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Statutory reg-page1
NAME OF THE CLIENT : Director In Charge : PERIOD OF AUDIT : Senior In Charge :
Audit team :
LIST OF STATUTORY REGISTERS A COMPANY HAS TO MAINTAIN (THIS IS A GENERAL LIST)
SL NO PARTICULARS OF REGISTERS SECTION YES/NO/N.A REMARKS
13.1 Register of investments not held in company’s name 49(7)
13.2 Register of Deposits 58A
13.3
13.4 Register of charges 143
13.5 Register of members 150
13.6 Index of members where their number is more than 50 151
13.7 Register and index of debenture holders 152
13.8 157
13.9 Copies of all returns u/s 159 & 160 163
13.10 193
13.11 Books of accounts
13.12 297 & 299
13.13 301
13.14 303
13.15 Register of directors shareholding 307
13.16 356 & 357
13.17 370
13.18
CHECKED BY
Creation/modification/satisfaction of charge & keeping a record of the charges
125, 135, 136, 138
Foreign register (and a duplicate) of members and debenture holders, if any
Minute books containing minutes of the proceedings of general meetings, board meeting & committees of the board
209(1)(a) to (c)
Register of contracts, with companies and firms, in which directors are interested giving details
Register of contracts with companies and firms in which directors are interested directly or indirectly
Register of directors, managing directors, managers and secretary
Register of appointment of directors or an associate as a selling agent outside India of goods produced by the company, and for supply of or rendering of service
Register of loans to companies ‘under the same management’
Register of loans made, guarantees given or securities provided to companies and investments in shares and debentures of other companies
372A (5) & (6)
Imp sections-page2
NAME OF THE CLIENT : Director In Charge : PERIOD OF AUDIT : Senior In Charge :
Audit team :
IMPORTANT SECTIONS OF THE COMPANIES ACT, 1956
CONTENTS SECTION NO.Acceptance of deposits 58A
Civil liabilities for misstatement in prospectus 62
Criminal liabilities for misstatement in prospectus 63
69
Effect of irregular allotment 71
Application for and allotment of shares and debentures 72
Shares issued at a premium 78
Shares issued at a discount 79
Issue of sweat equity 79A
80A
Payment of dividend in proportion to amount paid up 93
Charges 125
149
Resolution to be filed with the registrar 192
Managerial personnel 197A
198
Calculation of commission in certain cases 199
Provisions relating to dividends 205, 205 A & 205 C
Prohibition of allotment unless minimum subscription received
Compulsory redemption of irredeemable preference shares
Restriction on commencement of new business (not applicable to private limited company)
Overall maximum managerial remuneration and managerial remuneration in case of absence of or inadequacy of profits (not applicable to private company)
Imp sections-page3
209
Annual accounts 210
Forms of annual accounts presentation 211
Managing director and secretary to sign accounts 215
Auditor’s appointment, rights duties of auditors 224 & 229
Cost Audit 233 B
268
269
Disqualification of directors 274
Vacation of office by a director refer sub-section 1(14) 283
General power of the board 291
292
292 A
Restrictions on powers of board 293
Prohibition regarding making of political contribution 293A
294
Loans to Directors 295
297
Disclosure of interest by directors 299
300
Books of account to be kept by the company on accrual basis and maintenance of cost records where applicable
Provision relating to managing, whole time or non-rotational directors to require government approval (not applicable to private limited company)
Appointment or re appointment of managing director or whole time director to require government approval in certain cases. Mandatory appointment of managerial personnel in certain cases
Certain powers to be executed by board only at board meetings
Audit Committee (not applicable to private limited companies)
Appointment of sole selling/purchasing agents to require approval of company in general meeting (not applicable to private company)
Boards sanction required for certain contracts in which particular directors are interested
Interested director not to participate or vote in proceedings at board meetings
Imp sections-page4
309
310
311
Director’s holding office of profit 314
317
Compensation to directors for loss of office 318 & 319
349
Ascertainment of depreciation 350
Loans etc., to companies under the same management 370
372 A
417 & 418
Accounts of foreign companies 594
Special provisions relating to government companies 619
Maximum remuneration to directors (not applicable to private limited company)
Increase in remuneration to require government sanction (not applicable to private limited company)
Increase in remuneration of managing director or re-appointment to require government sanction (not applicable to private limited company)
Managing director not to be appointed for more than 5 years at a time (not applicable to private limited company)
Determination of net profits (not applicable to private limited company)
Purchase by company, of shares etc., of other companies (not applicable to private limited company
Treatment of security deposits of employees and company’s provident fund schemes
AAS-page5
NAME OF THE CLIENT : Director In Charge : PERIOD OF AUDIT : Senior In Charge :
Audit team :
COMPLIANCE WITH AAS
AAS NO SL NO PARTICULARS YES/NO/N.A REMARKS
1 & 2 1
2
3
3 4
5
6
e) Analysis of significant ratios and trends
f) Management representation letter
h) Notes on significant accounting policies.
i) Significant audit observations of earlier years.
j) Correspondence regarding annual appointment
k) Extract of minutes of important board meetings
p) Letters of confirmations received, if any.
Whether the audit complies with all the aspects of the scope of audit?
Whether an inquiry made about the matters covered under 227(1-A)? Adverse observations noticed during inquiry needs to be reported
Whether the audit report in accordance with the recommendation of Companies Act 1956 & ICAI (Refer AAS 28)?
Whether a standardized format for working papers followed? (For example, check lists, specimen letters etc) If so, in respect of each audits has it been completed in all respects?
Whether significant matters which require exercise of judgment together with conclusions thereon recorded in the working papers?
