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Private & Confidential

Checklist - Companies (Auditor's Report) Order, 2003


Client:
Audit Period:

Clause No. Area/Requirement Guidance and Audit Procedures Conclusion

4(i) (a) Fixed Assets Proper records No Reportable Issues


4(i) (b) Fixed Assets Physical verification-FA No Reportable Issues
4(i)( c) Fixed Assets Disposal of Fixed Assets No Reportable Issues
4(ii) (a) Inventories Physical verification- Inv. No Reportable Issues
4(ii) (b) Inventories Procedures of Verification No Reportable Issues
4(ii) ( c) Inventories Proper records of Inventory No Reportable Issues
4(iii) (a) Loans granted Loans granted No Reportable Issues
Loans taken Loans taken No Reportable Issues
4(iii)(b) Loans granted Loans granted No Reportable Issues
Loans taken Loans taken No Reportable Issues
4(iii)( c) Loans granted or taken Repayment N/A
4(iii) (d) Loans granted or taken Overdue amounts No Reportable Issues
4(iv) Internal Controls Internal controls on purchases,sales etc., No Reportable Issues
4(v)(a) & (b) Register under Section 301etc., 301 Register and transactions No Reportable Issues
4(vi) Fixed Deposits Public deposits No Reportable Issues
4(vii) Internal Audit Internal Audit No Reportable Issues
4(viii) Cost Records Maintenance of Cost Records No Reportable Issues
4(xi) (a) & (b) Statutory dues Statutory dues No Reportable Issues
4(x) Accumulated losses etc., Losses etc., No Reportable Issues
4(xi) Dues to Banks & Fis etc., Default in repayment of dues No Reportable Issues
4(xii) Loans and Advances granted Loans and Advances granted No Reportable Issues
4(xiii)(a) Chit Fund company Chit fund company No Reportable Issues
4(xiii)(a) to (d) Nidhi/mutual benefit fund/society Nidhi/mutual benefit fund etc., No Reportable Issues
4(xiv) Dealing or Trading in Securities Dealing etc.,in Securities No Reportable Issues
4(xv) Guarantees Guarantees given No Reportable Issues
4(xvi) Term Loans Utlisation of Term Loans No Reportable Issues
4(xvii) Funds raised Utlisation of funds No Reportable Issues
4(xviii) Allotment of shares Preferential allotment No Reportable Issues
4(xix) Debentures Securities on Debentures No Reportable Issues
4(xx) Money raised on public issue End use of monies No Reportable Issues
4(xxi) Fraud Fraud No Reportable Issues

Issue Sheet

I have staisfied myself that the above checklist has been properly completed ( refered Statement on CARO whereever relevant) and all matters requiring the
attention of the Audit Partner are set forth in the Issue sheet.(Refer the No. of the issue sheet).
Completed by: Date:

I have reviewed the work done by the assistant-in charge and have satisfied myself that the above checklist has been satisfactorily completed in line with the
Statement on CARO issued by ICAI. Working papers were reviewed and agree with the conclusions above.
Reviewed by: Date:
General Instructions

1 The home page contains the detailed description of the requirements of CARO under the respective clauses.

2. Please select the name of the audit firm from the dropdown menu on the home page.Please fill in other details
like name of the client, audit period etc., The home page also contains affirmations as to work done, review made
etc., Please fill in necessary details on completion and review of the checklist.

3. Critical matters and matters for reporting to management and other exceptions should be summarised in the
Issue sheet' (last work sheet in the workbook). Issue sheet can also be accessed through the link on home page.

4. Please click on the respective clause under the 'Guidance and Audit Procedures' column on the home page
for the detailed checklist containing audit steps to be performed, notes, responses and space for comments, if any,
for the respective clauses.The conclusion column on the home page has a drop down menu for choosing the appropriate
option.

5. Please complete the details as to prepared/reviewed by etc., on the individual checklist sheets. You can get back to
home page from the individual checklist sheet.

6. The Responses column contains a drop down menu with possible responses. Please select the appropriate response
from the options as applicable. Create a Working paper for work done under individual clauses or link to working papers,
if any, created in MYClient in this regard. Specific representations, where required, should be obtained as a part of
firm's standard representation letter.

7. This checklist cannot be construed as a substitute for the Statement on CARO issued by ICAI. Reference should
be made to the Statement for guidance and help in specific cases.

8. The words 'Act' as used in the checklist refer to the Companies Act,1956 unless otherwise stated.

Introduction

Applicability of the Order

1.This order applies to all the companies including-


a. Companies incorporated outside India, which established a place of business in India;
b. All the Branches of Companies (section 228 (3) (a) of the Act).

