since the institutions are generally exempted from the payment of income-tax.


24.   Verify the annual statements of accounts and while doing so see that separate statements of account have been prepared as regards Poor Boys Fund, Games Fund, Hostel and Provident Fund of Staff, etc.

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