Transcript AUDIT OF NGO*s - smvarmaandco.org
FORMATION & AUDIT OF NGO’s
23rd October, 2009 East Delhi CA CPE Study Circle NIRC of ICAI New Delhi CA SUDHIR VARMA FCA; CIA (USA)
Formation of NGO’s
Constituents
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Trust - Registered document Society - Registrar of Societies Company - Sec. 25 of the Companies Act, 1956
Trust
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No separate Act Trust Deeds can be registered Settler Corpus Trustees Trust Deed
Trust Deed
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On a stamp paper as per stamp duty payable on the corpus amount.
Must clearly and broadly define objects Strength of Board of Trustees Powers of the Trustees / remuneration / benefits Broad guidelines for management of trust On dissolution
Societies
Status Delhi / state All India
Societies
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In state level at least 7 promoters (not blood related) In all India level at least 8 promoters from 8 different states of India
Societies
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Memorandum of Association - name - objects - profits/benefits to promoters/board members - dissolution clause - subscribers
Societies
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Rules & Regulations - define rules of membership - define rules for elections - define powers, duties and responsibilities of the board and each office bearer - define broad parameters of governance
Societies
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Registration - covering letter in a file cover - power of attorney - affidavit from secretary / president - NOC for registered office - Memorandum of Association & Rules and Regulations signed by each promoter on each page - proofs of addresses for all promoters
Societies
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Certificate of Registration Certified copies from Registrar of - Memorandum of Association - Rules & Regulations
Societies
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Registrations - PAN - TAN - u/s 12AA of Income Tax Act - u/s 80G of Income Tax Act - IEC code - VAT
Societies
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Establish bank account Deposit membership fee Start members register
Companies
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Registration process as usual - apply for name of approval - apply for license to operate as a company registered u/s 25 of the Companies Act 1956 - after obtaining license submit papers for incorporation - certificate of incorporation issued to mention that the company is registered u/s 25 of the Companies Act 1956
Audit of NGO’s
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
Engagement
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Appointment by appropriate authority Engagement letter Scope of audit Reporting requirements Fee
Audit approach
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“Knowledge of business” objects ; activities Audit objectives Audit plan Audit process Resources
Transaction based audit System / Risk based audit Compliance / Statutory audit (as usual)
Project based audit
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Understand activity under the project Budget for the project Separate bank account / books of accounts Direct revenues from the project - grants - donations - revenue incomes Direct project expenses – nature Allocation of expenses to projects Projects utilization certificates
Donor based audit
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Donor sanction letter Terms & Conditions Budget Reporting requirements
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Corpus / Endowment fund Unutilized Grants Separate books of accounts for - foreign grants - local grants - revenue Accrual vs cash system of accounts Receipts and payments accounts
Efficiency audit
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Donors / Governing body / Trustees Verification of expenses beyond accounting External help of specialists Common sense / matured judgment Team leaders
Computerized Environment
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Size of NGO / No. of transactions Familiarity with software in use Asses software controls Use auditing softwares Remain abreast with technology
Statutory Compliances
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Income Tax Act FCRA / FEMA / RBI Registration laws 4.
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Labour laws VAT / Service Tax Commercial laws Protection laws 8. General laws
AAS1 AAS2 AAS3 AAS4 AAS5 AAS6 AAS7 AAS8 AAS9
Auditing and assurance standards
Basic Principles Governing an Audit Objectives and scope of the Audit of Financial Statements Documentation The Auditor’s Responsibility to consider Fraud and Error is an Audit of Financial Statements Audit Evidence Risk Assessments and Internal Control Relying Upon the work of an Internal Auditor Audit Planning Using the Work of another Auditor
Auditing and assurance standards
AAS10 AAS11 AAS12 AAS13 AAS14 AAS15 AAS16 AAS17 AAS18 AAS19 AAS20 Using the Work of an Expert Representations by Management Responsibility of Joint Auditors Audit Materiality Analytical Procedures Audit Sampling Going Concern Quality Control for Audit Work Auditing of Accounting Estimates Subsequent Events Knowledge of the Business
Auditing and assurance standards
AAS21 AAS22 AAS23 AAS24 AAS25 AAS26 AAS27 AAS28 Consideration of Laws and Regulations in an Audit of Financial Statements Initial Engagements – Opening Balances Related Parties Audit Considerations Relating to Entities Using Service Organizations Comparatives Terms of Audit Engagements Communication of Audit Matters with Those Charged with Governance The Auditor’s report on Financial Statements
Auditing and assurance standards
AAS29 AAS30 AAS31 AAS32 AAS33 AAS34 AAS35 Audit in a Computer information Systems Environment External Confirmations Engagements to Compile Financial Information Engagements to Perform Agreed – Upon Procedures Regarding Financial Statements Engagements to Review Financial Statements Audit Evidence – Additional Consideration for Specific Items The Examination of Prospective Financial Information
Q & A
Thank you SUDHIR VARMA FCA; CIA (USA)