SA 700, 705 and 706

Reporting Standards

1
Contents of todays coverage
! SA 700, Forming and Opinion and
Reporting on Financial Statements
! SA 705, Modifications to the Opinion in
Independent Auditors Report and
! SA 706, Emphasis of Matter Paragraph
and Other Matter Paragraph in the
Independent Auditors Report
! That deal with how to form an audit opinion,
reach audit conclusions and issue different
types of auditors reports.
2
Background
! Essentially, this is the culmination of
! Converging with IASBs international
standards
! Bring specific placement of
! Unqualified Opinion
! Basis for qualified opinion
! Basis for adverse opinion
! Basis for disclaimer of opinion
! Matters of emphasis (not qualified)
! Other matters of importance (not qualified)
3
SA 700
! Applicability from 1
st
April 2011
! Postponed by one year
! Applies only for audit report on general purpose
financial statements
! General purpose framework could be
! Fair presentation framework
" Like under Companies Act
! Compliance framework
" Whether in compliance with specific regulatory requirements
! There could be a mixture of both required
! Like applicable for Banks and NBFCs regulated by RBI
4
The process of reaching a conclusion
! Sufficient and appropriate evidence obtained SA 330
! Materiality of uncorrected misstatements SA 450
! Requirements of reporting framework materially complied
with (A/cing Standards)
! Management judgment are not biased SA 260 and 540
! Adequate disclosure of accounting policies
! Accounting policies are appropriate and consistent
! Accounting estimates are reasonable
! Information is relevant, reliable, comparable and
understandable
! Adequate disclosure for users to understand
! Terminology used is appropriate
! Achieve true and fair presentation considering
! Overall structure and content
! Represent underlying transactions in a manner thats true and
fair
Meticulous
collection of
evidence
Detailed
documentati
on of work
done
Analysing
with
professional
skill,
competence
and
reasoned
judgement
5
Forming an Opinion
Audit Process
Has obtained sufficient
appropriate evidence
Reaches a conclusion that
the financial statements
are free from material
mis-statement
Clean opinion
(SA 700)
Reaches a conclusion that
the financial statements
are not free from material
mis-statement
Modified opinion
(SA 705)
Unable to obtain sufficient
appropriate evidence
Issue a disclaimer of
opinion
(SA 705)
6
Which modified opinion to use
Nature of the
matter giving rise
to the modified
opinion
Auditors judgement about the
materiality and pervasiveness of the
effects or possible effects on the
financial statements
Material but not
pervasive
Material and
Pervasive
FS are materially mis-
stated
Qualified opinion Adverse opinion
Inability to obtain
sufficient appropriate
audit evidence
Qualified opinion Disclaimer of opinion
7
Professional Judgment
! The distinguishing feature of
the professional judgment
expected of an auditor is that
it is exercised by an auditor
whose training, knowledge
and experience have assisted
in developing the necessary
competencies to achieve
reasonable judgments.
! Can be evaluated based on
whether the judgment
reached reflects a competent
application of auditing and
accounting principles and is
appropriate in the light of, and
consistent with, the facts and
circumstances that were
known to the auditor up to
the date of the auditors
report.
! Professional judgment is
necessary in particular
regarding decisions about:
! Materiality and audit risk
! The nature, timing, and extent
of audit procedures used
! Evaluating whether sufficient
appropriate audit evidence has
been obtained
! Evaluation of managements
judgments in applying applicable
financial reporting framework
! Drawing of conclusions based
on the audit evidence obtained
8
Material mis-statement
! FS to comply with applicable
financial reporting framework
need to comply on four
aspects
! Recognition
! Measurement
! Classification and presentation
! Disclosure
! As per SA 540 (Evaluation of
misstatements identified during audit)
! Appropriateness of the selected
Accounting Policies
! Application of selected
Accounting Policies
! Appropriateness and adequacy
of disclosures
! Three key concepts
! Evidence
! Materiality
! Mis-statement
! Other Key SA to consider
! SA 320, Materiality in Planning
and Performing an Audit
! SA 450, Evaluation of
Misstatements Identified during
the Audit
! SA 500, Audit Evidence
! SA 501, Audit Evidence
Specific Considerations for
Selected Items
! SA 505, External Confirmations
! SA 570, Going Concern
9
What is Pervasive
! Pervasive effects on the financial
statements are those that, in the auditors
judgment:
! (i) Are not confined to specific elements,
accounts or items of the financial statements;
! (ii) If so confined, represent or could
represent a substantial proportion of the
financial statements; or
! (iii) In relation to disclosures, are fundamental
to users understanding of the financial
statements.
10
Inability to obtain sufficient
appropriate audit evidence
! Circumstances beyond the control of an entity For
example, the entitys accounting records are destroyed by fire
or are seized by an investigating agency;
! Circumstances related to the nature and timing of the
auditors work Examples: (a) for equity accounting of an
associate, adequate financial information of the associate is
not available; (b) the auditor is appointed after year-end and
is therefore unable to observe physical verification of
inventory; or (c) where the controls of the entity are not
effective and the auditor concludes that performing
substantive procedures alone is not sufficient;
! Limitation imposed by management For example,
management prevents the auditor from observing inventory
count or from requesting external confirmation of specific
account balances, or imposes unrealistic time deadlines
within which to issue an auditors report.
11
How to act if limitation placed by
Management?
! First seek to remove the restrictions
! Next Communicate to TCWG and
explore ways to perform alternate
procedures to obtain sufficient appropriate
audit evidence
! If that also does not yield results, determine
materiality and pervasiveness and
accordingly
! Qualify the opinion
! Resign from the engagement however, if law
does not permit that, provide a disclaimer of
opinion
12
Key requirements in the report
! Consistency
! Form with specific paragraphs
! Title
! Address
! Introductory Paragraph
! Managements Responsibility
! Auditors Responsibility
! Auditors opinion
! Other responsibilities
! Signature
! Date of the audit report
! Place of issue of audit report
13
Key Change 1 Use of the word
Independent in the context of
promulgation of SQC 1 from 2009
No Change Report continues to
be addressed to Members of a
Company; Partners of a Firm and
President of India for a Government
Undertaking
14
Key Change 2 Separate
Introductory paragraph
identifying the entity and the
financials
Key Change 3 More
detailed explanation of
the Managements
responsibility
15
Key Change 3
Management is responsible for the
preparation of these financial statements that give
a true and fair view of the financial position, financial
performance and cash flows of the Company in
accordance with the Accounting
Standards referred to in sub-section (3C) of
section 211 of the Companies Act, 1956 (the Act).
This responsibility includes the design,
implementation and maintenance of
internal control relevant to the preparation and
presentation of the financial statements that give a true
and fair view and are free from material
misstatement, whether due to fraud or
error.
