audit guide

VSA& COChartered accountants

Index to Audit Manual

Particulars Remarks (Y/N/NA)

Engagement letter- Statutory Audit- Limited Review

Audit Process Flow- Knowledge of Clients Business- Areas to do audit- Audit Program- Routine Audit with indepth checking and

internal control checklist

Finalization of accounts- Schedule wise with balance sheet checklist

- Share Capital- Reserves and Surplus- Secured Loans- Unsecured Loans- Fixed Assets- Investments- Inventories- Sundry Debtors- Loans and Advances- Cash and Bank Balances- Current Liabilities and Provisions- Miscellaneous Expenditure- Profit and loss account- General Checklist

Important Sections of Companies Act and Compliance checklist

- Important Sections of the Companies Act- Compliance Checklist

Notes to Accounts/ Disclosures with checklist- Notes to Accounts/ Disclosures- Notes to Accounts Checklist

CARO Requirements with Checklist- Checklist

RATIOS

Direct Confirmation- Direct Confirmation to be sent to Banks/

Financial Institutions


- Direct confirmation to be sent to Debtors/ Creditors


Checklist to Subsidiaries for material information

Physical verification of cash- certificate format

Procedure for physical verification of stock with checklist and possible errors in counting the inventory

- Stock Verification Checklist- Physical Verification of Inventories (Possible Errors)

Cross checking financial statement from all respects

Final Review: Statutory Audit

Management Representation Letters- General Management Representation Letter- Fixed Asset Certificate- Cash Balance Certificate- Sundry Debtors/ Loans and Advances

Certificate- Stock Certificate- Investment Certificate- CARO Certificate

Applicability of Accounting Standards

CHECKLIST FOR ACCOUNTING STANDARDS- AS 1 – Disclosure of Accounting policies- AS 2 – Valuation of Inventories- AS 3 – Cash Flow Statements- AS 4 – Contingencies and Events occurring

after the Balance sheet Date- AS 5 – Net Profit for the period, Prior Period

items and changes in Accounting Policies

- AS 6 Depreciation Accounting- AS 7 – Accounting for Construction Contracts- AS 8- Accounting for Research and

Development- AS 9 – Revenue Recognition- AS 10 – Accounting for Fixed Assets- AS 11 – The effects of changes in Foreign

exchange rates- AS 12- Accounting for Government Grants- AS 13- Accounting for Investments- AS 14- Accounting for Amalgamations- AS 15 – Accounting for Retirement Benefits- AS 16 Borrowing Costs- AS 17 – Segment Accounting


- AS18- Related Party Disclosures- AS-19 Accounting for Leases- AS 20 – Earnings per Share- AS 21 –Consolidated Financial Statements- AS 22 – Accounting for Taxes on Income- AS 23 – Accounting for Investments in

Associates in Consolidated Financial Statements

- AS 26 – Intangible Assets- AS 28 – Impairment of Assets- AS 29 – Provisions, Contingent Liabilities and

Contingent Assets

Tax Audit- Checklist for Tax Audit- General Management Representation Letter for

Tax Audit

Limited Review- General assurance for Limited Review of

Financial Statements- Checklist for Limited Review

File Maintenance and Completion

Independence Declaration

Engagement Letters

Statutory Audit(DRAFT)

To,The Board of DirectorsABC Company LimitedAddress…………………


……………………………

You have requested that we audit the balance sheet of ABC Company Limited as at 31st March, 2xxx and the related profit and loss account for the year ended on that date. We are pleased to confirm our acceptance and our understanding of this engagement by means of this letter. Our audit will be conducted with the objective of our expressing an opinion on the financial statements.

We will conduct our audit in accordance with the auditing standards generally accepted in India and with the requirements of the Companies Act, 1956. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

However, having regard to the test nature of an audit, persuasive rather than conclusive nature of audit evidence together with inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements of financial statements, resulting from fraud, and to a lesser extent error, if either exists, may remain undetected.

In addition to our report on the financial statements, we expect to provide you with a separate letter concerning any material weakness in accounting and internal control systems, which might come to our notice.

The responsibility for the preparation of financial statements on a going concern basis is that of the management. The management is also responsible for selection and consistent application of appropriate accounting policies, including implementation of applicable accounting standards along with proper explanation relating to any material departures from those accounting standards. The management is also responsible for making judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state affairs of the entity at the end of the financial year and of the profit or loss of the entity for that period.

The responsibility of the management also includes the maintenance of adequate accounting records and internal controls for safeguarding of the assets of the company and for the preventing and detecting fraud or other irregularities. As part of our audit process, we will request from management written confirmation concerning representations made to us in connection with the audit.

We also wish to invite your attention to the fact that our audit process is subject to ‘peer review’ under the Chartered Accountants Act, 1949. The reviewer may examine our working papers during the course of the peer review.

We look forward to full co-operation with your staff and we trust that they will make available to us whatever records; documentation and other information are requested in connection with our audit.

Disclaimers, Limitations and Privileges

These financial statements are intended solely for the use of ABC Company Limited and its management. These statements, or any part of it, shall not be reproduced in any form, except for the internal use of ABC Company Limited and for submission to statutory or regulatory authorities who may be required to be submitted with a copy of the said financial statements from ABC Company Limited


without our prior permission. Any other person who chooses to rely on the financial statements shall do so entirely at his/ her own risk.

a. We have used reasonable skill and care in carrying out this engagement. In no event shall we be liable for any loss, damage, cost or expense arising in any way from fraudulent acts misrepresentations or willful default on the part of ABC Company Limited, its directors employees or agents. We will also not liable for any loss, damage, cost or expense arising in any way from the action taken on the basis of information provided by us.

b. Our liability to any party, including ABC Company Limited, for any part of this engagement is limited to the fee received by us related to the part. No other liability will be accepted by us to any other party whatsoever.

c. In the event that we find ourselves subject to a claim or legal costs from another party arising out of this engagement (other than as a result of our own negligence or willful default), or we have to respond to you or to other parties, regulatory / statutory authorities subsequent to the issuance of the financial statements, any claim established against us and the costs we necessarily incur or the time we spend in responding to/ defending it would form a part of the expenses which we would recover from you.

d. Our views, findings or opinions, should not be construed to be a representations as to the future.

We look forward to full cooperation with your staff and we trust that they will make available to us all the records, documentation and other information as required in connection with our audit.

This letter will be effective for future years unless it is terminated, amended or superseded.

Please sign and return the attached copy of this letter to indicate that it is in accordance with your understandings of the arrangements for our audit of the financial statements.

For and on behalf of Acknowledged on behalf ofMGB & Co ABC Company LimitedChartered Accountants

(Name of the Partner in charge) (Name and Designation)

Date Date


Limited Review

(DRAFT)

To,The Board of DirectorsABC Company LimitedAddress………………………………………………

Sub: Scope of Limited Review

This is with reference to above subject appointing us to review the financial statements for the period ended ____________

This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide.

We will perform the following services:

We will review the Balance Sheet of ABC Company Limited as of March 31, ___, and the related statement of Profit and Loss for the period/year then ended, in accordance with the Auditing and Assurance Standard (AAS) 33, Engagements to Review Financial Statements issued by the Institute of Chartered Accountants of India. We will not perform an audit of such financial statements and,


accordingly, we will not express an audit opinion on them. Accordingly, we are expected to provide a negative assurance on the financial statements reviewed by us.

Responsibility for the financial statements, including adequate disclosure, is that of the management of the Company. This includes the maintenance of adequate accounting records and internal controls and the selection and application of accounting policies. As part of our review process, we will request written representations from management concerning assertions made in connection with the review.

Our engagement cannot be relied upon to disclose whether fraud or errors, or violation of laws and regulations exist. However, we will inform you of any material matters that come to our attention. We also wish to invite your attention to the fact that our audit process is subject to ‘peer review’ under the Chartered Accountants Act, 1949. The reviewer may examine our working papers during the course of the peer review.


Please sign and return the attached copy of this letter to indicate that it is in accordance with your understanding of the arrangements for our review of the financial statements.

For and on behalf of Acknowledged on behalf ofMGB & Co ABC Company LimitedChartered Accountants

(Name of the Partner in charge) (Name and Designation)

Date Date

Audit Process Flow

The audit process flow consists of steps o be followed upto finalization.

Knowledge of Clients Business


It is very necessary to understand the clients business before we start any audit. This is the first step of audit.

Understanding the clients business

There are various steps on the basis of which we can understand the clients business.

The first step for any audit to start is to go through the previous years audit file ,the permanent audit file and the finalization statements with emphasis on accounting policies and significant notes to accounts. While reading through these files you can understand the clients business along with the queries raised during the audit.

After going through the file the second step is to understand the business from the senior in charge in the previous year. This will help you to understand the business more clearly and clarify the doubts noted while reading the file.

The third step is to have an interaction with the client to understand if there are any changes in the business as regards the previous year. If there are any changes as compared to previous year, a file note has to be prepared as regards change in the business or new business incorporated with all important documents and method of accounting. Further all important agreements should be seen and understood. Confirm with the client, if there are any other important agreements entered during the year. Also enquire about the changes/ modifications (if any) in the old agreements. The main points (gist) should be made and the copy should be taken to be attached in the file.

After understanding the clients business the next step should be to take the organization chart of the client to understand the responsibility of each person.

Areas to do audit

Selecting areas for audit: -

While dong any audit there are two ways to do audit, one the common areas like cash vouching, bank vouching, journal vouching, purchase and sales etc. The other area is more important i.e. on the basis of client business the important areas to be checked.

Now what are important areas to be checked- These are areas where the client does the maximum expenditure or earns maximum revenue. This audit should be done irrespective of the common areas audited. The focus on this audit should be to understand the area from the beginning i.e. from the initial stage to the final stage.


The important areas selected must be after reviewing the business of the client, like

For Service Sector- entertainment industry –areas may be purchase of programs and films, advertisement expenses, advertisement revenue, subscription revenue etc.

For Service Sector- Education industry- areas may be purchase of equipments, course fees income, course fee expenses, advertisement expenses etc.

For manufacturing industry- excise records reconciliation, licenses to be checked, consumption of stores and spares, inventory audit, sale of goods etc.

After selection of areas an audit program should be prepared to cover the points to audit in each area.

A note should be prepared for each area specifically on the basis on which the area is selected with a brief note on that area, the manner in which the audit is conducted, the sample selected, observations, queries raised and resolved.

Audit Program

After selecting the important areas and the common areas the next step is to make an audit program.

Contents of Audit Program:-

This is an important step because on the basis of this program, audit will be further conducted or progressed and serve as a basis for the audit in the next year.

The audit program should consist the following: -

mgb&coChartered accountants

Name of the clientPeriod of audit Audit teamSr No Areas Covered % of

checkingName of the person

Number of days taken

Reviewed by


All the above columns should be properly noted and made.

Routine Audit with indepth checking and internal control checklist

After the audit program is finalized the next step is to start the routine audit. There will be some persons who will do the common areas and others will do specific area audit.

Routine audit of common areas:

Common areas are opening balance, cash vouching, bank vouching, purchase vouching, sales vouching, journal vouching, debit notes and credit notes.

Opening Balance:

This is the first area to check whenever an audit is carried i.e. opening balance tallies with the closing balance sheet. If any difference the same should be reconciled.

Cash Vouching:

Before we start the cash vouching the authority level chart should be taken and enclosed in the file.

When we start with cash vouching the initial stage should be to make cash analysis monthly for all expenses. After the analysis is prepared all major variations in expenses should be analyzed and notes should be prepared for the variations.

Then a sample of some days or months should be selected to check the maintenance of vouchers and system of the company. A note should be prepared on how the sample is selected and on the system and expense of all nature should be covered.

A review of cash book should be made completely to check any unusual expenses or any huge balance at any time during the year. If there are huge balances or unusual expenses, the same should be enquired.

All queries should be first discussed with your senior and then should be given to the client and as to how the queries are disposed off should be written. Any major queries not disposed off should be noted in the final observation.

Bank Vouching:

The procedure for bank vouching is same like cash vouching. Only in case of bank vouching expenses have to be checked. Party payments have not to be checked. All receipts/income has to be scrutinized except party receipts.


Purchase Vouching:

In case of purchase vouching make a summary of types of purchases which has to be checked i.e. local purchases, import purchases, purchases of raw materials, finished goods, stores and spares etc.

After identifying the purchases, each should be checked separately. A note should be prepared of different types of purchases, documents maintained.

While doing the purchase vouching the audit should be done from material requisition, initiation of PO, approval of PO, comparative prices, Goods received and final entry in books. This system should be checked for some purchases.

A note should be prepared as to the percentage of purchases checked with documentation required and maintained by the company. If any documents not maintained the same should also be noted. Further a note on major observations should also be made

Internal audit report for the said area should be seen and action taken for each query raised should be noted if relevant

The format of financial queries should be

VSA&coChartered Accountants

Name of the client

Sr No Particulars(Queries raised by the internal auditor)

Amount Action Taken by the client

Remarks(Effect in books of accounts)


Also, the internal control checklist for purchases has to be filled up to form an opinion on the internal control system existing in the company for purchases. Any deficiency, if material, should be documented with reasons.

The internal audit checklist for purchases is enclosed and should be filled in all respects wherever applicable: -

A. Purchase and Creditors Remarks

1. Is purchasing centralized in the Purchase Department?


2. (a) Are purchases made only from approved suppliers?(b) Is a list of approved suppliers maintained for this

purpose?(c) Does the master list contain more than one source

of supply for all-important materials?

3. Are the Purchase Orders based on valid purchase requisitions duly signed by persons authorized in this behalf?

4. (a) Are purchases made on behalf of employees?(b) If so, is the same procedure followed as for other

purchases?

5. Is special approval required for:(a) Purchase from employees, Directors and

Companies in which Directors are interested?(b) Purchases of capital goods?

6. Are purchases based on competitive quotations from two or more suppliers?

7. Is comparative quotation analysis sheet drawn before purchases are authorized?

8. If the lower quotation is not accepted, does a senior official approve the purchase?

9. If the price variation clause is included, is it approved by a senior official?

10. Are purchases orders pre-numbered and strict control exercised over unused forms?

11. Are purchase orders signed only by employees authorized in this behalf?

12. Do purchase orders contain the following minimum information:(a) Name of supplier?(b) Delivery terms?(c) Quantity?(d) Price?(e) Freight terms?(f) Payment terms?(g) Any extra term as applicable?

13. Is revision of terms of purchase orders duly authorized?


14. (a) Are copies of purchase orders and revisions forwarded to Accounts and Receiving Departments?

(b) If ‘yes’, do the copies show the quantities ordered?(c) If ‘no’, is there an adequate procedure for the

Receiving Department to be notified to accept deliveries?

15. Is a list of pending purchase orders complied by the Purchase Department at least once every quarter?

16. Are the materials, supplies, etc., received only in the Receiving Department?

17. If they are received directly by User Department / Processors / Customers, is there a procedure of obtaining acknowledgement for the quantity received and the condition of the goods?

18. Are persons connected with receipt of materials and the keeping of receiving records denied authority to issue purchase orders to approve invoices?

19. Are materials, supplies inspected and counted, weighted or measured in the Receiving Department?

20. Are quantities and description checked against purchase order (or other form of notification) and goods inspected for condition?

21. (a) Does the Receiving Department deliver or supervise the delivery of each item received to the proper Stores or Department location?

(b) Are acknowledgements obtained from suppliers for goods/containers returned to them?

22. Are all receipts of materials evidenced by pre-numbered Goods Received Notes?

23. Are copies of Goods Received Notes forwarded to Accounts Department and a list of goods received to Purchase Department?

24. Are all cases of materials returned, shortages and rejections advised to the Accounts Departments, for raising Debit Memos on suppliers or claim bills on carriers/insurance companies, as the case may be?

25. Are all debit notes, etc. –


(a) pre-numbered?(b) Numerically controlled?(c) Properly recorded (in the financial accounts or in

memorandum registers, as the case may be?

26. (a) Are all suppliers ‘ invoices routed direct to the Accounts Department ?

(b) Are they entered in a Bill Register before submitting them to other department for check and/or approval?

(c) Are advance and partial payments entered on the invoices before they are submitted to other department ?

27. Does the system ensure that all invoices and credit notes received are duly processed ?

28. In respect of raw materials and supplies, are reconciliation made of quantities and / or values received, as shown by purchase invoices, with receipts into stock records?

29. Are duplicate invoices marked immediately on receipt to avoid payment against them?

30. If payments are made against duplicate invoices even occasionally, are adequate precautions taken to avoid duplicate payments?

31. Does the Accounts Department match the invoices of suppliers with Goods Received Notes or acknowledgements received as per Q.17 and purchase orders?

32. (a) Are Goods Received Notes and receiving records regularly reviewed for items for which no invoices have been received?

(b) Are all such items investigated and is provision made for the liability in respect of such items?

(c) Is such review / investigation done by a person independent of those responsible for the receipt and control or goods?

33. Do all invoices bear evidence of being checked for prices, freight terms, extensions and additions?

34. Is the relative purchase order attached to the invoice for payment?


35. Where the client both buys from and sells to a person regularly, is a periodic review made of all amounts due from that person to determine whether any set-off is necessary?

36. a) Is a special request used for making payments in advance or against documents through Bank?

b) Thereafter, are the invoices processed in the normal course?

37. (a) Are all advance payments duly authorized by persons competent to authorize such payment?