Whether the working paper file contains the following?a) Information about the organizational structure of the clientb) Extracts of copies of important legal documents, agreements and minutes relevant to the auditc) A record for study and evaluation of internal controls and accounting system of the client
d) Copies of audited financial statements for the current as well as previous years
g) Proof of communication with previous auditor, if any, and the replies received from him
l) Evidence for audit planning and copy of audit programm) A record for determining the nature, timing and extent of audit procedures planned.
n) Evidence for work performed by assistants, its supervision and review.
o) Copies of opinion from experts, other auditors etc., if any.
q) Terms of audit engagement sent to the client and the acknowledgement for it.
r) Copies of communication to the client in audit matters
AAS-page6
7
4 8
9
a) Fraudulent financial reporting
b) Misappropriation of assets?
10
11
12
13
14
15
16
17
5 18
Whether the working papers are maintained for a period of 10 years?
Whether an evaluation about the possibility of misstatements arising in financial statements either due to a) fraud risk factor or b) error is made? Appendix 3 to AAS 4 outlines the circumstances which may indicate the possibilities of frauds or errors.
Whether the impact of misstatements considered from the perspective of
Whether the consideration of fraud risk factors is in accordance with appendix 1 to AAS 4?
Whether the fraud risk factor analyzed from the perspective of a) management fraud & b) employee fraud?
When there is a possibility of existence of fraud, is the response in accordance with recommendations outlined in appendix 2 to AAS 4?In those cases, where it is not possible to either confirm the existence of fraud or error, is the conclusions reached recorded in the working papers?Whether a communication about the fraud or error is sent to those who are charged with governance/management of the entity?
If fraud is committed by those who are charged with governance, it should be properly disclosed. Otherwise auditor’s report should disclose the same.In case of fraud, is it required to report to the regulatory authorities?
Unless statutorily required an auditor need not report.Where due to non availability of adequate evidence withdrawal from the audit engagement is contemplated, whether is it ensured that the communication sent to the incoming auditor does not violate the confidentiality clause of auditor’s responsibility?
Whether the best available evidence obtained considering the materiality of the item, nature of the item, adequacy of the internal controls, nature and size of the entity, the type of frauds or errors possible, type of information available, in respect of individual financial statement assertions?
AAS-page7
19
20
21
a) Existence
b) Rights and obligations
c) Occurrence
d) Completeness
e) Valuation
f) Measurement
g) Presentation and disclosure
22
6 23
24
25
26
7 27
28
a) Their independence & status
b) Scope of function
c) Technical competence
d) Due professional care
29
30
Whether the audit evidence collected is sufficient and appropriate to form an opinion about the financial statements?
Whether the review of compliance procedure confirms its existence, effectiveness and its continuity during the audit period of internal controls?
Whether the process of obtaining substantial procedure establish the following
Whether external evidence obtained where ever possible?Whether an assessment made about the state of internal control, accounting system & audit risk?
Whether the audit risk analyzed from the perspective of its 3 components, inherent risk, control risk and detection risk and its impact on the financial statements?
Whether the above analysis documented and recorded in working papers?
Whether the performance of substantial procedure confirms the initial assessment of detection risk?Whether is it planned to rely on the work of the internal auditor?
If yes, whether a general evaluation of the internal audit function is done from the perspective of
On the basis of the above if it is decided to rely on the work of an internal auditor, is it properly planned and coordinated in respect of the audit areas to be covered?
Whether a specific evaluation of the work of the internal auditor conducted in terms of planning, execution, sufficiency of evidence collected and conclusions reached?
AAS-page8
31
8 32
33 Whether the audit plan covers the following?
c) Legal or statutory requirements
d) Effect of pronounce-ments of ICAI
e) Identification of significant audit areas
f) Setting the materiality levels
g) Areas requiring special attention
h) Assessment of audit risk
i) Assessment of fraud risk factors
34
35
9 36
37
38
39
40
10 41
42
43 Whether the branch auditor’s report considered?
44
45
11 46
47
48
12 49
Whether the above evaluation documented and recorded in the working paper file?
Whether the knowledge of the client business is adequate to identify the events, transactions and practices significant to the financial statements?
a) The terms of engagement and statutory responsibilitiesb) The nature and timing of reports or other communication
Whether the audit plan documented and included in the working papers?
Whether an audit program prepared and documented?Whether the audit areas where the expert’s opinion required are identified?
If so, whether the expert’s skills, competence, objectivity, confidentiality & their relationship with the client evaluated?
Whether the expert’s report evaluated in terms of source of data used, assumptions and methods used and its consistency with the prior period and auditor’s knowledge on the subject?
On the basis of above evaluation, whether the expert opinion satisfies the requirements of proper audit evidence?
In case of expert opinion is not satisfactory and it is decided to issue other than clean report, whether the permission of expert obtained if it is decided to disclose his name in the audit report?
Whether it is ensured that, there is no restriction on the scope of branch auditor’s work?
Whether a communication sent to branch auditor about the nature & matters to be covered in his report?
Whether there are any significant points arising out of branch auditor’s report require further audit considerations. If so has it been documented including the conclusions reached on that matter?
Whether the audit report clearly discloses the division of reporting responsibility?
Whether a representation obtained from the management regarding the selection, consistent application of accounting policies and acknowledging their responsibility in the preparation of financial statements?Whether the representation dated before the audit report? Whether it covers all the assertions in the financial statements?In case of joint audits, whether the division of responsibility clearly documented and kept in the working paper file?
