AUDIT
PROGRAM
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Client : _____ ___________________________________
For the
period : _______________________________________
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Brief Particulars
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Performed By
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Remarks
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1. Check out the previous year’s balances & comparatives
(AAS 22 & 25)
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2. Share Capital
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(a)
Confirm Authorised & Issued Share
Capital with Statutory books.
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(b)
Check increase in Authorised Capital
with ‘Form No. 5’ and resolutions
passed.
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(c)
Verify that Authorised, Issued, Subscribed and Paid-up
Capital is properly classified. [Schedule-VI, Part-I].
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(d)
Check increase in Paid-up Capital
with ‘Form No. 2’ and resolutions
and note the details of shares issued.
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(e)
Check whether ‘Share Certificates’
for fresh issue of shares have been issued or not within 3 months.
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(f)
Issue of shares for consideration
other than cash to be disclosed separately. [Schedule-VI, Part-I].
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(g)
Issue of shares by way of fully paid
bonus shares to be disclosed separately. [Schedule-VI, Part-I].
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(h)
Calls in arrears to be shown by way
of deduction from the paid-up capital. [Schedule-VI, Part-I].
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(i)
Forfeited shares to be shown by way
of addition to paid-up capital. [Schedule-VI, Part-I].
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(j)
Check whether the
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(k)
Check whether the management has
disclosed the end use of money raised by public issue and the same has been
verified. [CARO{xx}].
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3. Reserves and Surplus
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(a)
Verify that Reserves and Surplus is
properly classified. [Schedule-VI, Part-I].
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(b)
Verify the revaluation reserve if any
& any adjustment for impairment loss & depreciation. [AS-28 and
AS-10]
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(c)
Ensure that adequate transfer to General
Reserve is made before declaration of dividend exceeding 10% according to
"The Companies (Transfer of profit to Reserves) Rules, 1975"and in the case of dividends being
declared out of reserves adequate compliance is being made to companies (Declaration of Dividends out of
Reserves) rules ,1975.
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4. Secured & Unsecured Loans
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(a)
Reconcile the balance as shown in
books of account with that of balance confirmation by Banks/
Institutions/Other Lenders.
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(b)
Verify the securities for Secured
loans from ‘Register of Charges’
and ‘Form 8(Modification of Charge) & 13(Registration of Charges)’ filed with ROC.
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(c)
Verify that secured loans and unsecured loans are properly
classified. [Schedule-VI, Part-I].
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(d)
Loans from Directors/Managers to be
shown separately. [Schedule-VI, Part-I].
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(e)
Loans guaranteed by
Directors/Managers to be disclosed. [Schedule-VI, Part-I].
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(f)
Verify that full disclosure is made
about the security of the loans. [Schedule-VI, Part-I].
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(g) Check whether the company has taken
any loans, secured or unsecured from the companies, firms or other parties
covered in the register maintained u/s 301 of the Act. If so, give no. of
parties and amount involved in the transactions.[CARO (iii)(e)]
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(h) Check whether the rate of interest
and other terms and conditions of loans taken by the company, secured or
unsecured, are prima facie prejudicial to the interest of the company; [CARO
(iii)(f)] and
(i)
Check
whether payment of the principal amount and interest are also regular. [CARO
(iii)(g)]
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(j) If overdue amount is more than Rs. 1
Lakh verify whether reasonable steps have been taken for the recovery of the
amount.[CARO{iii}{c}]
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(k)
Ensure transactions need to recorded
in the register maintained u/s 301 of the Act has been so entered. Under section 301 every company is required to
maintain one or more registers which contain all the particulars of all the
contracts or arrangements to which sec 297or 299 of the act applies.[CARO {v}
a]
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(l)
Verify that the total borrowings at
any time during the year are within the limits laid down by the shareholders
in General meeting as per ‘Sec. 293 (1)(d)’ of the Companies Act, 1 956.
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(m)
Ensure that all interest paid/due on
the loans is calculated as per loan agreements.
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(n)
Interest accrued and due on Secured
Loans should be included under the appropriate sub-heads under the head
“SECURED LOANS”. [Schedule-VI, Part-I].
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(o)
Verify whether TDS has been properly
deducted on interest provided in the books if not, report in the tax audit
report.
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(p)
Vouch all fresh loans received during
the year and ensure that all requirements have been fulfilled.
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(q)
Whether any amount has been
received/repaid in cash or in contravention with Sec. 269SS and 269T of I-Tax
Act. [Form-3CD, Clause (24)].
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(r)
Verify that the
secured loans are fully secured at the balance sheet date otherwise classify
it as unsecured loans. [Section 227-1A (iv)].
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(s)
Ensure that a note should reflect in
balance sheet regarding installments/amounts payable within next financial
year.
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(t)
In case of debentures
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i.
Whether provision of interest and TDS
thereon is provided.
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ii.
Whether terms of redemption/conversion
with earliest date of redemption/conversion are disclosed. [Schedule-VI,
Part-I].
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(u)
Verify that the funds obtained on
short term basis have been used for long
tem investment. If yes, the nature & amount is to be indicated. [CARO
{xvii}].