16
Key Change 5 Separate
paragraph on true and fair
opinion
Key Change 4 Very
detailed explanation of
the Auditors
responsibility
17
Key Change 4
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with the Standards on Auditing issued by the
Institute of Chartered Accountants of India. Those Standards require
that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement. An audit
involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures
selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those
risk assessments, the auditor considers internal control
relevant to the Companys preparation and fair
presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting policies used and
the reasonableness of the accounting estimates made by management,
as well as evaluating the overall presentation of the financial
statements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit opinion.
18
Key Change 4
! When a modified opinion is given, the auditors responsibility
para also changes:
! Qualified
! We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our qualified
audit opinion.
! Adverse
! We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our adverse
audit opinion.
! Disclaimer
! Our responsibility is to express an opinion on the financial
statements based on conducting the audit in accordance with
Standards on Auditing issued by the Institute of Chartered
Accountants of India. Because of the matter(s) described in the
Basis for Disclaimer of Opinion paragraph, however, we were
not able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion.
19
No change Closure of the
report. Auditor responsible for
events after Balance Sheet date
only upto the date of the report
Key Change 6
Separate report on
other legal and
regulatory
requirements
20
Key Change 7
! When issuing modified reports, there is a
need to specifically have a paragraph
! Basis for qualified opinion or
! Basis for adverse opinion or
! Basis for disclaimer of opinion.
! Also a separate paragraph for the opinion
! Qualified opinion or
! Adverse opinion or
! Disclaimer of opinion
21
SA 706 Emphasis of Matter
! A paragraph included in the auditors report that
refers to a matter appropriately presented
or disclosed in the financial statements that, in
the auditors judgment, is of such importance
that it is fundamental to users
understanding of the financial statements.
! An Emphasis of Matter paragraph is not a
substitute for either the auditor expressing a
qualified opinion or an adverse opinion, or
disclaiming an opinion, when required by the
circumstances of a specific audit engagement.
22
Circumstances which require a
Emphasis of Matter para
! An uncertainty relating to the future
outcome of an exceptional litigation or
regulatory action.
! Early application (where permitted) of a new
Accounting Standard that has a pervasive
effect on the financial statements in advance
of its effective date.
! A major catastrophe that has had, or
continues to have, a significant effect on the
entitys financial position.
23
Some examples
! A current topical example could be the likely
impact that migration from the existing Indian
Accounting Standards to the converged
Accounting Standards will have on the financial
position and performance of an entity in the
coming accounting period where such migration
has been notified by law or regulation.
! Another example could be the impact, if
significant, of an unconventional interpretation of
an Accounting Standard that an entity may have
taken, even though the auditor is fully in
agreement with it.
24
Other Matter Paragraph
! A paragraph included in the auditors
report that refers to matters other than
those presented or disclosed in the
financial statements that, in the auditors
judgment, is relevant to users
understanding of the audit, the
auditors responsibilities or the
auditors report.
25
When Other matter para required?
! To explain serious restrictions placed on
the audit
! Bring out the fact that another general
purpose FS has also been signed off under
a different reporting framework (for
instance IGAAP and IFRS)
! When the intent is for specific use and
not general purpose (but prepared in the
same manner), to limit the report to
intended users
26
Other matter para not to include
! Any matter that is required to be
presented or disclosed in the financial
statements
! Any information that the auditor is
prohibited from providing by law,
regulation or other Standards
! Information that is required to be
provided by management
27
Emphasis vs. Other Matter
Emphasis of Matter
! Relates to financial
statements including
the notes etc.,
! Relates to
appropriately
presented / disclosed
matter
! Placed immediately
after Opinion Para
Other Matter
! Relates to audit,
responsibilities and
report
! Relates to what is not
presented / disclosed
! Placed after emphasis
of Matter para
! If related to other legal
requirements, placed
after that section
28
Illustrations in the Implementation Guide
Unqualified Report
Standalone financials
Consolidated financials
Audit under other laws
Modified Opinion
Report
Qualified report
Adverse opinion report
Qualified report where
effect is not
determinable
Disclaimer of report
Report with
emphasis of
matter / other
matter
Matter of Emphasis para
uncertainty on a
major legal issue
Other matter paragraph
where subsidiaries
not audited by the same
auditor
29
Practical Example - 1
! Central Government or a court of law, say, at
the request of the entity, permits it to follow
a specific accounting treatment in respect of
a particular transaction.
! For example, an entity may be permitted to
account for a certain type of income or
expenditure on cash basis or on a deferral
basis that may not be permitted by the
Accounting Standards.
! Whether such departure from the
framework requires auditor to qaulify his
opinion?
30
Practical Example - 1
! Answer NO
! The departure is not a non compliance,
but compliance with a modified
framework
! If the effect of doing this is material, the
auditor should describe the resultant
deviation from the framework in sufficient
detail in an emphasis of matter paragraph
31
Practical Example - 2
! What if the law under which the report is to
be provided prescribes a format?
! As far as possible, to bring in the elements of
this SA 700 without affecting the ultimate
legal requirement
! Else, not to include the statement We
conducted the audit in accordance with the
Standards on Auditing issued by the Institute of
Chartered Accountants of India.
! Where required to issue a suitable opinion
under SA 705 / SA 706 as may be
appropriate
32
Practical Example - 3
! Where audit is done under two standards say
SA and ISA
! If the two standards do not have any conflict that
would require the auditor to form a different
opinion under each of them to state in report
! We conducted the audit in accordance with the
Standards on Auditing issued by the Institute of Chartered
Accountants of India and the International Standards on
Auditing.
! If conflict exists, auditor to issue separate reports
under each standard one could be a clean
opinion whilst the other is modified etc.,
33
Practical Example - 4
! Entity voluntarily provides or is required
by law / regulations to provide additional
information outside the scope of the
applicable financial reporting framework.
! For instance, RBI may require banks to
present many other financial information
! In such cases, what should the audit
approach be?
34
Practical Example - 4
! As a first option discuss with client on
possibility of providing such information
separately from the financial statements
! Presented separately in a way to clearly
show that such information is unaudited
! Even in such cases, under SA 720 to ensure at
least that such information is not inconsistent
with the audited financial statements
! If these are not possible and it is part of the
financial statements (including the notes)
then these have to be also included in the
scope of the audit opinion
35
Practical Example - 5
! Emphasis of Matter
! We draw attention to Note X(i) and X(ii) to the financial
statements which describe the execution application filed in
the Hble Bombay High Court by aggrieved selling
shareholders of the acquired entity against the deduction
made by the Company from deferred purchase consideration
in respect of payments it had to make to the Income Tax
authorities in respect of demands against the acquired
company for periods prior to acquisition, and the execution
proceedings initiated by the Company against the selling
shareholders for recovery of amounts due to it pursuant to
the selling shareholders obligation to indemnify the
Company against tax demands raised on the acquired entity
for years prior to the effective date of acquisition. Our
opinion is not qualified in respect of this matter.