AAS-page9
50
51
52
13 53
54
55
56 Whether it has been corrected?
57
14 58
59
c) Availability of the information
d) Reliability of the information
e) Relevance of the information
f) Source of the information
g) Comparability of the information
60
15 61
a) Specific audit objective
b) Population
c) Sample Size
d) Sampling risk
e) Stratification
62
63
Whether there are any matters which require the attention of other joint auditor? If so, has it been communicated to him in writing?
Where in case of a disagreement with other joint auditors on certain reporting aspects, whether a separate report issued?
If the answer to the above question is yes, whether the reason for the same is documented?
Whether the materiality been fixed at overall financial statements level and at the individual account balance level?
If so, has it been documented including the basis of such determination?
Whether the impact of items individually not material but collectively material considered? If so whether the management is approached for correction of the financial statements?
If the management does not accept the suggestion for correction, whether the audit report adequately discloses the position?
Whether the technique of analytical review used at the planning stage to identify the assertions that needs to be verified and also at the closing stage of the audit?
When intending to perform analytical procedure as a substantive procedure, whether the following factors considered?
a) The extent to which analytical review can be relied upon.b) The nature of the entity and the extent to which the information can be segregated.
Whether the deviations have been properly explained or investigated?
While employing the sampling technique for evidential value whether the following factors considered?
Whether the basis of determination of tolerable error level documented?
Whether the basis of determination of expected error level documented?
AAS-page10
64
a) Analysis of any errors detected in the sample
c) Reassessment of sampling risk
16 65
66
67
68
17 69
70
71
18 72
73
c) Is the subsequent reviewe condected ?
74
75
19 76
77
20 78
79
80
a) Assessing risks and identifying the problems
b) Planning and performing the audit
c) Assessment of audit evidence
21 81
82
83
Whether the sampling results evaluated in terms of
b) Projection of errors found in the sample to the population
Whether the assumption of going concern appropriate in the preparation of financial statements?
Whether the financial, operative and other indicators are considered in such a decision?
Where the assumption is not considered appropriate, whether a satisfactory disclosure made?If not, whether the audit report expresses an appropriate opinion?
Whether the quality control policy & procedures as to acceptance, retention & quality of service to clients adhered to?
Whether the quality control policy in respect of individual audit adhered to?
Whether a proper documentation to show the planning, direction, supervision and review for all the individual audits exists?
Whether an identification of items in the financial statements which are based on estimates made?
If so, whether a review of the same is made in the following manner.
a) Evaluation of the estimates made by the managementb) Has it been compared with the independent estimates developed by the auditor?
In case of the difference between the estimates made by the management and the auditor, does it require any adjustment?
If so, is the adjustment made? If not, whether the audit report adequately discloses the same?
Whether the subsequent events, which may require the adjustment in the financial statements identified? Materiality can be the guiding factor here.On the basis of above identification whether the adjustment made? If not, whether the audit report adequately discloses the same?
In case of a new client, whether an assessment made about the present level of knowledge, before acceptance and the possibilities of enhancing the same in the course of the audit?
In continuing audits, whether the knowledge frequently updated?
Whether the knowledge acquired is used to evaluate the following
Whether the operational and financial laws, which have a material bearing on the financial statements of the client identified?
On the basis of such identification, whether the compliance of the same is tested?
While performing substantive procedures, whether there are circumstances indicating the possibility of non compliance with certain laws and regulations?
AAS-page11
84
85
86
87
22 88 Whether the opening balances checked?
89
90
23 91 Whether a list of related parties obtained?
92
93
24 94
95
96
97
98
25 99
100
101
102
26 103
If so, whether a discussion held with the management to ascertain the possible compliance or non compliance?
In case of confirmed non compliance, whether an assessment made about its impact on the financial statements?
In case where adequate evidence is not obtainable in respect of compliance of law, whether its impact on the financial statements considered?
Whether the reporting responsibility properly discharged in accordance with the requirements of the relevant statute?
If the previous year’s financial statements are audited, does it satisfy the evidential value?
Where the previous year’s financial statements are not audited, whether the opening balances have been verified in accordance with the following methods
a) Current assets and Current Liabilities-By checking the subsequent events.
b) Other Assets & Liabilities-Documentary and other evidences
Whether the procedure for identification of related parties and the transactions with them is adequate?Whether the disclosure of related parties and the transactions with them is in accordance with the requirements of AS 18
Whether the client relies on service organization (SO)?If so, whether an assessment made in respect of material financial statement assertions affected by the operations of SO?
If the operations of service organizations are assessed as significant from the perspective of financial statements, whether a review about the internal controls & accounting systems of the SO made?
Where the review about the SO is done by any other auditor, whether a copy of his report obtained and documented?
Whether the report of the other auditor is evaluated for its evidential values?
Whether the comparatives (corresponding figures) furnished as part of the current financial statement disclosure, checked?
Whether the audit report for the prior period is modified but the issue which caused the modification is unresolved and results in a modified report for the current year, whether it is ensured that the current audit report regarding corresponding figures are also modified?
If the issue which is not resolved but does not require modification in the current report, Whether is it ensured that the audit report modified only for the corresponding figures?
Whether the matter which gave rise to the issuance of a modified audit report in the earlier year is resolved, has it been ensured that the current year report does not draw a reference to the same?Whether the terms of audit engagement letter issued to the client?
AAS-page12
104
105
b) Change in circumstances
c) Restriction on the scope of engagement
106
27 107
108
109
28 110
1) Title
2) Addressee
3) Opening Paragraph
4) Scope Paragraph
5) Opinion Paragraph3
6) Date of the report
7) Place of signature
8) Auditor’s signature
111 Whether is it decided to issue unqualified report?
112 Whether is it decided to issue modified report?
113
114
If your client is requesting to reduce the scope of audit to provide a lower level of assurance than initially appointed, whether the decision on the same documented with reasons?