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(v)
Ensure that term loans were applied
for the purpose for which the loans were obtained. [CARO{xvi}].
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(w)
Ensure that the company has complied
with the provisions of ‘Section 58A & 58AA or any other relevant provisions of the Companies Act 1956’ and
the ‘Companies (Acceptance of deposits) Rules 1975’ as well as the relevant
directions of the RBI with regard to the deposits from its employees etc.
[CARO {vi}].
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5. Fixed Assets
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(a) Ensure
that the Company has maintained proper records showing full particulars of
fixed assets. [CARO {i}(a)].
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(b)
Reconcile the fixed assets account
with the fixed assets register.
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(c)
Ensure that fixed assets have been
physically verified at reasonable intervals by the management and
discrepancies, if any are properly adjusted. [CARO {i}(b)].
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(d)
In case
there is sale of substantial part of fixed assets, whether it effects
the going concern concept. If yes, report. [CARO {i}(c)].
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(e)
Review statement of CWIP and ensure that
item shown in CWIP are not operational before year-end.
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(f)
Verify the rates of depreciation as
per Schedule XIV to the Companies Act, 1956. If the rate is different from
the rate given in Schedule XIV whether the same has been appropriately
disclosed. [AS-6].
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(g)
Verify depreciation calculations for
10 major items value-wise.
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(h)
Ensure that fixed assets are properly
classified in the final accounts. [Schedule-VI, Part-I].
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(i)
Ensure that cost of a fixed asset
includes all cost directly attributable in bringing an asset to its working
condition for its intended use including borrowing costs, if any. [AS-10
& 16].
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(j)
Review the repairs account for any
capital expenditure. Check the amount of current repairs eligible to be added
to cost of asset as per sec.30 of the Income Tax Act.
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(k)
Ensure that adequate adjustments are
made in respect of cost and depreciation of assets sold/ discarded in the schedule of depreciation and
fixed asset register and any gain/loss resulting from their disposal is
disclosed separately in Profit & Loss A/c. [AS-10].
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(l)
Verify that a board resolution has
been passed in respect of all additions if required by Articles.
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(m)
Vouch for all additions to fixed
assets above Rs. 10,000/-
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(n)
Vouch for all additions to plant
& machinery not exceeding Rs. 5,000/- to determine whether individual
items when consolidated constitutes more than 10% of the total actual cost of
plant and machinery. If yes provide normal rate of depreciation.
[Schedule-XIV, Note 8].
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(o)
Whether in any case, any individual
item of asset whose actual cost does not exceed Rs. 5000/- should be
depreciated @ 100% p.a. [Schedule-XIV, Note 8].
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(p)
Whether depreciation chart as per
Income Tax Rules been prepared showing, in case of additions, the date put to
use and adjustment for Cenvat claimed, subsidy/grant/ reimbursement, change
in rate of exchange of foreign currency. [Form-3CD, Clause (14)].
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(q)
Ascertain
whether there is an adequate internal control system commensurate with the
size of the company and the nature of its business and fixed assets . Whether
there is a continuing failure to correct major weaknesses in internal control
system; [CARO {iv}].
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(r)
Verify that any exchange differences
relating to foreign currency loans taken for purchase of such assets should
be adjusted in the cost of fixed asset and accordingly take the depreciation
effect. [as per AS-11]
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(s)
Check the impairment loss on the
overall basis and adjust for the
provision of the same from P/L a/c or revaluation reserve. (For
financial year 2004-05 applicable only for listed companies)
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6. Inventories (FG, RM, Scrap, Stores &
Spares)
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(a)
Verify whether the company is
maintaining proper records of inventory and whether any material
discrepancies were noticed on physical verification and if so, whether the
same have been properly dealt with in the books of account. [CARO {ii}(c)].
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(b)
Verify whether physical verification
of inventory has been conducted by the management at reasonable intervals.
[CARO {ii}(a)].
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(c) Verify whether procedures of physical
verification of inventory followed by the management are reasonable and
adequate in relation to the size of the company and the nature of its
business; and if not, mention the inadequacies. [CARO {ii}(b)].
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(d)
Verify whether valuation of stocks is
fair and proper in accordance with the normally accepted accounting
principles. [AS-2]
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(e)
Verify whether the basis of valuation
of stocks is same as in the preceding year; and if not, the quantify the
effect of change in valutation.
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(f) In the case of raw material which is
used for the production of the finished goods, remain unsold and the market
price of the raw material falls below its cost but the finished goods in which they are
used, expected to be sold not below its cost then the raw material should not
be valued below cost. [AS-2 (revised) Para-24].
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(g)
Obtain valuation certificate from
management.
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(h)
Whether adjustment of Excise/CENVAT
has been made in the value of stock-in-trade.
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(i)
Take 5 items and check that proper
excise duty is paid in case of duty paid finished goods lying with the
company.
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(j)
Verify valuation of 5 items of FG, RM and
WIP each at market rates.
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(k)
Verify valuation of 5 large items of
stores and spares.
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(l)
Verify estimated realisable value of
scrap for 2 large items.
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(m)
Review stock ledger, identify non-moving,
slow moving and obsolete inventories.
If it constitutes major part of inventory find out the reason for the same.
