What Are The Points On Which An Auditor Should Give Special Attention In The Audit Of Trial Balance And Trading And Profit And Loss Account?

While checking addition and balances of all ledgers accounts examine both sides of accounts to see that no item is left. Check ledgers balance into the trail balance. Verify the agreements of the trail balance. Verify the agreements of the trial balance. See to proper inclusion of adjusting entries in the trail balance. Check the items from the trail balance into the trading and profit and loss accounts and the balance sheet.

For audit of trading and profit and loss account first of all check each item from the trail balance. A comparison with previous year is highly desirable. Compare percentage of gross and net profits on sales with those of previous year and obtain satisfactory explanation in case of any big difference. The form of trading and profit and loss accounts should be consistent. Each item of income or expense should appear under its correct head. Revenue charges should not be wrongly capitalized and capital items should not be wrongly debited or credited to revenue.

Proper allocations and adjustments should be seen as outstanding expenses, prepaid expenses, income accrued, income received in revenue, bad debts, provision for bad debts and depreciation. No unearned profit should be brought in.

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