In case where the request is accepted for reduction in scope, whether it is considered for its appropriateness, reasonableness on the grounds of:a) Misunderstanding in the original terms of engagement as to the nature of services provided
In case where the reduction in scope is considered as not appropriate and withdrawal from engagement is contemplated is it ensured whether a communication sent to appropriate persons?Whether the audit matters of governance interest requiring communication to those who are charged with governance, identified?
In the terms of engagement letter, whether the relevant person to whom the communication to be sent, identified?
Otherwise whether an agreement reached with the client identifying such person?
Whether the audit report contains the following basic elements?
In case of a modified opinion does it affect auditor’s opinion? If not, whether the matter which gave rise to modified report emphasized in the paragraph before the opinion paragraph?
In case of a modified opinion, which affects the auditor’s opinion is due to limitation on the scope of the auditor’s work? If so whether a qualified opinion or a disclaimer of opinion issued?
AAS-page13
115
29 116 Whether the entity operate in CIS environment?
117 Whether the audit approach covers the following?
(e) Evidence Collection.
118 Is there a requirement for specialized skills?
119 If so, is it available in house?
120 Is it necessary to hire an expert?
121
122
CHECKED BY
In case of modified opinion, which affects the auditor’s opinion is due to disagreement with management regarding the acceptability of the accounting policies selected, the method of their application or the adequacy of financial statement disclosures? If so whether a qualified opinion or adverse opinion issued?
A CIS environment exists when one or more computer(s) of any type or size is (are) involved in the processing of financial information, including quantitative data, of significance to the audit, whether those computers are operated by the entity or by a third party.
(a) Understand the accounting and internal control system of the client.
(b) Knowledge and Planning- Organizational Policy, attitude/dependence.
(c) Assessment of Risk – Inherent risk, Control risk & Detection Risk.
(d) Performance of test of control & substantive procedures and consequent assessment of detection risk.
(f) The extent to which the CIS environment is used to record, compile and analyze accounting information;
(g) The system of internal control in existence in the entity with regard to:
(i) Flow of authorized, correct and complete data to the processing center;
(ii) Processing, analysis and reporting tasks undertaken in the installation; and
(h) The impact of computer-based accounting system on the audit trail that could otherwise be expected to exist in an entirely manual system
Whether the audit working paper record the audit plan, the nature, timing and extent of audit procedures performed and the conclusions drawn from the evidence obtained?
Whether the electronic evidences are properly stored?
CARO-page14
NAME OF THE CLIENT : Director In Charge :PERIOD OF AUDIT : Senior In Charge :
Audit team :
APPLICABILITY
Applicable to all companies except the following :
2. An insurance company as defined in clause (21) of section 2 of the Act
3. Company licensed to operate under section 25 of the Act and
COMMENCEMENT
SL NO PARTICULARSYES/NO/N.A REMARKS
Fixed Assets1
Description of the asset
Classification
Location
Quantity
Original cost
Year of purchase
Adjustment for revaluation
Date of revaluation
Rate of depreciation
Accumulated depreciation
Details of sale, discard demolition, or destruction
1. Banking company as defined in clause (C) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)
4. A private limited company with a paid up capital and reserves not more than 50 lacs and has not accepted any public deposit and does not have loan outstanding of Rs. 25 lacs or more from any bank or financial institution and does not have a turnover exceeding Rs. 5 crores (Comments: The conditions are cumulative)
Every report made by the auditor under section 227 of the Act, on the accounts of every company examined by him to which this order applies for every financial year ending on any day on or after 1st July 2003.
Whether the Fixed Asset Records shows the following details?
CARO-page15
2
3
4
Inventory5
6
7
8
9
Prepare a list of names and the amount involved.
10
11
12
13
Whether physical verification conducted at reasonable intervals by the management?
Whether any discrepancies were observed on such verification? If so has it been properly dealt with in the books of account?
Whether a substantial part of the fixed assets have been disposed off during the year? If so, whether it affects the going concern? (Refer AAS 16)
Whether physical verification of inventory has been conducted, at reasonable intervals, by the management?Whether the procedures of physical verification of inventory followed by the management is reasonable and adequate in relation to the size of the company and nature of its business? If not the inadequacies to be reported?
Whether the company is maintaining proper records of inventory?
Whether any material discrepancies were noticed on such verification? If so has it been properly dealt with in the books of accounts?
Loans granted/taken by the company
Whether Loans have been granted/taken from parties listed in the register maintained under section 301 of the Companies Act, 1956? If so, give the number of parties and the amount involved in the transactions?
Whether the rate of interest and other terms and conditions for loans granted/taken are prima facie prejudicial to the interest of the company?
Whether the payment of principal and interest are regular?
Whether reasonable steps have been taken by the company for recovery/payment of the principal and interest where the overdue amount is more than Rs. 1 lac?
Internal control over purchase of inventory and fixed assets and for sale of goods
Whether the internal control procedure is commensurate with the size and nature of the company and its business?
CARO-page16
14
15
16
17
18
19
20
Cost records21
22
Whether there is a continuing failure to correct major weakness in internal control?
An auditor may be guided by the internal audit report or management control assessment report to identify the weakness, the adequacy of steps taken by the management to correct the same and to decide about the major weakness and its continuity.
Transactions with parties listed under section 301 of the Companies Act, 1956 (Namely Director interested contracts)
Whether a register is maintained under section 301 of the Companies Act, 1956 and updated periodically?
Whether each of the transactions are made at prices which are made reasonable with regard to prevailing market prices at the relevant time?
(This information is required only in case of transactions exceeding a value of Rs. 5 Lacs in respect of any party in any one financial year)
Deposits from the public
Whether the company has accepted any deposits from the public?