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(n)
Verify the obsolete inventory as
worked out by the company.
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(o)
Verify the net realisable value of
obsolete inventory.
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(p)
Review the obsolescence provision for
reasonableness and adequacy in view of the net realisable value.
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(q)
Verify whether there is adequate
internal control procedure commensurate with the size of the company and the
nature of its business, for the purchase of stores and raw materials
including components. [CARO {iv}].
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(r)
Verify whether there has been any
transaction of purchase of goods and materials and sale of goods, materials
and services in pursuance of contracts or arrangements entered in the
register(s) maintained u/s 301 of the Companies Act, 1956.If so than ensure
whether the same has infact been
recorded in the registered maintained for the purpose.. [CARO {v}
(a)].
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(s)
Verify whether above mentioned
transaction in respect of any party aggregates during the year to Rs.
5,00,000/- or more; and if so, whether that has been made at the prices which
are reasonable having regard to prevailing market prices at the relevant
time. [CARO {v} (b)].
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(t)
Compare book balance in Excise
Records with Physical balances for FG.
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(u)
Reconcile purchases as per stock
ledger and as per financial books.
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(v)
Observe cut off procedures before
physical count.
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(w)
Attend year-end inventory count and
test count for 15 key items.
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(x)
Follow up test counts and agree to
final stock listings.
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(y)
Verify quantitative details of raw
materials and finished goods– WIP consumption.
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(z)
Show principal item of raw material,
which are more than 10% of total value of R.M consumed in quantitative
details. [Schedule-VI, Part-II].
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7. Inventory – WIP
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(a)
Verify overhead loading norms for
their reasonableness and conformity with A.S. 2 of ICAI.
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(b)
Ensure that costing methods are same
as in previous year.
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8. Sundry Debtors
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(a)
Review ageing analysis of Debtors.
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(b)
Ensure that the debtors balances are properly classified in the final
accounts as follows:
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i
More than six
months.
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ii
Less than six
months.
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iii
Secured and
considered good.
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iv
Unsecured and
considered good.
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v
Considered
doubtful (this amount should not exceed the amount of provision for bad &
doubtful debts).
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vi
Amount due by
directors or other officers of the company.
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vii
Due by a firm or
private company in which any director is a partner/director/member.
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viii
Due from other
companies under the same management as per sec 370 (1B).
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ix
Maximum amount
due by directors or other officers of the co, at any time during the year.
[Schedule-VI, Part-I].
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(c)
Ensure that foreign debtors are
fairly stated by conversion at closing rates. [AS-11]
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(d)
Review the outstanding balances and
identify the doubtful /disputed /long-term balances.
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(e)
Review year-end reconciliation for
all debtors and ensure that all claims by debtors which are acceptable have
been provided for.
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(f)
Consider adequacy of provision for
doubtful debts.
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(g)
For last two weeks of the year and first
week of next year, identify all sales invoices/ dispatch notes to ensure that
they are recorded in correct period.
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(h)
Ensure that confirmation of balances
(for major amount) has been
received from the debtors.
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(i)
Check posting of cash receipts from
debtors for 15 items into the debtors ledger.
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(j)
Ensure that write-off of balances (if
any) is according to the procedure laid down in this behalf.
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(k)
Reconciliation of balances as per
debtors and balances as per books.
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9. Advances towards purchase of machinery, materials etc.
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(a)
Verify that the capital advances are
properly classified in the final accounts as per Schedule VI of the Companies
Act, 1956.
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(b)
Reconcile supplier's accounts with
pending purchase orders and delivery schedules.
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(c)
Verify that adequate provision has
been made against advances that are doubtful of recovery.
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(d)
Verify whether penalty claims have
been made in case of delayed deliveries of the machinery.
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(e)
Review the aging analysis of the
advances.
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(f)
Agree with balance confirmation, for advances .
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10. Loans and Advances Recoverable in cash/kind.
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(a)
Obtain a list of all advances to
suppliers.
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(b)
Review all prepaid expenses and
compare with those for previous year to ensure they are fairly stated.
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(c)
Verify the aging analysis of advances.
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(d)
Ensure adequacy of provision for
doubtful advances.
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(e)
Review list of outstanding adv. in
the names of employees to ensure that they are still recoverable.
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(f)
Verify reconciliation of balances as
per books with balances as per relevant Cenvat credit records as per Excise
Rules and Regulations, at year-end.
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(g)
Reconcile the advances from
confirmation by the parties.
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(h)
Verify that the claims lodged with
the insurance company etc. are accounted for as per the stated policy of the
company.
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(i)
Verify whether loans and advances
made by the company have been shown as deposits. I[Section 227(1A) (d)].
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(j)
Ascertain whether security deposits
are fully recoverable or not. For additions during the year trace them to the
original payment vouchers. Whether proper adjustment, if any, has been made.
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(k)
Ensure that loans and advances made
by the company on the basis of security have been properly secured. [Section
227(1A) (a)].
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(l)
Ensure
that the loans, secured or unsecured to companies, firms or other parties
covered in the register maintained u/s 301 of the Act. If so, give the number
of parties and amount involved in the transactions; [CARO {iii} (a)].