(b) Is a list of pending advances made at least every quarter and is a proper follow-up maintained?

38. Are all adjustments to creditors’ accounts duly approved by those authorized in this behalf?

39. Is a list of employees, by designation, with limits of authority in respect of several matters referred to in this section maintained?

40. Are all suppliers’ statements compared with ledger accounts?

41. Is there any follow-up action to investigate differences, if any, between the suppliers’ statements and the ledger accounts?

42. Is a list of unpaid creditors prepared and reconciled periodically with the General Ledger Control account?

43. Is there a system of ensuring that cash discounts are availed of whenever offered?

Sales Vouching:

The procedure for sales vouching and the documentation for sale is same as purchases i.e. first make a summary of the different types of sales like sales of raw materials, export sales, local sales etc.

In case of contractual sales make gist of contracts entered by the company inclusive of the terms of sales, pricing and other after sales contingencies and warranties

After identifying the sales, each should be checked separately. A note should be prepared of different types of sales and documents maintained.


A note should be prepared as to the percentage of sales checked with documentation required and maintained by the company. If any documents not maintained the same should also be noted. Further a note on major observations should also be made

Internal audit report for the said area should be seen and action taken for each query raised should be noted if relevant. The format should be the same as given earlier in purchases


Also, the internal control checklist for sales has to be filled up to form an opinion on the internal control system existing in the company for sales. Any deficiency, if material, should be documented with reasons.

The internal audit checklist for sales is enclosed and should be filled in all respects wherever applicable: -

Sales and Debtors Remarks

1. Are standard price lists maintained ?

2. Are prices which are not based on standard price lists, required to be approved by a senior executive outside the Sales Department ?

3. Are written orders from customers received in all cases ?

4. If oral / telephonic orders are received, are they recorded immediately in the client’s standard forms?

5. Is there a numerical control of all customers’ orders ?

6. Are credit limits fixed in respect of individual customers ?

7. Are these limits approved by an official independent of the Sales Department ?

8. Are credit limits reviewed periodically ?

9. Are customers’ credit limits checked before orders are accepted ?

10. Is this done by a person independent of the Sales Department ?

11. If sales to employees are made at concessional prices :(a) Is there a limit to the value of such sales ?(b) Is there an adequate procedure to see that these limits


are not exceeded ?(c) Are the amounts recovered in accordance with the terms of sale ?

12. Are dispatches of goods authorized only by Dispatch Notes / Gate Passes or similar documents?

13. Do such Dispatch Notes / Gate Passes or similar documents bear preprinted numbers ?

14. Are they under numerical control ?

15. Are they prepared by a person independent of :(a) the Sales Department ?(b) the processing of invoices ?

16. Except when all documents are prepared in one operation, are the Dispatch Notes / Gate Passes matched with :(a) Excise Duty records ?(b) Sales invoices ?(c) Freight payable to carriers (where applicable)

17. Are unmatched Dispatch Notes / Gate Passes reviewed periodically ?

18. Are the goods actually dispatched checked independently with the Dispatch Notes / Gate Passes and Customer’s Orders ?

19. Are acknowledgements obtained from the customers for the goods delivered ?

20. Are the customer’s orders marked for goods delivered ?

21. Are shortages in goods delivered to the customers investigated ?

22. Are credits to customers for shortages, breakages and losses in transit match with claims lodged against carriers / insurers ?

23. Are sales invoices pre-numbered ?

24. Are all invoice numbers accounted for ?

25. Are invoices checked for :(a) prices ?(b) calculations (including excise duty and sales tax) (c) terms of payment ?


26. Are ‘no charge’ invoices authorized by a person independent of the custody of goods or cash ?

27. Are invoices mailed direct to the customers promptly ?

28. Are credits customers for remittances posted only from the entries in the cash book (or equivalent record) ?

29. Does cashier notify immediately :(a) Sales Department(b) Debtors’ Ledger Section and(c) Credit Controller :

(i) of all dishonored cheques or other negotiable instruments ?

(ii) of all documents sent through bank but not

returned by the customers ?

30. Is immediate follow-up action taken on such notification ?

31. Are bills of exchange (or other negotiable instruments) accepted by customers recorded ?

32. Are the bills of exchange, etc., as per such record periodically verified with the bills on hand ?

33. (a) Is a record of customers’ claims maintained ?(b) Are such claims properly dealt with in the accounts ?

34. Does the Receiving Department count, weigh or measure the goods returned by customers ?

35. Does the Receiving Department record them on a Sales Returns Note ?

36. Are copies of Sales Returns Notes sent to :(a) Customer ?(b) Sales Department ?(c) Debtors’ Ledger Section ?

37. Are the returned goods taken into stock immediately ?

38. Is a Credit Note issued to a customer for the goods returned ?

39. Are all Credit Notes pre-numbered ?

40. Are Credit Notes numerically controlled ?


41. Are Credit Notes authorized by a person independent of :(a) Custody of goods ?(b) Cash receipts ?(c) Debtors’ Ledger ?

42. Are Credit Notes :(a) compared with Sales Returns Notes or other substantiating evidence ?(b) checked for prices ?(d) checked for calculations ?

43. Are corresponding recoveries of sales commissions made when Credit Notes are issued to customers ?

44. Are units of sales (as per sales invoices) correlated and reconciled with the purchases (or production) and stocks on hand ?

45. Is the Sales Ledger balanced periodically and tallied with the General Ledger Control account ?

46. Are ageing schedules prepared periodically ?

47. Are they reviewed by a responsible person ?

48. Are statements of accounts regularly sent to all customers ?

49. Are the statements checked with the Debtors’ Ledger before they are issued ?

50. Are the statements mailed by a person independent of the ledger-keeper ?

51. Are confirmations of balances obtained periodically ?

52. Are the confirmations verified by a person independent of the ledger –keeper and the person preparing the statement?

53. Is special approval required for :(a) Payment of customers’ credit balances ?(b) Writing off bad debts?

54. Is any accounting control kept for bad debts written off ?

55. Is any follow-up action taken for recovering amounts written off ?


56. In the case of export sales :(a) is a record maintained of import entitlements due ?(b) does the record cover the utilization / disposal of such entitlements ?(d) is there a procedure to ensure that claims for incentives

etc., receivable are made in time ?

57. Are sales of scrap and wastage subject to the same procedures and controls as sales of finished goods ?


Journal Vouching: -

In case, journal entries consist of routine expenses then it should be done on sample basis to cover all nature of expenses. For others, it should be checked and reviewed completely.

Debit Notes and Credit Notes: -

All the debit notes and credit notes must be reviewed. In case of debit notes and credit notes all entries passed should be analyzed and enquired if huge debit notes and credit notes are passed during the period of audit or subsequent to cut off date. A file note should be prepared for all major observations and procedure adopted for checking.

Fixed Asset Scrutiny: -

In case of fixed assets major additions and deductions with bills have to be checked. The fixed asset register has to be verified and seen if they are tallied with the financial books of accounts

For depreciation and other points please refer points in finalization – schedule wise

Also, the internal control checklist for fixed assets has to be filled up to form an opinion on the internal control system existing in the company for purchases and sales of fixed assets. Any deficiency, if material, should be documented with reasons.

The fixed asset internal control checklist has to be filled

Sr. FIXED ASSETS Remarks

Purchases and Disposals1. Are budgets for capital expenditure approved by the

Board?

2. Are approved budgets communicated in writing to:(a) Purchase Department ?(b) Accounts Department ?(c) Department originating the request.

3. Are written authorizations required for incurring capital expenditure for items included in the budget.

4. Is the authority to incur capital expenditure restricted to specified officials ?

5. Are purchases of capital items subject to some controls as are applicable to purchases of raw materials, stores etc.?

6. Are receipts of capital items subject to same procedures as applicable to raw materials, stores, etc?

7. Is there proper check to see that amounts expended do not


exceed the amount authorized ?

8. Are supplemental authorization required for excess expenditures ?

9. Is there an established procedure for moving plant and machinery from the location to another ?

10. (i) Is written authority required for :(a) scrapping fixed assets ?(b) selling fixed assets ?

(ii) Is the authority to permit scrapping / selling of fixed assets restricted to specified officials

(iii) Are limits specified in this regard ?(iv) Are sales of fixed assets subject to same procedures as

are applicable to sales of finished goods?

11. Are reports issued promptly in respect of :a) units sold ?b) units scrapped ?c) units moved from one location to another ?

Records :

12. Are fixed assets under construction :(a) subject to separate control account in General Ledger?(b) controlled by job number ?

13. Is expenditure on wages, materials and stores charged to capital account on reasonable basis?

14. Is there any official responsible for ensuring that allocation of expenditure between capital and revenue is in accordance with the company’s accounting policy.

15. Is a register of all fixed assets (including fully depreciated assets) maintained ?

16. Is the register regularly written up throughout the year?

17. Is the register periodically tallied with the financial accounts ?

18. Is the following information available, in the register ?(a) Supplier’s name(b) Date of purchase(c) Cost (including additions, improvements, exchange rate adjustments etc).(a) Location and identification number


(b) Rate of depreciation and estimate life(c) Accumulated depreciation(d) Estimated salvage value

19. Is a record maintained of equipment used by the company, but owned by others?

20. Is the register of patents or trademarks maintained up-to-date?

21. Is there a list of title deeds for the landed properties and buildings?

22. Are title deeds of properties kept in safe place?

23. If they are lodged as security, are certificates obtained to that effect periodically?

24. Are registration books of vehicles periodically verified?

Verification :

25. Are fixed assets verified periodically ?

26. Is there a written procedure for such verification ?

27. Does the procedure provide for verification / confirmation of fixed assets with third parties ?

28. Does the procedure provide for verification of compliance with the warranties and conditions in the relevant insurance policies ?

29. Are reports prepared on such verification ?

30. Do such reports indicate damaged / obsolete items of fixed assets ?

31. a) Are discrepancies disclosed by such reports investigated?

b) Are the records and financial accounts corrected, with proper authority?

32. Are damaged / obsolete items disclosed by such reports, removed from the records and financial accounts with proper authority?

Moulds, Patterns, Jigs, Fixtures, Tools etc.

33. Is there satisfactory control over the acquisition and write-


off of such items ?

34. Are there physical safeguards against theft or loss of tools and other movable equipment ?

35. Are records maintained for :(a) items treated as stock ?(b) items treated as fixed assets /

Insurance :

36. (i) Are the following risks covered in respect of buildings and machinery : (a) Fire (b) Strike, riot and civil commotion (c) Floor (d) Earthquake (e) Nuclear risks (f) Malicious damage (g) War risks

(ii) If the answer to any of the above is negative, is it due to a specific decision taken by a senior official ?

37. Is there an adequate procedure to ensure that assets acquired between two renewal dates are also covered by insurance ?

38. Is there an official who decides on the value for which policies are taken ?

39. Are the fixed assets insured at re-instatement basis ?

40. Does the official who decides on the value for which policies are taken, review periodically the adequacy of the insurance cover ?

41. (i) Is there loss-of-profits insurance cover ?(ii) Is there machinery-breakdown insurance cover ?(iii) If the answer to (i) or (ii) is negative is it dues to a specific decision taken by a senior official?

Format of Query Sheet

All the queries must be noted in the format given.

mgb&coChartered Accountants


Name of the clientPeriod of auditArea Covered Name of the person

Voucher No/ Date Queries Amount How Disposed Off

Specific area audit:-

For specific area audit points to be checked in each area should be given to the client and queries raised should be resolved. A note should be prepared as specified above.

All internal audit reports and action taken reports should be reviewed and taken and major points affecting finalization or internal control should be properly noted and documented. Internal control weakness for CARO related and financial points affecting financial statements.

Finalization of accounts- Schedule wise with balance sheet checklist

Finalization of accounts consists of Schedule wise balance sheet, CARO, Notes to Accounts, and Related Secretarial Records

Before the process of finalization is started all the above steps should be completed and all queries should be resolved. Finally, major observations, unresolved queries and other important points pending should be noted separately and given to partner in charge.

After all the steps are completed finalization of accounts should be started.

The first step for finalization process is ledger scrutiny. How do we check the ledgers.

Debtors and Creditors Ledger:- In case of debtors and creditors ledger scrutiny only booking of bills and receipts and payments whether bill wise is done or not. Reasons should be asked for


old outstanding or amounts against old bills not paid or received while subsequent bills paid or received.

To check whether in case of old debtors provision is required or to be treated as bad debts, while in case of old creditors whether the same has to be written back. Reasons for non-payment or non-recovery should be noted.

Expense Scrutiny:- In case of expense scrutiny, whether all expenses upto the end of the financial year have been recorded properly, whether all required provisions have been made. All expenses are of regular nature and if there are unusual expenditure the same should be seen and scrutinized.

Income Scrutiny: - In case of income scrutiny, whether all income of the current financial year only has been booked should be checked. Further cut off date should be seen and checked for income booking. Income not of the current y ear should be carried forward in the next year. All income accounts should be seen and if there is any other unusual income the same should be seen and scrutinized.

After all the ledger scrutiny is done the queries should be given to the client and the same should be resolved before schedule wise checking is started.

Balance Sheet Audit (Schedule wise)

For starting the balance sheet audit schedule wise each and every schedule should be properly verified and all necessary documents should be kept in the file schedule wise. Necessary balance sheet checklist for each area should be simultaneously filled to have a clearer view as to what is to be seen and what is to be documented.

Share Capital

In case of share capital following should be checked.

- First check whether there are any changes in the authorized capital of the company. If there are changes whether relevant form 5 has been filed with the Registrar of Companies (ROC), resolution has been passed in the board. A copy of the board resolution and Form 5 has to be taken and duly filed.

- Then check the changes in issued, subscribed and paid up capital- If there are any changes see if proper resolution, minutes and form 5 and Form 2 for allotment has been filed. Obtain a copy of each of them.

- In case the company has preference shares, the terms of preference shares have to be seen and the same has to be given in the financial statements.

- Further the balance sheet checklist for the said schedule to be filled correspondingly and analysis for the said schedule to be made accordingly.

SHARE CAPITAL RemarksHas authorized share capital been checked with


Memorandum of Association or amending document?

Have all movements of share capital during the year been shown in the accounts.

Have you reviewed minutes authorizing movement of capital?

Shares issued for cash 227 (1A)(f).

Shares issued for consideration other than cash

Has the consideration been correctly described in the accounts (sec. 227 (1A)).

Shares issued by capitalization of reserves-bonus shares during the year

Date of general body resolution for issue of bonus shares.

Have bonus shares been issued within six months from date of such resolution.

Redeemable preference shares – terms of redemption.

Whether the terms have been followed, if not give details.

Expenses incurred on :

.1. increase in authorized capital.

.2. issue of share certificates.

.3. Public issue.

Have SEBI guidelines been followed.

Have you checked appropriate returns to Registrar of companies and acknowledgments for all changes in authorized and paid up capital.

In case of shares issued to Non-residents, ensure RBI formalities have been complied with.

Whether company has made buy – back of


shares?

Check the relevant resolution

Companies act formalities are complied.

Whether appropriate entries have been passed. Whether shares are issued under employee stock option ?

Check relevant resolution\ SEBI compliance

Check related accounting entries .

Confirm ESOP warrant outstanding. whether appropriate disclosure is made ?


Reserves and Surplus

Movements in reserves and surplus like increase in securities premium account as per form 2 and form 5 of allotment and as per minutes, mandatory transfers for declaration of dividend, increase/ decrease in capital redemption reserve, debenture redemption reserve, transfer to general reserve (as per board minutes) etc.

An analysis has to be made for all changes in reserves with reasons from the last financial year.

Further the balance sheet checklist for the said schedule to be filled correspondingly.

RESERVES AND SURPLUS RemarksHave all movements of reserves during the year been shown in accounts.

Have you reviewed the minutes authorizing the movements in reserves.

Ascertain whether reserves are required to be created in respect of :

.1. Foreign Project Reserve account – Section 80HHB I.T. Act.

.2. Foreign Exchange Earnings Reserve – Section 80HHD I.T. Act.

.3. Mandatory transfer to General Reserve – Section 205 read with transfer of profits to reserves Rules 1975.

.4. Debenture redemption reserve.—Section 117C

.5. Capital redemption reserve – Section 80.

Transfer from Reserves to :

.1. Profit and loss account.

.2. General reserve.

Have you ensured compliance with The Companies (Transfer of Profits to Reserves) Rules, 1975.

Are the reserves free to be distributed by way of dividends. If not give details of restrictions.


Secured Loans

In case of secured loans following documents have to be checked and filed

- All loan confirmation required for loans standing at the year end with confirmations for loans taken and repaid during the year.

- All term sheets with repayment schedules required for loans taken.- All sanction letters with security secured should be taken and noted.- Limits for borrowing to be checked.- Proper resolution passed for loans taken- copy to be taken.- Send direct confirmations to banks/financial institutions (except for car loans and hire

purchase loans) for balance confirmation. Collect the UPS copy from the client that all letters have been sent with the list to whom confirmations have been sent.

- Whether loans repaid as per repayment schedule, if not the same should be noted (CARO requirement). The same should be given in the following format.

mgb&coChartered Accountants

Name of the clientArea:- Repayment of loans takenSr No Loans Taken

along with interest

Amount Due Date for Repayment

Payment Date

Delay Days

- Term Loans taken from bank – purpose and utilization of funds required.mgb&co

Chartered Accountants

Name of the clientArea:- Utilization of Term LoanSr No Loan taken along with

purposeAmount Utilization of

term loanRemarks

- Interest calculation for all loans taken required.- Whether charge registered under Section 125.- An analysis showing movement in secured loans as compared to last year should be

included.- The required schedule in balance sheet checklist has to be filled.

