Sr. No.

Particulars

Page No.

1.

Introduction

2-4

2.

Types of Audit

5-7

3.

Internal Audit Checklist for Audit of Hospital

8-23

4.

Ten points to be in the audit of Income and

24

5.

Expenditure of a hospital
Special audit points to be considered by the auditor

25-26

6.

during the audit of a Hospital

Bibliography

27

Audit of Hospital
Index

Introduction:
1

An audit is the examination of the financial report of an organisation - as

presented in the annual report - by someone independent of that
organisation. The financial report includes a balance sheet, an income
statement, a statement of changes in equity, a cash flow statement, and
notes comprising a summary of significant accounting policies and other
explanatory notes.
The purpose of an audit is to form a view on whether the information
presented in the financial report, taken as a whole, reflects the financial
position of the organisation at a given date, for example:

Are details of what is owned and what the organisation owes properly
recorded in the balance sheet?

Are profits or losses properly assessed?

When examining the financial report, auditors must follow auditing standards
which are set by a government body. Once auditors have completed their
work, they write an audit report, explaining what they have done and giving
an opinion drawn from their work. Generally, all listed companies and limited
liability companies are subject to an audit each year. Other organisations
may require or request an audit depending on their structure and ownership.

Audit other information provided to the members of the organisation,

for example, the directors' report.

Check every figure in the financial report audits are based on

selective testing only.

Judge the appropriateness of the organisation's business activities or

strategies or decisions made by the directors.

Look at every transaction carried out by the organisation.

Test the adequacy of all of the organisation's internal controls.

Comment to shareholders on the quality of directors and management,

the quality of corporate governance or the quality of the organisation's
risk management procedures and controls.

Predict the future The audit relates to a specific past accounting

period. It does not judge what may happen in the future, and so cannot
provide assurance that the organisation will continue in business
indefinitely.

Be there all the time The audit is carried out during a defined
timeframe, and auditors are not at the organisation all the time. The
prime purpose of the audit is to form an opinion on the information in
the financial report taken as a whole, and not to identify all possible
irregularities. This means that although auditors are on the look-out for
signs of potential material fraud, it is not possible to be certain that
frauds will be identified.

The organisation's management prepares the financial report. It must

be prepared in accordance with legal requirements and financial
reporting standards.

The organisation's directors approve the financial report.

Auditors start their examination by gaining an understanding of the

organisation's activities, and considering the economic and industry
issues that might have affected the business during the reporting
period.

For each major activity listed in the financial report, auditors identify
and assess any risks which could have a significant impact on the
financial position or financial performance, and also some of the
measures (called internal controls) that the organisation has put in
place to mitigate those risks.

Based on the risks and controls identified, auditors consider what

management does has done to ensure the financial report is accurate,
and examine supporting evidence.
3

Auditors then make a judgement as to whether the financial report

taken as a whole presents a true and fair view of the financial results
and position of the organisation and its cash flows, and is in
compliance with financial reporting standards and, if applicable, the
Corporations Act.

Finally, auditors prepare an audit report setting out their opinion, for
the organisation's shareholders or members.

Auditors discuss the scope of the audit work with the organisation the
directors or management may request that additional procedures be
performed. Auditors maintain independence from management and directors
so that tests and judgments are made objectively. Auditors determine the
type and extent of the audit procedures they will perform, depending on the
risks and controls they have identified. The procedures may include:

asking a range of questions - from formal written questions, to informal

oral questions - of a range of individuals at the organization.

Examining financial and accounting records, other documents, and

tangible items such as plant and equipment

making judgments on significant estimates or assumptions that

management made when they prepared the financial report

obtaining written confirmations of certain matters, for eg, asking a

debtor to confirm the amount of their debt with the organization.

testing some of the organisation's internal controls

watching certain processes or procedures being performed

Type of Audits:
Internal Audit - Internal auditing is an independent,
objective assurance and consulting activity designed to add value and improve
an organization's operations. It helps an organization accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and
improve the effectiveness of risk management, control,
and governance processes. Internal auditing is a catalyst for improving an
organization's governance, risk management and management controls by
providing insight and recommendations based on analyses and assessments
of data and business processes. With commitment
to integrity and accountability, internal auditing provides value to governing
bodies and senior management as an objective source of independent advice.

