Sunday, September 7, 2014

What is Investigation? Distinguish between Audit and Investigation, define the scope and objectives of investigation.

What is Investigation? Distinguish between Audit and Investigation, define the scope and objectives of investigation.

Definition:
Investigation involves inquiry into facts behind the books and accounts, into the technical, financial and the economic position of the business or organisation.
Investigation is an examination of books and records preliminary of financing or for any specified purpose, sometimes differing in scope from the ordinary audit.
Investigation implies an examination of and record for some special purpose.

Audit and Investigation distinguished:
1.         Legal binding
  • Audit of annual financial statements is compulsory under the Companies Ordinance, 1984.
  • Investigation is not compulsory under Companies Ordinance but voluntary depending upon necessity.
2.         Object in view
  • Audit is conducted to ascertain whether the financial statements show a true and fair view.
  • Investigation is conducted with a particular object in view, viz to know financial position, earning capacity, prove fraud, invest capital, etc.
3.         Period covered
  • Audit is conducted on annual basis.
  • Investigation may be conducted for several years at a time, say three years.
4.         Parties for whom conducted
  • Audit is conducted on behalf of shareholders (or proprietor, or partners).
  • Investigation is usually conducted on behalf of outsiders like prospective buyers, investors, lenders, etc.
5.         Documents
  • Audit is not carried out of audited financial statements.
  • Investigation may be conducted even though the accounts have been audited.
6.         Extent of work
  • Audit is normally conducted on test verification basis.
  • Investigation is a through examination of books of accounts.
7.         Report
  • Audit report is addressed to shareholders (or proprietors or partners).
  • Investigation report is addressed to the party on whose instruction investigation was conducted.
8.         Adjustment in net profit
  • In case of audit net profit disclosed by audited accounts is final without further adjustments.
  • In case of investigation in order to determine real earnings certain adjustments are always essential.
9.         Person performing work
  • Audit is to be conducted by a chartered accountant.
  • Investigation may be undertaken even by a non-chartered accountant.
Nature of Investigation:
Investigation is an enquiry into the financial statements of a number of past years with a view to know the real financial position or earning capacity. It is in fact a kind of special audit with predetermined scope depending upon the purpose to be achieved. Investigation is neither accounting nor auditing. Investigation is carried out not in substitution of audit, but in addition to audit. The investigating auditor may even have to investigate the audited accounts.

Scope of investigation:
No general principle can be laid down with regard to the scope of every type of investigation. Scope of investigation, in each case, would be limited to the period or area to be covered by the investigator.
An investigation on behalf of a person intending to purchase running business of a sole trader will be restricted to the determination of value of assets, liabilities, reserves, existing potential and future prospects. An investigation to settle suspected irregularities in cash or stock would normally cover a period from three to six months.

Objectives of Investigation:
The real objective of conducting an investigation by an auditor on behalf of his client is to provide him the desired information in the form of a report about the matter specified. Normally the objective of investigation is to collect, analyze and evaluate facts in respect of desired field of activity with a view on some special purpose as determined by the person on whose behalf the investigation is undertaken. In short investigation is to ascertain the financial position and earning capacity of a business on behalf of a certain person.

The common objectives of investigation are listed below:
1) Proposed purchase of business.
2) Proposed sale of business.
3) Reasons for low profitability.
4) Cause of high employee turn over.
5) Reliability of business data.
6) Proposed investment in particular securities.
7) Suspected fraud.
8) Joining in existing partnership business.
9) Borrowing funds.
10) Lending funds.
11) Proposed purchase of controlling shares in a company.
12) Suspected misfeasance against directors.
13) Detection of undisclosed income for tax purposes.
14) Suspected misappropriation by trustees.

Classification of investigation:
1. Evaluation investigation
2. Review investigation
3. Survey investigation
4. Analysis investigation
5. Special audit
6. Statutory investigation

1. Evaluation Investigation:
Evaluation investigation is conducted to determine the real worth of business proposed to be purchased or sold, or to determine the performance of machinery or efficiency of the personnel of an organization. In case of proposed purchase of business, the investigation relates to valuating the assets and liabilities and ascertaining the present earning potential and future prospects. In case of sale of business, net worth of business is determined. In case of evaluation of machinery and personnel, the performance of machinery and efficiency of personnel is determined.

