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MAHATMA EDUCATION SOCIETYS

PILLAI COLLEGE OF ARTS COMMERCE

AND SCIENCE

NEW PANVELRE-ACCREDITED BY NAAC WITH A

GRADE

A PROJECT

ON

A PROJECT REPORT ON AUDIT OF COCA-COLA

CO.

In the subject AUDITING

SUBMITED TO

UNIVERSITY OF MUMBAI,FOR SEMESTER-III

OF

MASTER OF COMMERCE (PART 2)

BY

VINAYAK GHARAT

3522

UNDER THE GUIDANCE OFPROF.GAJANAN WADER

YEAR-2013-2014

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MAHATMA EDUCATION SOCIETYS

PILLAI COLLEGE OF ARTS COMMERCE AND

SCIENCE

NEW PANVEL

RE- ACCREDITED BY NAAC WITH A GRADE

EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and evaluated theprojecton,

A PROJECT REPORT ON AUDIT OF COCA-COLA

CO.

Submitted by VINAYAK GHARATStudent of M. Com Part-II

This project is original to the best of our knowledge and has beenaccepted for Internal Assessment.

Internal Examiner: Principal:-

Prof. GAJANAN WADER Dr. DAPHNE PILLAI

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MMAAHHAATTMMAAEEDDUUCCAATTIIOONNSSOOCCIIEETTYYSS

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PPRROOFF..GAJANAN WADER

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pprreessttiiggiioouussIInnssttiittuuttiioonn

I would also like to thank all my friends to help me in this project

work and giving their precious time to me.

LLaassttbbuuttnnootttthheelleeaassttIIwwoouullddlliikkeettootthhaannkkoouurrPPaarreennttssffoorrmmaakkiinngg

uussccaappaabblleeiinnddooiinnggtthhiisspprroojjeeccttaannddggiivviinnggtthheeiirrccoonnttiinnuuoouussssuuppppoorrttaanndd

gguuiiddaannccee..

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MAHATMA EDUCATION SOCIETYS

PILLAI COLLEGE OF ARTS, COMMERCE & SCIENCEE-ACCREDITED BY NAAC WITH A GRADE &

ISO 9001:2008 CERTIFIED

Internal Assessment: Project 40 Marks

Name of the Student Class Division Roll No.

First Name : VINAYAK

Fathers Name : VIKAS

Surname :GHARAT

M COM

PART II

3522

Subject: AUDITING

Topic for the Project:A PROJECT REPORT ON AUDIT OF COCA-COLA

CO.

Particulars Marks Awarded Signature

DOCUMENTATIONInternal examiner

(Out of 10Marks)

External Examiner(Out of 10 Marks)

Presentation

(Out of 10 Marks)

Viva and Interaction(Out of 10 Marks)

TOTAL MARKS (Out of 40 Marks)

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CONTENTS

SL.NO. PARTICULARS PAGE NO.

CHAPTER-1

1 INTRODUCTION 5-5

2 DEFINITION 6-6

CHAPTER -2

3 FEATURES 7-7

4 OBJECTIVES 8-8

5 TYPES OF AUDITS AND REVIEWS 9-12

6 PROCEDURE TO BE FOLLOWED TO DETECT

ERRORS.

13-13

7 DUTIES 14-14

CHAPTER 3SUMMARY OF THE STUDY

7 LEDGER FOR AUDIT 15-16

8 IMPORTANCE & UTILITY OF LEDGER ACCOUNTS 17-17

9 CONCLUSION 18-18

APPENDICES

10 BIBLIOGRAPHY/ WEBLIOGRAPHY 19-19

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INTRODUCTION -AN OVERVIEW OF AUDITING:

Economic decisions in every society must be based upon the information available at the time

the decision is made. For example, the decision of a bank to make a loan to a business is based

upon previous financial relationships with that business, the financial condition of the company

as reflected by its financial statements and other factors. If decisions are to be consistent with

the intention of the decision makers, the information used in the decision process must be

reliable. Unreliable information can cause inefficient use of resources to the detriment of the

society and to the decision makers themselves. In the lending decision example, assume that the

barfly makes the loan on the basis of misleading financial statements and the borrower Company

is ultimately unable to repay. As a result the bank has lost both the principal and the interest. In

addition, another company that could have used the funds effectively was deprived of the money.