Unsecured Loans


- All loan confirmation required for loans standing at the year end with confirmations. for loans taken and repaid during the year.

- All term sheets with repayment schedules required for loans taken.- Proper resolution passed for loans taken- copy to be taken.- Interest calculation for all loans taken required.- Utilization of bonds required to be checked.

BORROWINGS RemarksSecured – has the nature of security been property disclosed and co-related with register of charges.

Section 293 resolution :- limit- date

Term Loans – installments due within 12 months

Section 58A – Fixed Deposits :

.1. are the above within the prescribed limits.

.2. date of filing of return of deposits.

.3. date of advertisement/statement in lieu of advertisement.

.4. have declarations been obtained for exempt deposits.

.5. has register been maintained.

.6. has liquidity deposit been made.

.7. is liquidity deposit unencumbered.

.8. have Deposits from employees been treated as deposit under Section 58A.

.9. have you ensured that debentures secured against immovable property only are treated as exempt – Rule 2(b) (x).

Registration of charges – section 136 / 143

Whether terms of redemption of debenture have been specified.

Whether proportionate amount for debenture redemption reserve has been transferred – Refer


guideline dt 18.4.2001

What is the security for debentures

Has debenture deed been executed.

Whether loan confirmation have been obtained.

Have you correlated all borrowings with interest expenses.

Has interest accrued and due been included under loans and disclosed separately.

Have minutes authorizing fresh loans been reviewed.

In case of borrowings from a non-resident check for RBI approval and compliance with FEMA.

Fixed Assets

In case of fixed assets the following points or areas have to be seen- All additions and deductions to be checked.- Further for capitalization purpose the date of completion certificate to be

taken.- In case of deductions to check the details of sale proceeds along with

corresponding entry for profit or loss on sale of asset.- Check the fixed asset register maintained by the company.- Also check whether any physical verification was done by the company

during the year. A program should be obtained. All assets not physically available or in discarded form should be written off.

- Check the policy for depreciation to be charged. Analyze whether the rates charged to the asset is proper and in accordance with the useful life of the asset.

- To check impairment of asset. The asset generates revenue to the extent the asset has not to be impaired (the relevant standard AS 28 has to be followed).

- In case of Capital work in progress – status to be taken for all items in CWIP. Further details of capital commitment to be obtained and also details of capital advances to be taken.

- For assets acquired through foreign currency loans AS 11 applicability has to be seen.

- In case of qualifying asset as per AS 16 the said standard has to be fulfilled and the required checklist has to be filled.

- Also AS 10 checklist and AS 6 checklist has also to be filled.

FIXED ASSETS Remarks


Scrutinize repair accounts to ensure no items of capital nature are included therein.

Scrutinize additions to fixed assets to ensure no items of revenue nature are capitalized.

Has expenditure prior to asset being put to use been capitalized. AS-10.

Have you ensured that interest upto the date of use of asset been capitalized in case of specific loans against the asset.

Ensure borrowing cost is capitalized in consonance with AS-16 “Borrowing cost”

Have you ensured that expenditure after the asset is put to use has not been capitalized.

Has a composite acquisition of assets for a slump price been bifurcated into land and building and other assets supported by proper evidence.

Has land been disclosed as free hold land/or lease hold land.

For assets acquired by foreign currency loans ensure that adjustments are made as per Accounting standard on foreign exchange. AS-11

If asset acquired is a replacement, check that asset replaced has been deleted from fixed assets account.

Whether government grants (including capital subsidy etc) are received towards cost of assets. If so, place note on the treatment given. AS-12

State the basis on which fixed assets manufactured by the company are capitalized i.e. self constructed asset.

Have assets acquired under hire


purchase agreements been correctly and consistently accounted for.

In case of goodwill refer para 15 hereof.

Have fixed assets been revalued during the year.

If yes :

.1. what is the basis of revaluation

.2. fact of revaluation has to be disclosed for subsequent five years.

.3. quantum of revaluation has to be disclosed.

If a revalued asset has been sold, have transfers been made from revaluation reserve to capital reserve.

Have you insured that :

.1. immovable properties held as investments and as stock in trade have been shown accordingly in the accounts.

.2. all fixed assets were in use during the year. If not please give details

.3. have all items of fixed assets been adequately insured.

.4. additions/deductions deletions are authorized by Minutes of Board

.5. all additions are supported by documents of titles.

Have you obtained :

.1. List and value of fixed assets taken on lease. Ensure adequate disclosure is made as per AS-19 ‘’Leases”

.2. An item -wise list of ‘capital work in


progress’

.3. Explanation for items appearing in capital work in progress for a long time without any movement.

Scientific research fixed assets.

Written off in the year of acquisition ? If yes – note on the accounts.

Is the research department registered with the Department of Science and Technology of the Government of India.

Have you ensured that the assets have been correctly classified as scientific research assets.

Investments

Investments must be bifurcated into current investment and long term investment. There should be a further classification of investment into quoted and unquoted investment.

Following documents should be seen

- Physical verification for all investments as at the year end has to be done i.e. in case of quoted investments d-mat statements have to be taken and incase of unquoted investments physical certificates.

- Proper disclosure of all investments have to be made.- Additions in investments should be properly checked with 372 A limits and resolution.- Reconciliation with share application money given should also be checked.- Market value for all quoted investments have to be checked and disclosed in the

schedule.- If the market value is less than the cost a note should be appended whether it is

permanent diminution or temporary diminution. If permanent the effect should be taken in financial accounts.

- In case of unquoted investments the networth of each company has to be checked. If a company has negative networth or lower networth than the cost then a representation letter has to be taken for not writing off or providing for those investments and file note for either confirming the management view or otherwise.

- In case of current investments i.e. mutual funds the NAV has to be checked and amount lower of cost or NAV should be taken. Further all mutual funds bought and sold during the year should be seen and provided in the financial statements.

- All income by way of dividend or profit/ loss on investments should be properly disclosed.

- Also see the minutes and d-mat statement for shares pledged. Also if there are restrictions to sell any shares the same should be disclosed.


- All income from subsidiary and others should be disclosed separately.- AS 13 checklist has to be filled.- An analysis of changes in the investment should be properly disclosed and documented.- The following balance sheet checklist as mentioned below has to be filled.

INVESTMENTS RemarksIf investments have been made during the year:

.1. Director’s sanction – section 292.

.2. Has compliance with section 372 A been ensured regarding : .1. Limits .2. Shareholders sanction .3. Government sanction

Are there any restrictions on sale of investments. If so, place a note on the accounts.

Have investments been physically verified and are the investments held in company’s name – except as detailed in section 49.

In case of Companies other than Investment Companies or Banking Companies, whether any of the shares, debentures of securities have been sold at a price less than their purchase cost. If so, give details –section 227 – (1A) (c).

Whether investment register is maintained and updated with each transaction of investment. Has the list of investment register and ledger balance.

Have all investments been properly reflected in the accounts.

Have bonus issues, rights issues, and conversions relating to investments been properly accounted for.

Has income accruing from all the investments been included in the accounts.

Have trade and other investments and income there from been separately shown in the accounts.

In case of quoted investments have you


compared cost with stock exchange quotations as at year-end.

In case of unquoted investments have you compared cost with break-up value as at year-end.

Has provision been made for significant fall in value of investment.

Has investment are classified as Long term\ Short term and Quoted \ unquoted .

Has market value of quoted investment are identified and disclosed

Ensure investment are accounted as per accounting policy of the company and in consonance with the AS –13 .

Inventories

- Physical verification report of all inventories must be taken.- Discrepancies noticed on such verification should be documented and effect

taken in the financial statements have also to be seen and documented.- Further excise records should be reconciled with quantitative details

available.- Slow moving or obsolete inventory should be identified and effect to be

taken in books of accounts- Internal audit reports can be referred for this aspect. - Confirmation or physical verification report required for inventories lying with

third parties.- The valuation of inventory should be done as per the policy of the company.

Read the policy. If there are any changes as compared to last year the same should be reported and quantified.

- Cost should be FIFO, weighted average or specific identification method.- Check the components to be included in cost of the goods.- The corresponding AS 2 checklist should be filled to have a complete

knowledge of what to be checked and documented.- An analysis has to be prepared as to changes in stock as compared to last

year.The balance sheet checklist relating to stock should be duly filled also.


INVENTORIES RemarksHas the list of inventories physically verified been co-related with book records.

Have major difference between physical and book stock been satisfactorily explained.

Have the inventories lying with third parties been physically verified and/or confirmation obtained.

Have materials given/taken on loan been properly adjusted.

Have you checked goods in transit with subsequent receipts.

Have all comments/observations at the time of physical verification been considered.

Are you satisfied that all work-in-progress is for current jobs.

Have you compared quantities in valuation summary with physical verification stock sheets.

What is the basis of valuation for the following:

.1. Raw materials

.2. Work-in-progress

.3. Finished goods

.4. Stores and spares

Prepare a detailed note describing components of cost and basis of computing net realizable value.

Costs should be allocated on normal production or production for the year whichever is higher.

Have you ensured that excise duty and sales tax set off is not included in valuations of stock of raw materials where cenvat credit and sales tax set off have been credited to purchases.

Have adjustments been made to eliminate any unrealized profit on stock supplied by other units.


Have you ensured that duty element is included in valuation of “duty paid stocks i.e. generally finished goods where excise duty paid and stock is not sold to the buyer.

Have you ensured that adequate provision has been made in respect of:

.1. Slow moving or obsolete items.

.2. Damaged items of stock.

Ascertain if there has been a substantial fall in realize value of finished stock after year-end resulting in loss on sale.

Sundry Debtors

- Take a list of all debtors outstanding for less than 6 months, 6months – 1year, 1-2 years and 3 years and above.

- Take the current status of debtors outstanding at the balance sheet date.- Analyze old debtors or debtors not recovered till date and take reasons for their

recovery.- Provision should be seen that the same is adequate and as per the policy of the

company.- A reconciliation or moving chart of provision should be made to tally with balance sheet

and Profit and loss Account, i.e. opening provision + during the year provision- written off= closing.

- Send direct confirmations to debtors for balance confirmation. Collect the UPS copy from the client that all letters have been sent with the list to whom confirmations have been sent.

- Further after receipt of confirmation if any discrepancies noticed in the balance the same should be reconciled and reasons should be noted.

- If there are any disputed debtors the same should be provided. - An analysis to be prepared for change in debtors as compared to the last year with

reasons.- The required schedule in the balance checklist should be duly filled in.

DEBTORS RemarksHas balance at yearend been tallied with control account.


Debts due for more than :

6 months Rs.

12 months Rs.

24 months Rs.

36 months Rs.

Have subsequent payments been marked.

Reasons for non recovery/adjustment

Considered bad and doubtful :

.1. Debtors

If no provision made – note on accounts

Legal action if any taken – Note explaining status.

Whether secured debtors/loans have been segregated.

Nature of security if secured.

Have you checked statement of account of related parties.

Have you reviewed subsequent year’s transactions for reversal of cheques credited during current year.

Examine credit notes issued after year-end date and ascertain whether they relate to current year.

Are balances at year-end in foreign currency converted at yearend rate of exchange.

In case of foreign parties debts outstanding over six months would require RBI approval check whether same obtained.

Have you assessed need for provision in respect of:

.1. time barred debts/loans


.2. legally disputed debts/loans

If confirmation called :

.1. date of balances confirmed

.2. number of confirmations called for

.3. number of confirmations received

.4. value of confirmations sent

.5. value of confirmations received

.6. total outstanding on date of confirmation

.7. what action has been taken where balance confirmed does not tally with balance in books of account.

Note on accounts in case confirmations are not called for :

Loans and Advances

- Obtain the list of all loans given.- All loans given during the year – board resolution, term sheets with repayment schedule

and interest rate. Ensure compliance of 372 A and 295.- Networth of all companies to whom loans are given. I.e. balance sheet of all companies

required. If negative networth the same should be questioned and reasons should be obtained for not providing for such loans.

- All loan confirmations have to be obtained.- Co- relate interest income with all loans given.- Obtain a list as to whether loans are secured or unsecured. If secured the security

papers have to be obtained.- Obtain a list of 301 parties to whom loans are given. If loans given to 301 parties obtain

the loans given during the year, maximum balance and year end balance. - Further to check for loans given to 301 parties whether repayment of interest and

principal is as per repayment schedule and there are no overdue amounts.- Obtain a list of all advances with purpose .- Ageing of all advances required. Reasons for old advance lying in books with recovery

status. If no status the same should be provided.- All balances showing credit balance should be properly disclosed on the credit side.- Status of tax advances year wise to be taken with assessment copies in case any

assessment is done. The effect in the financial statements should be taken.


- Any assessment pending or demand raised- details should be obtained and to check whether demand is paid or is in dispute and unpaid. Accordingly contingent liability and CARO reporting has to be seen.

- Further loans and advances to subsidiaries should be properly disclosed.- Loans given to directors or to companies under the same management has also to be

disclosed separately or in notes to accounts.- For listed companies clause 32 requirement of listing agreement has to be seen and

disclosed if applicable.- In case of deposits , list of all deposits with the company with proper supporting have to

be obtained. Old deposit reason and recovery status should be taken.- If no deposit slips the same should be provided or written off.- An analysis of loans, advances and deposits have to be made with changes from last

year and during the year.

- The checklist pertaining to the said schedule should be duly filled.

Loans and Advances RemarksSection 227 (1A) :

.1. Are loans and advances made by the company properly secured, and the terms on which they

are made not prejudicial to the interest of the company and its members.

.2. Are loans and advances made to individual and private concerns shown correctly as such or as deposit?

Compare balances with previous year and enquire into major variances.

Ensure compliance with sections 372A , 295 and 292.

Consider applicability of Section 2 (22) (e) of the Income Tax Act.

Review cases where recoveries are not in accordance with terms of repayment.

Where loans have been advanced to companies (including subsidiaries) which show a negative net worth in view of huge losses examine whether any provision/disclosure has to be made.

Loans to employees does not include :


.1. Advance against expenses – provided expense account is regularly submitted.

.2. Advance against following month’s salary – provided it is adjusted.

Details of inter-corporate deposits.

Has interest on loans been accounted.

Is balance in prepaid account chargeable to future accounting period(s).

Advances to suppliers :

.1. on capital account

.2. for expenses

.3. for supplies

Reasons for non-adjustment of advance for more than reasonable time.

Have advances received been segregated from debit balances of parties and included on liability side.

Has maximum debit balance been shown separately :

.1. Directors

.2. Officers

.3. Companies under the same management with names in case of loans and advances.

Obtain the list of related party duly approved by BOD \ board committee\ Audit committee.

Ensure that proper disclosure is made for related party as per AS-18. Have amounts due from Companies or firms in which directors are interested been shown separately.

Cash and Bank Balances


- Obtain the cash certificate from the client. Also if cash verification was done on the last day of the financial year by auditors the same should be checked at the time of balance sheet and if any variation the reasons should be obtained.

- Obtain all the bank reconciliation and bank certificates for all banks.- Any banks closed during the year, resolution for closure and Nil balance certificate.- In bank reconciliation check for any old and stale cheques and clearance dates for all

cheques in the reconciliation. As regards cheques deposited but not cleared, deposit slips for all cheques required to prove that the same were deposited. If the cheque was received but not deposited then copy of proof should be obtained and treated as cheques in hand. Clearance dates for all cheques deposited should also be obtained.

- Balances with scheduled and non scheduled bank should be separately disclosed.- Maximum balance in non- scheduled bank should also be disclosed.- Further in case of fixed deposit- confirmation of fixed deposit with interest rate or copy of

fixed deposit should be obtained.- Obtain reconciliation of interest income with the fixed deposit and TDS certificate.- Provision for interest receivable should be made- Any deposit created for security as margin money or kept with any authority as security

the same should be disclosed.- Analysis of major bank balance should be obtained.- The required schedule in balance sheet checklist should be duly filled

CASH AND BANK BALANCES RemarksWhether cash, and stamps have been verified at year end/during the year (surprise check).

If unusually large cash balance was observed during the year have you obtained explanation from the company.

Have cash and bank certificates at yearend been obtained.Obtain the Bank reconciliation statement for each bank accounts.Have outstanding entries in Bank reconciliation statement been traced to subsequent bank statements.

Is any entry outstanding for unusually long time.

If any director or his relative is interested in bankers other than scheduled bank, have you disclosed the nature of interest.

In case of balance with the banks other than scheduled banks has maximum amount outstanding during the year been disclosed.

Security deposit received from employees to be kept


in a separate bank account. If not place a note – section 417.

Have you ensured that losses, if any, due to exchange variation have been accounted for in case of Foreign currency accounts.

Current Liabilities and Provisions

- Obtain a list of all creditors with ageing.- Reasons for old creditors and their payment status i.e. whether payment to

be made or not. Creditors to be written back if payment not to be made.- Segregate creditors into capital creditors, creditors for goods and creditors

for expenses and others.- Direct confirmations should be send to creditors and the process should be

the same as given in debtors.- Obtain a list of trade advances and deposits received with opening balance

+ received during the year-- refunded= closing.- Obtain a year wise list for unclaimed dividend and see if different bank

accounts are maintained for dividend not yet claimed. If dividend unclaimed for more than 7 years the same should be transferred to investor protection fund and a disclosure to be done in financial statements. Tally unclaimed dividend with corresponding bank balance.