Professionals called internal auditors are employed by organizations to

perform the internal auditing activity.
The scope of internal auditing within an organization is broad and may
involve topics such as an organization's governance, risk management and
management controls over: efficiency/effectiveness of operations (including
safeguarding of assets), the reliability of financial and management
reporting,and compliance with laws and regulations. Internal auditing may
also involve conducting proactive fraud audits to identify potentially
fraudulent acts; participating in fraud investigations under the direction of

fraud investigation professionals, and conducting post investigation fraud

audits to identify control breakdowns and establish financial loss.
Internal auditors are not responsible for the execution of company activities;
they advise management and the Board of Directors (or similar oversight body)
regarding how to better execute their responsibilities. As a result of their
broad scope of involvement, internal auditors may have a variety of higher
educational and professional backgrounds.
The Institute of Internal Auditors (IIA) is the recognized international standard
setting body for the internal audit profession and awards the Certified
Internal Auditor designation internationally through rigorous written
examination. Other designations are available in certain countries.[5] In the
United States the professional standards of the Institute of Internal Auditors
have been codified in several states' statutes pertaining to the practice of
internal auditing in government (New York State, Texas, and Florida being
three examples). There are also a number of other international standard
setting bodies.
Internal auditors work for government agencies (federal, state and local); for
publicly traded companies; and for non-profit companies across all
industries. Internal auditing departments are led by a Chief Audit
Executive ("CAE") who generally reports to the Audit Committee of the Board of
Directors, with administrative reporting to the Chief Executive Officer (In the

United States this reporting relationship is required by law for publicly traded
companies).

Statutory Audit - A statutory audit is a legally required review of the

accuracy of a company's or government's financial records. The purpose of a
statutory audit is the same as the purpose of any other type of audit: to
determine whether an organization is providing a fair and accurate

representation of its financial position by examining information such as

bank balances, bookkeeping records and financial transactions.
The term statutory is used to denote the audit is required by statute. A
statute is a law or regulation enacted by the legislative branch of the
organizations associated government. Statutes can be enacted at multiple
levels, including federal, state or another municipality. In business, statute
can also refer to any rule set forth by the organizations leadership team.
An audit is an examination of records held by an organization, business,
government entity or individual. Generally, this involves the analysis of
various financial records but can also be applied to other areas. During a
financial audit, an organizations records regarding income or profit,
investment returns, expenses and other items may all be included as part of
the audit process.
The purpose of a financial audit is often to determine if funds were handled
properly and that all required records and filings are accurate. At the
beginning of an audit, the auditing entity makes known what records will be
required as part of the examination. The information is gathered and
supplied as requested, allowing the auditing entity to perform its analysis. If
inaccuracies are found, appropriate consequences may be levied.

Internal Audit Checklist of a Hospital

Checklist for Accounts Department:
Checklist for Fixed Asset:
Check that a Fixed Assets Register is maintained and updated at all
times (Manual / Computerized)
Check that the Fixed Assets Register gives details of the fixed assets Quantity / No / Location / Identification Number / Depreciation /
Rate / accumulated depreciation / original cost / additions /deletions/
written down value.

Check that the identification number given on the fixed asset tallies
with the number given in the FA Register.
Check that for purchases as well as sale of fixed assets proper
authorization has been taken from the appropriate authorities
Check that the discrepancies observed on physical verification of fixed
assets have been correctly adjusted in the books of account after
taking approval from the appropriate authority.
Check the method and the procedure adopted for carrying out the
physical verification of fixed assets and ensure that verification was
carried out as per the generally accepted accounting practices and
procedures.
Check that the physical verification sheets in respect of fixed assets
are properly prepared and duly signed by the persons responsible for
carrying out the physical verification. The name, designation of
employees and the date of carrying out the physical verification should
also be clearly mentioned in the physical verification sheets.
Check that the physical verification of Fixed Assets is carried out by the
Management at least once in 3 years.

Checklist for Accounts Department:

Cash Vouchers \ Bank Vouchers
Check authorization of Cash Vouchers \ Bank Vouchers by a responsible

person.
Check supporting Bills / Invoices
Check the correctness of the accounting head expense / income
Check for cash receipts signature /acknowledgement of cash recd.
Check that all the relevant columns of the Cash/ bank vouchers have
been properly filled in.

