# Audit of Club

## Verification of Income

### 1. Entrance Fees

Vouch receipt for entrance fees with:
Members' applications
Counterfoils issued
Reference to minutes of Managing Committee

### 2. Subscriptions

Vouch members' subscriptions with counterfoils issued
Trace receipts for selected period to Register of Members

### 3. Arrears of Subscriptions

Ensure that arrears of subscriptions for previous year is correctly brought over
Arrears for year under audit are correctly adjusted

### 4. Arithmetical Accuracy

Check totals of columns of Register of Members and tally them

### 5. Irrecoverable Member Dues

See Register of Members to ascertain dues which are in arrear
Enquire if necessary steps are taken for their recovery

### 6. Management Powers

Examine financial powers of secretary
Check if these powers have been exceeded

## Verification of Member Accounts (Charges)

### 1. Pricing of Supplies

Verify internal check for members being charged with price of foodstuffs & drinks provided to them

### 2. Member Accounts

Trace debits for selected period from subsidiary registers maintained for supplies and services
Confirm that account of every member is debited with amounts recoverable from him

## Verification of Expenditure / Assets

### 1. Purchases

Vouch purchase of:
Sports items
Furniture
Crockery, etc.
Trace their entries into inventory registers

### 2. Margins Earned

Vouch purchases of foodstuffs, cigars, wines, etc.
Test their sale price to confirm that normal gross profit rate is earned on sales

### 3. Inventories

Check inventory of assets physically with inventory registers or inventories prepared at year-end

### 4. Investments

Inspect share scrips and bonds for investments
Check their current values for disclosure in final accounts

Worked example

### Example 1

Example - Gross Profit Margin Test on Food Sales:

Club purchased food/beverage costing Rs 10,00,000 during the year. Expected GP margin in industry is 50% (i.e., sales should be ~Rs 20 lakh).

If reported sales are Rs 12 lakh (GP only 17%), auditor:

Investigates possible pilferage, under-billing of members, free supplies not recorded
Checks if there is a system to charge members for all supplies
Reviews wastage records
Reports findings to Managing Committee

### Example 2

Example - Subscription Arrears Tracking:

For FY 2025-26:

Opening arrears: Rs 80,000
Subscriptions due during FY 2025-26: Rs 10,00,000
Subscriptions collected during FY 2025-26: Rs 10,40,000

Auditor verifies:

Closing arrears = 80,000 + 10,00,000 - 10,40,000 = Rs 40,000
Whether previous year arrears (Rs 80,000) have been fully or partly recovered
Steps taken to recover overdue subscriptions

### Example 3

Example - Financial Powers of Secretary:

Club constitution authorises Secretary to incur expenditure up to Rs 25,000 per transaction. Auditor finds Secretary signed a contract for Rs 60,000 for catering. Auditor:

Reports breach of authority to Managing Committee
Verifies whether ratification was obtained
Comments in audit report if not ratified

⚠️ Common exam mistakes

Not testing whether normal gross profit margin is earned on food and beverages - risk of pilferage
Failing to follow up on irrecoverable arrears - may need write-off with proper authorisation
Not checking if secretary exceeded financial powers
Verifying purchases but not tracing them into inventory registers - allowing misappropriation
Treating entrance fees as revenue income (some clubs may treat as capital)

Reference:

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