36
Practical Example - 6
! Emphasis of Matter
! We draw attention to Note XX to in Schedule XX of the
financial statements which provides details with regard to the
identification and adjustment during the year of the amount
of impairment of fixed assets amounting to Rs. xx cr (net of
tax) and certain expenses amounting to Rs. xx cr against
Business Reconstruction Reserve. This reserve was created
under the Scheme of Arrangement u/s391 to 394 of the
Companies Act 1956 approved by the Honourable High
Court of Mumbai vide its Order dated XXth June, 20XX by
transferring the balance standing to the credit of its
Securities Premium Account for adjusting certain expenses as
defined in the Scheme. Our opinion is not qualified in respect
of this matter.
37
Practical Example - 7
! Emphasis of Matter
! 1. We draw attention to Note XX in Schedule XX of the financial
statements relating to exercise of option by the Company to recognise
gains and losses arising on fluctuation of foreign exchange rates on long
term monetary items, to assets or to a reserve as detailed in the Note,
consequent to the amendment to Accounting Standard 11, The Effects of
Changes in Foreign Exchange Rates, resulting in the profits for the year
being higher by Rs xxx million and its consequential impact on the
reserves and surplus and carrying cost of assets as detailed therein.
! 2. We further draw attention to Note YY in Schedule XX of the financial
statements relating to change in method of recognizing the impact of
foreign currency fluctuations on effective hedging instruments in
accordance with principles of hedge accounting set out in Accounting
Standard 30, Financial Instruments Recognition and Measurement,
having no impact on the profits for the year.
! Our opinion is not qualified in respect of these matters.
38
Practical Example - 8
! Emphasis of Matter
! We draw attention to Note XX of Schedule XX
to the financial statements stating that the
Company has paid Rs xx cr under protest against
claims of Rs xx cr for expenses which the
Company has disputed in matters that are in
various stages of litigation. Pending resolution of
these disputes by the relevant courts, these
expenses have been accounted for in the financial
statements based on the managements
expectation of the amounts due. Our opinion is
not qualified in respect of this matter.
39
Practical Example - 9
! Emphasis of Matter
! We invite attention to Note No. X of Schedule
XX Notes to the Financial Statements,
regarding impairment of fixed assets wherein, due
to the highly technical nature of the plant and
machinery, we have relied on the estimates and
assumptions made by the Companys internal
technical department which we prima facie found
to be reasonable in arriving at the recoverable
value of the fixed assets at the Bhandup cash
generating unit of the Company. Our opinion is
not qualified in respect of this matter.
40
Practical Example - 10
! Emphasis of Matter
! We draw attention to Note No. X of schedule
XX to the financial statements regarding approval
of the Central Government in respect of certain
transactions for the rendering of services to the
parties covered under Section 297 of the
Companies Act, 1956 for the period up to
December 31, 20XX, which the Company has
applied for and is pending approval from the
authorities. Our opinion is not qualified in respect
of this matter.
41
Practical Example - 11
! Emphasis of Matter
! In view of their technical nature, we have placed
reliance on technical/ commercial evaluation by the
management in respect of categorization of wells as
exploratory, development and producing, allocation of
cost incurred on them, depletion of producing
properties on the basis of the proved developed
hydrocarbon reserves, liability for abandonment
costs, liabilities under NELP for under-performance
against agreed Minimum Work Programme and
allocation of depreciation on process platforms to
transportation and facilities. Our opinion is not
qualified in respect of this matter.
42
Practical Example - 12
! Emphasis of Matter
! Refer note no X of Notes to the Financial Statements in
Schedule XX regarding the Scheme of Demerged
Undertaking. The Company took over the demerged
undertaking of PQR Ltd. under the Composite Scheme of
Arrangement sanctioned by the Honble High Court of
Gujarat by Order dated 1st March, 20XX. The appointed
date for this purpose was 1st December, 20XX and the
effective date is 7th March, 20XX. Three parties have filed an
appeal against this Order before the Division Bench of the
Honble High Court of Gujarat and their appeal, which has
been admitted, is pending. The Company has given effect to
the above Scheme subject to the Honble High Courts
decision in the said appeal. Our opinion is not qualified in
respect of this matter.
43
Practical Example - 13
! Emphasis of Matter
! We draw attention to Note X in Annexure II to the abridged
financial statements and also Note XX in Schedule M to the
complete set of financial statements regarding deductions
made/ amounts withheld by some customers aggregating to
Rs. 605,083 thousand (Previous year Rs. 461,224 thousand)
on various accounts which are being carried as sundry
debtors. The Company is also carrying accrued income of Rs.
95,455 thousand (Previous year Rs. 95,455 thousand) relating
to these customers. The ultimate outcome of the above
matters cannot presently be determined although the
Company is of the view that such amounts are recoverable
and hence no provision is required thereagainst. Our opinion
is not qualified in respect of this matter.
44
Practical Example - 14
! Emphasis of Matter
! We draw attention to Note XX of Schedule
XXB to the financial statements regarding
non-disclosure of the impact of fair value
method of accounting on net results and
Earnings Per Share as required by the
Guidance Note on accounting for employee
sharebased payments issued by the Institute
of Chartered Accountants of India. Our
opinion is not qualified in respect of this
matter.
45
Practical Example - 15
! Emphasis of Matter
! We draw attention to: (a) Note 5 on the Statement,
which explains the circumstances under which no
obligation under a Share Purchase agreement has yet
arisen in terms of Accounting Standard 29, in relation
to the sale of investments of equity shares in XYZ
Limited made during the previous year ended 31st
March, 20X0; and (b) Note 4 on the Statement
regarding provision made for diminution, other than
temporary, in value of investments, which is
considered to be adequate for the reasons stated in
the said Note. Our opinion is not qualified in respect
of these matters
46
Practical Example - 16
! Emphasis of Matter
! We draw attention to Note 6 to the
Consolidated Financial Statements regarding
investments in certain subsidiaries aggregating Rs.
XXX lacs which are yet to break even. At
reporting date, the Companys share of
cumulative losses in these subsidiaries is Rs.XXX
lacs against which provision for diminution of Rs.
XXX lacs is considered as adequate by the
management, based on business plans. Our
opinion is not qualified in respect of this matter.