As society become more complex, there is an increased likelihood that unreliable information

will be provided to decision makers. There are several reasons for this: remoteness of

information, voluminous data and the existence of complex exchange transactions As a means of

overcoming the problem of unreliable information, the decision-maker must develop a method of

assuring him that the information is sufficiently reliable for these decisions. In doing this he must

weigh the cost of obtaining more reliable information against the expected benefits.

A common way to obtain such reliable information is to have some type of verification (audit)

performed by independent persons. The audited information is then used in the decision making

process on the assumption that it is reasonably complete, accurate and unbiased.

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DEFINITION

The term auditing has been defined by different authorities.

1. Spicer and Pegler: "Auditing is such an examination of books of accounts and vouchers of

business, as will enable the auditors to satisfy himself that the balance sheet is properly drawn

up, so as to give a true and fair view of the state of affairs of the business and that the profit and

loss account gives true and fair view of the profit/loss for the financial period, according to the

best of information and explanation given to him and as shown by the books; and if not, in what

respect he is not satisfied."

2. Prof.L.R.Dicksee. "auditing is an examination of accounting records undertaken with a view

to establish whether they correctly and completely reflect the transactions to which they relate.

3 The book "an introduction to Indian Government accounts and audit" "issued by theComptroller and Auditor General of India, defines audit an instrument of financial control. It

acts as a safeguard on behalf of the proprietor (whether an individual or group of persons)

against extravagance, carelessness or fraud on the part of the proprietor's agents or servants in the

realization and utilisation of the money or other assets and it ensures on the proprietor's behalf

that the accounts maintained truly represent facts and that the expenditure has been incurred with

due regularity and propriety. The agency employed for this purpose is called an auditor."

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FEATURES OF AUDITING

a. Audit is a systematic and scientific examination of the books of accounts of a business;

b. Audit is undertaken by an independent person or body of persons who are duly qualified for

the job.

c Audit is a verification of the results shown by the profit and loss account and the state of

affairs as shown by the balance sheet.

d. Audit is a critical review of the system of accounting and internal control.

e. Audit is done with the help of vouchers, documents, information and explanations received

from the authorities.

f. The auditor has to satisfy himself with the authenticity of the financial statements andreport that they exhibit a true and fair view of the state of affairs of the concern.

g The auditor has to inspect, compare, check, review, scrutinize the vouchers supporting the

transactions and examine correspondence, minute books of share holders, directors,

Memorandum of Association and Articles of association etc., in order to establish correctness of

the books of accounts.

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OBJECTIVES OF AUDITING

There are two main objectives of auditing. The primary objective and the secondary or incidental

objective.

a.Primary objective

as per Section 227 of the Companies Act 1956, the primary duty (objective) of the auditor is to

report to the owners whether the balance sheet gives a true and fair view of the Companys state

of affairs and the profit and loss A/c gives a correct figure of profit of loss for the financial year.

b.Secondary objective

it is also called the incidental objective as it is incidental to the satisfaction of the main objective.

The incidental objective of auditing are: i. Detection and prevention of Frauds, and ii. Detectionand prevention of Errors.

Detection of material frauds and errors as an incidental objective of independent financial

auditing flows from the main objective of determining whether or not the financial statements

give a true and fair view. As the Statement on auditing Practices issued by the Institute of

Chartered Accountants of India states, an auditor should bear in mind the possibility of the

existence of frauds or errors in the accounts under audit since they may cause the financial

position to be mis-stated. Fraud refers to intentional misrepresentation of financial information

with the intention to deceive. Frauds can take place in the form of manipulation of accounts,

misappropriation of cash and misappropriation of goods. It is of great importance for the auditorto detect any frauds, and prevent their recurrence. Errors refer to unintentional mistake in the

financial information arising on account of ignorance of accounting principles i.e. principle

errors, or error arising out of negligence of accounting staff i.e. Clerical errors.

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Types of Audits and Reviews

The Audit Process

In general, a typical audit includes the following sequential steps:

Scheduling an opening conference to discuss the audit objectives, timing, and report

format and distribution.

Assessing the soundness of the internal controls or business systems and operations.