Check that all the supporting to the Vouchers are crossed as cancelled
after the payment.
Check that payments are made only against original supporting.
Purchase Vouchers
Check authorization of Purchase Vouchers by a responsible person.
Check the Purchase Voucher with the supporting documents like Bill /
Invoice and the Goods Received Note(GRN).
Check whether the rates given in the purchase invoices are as per the
purchase Orders raised/amendments to the Purchase Orders/ approved
by an appropriate authority.
Check whether payment has been made/Bill passed for rejected
quantity of material as per the GRR.
Check whether a proper accounting head - expense has been debited.
Check that all the relevant columns of the Purchase Vouchers have
been properly filled in.
Check that the PV is passed as per the terms given in the Purchase
Orders.
Check that the purchase voucher is prepared only in respect of original
Bills / Invoices.
Photocopies of invoices \ duplicate invoices should not be passed.
Check that the Bills / invoices are passed strictly as per the PO terms.

Journal Vouchers
Check authorization of Journal Vouchers by a responsible person.
Check the Journal vouchers with supporting Bills / Invoices /documents.
Check that supporting documents are duly approved by an appropriate
authority.
Check the correctness of the accounting head - debit / credit.
Check that all the relevant columns of the journal vouchers have been
properly filled in.
In case of contractors bills check that bills submitted by the
contractors are supported by the Work Orders issued in advance to the
contractors. No bill should be passed unless supported by a/ WO and

the value of the Bill should be in agreement with the WO prepared.

Check that the Work Orders are prepared in advance before the start of
the work.
Check that the bills of the contractors are duly approved and certified
for payment by the person responsible for getting the work done i.e
the user. All the bills must have Approval for payment in writing by
the user on the face of the bill.
Check that all the supporting bills / invoices to a journal voucher are
approved / certified for payment by the User Department. The user
Department should specifically put a remark on the bill for approval\
payment.
In case of contract jobs relating to labour supply the bills are to be
supported by attendance sheets duly certified by the Time Office.
In case of transporters bills - check the bills with the agreed rates and
receipted copies of consignment notes.
Check the measurement books in case of bills for civil work and ensure
that the Measurement books are signed and checked by the Engineer
in charge of the Work.
In case of running and final bills for civil work check that the civil
engineer has checked and verified the measurements and entries of all
running and final bills are made in the Measurement Books.

Advance to Employees
Check the Trial balance in respect of Advance to employees to
ascertain the amount outstanding in the name of each employee. Find
out the date since when the advance is outstanding to be settled and
make a list if employees advances that have not been settled for a
long period.
Ensure that no further advance is given to an employee unless the
previous outstanding advance is cleared by him.

10

Advance to an employee may be towards - Travel / Official work\ loan

or a salary advance. Ensure that the recovery is made from the salary
of the employee when the advance taken by the employee is not
settled by him within a reasonable period.
Further check that the recovery of installments in respect of loan /
salary advance is made correctly on monthly basis from the salary of
the employees.
Check and make a list of employees who have left the company and
their full and final settlements have not been made but debit balances
are still appearing in their names in the Advance to employees
account.
Confirmation of Balances
Confirmation of balances with the banks \ Lending institutions should
be obtained on a monthly basis for the purpose of preparation of bank
reconciliation statements.
Confirmation of balances with the Creditors / Debtors should be
obtained on a six monthly basis. The balances in the Creditors\
Debtors Ledger account should also be reconciled with the balances as
per the partys books on a six monthly basis.
Debtors Ledger Trial Balance \ Debtors Ledger account
Check that the balance shown by the Debtors Ledger Trial balance
agrees with the balance shown by the Debtors control account in the
General Ledger Trial balance.
Check the Age wise analysis of Sundry Debtors and comment upon it.
Check the Debtors Accounts that are stuck up for long and are doubtful
of recovery.
Check the debtors accounts where legal cases have been filed / are to
be filed and ascertain the progress in the legal cases.
Carry out a scrutiny of various Debtors Account in the debtors ledger
I.
II.

and check for the following :Match the Debit and Credit entries individually.
Give the breakup of the closing balance - Invoice wise.
11

III.

Ensure that there are no such cases where the payments have been

IV.

received for later bills and the earlier invoiced are unpaid.
Give a breakup of the closing balance as above in (b) including the

V.
VI.

details of any debits on account of debit notes raised on the parties.

Prepare a list of Debtors account showing closing credit balances.
Tally each debit with a corresponding credit to locate any under
payment / over payment for any invoices.