- Obtain a certified list for fixed deposit pending.- Obtain a list for cheques overdrawn. This should be disclosed in the

financial statements.- Status of any disputed creditors should be known and verify if there is any

contingency.- Obtain that all provisions for expenses have been made. This can be seen

from subsequent year expenses and regular expenses whether booked for the full year.- In case of retirement benefits whether the same has been provided. Obtain

the certificate.- The provision for tax has to be worked out and checked and provided in

books. A year wise list has to be obtained.- Analysis has to be done.- The corresponding checklist should be filled.

CURRENT LIABILTIES AND PROVISIONS REMARKSHas total of individual balances been reconciled with control balance? If not, give details.

Have subsequent payments been marked.

Have you obtained list of creditors outstanding for more than 12 months along with reason for non payment.


Have you obtained a list of disputed creditors.

If confirmations called :

.1. date of balance confirmation

.2. number of confirmations sent.

.3. number of confirmation received.

.4. total of creditors on date of confirmations.

.5. value of confirmations sent.

.6. value of confirmations received.

.7. what action has been taken where discrepancies have been noticed between

balance as per party and balance as per books of account.

In case confirmations are not called for is a disclosure considered necessary.

Have advances been segregated from credit balances of parties and included on asset side.

Have you noticed unusually large debit or credit balances. If give details.

TAXATIONDoes the provision for taxation adequately cover estimated liability for taxation on income and wealth for the year.

Has provision been made for interests payable under the Income Tax Act.

If the accounting year of the company is not the “Financial year” has the provision been made in respect of income of the full accounting year. Have proper disclosures been made.

Is the aggregate provision for taxation in excess / short of provision reasonably required.

Obtain year-wise list of provision for taxation and taxes paid.


Does the company account for deferred taxation. If so please state basis of calculation and give details of movements in the year unless already shown in the accounts.

Are all the necessary entries made in respect of completed assessments including for the assessments which are disputed in appeal.

Have you examined whether orders of past years have bearing on provision for current year.

Attach full details of material points in dispute.

If in spite of book profit there is no provision for taxation is a note given on accounts or Provision for tax under MAT is provided.

Miscellaneous Expenditure

- The expenditure should be written off as per the policy of the Company.- It is should be as per last year. If any changes the same should be noted and

documented.- The required checklist is to be filled.DEFFERED EXPENDITURE AND OTHER INTANGIBLE ASSETS

Remarks

Give details of any expenditure incurred on intangible assets that has been carried forward and state the basis on which it is to be written off.

Give details of any amounts written off during the year, if not disclosed in the accounts.

Is the basis of carrying expenditure forward consistent with the practice of earlier years and are in consonance with AS-26.

Has the Board resolution for deferring the expense been seen. Is it supported by any expert opinion.

Have you considered effect on provision for taxes. Current taxes as well as deferred taxes.

In case of preliminary expenses, ensure write off is in accordance with section 35D of the Income Tax Act.


Profit and loss account

- All the revenue items should be properly checked with cut off date.- Monthly sales should be taken and compared. If there are variations the

same should be questioned and reasons should be noted.- Further check if there are huge credit notes or debit notes passed at the

year end or just after the year end. Enquire about the same.- Check all the income pertaining to important agreements have been duly

accounted for the full year.- Only income of the current year should be accounted.- Analysis to be done for increase or decrease in sales as compared to last

year.- In case of other income also all documents have to be taken with charts for

all income.- In case of expenses also all required expense charts with proper

provisioning should be taken. An analysis has to be done for all increase and decrease in expenses with reasons for any major expenditure done during the year.

- The required AS 9 checklist for revenue recognition should be duly filled.- The required schedule in balance sheet checklist should be duly filled.

Profit and Loss Account RemarksHave accounts been prepared on accrual basis of accounting. AS-9.

If not, list the items and quantify – section 209(3) and place note on accounts.

Have all outstanding and known liabilities been provided.

Have adjustments been made for prepaid expenses.

Have following been provided for :

.1. Gratuity – if not, note on accounts (Actuarial valuation)

.2. Bonus – if not, note on accounts

3. Leave Encashment - if not, note on accounts (Actuarial valuation)What is the basis for providing gratuity. check the assumption considered by the expert.

Has the company accounted for all the known


incomes accruing during the year.

Has income been accrued for materials processed but not delivered/invoiced.

Has income received in advance been properly adjusted.

Whether every material expense – i.e. 1% of the turnover has been shown separately.

Has non-recurring and extra ordinary items been shown separately. Obtain the management note on Extra Ordinary

Compare accounts with previous year and list major variations.

Raw material consumption ratio to production and comparison with previous year. Reasons for variation – in quantity.

Review percentage of scrap, by-products and waste generated with production and compare with previous year.

What is the basis of accounting for claims :

.1. made by the company

.2. made on the company

Is a register for claims maintained. If not, how is control on claims exercised.

Amortization of :

.1. Preliminary expenses

.2. Technical know-how cost.

.3. Share issue expenses

.4. Debenture issue expenses.

.5. voluntary retirement scheme payments.

.6. Others


Contributions to Political parties – Section 293A:

.1. Advertisement in souvenirs.

.2. Payment

Have payments to auditors been shown separately

Income for investments and Deposits.1. Gross

.2. Tax at source

Interest paid to Income Tax Department.

Interest received from Income Tax Department.

Income from subsidiaryDividendOthersPURCHASESHave all materials included in stock been recorded as purchase.

Have goods returned been adjusted and excluded from stock.

Have all claims for defective materials been adjusted.

Forward purchase contracts- outstanding at year end.

SALESHave goods delivered been invoiced.

Examine sales booked immediately after the year end with dispatch notes/excise gate pass.

Have goods invoiced been delivered.

Has provision been made for materials still to be supplied where invoice has been raised for the entire supply.

Scrutinize dates of dispatch notes prepared immediately after yearend.

Have sales returns been recorded – credit notes


issued and included in inventory.

Have rebates and discounts been adjusted.

Check sales invoices close to yearend with dispatch notes and gate passes/excise records/proof of service rendered.

In case of long term contracts :

.1. what is the basis of accounting profit/loss

.2. have provisions for losses been made if anticipated. If so on what basis.


General Checklist

After the required documents are collected and schedule wise balance sheet file has been completed. The following checklist should be filled

GENERAL RemarksHas the Internal Control questionnaire issued by the Institute of Chartered Accountants of India duly been considered with regard to different aspects and areas of checking. If should be duly filled up and attached herewith. (Changes in procedures should be recorded every year.)

Do you consider the company’s system of internal control and accounting satisfactory in the circumstances of the Company? If not, attach report on deficient areas along with your suggestions to be forwarded to management.

Have the following fundamental accounting concepts been followed :

.1. Going-concern (continuity of business of the Company in succeeding years).

.2. Accrual (income & expenses accruing during the year under review).

.3. Consistency (same basis of Accounting to be followed consistently).

.4. Prudence (future losses to be ascertained and accounted for whereas future gains to be deferred) been adhered to ?

If not, please give particulars of departures therefrom.

Compliance with Mandatory Accounting Standards :ACCOUNTING STANDARDS CHECKLIST CONTROL SHEET

OBJECTIVE: We are specifically required to state in our report to the shareholders whether the accounts are in compliance with the mandatory Accounting Standards issued by the ICAI, to the extent applicable. The objective of this checklist is to determine whether the accounts of the client have been prepared in accordance with the


mandatory standards. Separate checklist in respect of each applicable standard should be filled up.

NOTE: This checklist pre-supposes familiarity with the Standards and should be completed by the Audit Senior in charge before the accounts are sent to the partner for initialing. Any non- compliance with the Standard(s) should be highlighted.

A.S. Particulars Y/N/ NA 1 DISCLOSURE OF

ACCOUNTING POLICIESY/N/NA

2 VALUATION OF INVENTORIES

Y/N/NA

3 CASH FLOW STATEMENT

Y/N/NA

4 CONTINGENCIES & EVENTS OCCURING AFTER BALANCE SHEET DATE

Y/N/NA

5 PRIOR PERIOD & EXTRAORDINARY ITEMS & CHANGES IN ACCOUNTING POLICIES

Y/N/NA

6 DEPRECIATION ACCOUNTING

Y/N/NA

7 ACCOUNTING FOR CONSTRUCTION CONTRACTS

Y/N/NA

8 ACCOUNTING FOR RESEARCH & DEVELOPMENT

Y/N/NA

9 REVENUE RECOGNITION

Y/N/NA

10 ACCOUNTING FOR FIXED ASSETS

Y/N/NA


11 ACCOUNTING FOR FOREIGN EXCHANGE CHANGES

Y/N/NA

12 ACCOUNTING FOR GOVERNMENT GRANTS

Y/N/NA

13 ACCOUNTING FOR INVESTMENTS

Y/N/NA

14 ACCOUNTING FOR AMALGAMATION

Y/N/NA

15 ACCOUNTING FOR RETIREMENT BENEFITS

Y/N/NA

16 BORROWING COSTS Y/N/NA

17 SEGMENT REPORTING Y/N/NA

18 RELATED PARTY DISCLOSURES

Y/N/NA

19 LEASES Y/N/NA

20 EARNINGS PER SHARE Y/N/NA

21 CONSOLIDATED FINANCIAL STATEMENTS

Y/N/NA

22 ACCOUNTING FOR TAXES ON INCOME

Y/N/NA

23 INVESTMENTS IN ASSOCIATES

Y/N/NA

24 DISCONTINUING OPERATIONS

Y/N/NA

25 INTERIM FINANCIAL REPORTING

Y/N/NA

26 ACCOUNTING FOR JOINT VENTURES

Y/N/NA

27 ACCOUNTING FOR Y/N/NA


INTANGIBLES

28 IMPAIRMENT OF ASSETS

Y/N/NA

29 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Y/N/NA

Whether all the requirements of the above standards have been adhered to by the company?If not, report has to be suitably qualified.

Have the Institute’s statements and Guidance notes been read and applied.

Have accounting procedures for items such as MODVAT etc. laid down by the Institute from time to time adhered to? If not, please give brief particulars of material exceptions.

Have accounting policies as disclosed in the accounts been followed in preparation of the accounts.

Whether all the requirements of the above standard have been adhered to by the company? If no, draft report has to be suitably qualified?

Have other checklists on Statutory Registers, Companies Act Compliance checklists are completed?

Have all the documents as per the documentation checklist been placed on the working papers file?

Have you perused and noted important points arising from reports obtained by the company internally and external agencies such internal auditors, concurrent audits, etc.

Has the partner critically examined ratios as per the checklist?

Whether all the requirements of the above standard have been adhered to by the company? If no, draft report has to be suitably qualified?


Important Sections of Companies Act and Compliance checklist

Important Sections of the Companies Act

All index to board minutes, audit committee remuneration committee etc, with minute copies, 274 (1)(g) of directors, Form 24AA, List of documents filed with ROC, Important Resolution etc to be filed.

What are important sections:- All sections relevant to balance sheet are important. Some of them are listed below.

- Section 49- Investment of the Company to be held in its own name.- Section 58A/ 58AA- Public Deposits.


- Section 125- Register of Charges.- Section 295- Loan to Director.- Section 297- Certain contracts in which directors are interested- Resolution/ central

government.- Section 299- Disclosure of Directors Interest.- Section 301- Register of contracts- Section 198/ 349- Managerial Remuneration.- Section 205- Mandatory transfer to reserves.- Section 205A- Unpaid dividend after 7 years to be transferred to investors protection

fund.- Section 269- Managing director appointment for capital above Rs 5 crores.- Section 274- Disqualification by director.- Section 314- Office of profit by director.- Section 383A- Company Secretary.- Section 372A- Loan/ advance or deposit.- Form 2- Return of Allotment.- Form 5- Increase in authorized capital.- Form 8- Charge registered.- Form 13- Charge Registered.- Form 18- Change of registered office.- Form 32- Appointment/ Resignation of Director.- Form 23- Special resolution to be registered.- Form 24AA –declaration of director.- Form 25C- Managerial remuneration.- Form and contents of balance sheet and profit and loss account (Schedule VI).- Appointment and remuneration of managerial personnel (Schedule XIII).- Rates of depreciation (Schedule XIV).

Compliance Checklist

STATUTORY RECORDS – COMPLIANCE CHECKLIST

Section Particulars Remarks49(7) Register of investments in shares and securities not held in the

name of the company58A Register of deposits136 Copy of every instrument creating charge requiring registration

143(1) Register of charges150(1) Register of members151(1) Index of members in case of a company having more than 50

members unless register itself is in an index form152(1) & (2) Register and index of debenture holders

157(1) Foreign register of members or debenture holders


158 Duplicate of such foreign register of members or debenture holders

163(1) Copies of annual returns prepared under ss. 159 & 160 with copies of documents required to be annexed there to

193(1) Minute books of board of directors and committees of the board193(1) Minute books of proceedings of general meetings209(1) Books of account and other cost records209(2) Proper books of account letting to transactions affected at branch

office301(1), 301(5)

Register of contracts with directors, companies and firms in which directors are interested

302(6) All contracts entered in to by the company for the appointment of a managing director

303(1), 304(1)

Register of directors, Mg. directors and secretary

307(1) Register of inter-corporate loans and investments

Notes to Accounts/ Disclosures with checklist

Notes to Accounts/ Disclosures

Schedule VI of the Companies Act, 1956 should be seen for disclosures.

- After that note down all the important events during the year. All relevant documents of important events like resolution, if amalgamation done- method followed for amalgamation with documents , any subsidiary acquired or disposed off, or any major business line closed or change in business. For all these relevant papers must be taken and disclosed in notes to accounts.

- Then in case of deferred tax- components of deferred tax has to be seen and disclosed.

- As regards contingent liabilities- the same should be disclosed and properly documented. In all cases previous year figures should be seen and checked with current year changes. It should also be checked from board minutes. Note on system of contingent liability recognized by the company.


- In case of Corporate/ Bank guarantee given- all papers as regards guarantee papers, sanction letter, limits certificate, resolution, modification if any etc. and confirmations should be taken. The guarantee for subsidiary and others should be disclosed separately.

- In case of segment reporting the required primary segment and secondary segment should be identified and all disclosures given in AS 17 should be done and properly documented.

- Other Disclosures like Advances includes due from Subsidiaries, or given to a company in which director is interested, Current liabilities includes cheques overdrawn etc. All these should be properly documented in the file.

- Further the quantitative details should be properly given and working should be attached in the file.

- Other details like FOB value of exports, CIF value of imports, Expenditure in foreign currency, foreign Traveling etc. – working for all should be kept in file.

- In case of operating lease and finance lease the same should be disclosed as per AS 19 and the corresponding checklist has also to be filled in. Last year items should be checked.

- Other details as required should be properly filed.- In case of related party the list should be obtained from the company duly

signed by the Company Secretary and all transactions with related party should be mentioned and a summary chart should be prepared. The required As checklist i.e. AS 18 should be filled.

Sr No

Party Name

Relation Nature of Transac-tion

Opening Balance

Transa-ction

Reimburs-ement of expenses

Payme-nt Made

Payme-nt received

Closing balance

- In short for all notes to accounts supporting should be attached in the file.

Notes to Accounts Checklist

- A general checklist on notes to accounts should be filled.

NOTES TO ACCOUNTS RemarksA. GENERAL1. In the case of subsidiary companies, the

number of shares held by the holding company as well as by the ultimate holding company and its subsidiaries has been stated. [we are not required to certify the correctness of such shareholdings as certified by the management].

2. If in the opinion of the Board, any of the current assets, loans and advances have not a value on realization in the ordinary course of business at least equal to the amount at which they are stated, the fact that the Board is of the


opinion has been stated.

3. Comparatives are shown

4. Current accounts with directors whether they are in credit or debit are shown separately.

5. Reference to benefits expected from contracts to the extent not executed has not been made in the Balance Sheet, shall be made in the Boards’ report.

6. Have you ensured that there is adequate disclosure of Contingent Liabilities as per Schedule VI and AS? [Complete checklist on contingent liabilities]

7. The following have been shown by way of a note

a. Amount remitted during the year in foreign currencies on account of dividends.

b. The number of non resident shareholders

c. Number of shares held by them on which dividend was due and

d. The year to which the dividends related

B RAW MATERIAL CONSUMED1. All important basic raw materials are shown

separately

2. Materials do not include items like stores and fuel which only assist the manufacturing process.

3. Purchased intermediates and components are classified as raw materials and only those items which account for at least 10% of the value of raw materials consumed are shown separately in quantity and value.

4. The figures for raw materials consumed relate to actual consumption rather than the derived consumption; any normal shortage or loss may be included in the figure of consumption.


5. Internal transfers from one department to another are disregarded in determining consumption figures.

C Value of imports of raw materials, components and spare parts and capital goods on CIF basis have been shown by way of note in respect of

1. a. Raw Material

b. Components or spare parts

c. Capital goods

2. The total value of imports of components and spare parts may be disclosed in the aggregate

3. The disclosure in respect of imports is made on a mercantile or accrual basis. Therefore, items like goods in transit are included.

4. The value of imports is disclosed irrespective of whether or not such imports have resulted in an expenditure in foreign currency.