Testing the internal controls to ensure proper operation.

Discussing with management all preliminary observations.

Discussing with management the draft audit report and their responses, if available, priorto release of the final audit report.

Following up on critical issues raised in audit reports to determine if they have been

successfully resolved.

Internal Controls Educational Seminar

Any department or organization that would like a session on Internal Controls in the University

Environment should contact the Director of Internal Auditing Services at Ext. 5-4818 to schedule

it. The seminars are typically 1-2 hours in length and include a 20-minute video on internal

controls at colleges and universities. The presentation includes time for questions and answersand can be tailored to address a department's specific needs or requests.

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Audits

Types of Audits and Reviews:

1.

Financial Audits or Reviews

2. Operational Audit

3. Department Reviews

4. Information Systems Audits

5. Integrated Audits

6. Investigative Audits or Reviews

7.

Follow-up Audits

Financial Audit

A historically oriented, independent evaluation performed for the purpose of attesting to the

fairness, accuracy, and reliability of financial data. CSULB's external auditors, KPMG, perform

this type of review. CSULB's Director of Financial Reporting coordinates the work of these

auditors on our campus.

Operational Audit

A future-oriented, systematic, and independent evaluation of organizational activities. Financial

data may be used, but the primary sources of evidence are the operational policies and

achievements related to organizational objectives. Internal controls and efficiencies may be

evaluated during this type of review.

Department Review

A current period analysis of administrative functions, to evaluate the adequacy of controls,

safeguarding of assets, efficient use of resources, compliance with related laws, regulations and

University policy and integrity of financial information.

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Information Systems (IS) Audit

There are three basic kinds of IS Audits that may be performed:

1. General Controls Review

A review of the controls which govern the development, operation, maintenance, and security of

application systems in a particular environment. This type of audit might involve reviewing a

data center, an operating system, a security software tool, or processes and procedures (such as

the procedure for controlling production program changes), etc.

2. Application Controls Review

A review of controls for a specific application system. This would involve an examination of thecontrols over the input, processing, and output of system data. Data communications issues,

program and data security, system change control, and data quality issues are also considered.

3. System Development Review

A review of the development of a new application system. This involves an evaluation of the

development process as well as the product. Consideration is also given to the general controls

over a new application, particularly if a new operating environment or technical platform will be

used.

Integrated Audit

This is a combination of an operational audit, department review, and IS audit application

controls review. This type of review allows for a very comprehensive examination of a

functional operation within the University.

Investigative Audit

This is an audit that takes place as a result of a report of unusual or suspicious activity on the part

of an individual or a department. It is usually focused on specific aspects of the work of a

department or individual. All members of the campus community are invited to report suspicionsof improper activity to the Director of Internal Auditing Services on a confidential basis. Her

direct number is 562-985-4818.

Follow-up Audit

These are audits conducted approximately six months after an internal or external audit report

has been issued. They are designed to evaluate corrective action that has been taken on the audit

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issues reported in the original report. When these follow-up audits are done on external auditors'

reports, the results of the follow-up may be reported to those external auditors.

PROCEDURE TO BE FOLLOWED TO DETECT ERRORS.

Following procedures may be adopted by the auditor to detect the errors.

1. Check the opening balances from the balance sheet of the last year.

2. Check the posting into respective ledger accounts

3. Check the total of the subsidiary books.

4. Verify all the castings and the carry forwards.

5. Ensure that the list of debtors and creditors tally with the ledger accounts.

6. Make sure that all accounts from the ledger are taken into accounts.

7. Verify the total of the trial balance.

8. Compare the various items from the trial balance with that of the previous year.

9. Find out the amount of difference and see whether an item of half or such amount is entered

wrongly.

10. Check differences involving round figures as Rs. 1,000; Rs. 100 etc .

11. See where there is misplacement or transposition of figures that is 45 for 54; or 81 for 18 etc.

12. Ultimately careful scrutiny is the only remedy for detection of errors.

13. See that no entry of the original book has remained unposted.

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THE AUDITOR SHOULD PERFORM THE FOLLOWING DUTIES IN RESPECT OF

FRAUD.

1. Examine all aspects of the finance.

2. Vouch all the receipts from the counterfoils or carbon copies or cash memos, sales mart

reports etc.

