Audit of Educational Institution (School, College & University):

Key Points:

I. Preliminary
II. Audit of Income.
III. Expenditure Audit

 

Link : https://smckk14.blogspot.com/2023/03/cost-audit-meaning-objectives.html

The auditor should audit the accounts of an "Educational Institution" as follows -

I. Preliminary:

(a) Scope -

Auditor should go through his appointment letter to examine the scope.

(b) Fundamental Documents -

He should examine Bye - laws, Trust deed, or Regulation in case of school and college and should not its provisions affecting accounts. In case of University, he should study the Act and relevant rules.

(c) Minutes of Meeting -

Should examine minutes of meeting of General body, Society, Trust, Executive Council or Managing committee and note the resolutions on accounts, including banks accounts.

(d) Evaluation of Internal Control -

Careful evaluation of internal check and control systems to insure proper delegation of duties and responsibilities, system for authorisation and recording procedures in respect of assets and liabilities, reserve and expenses and observance of sound accounting practices.

II. Audit of Income:

(i) Tuition Fees etc. -

Auditor should check the Student Fees Register for each month and with class registers, showing the names of students on roll. He should test check entries in Fees register for tuition fees, sports fees, building fund etc. and see whether there have been properly computed, demanded and recovered from students.

(ii) Proof of Fee Receipt -

He should check the fees received with counter foils of money receipts issued to students, as also with entries in cash book and fees register. If fees have been received online, he should check the Bank account and entries in fees register.

(iii) Investigation of Deviations -

He should check fees collection for the month with aggregate total in fees register. In case of any difference, whether due to arrears or advance payments, he should see that the respective amount are carried forward and appropriately disclosed in annual accounts.

(iv) Fee Concession etc. -

In case of free studentship of other concessions, he should examine the authorisation and see that it is consistent with the policy decision of managing committee.

(v) Late Payments -

He should check late payment of fees along with fines, if any, with entries in fees register and authorisation for late payment by responsible official.

(vi) Capital Receipts -

Capital receipt like admission fees, building fund, contribution etc. are to be credited to separate account, unless there is a specific decision of managing committee to the contrary.

(vii) Arrears of Fees -

He should ascertain if all arrears of fees, including hostel dues, are recovered before the student's accounts are closed. In case there are heavy arrears of fees or hostel dues, it should be enquired whether these have been brought to the notice of the Management Committee.

(viii) Grants from Government or Local body -

He should check the basis of rules of Institution and relevant correspondence. If any Grant is in terms of a percentage of actual expenses, he should examine the unapproved expenses that are not eligible for grant.

(ix) Income from Endowment Fund -

He should examine the endowments fund and legacies and vouch the income from them by reference to relevant vouchers and investments. The investments as far as possible by physically verified and, if in the custody of a third person, he should be asked to confirm the holding. In case of endowments created for distribution of prizes in the names of donors, he should see that these are credited to a separate account and, where the income exceeds the expenses on prizes, the surplus is invested along with the Corpus. Income from donations or funds for specific purposes should not be treated as general income or applied elsewhere.

(x) Rental Income -

If a part of the building in the premises or elsewhere has been rented out, rental income should be checked with Rent Rolls, and income arrears or received in advance should be disclosed in annual statement, Income and Expenditure account and Balance sheet of the institution.

(xi) Investment Income -

If part of Grants or endowment has been invested in bank or Government Security, the auditor should follow the income and see if there is any default in payment. Some Institutions may use the capital for unauthorised construction of building to accommodate more students to enhance fee income. It is auditor's duty to check these and, if necessary, to report it to the authority giving the Grant. These may also be default in depositing provident fund contributions of staff.

III. Expenditure Audit:

(i). Classification of Reserve and Capital Expenses -

These should be proper difference between capital and revenue expenses. Capital expenses should be vouched with the resolution of managing committee that authorise it, as also relevant vouchers and receipts reserve expenses like salary of staff etc. should be checked with Cash /Bank account. If salary etc. are electronically transferred to accounts of the recipients, entries in the bank account and individual ledger account should be the basis for checking.

(ii) Expenses in excess of Budgeted Amount -

It should be authorised by managing committee giving reasons.

(iii) Purchase, Issues and Custody of Materials -

An institution purchases different things like Stationery, Sports item, Lab materials, Music Instrument, Furniture's etc. The auditor should see that all the purchases and issues are the properly authorised. Supported by receipts from vendors, and the remaining items are in safe custody of the responsible person.

(iv) Stock - Taking -

Stock of Furniture, Stationery, Equipment's etc. should, as far as practicable, be physically verified. He should compare the stock on hand with the quantity and description as given in the stock register and ascertain whether it has been properly valued.