Whether the company has complied with the provisions of Sections 58A & 58 AA of the Companies Act 1956/directions of the RBI and the rules made there under? If not nature of contravention to be reported.
Whether the company has complied the requirement of the order passed by the Company Law Board, wherever applicable?
Internal audit system
Whether the company has an internal audit system commensurate with its size and nature of business?
This is applicable to a company which is either listed or having a paid up capital and reserves exceeding Rs. 50 lacs as the commencement of the financial year concerned or having an average annual turnover exceeding Rs. 5 crore for a period of 3 consecutive financial years immediately preceding the financial year concerned.
Whether the company is required to maintain cost records under Section 209(1) (d)?
If so whether such accounts and records are made and maintained?
CARO-page17
Statutory Dues23
PF
Investor Education and protection fund
ESI
Income Tax
Sales Tax
Wealth Tax
Customs Duty
Excise Duty
Cess and
Any other statutory dues
Disputed taxes and duties not paid
24
Sick Company
25
26
27
28
Default in financial dues
29
Whether the company is regular in depositing undisputed statutory dues with appropriate authorities in respect of the following?
If not, the extent of arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than 6 months from the date they became payable shall be reported.
In case of above mentioned statutory dues are not deposited due to disputes, then the amounts involved and the forum where the dispute is pending should be reported.
It is clarified a mere representation to the department shall not constitute a dispute.
Whether the company has been registered for a period not less than 5 years?
Whether its accumulated losses at the end of the financial year are not less than 50% of its net worth?
Whether it has incurred cash losses in such financial year as well as in the immediately preceding financial year?If the above conditions are satisfied the same has to be reported
Whether the company has defaulted in repayment of dues to financial institutions/banks/debenture holders? If so, report on the period and the amount of default.
CARO-page18
Documentation in respect of loans granted
30
Applicable to chit funds
31
Applicable to Nidhi, Mutual Benefit Funds, Societies
32
33
34
35
36
37
Guarantees for Loans
38
End use of funds
39
40
Whether adequate documents and records are maintained in cases, where the company has granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities? If not the deficiencies to be reported.
Whether the provisions of any special statutes applicable to chit fund have been complied with?
Whether the net owned funds to deposit liability ratio is more than 1:20 as on the date of balance sheet?
Whether the company has complied with prudential norms on income recognition and provisioning against substandard/doubtful/loss assets?
Whether the company has adequate procedures for appraisal of credit proposals/requests, assessment of credit needs and repayment capacity of the borrowers?Whether the repayment schedule of various loans granted by the Nidhi is based on repayment capacity of the borrower and would be conducive of the recovery of the loan amount?
Applicable to companies dealing/trading of shares and other instruments
Whether proper records have been maintained of the transactions and contracts and whether timely entries have been made therein?
Whether the shares/securities/debentures/other securities are held in the name of the company, if not have you verified whether the provisions of Section 49 of the Companies Act has been complied with?
Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company?
Whether terms loans have been applied for the purpose for which the loans were obtained?
Obtain the project report and check the application of funds for which the loan is obtained.
Whether the funds raised for short-term purpose have been used for long-term investments and vice versa? If yes, the nature and the amount to be indicated.
For example, acquiring fixed assets by utilizing substantial/entire portion of borrowed working capital
CARO-page19
41
Preferential Allotment
42
Debenture Issued
43
Frauds44
(Refer AAS 4)
CHECKED BY
Whether the management has disclosed on the end use of money raised by public issues and whether the same has been verified?
Whether the company has made any preferential allotment of shares to the parties and companies covered under the register maintained u/s 301 of the Companies Act? If so, whether the price at which shares have been issued is prejudicial to the interest of the company.
Whether securities have been created in respect of debentures issued?
Whether any fraud on or by the company has been noticed or reported during the year? If so, the nature and the amount involved to be indicated.
AAS 16 – recommends that at every audit the auditor had to consider the appropriateness of the assumption of the going concern concept. The factors that are to be considered are Financial and Non Financial.
AS 4 – recommends auditor’s consideration of frauds and errors in a financial statements. Frauds are classified into fraudulent financial statements and misappropriation of assets. Again frauds are classified into management fraud and employee fraud. The annexure to AAS prescribes the possible instances of fraud risk factors and the auditor’s response to the same.
MAOCARO-page20
NAME OF THE CLIENT : Director In Charge : PERIOD OF AUDIT : Senior In Charge :
Audit team :
MAOCARO 1988
SL NO PARTICULARS YES/NO/N.A REMARKSFixed Assets
1
Description of the asset
Classification
Location
Quantity
Original cost
Year of purchase
Adjustment for revaluation
Date of revaluation
Rate of depreciation
Accumulated depreciation
Details of sale, discard demolition, or destruction
2
3
Revaluation of fixed assets
4
5
6
7
Whether the Fixed Asset Records shows the following details:
Whether physical verification conducted at reasonable intervals?Whether any discrepancies were observed on such verification? If so has it been properly dealt with in the books of accounts?
Whether the assets are revalued during the year? If so basis of revaluation to be reported.
Obtain the basis of revaluation, valuer name and qualification, class of assets
Stock of Finished Goods, Stores, Spare Parts and Raw Materials
Whether physical verification conducted at reasonable intervals?Whether the procedures of Physical verification is reasonable and adequate in relation to the size of the company and nature of its business?
Whether any discrepancies were observed on such verification? If so has it been properly dealt with in the books of accounts?