3. Check thoroughly the salary and wages register.

4. Verify the methods of valuation of stocks.

5. Check up stock register, goods inwards notes, goods out wards books and delivery challansetc

6. Calculate various ratios in order to detect fraudulent manipulation of accounts

7. Go through the details of unusual items.

8. Probe into the details of the problems when there is a suspicion.

9. Exercise reasonable skill and care while performing the duty.

10. Make surprise visit to check the accounts.

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INCOME STATEMENT OF COCA COLA

Income [+] in Millions of Dollars

12/2012 12/2011 12/2010 12/2009 12/2008

Operating Revenue 11,491 8,938 8,388 7,872 5,992

Adjustments to Revenue N/A N/A - - -

Cost of Revenue 6,153 4,837 4,176 3,920 2,934

Gross Operating Profit 5,338 4,101 4,212 3,952 3,058

Selling/General/Admin Expense (3,612) (2,657) (2,501) (2,450) (1,833)

Research & Development - - - - -

EBITDA (Operating Income Before Depreciation) 1,707 1,326 1,711 1,502 1,224

Depreciation & Amortization - - (326) (289) (236)

Operating Income 2,150 1,653 1,385 1,213 989

Interest Income 33 43 23 22 31

Other Income, Net (52) (161) (86) (93) (261)

Total Income Before Interest Expense (EBIT) 1,707 1,326 1,322 1,142 760

Interest Expense (152) (124) (142) (145) (159)

Income Before Tax 1,555 1,202 1,180 997 600

Income Taxes (488) (401) (345) (310) (180)

Minority Interest 44 40 (40) (34) (16)

Net Income from Continuing Operations 1,081 761 795 653 404

Net Income from Discontinued Operations - - - - -

Net Income from Total Operations 1,081 761 795 653 404

Normalized Income 1,099 761 795 653 404

Extraordinary Income/Loss - - - - -

Special Income/Charges (18) - - - -

Income from Cum. Effect of Acct Change - - - - -

Income from Tax Loss Carryforward - - - - -

Other Gains (44) - - - -

Total Net Income 1,037 761 795 653 404

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BALANCE SHEET FOR COCA-COLA CO.

Assets [+] in Millions of Dollars

12/2012 12/2011 12/2010 12/2009 12/2008

Cash and Equivalents 8,442 12,803 8,517 7,021 4,701

Restrictable Cash - - - - -

Marketable Securities 8,109 1,232 2,820 2,192 278

Receivables 4,759 4,920 4,430 3,758 3,090

Inventories 3,264 3,092 2,650 2,354 2,187

Prepaid Expenses 2,781 3,450 3,162 2,226 1,920

Current Deferred Income Taxes - - - - -

Other Current Assets 2,973 - - - -

Total Current Assets 30,328 25,497 21,579 17,551 12,176

Gross Fixed Assets 23,486 23,151 21,706 16,467 14,400

Accumulated Depreciation (9,010) (8,212) (6,979) (6,906) (6,074)

Net Fixed Assets 14,476 14,939 14,727 9,561 8,326

Intangibles 15,082 15,450 15,244 8,604 8,476

Cost in Excess 12,255 12,219 11,665 4,224 4,029

Non-Current Deferred Income Taxes - - - - -

Other Non-Current Assets 14,033 11,869 9,706 8,731 7,512

Total Non-Current Assets 55,846 54,477 51,342 31,120 28,343

Total Assets 86,174 79,974 72,921 48,671 40,519

Liabilities [+] in Millions of Dollars

12/2012 12/2011 12/2010 12/2009 12/2008

Accounts Payable 1,969 2,172 1,887 1,146 1,370

Short Term Debt 1,577 2,041 1,276 51 465

Notes Payable 16,297 12,871 8,100 6,749 6,066

Accrued Expenses 6,711 - - - -

Accrued Liabilities 6,711 6,837 6,972 5,247 4,835

Deferred Revenues - - - - -

Current Deferred Income Taxes 632 - - - -

Other Current Liabilities 1,267 362 273 528 252

Total Current Liabilities 27,821 24,283 18,508 13,721 12,988

Long Term Debt 14,736 13,656 14,041 5,059 2,781

Deferred Income Tax 4,981 4,694 4,261 1,580 877

Other Non-Current Liabilities 5,468 5,420 4,794 2,965 3,011

Minority Interest 378 286 314 547 390

Capital Lease Obligations - - - - -

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Preferred Securities of Subsidiary Trust - - - - -