5. The value of imports is calculated on a CIF basis.

6. The disclosure is made in Indian currency.

7. Disclosure is with regard to the value of imports by the Company i.e., direct imports.

8. Terms of payment for items imported an ignored since they have no relevance to value

D Value of Imported materials consumed

The following have been shown by way of a note:

1. Value of all imported raw materials, spare parts and components consumed during the financial year

2. Value of all indigenous raw materials, spare parts and components consumed during the financial year.


3. The percentage of (a) and (b) each to total consumption is shown

E. Expenditure in foreign currencies

1. Expenditure in foreign currencies during the year has been shown by way of note split between:

a. Royaltyb. Know-howc. Professional, consultancy feesd. Intereste. Other matters (specify)

2. “Other matters” in the Schedule VI requirement covers any items for which foreign currency expenditure is involved.

3. The requirement ordinarily relates to expenditure on intangible items.

4. Disclosure is made on accrual basis, otherwise basis to be stated.

5. Disclosure is limited to those cases where the company itself incurs a expenditure in foreign currency. The disclosure is to be made of the amounts actually incurred in foreign currency, which is remitted outside India (TDS under I.T.Act to be excluded)

F. Disclosure of Foreign Earnings

1. Export of goods calculated on FOB basis

2. Royalty, know-how professional and consultation fees.

3. Interest and dividend

4. Other income (indicating nature)

G. Licensed capacity, installed capacity and actual production

1. The following have been shown by way of notes


a. The licensed capacity on the last date of the year, (if applicable)

b. The installed capacity on the last date of the year.

c. Actual production of finished products meant for sale

2. A reconciliation between the quantity produced and quantity sold is prepared as it might reveal differences or errors

3. Where installed capacity relates to a particular product mixa. The entire range of variation may be shown

or

b. It may be designated in respect of the particular product mix already in operation during the accounting year or

c. The installed capacity may be indicated in neutral terms e.g., machine hours

H. OTHER ITMES FOR NOTES

1. Have you completed checklist on Segment Reporting to ensure compliance and disclosures in accordance with the standard?

2. Have you completed checklist on AS 20 EPS to ensure compliance and disclosures in accordance with the Standard?

I CONTINGENT LIABILITIES & COMMITMENTS DISCLOSERS

Audit Procedure

1. Have you obtained a note describing system of recording contingent liabilities of the company?

2. Is there a dependable procedure ensuring that all claims and contingent liabilities will be brought to the notice of the Chief Accountant/ Administration Head/ Board?

3. If not, how does the company’s system ensure


that all such claims and contingent liabilities will be duly recorded and brought to the notice of the management and eventually in the Fin. Statements?

4. Have you reviewed last year’s contingent liabilities and ensured that these have been duly considered for the current year’s account?

5. Obtain a list of contingent liabilities from the company and co-relate it with:a. Minutes of the Board or committee of

Directorsb. Company’s sale/ purchase contracts for

liquidated damages / penalties / warranties.c. Income Tax, Sales Tax and excise records.d. Confirmations from clients solicitors as to

pending suits for claims against the company and reconcile the same with schedule of fees paid to solicitors / counsels.

e. Certificate from clients, bankers for contingent liabilities (e.g. bills discounted, letters of credit, guarantees etc.)

f. Labour union agreements, whether these have expired and whether union have demanded a revision or additional remuneration or bonus?

g. Whether there is investment schedule for outstanding calls in investments?

h. Product warranties, guarantees and statutory obligations;

i. Guarantees given of obligations of subsidiary or related companies

j. Commitments for capital expenditurek. Disputes with tax or other government

authorities.l. Obligations under leasesm. Matters under arbitrationn. Pending labour demandso. Penalties under contractsp. Bills discounted but not maturedq. Forward contracts for purchase and sale of

goods and forex?

6. Have Contingent Liabilities been measured and disclosed as per AS 29 (refer para 26, 35- 48)

7. Have the following been disclosed in case of Contingent Liabilities as required by As 29:a. An estimate of its financial effect measured


under paragraph 35- 48b. An indication of the uncertainties relating to

any outflow; andc. The possibility of any reimbursement.

8. Have you ensured that separate disclosures have been made for the following as required by Schedule VI of the Companies Act?a. Claims against the company not

acknowledged as debts.b. Uncalled liability on shares partly paid.c. Arrears of fixed cumulative dividends (the

period for which the dividends are in arrears or if there is more than one class of shares, the dividends on each such class are in arrear)

d. Estimated amount of contracts remaining to be executed on capital account and not provided for

e. Other money for which the company is continentally liable.

f. The amount of any guarantees given by the company on behalf of directors or other officers of the company and where practicable, the general nature and amount of each such contingent liability, if material.


CARO Requirements with Checklist

Checklist

First of all to check whether CARO is applicable to the company. If applicable the required checklist clause wise should be filled to understand the points and documents to be seen and filed. The documents to be taken or reviewed are mentioned in finalization of accounts- schedule wise

The CARO checklist is as under

1. APPLICABILITY 1.1 Applicable to all companies except the following:

1. Banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949).

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

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. 10 Lacs or more from any bank or financial institution and does not have a turnover exceeding Rs. 5 Crores (Comments: The conditions are cumulative).

2. GENERAL2.1 For all representations made to auditors on the basis

of which the check-list is filled up, written confirmation from the client should be obtained, so far as is practicable.

2.2 All certificates, representations, working papers on the basis of which check-list has been filled up should be attached to this check-list and suitably referenced.

2.3 Detailed working note as to why auditors have come to such conclusion should invariably be attached to


this statement.

2.4 All important observations must be properly documented and cross linked to the individual working papers.

2.5 Where the are exceptions, i.e. adverse conclusions, such fact should be appropriately highlighted.

3 FIXED ASSETS

3.1 Does the Company maintain Fixed Asset Register/Cards

3.2 Do these give the following particulars :.1. Description of asset;

.2. Accounts classification;

.3. Location;

.4. Identification No;

.5. Quantity;

.6. Original Cost;

.7. Depreciation rate & amount;

.8. Cumulative depreciation;

.9. Details regarding disposal.

3.3 Has physical verification of the assets been conducted by the management at reasonable intervals. If yes :

.1. what is the frequency thereof

.2. what is the percentage in value thereof

.3. is there sufficient evidence thereof

3.4 Have the results of the verification been reconciled with the fixed asset record and if so :

.1. has a list of discrepancies been prepared and placed on audit file.

.2. are these discrepancies significant


.3. how have the discrepancies been dealt with in the accounts

3.5 Did the auditors observe all or any part of the verification

3.6 Has the Asset Register been reconciled with the financial records

3.7 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)

4 INVENTORIES4.1 List out the intervals at which physical verification is

conducted for :

.1. Raw materials

.2. Finished goods

.3. Stores and spare parts

4.2 Has the stock, at year end been physically verified by the management

4.3 Are Comprehensive written stock taking instructions issued – statement on auditing practices – Appendix A. Obtain a copy thereof. nIf not obtain a note on procedures of verification.

4.4 Whether auditors were present for physical verification.

4.5 Has due cognizance been taken of cut off procedures in physical verification and valuation of inventories

4.6 Are the procedures of physical verification followed by the management, reasonable and adequate

4.7 What is the percentage in value covered in the course of verification

4.8 Whether stock records are maintained

4.9 Verify the report of variations between book record and physical stock. Are the discrepancies material


4.10 Have these discrepancies been properly dealt with in the books of account.

5 LOANS TAKEN / GRANTED BY THE COMPANY5.1 Has the Company taken / granted any loans, secured

or unsecured from Companies, Firms or Other Parties listed in the Register maintained u/s. 301 of the Companies Act, 1956. If so, give the number of parties and the amount involved in the transactions?Prepare a list of names and the amount involved.(Certified copy of 301 party to be taken from the company and also Form 24AA should also be obtained with list of directors of the company)

5.2 Are the terms on which these loans have been taken / given prima facie prejudicial to the interest of the Company with regard to comparative terms for :

.1. security offered;

.2. rate of interest;

.3. terms of repayment;

.4. loan given by the Company;

.5. other conditions attached.5.3 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?

6 INTERNAL CONTROL OVER PURCHASE OF INVENTORY AND FIXED ASSETS FOR SALE OF GOODS.

6.1 Obtain, a note on the internal control system relating to purchase of the above items and for the sale of goods.

6.2 Has the system as explained been followed during the year

6.3 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.

6.4 TRANSACTIONS WITH PARTIES LISTED UNDER SECTION 301 OF THE COMPANIES ACT, 1956


(NAMELY DIRECTOR INTERESTED CONTRACTS)6.5 Obtain a list of companies, firms and other parties

entered in register under Section 301 with aggregate value of purchase of goods and sale of goods, materials and services transacted with these parties.

6.6 In case the aggregate value of such purchases and sales made during the year exceed Rs. 5,00,000 in respect of each party thereof ensure that the prices paid/obtained for such purchases/sales are reasonable as compared to

.1. prevailing market prices for such goods, materials or services.2. prices at which transactions for similar goods or services have been made with other parties

6.7 Prices charged to be compared after considering Debit/Credit notes.

7 DEPOSITS FROM THE PUBLIC7.1 Whether the company has accepted any deposits

from the public?

7.2 Whether the company has complied with the provisions of Section 58A & 58AA of the companies Act, 1956/ directions of the RBI and the Rules made there under?

7.3 If not, has the nature of contraventions been placed on the file and accordingly disclosed in the Report

7.4 Whether the company has complied the requirement of the order passed by the company law board, wherever applicable?

8 INTERNAL AUDIT SYSTEM8.1 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 Cr. For a period of 3 consecutive financial years immediately preceding the financial year concerned.

8.2 If so, does the Company have an internal audit system :.1. in the form of an outside firm of Chartered


Accountant

.2. in the form of its own internal audit department

8.3 Has the internal audit programme been reviewed. Was it drawn in consultation with statutory auditors.

8.4 Is the coverage of internal audit adequate

8.5 Are the persons carrying out the internal audit adequately qualified for the job

8.6 To whom does the internal auditor report

8.7 Have the internal audit reports been perused and ensured that they have been duly acted upon

8.8 In view of what is stated above, is the internal audit system of the Company commensurate with its size and the nature of its business

9 COST RECORDS9.1 Has maintenance of cost records been prescribed for

any of the activities of the Company

9.2 If so, whether the records, have been verified to form a prima facie opinion thereon

9.3 Having regard to the above, can it be concluded that prima facie the prescribed records have been maintained

9.4 Has cost audit been prescribed in respect of these records and if so, have reports been perused

10 STATUTORY DUES10.1 Whether the company is regular in depositing

undisputed statutory dues with appropriate authorities in respect of the following?

PFInvestor Education and protection fundESIIncome TaxSales TaxWealth TaxCustoms DutyExcise Duty


Cess andAny other statutory dues

10.02 Appropriate working papers to be kept in file.1. month-wise deductions and contributions on account of statutory dues

.2. due date

.3. date of deductions

.4. date on which these amounts have been deposited with the appropriate authorities.

10.03 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.

11 DISPUTED TAXES AND DUTIES NOT PAID11.1 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.

11.2 Ensure proper disclosure of these items

11.3 Where liability is disputed. Obtain a file note detailing the status

12 SICK COMPANY12.1 Whether the company has been registered for a

period not less than 5 years?

12.2 Whether its accumulated losses at the end of the financial year are not less than 50% of its net worth?

12.3 Whether it has incurred cash losses in such financial year as well as in the immediately preceding financial year?

12.4 If the above conditions are satisfied the same has to be reported

13 DEFAULT IN FINANCIAL DUES13.1 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.

14 DOCUMENTATION IN RESPECT OF LOANS GRANTED

14.1 Whether adequate documents and records are maintained 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.

15 APPLICABLE TO CHIT FUNDS15.1 Whether the provisions of any special statutes

applicable to chit fund have been complied with?

16 APPLICABLE TO NIDHI, MUTUAL BENEFIT FUNDS, SOCIETIES

16.1 Whether the net owned funds to deposit liability ratio is more than 1:20 as on the date of balance sheet?

16.2 Whether the company has complied with prudential norms on income recognition and provisioning against substandard/doubtful/loss assets?

16.3 Whether the company has adequate procedures for appraisal of credit proposal/requests, assessment of credit needs and repayment capacity of the borrowers?

16.4 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?

17 APPLICABLE TO COMPANIES DEALING/ TRADING OF SHARES AND OTHER INSTRUMENTS

17.1 Is the company dealing or trading in shares, securities, debentures, and other investments.

17.2 Have proper records been maintained of transactions and contracts.

17.3 Have timely entries been made in such records.

17.4 Have shares, securities, debentures and other investments been held in the name of the company.

17.5 If not, has company been exempted u/s. 49 of the Companies Act.


18 GUARANTEE FOR LOANS18.1 Whether the company has given any guarantee for

loan taken by others from bank or financial institutions, the terms and conditions whereof are prejudicial to the interest of the company?

19 END USE OF FUNDS19.1 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.

19.2 Whether the funds raised for short term purpose have been used for long term investment 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.

19.3 Whether the management has disclosed on the end use of money raised by public issues and whether the same has been verified?

20 PREFERENTIAL ALLOTMENT20.1 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.

21 DEBENTURE ISSUED21.1 Whether securities have been created in respect of

debentures issued?

22 FRAUD

22.1 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 indicted.

Ratios should be checked for comparing the balance sheet


RATIOS

CURRENT YEAR PREV. YEARSTRUCTURAL RATIOS

1. Debt to Equity (net worth)2. Long-term Debt (over 1 year) to Equity3. Net worth to Total Assets4. Fixed Assets to Net worth5. Fixed Assets to Capital Employed6. Capital employed to Total liabilities7. Fixed Assets to Total Assets

WORKING CAPITAL RATIOS8. Current Assets to Current Liabilities

(also known as Current Ratio)9. Liquid Assets to Current Liabilities

(also known as Acid Test Ratio)PROFITABIILITY RATIOSGross profit to sales (%) Operating profit to sales (%)PBIT to Sales (%) PBT to Sales (%)Net profit to Sales (%)


EXPENSES RATIOSCost of Goods Sold to SalesDirect Materials to Cost f Goods SoldPROFIT ALLOCATION RATIOSIncome Tax Provision to PBTOrdinary Dividend to Net ProfitRetained Earnings to Net ProfitTURNOVER RATIOSSales to Total AssetsSales to Fixed AssetsCost of Goods Sold to InventoryPROFITABILITY RATIOS (Balance Sheet)PBIT to Capital EmployedPBT to Net worthNet Profit to Net worthProfit to Fixed Assets


Direct Confirmation

Direct Confirmation to be sent to Banks/ Financial Institutions

DRAFT OF LETTER TO BE ADDRESSED BY CLIENTS ON THEIR LETTER-HEAD TO EACH OF THEIR BANKERS/FINANCIAL INSTITUTIONS ON THE CLOSING DATE.

(as also to bankers with which the client has dealt since the date of the previous accounts)

(BANK/FINANCIAL INSTITUTION)______________________________________________________

Dear Sirs,

Please send directly to our auditors, M/s. MGB& CO, CHARTERED ACCOUNTANTS, 101A JOLLY BHAVAN 2, 1st FLOOR, 7, NEW MARINE LINES, CHURCHGATE, MUMBAI-400 020, details of balances as at the close of business on____________20XX_________ of all our accounts viz. all balances outstanding documents, titles, contingent claims, Investments etc., if any with you.

For your convenience, we enclose in duplicate a form in which details of our balances with you can be filled in. Please send one copy to our auditors, retaining the other for your records. Should you find the spaces on the form insufficient to contain all the relevant information, please attach a separate statement.

We would request you to state ’NIL’ or ‘NA’ wherever applicable.

Yours faithfully, (To be signed by person authorized

to operate accounts)


Reply FromBank/Financial Institutions

M/s. MGB& CO, CHARTERED ACCOUNTANTS, 101A JOLLY BHAVAN 2,1st FLOOR, 7, NEW MARINE LINES,CHURCHGATE, MUMBAI-400 020 Date…………………..

Dear Sirs,

Re: ( Name of Client)

At the request of our client; M/s. ……………………………………….. vide their letter No…………….. dt………………… , we submit below particulars of their account, investments, bills etc. as the close of business on…………………….20XX……………….as shown by our records.

1. Saving Bank A/C (if applicable)Designation of Account Amount (Rs.)

2. Current Accounts in CreditDesignation of Account Amount (Rs.)

3. Overdrawn Current Account or other Overdrawn Account or Cash Credit AccountsDesignation of Accounts Amount (Rs.) Security Held (Give brief description

in case of in the case of securities please list fully)

4. Loan Accounts :Designation of Accounts Amount (Rs.) Security Held (Give brief description

in case of in the case of securities please list fully)

5. Fixed, Call & Short Deposit Account:Designation of Accounts Amount

(Rs.)Interest

accrued to the closing

date

Due Date Particulars of any charges or liens or margins (see item 7)

6. Investments and Other Documents of Title Held in safe custody:Designation Face Value or number of shares


/Debentures/Bonds

Details of the Investments/Securities particulars of Title Deeds/conveyance cl.

7. Margin against Letters of Credit, Guarantees Issued, etc.

Face Value or number of shares /Debentures/Bonds

Designation of Account Amount (Rs.)

