UNIT I
INTRODUCTION TO AUDITING
Q1) What is audit or auditing? What are the objectives of auditing? Or Explain the concept of audit and its objectives?
A1)
Auditing is an examination of the accounting records by a qualified and independent person on the basis of the proper evidence, to express his opinion as to the truth and fairness of financial statements.
According to R.K. Mautz “Auditing is concerned with the verification of accounting data with determining the accuracy and reliability of accounting statements and records.”
OBJECTIVES OF AUDITING
A. Primary Objectives
B. Secondary Objectives
C. Special Objectives
(A). PRIMARY OBJECTIVES
Following are the primary or principal objectives of auditing.
1. Accounting Polices
The main object of auditing is to examine the accounting policies. Accounting policies are needed for preparing the accounting records.
2. Fairness of Statements
One of the most important objectives of audit is to determine the fairness of statements. Auditor examine the books of accounts to know the reliability of financial statements.
3. Prescribed Laws
Another object of audit is to check that prescribed laws were followed or not in preparation financial statements. In Pakistan companies are governed under companies‟ ordinance 1984. So auditor verify whether the requirements of Ordinance have been compiled or not.
4. Independent Opinion
Expression of independent opinion about financial statement is the main objective of auditing. After complete scrutiny auditor give his opinion in the form of report about fairness of financial statements.
(B) SECONDARY OBJECTIVES
Following are the secondary or subsidiary objectives of auditing.
1. Detection of Errors
Unintentional mistakes in accounting records and financial statements are called financial errors. Errors are generally committed unintentionally. The objective of auditing is to detect errors.
2.Detection of Frauds
Intentional mistakes in accounting records and financial statements are called fraud. Frauds are committed with intention to deceive mislead and conceal the truth. Objective of auditing is to detect the fraud. 7. Prevention of Errors and Frauds Objective of auditing is not only to detect the errors and frauds but also to prevent them. It is not possible to prevent the errors and frauds fully but these can be minimized through efficient and effective internal control.
(C) SPECIAL OBJECTIVES
Following are the important special objectives of audit.
1. Satisfaction of Tax Authorities
The objective of audit is to satisfy tax authorities. The audited accounts are reliable. The business concern can settle the tax matters easily.
2. Loan Facilities
The objective of audit may be providing loan facilities to the organization. Banks rely on audited accounts. On the basis of audited accounts, the management can get loan from banks easily.
3. To Attract Investor
The object of audit is to attract investors. The audited accounts are more reliable. Investors can make investment by relying over audited accounts.
4. Purchase Consideration
The object of audit may be to determine the real value of business. Through audited accounts the fair value of assets and liabilities can be determined.
5. Variation in Profit
The object of audit may be to check the variation in profit. By auditing the auditor can analyse the fluctuation in profit.
6. Proper Supervision
The object of audit may be the proper supervision of business. Sometimes owner cannot look after the business personally. Audit acts as a check on employees and it saves the owner from losses.
7. Prevention of Disputes among Partners
Audited accounts are considered more reliable. Where a partnership regularly gets its accounts audited, there are less chances of misunderstanding and distrust among the partners.
8. Management Audit
It is a voluntary audit. The purpose of management audit is to assess the performance, review the organizational structure and suggest best course of action.
9. Social Audit
The purpose of social audit is to measure social performance of business. The society is concerned with the protection of natural environment.
Q2) Define audit. How does it differ from accounting? OR Define auditing. Also explain the difference between accounting and auditing?
A2)
Auditing is an examination of the accounting records by a qualified and independent person on the basis of the proper evidence, to express his opinion as to the truth and fairness of financial statements.
ACCOUNTING
Accounting is an art of recording business transactions in a systematic manner in the books of accounts and to prepare financial statements.
DIFFERENCE BETWEEN ACCOUNTING AND AUDITING / ACCOUNTANT AND AUDITOR
1. Meaning
(a) Accounting is an art of recording business transactions in books of accounts and to prepare financial statements
(b) Auditing is an examination of accounting records to check the fairness of financial statements.
2. Scope
(a) Accounting refers to the preparation of financial statements
(b) Auditing refers to examination of accounting records.
