auditing,budget allocation, inventory management

3. Audit overview
Posting checking
Testing the existence and effectiveness of
management controls that prevent
financial statement misstatement
Casting checking
Physical examination and count
Confirmation
Inquiry
Observation

4. •inspection
•Year-end scrutiny
•Re-computation
•Tracing in subsequent period
•Bank reconciliation
•Vouching
•Verification of existence, ownership, title and
value of assets and determination of the extent
and nature of liabilities

5. Auditing is all about evidence
 The auditor gathers evidence to determine
if the client's processes are working
correctly, its financial data are recorded
and presented correctly, and its financial
statements as a whole are fairly presented.
 This implies that--
 the process of auditing is to gather and
evaluate evidence to test assertions
 the audit process is systematic
 the auditor must be independent of the
entity audited and the process followed in
gathering evidence must be unbiased

6. Systematic process: Auditing is a
systematic and scientific process that
follows a sequence of activities, which
are logical, structured, and organized.
Three party relationships: The audit
process involves three parties, that is,
shareholders, managers, and the
auditors.
.
Features of an Audit

7. Subject matter: Auditors give assurance on a
specific subject matter. However, the subject
matter may differ considerably, such as – data,
systems or processes and behavior such as –
data, systems or processes
Evidence: Auditing process, requires
collecting the evidence, that is, financial and
non-financial data, and examining thereof.
s and behavior

10. A budget is a financial plan used to
estimate revenues and expenditures
for a specific period of time.
It is a management and planning
tool, not just an accounting
document. It assists in the allocation
of resources.
 A budget allocation is the amount
of funding designated to each
expenditure line.
Definition

11. Budgets are usually developed for 12-month periods.
When developing a budget, revenues are usually
estimated first to determine the level of resources that
will be available in the upcoming budget year.
Based on the estimated resources, expenditure limits,
also called budgetary allocations, are assigned to each
budget category.
When developing budgetary allocations, all needs of the
organization are taken into account and decisions are
made where best to allocate available money.
Developing Budgetary Allocations

12. Budgets are usually divided into departments and
program units.
This allows for easier identification of the resources
allocated to specific programs and functions.
Each category can be made of several budget
allocations, referred to as line items, for the specific
needs necessary to support the program or overall
department operation.
Budget Category Allocations

13. Budgetary allocations should be routinely monitored to ensure
the amounts budgeted are sufficient to meet expenditures.
It is important to have a tracking system in place for all
purchase orders and bills.
The purchase orders and bills should be matched regularly
against the budgetary allocation to ensure sufficient funds exist
for the remainder of the budget year
Monitoring Budgetary Allocations

14. Inventory management

15. In accounting language, inventory may mean
the stock of finished goods only. In a manufacturing
concern, it may include raw materials, work- in – progress
and stores etc.
Meaning and Nature of Inventory:

16. The term inventory refers to assets, which will
be sold in future in the normal course of
business operations. The assets, which the firm
stores as inventory in anticipation of need, are
raw material, working progress, and finished
goods.
Definition:

17. Raw Material: Raw material from a major input into
the organization. They are required to carry out
production activities uninterruptedly. The quantity of
raw materials required will be determined by the
rate of consumption and the time required for
replenishing the supplies.
Inventory includes the following
things:
Work in progress: The work in progress is that stage
of stocks which are in between raw materials and
finished goods. The quantum of work in progress
depends upon the time taken in the manufacturing
process. The quantum of work in progress depends
upon the time taken in the manufacturing process.

18. Consumables: These are the materials which are needed to
smoother the process of production but they act as catalysts.
Consumables may be classified according to their consumption
add critically.
Finished goods: These are the goods, which are ready for the
consumers. The stock of finished goods provides a buffer between
production and market, the purpose of maintaining inventory is to
ensure proper supply of goods to customers
Spares: The stock policies of spares fifer from industry to industry.
Some industries like transport will require more spares than the
other concerns. The costly spare parts like engines, maintenance
spares etc.,

19. objectives
•To ensure continuous supply of materials, spares and finished goods so
that production should not suffer at any time and the customers
demand should also be met.
•To avoid both over – stocking and under – stocking of inventory.
•To maintain investment in inventories at the optimum level as required
by the operational and sales activities.
•To keep material cost under control so that they contribute in reducing
the cost of production and overall costs.
•To eliminate duplication in ordering or replenishing stocks. This is
possible with the help of centralizing purchases.
•To minimize losses through deterioration, pilferages, wastages and
damages.