Trusts and societies are accountable to their trustees or managing committee, to donors, and, where registered under the Income-tax Act, to the tax authorities. An audit of such an entity examines whether receipts have been recorded completely, whether application of income is supported, and whether the financial statements reflect the restrictions attached to corpus, earmarked funds, and grants.
The work includes verification of donation receipts, bank statements, grant utilisation certificates, payroll of staff engaged in charitable activity, and payments to related parties. Distinctions between corpus and voluntary contributions, and between application and accumulation of income, are checked against the trust deed or bye-laws and against the conditions of registration under sections 12A/12AB and 80G, where applicable.
Reporting follows the format required by the instrument of the organisation and, where a tax audit or specified audit report is required, the forms notified for the year. Observations on weak receipt controls, delayed bank deposits, or incomplete beneficiary records are communicated so that the next year’s books start from a corrected base.
The audit file also supports annual filings, trustee meetings, and donor queries that ask for confirmation of how funds were used during the year.