## Audit of a Club: Income and Expenditure

Clubs (e.g., township clubs, sports clubs) are non-profit membership organisations. Their audit focuses on the Income and Expenditure Account rather than a Profit & Loss Account. The auditor must verify both revenue streams (subscriptions, entrance fees, pricing of services) and expenditure (purchases, margin checks).

### Key Areas to Audit

#### 1. Entrance Fees

Vouch receipts against members' applications and counterfoils.
Cross-reference with minutes of the Managing Committee (admissions require committee approval).

#### 2. Subscriptions

Vouch with counterfoils of receipts issued to members.
Trace receipts for a selected period to the Register of Members.
Reconcile: Total subscriptions due = Amount collected + Amount outstanding.

#### 3. Arrears of Subscriptions

Confirm prior-year arrears have been correctly brought forward.
Verify that current-year arrears and advance subscriptions are properly adjusted in the accounts.

#### 4. Arithmetical Accuracy

Re-check column totals of the Register of Members and cross-tally.

#### 5. Irrecoverable Member Dues

Review the Register of Members for dues in arrear.
Enquire whether recovery steps have been taken.
Report irrecoverable amounts specifically in the Audit Report.

#### 6. Pricing of Services

Verify internal check ensuring members are correctly charged for food, beverages, and special services (billiards, tennis, etc.).

#### 7. Member Accounts (Debit Tracing)

Trace debits from subsidiary registers (supplies and services) to individual member accounts to confirm each member is charged correctly.

#### 8. Purchases

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

#### 9. Margin Earned on Provisions

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

#### 10. Management Powers

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

### Why This Matters

Clubs handle cash-intensive transactions (daily F&B, subscriptions) with volunteer management — making segregation of duties and documentary evidence especially important.

Worked example

### Example 1

Scenario (MTP 6): You are appointed as auditor of 'The Prestigious Township Club' for FY 2023-24. What key points would you consider while auditing income and expenditure items?

Approach:

1. Entrance Fees — Vouch receipts against member applications + counterfoils + committee minutes.

2. Subscriptions — Trace receipts to Register of Members; reconcile dues vs. collected vs. outstanding.

3. Arrears — Confirm prior-year arrears are correctly b/f; current-year arrears and advances properly adjusted.

4. Arithmetic — Check column totals of Members Register and cross-tally.

5. Irrecoverable Dues — Identify and report irrecoverable member dues.

6. Pricing — Test internal check on charges for food, beverages, and special facilities.

7. Member Accounts — Trace service debits to individual accounts.

8. Purchases — Vouch and trace to inventory registers.

9. Margins — Compare purchase cost vs. sale price; verify and value closing stock.

10. Management Powers — Check secretary has not exceeded financial authority; escalate breaches to the Managing Committee.

⚠️ Common exam mistakes

Forgetting to reconcile total subscriptions due against collected + outstanding — reconciliation is a key test.
Not checking whether irrecoverable dues are reported in the audit report (mere identification is insufficient).
Overlooking the link between purchase vouchers and inventory register entries for assets like furniture/crockery.
Treating gross margin on provisions as a financial ratio exercise only — auditor must physically verify closing stock too.
Missing the need to cross-reference entrance fees with Managing Committee minutes (admission is a formal approval process).

Reference:

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Audit of Clubs – Income and Expenditure Items

Worked example

⚠️ Common exam mistakes