Auditing Audit of Educational Institutions – tryspring

By | August 12, 2019

Auditing – Audit of Educational Institutions

In this chapter, we will discuss the Audit of Educational

Maintenance of Accounts of Educational Institutions

A large number of educational institutions are registered under
the India Society Registration Act, 1860. The purpose behind the
formation of educational institutions is to spread education and
not just earn profits. The following table lists out the sources
for collection of amount and also the different types of expenses
incurred by the educational institutions −

Main Source of Collection

  • Admission fees, tuition fees, examination fees, fines, etc.
  • Securities from students.
  • Donations from public
  • Grants from Government for building, prizes, maintenance,

Types of Expenses / Payments

  • Salary, allowances and provident fund contribution for
    teaching and non-teaching staff.

  • Examination expenses

  • Stationery & printing expenses

  • Distribution of scholarships and stipends

  • Purchase and repair of furniture & fixture

  • Prizes

  • Expenses on sports and games

  • Festival and function expenses

  • Library books

  • Newspaper and magazines

  • Medical expenses

  • Audit fees and audit expenses

  • Electricity expenses

  • Telephone expenses

  • Laboratory running & maintenance

  • Laboratory equipment

  • Building Repair & maintenance

Preliminary Audit of Educational Institutions

Following points need to be considered by an Auditor while
conducting audit of educational institutions −

  • It is to be confirmed whether the letter of his appointment
    (the Auditor’s) is in order.

  • The Auditor should obtain a list of books, documents,
    register and other records as maintained by the educational

  • He should examine the audit report of last year and should
    note down the observation and qualification, if any.

  • He should note down the important provisions regarding to
    accounts and audit from the Trust Deed, Charter of

  • He should examine the Minutes of Meetings of the Board of
    Trustee or the Governing Body for important decisions
    regarding the sale or purchase of fixed assets, investments
    or delegation of finance power.

  • In case of colleges and university, the Grants Commission
    provides Grants to them subject to certain conditions. The
    Auditor should study all the conditions concerning grants.

  • The Auditor should examine the Code of State regarding

  • He should be aware of all the provisions and rules of related
    laws concerning books of account and audit.

Internal Control System

The Auditor should independently check the internal control
system regarding authorization procedures, record maintenance,
safeguarding of assets, rotation and division of staff duty, etc.
Following are some of the important aspects that need to be
considered by an Auditor to keep a check on the internal control
system −

  • Whether internal control and internal check system is
    working, if yes, how effectively.

  • Is there is any system to physically verify the fixed assets,
    stores and consumables at regular interval.

  • An Auditor should verify the control system concerning proper
    authorization, obtaining quotations, proper maintenance of
    accounts and record regarding purchase of fixed assets,
    purchase of material, investment, etc.

  • Whether bank reconciliation statement is prepared at regular
    intervals and what kind of action is taken for uncleared
    cheque which were pending since long.

  • Whether waiver of fees is properly sanctioned by appropriate

  • The person who is collecting fees and the cashier should not
    be the same person.

  • Class wise fees receivable and the actual fees received
    reconcile or not.

  • Whether collected fees is deposited in bank on a daily basis.

  • Fees collection register should be maintained on a daily

  • Whether approved list of supplier of sports material,
    stationery, lab items are readily available.

  • Whether control system for payment is adequate or not.

  • The system of letting out conference hall and class rooms,
    etc. for seminars and conventions.

  • Whether fees structure is properly authorized along with
    change in fee structure if any.

Audit of Assets and Liabilities

The following points need to be considered while conducting an
audit of Assets and Liabilities −

  • Verification of Assets register should be done considering
    grants on purchase of assets, if any received from State
    Government/ University Grant Commission (UGC).

  • Verification of depreciation is very important; it should be
    according to useful life of assets or as per the Companies
    Act, whichever is applicable.

  • If educational institution is running under Indian Public
    Trust Act, it is must for an Auditor to check, where
    investments have been made, because as per the Indian Public
    Trust Act, investment can be made in specific securities

  • If donation is received in the form of investment, an Auditor
    has to check all related correspondence with the donor.

  • All the applicable requirements of law should be fulfilled
    for the purchase of investments and fixed assets.

  • An Auditor should read and note down the state code and
    provisions relating to the conditions and procedures of
    Grants. He should also verify the requirements of State/UGC
    which are to be fulfilled by educational institutions for
    receiving Grants and also for continuations of Grants.

Audit of Income of Educational Institutions

The following points need to be considered by an Auditor while
conducting audit of the Income of Educational Institutions −

  • Fees and charges received on account of admission fees,
    tuition fees, sports fees, examination fees etc. should be
    verified based on the approved fees structure.

  • Verification of counterfoil copies of fees receipt with fees
    received register should be done.

  • Prescribed conditions by the State Government and the
    University Grants Commission should be verified whether
    fulfilled or not.

  • Cash book should be verified with counterfoil of receipt book
    and fees register.

  • Fees receivable and actual fees received should be

  • Charges and fees received and receivable should be examined
    on account of hostel accommodation, mess, housekeeping and
    clothing, etc.

  • Cash book should be verified with the donation received

  • Donation received should be accounted for according to the
    nature of donation means careful distinction should be there
    for revenue nature donation and capital nature donations; the
    same procedure is to be followed for Grants received.

  • The purpose and utilization of grant should be same.

  • Investment register and cash book should be verified for
    income received on account of interest on investment and
    dividends, etc.

Audit of Expenses of Educational Institutions

The following points need to be considered by an Auditor while
conducting audit of Expenses of Educational Institutions −

  • Electricity expenses, telephone expenses, water charges,
    stationery and printing, purchase of sports items should be
    properly verified with quotation, purchase bills, inward
    register and Bills received from service providers, etc. All
    purchases should be authorized by appropriate person.

  • In case where hostels purchase food items, provisions,
    clothing, etc. should be properly verified.

  • Verification of Tax Deducted at Source, Employee State
    Insurance and Provident Fund should be checked. It is also
    very important that all deducted amount should be deposited
    in appropriate Government accounts well within time without
    any default. These can be verified from relevant bank

  • Payment made on account of salary should be verified from
    terms of appointment and increment policy. Auditor should
    verify the computation of salary and check whether all
    required deductions are made out of it or not like advance
    salary, loan installment, absence from duty, ESI (Employee
    State Insurance), PF (Provident Fund), etc. The Net Salary
    Payable amount will be verified from cash book and bank pass
    book for salary paid.

  • Terms and conditions, cash book, voucher and receipts should
    be the basis for the verification of scholarship paid.

  • Appropriate provision should be made on account of
    outstanding payments.

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