3. Data
(a) Accounting is concerned with current data
(b) Auditing is mainly concerned with past data
4. Objective
(a) The main objective of accounting is to ascertain the trading results of business
(b) The main objective of auditing is to certify the correctness of financial statements
5. Duration
(a) Accounting work is undertaken throughout the year
(b) Auditing is generally done at the end of trading year.
6. Report
(a) In accounting it is not required to prepare and submit report
(b) In auditing it is required to prepare and submit report to the owners of business.
7. Techniques
(a) Accounting techniques include depreciation, amortization, valuation etc.
(b) Auditing techniques include vouching, verification and valuation
8. Necessity
(a) Accounting is necessity of every organization whether small or large
(b) Auditing is not necessary for every organization
9. Nature of Job
(a) Accounting job is mechanical in nature
(b) Auditing job is not so mechanical.
10. Qualification
(a) No specific qualification is required for accountant.
(b) Specific qualification is required for auditor such as for companies
(c) auditor must be chartered accountant (CA)
11. Appointing Authority
(a) The management committee is authorized to appoint accountant
(b) Owners or Securities and Exchange Commission of Pakistan (SECP) are authorized to appoint auditor.
12. Rights, Duties and liabilities
(a) Rights, duties and liabilities of accountant are fixed by business management
(b) Rights, duties and liabilities of auditor are fixed by companies’ ordinance 1984.
13. Employment
(a) Accountant is a permanent employee of organization
(b) Auditor is not a permanent employee or organization
14. Reward
(a) Reward of accountant is called salary
(b) Reward of auditor is called fee.
15. Removal
(a) Accountant can be removed from his job at any time.
(b) Auditor cannot be removed till he completes his period of appointment.
16. Advice
(a) Accountant has right to give advice to management on business matters.
(b) Auditor has no right to give advice to management on business matters.
17. Errors and Frauds
(a) Errors and frauds may be committed by accountant
(b) Errors and frauds are detected by auditor
18. Knowledge
(a) Accountant must have accounting knowledge
(b) An auditor must have accounting as well as auditing knowledge.
19. Evaluation: -
(a) The accountant cannot determine the efficiency of its own function.
(b) Auditor also cannot determine the efficiency of its own function but he can determine the efficiency of all the business.
20. Management Influence
(a) An accountant is under direct pressure of business management
(b) Auditor is not under direct pressure of the management
Q3) What is Continuous audit? What are the advantages and disadvantages (drawbacks) of continuous audit?
A3)
CONTINUOUS / RUNNING / DETAILED AUDIT
Continuous audit is conducted throughout the year. The auditor or his staff visits the client’s office at regular or irregular intervals and check the accounting records up to the date of his visit. According to R.G. Williams “Continuous audit is one where the auditor or his staff is constantly engaged in checking the accounts during the whole period or where the auditor or his staff attends client’s office at regular or irregular intervals during the period.
ADVANTAGES OF CONTINUOUS AUDIT
Following are the advantages of continuous audit.
1. Early Detection of errors and frauds
In continuous audit the auditor checks the accounts in detail, soon after the entries have been made. In this way if there is any error or fraud it can be detected at initial stage.
2. Quick Rectification
Due to Continuous Audit errors are located easily and rectified at an early stage.
3. Detailed Checking
In continuous audit, auditor has so much time so it is possible for him to check the accounts in detailed.
4. Checks on Fraud
Due to continuous audit surprise visits of auditor are possible and due to this accounting staff become alert and there are less chances of fraud.
5. Proper Attention
In continuous audit, the auditor has ample time to examine the accounting records, so he can give proper attention to the checking of books of accounts.
6. Early Presentation of Accounts
In continuous audit, accounting and auditing is done together so in this way audited accounts can be presented to shareholders soon after the closing of the trading period.
7. Accounts up to date
In continuous audit, the auditor visits are surprise at the client’s office, so clerks always keep the accounts up to date.
8. Interim Dividend
If the directors of company decide to pay the interim dividend continuous audit will help in preparation of interim accounts without much effort.
9. Prompt Filing of Returns
The continuous audit is also helpful for the prompt filing of returns. The management can submit audited account to the registrar as soon as the end of the year.