47
Practical Example - 17
! Emphasis of Matter
! (a) We draw attention to Note No. XX of Schedule YY regarding debit to Goodwill of the
loss arising on transfer of the Export Business Undertaking to ABC Private Limited and
adjusting such Goodwill against the balance in the Securities Premium Account in terms of
the Scheme of Arrangement as approved by the High Court of Bombay. Had such loss not
been adjusted against Securities Premium Account as permitted under the Order of the
High Court but debited to the Profit and Loss Account as per the generally accepted
accounting principles, the net loss before tax of Rs. XXX would have resulted into a net
loss before tax of Rs. XXX and the loss carried to Balance Sheet would have been Rs
XXX in stead of Rs XXX.
! (b) We also draw attention to Note No. CC of Schedule YY regarding investments in a
wholly owned subsidiary whose net worth is eroded and the consequent possibility of
impairment of the equity investment of Rs XXX made and non-recovery or partial
recovery loan of Rs XXX given to it by the Company. For reasons explained in the said
Note, including the subsidiarys future business plans and growth prospects, such
impairment if any is considered to be temporary in nature and no provision is considered
necessary in the accounts of the Company.
! Our opinion is not qualified in respect of these matters
48
Practical Example - 18
! Emphasis of Matter
! We invite attention to Note no. X of Schedule XX-X of the
financial statements regarding the cancellation of investment
in XXX equity shares of ABC Limited aggregating Rs XXX
and the issuance of XXX transferable warrants to the
Company, both pursuant to a court approved composite
scheme of Reduction cum Arrangement between ABC
Limited and its shareholders (including the Company). As
stated in the Note, the Company has obtained independent
legal counsels opinion that no tax liability arises on the
reduction cum arrangement. On that basis, no tax liability is
recognised in respect thereof. Our opinion is not qualified in
respect of this matter.
49
References
! Standards of Auditing
! SA 700 - Forming and Opinion and Reporting
on Financial Statements
! SA 705 - Modifications to the Opinion in
Independent Auditors Report
! SA 706 - Emphasis of Matter Paragraph and
Other Matter Paragraph in the Independent
Auditors Report
! ICAIs Implementation Guide on
Reporting Standards
50
Companies (Auuitoi's
Repoit) 0iuei 2uuS
1
2
Bistoiy of 227(4A)
8eLween 1973 Lo 1987 MACCA8C 1973
8eLween 1988 Lo 30-6-2003 MACCA8C 1988
8eLween 1-7-2003 Lo ull daLe CA8C 2003
MACCA8C 1973
CenLral CovernmenL lssued Lhe ManufacLurlng and CLher
Companles (AudlLor's reporL) order, 1973
applled Lo all manufacLurlng, servlce, Lradlng and nance
companles.
AudlLor Lo reporL on 22 lLems
MACCA8C 1988
AudlLor Lo reporL on 27 lLems
CA8C 2003 lssued orlglnally on 12
Lh
!une 2003 &
Amended on 23
Lh
november 2004
aragraph 4 has 21 sub paragraphs and 37
quesuons
3
CAR0 is wiuei compaieu to NA0CAR0
lssues ln CorporaLe governance
SLreamllnlng of reporung, deleung 8edundanL aragraphs
Lmphasls on lnLernal conLrol, lnLernal AudlL
8eporung on fraud
Wldenlng Lhe scope of reporung
4
Non Applicability of CAR0,
2uuS
8anklng company
lnsurance company
Secuon 23 company
rlvaLe company
ald up caplLal and reserves upLo y lakh rupees and
Loan ouLsLandlng from bank or ll upLo 23 lakhs and
1urnover upLo 3 crores
Foi examining the applicability of
0iuei, whethei position at the
close of the yeai is to be seen.
no.
ara 24 of Lhe SLaLemenL clearly provldes LhaL Lhe Crder becomes
appllcable lf aL any polnL of ume durlng Lhe year Lhe condluons are
covered.
3
Nannei of iepoiting in cases of
companies exempt by the 0iuei
lL may be ln good order Lo menuon Lhe facL LhaL Lhe company has
exempuon from Lhe appllcablllLy of Lhe Crder ln hls reporL.
ln case of a !"#$%&' )#*#&'+ ,-*.%/0 /-& 1-$'"'+ 20 &3' 4"+'":
1he audlLor should menuon ln hls reporL LhaL Lhe company ls
exempLed from Lhe appllcablllLy of Lhe Crder.
!"#$ &'()&* +)'$ ,)* #,-./+' 0 $*0*'1',* ), *"' 102'&$ $('-#3'+ #,
(0&0 4 )5 *"' 6)1(0,#'$ 78/+#*)&$ 9'()&*: ;&+'&<=>>? #$$/'+ @A *"'
B#,#$*&A )5 6)&()&0*' 8C0#&$< #, *'&1$ )5 $'-D), ==E748: )5 *"'
6)1(0,#'$ 8-*<FGHI< $#,-' #, )/& )(#,#), 0,+ 0--)&+#,J *) *"'
#,5)&10D), 0,+ 'K(.0,0D), J#L', *) /$< *"' $0#+ ;&+'& #$ ,)* 0((.#-0@.'
*) *"' -)1(0,AM
6
Nannei of iepoiting in case some of the
clauses of the 0iuei aie not applicable
1he audlLor Lo make a sulLable commenL ln hls reporL brlnglng ouL
Lhe facL of non-appllcablllLy of a parucular clause.
lor lnsLance:
!"' 6',*&0. J)L'&,1',* "0$ ,)* (&'$-&#@'+ 10#,*',0,-' )5 -)$*
&'-)&+$ /,+'& $'-D), =>G7F:7+: )5 *"' 8-* 5)& 0,A )5 *"' (&)+/-* )5 *"'
-)1(0,AM
7
Repoiting iesponsibilities of the
auuitoi of a bianch of a piivate
limiteu company
Condluons Lo be saused for belng exempL from Lhe
appllcablllLy of Lhe Crder have been lald down ln
respecL of Lhe company Laken as a whole.
lf Crder ls appllcable Lo Lhe company, a branch of Lhe
company does noL quallfy Lo be exempL from Lhe
appllcablllLy of Lhe Crder.
8
Applicability of 0iuei to a Liaison
0ffice, bianch office oi pioject office of
a foieign company
ara 2 of Lhe Crder- apply Lo all companles lncludlng forelgn
companles.
Same crlLerla ls Lo be applled as adopLed for a branch omce of an
lndlan company.
9
10
Sub Paiagiaphs of Paiagiaph 4
AudlLor Lo respond Lo 21 lLems relaung Lo
(l)llxed AsseLs
(ll)lnvenLorles
(lll)1erms, condluons of loans and advances(granLed &
Laken)
(lv)Adequacy of lnLernal conLrol sysLem
(v)aruculars of conLracLs or arrangemenLs referred ln
secuon 301
(vl)Compllance of 38A,38AA
(vll)lnLernal AudlL SysLem ln llsLed companles/cerLaln
specled companles
(vlll)MalnLenance of CosL 8ecords
11
Sub Paiagiaphs of Paiagiaph 4
(Contu.)