MAOCARO-page21
Loans taken by the company
8
9
Loans given by the company
10
11
12
13
14
15
16
17
If not reasons there for should be reported
Whether loans have been taken from parties listed in the register maintained under section 301 of the Companies Act 1956 or companies defined under section 370(1B) of the Companies Act 1956 ?
If so whether the rate of interest and other terms and conditions are prima facie prejudicial to the interest of the company?
Whether the company has granted any loans to persons listed in the register maintained under section 301 of the Companies Act 1956 or to companies defined under section 370(1B) of the Companies Act, 1956?
If so Check whether any terms is prima facie prejudicial to the interest of the company?
Loans and advances in the nature of loans given by the company
Whether the company has given any advance in the nature of loans?Whether the parties are repaying the principle and the interest as stipulated?
If not has the company taken reasonable steps for the recovery?
Internal control over purchase of stores, raw materials, Components, Plant & Machinery, Equipments and other assets and Sale of goods
Whether the internal control procedure is in commensurate with the size and nature of the company and its business? Purchase of materials and goods and sale of materials, goods and services from/to certain parties
Whether the list is obtained from the management showing the aggregate of the transaction of purchase of goods from and sale of materials, goods and services to each party listed in the register under section 301 of the Companies Act 1956?
Whether the aggregate of purchase/sale transactions exceeds Rs.50000 in respect of each party?
Whether the transactions are made on the prevailing market prices?
Damaged or unserviceable stores, raw materials or finished goods
MAOCARO-page22
18
19 Whether Provision for loss has been made correctly?
Deposits from the public
20
21
Sale and disposal of realisable by- products and scrap
22
Internal audit system
23
24
Cost records
25
Provident fund and ESI dues
26
Undisputed taxes and duties not paid
27
Income tax,
Wealth tax
Sales tax
Excise duty
Customs duty
Whether there exists a procedure to identify the damaged or unserviceable stores, raw materials or finished goods?
Whether the company has accepted any deposits from the public?Whether the company has complied with the provisions of sec 58A of the Companies Act 1956 or rules made there under? If not nature of contravention to be reported
Whether the company maintains reasonable records for generation, sale and disposable and internal consumption of by products and scrap? If not deviations to be reported.
Whether the companies paid up capital exceeds Rs.50 lacs or 3 years average annual turnover exceeds Rs.2 crores?
If so Whether the company has an internal audit system commensurate with its size and nature of business?
(a) Whether the company is required to maintain cost records under Section 209(1) (d)?
(b) If so Whether such accounts and records are being maintained?
Whether the company is regular in depositing the P.F and E.S.I dues with the appropriate authority? If not extent of arrears shall be reported.
Whether the company has any undisputed liability amount outstanding, as at the last day of the financial year concerned, for more than six months in respect of
MAOCARO-page23
MAOCARO-page24
Personal Expenses
28
It must be an industrial Company
29
SERVICE COMPANIES
30
31
32
TRADING COMPANY33
Whether personal expenditure has been charged to revenue? If so it is to be reported.
Sick Industry A company would be treated as a sick industrial company if the following conditions are satisfied
It must have been registered for a period of not less than 7 yearsIts accumulated losses should be equal to or exceed its net worth at the end of the financial year
It should have suffered cash losses in the financial year and in the financial year immediately preceding such financial year
If the company has become sick industrial company then check whether the Board of Directors has made a reference to BIFR within 60 days from the date of finalization of duly audited accounts for the financial year.
Whether the company falls within the meaning of section 3(1)(1) of Sick Industrial Companies (Special Provision) Act,1985?If so whether a reference has been made to BIFR?
Whether company has reasonable system with respect to recording of receipts, issues and consumption of material and stores and allocation of materials consumed to the relative job commensurate with its size and nature of its business?
Whether the company has a reasonable system of allocating man-hours utilized to relative jobs, commensurate with its size and nature of its business?
Whether the company has a reasonable system of authorization with regard to issue of stores and allocation of stores and labor to jobs?
Whether there is a system for properly identifying the damaged goods and whether adequate provision for the loss is made?
FINANCE, INVESTMENT, CHITFUND, NIDHI OR MUTUAL BENEFIT COMPANY.
MAOCARO-page25
34
35
36
• (a) Full name and address of the borrower
• (b) Amount of loan or advance
• (c) Terms of repayment, rate of interest
• (d) Type of security offered and its details
• (e) Recovery of principal and interest
•
• (g) Market value of the security pledged
37
Chit Fund Acts
Mutual Benefit Societies & Nidhis
CHECKED BY
THE FOLLOWING SHOULD BE INCLUDED IN THE PRELUDE
Whether the company is dealing or trading in Securities? If so whether proper records have been maintained?
Whether the securities are held in the name of the company, if not have you verified whether the provisions of Sec 49 of the companies act has been complied with?
Whether adequate documents and records are maintained for loans and advances granted on the basis of security by way of pledge of shares, debentures and other securities?
The following should be checked to ensure that the company has custody of proper documents of the security pledged.
(f) Proof regarding borrowing powers of the borrower
Whether the provisions of any special statute is applicable to the company? If so has it been complied with?
Ensure that all securities in a "body corporate" are covered. Section 372 deals with only shares in a company. Section 372A however deals with "body corporate". Check section 2 of The Companies Act, 1956, for meaning of the term.
(Generally it was considered that "securities" meant quoted investments. However, going by the definitions of "securities" and "listed company" in section 2 of the Companies Act, 1956, this view will not be valid. Therefore consider that all instruments whether quoted or not are covered.)