2. This order does not apply to Banking Companies, Insurance Companies,


Companies licensed to operate under section 25 of the Act and Private companies
fulfilling the following criteria-

a. having paid up capital and reserves less than Rs 50 lakhs;


(beginning of the year or at anytime during the year);and
b. no deposits are accepted from the public; and
c. no outstanding loans in excess of Rs10 lakhs from banks and financial
institutions; (at anytime during the year); and
d. turnover less than Rs 5 crores ( not to exceed the limit either in the year or in the
immediately preceding year).

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Fixed Assets Home


Audit Procedures Response Remarks
1. Whether records of fixed assets are
maintained showing the following
particulars:-

a).Year of acquisition
b).Sufficient description of the assets
to make identification possible.
c).Classificaton, that is, the head under
which it is shown in accounts eg. Land,
Building, Plant and Machinery etc.
d).Location
e).Quantity,i.e number in units.
f).Original cost
g).Adjustment for revaluation or for
increase or decrease in cost consequent
on revaluation of Foreign currency Liabilities
if any.
h).Depreciation written off to date.
i).Written down value.
j)Rate of depreciation and particulars regarding
amortisation and impairment
k) Particulars regarding sale, discarding,
demolition, destruction etc.
l) Particulars of fixed assets that have been retired
from active use and held for disposal.
m). Whether fixed assets as per Register/Records
agree with General Ledger balances. If not, note
the disagreements in respect of each class
of assets e.g.

- Land freehold
- Land leasehold
- Building
- Land
- Plant and Machinery
- Vehicles
- Furniture and Fixtures
- Office Equipment etc.
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Fixed Assets
Audit Procedures Response
1. Has the management carried out a physical
verification of fixed assets during the year according
to the policy of the company? (eg. phased manner,
all assets every year etc.,)

2. Obtain the instructions issued to by the


management to the staff for the physical verification.

3.Obtain the working papers of physical verification


done by the management during the year according
to the policy of the company.Confirm and evidence
adherance to the instructions issued.

4. Is the frequency of verification reasonable?

5. Ensure whether assets physically verified agreed/


reconciled to book figures?

6. Obtain a statement of descrepancies obtained


and consider if they are material, whether the same
have been properly adjusted in the books of
account.
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d Assets
Remarks
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Fixed Assets
Audit Procedures Response Remarks
1. Has a substantial portion of fixed assets been
disposed off during the year? "Substantial" has to be
judged in the backgorund of factors such as
proportion of assets disposed off to that category of
assets and also total assets of the company in value terms
terms.

2. Determine whether such disposal affected the going


concern status of company or not by carrying out
procedures such as- analysis and discussion with the
management of the significance of such assets to the
company as a whole, reading the minutes of the
meetings of the Board of directors and others to
understand the entity's future business plans, review
of the post balance sheet events to analyse the
affect of such disposal on the going concern status
of the company.

3. Consider any adverse implications on account of


the same in the main report.
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Inventories
Audit Procedures Response
1. Has the management physically verified the
following items of inventory during the year ?
i)Finished Goods
ii) Raw Materials and Components
iii) Stores & Spares
iv) Work-in-Progress
v) Maintenance Supplies
vi) Consumables and Loose Tools
vii) Packing Materials

2. Review firm's completed stock take questionnaire


and conclude on the effectiveness of the process and
whether the frequency of such verification is
reasonable.
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ories
Remarks
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Inventories
Audit Procedures Response Remarks
1 Have we observed the physical verification?

2. If so, have we completed the check list for attendance at


physical stock taking?

3. Are we satisfied that stock taking procedures were


reasonable and adequate in relation to the size of the
Company, nature of its business and volume of stock? If not,
list out the inadequacies/weaknesses observed by us.

4. In case we have not observed the physical verification, have


we studied the stock taking instructions issued by the client?
(Attach a copy where available)

5.Do these instructions cover, inter alia, the following key


control points-
-The independence of persons taking stock
- Proper stacking/arrangement of stocks to facilitate identification and
counting?
-Usage of counting tags or identification marks etc in order to prevent
double counting?
-Control of stock taking sheets/tags (e.g. numerical sequencing) and
reconciliation of the sheets/tags at the conclusion of stock taking
-Control over movement of stocks during the course of stock taking
(Stoppage of movements during stock taking is highly desirable).
-Collection of cut-off details viz. last challan No., GRN No., Excise
Gate Pass No. etc.
-Comparison of rough stock sheets with bin cards and preparation of
shortage/excess list
- Signing of stock sheets by the client’s staff (both by the counter and
by the supervisor)
-Identification of damages, obsoletes and slow moving stocks
- Proper segregation of goods invoiced and sold but yet to be
despatched and other stocks of third parties
-Checking of the serviceability and adequacy of the
measuring instruments

6. Is there any report/certificate from the client’s


official-in-charge of stock taking evidencing that the stock
taking instructions were followed? (Attach a copy)

7. In case the client does not have any instructions in writing,


is there any report from the client’s official-in-charge of stock
taking outlining the procedures followed during the course of
stock taking? (Attach a copy)

8. On the basis of our findings, are we satisfied that stock taking


procedures were reasonable and adequate in relation to the size
of the Company and nature of its business? If not, list out the
inadequacies/weaknesses.
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Inventories
Audit Procedures Response Remarks
1.Whether the records of the Inventory show the following
particulars:
(i) details regarding dates of transactions;
(ii) relevant document number and department identification, if any;
(iii) identification code of the item;
(iv) quantity of the receipts and issues and balances;
(v) physical verification quantities;
(vi) location;
(vii) particulars of the item, like nomenclature, nature, etc.
(vii) valuation details; etc.