(lx)ueposlung undlspuLed sLaLuLory dues
l,lLl,lLS,l1,Sales 1,W1,Servlce
1,CusLoms,Lxclse,Cess & oLher sLaLuLory dues
(x) Slck Companles
(xl)uefaulL ln repaymenL of dues ll/8ank/uebenLure
holders
(xll)uocumenLs for loans and advances granLed
(xlll)Compllance of ChlL fund acL
nldhl/MuLual beneL fund/socleues
(xlv)ueallng or Lradlng ln shares & securlues
(xv) CuaranLee for loans Laken by oLhers
(xvl)Appllcauon of 1erm Loan
12
Sub Paiagiaphs of Paiagiaph 4
(Contu.)
xvll) Appllcauon of Lerm loan fund ralsed for shorL Lerm basls
xvlll)referenual AlloLmenL Lo parues & companles covered by
secuon 301
xlx)Securlues & charge on debenLure lssues
xx)ulsclosure on Lhe end use of money ralsed by Lhe publlc lssue
xxl)8eporung on fraud on or by Lhe company nouced or reporLed
13
Paiagiaph 4(i)- Fixeu Assets
Cuesuons
roper records wlLh paruculars llke quanuLy and locauon
hyslcal verlcauon aL reasonable lnLervals
ueallng wlLh dlscrepancles, lf any
ulsposal of subsLanual poruon of lA
uocumenLauon
llxed AsseLs 8eglsLer showlng classlcauon
ManagemenL represenLauon on physlcal verlcauon
Lvldence of verlcauon and dlerences
Shareholders resoluuon for dlsposal [secuon 293(1)(a)]
8eferences
Companles AcL(secuon 293), AS 10, 24,and 26 and SA 370
What constitute piopei iecoius
of fixeu assets.
1he Crder ls sllenL as Lo whaL consuLuLe proper records.
Sub[ecL mauer of professlonal [udgmenL aer conslderlng facLs and
clrcumsLances of each case.
14
Recoius of fixeu assets maintaineu
electionically- Whethei constitutes
compliance.
?es provlded Lhe followlng condluons are meL:
LxlsLence of conLrol noL permlmng alLerauon ln records once enLered
lL can be reLrleved ln a leglble form
13
What constitutes substantial pait of
fixeu assets uisposeu off.
1he Crder does noL dene Lhe word subsLanual
uepends prlmarlly upon Lhe facLs and clrcumsLances
of Lhe case
lL ls noL necessary LhaL sale or dlsposal of whole or
subsLanually Lhe whole of underLaklng of Lhe
company ls same as sale of subsLanual parL of Lhe
xed asseLs
16
Bisposal of substantial pait of fixeu
assets anu its effect on the going
concein
lf Lhe dlsposal of subsLanual parL of xed asseLs eecL Lhe
companys ablllLy Lo conunue lLs operauon for Lhe foreseeable
fuLure lL shall be consldered Lo have eecL on lLs on golng
concern.
17
18
Paiagiaph 4(ii)- Inventoiy
Cuesuons
hyslcal verlcauon aL reasonable lnLervals
verlcauon procedure ls adequaLe Lo companys slze
and naLure of buslness
roper records
ulscrepancles noLed are properly dealL wlLh
uocumenLauon
Lvldence of physlcal verlcauon
LlsL of locauon & lnvenLory
ManagemenL represenLauon regardlng verlcauon
procedure
8eferences
AS 2, SA 301
What shoulu Inventoiy consist of.
lnvenLorles are asseLs:
Peld for sale ln Lhe ordlnary course of buslness.
ln Lhe process of producuon for such sale or
ln Lhe form of maLerlals and supplles Lo be consumed ln Lhe producuon
process or ln Lhe renderlng of servlces.
19
Naintenance of Stock Registei foi
woik-in-piogiess
Cases where lL ls lmpracucable Lo malnLaln sLock records of Wl
Can aL any polnL of ume one can arrlve or calculaLe Lhe quanuLy
and amounL lnvolved ln Wl?
lf yes, Lhe audlLor may form an oplnlon LhaL sLock records are belng
malnLalned.
20
21
Paiagiaph 4(iii)- Loans
uocumenLauon
ueLalls of loans Laken from & glven Lo persons covered
ln reglsLer under secuon 301
1erms, condluons and raLe of lnLeresL of above loans
prlma facle pre[udlclal Lo Lhe lnLeresL of company
8epaymenLs regular
ManagemenL represenLauon on reasonable sLeps
Laken for recovery of amounLs >1 lakh
8eferences
Companles AcL(secuon 227,297,299,301)
non-8anklng llnanclal Companles rudenual norms
(8eserve 8ank) ulrecuons, 1998 (aragraph 6A)
Loans gianteu oi taken uuiing the yeai
oi the opening balances of such loans
also to be consiueieu .
Clause appllcable Lo all loans Laken/granLed wheLher durlng Lhe
year or broughL forward as openlng balances
22
Loans taken oi given without
stipulation of iepayment
lor maklng commenL on Lerms and condluons noL
pre[udlclal Lo Lhe lnLeresL of Lhe company, number of
facLors are Lo be consldered lncludlng:
1he company/borrowers nanclal sLandlng,
lLs ablllLy Lo borrow/lend,
naLure of securlLy,
AvallablllLy of alLernauve source of nance,
1he urgency of Lhe borrowlng.

23
Repoiting when the company has not
maintaineuupuateu Registei as
iequiieu by section Su1
Menuon Lhe facL ln hls reporL.
24
Relateu paities as pei AS- 18 anu
paities listeu in Registei maintaineu
unuei section Su1- uiffeiences
1wo dlerenL Lerms.
Clause Lo cover only parues Lo be llsLed ln Lhe 8eglsLer malnLalned
under secuon 301 of Lhe AcL.
Also, 299 (3) provldes for general nouce (whlch may lnclude all
companles)
299 (6) sLaLes LhaL secuon lLself ls noL appllcable lf sLake noL 2
301 (3) requlres recordlng based on 299 (3)
1hus, reporung requlred even for companles whlch are noued
under 299 (3) buL excluded ln vlew of 299 (6)?
23
Repoiting iesponsibility in case loan
iepayable on uemanu anu uemanu has
not yet maue
1he audlLor Lo sLaLe Lhe facL LhaL he has noL made any commenLs
because Lhe Lerms of Lhe repaymenL have noL been supulaLed.
26
"#$ %&'($ )'%* +, +*"$-$," .-$$ )'%* %*/ *'
0'*/+"+'* %, "' -$1%23$*" '. 1-+*0+1%)
%3'4*" #%($ &$$* ,"+14)%"$/5
1he above commenL ls noL compleLe.