10. Early Meetings
This audit is helpful for the early meeting of the shareholders. The accounts are presented for the distribution of profit.
11. Auditor Advice
In the continuous audit the auditor can find the weakness of the business during the year and he can make the suggestion for the improvement of the business.
12. Distribution of Work
The work of audit continues the whole year. It is helpful in distribution of load of work on the staff.
13. Less chances of overlooking
Auditor has so much time, so he can consider all the important points. In this way there are less chances of overlooking the important matters.
14. Learning for audit staff
In continuous audit, audit work is carried out in detail. So continuous audit provide an excellent learning opportunity for junior audit staff.
15. Encouraging Investment
Investment is encouraged with the help of continuous audit because this audit is very helpful in controlling the irregularities.
DISADVANTAGES OF CONTINUOUS AUDIT
Following are the disadvantages of continuous audit.
1. Inconvenience
There may be inconvenience to the staff by the frequent visits of auditor and these visits may upset the work of auditor’s staff.
2. Expensive
This type of audit is very expensive because auditor has to make many visits and perform detailed work.
3. Thread of work is lose
In continuous audit the auditor visits client’s office at regular or irregular intervals. The link between the past and present work may not be maintained.
4. Staff Intimacy
Due to frequent visits of auditor, client’s staff and audit staff may develop friendly relationship. Friendship can affect the impartiality of auditor.
5. Not Suitable for Small Businesses
Continuous audit is not fit for small business concerns. A small business has few transactions so there is no need of audit for whole one year.
6. Seasonal Industries
In seasonal industries like textile and sugar the volume of work is reduced in off seasons so there is no need of continuous audit.
7. Alteration in Figures
Dishonest persons may change the figures in books after the checking by auditor.
8. Increase labour
In continuous audit alteration in figures can only be avoided by taking extensive notes by auditor which increases the work of auditor.
9. Unnecessary Dependence
Frequent visits of auditor to client’s office may induce the accounting staff to depend upon auditor even for petty matters.
10. Low Income for auditor
The continuous audit keeps the staff busy for one year. They are not able to start and complete many audits at the same time. So it is not suitable for audit staff from financial point of view.
Q4) Define interim audit. Discuss its merits and demerits.
A4)
Interim Audit: Interim audit is that audit which is conducted between the two annual audits for the purpose of finding the interim dividend. It also minimizes the work and time involved in final audit. These types of audit may be monthly, half yearly or quarterly. According to L.R Howard “When an audit is conducted to a particular date within the accounting period, it is called interim audit”.
Advantages of interim audit:
1. Interim dividend:
Interim audit is conducted to declare interim dividend. The shareholders feel satisfaction over the business.
2. Early deduction of errors and frauds:
The frauds and errors can be deducted early due to interim audit. Early deduction of errors and frauds can minimize future losses.
3. Auditor suggestions:
The accounting staff can follow auditor suggestion. Auditor’s advices are useful for better performance of business during the year.
4. Increase in profit
By implementing the auditor’s suggestions the deficiencies in accounting system can be removed. The performance of the management can be improved. So, interim audit provides chances to increase profit.
5. Comparative study of financial results
Interim audit reports show quarterly or half yearly financial results. These results are compared with final results to know the direction of profitability.
6. Planning:
Interim audit is helpful for making plans for remaining part of a year. We can increase the profitability of business due to better planning.
7. No over work:
In case of interim audit, there is no over work because the audit work is less. The audit staff can complete the audit work easily according to time table.
8. Moral check:
When the staff of the client knows that at any time during the year accounts are checked for the interim period then they will not commit any fraud.
9. Accounts up to date
In interim audit, the auditor examines the accounting records during the trading period. The accounting staff becomes regular and maintains the accounting records up to date.
10. Making investment:
Interim results are useful for investors. They can rely on audited accounts for making investment.
11. Early presentation of audited accounts
In case of interim audit, most of the audit work has already been performed during the trading period. The final audit can be completed early and audited accounts can be presented to the shareholders soon after the closing of trading period.
12. Convenient
Interim audit is very convenient for the management because they invite the audit staff when their business activity is low.
