Auditing - Audit of Clubs & Theatre

Audit of Clubs

The following points need to be considered while conducting Audits of Clubs −

An Auditor should decide his scope of work from his appointment letter.
He should know whether he is engaged for only accounting and financial matter or some other assignment too.
He should know about the constitution and the legal status of the Club under which Act the club is registered.
A Club may be registered under the Companies Act, the Societies Registration Act or the Public Trust Act.
An Auditor should note down all the related provisions of the applicable Act relating to the accounts and audit.
He should study the Memorandum of Association and the Articles of Association to know the powers of executive committee.
An Auditor should be aware of the important decisions relating to accounts, finance, sale and purchase of fixed assets and investment from the minute book of meeting of the Board of Directors or the Trustees or the Managing Committee.
He should obtain a list of books of accounts, related documents and other records maintained by that club.

Internal Control System

An Auditor should review the internal control system of Club to conclude on the effectiveness of it and to decide the area and scope of his work.

He should study the letting out system of the club premises, equipment and other facilities.
The Auditor should know the bills raising system.
He should study the rate and the basis of guest house charges, temporary membership charges, eatables, sports equipment.
If Auditors find that the internal control system is adequate in club, he may opt for test checking, otherwise he might have to go for detailed vouching.

Audit of Income and Expenditure of Club

In addition to the general procedure of auditing, an Auditor should consider the following points while conducting Audit of Income and Expenditure of Club −

The donation received by club will be verified with the counterfoils of receipt, donation register and cash book.
To verify whether it is a capital donation or a revenue donation, an Auditor should know the policy of the Managing Committee.
To know the policy regarding membership fees of the new members, an Auditor should check the policy of club, whether membership fees will be treated as revenue receipt or capital receipt.
Membership fees should be vouched with counter foil of receipts, membership register and cash book.
Annual subscription of members should be vouched from counterfoil of receipt and cash book.
On the basis of the members register, annual subscription dues received in advance and arrears of subscription should be reconciled.
Verification of rent received and outstanding rent may be verified with the rental agreement, receipt book and cash book. An Auditor should ensure that the provision for rent outstanding has been provided in books of accounts.
Income received on account of interest and dividend on investment should be verified with cash book, investment register and documents.
Bills raised for sports, canteen, health club and restaurant should be verified and he should check the payment against these bills are duly accounted for in cash book and ledger accounts.
Capital expenditure should be verified from minutes of meeting of managing committee.
Auditor should verify in due course of audit purchases on account of eatables, sports equipment, heath club equipment, general provisions, stationery and printing expenses, etc.
Staff salary and annual increment to staff should be verified from appointment letters, attendance register, salary register, time records, etc.
Physical verification is recommended for food items, wines, crockery, sports equipment etc. on the basis of stock register.

Audit of Cinemas and Theatre

Following are the sources of income for cinemas and theatres. We will also understand how the income is to be verified by the Auditor.

Sale of tickets
Parking
Canteen Sale
Advertisements
Rental income

An Auditor should verify the income from various sources in the following manner −

He should verify the rules regarding rates for different class of tickets, free passes, benefit shows, concessional tickets for booking of groups of student of schools and colleges etc.
An Auditor should ensure that each ticket should be serially numbered.
Daily collection should be deposited in bank.
An Auditor should verify the daily return for sale of tickets for different class and different shows from counterfoils of sold tickets.
He should verify the amount of Entertainment Tax collected on account of sale of tickets.
Auditor should ensure that Entertainment Tax collected on sale of tickets should be deposited with Government within due time without any fail.
Auditor should verify the rate of parking for each class of vehicle.
Auditor should verify the cash collection on account of parking from issued slips.
Auditor should ensure that the parking slip should be different for each class of vehicles.
If parking and canteen are allotted to contractor, an Auditor should examine the contract between client and contractors.
The payment received from contractor should be verified from the receipt book and the cash book.
The payment received on account of advertisement should be examined and verified with cash book and receipt book.
The premises of cinema or theatre may at times be let out on rent. An Auditor should verify the rent received from rental agreement, cash book and receipt book.

Audit of Expenses of Cinemas and Theatre

An Auditor should consider the following points while conducting audit of the expenses of cinemas and theatre −

An Auditor should verify film hire charges from the terms and conditions of agreement.
Accounting for the film purchased and the film hired should be done accordingly.
Film purchased but not shown should be accounted for properly.
Operating expenses should be thoroughly vouched.
Outstanding liabilities should be duly provided in the books of accounts.
Adequate depreciation should be provided on furniture & fixtures of cinemas and theatre. Rate of depreciation should be more than normal depreciation provided in other business.
Stock of various items should be verified.
Payment of revenue expenses like electricity, salary and wages, stationery and printing, and purchase of various items should be vouched with available supporting of vouchers.
Revenue and capital expenditure should be treated accordingly.
All the books like cash book, petty cash book and ledger accounts should be properly examined.

Internal Control System

An Auditor should examine the internal check and the internal control system of business operations, concerning the cash received, payments made and unsold tickets. He should ensure that the unsold tickets are kept under proper control and in good security conditions. Sold tickets should be duly signed by the authorized officer of the business.

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