1he audlLor has Lo commenL:
53'&3'" *"' &0*' )5 #,*'&'$* 0,+ )*"'& *'&1$ 0,+ -),+#D),$ )5 .)0,$ *0N',
@A *"' -)1(0,A< $'-/&'+ )& /,$'-/&'+< 0&' (&#10 50-#' (&'O/+#-#0. *) *"'
#,*'&'$* )5 *"' -)1(0,A 0,+ P"'*"'& (0A1',* )5 (&#,-#(0. 01)/,* 0,+
#,*'&'$* 0&' 0.$) &'J/.0&M
27
28
Paiagiaph 4(iv)- inteinal contiol system
Cuesuons
Adequacy of lnLernal conLrol sysLem commensuraLe wlLh
company slze and buslness for purchase of lnvenLory and
xed asseLs and for sale of goods and servlces
Conunulng fallure Lo correcL ma[or weaknesses
uocumenLauon
lnLernal conLrol quesuonnalre, owcharL
ManagemenL represenLauon on sLeps Laken Lo correcL
ma[or weaknesses
lnLernal audlL reporLs

8eferences
SA 400
What constitute continuous failuie to
coiiect majoi weaknesses in inteinal
contiol.
8equlremenL ln regard Lo adequacy of lnLernal
conLrols and conunulng fallure Lo correcL ma[or
weaknesses are noL lnLerllnked.
uepends upon Lhe facLs and clrcumsLances of Lhe
case.
resumpuon of conunulng from prevlous perlod and
reporung Lo Lhe managemenL for correcuon.
29
30
Paiagiaph 4(v)-Contiacts
Cuesuons
ueLalls of conLracLs/arrangemenLs referred ln secuon 301
enLered ln reglsLer
1ransacuons made aL reasonable prlces wlLh regard Lo
prevalllng markeL prlces
uocumenLauon
LlsL of companles, rms, parues covered u/s 301
Copy of lorm 24AA
ueLalls of sLaLemenL of conLracLs u/s 301
revalllng markeL prlces of slmllar lLems
ManagemenL represenLauon on reasonableness of prlces
8eferences
Companles AcL(secuon 301), AS 18, SA 330
Bow to examine ieasonableness of
piices paiu to paities listeu in
Registeieu maintaineu unuei section
Su1.
1he audlLor Lo use professlonal [udgemenL
Aer conslderlng all Lhe facLors surroundlng Lhe Lransacuons.
noL necessarlly be Lhe lowesL prlce.
31
the tiansactions, iefeiieu to in Section
Su1, enteieu into uuiing the financial yeai
weie maue at pievailing maiket iates at the
ielevant time.
1he Crder requlres Lhe audlLor Lo reporL LhaL
Lransacuons have been made aL prlces whlch are
reasonable havlng regard Lo Lhe prevalllng markeL
prlce aL Lhe relevanL ume. 1he reporung on
reasonableness of prlces ls mlsslng.
32
33
Paiagiaph 4(vi)-Beposits
Cuesuons
Compllance wlLh 88l dlrecuves , secuon 38A,38AA & oLher
relevanL provlslons of Lhe AcL
ueLalls of naLure of conLravenuons
Compllance wlLh orders of CL8, nCL1, 88l or any CourL
uocumenLauon
8eLurn led wlLh 8CC
CheckllsL for rules u/s 38A & 38AA
Copy of order of CL8, nCL1, 88l or any CourL
ManagemenL represenLauon for compllance wlLh 88l
dlrecuves
8eferences
Companles AcL(secuon 38A & 38AA)
Beposit fiom public - how to
tieat ueemeu ueposits.
ueemed deposlLs, belng loan from shareholders, relauves or oLher
parues whlch are noL exempL from Lhe denluon should be
examlned and reporLed accordlngly.
34
33

Paiagiaph 4(vii)-Inteinal auuit system

Cuesuons
LxlsLence of lnLernal audlL sysLem commensuraLe wlLh
slze & naLure of buslness for:
LlsLed companles or,
Companles wlLh pald up caplLal and reserves >30 lakhs or,
Average annual Lurnover >3 crores for 3 consecuuve years
uocumenLauon
LxlsLence of lnLernal audlL deparLmenL
lLs organlsauonal charL
lnLernal audlL reporLs
8eferences
SA 610
36
Paiagiaph 4(viii)-Cost iecoius
Cuesuons
MalnLenance of cosL records prescrlbed by CenLral CovernmenL
u/s 209 (1)(d)
uocumenLauon
LlsL of records malnLalned u/s 209 (1)(d)
8eference
Companles AcL(secuon 209)
37
Paiagiaph 4(ix)-Statutoiy uues
Cuesuons
8egular paymenL of undlspuLed sLaLuLory dues lncludlng l,
LSl,lncome Lax, Sales Lax, servlce Lax , cusLom duLy, exclse
duLy, cess or oLher sLaLuLory dues
AudlLor Lo glve deLalls of Arrears of ouLsLandlng sLaLuLory dues
for more Lhan 6 monLhs
ueLalls of dlspuLed dues
uocumenLauon
LlsL of sLaLuLory dues wlLh deLalls and evldence of paymenL
ManagemenL represenLauon regardlng compleLeness of
lnformauon
LlsL of dlspuLed dues
Schedule of conungenL llablllLy
8eference
Companles AcL(secuon 203C), lncome Lax (secuon 44A8)
What constitute statutoiy uues
anu any othei statutoiy uues.
Any sum, whlch ls Lo be regularly pald Lo an
approprlaLe auLhorlLy under a sLaLuLe (wheLher
cenLral, sLaLe or local) appllcable Lo Lhe company
should be consldered as a sLaLuLory dues.
All Lypes of dues under varlous sLaLuLes whlch may
be appllcable Lo Lhe company havlng regard Lo Lhe
naLure of lLs buslness should be consldered as oLher
sLaLuLory dues.
38
Repoiting iesponsibility in case
of bonus anu giatuity payable
unuei iespective Acts
noL Lo be reporLed.
39
Repoiting iesponsibility in case
of statutoiy uues not iecogniseu
in books of the company
8eporung responslblllLy lles wlLh Lhe audlLor
1he audlLor Lo perform procedures Lo mlugaLe rlsk of noL deLecung
such non-compllance.
40
Repoiting in case of uelay of one
oi two uays in uepositing
statutoiy uues
need noL speclfy each lnsLance
Can lndlcaLe wheLher generally Lhe deposlLs have
been regular or oLher wlse.
"#$%&'()*$ &)+)(),-. $(*& %#/0($%#12223 4+5* #,)
1*#*-+00. 6**# -*1(0+-0. $*',&%)*$ 7%)4 )4* +''-,'-%+)*
+()4,-%8*& )4,(14 )4* $*0+. %# $*',&%) 4+5* #,) 6**#
&*-%,(&3
41
What aie uisputeu uues.