2. Review Investigation:
Review investigation is usually conducted to determine the reliability of business data, or to ascertain the compliance with the terms of a contract. Where payment of commission, royalty, subsidy or similar items is based on output or turnover, investigation shall be conducted to determine the correctness of data provided by the party. The secured creditors may desire to know that the borrower has, in fact created a charge, as agreed, on the assets in their favor.

3. Survey Investigation:
Survey investigation is conducted to determine the accounting system, costing methods, manpower efficiency and similar matters. A survey of accounting system, may be carried out to overcome the weaknesses pointed out in audit report, to introduce a budgetary control system, or necessity of strengthening internal check or introduction of internal audit. A survey of cost system may be with a view to improve existing procedures. A survey of manpower may be undertaken to determine the real number of employees required, surplus staff, inefficient workers, etc.

4. Analysis Investigation:
Analysis investigation is conducted with a view to facilitate the decision making by top management in areas of vital importance like price fixation, cost of products or services, reasons for increase in price, ways to control them.

5. Special Purpose Audit:
Special purpose audit is in fact an investigation conducted with a  view to determine fraud, losses caused by fire, loss of production due to machinery breakdown, loss of profit as a consequence of fire.

6. Statutory Investigation:
Companies Ordinance provides for statutory investigation in section 263 to 282. Such an investigation may be made on:
a. The report of register of companies.
b. The application of members of the company.
c. In other cases like special resolution of company or under court order.
a. On report of register section 263 (1):
The Securities and Exchange Commission upon a report by the registrar of companies, under section 261 (6) appoint inspector to investigate the affairs of the company and to report thereon, (Section 163(1)).
If the company does not furnish the information required by the registrar, under section 261 (1) within the time allowed or if the information submitted disclose an unsatisfactory position or does not disclose full and fair position, the registrar shall report the position to commission whereupon the commission may order investigation.
b. On application of member section 263 (1) & 264:
Securities and Exchange Commission may appoint inspector to investigate the affairs of any company and to report thereon in such manner as Commission may direct:
Such appointment shall be made as under:
i. In case of company having share capital on the application of members holding at least one-tenth voting powers.
ii. In case of company not having share capital on the application of at least 1/10th of members.
The application by members must be supported by such evidence as the Commission may require, supporting their claim for investigation. The applicant shall also give security for the payment of cost of investigation, section 264.
c. Investigation in other cases section 263 (1):
Securities and Exchange Commission may order investigation, according to section 265, in the following two circumstances:
a. When company passes a resolution in general meeting required investigation.
b. When investigation is ordered by the court.
  • When investigation is mandatory section 265 (a)
The shareholders, by a resolution, desire the commission to appoint inspector to investigate the affairs of the company. They need not specify the circumstances in the resolution due to which they desire investigation. This right can be exercised in whosoever hand the company may be i.e. director, receiver appointed by debentures holders, administrator appointed by the court.
  • When investigation is discretionary section 265 (b)
Securities and Exchange Commission may appoint inspector to investigate company’s affairs if in its opinion there are circumstances suggesting.
a. That the business is conducted with intention to defraud creditors, members or any other person.
b. Company was formed fraudulent or unlawful purpose.
c. Person involved in formation or management is guilty of fraud, misfeasance or other misconduct.
d. Members have not been given full information.
Powers of Inspector
1. Investigate affairs of any other company in the same group.
2. Require officer to produce books, etc, and to assist.
3. Require anybody corporate to give information.
4. Keep books and papers in custody.
5. Examine officers on oath.
6. Seize books and papers.
Inspectors report section 269
The inspector may make interim report, or on the conclusion of investigation shall make a final report to the Commission.

Thursday, May 1, 2014

The Elementary Tissues of the Body

There are four groups of tissue in the body which are known as the elementary tissues. They are:

1. Epithelial Tissue
2. Muscular Tissue
3. Nervous Tissue
4. Connective Tissue

1. Epithelial Tissue:
An epithelium consists of cells which cover surface of the body, e.g. skin, or which line hollow organs, tubes or cavities e.g. blood vessels, and the air cells. There are two main classes of epithelial tissue, each containing several varieties.
a) Simple Epithelium
b) Compound Epithelium
All epithelial cells lie on and are held together by a homogeneous substance called a basement membrane.

a) Simple Epithelium:

This class consists of a single layer of cells, and is subdivided into three varieties.