NAME OF THE CLIENT : Director In Charge : PERIOD OF AUDIT : Senior In Charge :
Audit team :
COMPARATIVE STATEMENT OF MAOCARO AND CARO(Changes have been typed in bold letters)
SL No MAOCARO i.e. applicable prior to 1.7.2003 New CARO i.e. applicable from 1.7.2003
1
2
3 Deleted
4
5
6
7
8 Deleted
9
Applicable for Reports on accounts where financial year ends before 1.7.2003
Applicable for Reports on accounts where financial year ends on or after 1.7.2003
Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets; whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account.
Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets; whether these fixed assets have been physically verified by the management at reasonable intervals; whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account.
Whether any of the fixed assets have been revalued during the year; if so, the basis of revaluation should be indicated.
If a substantial part of fixed assets have been disposed off during the year, whether it has affected the going concern.
Whether physical verification has been conducted by the management at reasonable intervals in respect of finished goods, stores, spare parts and raw materials
Whether physical verification of inventory has been conducted by the management at reasonable intervals
Are the physical verification of stocks followed by the management reasonable and adequate in relation to the size of the company and the nature of its business? If not, the inadequacies in such procedures should be reported.
Are the physical verification of stocks followed by the management reasonable and adequate in relation to the size of the company and the nature of its business? If not, the inadequacies in such procedures should be reported.
Whether any material discrepancies have been noticed on physical verification of stocks as compared to book records, and if so, whether the same have been properly dealt within the books of account ?
Whether the company is maintaining proper records of inventory and whether any material discrepancies have been noticed on physical verification of stocks and if so, whether the same have been properly dealt within the books of account ?
Whether the auditor, on the basis of his examination of stocks, is satisfied that such valuation is fair and proper in accordance with the normally accepted accounting principles? Is the basis of valuation of stocks same as in the preceeding year? If there is any deviation in the basis of valuation, the effect of such deviation, if material, should be reported.
If the company has taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, and /or from the companies under the same management as defined under sub-section (1B) of section 370 of the Companies Act, 1956, whether the rate of interest and other terms and conditions of such loans are prima facie prejudicial to the interest of the company.
If the company has taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. If so, give the number of parties and the amount involved in the transactions. Whether the rate of interest and other terms and conditions of such loans are prima facie prejudicial to the interest of the company. Whether the payment of the principal amount and interest are regular.
9
10
NOTE:
11 Deleted
12
13
14 Deleted
15
If the company has taken any loans, secured or unsecured, from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956, and /or from the companies under the same management as defined under sub-section (1B) of section 370 of the Companies Act, 1956, whether the rate of interest and other terms and conditions of such loans are prima facie prejudicial to the interest of the company.
If the overdue amount is more than Rs. 1,00,000, whether reasonable steps have been taken by the company for payment of principal and interest.
If the company has granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act 1956, and /or to the companies under the same management as defined under sub-section (1B) of section 370 of the Companies Act, 1956, whether the rate of interest and other terms and conditions of such loans are prima facie prejudicial to the interest of the company.
If the company has granted any loans, secured or unsecured, to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. If so, give the number of parties and the amount involved in the transactions. Whether the rate of interest and other terms and conditions of such loans are prima facie prejudicial to the interest of the company. Whether the payment of the principal amount and interest are regular.
If the overdue amount is more than Rs. 1,00,000, whether reasonable steps have been taken by the company for recovery of principal and interest.
Loans etc., to companies under the same management covered under section 370 of the Act is not applicable with effect from 31.10.1998 after the commencement of Companies (Amendment) Act, 1999.
Hence the reporting on the same has been removed in the New CARO.
Whether the parties to whom the loans or advances in the nature of loans have been given by the company are repaying the principal amounts as stipulated and are also regular in payment of the interest and if not whether reasonable steps have been taken by the company for the recovery of principal and interest.
Is there an adequate internal control procedure commensurate with the size of the company and the nature of its business, for the purchase of stores, raw materials, including components, plant and machinery, equipment and other assets, and for the sale of goods.
Is there an adequate internal control procedure commens-urate 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. Whether there is a continuing failure to correct major weakness in the internal control.
Whether the transaction of purchase of goods and materials and sale of goods, materials and services, made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956, as aggregating during the year to Rs. 50,000/- or more in respect of each party, have been made at prices which are reasonable having regard to prevailing market prices for such goods, materials, or services or the prices at which transactions for similar goods or services have been made with other parties.
Whether the transaction that need to be entered in the register maintained under section 301 of the Companies Act, 1956, have been so entered and whether each of the transaction have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.
(This information is required only in case of transactions exceeding the value of five lakh rupees in respect of any party and in any one financial year).
Whether any unserviceable or damaged stores, raw materials, or finished goods, are determined and whether provisions for the loss, if any, have been made in the accounts.
In case the company has accepted deposits from the public, whether the directives issued by the RBI and the provisions of section 58A of the Companies Act, 1956, and the rules framed thereunder, where applicable have been complied with. If not, the nature of contravention should be stated.
In case the company has accepted deposits from the public, whether the directives issued by the RBI and the provisions of section 58A and 58AA of the Companies Act, 1956, and the rules framed thereunder, where applicable have been complied with. If not, the nature of contravention should be stated. If an order has been passed by the company law board whether the same has been complied with or not?
16 Deleted
17
18
19
20
21 Deleted
22 Deleted
23 Deleted
24 Deleted
25 Deleted
26 Deleted
27
28
29
Is the company maintaining reasonable records for the sale and disposal of realisable by-products and scraps, where applicable.
In the case of companies having a paid up capital exceeding Rs. 25 lakhs as at the commencement of the financial year concerned, or having an average annual turnover exceeding Rs. 2 Crores for a period of three consecutive financial years immediately preceeding the financial year concerned, whether the company has an internal audit system, commensurate with its size and nature of its business.