AmounLs lnvolved ln cases where a dlerence of oplnlon exlsLs
beLween Lhe relevanL deparLmenL and Lhe company
1here has Lo be an appeal before Lhe appellaLe auLhorlLy
42
43
Paiagiaph 4(x)-Sickness
Cuesuons
lor a company reglsLered for noL < 3 years
AccumulaLed losses noL < 30 of neL worLh
Cash losses ln currenL nanclal year and precedlng nanclal year
uocumenLauon
SLaLemenL of neL worLh and accumulaLed losses, lf any
8eference
Companles AcL[secuon 2(29A)]
pioceuuie foi computing cash
losses
1he gure of proL/loss as per & L AccounL ad[usLed for Lhe eecL
of non-cash Lransacuons such as depreclauon, amoruzauon,
deferred revenue expenses wrluen o, eLc.
44
Implications in the cases of a tiauing oi
a consulting company whose
accumulateu losses aie moie than Su%
of its net woith
no dlsuncuon for Lradlng or servlce provldlng companles.
43
What aie the iepoiting iesponsibilities of the
auuitois unuei this clause in case the company
uoes not have cash losses in both the yeais (that
is, the cuiient financial yeai anu the pieceuing
financial yeai) but only in one of these yeais.
A prudenL lnLerpreLauon would be Lo commenL on Lhe Lwo years
seperaLely.
46
47
Paiagiaph 4(xi)-Befault in iepayment
Cuesuons
ueLalls of defaulL, lf any , ln repaymenL of dues Lo nanclal
lnsuLuuons, banks or debenLure holders
erlod and amounL of defaulL
uocumenLauon
Schedule showlng loans Laken wlLh Lerms, condluons &
repaymenL schedule
ueLalls of debenLures wlLh redempuon daLe, paymenL daLe
eLc
Loan agreemenL, debenLure LrusL deeds
8eference
Companles AcL, 1936 (secuon 372A)& SL8l ul Culdellnes,
2000(chapLer x)
48
Paiagiaph 4(xii)-Loans on secuiity
Cuesuons
Adequacy of records & documenLs where loans &
advances granLed on securlLy of shares,
debenLures & oLher securlues
ueLalls of declencles , lf any
uocumenLauon
LlsL of loans & advances granLed by pledge of securlLy
LlsL of records malnLalned by company
SLaLemenL of holdlng sLaung reglsLrauon ln companys
name(u-maL shares & securlues)
8eference
Companles AcL, 1936 (secuon 123, 372A and Schedule vl)
49
Paiagiaph 4(xiii) - Chit FunuNiuhi Nutual
benefit funu societies
Cuesuons
Compllance wlLh provlslons of any speclal sLaLuLes
appllcable
Check
a) neL Cwned lunds Lo ueposlL LlablllLy 8auo > 1:20 as on daLe
of 8alance SheeL
b) Compllance wlLh prudenual norms on lncome recognluon
and provlslonlng agalnsL non erformlng AsseLs
c) LxlsLence of proper credlL appralsal procedures
d) 8epaymenL schedule of varlous loans granLed by nldhl based
on Lhe borrowers capaclLy Lo repay
30
Paiagiaph 4(xiii) - Chit FunuNiuhi Nutual
benefit funu societies
uocumenLauon
ManagemenL represenLauon on appllcablllLy of speclal sLaLuLe
rocedure of company for credlL appralsal, credlL needs,
borrowers repaymenL capaclLy
SLaLemenL showlng neL owned funds vls a vls llablllLy rauo
8eference
Companles AcL (secuon 620A),ChlL lund AcL ,1982
31
Paiagiaph 4(xiv) - Companies Bealing in
shaies etc.
Cuesuons
MalnLenance of proper records of Lransacuons
and conLracLs and umely recordlng of enLrles by
companles who deal or Lrade ln shares, securlues,
debenLures and oLher lnvesLmenLs.
securlues Lo be held ln companys own name sub[ecL
Lo exempuon under Secuon 49 of Lhe Companles AcL
uocumenLauon
LlsL of records malnLalned
SLaLemenL of holdlng sLaung reglsLrauon ln companys
name(u-maL shares & securlues)
8eference
Companles AcL (secuon 49), AS 13
32
Paiagiaph 4 (xv)- uuaiantees
Cuesuons
WheLher Lhe company has glven guaranLee for loans Laken by
oLhers from bank or nanclal lnsuLuuons, Lhe Lerms and
condluons whereof are pre[udlclal Lo Lhe lnLeresL of Lhe company
uocumenLauon
LlsL of guaranLees provlded wlLh deLalls of name,
amounL ,perlod and purpose
8oard resoluuon
ManagemenL represenLauon sLaung reason for
guaranLee
8eference
Companles AcL (secuon 372A)
whethei the guaiantee given by the
company on behalf of otheis can be
piejuuicial to the inteiests of the
Company.
?es.
1he nanclal sLaLe of aalrs of Lhe oLher parLy, purpose of loan
Laken, nanclal lmpacL ln case of defaulL by Lhe oLher parLy,
guaranLee commlsslon are some of Lhe lmporLanL aspecLs LhaL wlll
deLermlne.
33
34
Paiagiaph (xvi) - Application of Teim
Loans
Cuesuons
WheLher Lerm loan applled for purpose
obLalned
uocumenLauon
LlsL of loans Laken
8oard resoluuon
Sancuon leuer Lo verlfy Lhe purpose of loan
8eference
1he Companles AcL [secuon 227(1A)]

Whethei teim loans obtaineu fiom entities
peisons othei than banksfinancial institutions
aie also coveieu.
?es.
1he clause does noL make any dlsuncuon beLween Lerms loans or
oLher loans
uebenLures would noL be covered.
CuaranLees glven for loans Laken from sources oLher Lhan bank and
nanclal lnsuLuuons are noL covered.
33
whethei iepoiting is to be maue on the teim loans
obtaineu uuiing the yeai oi outstanuing as at the enu of
the yeai iiiespective of the yeai in which they aie
obtaineu.
CommenLs are requlred upon uullsauon of all loans
1he dlsuncuon of Lhe Lerm loans obLalned durlng Lhe year or
ouLsLandlng as aL Lhe end of Lhe year ls lrrelevanL.
36
What pioceuuies to be auopteu in case of teim loans
fiom banks, iaiseu against title ueeus, long teim FBRs,
NSCs etc., wheie the bank is not conceineu with the
puipose foi which it is being obtaineu.
1he audlLor Lo reporL Lhe facL LhaL ln Lhe absence of any supulauon
regardlng Lhe uullsauon of loans, he ls noL ln a posluon Lo commenL
wheLher Lhe Lerm loans have been applled for Lhe purpose for
whlch Lhey were obLalned.
