The charitable institution may be private, public, or both of private and public or society. In India, there are many charitable institutions providing services to needy people without any discrimination, the company’s or firms donate a large amount of money to these charitable institutions.
To ensure whether the money is used incorrect purpose, the conduction of the audit program in these institutions is important.
When conducting the audit of charitable institutions the following points should be taken care of:
- The auditor must study about the legal status of Charitable Institutions and gather complete information about the constitution of Institution. The auditor must be aware of the laws of the state, Central government and other laws if any applicable to the Charitable Institutions.
- The auditor should prepare all the documents, records before conducting an audit.
- To make the correct decision, the auditor should study the Minutes Book of Government rules and regulations.
Know about contracts: The auditor should make a list of regular donors to know the purpose of donation and make records of the amount donated to Institutions.
The donation from the counterfoils of receipts, member lists, cash book and the donation register of the institution must be investigated to gather complete information. He must ensure whether the donation money is used for the right purpose or not, the donation money fulfilled the purpose of donation or not.
The Indian government has given exemptions to charitable institutions for serving the people of the nation. According to sub-section 15 of Section 2 of the Income Tax defines charitable purposes include: Relief of the poor, education, and medical relief.
The capital donation and revenue donation must be examined separately, the state code must be studied properly to verify if any grant is applied to the institution. In the charitable institution, it should be checked whether subscription for last year has been received or not, and the current year subscription is received or not.
The investments or donations should be checked physically in the investment register of an institution. The documents of the land and building of institutions must be verified even the legacies in the legacies register. The assets and liabilities on institutions should be verified on the date of the balance sheet, the cash in hand or bank should be also verified.
Event Organization: The Charitable institutions organize events to get the donation, the auditor should check the vouches of receipts and cheques given to the institution during events or for organizing events.