2. Are the stock registers are updated as and when the


transactions occur?

3. Verify that the transactions entered in stock registers are duly


supported by relevant documents.

4. Verify whether inventories as per Register/Records


agree with General Ledger balances.

5. Obtain a statement of descrepancies obtained


and consider if they are material, whether the same
have been properly adjusted in the books of
account.
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Loans granted
Audit Procedures Response
1.Has the company granted any loans to
companies,firms and other parties covered in the
Register maintained under Section 301 of the Act?

2. Obtain a statement containing the name of the


company, firm or other Party, nature of relationship,
amounts and dates of loans granted, amounts and dates
of loans refunded amounts and dates of interest
received, closing balance at year end, particulars of
instalments (amount and period outstanding for) of
overdue principal and interest together with the details
regarding the rate of interest, if any, and brief terms and
conditions like security, repayment particulars (principal
and interest) etc.,
3. Examine the above statement with necessary

documents and records on a reasonable test check basis.


4. Report information as per the table below in the case
of all loans granted.
5. Check and conclude that the rate of interest and other
terms and conditions are not prima facie
prejudicial to the interest of the company or otherwise
by consideration of factors such as- loan agreements,
borrower's financial standing, its ability to lend,
nature of security, the availability of alternative sources
of finance, the urgency of borrowing,
purpose of the loan, prevailing market rates of
interest etc.,

Number of Parties Amount


involved
(In Rupees)

Notes:1. The requirement of this clause also covers advances which are in the nature of loans.
2. Loan transactions that have been squared up during the year also would get covered under the requi
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anted
Remarks

Year end
balance
(In
Rupees)

which are in the nature of loans.


also would get covered under the requirement.
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Loans taken
Audit Procedures Response Remarks
1.Has the company taken any loans from companies,firms
and other parties covered in the Register maintained under
Section 301 of the Act?

2. Obtain a statement containing the name of the company,


firm or other Party, nature of relationship, amounts and dates
of loans taken, amounts and dates of loans repaid, amounts
and dates of interest paid, closing balance at year end,
particulars of instalments (amount and period outstanding
for) of overdue principal and interest together with the details
regarding the rate of interest, if any, and brief terms and
conditions like security, repayment particulars (principal and
interest) etc.,

3. Examine the above statement with necessary


documents and records on a reasonable test check basis.
4. Report information as per the table below in the case of
loans
all loans taken.

5. Check and conclude that the rate of interest and other


terms and conditions are not prima facie prejudicial
to the interest of the company or otherwise by
consideration of factors such as- loan agreements,
company's financial standing, its ability to borrow,
nature of security, the availability of alternative sources
of finance, the urgency of borrowing, purpose of the
loan, prevailing market rate of interest etc.,

Number of Parties Amount Year end balance


involved (In Rupees)
(In Rupees)

Notes:1. The requirement of this clause also covers advances which are in the nature of loans.
2. Loan transactions that have been squared up during the year also would get covered under the requirement.
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Repayment of Loans
Audit Procedures Response
1. The regularity of payment of principal
amount and interest should be considered
in the light of procedures such as-review of
repayment schedule,loan agreements and other
relevant documents, actual dates of payment of
principal and interest.

2. The following particulars should considered


in reporting the irregularity of principal and
interest-
Name of the Party Overdue Principal

Notes: 1. If a due date for payment of interest is not specified, it would be reasonable to assume that it
on each anniversary of the loan.
2. Where no stipulations have been made for repayment of the loan, the auditor should state his inabili
comments in the absence of terms of repayment.
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ment of Loans
Remarks

(In Rupees)
Overdue Interest Year end Balance

ified, it would be reasonable to assume that it falls due

of the loan, the auditor should state his inability to make


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Loans overdue
Audit Procedures Response
1. Obtain a statement with the names of the companies, firms
or other parties, amount of loan granted or taken, outstanding
amount at the year end and steps taken for the recovery or
payment thereof.

2. The reasonableness of steps taken by the company for


recovery and payment should be judged in the light of
factors such as issue of reminders, sending advocate's
notice, management's representations, follow up with the
borrowers, arrangement for raising finances, restructuring
proposals, arrangement with lenders for compromise
proposals etc., as the case may be.