37
38
Paiagiaph (xvii) - Shoit teim Funus
Cuesuons
verlfy wheLher Lhe funds ralsed on shorL-Lerm
basls used for long Lerm lnvesLmenL,
lf yes, Lhe naLure and amounL ls Lo be
lndlcaLed
uocumenLauon
repare sLaLemenL showlng long Lerm sources
of funds vls a vls long Lerm appllcauon of
funds

Bow to comply with iepoiting
iequiiement unuei clause 4(xvii).
osluon Lo be seen on cumulauve basls.
8ased on 8alance sheeL deLermlne long Lerm sources and long Lerm
uses and compare
8equlremenL ls only Lo hlghllghL Lhe facLs.
39
60
Paiagiaph (xviii) - Piefeiential Allotment
Cuesuons
referenual alloLmenL of shares Lo parues and
companles covered ln Lhe 8eglsLer malnLalned under
secuon 301 of Lhe Companles AcL
lssue prlce of shares ls pre[udlclal Lo Lhe lnLeresL of Lhe
company
uocumenLauon
LlsL of companles, rms, parues covered u/s 301
8oard resoluuon for preferenual alloLmenL
valuauon reporL
8eference
1he Companles AcL (secuon 301), SL8l ul Culdellnes, 2000
What secuiities aie coveieu.
As Lhe word used ls shares" - boLh equlLy and preference shares
are covered.
Powever, Lhls does noL exLend Lo any oLher Lype of securlLy
61
Whethei a situation, wheie a limiteu company has
alieauy issueu shaies at a piemium to outsiueis anu latei
on issueu shaies (at pai oi book value) to paities listeu
unuei section Su1 of Act, the lattei issue of shaie woulu
be tieateu as being piejuuicial to the inteiests of the
company.
noL always.
1he audlLor Lo examlne all Lhe facLs and clrcumsLances of Lhe case
and use hls professlonal [udgemenL Lo form an oplnlon ln Lhls
regard.
62
Wheie a piivate limiteu company having foui
shaieholueis (being ielatives )holuing 2Spei cent each of
the shaie capital of the company, aie allotteu shaies in
equal piopoitions at a value of , say, Rs.1u while the book
value of shaies is, Rs. Su, woulu it be iepoitable unuei
this clause.
1hls shall noL be consldered as preferenual alloLmenL and
Lherefore, noL covered by Lhe clause.
63
Will issue of ES0Ps by piivate
companies be consiueieu as
piefeiential allotment.
lf as per SL8l guldellnes, noL pre[udlclal Lo Lhe lnLeresL of Lhe
company.
ln case of lssues by llsLed enuues, due Lo SL8l requlremenLs for
preferenual alloLmenL as well as for LSC lssue, Lhere ls
auLomaucally a basls for Lesung wheLher lL ls pre[udlclal or noL
ln case of prlvaLe companles as well as unllsLed publlc companles
all such alloLmenLs lncludlng LSC need Lo be evaluaLed for lLs
eecL
64
63
Paiagiaph (xix) - Secuiity foi Bebentuies
Cuesuons
Creauon of securlLy or charge for debenLures
lssued
uocumenLauon
LlsL of debenLures lssued
8oard resoluuon for creauon of charge or
securlLy
verlfy creauon of charge from 8CC
documenLauon
8eference
1he Companles AcL and SL8l AcL, 1992
whethei iepoiting is iequiieu to be uone in
iespect of uebentuies issueu uuiing the
yeai oi outstanuing as on the yeai enu
iiiespective of the yeai in which they weie
issueu.
1he clause does noL refer Lo debenLures lssued durlng Lhe year.
1herefore, reporung ls requlred for all debenLures lssued by Lhe
audlLee company.
66
If the uebentuies have been issueu towaius
the enu of the yeai anu the secuiities aie
cieateu subsequently, what aie the
iepoiting iesponsibilities of the auuitoi
unuei this clause.
Menuon Lhe facL and reasons.
Lnsure Lhe delay ls noL dellberaLe or lnadverLenL.
67
68
Paiagiaph (xx) - Enu 0se of Noney
Cuesuons
ulsclosure of end use of money ralsed by
publlc lssues
verlcauon of same by audlLor
uocumenLauon
Copy of prospecLus
ManagemenL represenLauon on compleLeness of
dlsclosure
Bow to iepoit in a case wheie the
company has investeu suiplus funus,
not immeuiately iequiieu, in shoit-
teim loansinvestments.
Menuon Lhe facL LhaL pendlng uullsauon of Lhe funds ralsed
Lhrough publlc lssue for Lhe sLaLed purposes, Lhese were
Lemporarlly used for Lhe purpose oLher Lhan sLaLed buL ulumaLely
uullsed for sLaLed-end-use.
69
Boes this clause apply to monies iaiseu
by public issues uuiing the yeai oi
even eailiei yeais.
Clause applles Lo all monles ralsed Lhrough publlc lssues - ralsed
durlng Lhe year as well as remalnlng unuullzed aL Lhe beglnnlng of
Lhe perlod under reporL.
70
71
Paiagiaph (xxi) - Fiauu
Cuesuons
WheLher any fraud on or by Lhe company has been
nouced or reporLed durlng Lhe year,
lf yes, Lhe naLure and amounL lnvolved ls Lo be lndlcaLed
uocumenLauon
LlsL of debenLures lssued
8oard resoluuon for creauon of charge or securlLy
verlfy creauon of charge from 8CC documenLauon
8eference
SA 240
What aie the iepoiting iesponsibilities in case
wheie fiauus have been committeu by the
uiiectois of the company but aie not iepoiteu by
the company anu come to the knowleuge of the
auuitois fiom piivate souices.
1he audlLor Lo comply wlLh SA 240 and SA 260.
72
Whethei the total amount of fiauus anu the
each majoi can be clubbeu anu uiscloseu.
Whethei inuiviuual amount involveu in
each fiauu is to be sepaiately listeu out with
the coiiesponuing natuie of fiauu.
Lach fraud Lo be dlsclosed separaLely dlscloslng Lhe amounL
lnvolved.
1he fraud of slmllar naLure may be comblned.
73
Nannei of iepoiting in the main
auuitois iepoit in case any of the ieply
to any of the clauses unuei the 0iuei is
in auveise
AudlLor Lo conslder wheLher hls commenL has a
bearlng on Lhe Lrue and falr vlew presenLed by Lhe
nanclal sLaLemenLs
lf yes, he may prefer Lo preface hls reporL under sub-
secuons (2),(3) and (4) of secuon 227 by sLaung Lhe
quallcauon ln addluon Lo quallcauon made agalnsL
Lhe speclc lLem belng qualled.
74
TBANK Y00
73