8. Bills for CollectionDesignation of Account Amount (Rs.) Due Date

9. Bills Discounted or purchasedName of Drawee Amount (Rs.) Due Date

10. Letters of Credit Open & Outstanding or other FormIn favour of Amount not

utilizedValid upto

11. Guarantees given on behalf of clients (If given against security give brief description of security)In favour of Amount

(Rs.)Date of Expiry

12. Any other particulars not included above

We certify that the above particulars are full and correct and do not excluded any other obligations of the company to us.

Yours faithfully,

Name of Bank/Financial Institution (Designation of Signatory)

Direct confirmation to be sent to Debtors/ Creditors

Debtors/Creditors Name & address

SUB: REQUEST FOR CONFIRMATION OF ACCOUNT AS ON 31/03/2004


Dear Sirs,As per our books of Accounts your account shows a balance of Rs. …………/-.as on 31st March, 2xxx.

You are requested to kindly send the confirmation duly signed to our statutory auditors at the below mentioned address:

MGB & CO Jolly Bhavan 2, 1st floor 7, New Marine line, Churchgate MUMBAI- 400 020

In case the reply is not received from you in 15 days from the issue of this letter, it will be presumed that the above balance as reflected in the books of accounts is in agreement with your books of accounts.

For your convenience an addressed envelope is enclosed for sending confirmation.

Yours faithfully,For …………………. Limited

Authorised Signatory

FORM OF CERTIFICATE

REF: DEBTORS/CREDITORS BALANCE

We hereby certify that the following balance is appearing in our books as at March 31, 2xxx is receivable/payable Balance Rs

( To be signed by officer responsible for this payment)

Checklist to Subsidiaries for material information

Name of the Company :

Name of the Parent Company :

Extent of holding by Parent Co.:

Year Ended :

Checklist for material information to be obtained from subsidiary companies


S.No. Particulars Remarks if any1) Nature of Business:

a) Whether there is any change in nature of business. Any new business / discontinuance of any business as compared to Last year.

b) Whether there is any major activity/ event/ development during the year.

2) Whether there is any change in accounting policy as compared to previous financial year/ or holding company Accounting Policies.

3) Whether there are any material commitments outstanding at the end of the Balance sheet date.

4) Summary of major transactions with related parties with arms length substantiation.

5) Whether there are any transaction/events affecting going concern assumptions.

6) Whether there are any investments acquired or disposed off during the year.

7) Whether there is any material contingent liability as compared to previous year March/ December.

8) Whether there are any major events after the balance sheet date and its impact / disclosures in accounts.

9) Provide the accounting policy difference / deviation as per accounting standard checklist for AS1 – AS29 (Separately provided).

10) Whether any Representation provided during the year to auditors – provide the copies thereof.

11) Any matters requiring parent company attention for consideration of final accounts.

12) Whether any abnormal gain/ income/ expenses


accounted during the year having impact on parent company result.

Physical verification of cash- certificate format

PHYSICAL VERIFICATION OF CASH

Name Of the Company: Time of Verification:

Dear Sir,This is to certify that we have physically verified the Cash Balance as 31st March 2xxx:CASH IN HAND Currency Denominations1000 x 500x 100x 50x 20x 10x5x Total XXX(Balance in Words………………………………)


COINS IN HAND

Total XXX(Balance in Words……………………………)

Cash in Form of IOU’s(As per list attached)

Total XXX(Balance in Words………………………………)

GRAND TOTAL XXX(Balance in Words………………………………)

VERIFY THE BALANCE WITH THE BOOKS

On the basis of said verification, the cash balance have been found in agreement with the balance shown in the respective books of account.

Verification Done By Sign.

Company’s representative Sign.

Procedure for physical verification of stock with checklist and possible errors in counting the inventory

Stock Verification Checklist

Name of the Client:……………………………………….. Location: ……………Date of Verification: ……………….. 2xxx Year Ending: 31st March 2xxx

Sr.No. Audit Procedure Remarks1. Preliminary

Obtain copy of stocktaking instructions; review these in conjunction with available Permanent File notes in order to familiarize yourself with the client’s stocktaking procedures.

2. At the Client’s Premises

Observe the physical counting and recording of the physical stock to determine whether:

a. The attitude and conduct of counters is conducive to accurate results.

b. The stocktaking instructions are being followed.c. The counts are being accurately recorded.d. Consideration is being given to the quality and


condition of the stock items.e. Movement of stock between departments is properly

controlled.3. Review the adequacy of the client’s procedures for

determining the stage of completion of work in progress.

4. Test the Client’s Counting Procedures:

a. Verify the counts of a representative number of items b. Resolve differences between the test counts and the

employee counts.c. Determine whether the frequency of differences

requires complete recounts of specific areas.d. List data to facilitate subsequent comparison to the

final stock sheets for a sufficient number of items test counted.

5. In respect of engineering stores limited Check whether client has carried out an A,B,C analysis of stocks;

a) if yes, confine checking largely to ‘A’ class items. Else take assistance of employees present to identify high value items for checking.

b) If the client follows a system of perpetual inventory select items, which have not been checked in the recent past.

6. Observe the physical condition of stocks (not identified as

obsolete) and enquire about and document

a. Items stored in relatively inaccessible areas.b. Items in a deteriorated condition or of unknown

description.c. Items in subsequently the same condition as in prior

year (where known)d. Items with the prior year’s stock ticket still attached.e. In case of items subject to any expiry date check

labels to identify items remaining in stock beyond their expiry date.

7. Check that all items in each area have been counted and marked off prior to the removal of cards or tickets or by performing the following procedures when count sheets are used.

a. Trace a representative sample of items listed on the sheets to the physical goods.

b. Trace a representative sample of physical goods to listing on the sheets.

8. Investigate stocks held by the client for others as follows:


a. Observe whether the stock has been physically counted and properly identified as belonging to others .

b. Compare physical count information to the stock records.

c. Obtain written confirmation of the stocks from the consignor.

9. Obtain a copy of the client’s stock taking control sheet and:

a. Determine that all tickets, dockets, count sheets or other count documents have been accounted for.

b. Account for unused and spoiled documents.c. Obtain explanations for erasures, alternations or

other unusual items noted.10. Cut off Information

Observe the adequacy of the dispatch cut off procedures and obtain the following information:

The last dispatch document number used and the next unused number, or

A list of dispatches for a reasonable period prior to the stock take when dispatch documents are not numbered.

A list of completed dispatch documents for goods not dispatched as at the stock take date and ascertain whether such items were included in the stock count.

11. Observe the adequacy of the receiving cut-off procedures and:

a. Obtain the last goods received note number used and the next unused number.

Or

Obtain a list of items received during a reasonable period prior to the stock take date when goods received notes are not pre-numbered or are not used.

b. Determine items received but not stored were included in the stock take.

12. Obtain the following additional cut-off information as appropriate for subsequent verification of cut-off procedure when physical stock is taken at balance sheet date. Last purchase invoice number Last cheque number for each bank account.


List of cheques entered but not issued as of the balance sheet date.

Last sales invoice number. Last credit note number. Last work order number. Last purchase order number. Last details of last bank paying-in. Count cash floats, where appropriate.

13. Other

Observe condition of plant and equipment enquire about significant changes noted and record information for subsequent comparison to fixed asset records including.

a. Significant fixed asset additions.b. Equipment not in use.

** If applicable and covered put ‘ ‘ mark. If not applicable mark ‘NA’

Senior –in-charge:

Physical Verification of Inventories (Possible Errors) Sr.No.1 Possible errors in Counting the Inventory:1.1 Inaccurate count/ description resulting in inventory overstatement (quantity, identification,

percent completion).1.2 Inaccurate count/ description resulting in inventory understatement (quantity,

identification, percent completion).2 Possible Errors in compilation of Physical Counts2.1 Inaccurate compilation resulting in inventory overstatement (e.g. quantities changed,

compiled, inventory deleted)2.3 Inventory description inaccurately compiled (under or overstatement)2.4 Conversion errors (counted in inches, posted in pounds)3 Possible Errors in Cutoff3.1 Receipts3.2 Shipments3.3 Transfers4 Possible Errors in Consigned Inventory4.1 Stock held by third parties are not included or are wrongly included.4.2 Stock held on behalf of third parties are included in own inventory.5. Possible errors in classifying Inventory.5.1 State of completion of work in progress is not correctly assessed or recorded.5.2 Work-in-progress is wrongly classified as finished at.6. Possible Mechanical (Compilation) Errors6.1 Incorrect physical or perpetual quantities used in compilation.6.2 Incorrect costs applied in compilation.6.3 Errors in extension or footings in compilation.6.4 Errors in compiling unit costs.


7. Possible Valuation Errors (Actual Costs)7.1 Material quantities in WIP/ FG (e.g. unit assemblies) are incorrect.7.2 Material prices are incorrect.7.3 Labour hours are incorrect.7.4 Errors in overhead accounts (off) / amounts included in OH pool.7.5 Errors in calculation of OH rate.7.6 Errors in application of OH rate.8. Possible Valuation Errors (Standard Costs)8.1 Material quantities in WIP/ FG (e.g. unit assemblies) are incorrect.8.2 Material prices are incorrect.8.3 Labour hours are incorrect.8.4 Labour rates are incorrect.8.5 Build up of material and labour costs (WIP) does not accurately reflect stage of

production (% completion)8.6 Errors in overheads accounts/ amounts included in OH pool.8.7 Errors in calculation of OH rate.8.8 Errors in application of OH rate.9. Stock records not adjusted for differences found at the time of stock counts.

Cross checking financial statement from all respects

CROSS CHECKING / COMPARISION OF FINAL FINANCIAL STATEMENTS FROM ALL RESPECTS

Name of the Client: _______________________________________________


Period: ___/___/20___ To ___/____/20____

Statement: _______________________________________________

Particulars YES / NO

1. Whether the wordings, figures, totals, sub-totals, Carried overs and brought overs have been checked.

2. Whether cross checking of checked total of captions on the final statements e.g. Sundry Creditors, Sundry Debtors etc. with grouping an details, additional details of Schedules VI Part II, has been done (cross checking).

3. Whether you have checked broadly if the form conforms to our usual standards and particularly with Schedule VI.

4. Whether you have put your signature and full name on every page and put proper ticks.

5. Whether checked if any directives sentence is written in the statement e.g. see notes. In that case check up whether notes have been attached properly referred.

6. Whether checked and ensured that corrections properly carried out.

Checked by:- _______________________________________________

Reviewed by:- _______________________________________________

Final Review: Statutory Audit

CLIENT……………………………………………. YEAR……………………… Comments mostly

YES/N.A.


A. Company Profile (detailed) taken

B. Directors’ ReportSummary of the Minutes of the BoardSummary of the Minutes of the Audit CommitteeSummary of the Minutes of the Annual General Body Meeting.Summary of the Minutes of the Extra Ordinary General Body Meeting.Summary of the Minutes of Remuneration committee

C. In the Minutes (upto date) to see inter alia, the following :

a) Remuneration to managerial personnel/perq.in cash or kind/disclosure/commission/Govt. approval

b) Important agreements and MOUs approvedc) Stock Options, Bonus/incentives to Executivesd) New business/Joint ventures ~Object clauses in

Memorandum/Terms etc. e) Loan arrangements and convertibility clause e.g. conversion of

Preference into Equity, conversion of loan into Equity, issue of capital, arbitration awards, approval of accounts.

f) Section 292 Resolution for loans taken, given, Debentures issued. Section 293 borrowings, sale of undertaking, donations etc. Section 372 (A) for investments, loans given etc and to see other Resolutions and discussions of the matters affecting the financial statements.

D. Summary of internal audit reportsSummary of concurrent audit reportsCost auditors reportTax auditors reportValuation reportsExperts opinions

E. Fixed assets AS 10 & 6 Wasting assets - in house valuation of mines, out side confirmations of valuations Leasehold land- assignment for new leases. Title deeds for Freehold land or as well as Leasehold land, New additions to Fixed assets, deductions, assets held for disposal/discarded, interest and other expenses capitalization, capital advances, capital commitment, physical verification papers, capital work in progress, Engineers Certificates, depreciation/ revaluation, exchange fluctuation on related loans/credits.

F. Investments, physical verification and or Demat Statements Valuations - Quoted and unquoted provisioning AS – 13 Investment in subsidiaries, Conversion clause and encumbrance etc.


G. Inventories AS-2 – Physical verification, valuation, obsolete slow moving, non-moving, Excise Duty, additions and corresponding liability, accounting policy-valuations, provisioning etc. capacity utilization/over heads allocation.

H. Sundry Debtors – Age wise analysis, bad debts to be written off, provisioning policy, specific provisions, confirmations, confirmation analysis, reconciliation and adjustments.

I. Cash and Bank Balances – Cash verification system, Bank reconciliation, Outstanding entries therein, subsequent cheque clearances, fixed deposit receipts, Lien/pledge - fixed deposit, fixed deposit receipts physical verification. Cash and cash equivalent in cash flow statement not to include such encumbered fixed deposits.

J. Loans and Advances - corresponding liability provisioning , age wise analysis, capital advances, recoverability, advance to associate concerns, interest. Statement should be comprehensive providing previous year’s figures.

K. Loans taken - Updating the foreign currency loans as per the exchange rate at the close of the year.Securities, guarantees, letter of comfort and pledge of investments and fixed deposits, first charge or second charge or pari passu under unsecured-disclosure/less than one year payable.

L. Current liability and Provisions – Age wise analysis, confirmations, reconciliation of major suppliers accounts, advance received, due to subsidiary companies, provision for Income-tax, Wealth tax, Gratuity, Leave encashment, proposed dividend on equity and preferential shares, corporate tax on dividend, liability for statutory payments such as sales tax, P.F., E.S.I., Pension Fund, Superannuation provision for contingencies, nature etc. Previous year’s figures for comparison

M. Sales – Revenue recognition, cut off date for sales returns, claims, sale of services still to be rendered, Excise Duty on sales to be deducted therefrom, should be net of trade discounts, to associate concerns, subsidiaries, transfer pricing, inter departmental movements, comparisons – month to month, sales to consignment agents ~ review even if on principal to principal basis. Commission payable particularly with reference to completion of target sales which may cross over to the next year.

N. Other Income – Dividend, interest, rent etc and accounting thereon on the basis of accrual.TDS, disclosure on long term/current/subsidiary


O. Payment and provision for employees – Liability provisions, Union agreements, tax deductions, other deductions, Bonus as per the payment of Bonus Act, 1965, statutory registers therefor, gratuity, Superannuation, E.S.I. etc.

P. Other expenses – Analytical review, review of miscellaneous expenses – Schedule VI Part II provisioning, scrutiny of legal expenses in order to have knowledge of contingent/ascertained liabilities.

Q. Interest – Over all working, disclosure of interest on fixed loans and debentures

R. Significant accounting policies – Departure from previous year, standards such as deferred tax asset, government grants, E.P.S.I, and other applicable standards.

S. Contingent Liabilities – Scrutiny, linking with various agreements commitments as mentioned in various minutes and reports Income Tax Charts/Sales Tax/Excise/Customs, Legal cases/Guarantees/Obligations etc.

T. Disclosure of notes about revaluations, disclosures of managerial remunerations, audit fees, other capacity, out of pocket expenses, disclosure about small scale industrial undertakings, exchange fluctuations, related party disclosures, deferred taxation working, quantitative information, actual productions, sales, raw material consumed, analysis of valuation of all raw materials components and spare parts consumed – imported, exports and other income. Dividend remittance to non-residents.

U. Presentation of cash flow statement as per accounting standard encumbered fixed deposits etc. not a part of cash/equivalent.

V. Corporate governance disclosure, separate check list.

W. Internal control procedures – efficacy of internal audit system, major transactions of sales and purchases or services rendered to/from interested parties, deposits accepted from public to see regulatory requirements, system of disposal of by- products, scrap and waste, completeness of cost report, timely deposit of P.F. dues, Income-tax, Wealth tax, Customs duty and Excise Duty liability and whether any of tax liabilities which are undisputed and outstanding for more than 6 months. Report about personal expenses if any.Reporting whether the company a Sick Industrial company within the meaning of Sick Industrial companies legislation.

X. Whether the company can operate as a going concern to be sync with risk analysis.


Y. Analytical study – With reference to comparison from earlier years, ratios, industry norms/budgets etc.Whether BDO Audit Methadology has been properly followed and to review the same.

Z. Audit Report - In proper format, qualifications and necessary supports for the same. In CARO) report, special attention to be given to loans given to interested parties, provisioning. Whether the directors are eligible with reference to Section 274 (1) (G), whether qualifications are clear enough provided for impact on revenue surplus, reserves, assets and liabilities of the company. In case the qualification gives substantial impact to consider whether report is to be given that the Balance sheet does not show true and fair view of state of affairs of the company and that the Profit & Loss Account does not give true and fair view of the profit or loss for the year.

AA. To ensure whether cross verifications have been done properly.

BB. Accounting standards in respect of joint ventures and consolidation of statements should be applied for disclosures and whether minority interest and percentage of interest in joint venture are properly taken note of and computed/ disclosed

CC. Confirmation of Accounting statements from holding companies, subsidiaries, sister concerns, associate concerns.

DD. Revenue expenditure – Policy, intangible assets written off as per company’s policy /relevant account standard.

EE. Insurance coverage, prepaid premium etc.

FF. Audit papers, cost sheets, evaluation of audit staff particularly that of managers.

Records keeping, filing of papers and keeping of files as per BDO Methodology, linking of various statements etc.

GG. Review of engagement letter, management representation, power point presentation contents – audit committee, last year’s discussion notes/resolution of problems, systems improvements.