13. No Staff intimacy
In interim audit, the audit time is short and audit staff does not visit the client‟s office frequently. There are no chances of staff intimacy.
14. Case of New Partner
At time of admission of new partner in a business it is necessary to determine the correct position of assets and liabilities. For the determination of values of assets and liabilities during the year interim audit is very helpful.
15. Retirement and Death Case
If any partner dies or wants to leave from the business then interim audit can easily determine the correct position of its assets and liabilities.
Disadvantages of interim audit:
1. Figures alteration:
In interim audit after completion of work books are returned to accounting staff. Figures can be changed by accounting staff after the end of the audit.
2. Additional work:
To prevent the alteration of figures, it is necessary for audit staff to keep notes of important balances and totals. Note taking is an extra work for an auditor
3. Test checking:
In interim audit, test checking technique is followed. Audit risk is maximized because interim financial statements will be based on sample results.
4. Additional expense
Interim audit increases the business expenses. Interim audit is optional for management, so audit fee is an expense for business.
5. Work suffers:
Interim audit creates troubles for accounting staff. When accounting books are collected by audit staff, the client work suffers as books are not available for making entries.
6. Limited Scope
Interim audit is extra financial burden for the organization. Small business units cannot afford this financial burden. Thus, scope of interim audit is limited to large business units only.
7. Useless for third party
Interim audit provides interim results. These results are not final. The interim results do not provide guidelines for third party. So interim audit is useless for third party.
Q5) What are the advantages or importance of audit or auditing? OR
Describe the benefits of getting the accounts audited to the business itself and public at large. OR
Why accounts are got audit?
A5)
ADVANTAGES OF AUDITING
The advantages of auditing can be discussed under the following headings.
A. Advantages to the Business B.
B. Advantages to the owners
C. Advantages to the government or State
D. Advantages to general public
ADVANTAGES TO THE BUSINESS
1. Moral Check
The fear of detection of errors and frauds acts as a moral check on the employees. Due to this check the employees become regular and more careful in their work.
2. Detection of errors and frauds
Errors and frauds if any, committed by employees of the business in accounting records can be detected by auditing.
3. Loan facilities
Business can easily obtain loan with the help of audited accounts because audited accounts are accepted by the lenders for granting loan
4. Business Purchase
Price If a running business is to be sold, purchase consideration ( Price) can easily be determined (Calculate) on the basis of audited accounts.
5. Tax Payments
If accounts are audited then these are easily accepted by the tax department for the assessment of taxes and there is no need for further inquiry
6. Settlements of Disputes
If any dispute arise among directors, partners or shareholders regarding share of profit etc. it can easily be settled through the audited accounts.
7. Settlement of Insurance Claims
In case of loss or damage to business property due to fire, earthquake, theft etc. the audited accounts facilitate to settle the insurance claim.
8. Correct Information about Business
Due to fear of audit, the work of accounting always remains up to date and correct information is given to the members in time.
9. Owner’s satisfaction:
In the presence of audit, the owners feel satisfaction about business operation and working.
10. Helpful for partners
The partners can rely on the audited accounts. The audited accounts help the partners to adjust their capital and determine the value of goodwill at the time of admission, retirement and death of a partner.
11. Shareholders Protection
Audit is the only way to save shareholders from exploitation The shareholders can watch business through auditor. The auditor takes utmost care to protect their rights.
12. Deceased Estate
If the accounts are audited then the family of deceased person can rely on these accounts for distributing the estate.
13. Fluctuation in Profit
If accounts are audited then owners can easily know that what are the reasons for fluctuation of profit.
14. Making of Budget
If accounts are audited then owners can easily know the true and fare view about their business activities and they can make the budget for next year.
15. Valuable Advice
The auditor is an expert in accounting problems. The owners of the business can get valuable pieces of advice to solve the accounting problems.
ADVANTAGES TO GOVERNMENT
1. Easy assessment of Taxes:
In the presence of audited accounts, the tax authorities can easily assess (calculate) the income tax, sales tax and pass the assessment order without further investigation.
2. Early recoveries of Taxes:
The assessment orders can be made by tax authorities at early date which leads to early recovery of taxes.