3. If not satisfied about the reasonability of steps taken,


consider the name of the party, overdue amount of
principal and interest for reporting.
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Remarks
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Internal controls procedures


Audit Procedures Response
1. On the basis of our understanding,
documentation and validation thereof in the
Myclient file-control activities in the areas of
Inventory cycle,property, plant and equipment
cycle,revenue and receivables cycle, review of
internal audit reports are we satisfied that there
are adequate internal control procedures
commensurate with the size of the company
and the nature of its business for the purchase
of inventory and fixed assets and for the sale of
goods? If not document the inadequacies and
weaknesses thereof and consider implications
for reporting. Yes

2. Review the reports of internal audit, minutes


of the Board, Audit committee, management
committee, if any and anyother relevant internal
reports to identify major weaknesses in internal
controls and whether there is any continuing
faliure to correct such weaknesses. Done

3. In the case of continuing failure to correct


any major weakness identified, report the
weakness and steps taken by the management to
correct such weakness or the failure to correct
as the case may be. Done

4. Consider the implications of such control


weaknesses on the nature, extent and timing of
audit procedures in those areas and implications
if any on the adequacy or reliability of the books
of accounts and the overall report. Done

Notes: 1. Ordinarily, any weakness in internal controls that may result into a significant loss to the
company or may result in a material misstatement in the financial statements is considered a major
weakness.
2. Continuing failure should be judged with reference to the weakness that existed at the time of
previous year's audit.
3. If any major weakness is corrected by the date on which the audit report is issued the fact of such
correction subsequently must also be reported.
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rols procedures
Remarks

s that may result into a significant loss to the


he financial statements is considered a major
to the weakness that existed at the time of

hich the audit report is issued the fact of such


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Completeness of Register maintained under Section 301 of the Act and transactions
Audit Procedures Response
1.Has the company entered into transactions that need to be
entered into the register maintained under Section 301 of the
Act?

2.Obtain a list containing the name of the party, nature of


relationship, description of transaction and amount and date of
each such transaction individually for all the transactions during
the year.

3. Check the list for completeness of information with


reference to- knowledge from previous year's audit, review of
entity's procedures for identification of entries to be made in
301 register, inquiries as to the affiliation of directors and key
management personnel, officers with other entities, review of
shareholders records to identify the principal shareholders,
review of entity's income tax returns, review of joint venture
and other relevant agreements, minutes of board meetings, Form
24AAs submitted etc.,

4. In the case of transactions exceeding the value of Rs. five


lakhs in respect of any party and in any one financial year
examine information such as price lists, quotations and records
relating to prices for similar transactions with other
parties at the relevant time.

5.In cases where transactions are entered with sole suppliers


examine the reasonableness of prices paid with reference to list
prices of the supplier concerned, other trade terms of the
supplier, etc. and where required consider the same appropiately
in the report.

6. The reasonableness of the prices should be determined


taking into account factors such as delivery period, quality
of the product, quantity, credit terms, past performance of the
party etc.,
Notes: 1. The requirement of this clause does not cover transactions with subsidiaries perse unless one
directors of the company are interested in the subsidiary.
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ion 301 of the Act and transactions thereof


Remarks

ons with subsidiaries perse unless one or more of the


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Public Deposits
Audit Procedures Response Remarks
1. Has the Company accepted any deposits from
public within the meaning of Section 58A, 58AA and
the rules framed thereunder?

2. Obtain a general understanding of Section 58A,


58AA and the relevant rules and ascertain the
system and procedures in place to ensure
compliance with the provisions of the said sections
and the rules made thereunder.

3.Check the compliance with the requirements of the


Act and the rules framed thereunder by completing
the firm's checklist on Acceptance of deposit rules and
Companies Act 1956.

4. Examine the internal controls in place for intimating


the Tribunal (Company Law Board) any default in
repayment of deposit made by small investors or part
or any interest thereupon. Based on the
understanding so gained, perform a reasonable test
check of the deposits received from small investors.

5. Enquire of the management possible instances of


non-compliances with Section 58A, 58AA and
relevant rules and about any order passed by the
Company Law Board for contravention of Section 58A,
58AA and the rules.

6. Examine the correspondence and documents filed


with the Registrar of companies to ascertain whether
there is any contravention or whether the Company
Law Board has passed and order. If an order has been
passed, examine the steps taken by the company to
comply with the order.
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Internal Audit
Audit Procedures Response Remarks
1. Is the company a listed company or having paid up capital
and reserves exceeding Rs. 50 lakhs as at the commencement
of the financial concerned or having an average annual
turnover exceeding five crores rupees for a period of three
consecutive financial years immediately preceding the
financial year?

2.Consider the following factors to determine whether the


internal audit system is commensurate with the size of the
and the nature of its business-
-Size of the internal audit department;
- Qualifications of the internal audit staff;
-Reporting levels of internal audit;
- Areas of coverage;
-Adequacy of technical assitance available to the internal
audit department;
-Reports submitted by the internal audit and follow up
procedures thereof.

