Corporate Accounting and Auditing Notes
Subject Overview
Corporate Accounting and Auditing familiarizes students with the regulatory framework for company accounts and auditing — company final accounts and managerial remuneration under the Companies Act 2013, goodwill and share valuation approaches, statutory and cost auditor appointment and duties, and management audit of functional areas. A 4-credit core theory paper.
Subject at a glance
4
Units
27
Topics
4
Credits
4
Infographics
Unit-wise Syllabus
4 units — open any unit for detailed topic-wise notes, diagrams and important exam questions
- Requirements of the Companies Act 2013
- form and contents of profit and loss account and balance sheet
- meaning of profit and managerial remuneration
- divisible profits
Equity
Share capital, other equity
Non-current liabilities
Long-term borrowings, provisions
Current liabilities
Trade payables, short-term borrowings
Non-current assets
PPE, intangibles, investments
Current assets
Inventories, receivables, cash
Study guide
This unit covers company final accounts under the Companies Act 2013, the form and content of the profit and loss account and balance sheet, meaning of profit, managerial remuneration and divisible profits. Learn the Schedule III formats.
- Concept and rationale of financial audit
- cost audit
- management audit
- internal audit
- proprietary audit
- efficiency audit and audit by the C&AG
- valuation of goodwill (super profit, annuity, capitalization approaches)
- valuation of shares (book value, earnings approach)
Super profit
Average profit − normal profit
Goodwill (super profit)
Super profit × number of years' purchase
Goodwill (capitalisation)
(Average profit / normal rate × 100) − net assets
Share value (net assets)
Net assets for equity / number of shares
Share value (yield)
(Expected rate / normal rate) × paid-up value
Study guide
You study the types of audit (financial, cost, management, internal, proprietary, efficiency, C&AG) and valuation of goodwill (super profit, annuity, capitalisation) and shares (book value, earnings). Practise goodwill and share valuation.
- Statutory auditor appointment
- qualifications and removal
- duties and liabilities
- code of conduct and professional misconduct
- cost audit meaning/objectives/scope
- cost auditor appointment/duties/liabilities
- cost audit report
- 1First auditor
By the Board within 30 days
- 2Subsequent auditors
At the AGM, for 5 years
- 3Conduct the audit
Evidence, vouching, verification
- 4Audit report
Unmodified or modified opinion
- 5Removal
Special resolution and government approval
Study guide
You study the statutory auditor's appointment, qualifications, removal, duties, liabilities, professional misconduct and cost audit with the cost auditor's appointment, duties and report. Know the statutory auditor's rights and liabilities.
- Meaning
- objectives and scope of management audit
- appointment and qualifications of the management auditor
- audit of management functions (planning, organising, control)
- audit of functional areas — production
- personnel
- marketing
- finance and accounting
Planning
Quality of goals and plans
Organising
Structure and delegation
Production
Efficiency, capacity use
Personnel
HR policies and morale
Marketing
Sales effectiveness
Finance
Fund use and controls
Study guide
You study management audit: meaning, objectives, scope, the management auditor and audit of planning, organising, control and functional areas. Compare management audit with financial audit.
Why Corporate Accounting and Auditing Matters
Audit and corporate accounting are the base of CA, CS and audit careers and are crucial for understanding company financial statements.
How to Prepare for Corporate Accounting and Auditing
- Learn the Schedule III format and practise final accounts.
- Prepare notes on auditor duties and liabilities.
- Practise goodwill and share valuation problems.
Corporate Accounting and Auditing: Frequently Asked Questions
What is a statutory audit?
A statutory audit is an independent examination of a company's financial statements required by law, resulting in an auditor's report.