In the case of listed companies having a paid up capital and reserves exceeding Rs. 50 lakhs as at the commencement of the financial year concerned, or having an average annual turnover exceeding Rs. 5 Crores for a period of three consecutive financial years immediately preceeding the financial year concerned, whether the company has an internal audit system, commensurate with its size and nature of its business.
Where maintenance of cost records has been prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956, whether such accounts and records have been made and maintained.
Where maintenance of cost records has been prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956, whether such accounts and records have been made and maintained.
Is the company regular in depositing Provident Fund and Employees’ State Insurance dues with the appropriate authority and if not, the extent of arrears of Provident Fund and Employees’ State Insurance dues shall be indicated by the auditor.
Is the company regular in depositing Provident Fund and Employees’ State Insurance dues with the appropriate authority and if not, the extent of arrears of Provident Fund and Employees’ State Insurance dues shall be indicated by the auditor.
Whether any undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty and excise duty were outstanding, as at the last day of the financial year concerned, for a period of more than six months from the date they became payable; if so, the amounts of such outstanding dues should be reported.
Whether any undisputed amounts payable in respect of income tax, wealth tax, sales tax, customs duty and excise duty were outstanding, as at the last day of the financial year concerned, for a period of more than six months from the date they became payable; if so, the amounts of such outstanding dues should be reported. In case of dues of sales tax/income tax custom tax/excise duty/cess have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending may please be mentioned.
Whether personal expenses have been charged to revenue account; if so, details thereof should be reported.
Whether the company is a sick industrial company within the meaning of clause (o) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985; if so, whether a reference has been made to the Board for Industrial and Financial Reconstruction under section 15 of that Act.
Whether the company has a reasonable system of recording receipts, issues and consumption of material and stores and allocating materials consumed to the relative jobs, commensurate with its size and nature of its business.
Whether the company has a reasonable system of allocating man-hours utilized to the relative jobs, commensurate with its size and nature of its business.
Whether there is a reasonable system of authorization of proper levels, and an adequate system of internal control commensurate with the size of the company and nature of its business, on issue of stores and allocation of stores and labour to jobs.
Have the damaged goods been determined and if the value of such goods is significant, has provision made for the loss.
Whether in case of a company which has been registered for a period not less than five years, its accumulated losses at the end of the financial year are not less than fifty percent of its networth and whether it has incurred cash losses in such financial year and in the financial year immediately preceding such financial year also
Whether the company has defaulted in the repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reported.
Whether adequate documents and records are maintained in a case where the company has granted loans and advances on the basis of security by way of pledge of shares debentures and other securities.
Whether adequate documents and records are maintained in a case where the company has granted loans and advances on the basis of security by way of pledge of shares debentures and other securities. If not, the deficiencies to be pointed out.
30
In respect of nidhi/mutual benefit fund/societies;
31
32
33
34
35
36
37
38
APPLICABILITY
MAOCARO i.e. applicable prior to 1.7.2003 New CARO i.e. applicable prior to 1.7.2003 from 1.7.2003
a) Manufacturing, mining, or processing;
b) Supplying and rendering services;
c) Trading; and
Whether the provisions of any special statute applicable to chit fund, nidhi or mutual benefit society have been duly complied with.
Whether the provisions of any special statute applicable to chit fund, nidhi or mutual benefit society have been duly complied with.
a) Whether the net owned funds to deposit liability ratio is more than 1:20 as on the date of balance sheet;
b) Whether the company has complied with the prudential norms on income recognition and provisioning against sub-standard/default/loss asset;
c) Whether the company has adequate procedures for appraisal of credit proposals/requests, assessment of credit needs and repayment capacity of the borrowers;
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.
If the company is dealing or trading in shares, securities, debentures and other investments, whether proper records have been maintained of the transactions and contracts and whether timely entries have been made therein; also whether the shares, securities, debentures and other investments, have been held by the company in its own name except to the extent of the exemption, if any, granted under section 49 of the Companies Act, 1956.
If the company is dealing or trading in shares, securities, debentures and other investments, whether proper records have been maintained of the transactions and contracts and whether timely entries have been made therein; also whether the shares, securities, debentures and other investments, have been held by the company in its own name except to the extent of the exemption, if any, granted under section 49 of the Companies Act, 1956.
Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company.
Whether the term loans were applied for the purpose for which the loans were obtained.
Whether the funds raised on short-term basis have been used for long term investment and vice versa; if yes, the nature and amount is to be indicated.
Whether the company has made any preferential allotment of shares to parties and companies covered in the register maintained under section 301 of the Act and if so whether the price at which shares have been issued is prejudicial to the interest of the company.
Whether securities have been created in respect of debentures issued?
Whether the management has disclosed on the end use of money raised by public issue and the same has been verified.
Whether any fraud on or by the company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.
The order applies to every company which is engaged or proposes to engage in one or more of the following activities, namely—
It shall apply to every company including a foreign company as defined in section 591 of the Act, except the following:
(i) a banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949;
(ii) an insurance company as defined in Section 2(21) of the Companies Act, 1956;
(iii) a company licensed to operate under Section 25 of the Companies Act, 1956; and
d)
The order specially provides that it shall not apply to:
(i)
(ii)
(iii)
The business of financing, investment, chit fund, nidhi or mutual benefit societies.
(iv) a private limited company with a paid up capital and reserves not more than fifty lakh rupees and has not accepted any public deposit and does not have loan outstanding ten lakh rupees or more from any bank or financial institution and does not have a turnover exceeding five crores.
A banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949 An insurance company as defined in Section 2(21) of the Companies Act, 1956; andA company licensed to operate under Section 25 of the Companies Act, 1956.
