Question

Discuss the differences between auditing a service company and a manufacturing company.

Answer 1

-	AUDITITNG IS GENERALLY CARRIED OUT TO GIVE THE OPINION ON THE TRUE AND FAIR PIRCTURE OF THE FINANCIAL STATEMENTS.
-	FINANCIAL STATEMENTS OF THE MANUFACTURING COMPANY AND SERVICING COMPANY HAVE SOME SIGNIFICANT DIFFERENCE.
-	THEREFORE AUDITING OF THE MANUFACTURING COMPANY AND SERVICING COMPANY DIFFERES.
-	SERVICING COMPANY WILL NOT HAVE TANGIBLE OUT PUTS WHILE MANUFACTURING COMPANY HAVE A SIGNIFICANT INVENTORY WHICH IS A IMPORTANT PART OF THE BALANCE SHEET
-	AUDITING OF THE INVENTORY WITH DETAILED PROCESURE BECOMES NECESSARY IN CASE OF MANUFACTURING COMPANY
-	AUDITOR HAVE TO CHECK THE VALUATION, PHYSICAL EXISTENCE, SECURITY CONTROLS, RECORDING SYSTEM ETC, OF THE INVENTORY MORE INTENSIVELY IN CASE MANUFACTURING COMPANY.
-	IN SERVICING COMPANY, LABOR COST WILL BE HIGHEST WHILE IN CASE MANUFACTURING COMPANY MATERIAL AND LABOR BOTH ARE IMPORTANT.
-	IN CASE OF SERVICING COMPANY, PHYSICAL FIXED ASSETS MAY BE LESS AS COMPARED TO MANUFACTURING COMPANY.
-	LEAKAGE OF REVENUE BEING A SERVICE CHARGES NOT RECEOVERD FULLY FROM ALL CUSTOMER IS POSSIBLE WHILE IN MANUFACTURING COMPANY SALE UNRECORDED MAY HAPPEN
	THE ISSUE IS THAT, UNRECORDED SALE CAN COME TO KNOW WHILE RECONCILLING THE INVENTORY, BUT IN CASE OF SERVICE CHARGES NOT RECOVERED CAN NOT BE IDENTIFIED THAT MUCH EASILY.
-	WHILE AUDITING THE REVENUE, AUDITOR MAY HAVE OTHER SUPPORTING DOCUMENTS LIKE TRANSPORT RECEIPTS, TO SUPPORT THE SALE RECORDED, AUDITOR MAY CONCLUDE THAT IF THERE IS LORRY RECEIPT THEN GOODS ARE TRANSFERRED ACTUALLY AND SALE RECORDED IS NOT THE FAKE JUST TO INCREASE THE REVENU.
	BUT IN CASE OF SERVICING COMPANY , IT BECOMES BIT DIFFIULT TO FIND OTHER SUPPORTING DOCUMENT OR NOTHING IS THE EVIDENCE OF ACTUAL SERVICE PERFORMED.
-	IN CASE OF SERVICING COMPANY, CREDIT PERIODS ALLOWED TO CUSTOMER WILL BE VERY SMALL AS COMPARED TO MANUFACTURING COMPANY\
	WHILE AUDITING THE DEBTORS, THIS POINT SHALL BE KEPT IN MIND.
-	TAX RATE LIKE GOODS AND SERVICE TAX HAVE DIFFERENT RATES FOR MANUFACTURING AND SERVICING COMPANY.
	RULES APPLICABLE FOR TAXATION MAY HAVE DIFFERENT APPLICABILITY FOR BOTH
	WHILE AUDITING THE TAXES AND LEGAL COMPLIANCES, THIS POINT DIFFER IN BOTH COMPANY