A special audit is conducted by the government in certain circumstances to examine a company's financial information. It can be performed by the company's auditor or another chartered accountant appointed by the government. The special auditor has the same powers as a statutory auditor and must report findings to the government. The scope includes examining matters in a normal audit report and any other issues referred by the government. The company must pay expenses of the special audit.

1. SPECIAL

2. AUDITING
 According to the AAS-1 issued by the ICAI,
“An audit is an independent examination of
financial information of any entity, whether
profit oriented or not, and irrespective of its
size or legal form, when such an examination
is conducted with a view to expressing an
opinion thereon.”

3. WHAT IS SPECIAL AUDIT?
 An audit other than the annual audit of
accounts of the company called in special
circumstances is known as Special Audit.
Section 233A empowers the Central
Government, in certain cases, to call for a
‘special audit’ of a company.

4. WHY SPECIAL AUDIT?

6. WHO SHALL CONDUCT SUCH AUDIT?
 The audit may be conducted either by the
company’s auditor or another chartered
accountant who may or may not be engaged
in a practice, appointed by the Central
Government [Sections 233(1) & (2)].

7. POWERS AND DUTIES OF SUCH AUDITOR
 The auditor so appointed shall have the
same powers and duties in the matter of
special audit as the statutory auditor of a
company has under section 227, except for
the fact that he must report to the Central
Government in place of the members of the
company.

8. SCOPE OF SPECIAL AUDITOR
 The special auditor’s report must include, as
far as may be practicable, all the matters
required to be included in a normal auditor’s
report u/s 227 and
 Where the Central Government so directs,
also a statement on any matters which may
be referred to him by that Government.

9. SCOPE(CONT….)
 To facilitate the special auditor’s work, the
Central Government may serve an order on
any person directing him to furnish all
information that the special auditor may
need. Non-compliance with the order attracts
a fine upto Rs.5,000 [Section 233A(5)].

10. REPORT
 On receipt of the report, the Central
Government may take necessary action under
the Companies Act,1956 or any other law.
 If no action is taken within four months from the
receipt of the report, the Central Government
must send either a complete copy of the report
or relevant extracts from it and direct the
company either to circulate the copy or extracts
among the members or to read it at the next
general meeting [Section 233A(6)].

11. REMUNERATION & ITS RECOVERY
 The expenses of or incidental to a special
audit, including the remuneration of the
special auditor as fixed by the Central
Government (and its decision in this regard is
final), must be paid by the company.
 If the company defaults in making the
payment, the amount can be recovered from
the company as arrears of land revenue
[Section 233A(6)].

12. AUDIT OF A HOSPITAL

13. GENERAL POINTS
 The nature of the entity must be understood. It
may be a sole proprietorship a partnership firm
or a company. Auditor should make his audit
programmed accordingly.
 Auditor should study the minutes of the
meetings of the board of directors. It will provide
information regarding the decisions made by the
entity.
 He should study the internal control system
present in the entity. It should be decided that
whether reliance can be placed on it or not.

14. INCOME
 The main source of income of hospital is
receipts from patients. The receipts of bills
should be checked with the cashbook entries.
 Other source of receipts may be grants from
different parties. These should be verified with
their respective counterfoils and
correspondence between the parties.
 Other receipts may be form rents, interest or
dividends. These may be checked with their
respective vouchers.

15. PAYMENTS
 All the purchase should be checked with their
respective purchase invoices.
 Other items of expenditure should be
vouched with their respective supporting
papers.
 Proper division between the capital and
revenue expenditure should be made.

16. ASSETS & LIABILITIES
 Auditor should check the assets and liabilities
appearing in the balance sheet on the date of the
balance sheet. It should be checked that they are
shown at true value. Proper depreciation should be
provided on the assets.
 Assets and liabilities should be actually physically
verified by the auditor on the balance sheet date if
possible.
 It should be checked that the balance sheet and
profit and loss account have been drawn according to
the provisions of the act applicable to the business
entity.