3. Economic Progress:
The government can check the economic progress of the various companies by going through the audited accounts. If these companies are earning reasonable profit, it shows a good sign for the economy.
4. Privatization
If some industries under government control are running in loss, the government may privatize these sick industrial units. The sale price of these industrial units is settled on the basis of audited accounts.
5. Purchase of Private Business
Units If any private business unit is not working for the welfare of the general public. The government may take over such business units. The purchase price of these units is settled on the basis of audited accounts.
ADVANTAGES TO GENERAL PUBIC AND OTHERS
1. No lender’s Loss:
There may be no loss to lenders because banks and others financial institutions get the audited accounts before granting loan and with the help of audited accounts, they can check the trust worthiness of customers.
2. Better Pay:
Audited accounts provide the true and fair view of profit, so employees can demand higher pay.
3. Investor’s Satisfaction:
The investors can easily judge the position of the company and thus make the decision to invest in one company and not others.
4. Employment Opportunities:
As organization and businesses are expanding; the need of audit is increasing, so this field is providing more and more job opportunities to the thousands of people.
5. Training Facilities
The audit assistants and clerks work under the supervision and control of auditor. They get trained and become human capital for the industry.
Q6) What are the limitations of Auditing?
A6)
1. Lack of complete picture—The audit may not give complete picture. If the accounts are prepared with the intention to defraud others, auditor may not be able to detect them.
2. Problem of Dependence—Sometimes the auditor has to depend on explanations, clarification and information from staff and the client. He may or may not get correct or complete information.
3. Existence of error in the audited accounts—Due to time and cost constraints, the auditor cannot examine all the transactions. He uses sampling to check the transactions. As a result, there may be errors & frauds in the audited accounts even after the checking by the auditor.
4. Exercise of judgement—The nature, timing and extent of audit procedures to be performed is a matter of professional judgement of the auditor. The same audit work can be done by two different auditors with difference in sincerity & personal judgement.
5. Diversified situations—Auditing is considered to be a mechanical work. Auditors may not be in a position to frame audit programme which can be followed in all situations.
6. Lack of Expertise—In some situations, an auditor has to take opinion of experts on certain matters on which he may not have expert’s knowledge. The auditor has to depend upon such reports which may not be always correct.
7. Limitations of internal control—The auditor can only report on the truth and fairness of the financial statements. But other problems relating the management and control may not be possible to be covered by the auditor. Examples of such problems or limitations of internal control are cast-ineffectiveness, manipulations by management, etc.
8. Influence of management on the auditor—This is also come of the limitations of the audit that the auditor is influenced by the doings of those in management. The reason is that he is appointed by the share holders and directors who pay him remuneration or fee.
Q7) What are the advantages and disadvantages of continues audit?
A7)
Advantages:
1. Easy and quick discovery of Errors and frauds: Errors and frauds can be discovered easily and quickly as the auditor checks the accounts at regular intervals and in details.
2. Helps the auditor in making valuable suggestions: since the auditor remains more in touch with the business, he is in a position to know the technical details of it and hence can be of great help to his clients by making valuable suggestions.
3. Quick presentations of accounts: As the checking work is already performed during the year, the final audited accounts can be presented to the share-holders soon after the close of the financial year at the annual general meeting.
4. Keeps the client’s staff regular: As the auditor visits the clients at regular intervals, the clerk will be very regular in keeping the accounts up-to-date.
5. Moral cheek on the clients staff: If the auditor pays surprise visits, it will have a considerable moral check on the clerks preparing the accounts.
6. Efficient Audit: As the auditor has more time at his disposal, he can check the accounts with greater attention and in detail and his work will be more efficient.
7. Preparation of Interim Accounts : If the directors of a company wish to declare an interim dividend. Continuous audit will help in the preparation of the interim accounts without much delay,
8. Audit staff can be kept busy: The audit staff may be sent to other clients after having finished the work for one client and thus can be kept busy throughout the year.
Disadvantages:
1. Alteration of figures: Figures in the books of account which have already been checked by the auditor at his previous visit, may be altered by a dishonest clerk to defraud the accounts.
