1. FORMATION & AUDIT OF NGO’s
Dr.V.Bastin Jerome
Assistant Professor of Commerce
St.Joseph’s College,
Trichy - 2

2. Formation of NGO’s

3. Constituents Trust - Registered document
Society Registrar of Societies
Company - Sec. 25 of the Companies Act, 1956

4. Trust No separate Act Trust Deeds can be registered Settler Corpus
Trustees
Trust Deed

5. Trust Deed
On a stamp paper as per stamp duty payable on the corpus amount.
Must clearly and broadly define objects
Strength of Board of Trustees
Powers of the Trustees / remuneration / benefits
Broad guidelines for management of trust
On dissolution

6. Societies
Status
- Delhi / state
- All India

7. Societies In state level at least 7 promoters (not blood related)
In all India level at least 8 promoters from 8 different states of India

8. Societies Memorandum of Association - name - objects
- profits/benefits to promoters/board members
- dissolution clause
- subscribers

9. Societies Rules & Regulations - define rules of membership
- define rules for elections
- define powers, duties and responsibilities of
the board and each office bearer
- define broad parameters of governance

10. Societies Registration - covering letter in a file cover
- power of attorney
- confirmation from secretary / president
- NOC for registered office
- Memorandum of Association & Rules and
Regulations signed by each promoter on each
page
- proofs of addresses for all promoters

11. Societies Certificate of Registration
Certified copies from Registrar of
- Memorandum of Association
- Rules & Regulations

12. Societies Registrations - PAN - TAN - u/s 12AA of Income Tax Act
- u/s 80G of Income Tax Act
- IEC code
- VAT

13. Societies Establish bank account Deposit membership fee
Start members register

14. Companies Registration process as usual - apply for name of approval
- apply for license to operate as a company
registered u/s 25 of the Companies Act 1956
- after obtaining license submit papers for
incorporation
- certificate of incorporation issued to mention that
the company is registered u/s 25 of the
Companies Act 1956

15. Audit of NGO’s

16. Types of Audit 1. Transaction based audit 2. System / Risk based audit
3. Project based audit
4. Donor based audit
5. Efficiency audit
6. Compliance / Statutory audit
- Income Tax
- FCRA
- Registering authority

17. Engagement Appointment by appropriate authority Engagement letter
Scope of audit
Reporting requirements
Fee

18. Audit approach “Knowledge of business” objects ; activities
Audit objectives
Audit plan
Audit process
Resources

19. Transaction based audit
System / Risk based audit
Compliance / Statutory audit (as usual)

20. Project based audit Understand activity under the project
Budget for the project
Separate bank account / books of accounts
Direct revenues from the project
- grants
- donations
- revenue incomes
Direct project expenses – nature
Allocation of expenses to projects
Projects utilization certificates

21. Donor based audit Donor sanction letter Terms & Conditions Budget
Reporting requirements

22. Corpus / Endowment fund
Unutilized Grants
Separate books of accounts for
- foreign grants
- local grants
- revenue
Accrual vs cash system of accounts
Receipts and payments accounts

23. Efficiency audit Donors / Governing body / Trustees
Verification of expenses beyond accounting
External help of specialists
Common sense / matured judgment
Team leaders

24. Computerized Environment
Size of NGO / No. of transactions
Familiarity with software in use
Asses software controls
Use auditing softwares
Remain abreast with technology

25. Statutory Compliances
Income Tax Act
FCRA / FEMA / RBI
Registration laws
Labour laws
VAT / Service Tax
Commercial laws
Protection laws
8. General laws

26. Auditing and assurance standards
AAS1 Basic Principles Governing an Audit
AAS2 Objectives and scope of the Audit of Financial Statements
AAS3 Documentation
AAS4 The Auditor’s Responsibility to consider Fraud and Error is an Audit of Financial Statements
AAS5 Audit Evidence
AAS6 Risk Assessments and Internal Control
AAS7 Relying Upon the work of an Internal Auditor
AAS8 Audit Planning
AAS9 Using the Work of another Auditor

27. Auditing and assurance standards
AAS10 Using the Work of an Expert
AAS11 Representations by Management
AAS12 Responsibility of Joint Auditors
AAS13 Audit Materiality
AAS14 Analytical Procedures
AAS15 Audit Sampling
AAS16 Going Concern
AAS17 Quality Control for Audit Work
AAS18 Auditing of Accounting Estimates
AAS19 Subsequent Events
AAS20 Knowledge of the Business

28. Auditing and assurance standards
AAS21 Consideration of Laws and Regulations in an Audit of Financial Statements
AAS22 Initial Engagements – Opening Balances
AAS23 Related Parties
AAS24 Audit Considerations Relating to Entities Using Service Organizations
AAS25 Comparatives
AAS26 Terms of Audit Engagements
AAS27 Communication of Audit Matters with Those Charged with Governance
AAS28 The Auditor’s report on Financial Statements

29. Auditing and assurance standards
AAS29 Audit in a Computer information Systems Environment
AAS30 External Confirmations
AAS31 Engagements to Compile Financial Information
AAS32 Engagements to Perform Agreed – Upon Procedures Regarding Financial Statements
AAS33 Engagements to Review Financial Statements
AAS34 Audit Evidence – Additional Consideration for Specific Items
AAS35 The Examination of Prospective Financial Information