- Examine the basis on which the gratuity payable to employees is worked out. The liability for gratuity may either be worked out on actuarial rules or agreement or on the presumption that all employees retire on the balance sheet date.
- Ensure that the basis of computing gratuity is valid.
- Verify computation of liability of gratuity on the aggregate basis.
- Check the amount of gratuity paid to employees who retired during the year with reference to number of years of service rendered by them.
- See that the annual premium has been charged to Profit and Loss Account in case the concern has taken a policy from LIC.
- Ensure that the accounting treatment is in accordance with AS-15 (Revised), “Retirement Benefits”.
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