Creditors Ledger Trial Balance/Creditors Ledger Account

Check that the balance shown by the Creditors Ledger Trial Balance
agrees with the balance shown by the Creditors control account in the
General ledger trial balance.
Check the creditors account that are outstanding to be paid since long
(unclaimed Creditors) and that can be considered for a write back in
the books of account.
Carry out a scrutiny of various Creditors account in the creditors ledger
and check for the following.
Match the Credit and Debit entries correspondingly.
Give the breakup of the closing balance Invoice wise.
Ensure that there are no such cases when the payments have been
made for later invoices and the earlier bills are unpaid.
Give a break up of the closing balance as above in i (b) including the
details of any credits on account of credit notes raised on the party.
Prepare a list of creditors account showing closing debit balances
alongwith the reasons for debit balances. Comments or details should
be taken from the auditee in respect of every single debit balance.
Tally each credit with a corresponding debit to locate any over payment
/under payment for any invoice.
Check all the Creditors Ledger Trial balance as given below for above
I.
II.
III.
IV.

details.
Suppliers
Contractors
Transporters
Others

Outstanding Liabilities

12

Check that the outstanding liabilities pertaining to the earlier years

have been adjusted in the books of account.
Excise V/s Accounts Reconciliation
Ensure that a reconciliation statement is prepared on a monthly basis
to reconcile the modvat / Cenvat balance in the excise with the
accounts balances.
Check if any old pending entry is appearing in the reconciliation
statement.
Check the unreconciled / reconciled difference in the balances shown
by the excise records and the accounts records.
TDS
Check that all TDS deductions are deposited in time with the
government - check the monthly TDS statement and the actual date of
deposit with the TDS challans.
Check whether the TDS Returns are submitted in time with the
Government.
Check that the TDS deductions are made properly from all the payees
wherever applicable.
Budget V/s Actual - Expenses
Check the Budget V/s Actual position as on a particular date with the
Budget statement for all the expenses - Fixed / Variable overheads.
Check the Variances between the Budget / Actual figures.
Obtain comments on reasons for variances between the Budget V/s
Actual.
Analyse the variances between Budget / Actual in terms of percentage.
Scrutiny of Ledger Account - Expenses / Others
Check that in case of expenses the destination between Capital and
Revenue expenditure is properly made.
Check that proper account head has been used to debit the expenses.

13

Pick up a few entries from the ledger account and trace the entry to
the Voucher and the supporting bills / Invoices to ensure that the
expense bills are properly approved / authorized and accounted for.
General Ledger Trial Balance / Revenue ledger Trial Balance
Carry out a scrutiny of the General Ledger Trial balance/Revenue
ledger Trial balance and comment on accounts that need to be
reconciled like inter office account / Inter unit account etc.
In case of accounts like TDS Receivable / Interest Receivable/ Insurance
claim Receivable / Margin money deposit with banks ask for the break
up / detailed statements of accounts and comment upon it.
In case of Creditors / Debtors account check that the amount as given
in the General ledger agree with the balance shown by the Creditors
Ledger Trial balance/ Debtors ledger Trial balance.
Check whether any special accounts like suspense account etc. are
appearing in the trial balance and carry out a scrutiny.
In case of other accounts carry out a review of the ledger of the
account to locate any irregularity / reconciliation matter
Checklist for Physical verification of cash
Carry out a surprise physical verification of cash.
Check that the physical cash balance tallies with the balance shown by
the cash book.
Check that the cash book is up to date at all times.
Check that the cash in safe/cash in transit is within the insurance cover
taken.
Check that fidelity insurance cover is taken in the names of persons
who have the custody of cash.
Check that receipts are issued by the cashier at the time of receipt of
cash from the employees / others.
Check that signatures of the payee are taken by the cashier on the
cash payment Voucher at the time of making cash payment.
Checklist for Bank reconciliation
Check that Bank reconciliation statements in respect of all the bank
accounts are prepared on a monthly basis.
14

