CMA Intermediate · Corporate Accounting and Auditing · Auditing of Different Types of Undertakings
In the audit of a charitable trust registered for public benefit, which document should the auditor examine first to decide whether expenditure incurred by the trustees is within the permitted objects?
The auditor should first study the trust deed. It sets out the trust's objects, the trustees' powers and how funds may be applied, so it is the benchmark against which every item of expenditure is tested for authority before other records are vouched.
- AThe trust deedCorrect
- BThe bank pass book
- CThe cash book
- DThe list of donors
Explanation
The trust deed lays down the objects, powers of trustees and the manner of applying funds. Without reading it, the auditor cannot judge whether an expense is authorised. Bank and cash records only show that payments were made, not whether they were permitted.
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