Applicability – Applies to all companies, including foreign companies,
Except – It is not applicable to Insurance co, banking co, charitable organizations, one person Company & private company with equity of not more than 50lacs/loan not exceeding 25lacs /sales not exceeding 5crores.
Matters to be covered in auditor’s report: These are the questions the auditors have to be answered in audit report:
Fixed asset – If proper records are maintained for fixed assets and the assets are verification at reasonable intervals.
Inventory – If proper records are maintained for inventory, if verification of inventory are done at reasonable interval and process adopted for verification is reasonable/adequate.
Loans to related parties – If loans are given to related parties, check if principle & interest are received on time. If the overdue is more than 1lacs, if reasonable steps are taken to recover.
Internal control – If internal control is adequate considering the size of the company & nature of the business. If there are any continuing failures to correct the major weakness in internal control?
Deposits – If deposits are accepted by the company, the direction so of the companies act and RBI are followed.
Cost records – If the cost records are specified by the central government, whether the same are maintained?
Statutory dues – If the company is regular in depositing stat due. If not, arrears of such dues at the end of financial year for a period of more than 6 months from the date they become due. If dues are not deposited due to dispute, mention the amount and the forum where it is pending.
Accumulated loss exceeding net worth and cash loss – If the company is registered for the period equal to or more than 5 years & if the accumulated loss is more than 50% of net worth, report the case. If the company has incurred any cash loss, that too need to be reported.
Default in paying dues to banks – If the company has defaulted in payment of any dues to banks and debenture holders, the same has to be reported.
Guarantee given to bank are not prejudicial – If the company has given any guarantee for loan taken by others form bank or financial institution, the terms and conditions whereof are prejudicial to the interest of the company.
Term loan application – If the term loan taken is applied for the purpose for which they were obtained.
Fraud by or on the company – If the fraud by or on the company has been noticed, the nature and the amount has to be indicated.
Reason for unfavorable or qualified answer:
Un-favorable/qualified answer – if the answer to any of the question is un-favorable or qualified, auditor shall state the reason.
Unable to express opinion – if the auditor is unable to express an opinion on any of the questions, he has to state the reason for the same.
Tags :Corporate Law