Notes: 1. The date of the balance sheet must be considered in reckoning the listing status of the company.
2. While evaluating the adequacy of internal audit system, existence or otherwise of other forms of internal controls must also
be taken into account.
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Maintenance of Cost Records


Audit Procedures Response
1. Has maintenance of cost records prescribed
by central government under Section 209(1)(d)
to the company?

2. Obtain a list of books and records made


and maintained by the company under Section
209(1)(d) of the Companies Act,1956.

3. Conduct a general review of the cost records


to ensure that the records as prescribed are
made and maintained.
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f Cost Records
Remarks
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Statutory Dues
Audit Procedures Response Remarks
1. Obtain a statement containing the list of various
statutes under which the company is required to
make payments to appropriate authorities, the
nature and amounts of payments under each statute,
the due dates for making such payments, the dates
on which the payments were made by the
Company, the arrears due for more than six months
as at the Balance Sheet date and the date and
amount of subsequent payments, if any made out of
such arrears.

2. Obtain a general understanding of various


statutes governing the entities and dues payable
under those statutes. Make enquiries of the
management about the statutes under which
the company is required to pay dues and the
policies and procedures in place for
identifying and payment of such dues.

3. Verify the statement under 1 above, with the


general understanding obtained and gained,
underlying documents and records.Compile the
the following details in the case of arrears of
statutory dues-
-Name of the statute
- Nature of the dues
- Amount
- Due date
-Date of payment

4.Whether the Company has been generally regular


in depositing statutory dues or otherwise, report the
same appropriately.

5. In the case of disputed statutory dues, compile


the following details-
- Name of the Statute
- Nature of the dues
- Amount
- Forum where dispute is pending

Information under this clause should be given


separately for each period eventhough the
dispute relates to the same nature of statutory dues,
like income taxes etc.,

Notes: 1. The scope under this clause is restricted to only those statutory dues which are
required to be paid regularly to a body.
2. Reporting under this clause is required irrespective of the fact whether or not there are any
arrears as at the balance sheet date.
3. For a matter to be considered as "disputed" there must be a positive evidence or action
on the part of the company to show that it has not accepted the demand for payment of
duty or tax. Auditor need not make a judgement about the sustainability or otherwise of the
claim. A mere representation to the department shall not constitute a dispute.
4. Penalites or interest would be covered under "amounts payable".
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Accumulated Losses etc.,


Audit Procedures Response Remarks
1.Has the company been registered for a period of five or
more years as at the balance sheet date?

2.Compute the accumulated losses and net worth of the


company as at the end of the financial year. Verify
whether the accumulated losses as at that date are more
than 50% of company's net worth.

3. Compute and check whether the company has incurred


cash losses for the period under review and in the
immediately preceding financial year.

Notes: 1.The impact of qualifications which can be quantified must be adjusted in computing the accumulated losses and
net worth, as at the balance sheet date and in arriving at the cash losses. The fact of such adjustment must be indicated
in reporting under this clause.Where the qualifications are not quantifiable, the report should state the fact that the
effect of such unquantified qualifications has not been taken into consideration in computing the above amounts.
2. Net worth is the sum total of paid up capital and free reserves after deducting the provisions or expenses as may be
prescribed. Free reserves means all reserves created out of profits and share premium account but does not include
revaluation reserve, write back of depreciation provisions and amalgamation.
3. Loss shown by the profit and loss account is adjusted for the effects of transactions of a non-cash nature such as
Depreciation, amoritisation, any deferrals or accruals of past or future cash receipts or payments in determining the cash losses.
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Default in repayment of dues to Banks,Financial Institutions or debentureholders


Audit Procedures Response

1. Obtain a statement containing the names of the


institution/bank/debenture holder, the period
and amounts of default, due dates thereof and
dates and amounts of subsequent payments, if any.

2. Verify the statement in 1 above, with documents


such as agreements, other terms and conditions,
debenture trust deed as the case may be. Identify the
period and amount of default for reporting.

Notes: 1. The requirement covers all the defaults exisiting on the balance sheet date, irrespective of wh
defaults have occurred.
2. Dues cover all amounts including interest and principal.
3. Applications for reschedulement/resturcturing will not be binding unless approved.
4. Dues not paid by the company on account of unilateral disputes tantamount to default.
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inancial Institutions or debentureholders


Remarks

g on the balance sheet date, irrespective of when the

be binding unless approved.


disputes tantamount to default.
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Maintenace of documents and records for loans and advances granted


Audit Procedures Response
1. Whether the company has granted any
loans and advances on the basis of security
by way of pledge of shares, debentures and
other securities?