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(m) Whether the rate of interest and
other terms and conditions of loans given by the company, secured, are prima
facie prejudicial to the interest of the company. [CARO {iii} (b)].
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(n) Ensure whether receipt of the
principal amount and interest are also regular; [CARO {iii} (c)]
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(o) If overdue amount is more than one
Lakh, ensure whether reasonable step has been taken for recovery of the principal and interest; [CARO {iii} (d)].
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(p)
Check provisions for advances, which
are doubtful.
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(q)
Advances & loans to subsidiary
are to be shown separately.
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(r)
Check the applicability of Sec.372-A.
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(s)
Check the amount treated as deemed
dividend under section 2(22) (e) of Income Tax Act.
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(t)
Ensure Compliance with Sec 295 of the companies Act, 1956
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11. Cash & Bank Balances
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(a)
Review the cash-book for evidence of
large (greater than Rs.20,000/-) or unusual payments and receipts. These will exclude Statutory Liabilities,
Personal Liabilities and wages/salaries/transactions. Vouch identified items
to supporting documentation.
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(b)
Obtain confirmation from banks for
year-end bank balances and B/R.
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(c)
Review year-end bank reconciliation
for all bank accounts including those covered under loans.
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(d)
Reconcile the balances of unclaimed
dividend accounts with actual unclaimed dividends.
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(e)
Perform physical verification of cash
as at the year-end and obtain cash balance certificate from the management.
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(f)
Please give break-up in the following
manner:
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(i) Balances with scheduled banks.
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(ii)
Others
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(iii) Further break-up in
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1st
Current account
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2nd
Deposit a/c
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(g)
To obtain the certificate from bank
regarding interest accrued on FDRs and check whether interest accrued on FDR
has been provided or not.
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(h)
Check the renewal and cancellation of
expired FDRs.
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12. Current Liabilities & Provisions
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(a)
Review year end creditors’
reconciliation for all parties having a balance exceeding Rs.5 Lacs or major parties depending upon the case
and obtain conformation from them.
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(b)
Review all letters of credit opened
but outstanding at year-end and compare with the list of Acceptances.
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(c)
Ensure that the undisputed statutory dues including PF, ESI, Income Tax, Sales
tax, Excise duty & Custom duty, cess & any other statutory dues are
regularly deposited by the co. with the appropriate authority. If not than
the extent of arrears of outstanding dues as at last of financial year concerned
for a period of more than six month from the date they become payable shall
be reported.[CARO{ix}(a)]
Mention nature and amount in respect of each item.
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(d)
In case dues of sales tax/income
tax/custom duty/wealth tax/service tax
/excise duty/cess have not been deposited on account of dispute,
then the amounts involved and the forum where dispute is pending may please
be mentioned.[CARO{ix}(b)]
Mention
nature and amount in respect of each item.
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(e)
Check calculations of accruals
exceeding Rs.50,000/- for their accuracy.
|
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(f)
Check calculations for interest
accrued but not due.
|
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(g)
Review all assessment orders of Sales
tax, Excise duty and Income Tax
for any demands, which have not been provided for.
|
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(h)
Review post year payments for two to
four weeks for any unrecorded accruals.
|
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(i)
Verify that the acceptance have been
shown separately.
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(j)
Ensure that interest accrued but not
due on loans is under shown under current liabilities.
|
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(k)
Ensure that the co. has not defaulted
in repayment of dues to any financial institution/bank/debenture holders. If
so then the period & amount of default should be reported.[CARO{xi}]
|
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(l)
Verify that the provision for
dividend & corporate dividend tax is as per board approval.
|
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(m)
Review confirmations from customers
for their advances.
|
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(n)
Review provision for tax.
|
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(o)
Review payroll expenses for accruals
of salaries & wages for the last months.
|
||
(p)
Ensure that PF and ESI have been
regularly deposited with the appropriate authority and prepare the statement
containing the amount of employer contribution, employee contribution, due
date and actual date of depositing the same. [CARO {ix}(a)] and [Form-3CD,
Clause 16(b) & 21(ii)(B)].
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13. Investments
|
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(a)
Verify investments with
Depository/actual securities.
|
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(b)
Ensure that investments are held in
the name of the company and not on behalf of or in the name of other persons
except under section 49 of the Act.
|
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(c)
Ensure that provisions of Sec.372A of
the Companies Act, 1956 have been complied with in case of any inter
corporate investments.
|
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(d) Verify in the case of other than
banking and investment company, whether so, much of the assets of the co. as
consists of shares, debentures and other securities have been sold at prices
less than its cost. [Sec 227(1A)]
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(e)
Ensure that the terms and conditions
of the investments are not prejudicial to the interest of the company.
|
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(f)
Ensure that quoted and unquoted
investments are shown separately.
|
||
(g)
Further the investments be classified
as under:
|
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i
Government
securities
|
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ii
Shares,
debenture or bonds showing separately investment in subsidiary co.
|
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iii
Immovable
property
|
||
iv
Investment in
capital of partnership firm.
|
||
(h)
Ensure that the investments have been
classified into “current” & “Long
Term” and the same are valued as per the AS-13.
|
||
(i)
Verify that the investment in
Associates have been valued following equity method & have been disclosed
separately. [AS-23]
|
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(j)
Verify the investments in Joint
venture. Ensure that the valuation & disclosure of the assets,
liabilities & interest is in accordance with AS-27.
|
||
(k)
Ensure that interest accrued on
investments be shown under the head “Current Assets”.
|
||
14. Deferred Asset/Liability
|
||
(a)
Verify that there is no pecuniary
loss on account of delayed deliveries by the machinery suppliers.
|
||
(b)
Verify the terms and conditions of
machinery purchased and ensure that all deferred payment liabilities are
accounted for.
|
||
(c)
Ensure that accrued interest on
deferred liabilities is properly calculated and accounted for.
|
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(d)
Verify that the Deferred tax asset
has been created on the basis of convincing evidence & virtual certainty
of future taxable income. It is to be ensured that the same is separately
disclosed in Balance Sheet”. [AS-22]
|
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(e)
Verify that the deferred tax
asset/liability is adjusted every year on account of change in the tax rate.
|
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15. Miscellaneous Expenditure
|
||
(a)
Preliminary expenses. Whether amount
for the year has been written off/not.
Ensure the compliance with sec 35D of the Income Tax Act as well as
Accounting Standard 26 ie accounting for intangible assets.
|
||
(b)
Deferred Revenue Expenditure
|
||
i
State the policy
of expenses and basis of amortization in the notes to a/cs.
|
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ii
Whether amount
written off during the year or not.
|
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iii
To transfer
amount from different heads to D. R. Exp.
A/c.
|
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(c)
Pre-operative expenses
|
||
i
To disclose
separately with detail.
|
||
ii
Give note
regarding expenses in the notes to account.
|
||
16. Contingent Liabilities and Capital Commitments
|
||
(a)
Review debtor’s reconciliation for
any claims by debtors, which are disputed by the company. They are to be
shown, as claims against the company not acknowledged as debts.
|
||
(b)
Review list of Bank guarantees
outstanding at year-end.
|
||
(c)
Review list of Bill discounted with
Banks and outstanding at year-end.
|
||
(d)
Obtain Banker’s confirmation for BG’s
outstanding and Bills discounted outstanding at year-end.
|
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(e)
For capital commitments:
|
||
i.
Review
outstanding letters of credit for any LC’s against capital item purchases.
|
||
ii.
Review list of
advances for any advances against orders for capital item purchases.
|
||
iii.
Obtain client’s
confirmation for any other orders for capital item purchases, which are
pending as at year-end
|
||
(f)
Obtain a list of pending legal cases,
which may have contingent liabilities on the company.
|
||
(g)
Scrutinize details of Legal &
Professional charges and compare with list of pending cases to ensure that
there are no cases, which are not stated in the list of pending legal cases.
|
||
(h)
Verify the sales tax & income tax
assessments and excise returns of the Company for any demands, which may be
disputed, by the company.
|
||
(i)
Confirm contingent liability for
excise duty.
|
||
(j) Ensure contingent Liabilities are
properly disclosed in the Balance Sheet as required by the Schedule VI of the
Companies Act, 1956.
|
||
17. General points to be verified.
|
||
(a)
Verify the TDS Returns filed with the
I. T. Department. [Form-3CD, Clause (27)].
|
||
(b)
Ensure that contributions to
political party u/s 293A are not in excess of permissible limits.
|
||
(c)
Obtain
the quantitative details of the following:
In case of manufacturing company
I.
The licensed capacity ( where license
is in force )
II.
The installed capacity
III.
The actual production
Following
details to be obtain further
I.
Raw material consumed ( Giving item
wise breakup )
II.
The opening and closing stock of
goods produced.
|
||
(d)
Verify whether the P/L A/c and
Balance sheet comply with the accounting standards referred to in sub-section
(3C) of section 211. [Section 227(3) (d)].
|
||
(e)
Verify whether transactions of the
company, which are represented merely by the book entries, are not
prejudicial to the interest of the company. [Section 227(1A)(b)].
|
||
(f)
Verify whether any asset in the form
of shares, debentures and other securities have been sold at a price less
than at which they were purchased. [Section 227(1A) (c)].
|
||
(g)
In case of listed co. and the company having paid-up capital exceeding Rs.
50 lakhs as at the commencement of the financial year concerned, or having
average annual turnover exceeding 5 crore for a period of three consecutive
F.Y immediately preceding the F.Y .concerned ,whether the company has an
internal audit system commensurate with its size and nature of its business.
[CARO {vii}].
|
||
(h)
Check whether any director is
disqualified from being appointed as director under clause (g) of sub.
Section (1) of section 274.Obtain
Certificate from Directors that they are not disqualified u/s
|
||
(i)
Whether maintenance of cost records
have been prescribed by the Central Government under section 209(1)(d) of the
Companies Act, 1956 (1 of 1956). Whether such accounts and records have been
made and maintained. [CARO {viii}].
|
||
(j)
Ensure that the accumulated losses at
the end of financial year are less than 50% of its net worth and the co. has
not incurred cash losses in F.Y. and in preceding F.Y. [CARO {x}].
|
||
(k)
Ensure that the guarantee given by
the
|
||
(l)
In the case of finance, investment,
chit fund, nidhi or mutual benefit company :
|
||
i
Whether the net
owned funds to deposit liability ratio is more than 1:20 as on last date of
balance sheet. [CARO {xiii}(a)]
|
||
ii
Whether the
provisions of any special statute applicable to chit fund, nidhi or mutual
benefit society have been duly complied with. [CARO {xiii}].
|
||
iii
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 exemption, if any, granted under
section 49 of the Companies Act, 1956 (1 of 1956). [CARO {xiv}]
|
||
iv
Whether the co.
has complied with the prudential norms on income recognition and provisioning
against substandard/default/loss assets [CARO {xiii} (b)]
|
||
v
whether the co.
has adequate procedures for appraisal of credit proposals/requests,
assessment of credit needs and repayment capacity of the
borrowers.[CARO{xiii}(c)]
|
||
vi
Whether the
repayment schedule of various loans granted by the nidhi co. is based on the
repayment capacity of the borrower & would be conductive to recovery of
the loan amount. [CARO {xiii} (d)].
|
||
18-A Foreign
Exchange Earnings/Expenditure
|
||
(a)
Ensure that proper records in respect of foreign exchange transactions
has been maintained as :
|
||
I. Value of imports made by the
a. Raw materials
b. Components and spare parts
c. Capital Goods
|
||
II. Expenditure in foreign currency on
account of royalty, know how, professional and consultation fee, interest and
other matters.
|
||
(b) Ensure that earning in foreign
exchange ( if any ) classified under the following heads, namely
|
||
a.
Export
of goods
b.
Royalty,
Know-how, Professional and Consultation fee.
c.
Other
income (Indicating the nature thereof )
|
||
(c) Ensure that all the requirements of AS
11 has been complied
with.
|
||
(d) Ensure that the provision of TDS has been
complied with in
respect with foreign
exchange transactions.
|
||
18. Sales
|
||
(a)
Verify whether there is adequate
internal control procedure commensurate with the size of the company and the
nature of its business, for the sale of goods and services. [CARO {iv}].
|
||
(b)
Month-wise sales (qty wise, rate,
value) and comparatives with last year month-wise sales details.
|
||
(c)
Ensure that the sales made to parties
listed in the Register maintained u/s 301 of the Companies Act, 1956 have
been made at prices, which are reasonable at the relevant time (This
information is required only in cases of transactions exceeding Rs. 1 Lakh in
respect of any party and in any one financial year). [CARO{v}(b)]
|
||
(d)
Reconcile quantity wise sales as per
Sales book with that of dispatches
Register maintained under the sales and excise act.
|
||
(e)
Ensure that Sales claims, rebates,
incentives etc. are properly accounted for.
|
||
(f)
Ensure that cut off procedures for
sales have been adequately performed.
|
||
(g)
To show each class of goods sold
separately with their individual quantities in the notes to accounts.
|
||
(h)
Whether sales are inclusive of excise
duty.
|
||
(i)
Whether treatment of CENVAT has been
done properly.
|
||
(j)
Whether excise on capital goods
available for CENVAT has been accounted for in financial records.
|
||
(k)
Whether closing balance of different
excise records have been reconciled.
|
||
(l)
Whether sales return/goods for
replacement as per excise records has been accounted for.
|
||
(m)
Whether sales are exclusive of sales
tax.
|
||
(n)
Whether sales as per ledger are
reconciled with sales tax returns filed for the year.
|
||
(o)
Is there any need to file revised
sales tax return?
|
||
(p)
Whether all statutory forms
"C" form ST-l, ST-35, has been received by the company against the
current year sales. If not, whether
any note has been given under the head "Contingent liability".
|
||
19. Export Sales
|
||
(a)
Whether export sales are accounted
for in the books, as per the accounting policy of the company, which must be
in compliance with the AS-9.
|
||
(b)
Whether any uniform basis of exchange
rates has been consistently followed by the company. If any deviations,
please specify.
|
||
(c)
Ensure that
|
||
(d)
Whether export sales have been
realised within six months at the end of financial year. If not, please note
the unrealised amount.
|
||
20. Other Income
|
||
(a)
Ensure that adequate records for sale
and disposal of realizable scrap are being maintained.
|
||
(b)
Reconcile total scrap sales with the
scrap generated.
|
||
(c)
Reconcile interest received with the
loans and advances, investments and with FDR Certificates.
|
||
(d)
Ensure that income from investment
has distinguished as income from Trade Investment and Non-Trade Investment.
|
||
(e)
Review the statement of unpaid
liabilities and review the list of those no longer required.
|
||
(f)
Ensure that only the insurance claims
accepted by the insurance companies are accounted for.
|
||
(g)
Whether profit/loss on sale of assets
have been properly accounted for.
|
||
(h)
Whether any other income has been
accounted for on accrual basis or any other basis regularly employed by the
company.
|
||
(i)
Interest Received from Parties
|
||
(j)
Sale of Advance, Licenses etc. [Basis
of booking this entry, also calculate profit & loss on sale of advance
licenses]
|
||
21. Purchase
|
||
(a) Ensure that all materials included in
stock have been recorded as purchases.
|
||
(b)
Ensure
that goods returned has been adjusted properly and excluded from stock.
|
||
(c)
Match
the Goods receipt note with the ordered quality and quantity.
|
||
(d)
Ensure
that forward purchase contracts that are outstanding at the year-end are
properly accounted for.
|
||
(e) Ensure that the purchase
of finished goods is separately
disclosed and is not clubbed with
the purchase of raw materials
|
||
(f)
Ensure
that the purchases made from the parties listed in the Register maintained
u/s 301 of the Companies Act, 1956 have been made at prices that are
reasonable. [CARO {v} (b)].
|
||
(g)
Ensure
that properly executed purchase orders are placed for all purchases.
|
||
(h)
Ensure
that all the purchase orders are properly authorised
|
||
(i)
Ensure
that Credit Notes in respect of all returns, shortages and rejections are
received.
|
||
(j)
Ensure
that rate difference (if any) is properly accounted for.
|
||
22. Cost of Raw Materials consumed
|
||
(a)
Peruse through the stores ledger for
any unusual fluctuations in purchase price of major raw materials and enquire
into the same, if any discrepancy is found in the store ledger.
|
||
(b)
Compare actual consumption of RM with
Standard consumption for any unusual variance.
|
||
(c)
Ensure that individual items of RMC,
which account for more than 10% of the total value of RMC-Consumption, are
fairly stated and separately disclosed.
|
||
(d)
Verify break up of consumption RMC into
imported and indigenous.
|
||
(e)
Verify that RMC does not include cost
of materials sold.
|
||
23. Stores, spares and tools consumed.
|
||
(a)
Ensure that stocks and spares are
bifurcated into imported and indigenous items.
|
||
(b)
Perform ratio analysis under major
subheads of stores and spare tools consumed.
|
||
24. Power & Fuel Expenses
|
||
(a)
Perform analytical review and
reconcile the total to the final accounts.
|
||
(b)
Review the power bills for any
additional demands raised by the electricity board and disputed by the
company.
|
||
(c)
Ensure that Security paid (if any)
for Electricity, advance payment etc. has been properly accounted.
|
||
(d)
Verify that fuel adjustment charges
revised with retrospective effect
(e)
, if any, have been properly
accounted for
|
||
25. Other Manufacturing & Maintenance Expenses
|
||
(a)
Ensure that expenses are disclosing
in P & L as per Schedule VI requirements.
|
||
(b)
Review details of following expenses:
|
||
i.
Processing
Charges
|
||
ii.
Repairs &
Maintenance and compare with last year's details. Enquire for any abnormal
variations. Ensure that no capital
items have been charged to expenses.
|
||
26. Administrative, selling, distribution and other expenses
|
||
(a)
Ensure that expenses are shown in
Profit & Loss A/c as per the requirements of Schedule VI of the Companies
Act, 1956.
|
||
(b)
Ensure that any expenses, which are
more than 1 % of the total turnover or Rs. 5000 whichever is higher, are
shown separately in the P&L A/c and not clubbed with the miscellaneous
expenses.
|
||
(c)
Ensure that Commission paid to sole
selling agent is according to the agreement entered in this behalf.
|
||
(d)
Verify that no personal expenses been
charged in the accounts. [Section 227(1A) (e)].
|
||
(e)
Ensure all expenses relating to
intangible assets upto the stage of research & development have been
written off in accordance of AS-26.
|
||
27. Payments to and Provision for employees
|
||
(a)
Review 12 months payroll expenses
(Monthwise).
|
||
(b)
Ensure that statutory deductions have
been made for PF, ESI etc. and the Company has also contributed its share for
such dues and deposited with appropriate authorities well in time.
|
||
(c)
Ensure that separate disclosure is
made for expense on account of contribution to PF, ESI & such other
funds.
|
||
(d)
Ensure that provisions for bonus have
been made in accordance with the provision of the payment of Bonus Act, 1965.
|
||
(e)
Ensure that gratuity liability has
been provided on the basis of actuarial valuation or per company's policy.
[AS-15].
|
||
(f)
Leave encashment benefits and other
retirement benefits should be in accordance with AS-15.
|
||
28. Service Tax
|
||
(a)
Examine
whether the
|
||
(b)
Ensure
that
|
||
(c)
Ensure
that the tax has been paid every month/quarter as the case may be .
|
||
(d)
Ensure
that Return of Service Tax has been filed on or before due date.
|
||
(e)
Verify
that the service tax credit has been taken according to the Service Tax
Credit Rules 2004.
|
||
(f)
Check
whether there is any disputed amount, if yes, proper provision in this regard
has been made.
|
||
(g)
Ensure
that Assessment Order has been received if Assessment has been made.
|
||
29. Cenvat
|
||
(a)
Verify Cenvat Return for any undisclosed liabilities/ demands by Excise
authorities.
|
||
(b)
Verify excise duty deposits with TR-6 challans for 5 items.
|
||
(c)
Verify excise gate passes for export
sales to ensure that no duty is paid on such sales.
|
||
(d)
Perform Corroborative Analytical
Review Procedure for total excise duty expense.Reconcile total expense with
final accounts.
|
||
(e)
Review excise duty reconciliation for
any significant differences in amounts debited in the accounts and that
actually paid.
|
||
(f)
Verify RG 23-Part II and PLA registers and confirm that the balances in
these at the year end have been transferred to the balance sheet.
|
||
(g)
In case of concerns where MRP based
excise is applicable adjustment of profit should be made as per sec 145A of
the IT Act.
|
||
30. Interest & Financial Charges
|
||
(a)
Ensure that interest and bank charges
are properly classified.
|
||
(b)
Verify interest payments with
Schedule of payment.
|
||
(c)
Ensure that interest on debentures
and other fixed loan should be stated separately.