Check that the entries appearing in the Bank reconciliation statements

are cleared in the subsequent month.
Check for any old pending entry and inquire into the nature and details
of such an outstanding entry.
Check that entries relating to cheque issued but not presented for
payment for more than 6 months are reversed.
Check that all postdated cheque received are kept in safe custody until
deposited.
Cheque that all cancelled cheques are kept properly in the cheque
book.
Check the cheque signing authorization levels of management and
ensure that the cheques are signed according to the prescribed and
delegated authority.
Check that cheque books / counter foils are kept in safe custody.
Checklist for Purchases:
Check whether an Approved Vendor list of suppliers / authorized
dealers has been prepared and is updated on a regular basis. The
Approved Vendor list should carry all the items of purchases - Raw
Material / Engineering / Consumables / Packing material etc. The
approved vendor list can be Vendor - item / Item -Vendor wise.
Check whether a Purchase Manual has been prepared and approved.
The Purchase Manual should include policies / procedures / and all the
matters relating to purchase methodology.
Find out the Rate Variations over a period of time in respect of every
item of purchases. The purchase register whether prepared Manually /
Computerized would indicate the item Code / Name of the item and
purchases made of the item over a period of time at varying / same
rates with reference to the Purchase Order Number.
Reasons for purchases made at varying rates should be obtained. Rate
Variations without a proper justification should be reported.
A scrutiny of Purchase Orders should be carried out to ensure that
comparative statement of quotations is prepared and the order is

15

placed on the lowest bidder after considering factors like quality /

delivery / payment terms / profile & competence of the vendor.
Check whether the comparative statements of quotations are duly
approved by an appropriate authority and dated.
The comparative statements should be prepared on a landed cost
criteria. All the costs such as the basic price / taxes / duties/
insurance / P&F / freight & cartage / interest etc should be indicated in
the comparison and the final cost of comparison should be the landed
cost of the item.
Ensure that a proper justification (Technical / Commercial) is given in
writing on the comparative statement wherever the purchases are
made from a source not being the lowest bidder.
Ensure that a sufficient number (3 or 4) of quotations / offers are called
from the suppliers at the time of making a comparative statement.
In case of single offer / quotation cases obtain reason s for placing the
order on specific parties.
Ensure that in case of Repeat orders - fresh offers / quotations are
called from the competitive suppliers and a fresh comparative
statement prepared. Further a Repeat order should not be placed
beyond 6 months from the date of the original purchase order. A fresh
order should be raised on the suppliers after 6 months have elapsed
from the date of the original PO.
Ensure that a justification note is put in writing on every comparative
statement giving reasons for awarding the PO to a supplier.
Carry out a scrutiny of Indents / Purchase requisitions to ensure that
the purchase orders are placed as per the requirements given in the
Indents.
Ensure that the quantity discounts / rebates offered by the suppliers as
per the terms given in the PO have been availed by the company.
Obtain a list of Indents pending for conversion into PO and comment
upon the old pending indents.
Obtain a list of POs pending for delivery of material and comment upon
the old pending PO where the due date of delivery of material has
expired.

16

Ensure that the Purchase Orders have been signed / authorized by

authorities as per the financial limits given in the Purchase Manual /
Policy. Deviations should be reported.
In case of amendments to the PO ensure that the amendments are
duly approved by an appropriate authority and reasons for the
amendment (Rate / Quantity ) are given by way of a Note.
Comment upon the possibilities of entering into 6 monthly / annual
rate contracts with the suppliers where the consumption trend or level
is high.
Examine whether there is a system of standard costing or Budgetary
Control in vogue in the Purchase Department. Also, check the Monthly
Purchase Variance Report wherein all items above + 10% in value
should be highlighted and reasons thereof.
Checklist for Goods:
Check that the plan for the dispatch of finished products is received by
the Dispatch section clearly indicating the Quantity/ location and the
description of the material.
Examine the method and the procedure for the dispatch of material to
ensure that the dispatches are effected smoothly.
Check the dispatch report prepared as at the end of the day to ensure
that the dispatches planned for the day are in fact effected in totality.
Check the pending delivery / despatcher status for a particular period
(on a day to day basis). This information can be maintained in the form
of a report.
Ensure that there is a proper system to weigh the finished goods for
dispatch. The weighbridges and the related equipment should always
be properly maintained (including calibration of weighing machines)
If the sales invoices are prepared at the despatch section check a few
invoices spread over a period to ensure that the invoices are prepared
correctly as regards Rates / Excise duty / Sales Tax etc. Ensure that a
proper control is kept over the stationery of blank invoices. The sales
invoices should be authorized by a person duly authorized in writing in

