Types of audit programme. Points in modifying audit programme.

 Q. Discuss various types of audit programmes. What are the points to be kept in mind while modifying audit programme.

Ans. An Audit programme is a flexible, planned procedure of examination. Audit programme are of following two types.

(1) Standard Programme: An audit programme based on standard format is known as a standard auditing programme. This document is used uniformly in all audits, and there is no need for the auditor to prepare a separate audit programme for each audit. Such a programme is also referred to as fixed or predetermined or planned programme. Such a programme may be suitably modified in order to accommodate the specific problems of a particular business.

(2) Tailor-made Programme: A tailor-made programme is one which is prepared separately for each organisation keeping in mind the nature of business, nature of transactions, method of accounting, efficiency of internal control etc. Such a programme is more practical and flexible as compared to a standard programme.

Every auditor prepares an audit programme according to his convenience and keeping in mind the nature of business. The success of an efficient auditor depends largely upon the audit programme. Hence, the auditor should formulate the audit programme very carefully. While preparing an audit programme the following things must be kept in mind:

1. In Writing: The audit programme should always be in writing in order to avoid any misunderstandings between the auditor and his employees in the future. When there is a written audit programme the auditor’s staff need not enquire again and again about the work to be performed by them.

2. Clarity: While drafting the audit programme it should be ensured that it is simple and clear so that every person concerned with the programme can understand it easily. Ambiguity in the programme results in hindrances in the audit work and waste of the time and efforts.

3. Division of Work: The audit programme should be in accordance with the departments of the organisation so that work may be assigned and responsibility may be fixed among the staff on the same basis. While dividing the work the auditor should be completely aware the level of competence of his staff, since only then he will be able to assign work in accordance with the capabilities of the person. The division of work should be done keeping the business of the organisation and various other aspects of the work to be done in mind, so that the work may be completed successfully and no part of the work escapes examination by the auditor.

4. Flexibility: The audit programme should be flexible, so that in case of a change in circumstances, there is no problem in altering the programme. During the course of the audit, some circumstances do arise due to which work cannot be proceed according to the plan and minor deviation have to be made. Hence, the programme should be such that minor alterations can be made in it.

5. Policies and Provisions: While formulating the audit programme, the related policies and provisions having bearing on the audit work should be kept in mind, such as, Memorandum of Association and Articles of Association in the case of a company and the partnership deed in case of a partnership concern. In order to prepare a good audit plan it is necessary that the books of accounts being maintained by the organisation, the method of accounting being used, internal check system etc. be kept in mind and efforts should be made to reduce the deficiencies in the same. 

6. Object Oriented: The audit programme should be in accordance with the objectives of the organisation so as to maintain co-ordination in the work of the organisation and complete the audit smoothly and within the specified time. Unless the audit programme has these qualities, it is of no practical use.

7. Previous Reports: While drafting the audit programme the final accounts and auditors reports of past years should be looked into, since by doing so many facts which are important from the point of view of the audit will come to light.

8. Department–wise: A separate audit programme should be prepared for each department and sub-department of the organisation. Apart from this different audit programmes should also be prepared depending upon the nature of work. For example, different audit programmes should be prepared for cash, purchases, sales etc. By doing so one can obtain important information and explanations from the employees of the organisation in a smooth manner.

Define Budgetary Control. Objectives.

Q. Define Budgetary Control. Describe the objectives of budgetary control.

SBP

Ans. MEANING OF BUDGETARY CONTROL: Budgetary control is an important technique of control on business activities by management, in which business activities are operated on the basis of pre-prepared budget and thereafter actual results are evaluated in the light of budget estimates. 

DEFINITIONS OF BUDGETARY CONTROL: Important definitions of budgetary control are as follows:

1. According to Brown and Howard, “Budgetary control is a system of controlling costs which includes the preparation of budgets, co-ordinating the departments and establishing responsibilities, comparing actual performance with budgeted and acting upon results to achieve maximum profitability.”

2. According to J. Batty, “Budgetary Control is a system which uses budgets as a means of planning and controlling all aspects of productivity and/or selling commodities or services.”

