As per various laws, the audit of accounts is being done by the competent and professionally qualified persons. The audit of accounts record is done by qualified accountants and authorized by the concerned government. For example cost audit is done by cost accountant, statutory audit and tax audit is done by chartered accountants etc. These professionals charge their fees for auditing of accounts. The amount, which is paid to the auditors for auditing of accounts, is called as audit fees.

When any fees is paid to the auditors of the business firm for auditing of accounts then it will booked under Audit Fees Account. Auditing of accounts record is compulsory in certain cases. Even otherwise, the auditing of the accounts record is very much beneficial for a business entity for internal purposes as well as for external purpose. The audited accounts show much more authenticity of the business transactions and are accepted undoubtedly by various tax authorities and the persons interested in the business firms.

The audit fee is indirect expenses and is shown in expenses side of profit and loss account. An unpaid audit fee, first, is added to Audit Fees Account and then the same is shown in liabilities side of balance sheet as outstanding expenses or expenses payable.

Accounting Treatment of Audit Fees

a) In case of payment of audit fees, made in cash:-

Type of voucher to be prepared:- Cash Payment Voucher

Entry to be made

Debit:-         Audit Fees Account

Credit:-           Cash Account

b) In case of payment of audit fees, made by cheque:-

Type of voucher to be prepared:- Bank Payment Voucher

Entry to be made

Debit:-         Audit Fees Account

Credit:-    Bank Account

b) In case of unpaid audit fees:-

Type of voucher to be prepared:- Journal voucher

Entry to be made

Debit:-          Audit Fees Account

Credit:-      Audit Fees Payable Account

or

Expenses Payable Account

or

Outstanding Expenses Account

or

Auditor’s Personal Account

Treatment of Audit Fees in final accounts

Audit Fees is indirect expenses. Therefore, it will be shown in debit side of Profit and Loss Account.

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