17

this behalf. Check that the Freight consignment Notes are properly
prepared.
Check that the consignment of finished goods once weighed and
okayed at the despatch section are checked for the necessary papers Gate pass / Sales Invoice / Road permit / Freight Consignment No, etc.
at the exit gate by security or by a responsible person deputed in the
sales despatch section.
Verify the status of transporter wise trucks provided against the trucks
ordered. Also, ensure that penalty for not providing the trucks is
charged without exception.
Check that all the trucks being dispatched are not being loaded less
than the minimum weight agreed for payment. If so, proper
justification & approval should be reviewed.
Status of marine insurance, if any to be checked.
Check that all the transporters are approved transporters and their
contract is approved by authorized person from Head Office.
Check that entry for the incoming material is made at the entry gate
register.
Ensure that the weighment / Counting of the incoming material is
made properly and correctly at the receiving section.
Check that stamp / acknowledgement of the receipt of the incoming
material is made on the back side of Freight Consignment Note.
The remark should indicate the quantity (weight / number of pieces
etc.) of the material recorded at the receiving section along with
condition (ok / damaged / wet etc) in which material has been
received.
The receiving section should maintain a record of all the incoming
material received consignment wise, clearly giving the date / No. of
vehicle / Description of the material / Quantity etc. This record can be
maintained in the form of MIS report prepared on a daily basis.
Check the procedure for the clearance of RM for use in the production
Ensure that the procedure for quality testing of raw material / finished
goods is well documented in the form of a quality manual.

18

Ensure and check that the raw material / finished goods once rejected
are not subsequently cleared under deviation. In special cases ensure
that the approval under the deviation is duly approved.
Check the specification / laid down standards for the testing and
clearance of the raw material / finished goods and ensure that the
actual test result conform to the laid down specification.
Whenever there is a change in the laid down specification ensure that
the change is approved and authorized in writing by an appropriate
authority and that the change is incorporated in the manual of
specification.
Check the time taken at the quality assurance to clear the sample
received

for testing. The test sample of raw material and finished

goods should be cleared within a short time.

Check the management level to which the Head of Quality Assurance
reports- As a matter of fact in order to ensure that the quality
assurance function as an independent arm the quality assurance
should report to the Head of the Organization / Unit.
Ensure that the testing samples accepted / rejected are segregated
and kept separately with proper and clear marking. Ensure that the
sample do not get mixed up.

Checklist for Excise

Ensure that the Modvat / Cenvat is claimed and credit is taken in the
excise records immediately after the receipt of the material. There
should be no delay in taking the credit of Modvat / Cenvat once the

19

material has been received. Calculate the loss of interest due to delay
in Modvat / Cenvat claim.
Challans / invoices in respect of material sent for processing should be
received back in the plant within 6 months. Ensure that the material
sent outside the factory for processing is received back in the factory
within 6 months from the date of despatch. (180 days). (A delay
beyond 180 days would result in a loss of Modvat / Cenvat to the
sender).
Check whether the statutory records PLA and RG - I are properly
maintained.
Check whether the classification, declaration, Price declaration or MRP
value, declaration of marketing pattern, and discount structure are
filed by 15th April every financial year.
Check whether RT-12 returns have regularly been filed with the excise
authority by 10th day of the following month accompanied by copies of
PLA and TRG challan and Cenvat monthly return. An
acknowledgement should be obtained from the Excise Department.
For export sales ensure that applications in Form AR4 and the original
invoices have been submitted to the excise authorities.
Credit on Capital goods is to be taken immediately in the same
financial year upto 50% of duty paid and the balance credit in any
subsequent financial year provided capital goods are still in possession
and use of the manufacturer. Ensure that the above provision is taken
care of.
Further the cenvat credit is allowed even if the goods (Input / Capital)
are acquired by the manufacturer on lease, hire purchase or loan
agreement from a financing company. The credit is not allowed if the
manufacturer claims depreciation under Section 32 of the Income Tax
Act on the amount of duty paid. Check whether the above provisions
have been considered while considering the Modat / Cenvat Credit.
The Excise law / rules should be referred from time to time as the
provisions change every year.

20

Ensure that full Credit for Modvat / Cenvat / PLA has been taken by
20th of every month in respect of duty debited for despatches made
during 10/15th day of the month and full credit is taken by the 5th of
the next month in respect of duty debited for despatches made
between 16th to 30/31st of the month. Ensure that there is no lapse
on this account and that the duty credited is equivalent to the duty
debited on fortnightly basis.
Ensure that Cenvat account debit should be limited to the Credit
balance available on the 15th day and the last day of the month
respectively.
Checklist for Insurance Expenses:
Check whether the Insurance policies taken by the company cover the
following assets at all the locations (factories, offices, branches etc.)
Plant & Machinery, Furniture / Fixtures, Electrical installation, Office

equipments etc. Buildings / Warehouses etc.