1. Pavement or Squamous Epithelium
2. Columnar Epithelium
3. Ciliated Epithelium





1. Pavement or Squamous Epithelium:
They are fine thin plates placed edge to edge like the particles in a mosaic pattern or the stones of a pavement. These cells form the alveoli of the lungs. They are found whenever a very smooth surface is essential as in the lining of the heart (serous membrane), lining of blood vessels and lymphatics. When lining these structures the epithelial covering or lining is called endothelium.

2. Columnar Epithelium:
They form a single layer or they are the cells which line the ducts of most glands, the gall bladder, nearly the whole of the digestive tract, in which goblet cells are interspersed, and parts of the genitor urinary tract. In intestine, these have a slightly striated border. In some situations, as when lining the alveoli of secreting glands, the cells of columnar epithelium are short and have a cubical appearance. They are then described as cubical cells.

3. Ciliated Epithelium:
It is found lining the air passages and their ramifications such as the frontal and maxillary sinuses. It also lines the uterine tubes or oviducts and part of the uterus and the ventricles of the brain.

Ciliated cells are like columnar cells in shape, but they have in addition fine hair like processes attached to their free edge. These processes are called cilia. The ciliary processes keep up a continual movement directed towards the external opening. This movement has been likened to the movement seen in a field of corn, blown in one direction by the wind. In the respiratory passages the constant movement prevents dust, mucus, entering the lungs, and in the uterine tubes the movement conveys the ovum into the uterus.

Goblet cells are mucus-secreting cells which lie in the walls of glands and ducts lined by columnar cells, either plain or ciliated. Goblet cells secrete mucus or mucin and express it on to the surface; they act as mucus-secreting glands and are most numerous where a considerable amount of mucus covers the surface as in the stomach, colon, and trachea.

b) Compound Epithelium: It consists of more then one layer of cells. Stratified Epithelium forms the epidermal layers of the skin. It also lines the mouth, pharynx, oesophagus, the lower part of the urethra, the anal canal and the vagina, and covers the surface of the cornea. In these areas it does not become cornified.

Transitional Epithelium is a compound stratified epithelium consisting of three layers of cells. It lines the urinary bladder, the pelvis of the kidney, the ureters and the upper part of the urethra. The deeper layers of cells in transitional epithelium are of the columnar type of cell with rounded ends which make them pyriform or pear shaped.

Functions of Epithelial Tissue:
The epithelial tissue which forms the covering of the body, the skin and the lining of the cavities which open on to the surface is mainly protective.
It prevents injury to the underlying tissues.
It prevents the loss of fluid from these tissues and also prevents the passage of fluid into the structures which are covered by skin.
The micro organisms cannot pass through healthy skin but they can and do pass through abraded skin.

(a) Glands:
A gland is a secretory organ which may exist as a separate organ such as the liver, pancreas and spleen or may be simply a layer of cells as the simple tubular glands of the alimentary canal, body cavities etc. All glands have a rich blood supply. Their special function is to select from the blood stream certain substances, which they then elaborate into their important juices or secretions.

There is a tremendous variety of glands, each with its different function, making a collective description and classification difficult. A simple classification is as follows:

a. Glands which pour their secretion directly on to the surface include the sweat glands, sebaceous glands, and the gastric and intestinal glands.

b. Glands which pour their secretion indirectly, by means of ducts, on to the surface include the salivary glands, pancreas, and liver.

c. Ductless glands: These form the group described as endocrine organs. These are the glands of internal secretion. A great deal of the well being of the body depends on these glands, which through their secretions exert an important chemical control on the functions of the body.

(b) Membranes:
Layers of specialized cells which line the cavities of the body are described as membrane. The three principal membranes are:
1. Mucous membrane
2. Synovial membrane
3. Serous membrane
All these membranes secrete a fluid to lubricate or moisten the cavity they line.

1. Mucous membrane is found lining the alimentary tract, the respiratory tract, and parts of the genitor urinary tract. It varies in character in the different areas. In the digestive tract it consists of columnar epithelial cells closely packed together. Some of them become distended with mucous secretion and are then called goblet cells. The cell becomes more and more distended and finally ruptures and discharges it secretion on to the surface.
Mucus is the secretion of the membrane and consists of water, salts, and a protein, mucin, viscid character to the secretion.