HH. Industry/business Specific points


Management Representation Letters

General Management Representation Letter

(Date on which financial statement is signed)

To,M/s. MGB & CoChartered Accountants,101-A, Jolly Bhavan No.2,7, New Marine Lines,Churchgate, Mumbai – 400 020.

Dear Sir(s),Re : Representation on financial statements for the year ended 31.03.2xxx

This representation letter is provided in connection with your Audit of the financial statements (Balance Sheet as on 31st March, 2xxx and profit and loss account for the year ended 31 st March 2xxx and the Cash Flow Statement as on that date along with all schedules and annexures), of ……………………………….LIMITED, Mumbai; as at 31st March, 2xxx for the purpose of expressing an opinion as to whether the financial statements give a true and fair view of the financial position and results of operations in accordance with provision of the Companies Act, 1956 and normally accepted accounting principles and standards. The financial statements are the responsibility of the management of the Company. We confirm that we are responsible for the presentation in the financial statements in conformity with generally accepted accounting principles. Certain irregularities in this letter are described as being limited to matters that are material. Items are considered material, regardless of size if they involve an omission or misstatement of accounting information that in the light of surrounding circumstances makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.


We believe that the effect of the uncorrected misstatements, if any, is immaterial both individually and in aggregate, to the financial statements taken as a whole.

There has been no:1. Fraud involving management or employees who have significant roles in the internal control.2. Fraud involving others who could have a material effect on the financial statements.

The company has no plans or intentions that may materially affect the carrying value of the assets and liabilities.

We confirm to the best of our knowledge and belief the following representations in addition to the specific representations made during the course of audit: -

A. We confirm and certify the following to be true and correct:-

3. We acknowledge our responsibility that appropriate accounting policies have been selected and they have been consistently applied and that judgment and estimates made are reasonable and prudent so as to give a true and fair presentation of the state of affairs as at 31st March, 2xxx.

4. The applicable accounting standards have been followed in the preparation of financial statement.

5. Proper and sufficient care has been taken for the Maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for the safeguarding of the assets of the company and for the prevention and detection of frauds and other irregularities.

6. The financial statements have been prepared on going concern basis.

7. The company has a satisfactory title to the fixed assets included in the accounts and we have physically verified the same and there was no major discrepancy noticed on such verification.

8. We have made available to you all books of accounts and supporting documents that were in the custody of the company or its representatives and all minutes of the meeting of the Board of Directors conducted upto date.

9. No material commitments have been given to acquire other non current assets except otherwise stated

10. Provision have been made in the accounts for :-

i) All Liabilities, which existed at the Balance Sheet date, other than Contingent Liabilities in respect of which no actual liability is expected to arise.

ii) All losses expected to arise from events, which have occurred by Balance Sheet date.

11. All income, which is actually received, or receivable upto the date of the Balance Sheet, has been brought into account.

12. There are no contingent liabilities except as detailed in Note … to Schedule …. The company has given corporate guarantee on behalf of related parties also disclosed in Note … to Schedule ….


13. The Balance Sheet includes all cash & bank accounts and all other assets of the company required being included therein.

14. Disclosure has been made in the accounts of all matters necessary for those accounts to show a true and fair view of the Company’s state of affairs and results there on.

15. None of the items of the Current Assets, Loans and advances has a value on realization in the ordinary course of business, which is less than the amount stated in the Balance Sheet except otherwise stated and provision for all known liabilities is made in the Accounts.

16. No charges are pending against the Company for alleged violations of the constitution of the Company or any regulation or rules, which if decided adversely would have a material effect on the state of affairs or on the result for the year as shown by the accounts of the company. To the best of our knowledge and belief there have been no such violations.

17. The Company has made necessary provision for employee retirement benefits.

18. Information has been furnished to you in respect of all contracts of a material nature that were effective during the year or that have become effective since that date. Further, the Company has compiled with all aspects of contractual agreement that could have a material effect on the financial statement in the event of non-compliance. There has been no communication concerning non-compliance with requirements of Government, Semi-Government or other authorities with respect to financial or other matter.

19. There have been no irregularities involving management or employees especially by those who play a significant role in the system of internal control or that could have material effect on the financial statement.

20. There are no shortages or irregularities were discovered during the year and we have no knowledge of the existence of any conditions that might be indicative of or conducive to shortage or irregularities.

21. Expenses incurred for overseas traveling by the employees and directors of the Company were purely in connection with the business of the Company.

22. Events since the Balance Sheet date have been fully taken into account in so far as they have a

bearing on the accounts attributable to assets and/or liabilities at that date.

23. Apart from the changes in the ordinary course of business have not made the present financial position substantially different from that shown in the Balance Sheet.

24. Dues payable to small-scale industrial undertakings, which are outstanding for more than 30 days are …………………………

25. The company has taken office premises, residential facilities and plant and machinery

(including equipments) under cancelable/non cancelable agreements that are renewable on a periodic basis at the option of both the lessee and lessor. The initial tenure of the lease generally is for ……………………….


26. The listing and details of transactions with related parties are as follows: (as given in notes to accounts).

27. Disclosures as required by the amendment to Clause 32 of the listing agreement vide SEBI circular no.2/2003 of 10th January 2003: (as given in notes to accounts).

28. All notes to accounts should be covered like segment, expenditure and earnings in foreign currency restructuring, events subsequent to balance sheet.

Thanking You.Yours faithfully,For ………………………….LIMITED

Managing Director


Fixed Asset Certificate


To,M/s. MGB & CoChartered Accountants,101-A, Jolly Bhavan No.2,7, New Marine Lines,Churchgate, Mumbai – 400 020.

Ref : Fixed Assets Certificate.

Dear Sir,

Following is a summary of the Fixed Assets held by “……………..Limited” as on 31.03.2xxx.

List of Fixed Assets Rs (W.D.V.)ComputersFurniture & FixtureVehiclesOffice EquipmentsBuildingGrand Total

With respect to the above Fixed Assets, we hereby certify that to the best of our knowledge and belief:-

1) The Company is maintaining proper records of its fixed assets giving full particulars including quantity details, and situation of fixed assets.

2) During the year the management has carried out physical verification of the said assets. No material discrepancies were noticed on such verification. All discrepancies noticed have been properly dealt with in the books of accounts

3) That none of the Fixed Assets have been revalued during the year.

4) Further the Company has not disposed off substantial part of the fixed assets

5) All the said fixed assets shown above are the property of this company recorded in the register of Fixed Assets.

6) Addition to fixed assets of Rs …………….. is done during the year.

7) Fixed assets are stated at cost less accumulated depreciation. Cost comprises of purchase price and any attributable cost required to bring the asset to its working condition for its intended use


8) Depreciation on assets acquired is provided using the Written down value Method at the rates specified in Schedule XIV to the Companies Act 1956(Policy required)

9) Shortage on physical verification of fixed assets and loss on sale of fixed assets amounting to Rs./Thousand ………. (………) has been debited to Profit and Loss Account

Thanking You.Yours faithfully,For ……………………LIMITED

Managing Director

Cash Balance Certificate


To,


M/s. MGB & CoChartered Accountants,101-A, Jolly Bhavan No.2,7, New Marine Lines,Churchgate, Mumbai – 400 020.

Ref : Cash Balance Certificate.

Dear Sirs,

1) This is to certify that, we have physically verified the Cash Balance of Rs. ……………/- as on the Balance Sheet date 31.03.2xxx.

2) On the basis of said verification, the balance has been found in agreement with the balance shown in the books of accounts.

Thanking You.

Yours faithfully,For ………………………LIMITED

Managing Director

Sundry Debtors/ Loans and Advances Certificate


To,M/s. MGB & CoChartered Accountants,101-A, Jolly Bhavan No.2,


7, New Marine Lines,Churchgate, Mumbai – 400 020.

Ref : Sundry Debtors / Loans & Advances Certificate.Dear Sir,

In connection with your audit of the financial statements of……………………….Limited for the period ended 31st March, 2xxx, we certify that the following items appearing in the books as at 31st March, 2xxx are considered good and fully recoverable with the exception of those specifically shown as “doubtful” in the Balance Sheet.

PARTICULARS Rs. Rs.Sundry DebtorsOver six monthsOthersLoans & AdvancesLoansAdvancesDeposits

Notes:

1. The company has not granted loans to firms, Companies or other parties listed in the register maintained under Section 301 of the Companies Act, 1956.

2. None of the items of the Debtors, Loans and Advances has a value on realization in the ordinary

course of business, which is less than the amount stated in the Balance Sheet except otherwise stated and provision for all known liabilities is made in the Accounts.

3. Advances include Rs……….. due from a company in which director is interested as a member(if any)

4. All advances have been given in relation to the business of the company.

5. The company has made suitable provisions for doubtful debts and advances. The company is pursuing recovery and does not consider them as bad debts or advances.

Thanking You.

Yours faithfully,For …………………………. LIMITED

Managing Director


Stock Certificate

(Date on which financial statement is signed)To,M/s. MGB & CoChartered Accountants,101-A, Jolly Bhavan No.2,7, New Marine Lines,Churchgate, Mumbai – 400 020.

Ref : Stock Certificate.

Dear Sirs,

Following is the Summary of Inventories as on 31.03.2xxx is as under :

Inventories (break up):


Total ………………

Further to the above, we certify that :

1. Stock in trade have been physically verified by the Management. The schedule and procedure have been annexed herewith.

2. Valuation of Stock is fair and proper in accordance with normally accepted accounting principles as on the same basis as preceding year. All inventories are valued as per accounting policies detailed below and necessary provision has been made for fall in case inventory is valued at net realizable value.

a) Inventories (Policy to be disclosed)

3. We have received confirmations is respect of stock held by third parties in most cases.

4. Stock written off/ impaired during the year as identified by the management as obsolete/ slow moving/ non-moving is Rs………………..

Thanking You.Yours faithfully,For ……………………….LIMITED

Managing Director

Investment Certificate

(Date on which financial statement is signed)To,M/s. MGB & Co.Chartered Accountants101-A, Jolly Bhavan No.2,New Marine Lines, Churchgate,Mumbai - 400 020

RE: INVESTMENT CERTIFICATE

Dear Sir,

Following are Investments held as on 31st March 2005: Investments Amount

With respect to the above investment, we hereby certify that to the best of our knowledge and belief:


1. The Company is maintaining proper record of its investment, giving full particulars including Folio No. and Share Certificate No.

2. During the year the management has carried out the physical verification of the said investments.

3. All Non Monetary foreign currency items are carries at cost and hence investments are stated at cost. Investments in shares of foreign subsidiary and other companies are expressed in Indian Currency at the rates of exchange prevailing at the time when the original investments were made. Provisions for diminution in value of Long term investments is made, if the diminution is other than temporary.

Thanking You.Yours faithfully,For ……………………….LIMITED

Managing Director

CARO Certificate


To,M/s. MGB & Co.Chartered Accountants101-A, Jolly Bhavan No.2,New Marine Lines, Churchgate,Mumbai - 400 020

Dear Sirs,

Re: Audit for the period 2xxx-2xxx(CARO)

As regards your enquiries pertaining to various information required in connection with the companies (Auditors' Report) Order,2003 issued by the Central government in terms of Section 227 (4A) of the Companies Act, 1956 is represented to you as under and certify as under :

1) The Management has done the physical verification of the fixed assets during the year and has observed no discrepancies. The fixed assets have not been re-valued during the year. Further no substantial part of the fixed assets has been disposed off during the year to affect the going concern of the Company.


2) The management has physically verified the inventories during the year. The procedures of physical verification of inventories are reasonable and adequate in relation to the size of the company and the nature of its business. There were no material discrepancies noticed. The discrepancies noticed have been properly dealt with in the books of accounts.

3) (a) The Company has granted loan to … companies covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and year end balance of such loans aggregate to Rs ……. lacs and Rs……. lacs respectively.

(b) The rate of interest and other terms and conditions of such loans are not prima facie prejudicial to the interest of the Company

(c) In respect of aforesaid loans, including interest wherever stipulated, given by the company were repayable on demand.

(d) In respect of aforesaid loans, there is no overdue amount more than Rs One Lakh.

(e) The Company has taken unsecured loans from …… parties covered in the register maintained under Section 301 of the Act. The maximum amount involved during the year and year end balance of such loans aggregate to Rs ….. lacs and Rs …. Respectively

(f) The rate of interest, wherever applicable and other terms and conditions are not prima facie prejudicial to the interest of the company.

(g) The aforesaid loans, including interest wherever stipulated, taken by the company were repayable on demand

4) The internal control procedure regarding purchase of inventory, fixed assets and sale of goods and services of the company are adequate and commensurate with the size of the business.

5) (a) The particulars of contracts or arrangement that need to be entered into the register maintained under section 301 of the Companies Act, 1956 have been so entered.

(b) All transactions made in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956, aggregating during the year to Rs.5,00,000/- or more in respect of each party during the year have been made at prices which are reasonable having regard to the prevailing market price at the relevant time.

6) The company has not accepted deposits from the public with in the meaning of section 58A and 58AA of the Companies Act, 1956 and the companies (Acceptance of deposit) rules 1975. Further no order has been passed by the company law board on the aforesaid section.

7) The Company had adequate internal audit system during the year.

8) The Central government of India has not prescribed the maintenance of cost records under Section 209 (1)(d) of the Companies act 1956.

9) (a) The company is regular in depositing the undisputed statutory dues including provident fund, employees state insurance, Income tax, wealth tax, custom duty, sales tax and other statutory dues with appropriate authorities except delay in few cases. The undisputed amounts payable in


respect of Income tax, Wealth tax, custom duty, sales tax and excise duty outstanding as on the balance sheet date for a period of more than six months from the date they became payable are as under.

Name of the Statute Nature of the Dues Amount (Rs.)

Period to which the amount relates

(b) The disputed Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which

have not been deposited are as under:

Name of the Statute

Nature of the Dues

Amount (Rs.)

Period to which the amount relates

Forum where dispute is pending

10) The accumulated losses of the company are not more than fifty percent of its net worth. However the company has incurred cash losses in the current financial year but had cash profit in the immediately preceding financial year.

11) The company has not taken any loan from financial institution or bank or debenture holders during the year.

12) The company has not granted any loans or advances on the basis of security by way of pledge of shares, debentures and other securities during the year.

13) The provision of any special statute as specified in Clause 4(xiii) of the Order are not applicable to the company.

14) The Company is not dealing in or trading in shares, securities, debentures or other investment.

15) The company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

16) The company has not raised any term loan during the year.

17) Short-term funds to the extent of Rs……… have been used during the year for long-term Investment.

18) The Company has not made any preferential allotment of shares to parties/ Companies Covered under Section 301 of the Companies Act, 1956.

19) The company has not issued any Debentures during the year.

20) The company has not raised any money by way of public issues during the year.

21) There are no instances of fraud on or by the company during the year.

Thanking you,


Yours faithfully, ……………………….Limited

Managing Director

Applicability of Accounting Standards

For the purpose of applicability of Accounting Standards, enterprises are classified into three categories, viz., level I, level II and level III.

Criteria for Classification of enterprises

Level I Enterprises

Enterprises which fall in any one or more the following categories, at any time during the accounting period, are classified as Level I enterprise:

(i) Enterprise whose equity or debt securities are listed whether in India or outside India.

(ii) Enterprises, which are in the process of listing their equity or debt securities as evidenced by the board of director’s resolution in this regard.

(iii) Banks including co-operative banks.

(iv) Financial institutions.

(v) Enterprises carrying on insurance business.

(vi) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crores. Turnover does not include ‘Other Income’.

(vii) All commercial, industrial and business reporting enterprise having borrowings, including public deposits in excess of Rs. 10 crores at any time during the accounting period.

(viii) Holding and Subsidiary enterprises but fall in any one or more of the above at any time during the accounting period.

Level II Enterprises

Enterprises which are not level I enterprises but fall in any one or more of the following categories are classified as Level II enterprises:


(i) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 40 Lakhs but does not exceed Rs. 50 Crores. Turnover does not include ‘other income’.

(ii) All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 1 Crore but not in excess of Rs. 10 crore at any time during the accounting period.

(iii) Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level III Enterprises

Enterprises, which are not covered under Level I and Level II, are considered as Level III enterprises.

Applicability

Level II and Level III enterprises are considered as SMEs

Level I enterprises are required to comply fully with all the accounting standards.

No relaxation is given to level II and Level III enterprises in respect of recongnition and measurement principles. Relaxations are provided with regard to disclosure requirements. Accordingly, Level II and level III enterprises are fully exempted from certain accounting standards which mainly lay down disclosure requirements. In respect of certain other accounting standards, which lay down recognition, measurement and disclosure requirements, relaxations from certain disclosure requirements are given.