2. If yes, examine whether documents and


records include details such as- name and
address of the borrower, amount, terms and
conditions such as period, rate of interest,
security etc.,; disbursements, repayments,
recovery of interest; full particulars of
security- names of the companies, number and
class of shares, distinctive numbers, particulars
as to title etc; documents needed for transfer,
details as to periodical ackowledgements of the
parties, proof to establish the power of the
party to borrow- e.g. board resolution etc.,

3. Obtain a statement containing the details of


such loans granted-name of the party, amount
of loan/advance granted, amount outstanding
as the balance sheet date and type and nature of
security and verify the same on a reasonable
test check basis with documents and records
mentioned in 2 above.

4. Verify the securities pledged by reference to


physical securities or statements from
depository participants.In the case of
dematerialized form of securities confirm that
the company has a valid right to sell the
shares in the event of default.

5.Whether security is in the custody of company


and market value of security is adequate to cover
the outstanding amount of loan and interest?

6. List the deficiencies for reporting.


Notes: 1. The requirement of this clause does not extend to other forms of security like
hypothecation, guarantee etc.,
2. Other securities may be construed to mean bonds or promissory notes issued by a government
or semi-government authority.
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ords for loans and advances granted


Remarks
end to other forms of security like

or promissory notes issued by a government


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Chit Fund Company


Audit Procedures Response
1. Is the Company a chit fund company?

2. Gain an understanding of the relevant Acts and the


rules applicable to the company situated in a particular
state/union territory.

3. Test check compliance with the requirements under


the Act and the rules as applicable.

3. Ensure that the requirements of the rules regarding


the records to be maintained, returns to be filed etc.,
are complied with, where applicable.

Notes: 1. The requirement only applies to checking compliance with the provisions of special statutes
as they have application to the accounts of the chit fund company.
2. If the company's branches are situated in more than one state, legal opinion may be sought regarding
applicability and compliance with the relevant provisions of the Acts/Rules.
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mpany
Remarks

e with the provisions of special statutes in so far

e, legal opinion may be sought regarding the


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Completed by:
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Nidhi/mutual benefit fund/societies


Audit Procedures Response
1. Is the Company a nidhi/mutual benefit fund/
society?

2. Check complaince with the following-

a) whether the net ownedfunds to deposit


liability ratio is more than 1:20 as on the
date of balance sheet;

b) whether the company has complied with


the prudential norms on income recognition
and provisioning against sub-standard /
default / loss assets;

c) Whether the company has adequate


procedures for appraisal of credit proposals
/ requests, assessment of credit needs and
repayment capacity of the borrowers by examination
of the policies and procedures a reasonable test
check of the transactions effected during the year
with relevant documents such as individual borrower
files, loan application forms,supporting
documentation, sanctions, security documents etc.,

d) Whether the repayment schedule of


various loans granted by the nidhi is based
on the repayment capacity of the borrower
and would be conducive to recovery of the
loan amount by examination of the system of
granting of loans and making a reasonable test
check of transactions.

3. Ensure that the requirements of the rules regarding


the records to be maintained, returns to be filed etc.,
are complied with, where applicable.

4. Consider the implications of non-compliances


under 2 a) and b) above also in the auditors' report
on the financial statements.
Notes: 1. Net owned funds means the aggregate of paid up equity capital and free reserves as reduced
by accumulated losses and intangible assets appearing in the last audited balance sheet of the company
i.e. balance sheet of the current year.
2. Deposit liability would mean aggregate of deposits accepted by the company.
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fit fund/societies
Remarks
quity capital and free reserves as reduced
last audited balance sheet of the company

ed by the company.
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Date:
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Dealing or Trading in Securities


Audit Procedures Response Remarks
1.Is the company dealing or trading in shares, securities,
debentures and other investments?

2.Whether the records of the Investments show the following


particulars:
(i) details regarding dates of transactions-purchases and sales.
(ii) classes of investments
(iii) distinctive numbers and the face value ;
(iv) quantity of the receipts and issues and balances;
(v) physical verification quantities;
(vi) cost, valuation details;
(vii) profit/loss arising on sale
(viii) amounts receivable/payable.

3. Examine the timeliness of updation of the records by adpoting


procedures such as surprise inspection of the records, system of
internal controls over updation, review of internal audit and other
reports for exceptions, if any, in this regard.

4. Verify that the transactions entered in the registers are duly


supported by relevant documents.

5. Verify whether the aggregate of balance as per the Registers/Records


agrees with General Ledger balances.

6. Obtain a statement containing details of investments not held in the


name of the company and those where exemption under Section 49 is
available. Check the statement with necessary supporting documents
as in 4 above and with the requirements of Section 49 of the Act.

7.In case investments which are intended to be sold immediately may not
have been transferred in the name of the company, whether, in the
circumstances of each case, the failure to transfer the investments to the
company’s name is understandable.