Inventories / Stocks in transit/Cash/Vehicles/Any other.
Ensure that the value of Assets insured is adequate.
Ensure that all the risks are covered in the policy.
Check whether the loss of profits policy has been taken by the

company.
Ensure that the additions / deletions to the fixed assets during a
particular accounting year are fully taken care of in the policy.
Check whether the insurance premium amount has been properly
negotiated. Ensure that competitive rates of 2-3 insurance companies
were taken into consideration while finalizing the premium payable.
For this purpose, all necessary precautions should be taken to reduce
the level of premium.
Obtain a list of all the insurance claims pending for settlement as on a
particular date and comment upon the old pending cases.
Obtain a list / statement of all the Insurance policies and ensure that all
the assets of the company are fully insured.
Ensure that the value of assets / fixed assets declared by the
company is proper and that the assets are not under covered.

21

Ensure that maximum discounts / rebates were availed by the

company at the time of finalizing the insurance policies / premium.
Check whether insurance policies in respect of group Gratuity / Medical
/ Superannuation / accident etc. are obtained at the best rates.
Comparative statements / comparative data should be checked.
Ensure that the Insurance policies are renewed in time i.e. before the
expiry of the period of validity.
Check the list of fixed assets / assets filed with the insurance company
to ensure that all the Fixed assets / assets are covered by the
insurance policies.
Ensure that all the policies are obtained for the uniform period
matching with the accounting year of the company.
Check whether the terms and conditions given in the insurance
policy are complied with by the company.
Checklist for Personnel & Time Office
Obtain a list of sanctioned strength - Department wise and compare
with the actual strength of the employees. Note the variation and
comment upon the cases where the actual strength of the employees
is more than the sanctioned strength. Check approval for the extra
man power deployed.
Review the personnel service files of employees kept by the Personnel
Department to check whether
all the copies of certificates / testimonials have been taken from the
employees at the time of joining.
Nomination in case of Gratuity / Pension / PF / superannuation
etc. have been collected from the employees
all the other documents like increment letters / promotion letters etc.
are properly filed in the service files.
Copies of appointment advice / appointment letters / confirmation
letters etc. are kept in the service files.
Obtain a list of all the pending legal cases being handled by the
Personnel Department. Check the status of all the legal cases
including the date of next hearing. Comment upon the speedy

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settlement of the legal cases. For keeping an effective control over the
legal cases the Personnel Department should prepare a status report of
pending legal cases on a monthly basis.
Ensure that the Personnel Department is taking due care in case of
contract labour employed by it to ensure that legal and statutory
obligation like FPS / PF / ESI are taken care of. The Personnel
Department should maintain proper attendance record in respect of
the contract labour and should obtain copies of monthly PF / ESI
challans from the contractor.
Check that the various licenses like the Factory license / license under
the Contract labour (abolition + regulation) act 1970 / license for
storage of inflammable and hazardous chemicals etc. are renewed in

time.
Ensure that the various provisions of industrial and labor laws
Like the Apprentices Act / Factories Act / Payment of wages Act
Minimum wages Act etc. are duly taken care of.
Ensure that proper attendance / leave records are maintained by the
Personnel Department is respect of all the workmen / staff / officers/

managers / higher management.

Check the leave / attendance record of employees (register /
punch card/ computerized attendance printouts) to ensure that there
are no irregularities. Comment on the irregularities. if any, observed.
Examine the agreement with the Union and ensure that the terms
and conditions as agreed to by the parties to the agreement are duty
complied with. Examples: Incentive scheme, loan / advance scheme,
facilities, attendance procedure, leave procedure, festival advance ,
canteen / tea, transport ,uniform, production etc. Further check the
various schemes linked to production / output to ensure that the
payment under various incentive schemes are made strictly as per the
laid down productivity linked / incentive scheme.
Ensure that the system installed at various locations to mark the
attendance(in/out) are working properly and are giving consistent
results.

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Check the record relating to attendance / leave including a cross

verification of data and ensure that the methods and procedure for
recording of attendance / leave are sound and sufficient internal
controls exist. Point out the lacunae / weakness in the internal control
system.
In case of productivity linked schemes ensure that there is a proper
system to record and measure the quantity / quality / output of each
employee.

