Before auditing of balance sheet, it is the duty of auditor to audit income statement. In income statement audit, he has to check and verify different expenses and incomes. Following are the main steps of Income Statement Audit.

1st Step : Audit of Expenses

First of all CA has to audit all the expenses to see all expenses are valid or not. He also varify the amount of expenses with its each account.

a) Cost of Goods Sold Audit

CA has to check whether cost of goods sold is calculated as per rules and regulations. Whether each item in it represents the cost of production and cost relating to sale. Whether using formula is correct or not.

b) Operating Expenses  Audit

CA also check all operating expenses one by one. He will verify selling expenses, administration expenses and depreciation.

2nd Step : Revenue Audit

In this audit, CA must check each revenue of business whether it is getting from rent, interest or commission. If there is any income which is not relating to business. It will be excluded from business income. It will be added in personal income.

3rd Step : Income Tax Audit

Auditor will check the net income before the tax by accountant. He will calculate the income tax as per updated law. He will see whether it is equal as per accountant or not. If there is difference between his calculation and accountant's calculation, he will go deep for knowing actual reason.
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Accounting Education: How to Audit Income Statement
How to Audit Income Statement
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Accounting Education
https://www.svtuition.org/2014/05/how-to-audit-income-statement.html
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http://www.svtuition.org/
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