Preferred Equity Outside Shareholders' Equity- - - - -

Total Non-Current Liabilities 25,563 24,056 23,410 10,151 7,059

Total Liabilities 53,384 48,339 41,918 23,872 20,047

Preferred Shareholder's Equity - - - - -

Common Shareholder's Equity 32,790 31,635 31,003 24,799 20,472

Total Equity 32,790 31,635 31,003 24,799 20,472

Total Liabilities & Shareholder's Equity 86,174 79,974 72,921 48,671 40,519

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Ledger Accounts

Accounting Entries are recorded in ledger accounts. Debit entries are made on the left side of the

ledger account whereas Credit entries are made to the right side. Ledger accounts are maintained

in respect of every component of the financial statements. Ledger accounts may be divided into

two main types: balance sheet ledger accounts and income statement ledger accounts.

Balance Sheet Ledger Accounts

Balance Sheet ledger accounts are maintained in respect of each asset, liability and equity

component of the statement of financial position.Following is an example of a receivable ledger

account:

Receivable Account

DEBIT Rs. Credit Rs.

Balance b/d 400 Cash 400

Sales 900 Balance c/d 900

1300 1300

Balance brought down is the opening balance is in respect of the receivable

at the start of the accounting period.

These are credit sales made during the period. Receivables account is

debited because it has the effect of increasing the receivable asset. The

corresponding credit entry is made to the Sales ledger account. The account

in which the corresponding entry is made is always shown next to the

amount, which in this case is the Sales ledger.

This is the amount of cash received from the debtor. Receiving cash has the

effect of reducing the receivable asset and is therefore shown on the credit

side. As it can seen, the corresponding debit entry is made in the cashledger.

This represents the balance due from the debtor at the end of the accounting

period. The figure has been arrived by subtracting the amount shown on the

credit side from the sum of amounts shown on the debit side. This

accounting period's closing balance is being carried forward as the opening

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balance of the next period.

Similar ledger accounts can be made for other balance sheet components such as

payables, inventory, equity capital, non current assets and so on.

Income Statement Ledger Accounts

Income statement ledger accounts are maintained in respect of incomes and

expenditures.

Following is an example of Office expense ledger:

POSTAGE & TELEGRAM Expense Account

Debit Rs. Credit Rs.

Cash 1500 Income Statement 1500

1500 1500

This is the amount of cash paid against P & T bill. The expense ledger is being

debited to account for the increase in expense. The corresponding credit entry

has been made in the cash ledger.

This represents the amount of expense charged to the income statement. The

balance in the ledger has been recycled to the income statement which is being

debited by the same amount. Unlike balance sheet ledger accounts, there is no

balance brought down or carried forward. Instead, the income statement ledger

is closed each accounting period end with the balancing figure representing the

charge to income statement.

Similar ledger accounts can be made for other income statement components

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Importance & Utility of Ledger Accounts

The following are the important utilities of ledger accounts.

1.

Ledger account keeps a permanent record of all financial transactions in a

classified manner

2. Ledger account shows detailed financial information of a business regarding

debtors & creditors, assets, and incomes & expenses.

3. Ledger account helps to prepare a trail balance in order to check the arithmetical

accuracy of the recording of the financial transactions of the business.

4. Ledger account helps to prepare profit & loss account so as to ascertain the

profit or loss of the business

5. Ledger account helps to prepare the balance sheet with a view to show the

financial position of the business.

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CONCLUSION

The all above information is related with Auditing of ledger. It helps to know how to audit of a

ledger or how to scrutinize it .

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BIBLIOGRAPHY

Varsha Ainapure, Mukund Ainapure AUDITING- Manan Prakashan

T.Y.B.com AUDIT- Sheth Prakashan

Google (http://www.google.co.in)

Wikipedia

Various sites.

http://www.google.co.in/http://www.google.co.in/http://www.google.co.in/http://www.google.co.in/