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

Shree Vidya Trust, a public charitable trust running a school in Pune, has appointed CA Meera to audit its accounts. The trust's registered instrument allows it to accept donations in kind and to run a canteen for students. Which of the following should CA Meera primarily examine first to understand the scope of her audit of the trust?

CA Meera should first examine the trust deed. It sets out the objects, powers of the trustees and the way funds and property must be applied, so it defines what the auditor must verify, such as whether donations and canteen income are used in line with the trust's objects.

  1. AThe trust deed, to understand the objects, powers and the manner of administering fundsCorrect
  2. BThe bank statements of trustees, to check their personal transactions
  3. CThe income-tax return of the school's staff
  4. DThe Registrar of Companies filings of the trust

Explanation

In an audit of a trust, the auditor first reads the trust deed (and any rules and regulations) to understand objects, powers of trustees, and how funds are to be applied. Other documents are not the starting point. Trusts are not registered with the ROC, and personal bank statements of trustees or staff tax returns are irrelevant to scope.

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