Special Auditing

Special Auditing and Auditing of a Hospital

1. SPECIAL AUDITING

2. 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.”

3. 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.

4. Why SPECIAL AUDIT?

5. 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)].

6. 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.

7. 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.

8. 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)].

9. Report On receipt of the report, the Central Government may take necessary action under the Companies Act,1956 or any other law. If no action is taken within four months from the receipt of the report, the Central Government must send either a complete copy of the report or relevant extracts from it and direct the company either to circulate the copy or extracts among the members or to read it at the next general meeting [Section 233A(6)].

10. Remuneration & its Recovery The expenses of or incidental to a special audit, including the remuneration of the special auditor as fixed by the Central Government (and its decision in this regard is final), must be paid by the company. If the company defaults in making the payment, the amount can be recovered from the company as arrears of land revenue [Section 233A(6)].

11. AUDIT of a HOSPITAL

12. GENERAL POINTS The nature of the entity must be understood. It may be a sole proprietorship a partnership firm or a company. Auditor should make his audit programmed accordingly. Auditor should study the minutes of the meetings of the board of directors. It will provide information regarding the decisions made by the entity. He should study the internal control system present in the entity. It should be decided that whether reliance can be placed on it or not.

13. INCOME The main source of income of hospital is receipts from patients. The receipts of bills should be checked with the cashbook entries. Other source of receipts may be grants from different parties. These should be verified with their respective counterfoils and correspondence between the parties. Other receipts may be form rents, interest or dividends. These may be checked with their respective vouchers.

14. 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.

15. ASSETS & LIABILITIES Auditor should check the assets and liabilities appearing in the balance sheet on the date of the balance sheet. It should be checked that they are shown at true value. Proper depreciation should be provided on the assets. Assets and liabilities should be actually physically verified by the auditor on the balance sheet date if possible. It should be checked that the balance sheet and profit and loss account have been drawn according to the provisions of the act applicable to the business entity.