2. Synovial Membrane lines the cavities of joints. It consists of fine connective tissue, with a layer of squamous endothelial cells on the surface. The secretion of synovial membrane is thick and glairy in character.

3. Serous Membranes are found in the chest and abdomen, covering the organ contained therein and lining these cavities.
The pleura covers the lungs and lies the thorax.
The pericardium covers the heart as a double layer.
The peritoneum covers the abdominal organs and lines the abdomen.
The characteristics which are common to all three serous membranes are, that each consists of a double layer of membrane having an intervening potential cavity which receives the fluid secreted by the membrane. This serous fluid is very similar to blood serum or lymph. It acts as a lubricant, and in addition it contains protective substances and removes harmful products, passing these on to the lymphatic system to be dealt with.

2. Muscular Tissue: Muscle is a tissue which is specialized for contraction, and by means of this, movements are performed. It is composed of cylindrical fibres which correspond to the cells of other tissues. These are bound together into little bundles of fibres by a form of connective tissue which contains a highly specialized contractile element.

Types of Muscle:
1. Striped (striated skeletal or voluntary muscle):
The individual muscle fibres are transversely striated by alternate light and dark markings. Each fibre is made p of a number of myofibrils and enclosed in a fine membrane. The sarcolemma (meaning – muscles sheath).





2. Unstriped (unstriated, smooth or involuntary muscle):
This type will contract without nervous stimulation although in most parts of the body its activity is under the control of the autonomic (involuntary) nervous system. This variety is composed of elongated spindle shaped muscle cells which retain the appearance of a cell.
Involuntary muscle is found in the coats of blood and lymphatic vessels, in the walls of the digestive tract and the hollow viscera, trachea, and bronchi, in the iris and ciliary muscle of the eye, and in the involuntary muscles in the skin.

3. Cardiac Muscle is found only in the muscle of the heart. It is striated like voluntary muscle. But it differs in that its fibres branch and anastomose with each other; they are arranged longitudinally as in striated muscle, are characteristically red in colour and not controlled by the will.






Cardiac muscle possesses the special property of automatic rhythmical contraction independent of its nerve supply.

3. Nervous Tissue: 
The nervous tissue consists of three kinds of matter (a) grey matter, forming the nerve cells, (b) white matter, the nerve fibres and (c) neuroglia, a special kind of supporting cell, found only in the nervous system, which holds together and supports nerve cells and fibres. Each nerve cell with its processes is called a neurone.
Nerve cells are composed of highly specialized granular protoplasm, with large nuclei and cell walls on other cells. Various processes arise from the nerve cells; these processes carry the nerve impulses to and from the nerve cells.

4. Connective Tissue: Connective tissue provides the frame work of the body. There are several varieties of connective tissue.

Areolar Tissue: This consists of loosely woven tissue which is distributed widely throughout the body. It is placed immediately beneath the skin and mucous surfaces forming the subcutaneous and sub-mucous tissue, and it also forms the sheaths of fascia which support and bind and connect together muscles, nerves, blood vessels, and other organs.

Sunday, September 8, 2013

Reproduction

A cell does not go on growing indefinitely in size but at a certain optimum point divides into two daughter cells. Further, certain cells will undergo division to replace worn-out cells or those destroyed by disease. This kind of cell division is called mitosis or karyokinesis.

Activity begins in the nucleus. The nuclear membrane disappears and the chromatin changes character and becomes long filaments called chromosomes.

The centrosome divides and the two new centrosomes move away from each other to each end of the nucleus called the poles.

The chromosomes are then attracted to the poles and lie near the new centrosomes. The chromatin of which nucleus is formed now comes to rest and two new nuclei exist. Finally the protoplasm of the cell constricts and divides and the two new cells are complete.
Each new daughter cell resulting from mitosis contains forty six chromosomes, so that during mitosis each chromosome must duplicate itself. The process of chromosomal duplication is one of the least understood of the cell’s activities.

However, mitosis is not the only kind of cell division. In the sex organs, the ovary and testis, another kind of cell division occurs called meiosis. During the formation of the sex cells, or gametes, the number of chromosomes is halved, so that the spermatozoon contains only twenty-three chromosomes and the egg-cell or ovum, twenty three.

When fertilization occurs, that is when spermatozoon and ovum fuse to form the cell (zygote) which develops into a new individual the normal chromosomal complement of forty six is restored. By this means a mixing of the hereditary determinants or genes, from male and female is achieved.