In brief, budgetary control is a tool of management control and accounting which directs and co-ordinates the working operation on the basis of budgets. If there are variances in actual results, then they are corrected or budget is modified so that the objective of maximum efficiency as per the policy of management may be achieved.

OBJECTIVES OF BUDGETARY CONTROL: Budgetary control is essential for policy planning and control. It also acts as an instrument of co-ordination. The main objectives of budgetary control are as follows:

1. To assist in policy formulation on the basis of proper and reliable data.

2. To ensure planning for future by setting up various budgets.

3. To determine short-term and long-term financial and physical targets.

4. To operate various cost centres and departments with efficiency and economy.

5. To classify expenses according to their nature such as direct and indirect expenses; fixed, variable and semi-variable, etc.

6. To help administration as under this system, executives perform their functions according to pre-determined budgets.

7. To anticipate capital requirements and to make necessary arrangements for it.

8. To make cost accounting more reliable and systematic.

9. To promote research in order to bring down cost, to increase efficiency, and to achieve the targets of sales.

10. To develop co-ordination and co-operation among employees and executives.

11. To eliminate waste and profitability.

12. To correct the variations from the established standards.

13. To fix the responsibility of various individuals in the organisation.

VK

Ans. The main objective of budgetary control is to maximise the profits by proper use of limited business resources. It is an important tool for policy planning and control. The main objectives of budgetary control are as follows: 

1. To help in policy making.

2. To determine the capital requirement.

3. To coordinate the activities of different departments.

4. To control the costs of various departments.

5. To control research and development activities.

6. To eliminate the wastage and increase in profitability.

7. To anticipate capital expenditure for the future.

8. To bring economy in costs by classifying them into fixed and variable.

9. To increase the efficiency of production.

10. To help the management in administrative functions.

Codification of overheads: Meaning and Methods.

 Q. What do you mean by codification of overheads? Discuss the various methods of codification. 

Ans. Meaning of Codification of overheads: When the collected overheads are grouped according to their class it is known as classification of overheads. Each group or class is given a code number to help in maintaining mechanised accounting and secrecy in the system. This code allotment procedure is known as codification. Codification may be done by any of the following methods:

(i) Numbers

(ii) Alphabets

(iii) Combination of numbers and alphabets

(iv) Symbols

Methods of Codification: The various methods of codification are as follow:

(1) Numerical Numbers: Under this method the various groups are alloted numerical numbers so that one group of overhead may represent one standing order number. As for example 

No. 1 to 20 Indirect Material 

       21 to 30 Indirect Labour

       31 to 37 Idle Time

       38 to 43 Overtime 

       44 to 50 Insurance 

       51 to 54 Rent

       55 to 70 Depreciation 

       51 Rent of factory

       52 Rent of Office Building 

       53 Rent of Warehouse 

       54 Rent of Branch Office

(2) Alphabets: Under this method, alphabets are alloted to each overhead. These alphabets help in memory and identification of overheads. For example, 

PO – Power

RE – Repair

DE – Depreciation 

CA – Carriage

MA – Maintenance 

(3) Combination of Alphabets and Numericals: Under this method both of the above methods are combined into one. Under this method, alphabet stands for head of expenses and number shows further analysis of expenses. As for example,

RE1 = Repair to factory building

RE2 = Repair to office building 

RE3 – Repair to warehouse 

RE4 – Repair to vehicle

RE5 – Repair to furniture 

Again repair to furniture can be divided into further code number.

RE5.1 – Repair to factory furniture 

RE5.2 – Repair to office furniture 

RE5.3 – Repair to warehouse furniture and so on.

(4) Symbols: This method is used in those concerns which are working under mechanised system with punched card accounting. The nine digit punched card is divided into four parts.

00/000/00/00

The first part of two digits represents class of overhead i.e., fixed or variable. The second part of three digits represents head of overhead (i.e. idle time etc.), the third part of two digits signifies analysis of expenses (i.e. waiting for material). The fourth part of two digits represents the cost centre (i.e. assembly shop).

   For example symbol 10/120/01/07

Stands for 10 for variable cost, 120 for idle time, 01 for waiting of material, 07 for assembly shop.

