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NGO AUDITS opportunities in Social Auditing

NGO AUDITS opportunities in Social Auditing. NIRC of ICAI New Delhi 5 th February, 2011. CA SUDHIR VARMA. FCA; CIA (USA). Types of Audit. 1. Transaction based audit 2. System / Risk based audit 3. Project based audit 4. Donor based audit 5. Efficiency audit

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NGO AUDITS opportunities in Social Auditing

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  1. NGO AUDITSopportunities in Social Auditing NIRC of ICAI New Delhi 5th February, 2011 CA SUDHIR VARMA FCA; CIA (USA)

  2. Types of Audit 1. Transaction based audit 2. System / Risk based audit 3. Project based audit 4. Donor based audit 5. Efficiency audit 6. Compliance / Statutory audit - Income Tax - FCRA - Registering authority

  3. Engagement 1. Appointment by appropriate authority 2. Engagement letter 3. Scope of audit 4. Reporting requirements 5. Fee

  4. Audit approach 1. “Knowledge of business” objects; activities 2. Audit objectives 3. Audit plan 4. Audit process 5. Resources

  5. Types of Audit 1. Transaction based audit 2. System / Risk based audit 3. Compliance/Statutory audit

  6. Project based audit 1. Understand activity under the project 2. Budget for the project 3. Separate bank account / books of accounts 4. Direct revenues from the project - grants - donations - revenue incomes 5. Direct project expenses – nature 6. Allocation of expenses to projects 7. Projects utilization certificates

  7. Donor based audit 1. Donor sanction letter 2. Terms & Conditions 3. Budget 4. Reporting requirements

  8. Efficiency audit 1. Donors / Governing body / Trustees 2. Verification of expenses beyond accounting 3. External help of specialists 4. Common sense / matured judgment 5. Team leaders

  9. Computerized Environment 1. Size of NGO / No. of transactions 2. Familiarity with software in use 3. Assess software controls 4. Use auditing software 5. Remain abreast with technology

  10. Statutory Compliances 1. Income Tax Act 2. FCRA / FEMA / RBI 3. Registration laws 4. Labour laws 5. VAT / Service Tax 6. Commercial laws 7. Protection laws 8. General laws

  11. Social Audit 1. This is more holistic than financial audit 2. Social audit of program/organization 3. Covers social performance of an activity, it’s relevance & effectiveness 4. Evaluates input resources vs beneficiary spread 5. Audit process

  12. Social Accounting 1. Intent of organization 2. Social book keeping & accounting 3. Define measurable parameters 4. MIS reports on program implementation 5. Program ledgers 6. Procedures, formats with relevant information

  13. Audit report 1. Statutory formats 2. Additional report to management - scope - methodology - information verified - limitations/disclaimers - comments/observations - recommendations - actions taken/not taken on past recommendations

  14. Audit report 1. Report to donors - scope - methodology - information verified - limitations/disclaimers - comments/observations - variations from budgets/programs - approvals of variations

  15. Some issues 1. Transfer from project to general funds 2. Definition of program expenses vs administration expenses

  16. Standards on Auditing SA200 Basic Principles Governing an Audit SA200A Objectives and scope of the Audit of Financial Statements SA210 Agreeing the terms of Audit Engagements SA220 Quality Control for Audit Work SA230 Audit Documentation SA240 The Auditor’s Responsibility relating to Fraud in an audit of Financial Statements SA250 Consideration of Laws and Regulations in an Audit of Financial Statements SA260 Communication of Audit Matters with those Charged with Governance

  17. Standards on Auditing SA299 Responsibility of Joint Auditors SA300 Planning an audit of Financial Statements SA320 Materiality in planning & performing an audit SA402 Audit Considerations Relating to Entities Using Service Organizations SA500 Audit Evidence SA501 Audit Evidence – Additional Consideration for Specific Items SA505 External Confirmations SA510 Initial Engagements – Opening Balances SA520 Analytical Procedures SA530 Audit Sampling

  18. Auditing and assurance standards SA540 Auditing Accounting Estimates, including fair value Accounting Estimates & related Disclosures SA550 Related Parties SA560 Subsequent Events SA570 Going Concern SA580 Written Representations SA600 Using the work of another Auditor SA610 Using the work of an Internal Auditor SA620 Using the Work of an Expert SA700 The Auditor’s report on Financial Statements SA710 Comparatives

  19. Q & A Thank you

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