Notes:1. The requirement does not apply to companies which are not dealing or trading in investments but purchase
investments with a view to hold such investments and earn income from dividend or interest.Factors to consider to decide
in this regard include-objects of the company, period for which investments are normally held, reasons for purchase/sale,
internal approvals covering such purchase and sale, method of valuation-cost or lower of cost or market value, treatment
of profits/gains in the tax assessments etc.,
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Guarantees given
Audit Procedures Response
1. Has the company given any guarantees for loans taken by
others from bank or financial institutions?

2. Obtain a list containing the name of the party, nature


of relationship, if any, amount of loans taken, closing
balance as at the balance sheet date together with brief
terms and conditions like description of security given,
estimated amount of such security, default action
conditions, if any.

3. Understand and document the internal controls over


issue of guarantees and confirm its operation during the
year. Consider implications, if any, on reporting or in
management letter.

4. Verify the above statement with documents such as


memorandum of association- to confirm whether the
company can issue guarantees, maximum permissable
amounts, the
directors, parties inwith
compliance respect of whom and of
the requirements theSection
types 372A
guarantees
of the that Act,
Companies can be given;
letters of minutes of the
borrowing board
parties of
requesting
the
295/372A of the Companies Act, letters of borrowing
parties requesting the guarantee, company's letters,
guarantee documents etc.,

5. If the company has issued a guarantee in contravention


of the clauses of the memorandum of association, consider
the same appropriately in reporting.

6.Whether the tangible/ intangible benefits flowing to the


company due to furnishing of guarantee are commensurate
with risk undertaken by the company in doing so?

7. If in judgement and conclusion it was established that


the terms are prejudicial to the interest of the company,
obtain an explanation from the company why the company
considers the same as not prejudicial.

8. If not convinced by management's explanation, consider


appropriately in reporting disclosing the amount of such
guarantee.

Notes:1. The requirement only applies to guarantees given for loans taken by others from banks or
financial institutions and not from other sources.
2. The requirement only relates to guarantees given during the year.
3. In determining whether the any guarantees given are prejudicial to the interest of the company,
factors such as financial standing of the party, its ability to borrow, nature of security offered,
availability of alternate sources of finance, urgency of the borrowing for which the guarantee was give
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given
Remarks
oans taken by others from banks or

cial to the interest of the company,


ow, nature of security offered,
owing for which the guarantee was given etc.,
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Utlisation of Term Loans


Audit Procedures Response Remarks
1. Has the company obtained any term loans or made any
utilisation during the year?

2.Obtain a statement containing the specific terms of


loans and the details of application-amounts, dates and
the purpose.

3.Verify the statement with documents such as sanction


letters and other documents containing the terms and
conditions and those relating to actual utilisation.

4. If term loans were not applied for the purpose for


which they were obtained, indicate the amount and the
purpose for which it was ultimately utilised.

5. In the case of temporary application of funds for other


purposes before they were utilised for the stated purpose,
mention such fact in the report.

6.Whether the funds flow statement has been reviewed


where one to one correlation is not possible?

Notes: 1. Working capital term loans are not within the scope of this clause.
2. The reporting requirement under this clause also covers temporary use of surplus funds.
3. It is not necessary to establish a one to one relationship with the amount of term loan and its utilisation.
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Utlisation of Funds
Audit Procedures Response
1.Obtain a statement containing the specific
terms of funds and details of use-amounts and
nature.

2. Compare the quantum of long term funds


with the long term application of funds.

3. Compare the quantum of short term funds


with the short term application of funds.

4. If the differences point towards use of short


term funds for long term investment and vice
versa , consider appropriately in reporting.

Notes: 1. Long-term sources of funds would include share capital, reserves and surplus, provision
for depreciation, long term debt securities, long term loans. Long term application of funds would
include investment in fixed assets, long term investments and other assets of similar nature,
repayment of long term loans and advances or redemption of debt securities, use for core working
capital etc., Short term sources of funds include temporary credit facilities like cash credits,
overdraft, reduction in current assets or increase in current liabilities etc., Short term application of
funds includes all application otherwise than for long term use, increase in current assets or
decrease in current liabilities etc.,
2. The requirement has to be determined on the basis of the overall picture of the sources and
application of funds based on the balance sheet of the company unless a one to one direct
relationship can be established between a particluar source and application.
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on of Funds
Remarks

e share capital, reserves and surplus, provision


m loans. Long term application of funds would
ments and other assets of similar nature,
mption of debt securities, use for core working
porary credit facilities like cash credits,
current liabilities etc., Short term application of
g term use, increase in current assets or

s of the overall picture of the sources and


he company unless a one to one direct
source and application.
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Date:
Reviewed by:
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Preferential allotment of shares


Audit Procedures Response Remarks
1. Has the company made any preferential allotment of shares to
parties and companies covered in the Register maintained under
Section 301 of the Companies Act,1956?

2. Obtain a statement containing the names of the parties and companies,


nature of relationship, description of allotments made-equity/preference,
number of shares, price and terms and conditions of the allotments made
during the year.

