Auditing Audit of Clubs & Theatre – tryspring

By | August 15, 2019

Auditing – Audit of Clubs & Theatre

In this chapter, we will discuss the Audit of Clubs and 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

  • 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

  • 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

  • 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

  • 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

  • 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

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

  • 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

  • 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

  • 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

  • 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

  • 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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