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CA Intermediate · Auditing and Ethics · Special Features of Audit of Different Type of Entities

CA Meera is the auditor of Shree Annapurna Charitable Trust, which runs a free hospital and is registered as a public trust. The trust deed requires that surplus funds be applied only to the stated charitable objects. While planning the audit, which of the following is the most appropriate audit response specific to this type of entity?

The auditor should examine the trust deed and applicable trust law, then verify that income was fully recorded and that funds were applied in line with the trust's objects. Audit of a trust is not limited to arithmetic or bank balances, and the Companies Act does not govern a public trust.

  1. AVerify only the arithmetical accuracy of the receipts and payments account, since trusts have no compliance requirements
  2. BExamine the trust deed and the relevant trust law provisions, and check that income and funds have been applied in accordance with the trust's objects and the deedCorrect
  3. CIgnore the trust deed because audit is governed only by the Companies Act, 2013
  4. DConfine the audit to confirming bank balances because trusts hold no other assets

Explanation

In the audit of a trust, the auditor first studies the trust deed and applicable law, then checks that receipts are properly accounted for and that funds are applied to the objects stated in the deed. Option A ignores compliance; option C is wrong because a public trust is not governed by the Companies Act; option D wrongly restricts the scope.

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