Checklist for Audit of Expenses for Manufacturing Companies


Direct Expenses
** Expenses vouching
** Expenses for Fuel consumption
** Freight and forwarding Expens analysis - relating to RM 
** Cut off procedure
** Variance analysis

Indirect Expenses analysis and vouching
** Cut off procedure
** Variance analysis

Persoanl Expenses of Director 
*Travelling Exp and conveyance ledger analysis
* Foreigin Tour Ledger Analysis

Capitalization of freight and custom duty
for Import Machinery
* Freight ledger analysis
*Machinery Ledger Analysis

Prior Period Transaction Verfication-- Cut off procedure (Expenses and Incomes)
**Analysis of Cash ledger 
** Find out the expenses in cash book which are  relating to previous financial year
** Purchase account analysis 
** Stock ledger and GRN analysis

Prepaid Amount Verification
** Prepaid expenses calculation sheet
** Ledger analysis
**Freight
**Custome Duty
**Any other Expenses

Revenue / Capital Expense analysis
** Find out the freight and other expenses for  capital goods in profit and loss  account .
** Find out the revenue expenses have been debited in the Asset account

The following ledgers  can be taken for analysis
** Freight ledgers
** Custom duty account
** Prepayment  custom duty account
** Asset repair and maintenance expenses
** Asset account and other assets account.

** Finally capitalize all the expenses in the PL  which  are relating to capital nature
** Finally decapitalize all the expenses in asset account which are relating to  revenue nature

Electricity  Expenses
** Monthwise breakup for all payments
** Check whether there is any interest receivable for deposits
** Check whether there is any deposit adjustment during the year for the current year consumption.
** Match with TDS receivable certificates and  for Interest receipt for the interest from electricity board

Royalty Calculation and Agreement Verification
* Net Sales to be consider for calculation
* Net sales excludes of Taxes and import component of RM and freight and Sales return.
* TDS 
*Payment of TDS and Service tax to be verified
*Check RBI cess on gross royalty and taking the servie tax credit

Financial Charges
** Break up of Expenses and detailed interest calculation Workings
** Wheather any default in repayment of interest
** Check whether provision for March in the OD account