## Audit of Clubs

### 1. Entrance Fees

Vouch receipts for entrance fees against members' applications, counterfoils, and minutes of the Managing Committee.

### 2. Subscriptions

Vouch members' subscriptions with receipt counterfoils.
Trace receipts for a selected period to the Register of Members.
Reconcile total subscriptions due vs. collected vs. outstanding.

### 3. Arrears of Subscriptions

Ensure arrears from the previous year are correctly brought forward.
Verify arrears for the current year and subscriptions received in advance are correctly adjusted.

### 4. Arithmetical Accuracy

Check totals of various columns in the Register of Members and tally across columns.

### 5. Irrecoverable Member Dues

Examine the Register of Members for dues in arrear.
Enquire whether necessary steps have been taken for recovery.
The amount considered irrecoverable should be mentioned in the Audit Report.

### 6. Pricing (Internal Check on Billing Members)

Verify the internal check as regards members being charged for:
Foodstuffs and drinks
Fees for special services (billiards, tennis, etc.)

### 7. Member Accounts

Trace debits for a selected period from subsidiary registers to each member's account.
Confirm every member is debited with all amounts recoverable from them.

### 8. Purchases

Vouch purchases of sports items, furniture, crockery, etc.
Trace entries into the respective inventory registers.

### 9. Margins Earned (Restaurant/Bar)

Vouch purchases of foodstuffs, cigars, wines, etc.
Test sale prices to confirm normal rates of gross profit are being earned.
Physically verify and check valuation of unsold provisions and stores at year-end.

### 10. Inventories

Physically check furniture, sports material, and other assets against inventory registers.

### 11. Investments

Inspect share scrips and bonds.
Check current values for disclosure in final accounts.
Confirm satisfactory arrangements for safe custody.

### 12. Management Powers

Examine the financial powers of the secretary.
If powers have been exceeded, report specific cases to the Managing Committee for ratification.

Worked example

### Example 1

Example: The club secretary has entered into a purchase contract for new sports equipment worth ₹8 lakhs, but his financial limit is ₹2 lakhs. Identify the audit issue.

Answer: The secretary exceeded his financial powers. As auditor, you must report this specific case to the Managing Committee for confirmation/ratification. The expenditure itself must also be vouched with proper documentation.

### Example 2

Example: The club's bar shows purchases of ₹12 lakhs but only ₹10 lakhs in sales revenue for the year with ₹3 lakhs of closing inventory. Is the gross profit margin reasonable?

Answer: Opening inventory + Purchases − Closing inventory = Cost of goods sold = Opening inv + ₹12L − ₹3L. With sales of ₹10L, the club appears to be selling below cost, which is abnormal. The auditor should investigate whether the inventory valuation is correct, whether goods were pilfered, or whether the pricing policy results in subsidised sales to members.

⚠️ Common exam mistakes

Not reporting irrecoverable member dues in the audit report — this is specifically required and clubs often accumulate large arrears.
Missing the check on financial powers of the secretary — clubs frequently have unauthorized expenditure by management.
Treating entrance fees as recurring revenue — entrance fees are capital receipts and must be credited to a Capital Fund.
Skipping physical inventory verification of sports equipment and furniture — these are high-value assets prone to misuse in clubs.

Reference:

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →