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Private & Confidential

WALTER & ASSOCIATES


Checklist - Companies (Auditor's Report) Order, 2004
Client: Cmax Infocom Ltd.
Audit Period: 31st March,2005.
Clause No.

Area/Requirement

Fixed Assets
Fixed Assets
Fixed Assets
Inventories
Inventories
Inventories
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
4(i) (a)
4(i) (b)
4(i)( c)
4(ii) (a)
4(ii) (b)
4(ii) ( c)
4(iii) (a)

Guidance and Audit Procedures


Conclusion
Proper records
Physical verification-FA
Disposal of Fixed Assets
Physical verification- Inv.
Procedures of Verification
Proper records of Inventory
Loans granted

No Reportable Issues
No Reportable Issues
No Reportable Issues
No Reportable Issues
No Reportable Issues
No Reportable Issues
No Reportable Issues
No Reportable Issues
Loans granted
No Reportable Issues
Loans taken
No Reportable Issues
Repayment
Refer Issue Sheet
Overdue amounts
No Reportable Issues
Internal controls on purchases,sales
No Reportable
etc., Issues
301 Register and transactions
No Reportable Issues
Public deposits
No Reportable Issues
Internal Audit
No Reportable Issues
Maintenance of Cost RecordsNo Reportable Issues
Statutory dues
No Reportable Issues
Losses etc.,
No Reportable Issues
Default in repayment of duesNo Reportable Issues
Loans and Advances granted No Reportable Issues
Chit fund company
No Reportable Issues
Nidhi/mutual benefit fund etc.,
No Reportable Issues
Dealing etc.,in Securities
No Reportable Issues
Guarantees given
No Reportable Issues
Utlisation of Term Loans
No Reportable Issues
Utlisation of funds
No Reportable Issues
Preferential allotment
No Reportable Issues
Securities on Debentures
No Reportable Issues
End use of monies
No Reportable Issues
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
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 includinga. 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 criteriaa. 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 Rs25 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).

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

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

Home

Fixed Assets
Response Remarks

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

Yes
Yes

Yes
Yes
Yes
Yes
Yes

on revaluation of Foreign currency Liabilities


if any.
h).Depreciation written off to date.
i).Written down value.

Yes
Yes

j)Rate of depreciation and particulars regarding


amortisation and impairment

Yes

k) Particulars regarding sale, discarding,


demolition, destruction etc.

Yes

l) Particulars of fixed assets that have been


retired from active use and held for disposal.
Yes
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.

N/A
N/A
N/A
N/A
Yes
N/A
N/A
N/A

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Fixed Assets
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.,)
No
Audit Procedures

2. Obtain the instructions issued to by the


management to the staff for the physical verification.Yes
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.
Yes
4. Is the frequency of verification reasonable?

Yes

5. Ensure whether assets physically verified agreed/


reconciled to book figures?
Yes
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.
Yes

Remarks
Since company has been taken over by
Bharti this February, Bharti's
management want to carry the Fixed
assets valuation & verification in near
future, hence same as not been
conducted during the year.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Fixed Assets
Response Remarks
1. Has a substantial portion of fixed assets
been
Audit Procedures

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.

No

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.

Done

3. Consider any adverse implications on


account of
the same in the main report.

Done

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Inventories
Response
1. Has the management physically verified
the
Audit Procedures

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

Yes
N/A
Yes
N/A
Yes
N/A

vii) Packing Materials

Considering Cost Benefit physical


verification has not been carried
out, secondly packing material is
procured as & when required,
which result to very less stock.Impact on profit is immaterial
No

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.

Remarks

Done

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Audit Procedures
1

Have we observed the physical verification?

Home

Inventories
Response
Yes

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


physical stock taking?
Yes
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.
Yes
4. In case we have not observed the physical verification, have
we studied the stock taking instructions issued by the client?
N/A
(Attach a copy where available)

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


control points-The independence of persons taking stock
Yes
- Proper stacking/arrangement of stocks to facilitate
identification and counting?
Yes
-Usage of counting tags or identification marks etc in
order to prevent double counting?
Yes
-Control of stock taking sheets/tags (e.g. numerical
sequencing) and reconciliation of the sheets/tags at the
conclusion of stock taking
Yes
-Control over movement of stocks during the course of
stock taking (Stoppage of movements during stock taking
is highly desirable).
Yes
-Collection of cut-off details viz. last challan No., GRN No.,
Excise Gate Pass No. etc.
Yes
-Comparison of rough stock sheets with bin cards and
preparation of shortage/excess list
Yes
- Signing of stock sheets by the clients staff (both by the
counter and by the supervisor)
Yes
-Identification of damages, obsoletes and slow moving
stocks
Yes
- Proper segregation of goods invoiced and sold but yet to
be despatched and other stocks of third parties
Yes
-Checking of the serviceability and adequacy of the
measuring instruments
Yes
6. Is there any report/certificate from the clients
official-in-charge of stock taking evidencing that the stock
taking instructions were followed? (Attach a copy)
No
7. In case the client does not have any instructions in writing,
is there any report from the clients official-in-charge of stock
taking outlining the procedures followed during the course of
stock taking? (Attach a copy)
No
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.
Yes

Remarks

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Audit Procedures

Inventories
Response

Remarks

1.Whether the records of the Inventory show the following


particulars:
(i) details regarding dates of transactions;
Yes
(ii) relevant document number and department identification, if any;Yes
(iii) identification code of the item;
Yes
(iv) quantity of the receipts and issues and balances;
Yes
(v) physical verification quantities;
Yes
(vi) location;
Yes
(vii) particulars of the item, like nomenclature, nature, etc.
Yes
(vii) valuation details; etc.
Yes
2. Are the stock registers are updated as and when the
transactions occur?

Yes

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


supported by relevant documents.

Yes

4. Verify whether inventories as per Register/Records


agree with General Ledger balances.

No

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.

Descrepancies where adjusted during the year.


(Ref.":- Stock Folder / Inventory final (jan&feb) (7-305).xls )
Descrepancies where adjusted during the year.
(Ref.":- Stock Folder / Inventory final (jan&feb) (7-305).xls )

Done

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Audit Procedures
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.,

Loans granted
Response

Remarks

No

N/A

3. Examine the above statement with necessary


documents and records on a reasonable test
check basis.

N/A

4. Report information as per the table below in


the case of all loans granted.

N/A

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 asloan 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

N/A
Amount involved
(In Rupees)

Year end
balance (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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Loans taken
Response

Audit Procedures

1.Has the company taken any loans from


companies,firms and other parties covered in the
Register maintained under Section 301 of the
Act?

Remarks

No
Register was not ready at the time of
audit

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.,

No

3. Examine the above statement with necessary


documents and records on a reasonable test
check basis.

N/A

4. Report information as per the table below in


the case of loans
all loans taken.

N/A

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
agreements,
company's
borrow,

of

financial

factors

such

standing,

its

as-

loan

ability

to

nature of security, the availability of alternative sources


of finance, the urgency of borrowing, purpose of the
loan, prevailing market rate of interest etc.,
N/A
Number of Parties

Amount
Year
end
involved (In Rupees)
(In Rupees)

balance

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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home
Repayment of Loans
Response

Audit Procedures

Remarks

1. The regularity of payment of principal


amount
and
considered

interest

should

be

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 interestName of the Party

Done

Done
Overdue
Principal

(In Rupees)
Overdue
Interest

Year end Balance

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

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Audit Procedures

Loans overdue
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.

Done

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.
Done
3. If not satisfied about the reasonability of steps taken,
consider the name of the party, overdue amount of
principal and interest for reporting.
Done

Remarks

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Internal controls procedures


Response Remarks
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
Audit Procedures

Only Board minutes were available


for review which does not refer to any
major weakness in interal control.

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.

No

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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home
Completeness of Register maintained under Section 301 of the Act and transactions thereof
Audit Procedures
Response Remarks
1.Has the company entered into transactions that
need to be entered into the register maintained
under Section 301 of the Act?

N/A

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.
N/A
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.,

No

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.

N/A

N/A

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.,
N/A
Notes: 1. The requirement of this clause does not cover transactions with subsidiaries perse unless one or more of the
directors of the company are interested in the subsidiary.

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Audit Procedures

Public Deposits
Response Remarks

1. Has the Company accepted any deposits


from
public within the meaning of Section 58A,
58AA and
the rules framed thereunder?

No

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.

N/A

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.

N/A

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.

N/A

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.

N/A

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.

N/A

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home

Internal Audit
Response
1. Is the company a listed company or having paid
up capital
Audit Procedures

Remarks

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?

No

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

N/A
N/A
N/A
N/A

audit department;
-Reports submitted by the internal audit and follow
up

N/A

procedures thereof.

N/A

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.

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Maintenance of Cost Records
Audit Procedures
Response Remarks
1. Has maintenance of cost records prescribed
by central government under Section 209(1)(d)
to the company?
N/A
2. Obtain a list of books and records made
and maintained by the company under Section
209(1)(d) of the Companies Act,1956.
N/A
3. Conduct a general review of the cost records
to ensure that the records as prescribed are
made and maintained.
N/A

Home

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Statutory Dues
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.
Audit Procedures

Yes
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.

Yes

3. Verify the statement under 1 above,


with the
general
gained,

understanding

obtained

underlying
documents
records.Compile the

and
and

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

Yes
Yes
Yes
Yes
Yes

Yes

Yes
Yes
Yes
Yes
Yes

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".

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Accumulated Losses etc.,


Response
1.Has the company been registered for a period of
five or
more years as at the balance sheet date?
No
Audit Procedures

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.

N/A

3. Compute and check whether the company has


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

N/A

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 los

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Default in repayment of dues to Banks,Financial Institutions or debentureholders


Audit Procedures
Response Remarks
1. Obtain a statement containing the
names of the
institution/bank/debenture
period

holder,

the

and amounts of default, due dates thereof


and
dates and amounts
payments, if any.

of

subsequent

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.

N/A

N/A

Notes: 1. The requirement covers all the defaults exisiting on the balance sheet date, irrespective of when the
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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Home
Maintenace of documents and records for loans and advances granted
Audit Procedures
Response Remarks
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?
No
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.,
N/A
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.
N/A
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.
N/A

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?
N/A
6. List the deficiencies for reporting.

N/A

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.

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:
Chit Fund Company
Audit Procedures
Response
1. Is the Company a chit fund company?
No

Home

Remarks

2. Gain an understanding of the relevant Acts and the


rules applicable to the company situated in a particular
state/union territory.
N/A
3. Test check compliance with the requirements under
the Act and the rules as applicable.
N/A
3. Ensure that the requirements of the rules regarding
the records to be maintained, returns to be filed etc.,
are complied with, where applicable.
N/A
Notes: 1. The requirement only applies to checking compliance with the provisions of special statutes in so far
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 the
applicability and compliance with the relevant provisions of the Acts/Rules.

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Nidhi/mutual benefit fund/societies


Response Remarks
1. Is the Company a nidhi/mutual benefit fund/
society?
No
Audit Procedures

2. Check complaince with the followinga) whether the net ownedfunds to deposit
liability ratio is more than 1:20 as on the
date of balance sheet;

N/A

b) whether the company has complied with


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

N/A

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.,N/A
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.

N/A

3. Ensure that the requirements of the rules regarding


the records to be maintained, returns to be filed etc.,
are complied with, where applicable.
N/A
4. Consider the implications of non-compliances
under 2 a) and b) above also in the auditors' report
on the financial statements.
N/A
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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Dealing or Trading in Securities


Response Remarks
1.Is the company dealing or trading in shares, securities,
debentures and other investments?
No
Audit Procedures

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.

N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A

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.
N/A
4. Verify that the transactions entered in the registers are duly
supported by relevant documents.

N/A

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


agrees with General Ledger balances.
N/A
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. N/A
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 companys name is
understandable.

N/A

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.,

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Guarantees given
Response Remarks
1. Has the company given any guarantees for
loans taken by others from bank or financial
institutions?
Yes
Audit Procedures

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.
Yes
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 parties in respect of whom and the types
of guarantees that can be given; minutes of the
board of
directors, compliance with the requirements of
Section 372A of the Companies Act, letters of
borrowing parties requesting the
295/372A of the Companies Act, letters of
borrowing

Yes

parties requesting the guarantee, company's


letters,
guarantee documents etc.,

Yes

5. If the company has issued a guarantee in


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

Yes

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.
Yes
8. If not convinced by management's explanation, consider
appropriately in reporting disclosing the amount of such
guarantee.
Yes
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 given etc.,

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Utlisation of Term Loans


Response
1. Has the company obtained any term loans or made
any utilisation during the year?
No
Audit Procedures

2.Obtain a statement containing the specific terms of


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

N/A

3.Verify the statement with documents such as sanction


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

N/A

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.

N/A

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.

N/A

Remarks

6.Whether the funds flow statement has been reviewed


where one to one correlation is not possible?
N/A
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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Utlisation of Funds
Response Remarks
1.Obtain a statement containing the specific
terms of funds and details of use-amounts and
nature.
N/A
Audit Procedures

2. Compare the quantum of long term funds


with the long term application of funds.

N/A

3. Compare the quantum of short term funds


with the short term application of funds.

N/A

4. If the differences point towards use of short


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

N/A

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.

Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Preferential allotment of shares


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?
No
Audit Procedures

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.
N/A
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.

N/A

N/A

N/A

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.
N/A
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.
N/A
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.
N/A
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.
N/A
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.

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

Securites for Debentures


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

No
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. N/A
3. Verify whether such security is created as required under
section 125 and 130 of the Act by examining the documents
N/A
evidencing the charge-forms filed with ROC etc.,

Remarks

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Home

End use of Public issue Monies


Response
1. Has the company made any public issue or made
utilisation during the year?
No
Audit Procedures

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.

N/A

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.

N/A

4. Verify the disclosure made by the company in the


financial statements in this regard.

N/A

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.

N/A

6. Whether the cash flow statement has been reviewed where


one to one correlation is not possible?

N/A

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.

N/A

Remarks

WALTER & ASSOCIATES


Completed by:
Date: 7th April, 2005.
Reviewed by:
Date:

Audit Procedures

Home

Fraud
Response

Remarks

1. Complete our understanding and assessment


of
fraud considerations as per steps given under
"Fraud Risk" in MYClient file.

Done

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

Yes

Done

Statements"
4. If the response to 2 above is "No" determine
the
.
nature
and extent of such frauds and
implications
our reporting.on
Done
Note: The following are the indicative sources relating to identification of Fraudi. 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.,

WALTER & ASSOCIATES


Home

Clause No.
4(i) (a)
4(i) (b)
4(i)( c)
4(ii) (a)
4(ii) (b)
4(ii) ( c)
4(iii) (a)

Area/Requirement
Fixed Assets
Fixed Assets
Fixed Assets
Inventories
Inventories
Inventories
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)
4(xiii)(a) to
(d)

Chit Fund company


Nidhi/mutual benefit
fund/society

4(xiv)

Dealing or Trading in
Securities

4(xv)
4(xvi)
4(xvii)
4(xviii)
4(xix)
4(xx)
4(xxi)

Guarantees
Term Loans
Funds raised
Allotment of shares
Debentures
Money raised on public issue
Fraud

Brief Description of the Issue

How addressed in the Audit