3. In the case of listed companies check whether the price


for shares issued on a preferential basis is not less than
higher of the following-
-the average of the weekly high and low of the closing prices
of the related shares quoted on the stock exchange during the
six months preceding the relevant date.
- the average of the weekly high and low of the closing prices
of the related shares quoted on the stock exchange during the
two weeks preceding the relevant date.

4. In the case of listed companies, confirm and verify that the


company has complied with the requirements of guidelines
laid down in this regard by SEBI.

5. In the case of private company and an unlisted public company ,


examine the method used for valuation of the shares and also
ascertain the reasonableness of the assumptions underlying the
calculation.

6.If in the judgement and conclusion it was eastablished that the price
charged is not fair, obtain a representation from the management as to
why such price charged is not prejuducial to the interest of the
company and consider appropriately in reporting.

7. Consider compliance with the requirements of AAS-9 "Using the


work of an Expert" if the valuation report of an expert is used as the
basis.

8. If the company has made preferential issue by passing an ordinary


resolution, also examine the relevant order of the Government passed
in this regard. If on the basis of order it is concluded that the price
charged is not prejudicial, state the fact of reliance on such order
for the purpose of reporting.
Notes: 1.The term "shares" includes both preference as well as Equity.

2. In the case of a listed company allotment of shares under Section 81(1A) of the Companies Act,1956 is known as
preferential allotment of shares.
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Securites for Debentures


Audit Procedures Response
1. Has the company issued any debentures and the same
outstanding at the end of the year?

2.Verify the debenture trust deed executed under Section


117A of the Act in respect of debentures issued during the
year with particular reference to security requirements.

3.Verify whether such security is created as required under


section 125 and 130 of the Act by examining the documents
evidencing the charge-forms filed with ROC etc.,
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es
Remarks
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Completed by:
Date:
Reviewed by:
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End use of Public issue Monies


Audit Procedures Response
1. Has the company made any public issue or made utilisation
during the year?

2.Obtain a statement containing the quantum of money


raised on public issue of any security made by the company
during the year and details of end use of money so raised.

3. Verify such statement with reference to end use as set


out in the Prospectus. Where the issue exceeds Rs. 500
Crores, refer the half yearly reports of the monitoring
agency as submitted to SEBI.

4. Verify the disclosure made by the company in the


financial statements in this regard.

5. If we are not satisfied with the disclosures made in the


financial statements, consider the matter for reporting
setting out clearly the information which should have
been dislosed.

6.Whether the cash flow statement has been reviewed where


one to one correlation is not possible?

7. If we are unable to determine the end use of money


raised from public issues state the fact together with the
reasons thereof in our report.
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sue Monies
Remarks
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Completed by:
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Fraud
Audit Procedures Response Remarks
1.Complete our understanding and assessment of
fraud considerations as per steps given under
"Fraud Risk" in MYClient file.

2. On the basis of work carried out as above, are


we satisfied that there are no indications
of fraud on or by the company noticed or reported
during the year?

3. If any fraud is noticed or if there is a doubt about the


existence of fraud, carry out procedures as mentioned
in AAS-4 "The Auditor's Responsibility to consider
fraud and error in an audit of Financial Statements"

4.If the response to 2 above is "No" determine the .


nature and extent of such frauds and implications on
our reporting.
Note: The following are the indicative sources relating to identification of Fraud-
i. the reports of internal reviews conducted, if any.
ii.Inquiries of the management about any frauds on or by the company that its has noticed or that have been reported to it.
iii. discussions with other employees of the company.
iv. Examination of the minutes book of the meetings of Board, audit committee etc.,
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Clause No. Area/Requirement Brief Description of the Issue


4(i) (a) Fixed Assets
4(i) (b) Fixed Assets
4(i)( c) Fixed Assets
4(ii) (a) Inventories
4(ii) (b) Inventories
4(ii) ( c) Inventories
4(iii) (a) Loans granted
Loans taken
4(iii)(b) Loans granted
Loans taken
4(iii)( c) Loans granted or taken
4(iii) (d) Loans granted or taken
4(iv) Internal Controls
4(v)(a) & (b) Register under Section 301etc.,
4(vi) Fixed Deposits
4(vii) Internal Audit
4(viii) Cost Records
4(xi) (a) & (b) Statutory dues
4(x) Accumulated losses etc.,
4(xi) Dues to Banks & Fis etc.,
4(xii) Loans and Advances granted
4(xiii)(a) Chit Fund company
4(xiii)(a) to (d) Nidhi/mutual benefit fund/society
4(xiv) Dealing or Trading in Securities
4(xv) Guarantees
4(xvi) Term Loans
4(xvii) Funds raised
4(xviii) Allotment of shares
4(xix) Debentures
4(xx) Money raised on public issue
4(xxi) Fraud
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How addressed in the Audit