(d)
Ensure that tax has been deducted at
source wherever required at the time of payment of interest.
|
||
(e)
Review expense details to identify
any expense to be capitalized.
|
||
(f)
Verify loan agreements &
subsequent correspondence for adequacy of interest rates.
|
||
(g)
Ensure classification of interest
expenses into "term loans" and "others", stating
separately, in case of Term Loans/Debentures, the amount of interest, if any,
paid or payable to the Managing Director and the manager if any.
[Schedule-VI, Part-II, 3(v)].
|
||
(h)
Review correspondence file with bank
and financial institutions for any change in interest rates with
retrospective effect.
|
||
31. General Notes for Expenses
|
||
(a)
Whether expenses are in conformity
with the ratios as compared with the last year. If there are significant
variations, whether you have analyzed the reasons for such variations and pen down the reasons of variations.
|
||
(b)
Whether the expenses, which are
required to be shown separately as per Part II of Schedule VI, are shown as
such.
|
||
(c)
Whether transactions with other
concerns, firms/companies in which directors are interested have been made at
competitive rates.
|
||
(d)
Prior Period/Extraordinary items to
be shown separately. [AS-5].
|
||
(e)
Whether any personal expenses debited
to P & L A/c. [Section 227-1A (e)].
|
||
(f)
To obtain the list of expenses as per
format given in Income Tax Rules regarding.
|
||
i
See
40(A)(2)(b)-Payment made to specified persons
|
||
Ii Rule
6DD-Exception of cash payment in excess of
Rs. 20,000.
|
||
Iii Directors Remuneration and expenses
incidental to that.
|
||
(g)
Whether managerial remuneration in
accordance with the provision of Section 198, 350 & Schedule XIII of the
Companies Act.
|
||
(h)
Review tax provision, if any, as per
the provisions of the Income tax Act, 1961.
|
||
(i)
Ensure all related party transaction
have been entered in the certificate provided by the management & control
over the related party transactions is proper.[AS-18]
|
||
(j)
TDS – every assessee deducting tax
has to submit quarterly statement 15th of the month following the quarter and
yearly return.
|
||
(k)
Annual Information Return.
|
||
(l)
Income from other sources – As per
Section 56(1)(iv) any gift in cash exceeding Rs. 25000/- to any person shall
be chargeable to Tax subject to exception.
|
||
(m)
Ensure TDS has been deducted on every
work contract in case individually it exceeds Rs. 20000/- or Rs. 50000/- in
aggregate during the financial year.
|
||
(n)
Ensure TDS has been deducted from the
payments made for Interest, Brokerage, technical services, professional
services, contractors/ subcontractors. In case TDS has not been deducted same
payments shall not be allowed u/s 40(a)(ia) of Income Tax Act.
|
||
(o)
BOD resolution for any donation
exceeding Rs. 50000 or 5% of average net profit during last 3 financial years
whichever is greater under section 293 of Companies Act 1956.
|
||
(p)
Ensure Cenvat credit has been taken
adequately in respect of Service Tax & Excise Duty.
|
||
32.
Tax Audit
|
||
(a)
Obtain a certificate from the assessee to the effect that, wherever applicable
, tax has been deducted at source on the payments covered under items falling
within purview of sec 40(a).
|
||
(b)
Obtain certified list of persons specified in section 40A(2)(b).
|
||
(c)
Note down all the prior period items, i.e. expenses of last year debited in
the current year.
|
||
(d)
Note Payment made to clubs on account of :-
-
membership and subscription
-
entertainment expenditure
|
||
33.ROC
|
||
(a)
Check whether the minute book containing
the Directors and
Shareholders meeting is updated or not.
|
||
(b)
Check whether appropriate form for
appointment of Director/Managing Director, allotment of shares ,change in the
authorised and paid up capital ,change in the name of the company or its
registered office or other changes which require reporting to the ROC has
been properly filed with the ROC.
|
||
(c)
Check whether the last year annual
return has been timely filed or not.
|
||
(d)
Take a copy of the compliance Certificate from the Company
Secretary in case of companies having paid up share capital more than Rs. 10
Lakh.[Section 383A proviso of the Companies Act,1956]
|
||
(e)
Check in case of companies having
paid up share capital Rs. 2 crore or more whether the whole time company
secretary has been appointed or not as per the provisions of Sec 383A of the
Companies Act, 1956.
|
||
Saturday, December 28, 2013
AUDIT PROGRAMME FOR STATUTORY AUDIT
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