What are the special points to which you will give your particular attention while auditing the accounts of either an insurance company or a colliery company in India?

Thus, the companies carrying on Non-Life Insurance business are still governed by the Insurance Act, 1938.

The Non-Life Insurance Business (I. e., General Insurance) consists of-

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

(1) Fire,

(2) Marine, and/or

(3) Miscellaneous Insurance Business.

Auditor’s Duty

General:

1. The auditor should first examine the internal check system in vogue in the company and determine the extent to which he can rely upon the system.

2. The auditor should inspect the minutes of the meetings of shareholders and the Board of Directors. He should also refer to the treaties entered into by the company in respect of claims, premiums and commissions.

3. He should inspect the certificates in respect of securities deposited with the Reserve Bank of India.

4. He should confirm that separate accounts have been maintained in respect of different funds.

5. He should check that under the provisions of the Act, proper registers for agents, policies and claims are being maintained.

6. He should see that the Annual Accounts are prepared in accordance with the Insurance Act, 1938 and the Companies Act, 1956 (as amended to date).

Income:

7. An Insurance Company has its main source of income from the receipt of premiums from policyholders. He should verify such receipts with the Policy Registers and Premium Registers. It is to be noted that under the code of conduct, insurance premiums are payable in advance except when the insured maintains with the insurance company a deposit which is sufficient to cover the amount of the premium due or he furnishes a bank guarantee for the payment of the premium.

8. He should check the accounts for such receipts and ascertain that separate accounts are being maintained for separate insurance business.

9. Then, he should vouch the receipt of interest, dividends and rents. The necessary investment should be verified and it should be ensured that no part of the income remains unrealised.

10. Outstanding premiums should also be brought into account. It should be confirmed that they are recoverable.

11. Similarly, premiums received in advance should not be credited to the Revenue Account of the current year. They should be carried forward.

Expenditure:

12. Claims paid should be vouched by reference to the Claims Register and other documentary evidence such as Cash Book, counterfoils of the Cheque Book, the receipts received from the claimants, cancelled policies, etc.

13. Claims admitted but not yet paid on the date of the Balance Sheet should be shown as liabilities and shown on the debit side of the Revenue Account.

14. The commission and allowances paid to the agents should be vouched with the help of agents, agreements, returns, etc. It is to be that the amount of commission does not exceed the limit prescribed by Sec. 40-A of the Insurance Act.

15. He should check the bonus by reference to the Cash Bonus Register.

16. He should ascertain that the amount of salvage has been deducted from the Claims Account.

17. He should ensure that all expenses (e.g. legal expenses, etc.).

18. He should see that different expenses are apportioned properly different heads of department account according to their nature and character.

19. He should check all payments for Annuities and see that annuities due but paid have been provided.

Miscellaneous:

20. He should check the Re-insurance Account in the Re-insurance Register and verify Re-insurance Premium and Re-insurance Claims. He avoid also verify the account of Reserve Deposits held on account of Re-insurances.

21. He should confirm that all outstanding branch and agency glances are recoverable.

22. He should verify the assets and liabilities and ensure that proper depreciation has been provided for. It should be seen that investments have been valued in comparison with the market quotations.

23. He should ascertain that due provision has been made for the risk in the accounts. Normally, a provision of 40% of the premiums is considered to be adequate as the minimum required under the Insurance Act for the unexpired risk.

24. He should ensure that the Code of Conduct has been strictly adhered to by the insurance company.

1. The auditor should examine the internal check system in vogue specialty in regard to wages payment, both surface and underground.

2. He should inspect lease and other contracts for royalties, and arrangements for dead rent, short workings, etc. specially.

Income:

3. The income of a colliery is mainly from the sale of the output of coal. He should, therefore, check the entries in the Cash Book to ascertain whether correct amounts have been entered into or not.

4. The raising of coal, etc. should be checked by reference to the Output Book and it should be ensured that the provision of minimum rent is complied with.

5. Sales should be verified with the Agent’s Account and the amount of royalty should be verified from the production of the year.

Expenditure:

6. He should carefully examine the distinct and proper allocation of expenditure between capital and revenue.

7. The purchase of wagons on hire-purchase system should be properly verified.

8. Wages paid to workers should be vouched by reference to wage sheets which should be certified by proper authorities.

9. Capital Expenditure relating to sinking of pits, construction of tramways, railways, workmen’s cottage and purchase of machinery and other fixed assets should be properly and carefully vouched.

10. It should be noted by him that the development expenses, which have been treated as capital expenditure, are spread over a number of years as such.

11. All fixed assets should be duly depreciated and liabilities should be shown distinctly in the Balance Sheet. It should be seen.

12. The accounts are prepared and books are maintained properly. It is also to be seen.

x

Hi!
I'm Eddie!

Would you like to get a custom essay? How about receiving a customized one?

Check it out