2. Dislocation of client’s work: As the auditor visits frequently, it may dislocate the work of his client and cause inconvenience to the latter.
3. Expensive: It is an expensive system of audit as such an audit is carried on throughout the financial year at regular intervals.
4. Queries may remain outstanding: As there may be a long interval between the two visits, the audit clerk may lose the link between the past and present work and the queries which he wanted to-make may remain outstanding.
5. Mechanical work: Under such an audit, the work of the auditors becomes mechanical and his frequent visits may also cause boredom to him.
Precautions to guard against its disadvantages:
1. The auditor should issue clear instructions to the effect that the audited figures should not be changed without bringing he to his notice. If some alteration is necessary it should be done by passing rectification entries in the journal.
2. He should try to check the accounts of similar nature in one and continuous sitting as far as possible and if not possible, he should check the transaction up to a particular date. He should also note important totals and balances up to that date in his diary and compare them at his next visit,
3. The auditor should prepare an exhaustive programme to prevent any loop-holes.
4. The explanations of important questions which he finds unsatisfactory should be noted in his note-book and efforts should be made to get the matters settled. 5. He should go through the past work and alterations, if any, before he begins his work.
Q8) What are the features of Auditing?
A8)
a. Audit is a systematic and scientific examination of the books of accounts of a business;
a. Audit is undertaken by an independent person or body of persons who are duly qualified for the job.
b. 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.
c. Audit is a critical review of the system of accounting and internal control.
d. Audit is done with the help of vouchers, documents, information and explanations received from the authorities.
e. The auditor has to satisfy himself with the authenticity of the financial statements and report that they exhibit a true and fair view of the state of affairs of the concern.
f. The auditor has to inspect, compare, check, review, scrutinize the vouchers supporting the transactions and examine correspondence, minute books of shareholders, directors, Memorandum of Association and Articles of association etc., in order to establish correctness of the books of accounts.
Q9) Write a short note about expression of opinion?
A9) When we speak of the objective, we rationalize the thinking process to formulate a set of attainable goals, with reference to the circumstances, feasibility and constraints. In money matters, frauds and errors are common place of occurrence. Apart from this, the statements of account have their own purpose and use of portraying the financial state of affairs. The objective of audit, naturally, should be to see that what the statements of account convey is true and not misleading and that such errors and frauds do not exists as to distort what the accounts should really convey. Till recently, the principal emphasis was on arithmetical accuracy; adequate attention was not paid to appropriate application of accounting principles and disclosure, for ensuring preparation of accounting statement in such a way as to enable the reader of the accounting statement to form a correct view of the slate of affairs. Quite a few managements took advantage of the situation and manipulated profit or loss and assets and liabilities to highlight or conceal affairs according to their own design.
This state of affairs came up for consideration in the Royal Mail Steam Packet Company’s Case as a result of which the Companies Acts of England and India were amended in 1948 and 1956 respectively to require the auditor to state inter alia whether the statements of account are true and fair. This is what we can take as the present-day audit objective. The implication of the substitution of “true and fair” need to be understood. There has been a shift of emphasis from arithmetical accuracy to the question of reliability to the financial statements. A statement may be reliable even though there are some errors or even frauds, provided they are not so big as to vitiate the picture. The word “correct” was somewhat misplaced as the accounting largely consists of estimates.
However, you should not infer that the detection of errors and frauds is no longer an audit objective; it is indeed an audit objective because statements of account drawn up from books containing serious mistakes and fraudulent entries cannot be considered as a true and fair statement. To establish whether the financial statement show a true and fair state of affairs, the auditors must carry out a process of examination and verification and, if errors and frauds exist, they would come to his notice in the ordinary course of checking. But detection of errors of frauds is not the primary aim of audit; the primary aim is the establishment of a degree of reliability of the annual statements of account. If there remains a deep-laid fraud in the accounts, which in the normal course of examination of accounts may not come to light, it will not be construed as failure of audit, provided the auditor was not negligent in the carrying out his normal work.
Q10) What are the procedures to be followed to detect errors?
A10)
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.
Q11) What are the duties of auditor in respect of fraud?
A11)
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 challans etc
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.