Code.                       Stands

10/120/01/07.        Variable/Idle Time/Waiting for material/Assembly Shop

Training of Sales Force: Meaning and Methods

 Q. What do you mean by training of Sales force? Explain the various methods of training the sales force. 

Ans. Meaning of training of sales force: Industrial sales force training is a process of providing the sales force with specific skills for performing their task better and helping them to correct deficiencies in their sales personnel.

In modern industrial organization, the need of training of sales personnel is widely recognized so as to keep the sales personnel in touch with the new technological developments. Every company must have a systematic training program for the growth and development of employees. Training is one of the most important activities of management. The technological developments are taking place at much faster rate. Individual needs training to match him with the requirements of new changes. After recruitment and selection, the next step is training, which is required for all types of jobs in the organisation. New jobs require some sort of special training. Training is also valuable for sales personnel and the organization. It helps to reduce the cost. Training is thus no more a luxury but now it is considered as a necessity.

According to Jucius, “The term training is used here to indicate only process by which the aptitudes, skill and abilities of employees to perform specific jobs are increased.”

Methods of training the sales force: The various training methods adopted for the training of sales personnel are as follows: 

1. Orientation and Induction Training: This training is given to help new entrants for adapting themselves with the new environment. In this method, the new comer is taken around the organisation and informed about the location of various departments and offices. The employees are given a full description of the job they are expected to perform. Orientation training helps the new employees to acquaint themselves with their immediate boss and the persons who will work under their command. They are also informed about the policies, procedures and rules which are related to their assigned work. 

2. Refresher Training: Refresher training is helpful in acquainting personnel with latest improvements in their work. The changing technological methods require fresh training to existing employees even if they are well trained and qualified. Everybody requires attending refresher courses to know the the latest techniques of doing the work. Such training also helps in refreshing the memory of the sales personnel. The introduction of new products may also necessitate fresh training of sales personnel.

3. Case Study: In this method, the case is assigned to the trainees. The trainees learn analytical thinking and reasoning ability by discussing the case. This method improves the ability to evaluate facts and appreciate other’s view point. The trainees come to understand more than one way to analyze the problem.

4. Coaching: In this method, the immediate superior guides and instructs his subordinates as a coach. It is learning through on the job experience because a manager can learn when he is a put on a specific job. The immediate superior briefs the trainees what is expected from them and guides how to effectively achieve them. The coach or immediate superior watches the performance of their trainees and directs them in correcting their mistakes.

5. Special Projects Assignment: In this method a trainee is assigned a project which is closely related to his job. Further, sometimes the number of trainee executive is provided with the project assignment which is related to their functional area. This group of trainees is called project team. The trainee studies the assigned problem and formulates recommendation on it. These recommendations are submitted in the written form by the trainee to his superior.

6. Role Playing: In role playing, the conflicting situation is created and two or more trainees are assigned different roles to play on the spot. They are provided with the written or oral description of the situation and roles to play. The trainees are then provided with the sufficient time, they then have to perform their assigned roles spontaneously before the class. This technique is generally used for human relations and the leadership training. This method is used as a supplement to other methods.

7. Syndicate Method: Syndicate refers to the group of trainees and involves the analysis of the problem by different groups. Thus, in this method, 5 or 6 groups consisting of 10 members are formed. Each group works on the problem on the basis of the briefs and the backgrounds provided by the resource persons. Each group presents its view on the involved issues along with the other groups. After the presentation, these views are evaluated by the resource persons along with the group members. Such exercise is repeated to help the members to look into the right perspective of the problem. This method helps in the development of the analytical and the interpersonal skills of the managers.

8. Demonstration: In this method, the trainees are given the demonstration of the product. This method is appropriate for imparting training for technical and complex products. It demonstrates the features of the product, its uses, method of using it, its superiority over the competitirs’ product. The purpose of the training is to make the salesmen fully aware of the product so that they can effectively demonstrate the product to the prospective customer.

9. Sales Conference Method: In sales conference method, training is given in both formal and informal ways. These conferences are addressed by an expert or group of experts. Salesmen of the organization attend these conferences as participants. The experts give knowledge of new sales techniques to the participants. These conferences discuss specific sales related problems like how to redress consumer complaints, how to maximize consumer satisfaction, etc. The group discussion between the experts and the participants is organized at the end of the conference, thereby making it a two way communication.