Audit of Charitable Institution
An auditor may evaluate the internal control system in general, to ensure that the procedure is reliable. Institutions which are established to perform social works or to help the disabled are known as a charitable institution like Scout, Red Cross, etc. Such institutions must make an audit of books of accounts every year. He should ensure that the institution complies with all the requirements of law under which it is set up. An auditor should perform the following works while conducting the audit of charitable institutions.
- The auditor should study the constitution, legal status, rules and regulations of the charitable institutions.
- He should know about the constitution and the legal status of Charitable Institutions.
- The auditor should go through the minute’s book of the governing body to see the decisions affecting accounts.
- He should obtain a list of accounts, correspondence and all related documents which are required for the purpose of audit.
- The auditor should vouch for all the receipts with respect to donations, subscriptions, etc., with the subscription and donation. He should vouch the amount of subscription and donations from counterfoils of receipts, members list, donation register and cash book, etc.
- The auditor should verify that a fund is received for a particular purpose and see that it has been utilized for such purpose only. He should verify the nature of donation and accounting treatment of such donations.
- In respect to legacies, the auditor should verify the receipts with Legacy Register. Title deed and other related documents of Land & Building should be verified.
- An Auditor should verify assets and liabilities on institutions on the date of Balance-sheet. Any amount invested should be as per the rules of the institution.
- The income from an investment is properly accounted for in the books. He should verify the cash in hand and the cash at bank.
- The auditor should see that no income tax is deducted from the incomes of the client. The incomes of charitable institutions are usually exempt from tax.
- The auditor should verify the assets and liabilities on the date of balance sheet. He should ensure that the unused receipt books are under the custody of a responsible person.
- It should be seen that proper distinction is made between capital and revenue expenditure. The cash in hand and cash at the bank should be verified.