Ten points to be in the audit of Income and Expenditure of

a hospital:

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I.

Verify the register of patients with duplicate copy of bills and patients
admission record to see that bills have been property and correctly

II.

prepared for all the services, tests and treatments.

Check cash collections from patients by tracing the receipt issued into

III.

cash book.
Check receipt of interest. rent, dividend etc. with receipt counterfoil
into cash book and bank book and ensure that all such income has

IV.

been duly accounted for.

Check collection of subscription, donations from the receipt issued,

V.

correspondence etc., into cash book.

Verify that all grants from government and other bodies have been

VI.

duly accounted for and have been applied in the manner as. specified.
Verify all recurring nature of revenue expenditure, with necessary

VII.

evidence like bill, authority, period etc.

Examine the internal check as regards the receipt and issue of stores,
medicines, linen etc., to ensure that these have been properly

VIII.

recorded and issued/consumed only on proper authorization.

See that depreciation has been written off in respect of all the assets at

IX.

appropriate rate and method as in the earlier year.

Verify the receipts from supply of food and canteen receipts and

X.

compare the same with previous year as regards number of patients.

Ensure that all outstanding liabilities have been adequately provided
for and similarly all accrued incomes and receipts have been duly
accounted for.

Special audit points to be considered by the auditor

during the audit of a Hospital:

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I.

Vouch the Register of patients with copies of bills issued to them. Verify
bills for a selected period with the patients' attendance record to see
that the bills have been correctly prepared. Also, see that bills have
been issued to all patients from whom an amount was recoverable

II.

according to the rules of the hospital.

Check cash collections as entered in the Cash Book with the receipts,
counterfoils and other evidence for example, copies of patients bills,
counterfoils of dividend and other interest warrants, copies of rent bills,

III.

etc.
See by reference to the property and Investment Register that all
income that should have been received by way of rent on properties,
dividends, and interest on securities settled on the hospital, has been

IV.

collected.
Ascertain that legacies and donations received for a specific purpose

V.

have been applied in the manner agreed upon.

Trace all collections of subscription and donations from the Cash Book
to the respective Registers. Reconcile the total subscriptions due (as
shown by the Subscription Register and the amount collected and that

VI.

still outstanding).
Vouch all purchases and expenses and verify that the capital
expenditure was incurred only with the prior sanction of the Trustees or
the Managing Committee and that appointments and increments to

VII.

staff have been duly authorized.

Verify that grants, if any, received from Government or local authority
has been duly accounted for. Also, that refund in respect of taxes

VIII.

deducted at source has been claimed.

Compare the totals of various items of expenditure and income with
the amount budgeted for them and report to the Trustees or the

IX.

Managing Committee significant variations which have taken place.

Examine the internal check all regards the receipt and issue of stores;
medicines, linen, apparatus, nothing, instruments, etc. So as to ensure
that purchases have been properly corded in the Stock Register and
that issues have been made only against proper authorization.

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X.

See that depreciation has been written off against all the assets at the

XI.

appropriate rates.
Inspect the bonds, share scrips, title deeds of properties and compare
their particulars with those entered in the property and Investment

XII.

Registers.
Obtain inventories, especially of stocks and stores as at the end of the
year and check a percentage of the items physically; also, compare
their total values with respective ledger balance.

Bibliography

https://en.wikipedia.org/wiki/Audit
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http://www.investopedia.com/terms/i/internalaudit.asp
https://en.wikipedia.org/wiki/Internal_audit
http://www.investopedia.com/terms/s/statutory-audit.asp
http://www.internalauditexpert.in/healthcare-hospital
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/85-internal-audit-checklist-of-accounts-

deptt
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/111-internal-audit-checklist-ofadministration-deptt
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/83-internal-audit-checklist-of-bankreconciliation-statement
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/92-internal-audit-checklist-of-dispatch-ofgoods-receipt-of-material
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/119-internal-audit-checklist-of-export-saleof-goods
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/86-checklist-of-fixed-asset-register
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/115-internal-audit-checklist-of-purchasedeptt
http://www.internalauditexpert.in/component/content/article/15-iachecklists-audit-programme/101-internal-audit-checklist-of-personneltime-office
https://en.wikipedia.org/wiki/Statutory_auditor
http://resource.cdn.icai.org/30846ipcc_may-nov14-it_vol1_cp-4.pdf

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