AS Description Level 1 Level 2 Level 31 Disclosure of Accounting Policies Applicable Applicable Applicable 2 Valuation of inventories Applicable Applicable Applicable 3. Cash Flow Statements Applicable Not Applicable Not Applicable4 Contingencies and Events occurring

after the Balance Sheet DateApplicable Applicable Applicable

5 Net profit or Loss for the period, Prior period items and changes in Accounting Policies

Applicable Applicable Applicable

6 Depreciation Accounting Applicable Applicable Applicable 7 Construction contracts Applicable Applicable Applicable

(Old+New) Refer Note1 Refer Note1Refer Note1

8 Accounting for Research and Development (this standard has been withdrawn w.e.f. 1-4-2004 for all levels of enterprises and AS 26 is applicable)


9 Revenue Recognition Applicable Applicable Applicable 10 Accounting for Fixed Assets Applicable Applicable Applicable 11 The effects of changes in Foreign Applicable Applicable Applicable


Exchange Rates(applicability of old and new standards should be mentioned) Refer Note2 Refer Note2 Refer Note2

12 Accounting for Government Grants Applicable Applicable Applicable 13 Accounting for Investments Applicable Applicable Applicable 14 Accounting for amalgamations Applicable Applicable Applicable 15 Accounting for Retirement Benefits in

the Financial Statements of Employers


16 Borrowing costs Applicable Applicable Applicable 17 Segment Reporting Applicable Applicable with

modificationsApplicable with modifications

18 Related Party Disclosures Applicable Applicable with modifications

Applicable with modifications

19 Leases Applicable Applicable with some modifications and exemption from Disclosure Requirements (Ref Note 3)

Applicable with some modifications and exemption from Disclosure Requirements (Ref Note 3)

20 Earning per Share Applicable Applicable with some modifications and exemption from Disclosure Requirements (Ref Note 34

Applicable with some modifications and exemption from Disclosure Requirements (Ref Note 4)

21 Consolidated Financial Statements Applicable (Refer Note 5)

Not applicable Not applicable

22 Accounting for Taxes on Income Applicable except for non corporate enterprises w.e.f. 1-4-2006 as per announcement for AS22 by ICAI

Applicable except for non corporate enterprises w.e.f. 1-4-2006 as per announcement for AS22 by ICAI

Applicable except for non corporate enterprises w.e.f. 1-4-2006 as per announcement for AS22 by ICAI

23 Accounting for Investments in Associates in Consolidated Financial Statements

Applicable Not applicable Not applicable

24 Discounting Operations Applicable Not applicable Not applicable25 Interim Financial Reporting Applicable

(Refer Note6)Not applicable

26 Intangible assets Applicable Applicable Applicable27 Financial Reporting of interests in Applicable Not Applicable Not Applicable


Joint Ventures (Refer Note 5) to the extent of requirements relating to consolidated financial statements

to the extent of requirements relating to consolidated financial statements

28 Impairment of Assets Applicability from 1-4-2004 onwards

Applicability from 1-4-2006 onwards

Applicability from 1-4-2008 onwards

29 Provisions, Contingent Liabilities and Contingent assets

Applicable Disclosure requirements are not applicable

Disclosure requirements are not applicable

Notes:1. The revised Standard (2002) comes into effect in respect of all contracts entered into during

accounting periods commencing on or after –1-4-2003 and is mandatory in nature from that date. Accordingly, the pre-revised As 7 (issued 1983) is not applicable in respect of such contracts.

2. The revised AS11 (2003) would come into effect in respect of accounting periods commencing on or after 1-4-2004 and would be mandatory in nature from that date. The revised Standard (2003) would supersede As 11 (1994), except that in respect of accounting for transactions in foreign currencies entered into by the reporting enterprise itself or through its branches before the date the revised As 11 (2003) comes into effect, AS 11 (1994) will continue to be applicable.

3. As 19: Para 22 (c) & (f); Para (b) & (c ); Para 37 (a), (f) & (g) and Para 46 (b), (d) & (e) of As 19.4. AS 20: No need to disclose diluted earning per share and information required by para 48 of AS 20.5. Relevant regulators require compliance with AS21, AS23 & AS27 only by certain Level 1 enterprises.6. AS 25, Interim Financial Reporting, does not require any enterprise to present interim financial report.

It is applicable only if an enterprise is required or elects to prepare and present an interim financial report. However, the recognition and measurement requirements contained this Standard applicable to interim financial results, e.g. quarterly financial results required by the SEBI.

At present, in India enterprise are not required to present interim financial report within the meaning of AS 25. Therefore, no enterprise in India is required to comply with the disclosure and presentation requirements of AS25 unless it voluntarily presents interim financial report within the meaning of AS25. The recognition and measurement principles contained in AS 25 are also applicable only to certain Level1 enterprises since only these enterprises are required by the concerned regulators to present interim financial results.

in view of the above, at present, AS 25 is not mandatorily applicable to Level II and Level III enterprises in any case.

CHECKLIST FOR ACCOUNTING STANDARDS

Client___________________________

Year ended: , 200__________


ACCOUNTING STANDARDS CHECKLIST CONTROL SHEET

OBJECTIVE: The objective of this checklist is to determine whether the accounts of the client, been prepared in accordance with the Accounting Standards. Any non-compliance with the Standard(s) should be highlighted.

AS Compliance Remarks 1 Disclosure of Accounting Policies Y/N

2 Valuation of Inventory Y/N/NA

3 Cash flow statements Y/N/NA

4 Contingencies & events occurring after the Balance Sheet date (Revised)

Y/N

5 Net Profit or Loss for the period, extraordinary items & changes in accounting policies

Y/N

6 Depreciation Accounting Y/N/NA

7 Accounting for construction contracts Y/N/NA

8 Accounting Research & Development(Standard requires disclosure of R&D expenditure)

9 Revenue Recognition Y/N/NA

10 Accounting for Fixed Assets Y/N/NA

11 Accounting for the effects of changes in foreign exchange rates

Y/N/NA

12 Accounting for Government grants Y/N/NA

13 Accounting for investments Y/N/NA

14 Accounting for amalgamations Y/N/NA

15 Accounting for retirement benefits in the financial statements of employers

Y/N/NA

16 Borrowing Costs Y/N/NA

17 Segmental Reporting Y/N/NA


18 Related Party Transactions Y/N/NA

19 Accounting for Leases Y/N/NA

20 Earning per Share Y/N/NA

21 Consolidated Financial Statements Y/N/NA

22 Accounting for taxes on income Y/N/NA

23 Accounting for investments in associates in consolidated financial statements

Y/N/NA

24 Discounting operations from 1-4-2004/5 Y/N/NA

25 Interim Financial Reporting Y/N/NA

26 Intangible Assets Y/N/NA

27 Financial Reporting of interests in Joint Ventures

Y/N/NA

28 Impairment of assets from 1-4-2004/05 Y/N/NA


AS 1 – Disclosure of Accounting policies

Area Y/N Remarks1. Is there a list of all significant policies adopted by

the auditee?2. If yes, are all the relevant areas listed below are

adequately covered, so far applicable?

(a) Basis for preparation of financial statements

(b) Method of accounting

(c) Valuation of Fixed Assets

(d) Treatment of goodwill

(e) Treatment of Impairment of Assets

(f) Method of depreciation, depletion and amortisation

(g) Treatment of expenditure during construction

(h) Valuation of Investments

(i) Valuation of Inventories

(j) Research & Developments

(k) Deferred Revenue Expenditure

(l) Receivables and Liabilities

(m) Revenue Recognition

(n) Conversion of translation of foreign currency items.

(o) Disclosure of events subsequent to the balance sheet date

(p) Treatment of Borrowing Cost

(q) Treatment of Lease Accounting

(r) Provision for Taxes on income, both current and deferred


(s) Treatment of Prior Period items

(t) Treatment of Miscellaneous Expenses not written off

(u) Excise and Customs Duty: Definition of turnover

(v) Treatment of retirement benefits

(w) Recognition of profit on long term contracts

(x) Treatment of contingent liabilities.

3. If there is a change in accounting policies whether it has been disclosed separately with quantification of its impact on the financial statements?

Done By:………………………..

Checked by:……………………

Reviewed by:……………………


AS 2 – Valuation of Inventories

Audit Procedure Y/N Remarks

1. Obtain a complete list of the following: Inventory items and codes Groups Cost sheets (if the volume is high, sample

check and append a note) Inventory valuation statement as at valuation

date. Note on procedure for valuing inventory Note on method of determining net

realizable value (NRV)

2. Check whether inventorised asset includes- Held for sale in the ordinary course of

business In the process of production for such sale; orIn the form of materials or supplies to be consumed in the production process.

3. Ensure that Inventories include materials, maintenance supplies, consumables and loose tools awaiting use in the production process.

4. See that inventories do not include machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular.

5.

51.

5.2

5.3

Are the NRV disclosed and compared with historical costs? (HC). If yes are they for individual items or a group of items? Specify.Is the NRV supported by orders, sales, invoices, etc?

Are there any class of goods/item by item whose NRV is below cost for reasons such as damage, fall in SP, obsolescence etc?

Have you considered reliable evidence to arrive at NRV that may have occurred after the Balance Sheet date such as price fluctuation, change in contract price for which specific inventories are held………?

6. Which of the method for determination of HC is


followed: FIFO / Weighted Average Specific Identification Adjusted Selling Price- Retail business or

businesses where costs are not readily ascertainable

Standard Cost

Is the method appropriate as defined if not, specify. After review by Senior, ascertain whether qualification is necessary and recommended.

Have you ensured that the cost of inventories include all costs of purchase, conversion including duties and taxes (other than those subsequently recoverable by the enterprise) and freight where applicable to bring them to their present location and condition?

Have excise duties paid/ payable on the Balance Sheet date been included in the inventories of Finished Goods? Whether provision for excise duty payable made of same amount?

Have you ensured that trade discounts, rebates and duty drawback are deducted in determining the costs of purchases?

7. In case of manufactured products, costs can be determined ONLY by (A) Absorption Costing (D) Direct costing is not permitted. Specify the allocation of fixed costs on the basis of NORMAL LEVEL OF PRODUCTION:

Append Note:

8.

8.1

8.2

Overheads

Obtain a list of overheads

Have you ensured that costs like advertising, selling, sales promotion, all costs that do not contribute to bringing the inventories to their present location and conditions are eliminated?

Have you ensured that any cost which relates to


8.3 ex-factory movement (not being transfer to depot is not considered?)

9.

9.1

9.2

Consumable stores etc.

You have ensured that these are valued at cost? If not, is there a justification for valuing at below cost. Specify the percentage and basis for valuation below cost.

If the total value is material, is the basis for valuation certified by the costing department/ senior manager?

10.

10.1

10.2

10.3

10.4

Bye-products/Non usable waste

Obtain a certified list of by products

Have these been valued at lower cost or NRP?

Are the by products costs defined? If not has NRP been applied for valuation

If the client does not have facility for reusing waste has the non reusable waste been valued at NRP/

11.

11.1

11.2

11.3

11.4

Disclosure

Has the Accounting policy for valuation been disclosed in the financial statements? Are ‘cost formulas’ also disclosed/

In case ‘Base Stock Method’ used, has the following been disclosed? Valuation of Base Stock carried Valuation of Excess Stock over Base Stock Difference between Base Stock & Excess Stock and the procedure for valuation.

Is the total carrying amount and its appropriate classification disclosed in the accounts?

Have the inventories been classified in the accounts under the heads- Raw materials and components, WIP, FG, stores and spares and loose tools?

12. Consistency


12.1

12.2

12.3

12.4

Is the method of valuation same as last year?

If answer is no, is the change likely to be immaterial for:

a) Current or

b) Later periods

if 9.2 is no, append working note for the financial impact if determinable.

If the amount is not determinable, review by senior determine the nature of note and qualification.

Done By:………………………..


Reviewed by:……………………….


AS 3 – Cash Flow Statements


1. Ensure that a cash flow statement for the current year is prepared and cash flows are classified as operating, investing and financing activities.

2. Whether the enterprise has reported cash flows from operating activities using either direct or indirect method?

3. Whether the enterprise has reported separately major classes of gross receipts and gross cash payments arising from investing and financing activities, (except to the extent that cash flows described in paragraphs 22 and 24)?

4. Are there any foreign currency cash flows? If so are they recorded in an enterprise’s reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the cash flow?

5. Is the effect of changes in exchange rates on cash and cash equivalents held in a foreign currency reported as a separate part of the reconciliation of the changes in cash and cash equivalents during the period?

6. Are there any cash flows arising from extraordinary items? If so are they classified as arising from operating, investing and financing activities as appropriate and separately disclosed?

7. Are the following considered in respect of dividends and interest?

(a) Cash Flows from interest and dividends received and paid should each can be disclosed separately.

(b) Cash flows arising from interest paid and interest and dividends received in the case of a financial enterprise should be classified as cash flows arising from operating


activities.

(c) In the case of other enterprises, cash flows arising from interest paid should be classified as cash flows from financing activities while interest and dividends received should be classified as cash flows from investing activities.

(d) Dividends paid should be classified as cash flows from

8. Are the cash flows arising from taxes on income separately disclosed and classified as cash flows from operating activities except if they are specifically identifiable with financing and investing activities?

9. Are the aggregate cash flows arising from acquisitions and from disposals of subsidiaries or other business units presented separately and classified as investing activities?

10. Has the enterprise disclosed, in aggregate, in respect of both acquisition and disposal of subsidiaries or other business units during the period of each of the following:

a) the total purchase or disposal consideration and;

b) the portion of the purchase or disposal consideration discharged by means of cash and cash equivalents.

11. An non-cash investing and financing transactions excluded from cash flow statement?

12. Has the enterprise disclosed the components of cash and cash equivalents and presented a reconciliation of the amounts in its cash flow statement with the equivalent items reported in the balance sheet?

13. Whether the enterprise has disclosed, together with a commentary by management, the amount of significant cash and cash equivalent balances held by it that are not available for use by it?


Done By:………………………..




AS 4 – Contingencies and Events occurring after the Balance sheet Date


1. Are there events such as these occurring after the balance sheet date:

(i) Natural calamity such as fire, flood, earthquakes, riots etc.

(ii) Theft of stocks, assets, cash, etc.

(iii) Major clients/ customers becoming bankrupt.

(iv) Claims made by suppliers

(v) Fresh wage revisions

(vi) Change in Policy of Government

(vii) Define other items such as amalgamations, mergers, etc.

(viii) Any other event such as above

2. In order to identify any significant post balance sheet events of which we are not already aware:

(i) Review latest management accounts, cash flow forecasts etc. and investigate unusual items, trends etc.

(ii) Peruse minutes of meetings of shareholders, directors executive committees etc.

(iii) Inspect register of charges

(iv) Review material journal entries

(v) Review cash book

3. Enquire from executives having responsibility for financial and accounting matters as to:

(i) Material contingent liabilities or


commitments as of the balance sheet date and the date of enquiry.

(ii) Significant changes in equity capital, long-term loans and working capital to the date of enquiry.

(iii) Any unusual adjustments recorded since the balance sheet date.

(iv) The status of purchase or sale commitments of an unusual nature

(v) Any other matters of significance (litigation, effect of changed legislation etc.)

4. Evaluate post balance sheet events identified by auditors of subsidiary and associated companies.

5. Obtain updated management representations where appropriate.

6. Do events occurring after the Balance Sheet date material?

7. Has a list of all such contingencies prepared?

8. Is it probable that future events will confirm after taking into account any related probable recovery that an asset has been impaired or a liability incurred as at the balance sheet date

9. Can a reasonable estimate of the resulting loss be made?

10. Does the contingency require a provision for a liability or write off of any asset?

11. If yes, quantify the loss. Is a charge made in P& L A/c?(i) Is the estimate supported by a working

note?(ii) If the contingency fulfils only one of the two

specified conditions has a disclosure been made in the notes to accounts?

(iii) Have you ensured that contingent gains have not been recognised in the financial statements except when the realization of the gain is virtually certain?

(iv) Is there a board resolution appearing of the


charge to the P&L Account?(v) Is there appropriate and sufficient adequate

evidence for such a provision?

12. If the charge is not made in the P&L ac, is there a note in the accounts. Have the amount of such contingency been determined based on the information available on the date of approval of financial statements?

13. Has the provision for dividends declared been made in the accounts?

14. Have you ensured that contingent gains should not be recognised in the financial statements?

15. Specifically have you ensured that the following information is disclosed:

(i) Nature of contingency/ event(ii) Uncertainties which will affect future

outcome(iii) Estimate of financial effect, or if not

possible, a statement that such an estimate is not possible.

(iv) The nature of the event(v) An estimate of the financial effect, or a

statement that such an estimate cannot be made.

Done By:………………………..



AS 5 – Net Profit for the period, Prior Period items and changes in Accounting Policies


1. Prior Income/ Expenses

1.1 Have you made a list of prior period income?

1.2 Have these been separately disclosed in the P&L account in a manner that their impact on current profit/loss is perceived clearly? Or a


schedule or a note given for this if required?

1.3 Is the impact on the operating profit determined? If not a note to that effect is required? How is the operating profit determined? In what way is it (if at all) different from the net profit? A working note to be attached.

2. Extraordinary items

2.1 Has there been any extraordinary event during the period under report e.g. a loss arising out of natural disaster, attachment of property, sale of business division, additional liability/benefit arising out of judicial pronouncement and the like affecting the entity? Have you made a list of these items?

2.2 Have you ensured that it is disclosed in the statement of profit and loss as part of net profit or loss for the period? Have these been separately disclosed in the P&L A/c? is a schedule or a note given for this?

2.3 Is the impact on the operating profit determined? If not, a note to that effect is required? How is the operating profit determined? In what way is it (if at all) different form the net profit? A working not to be attached.

3. Ordinary activities

3.1 Have you ensured that if items of income and expense within profit or loss from ordinary activities are of such size, nature or incidence that their disclosure is relevant to explain the performance of the enterprise for the period, the nature and amount of such items is disclosed separately?

4. Accounting estimate

4.1 Is there any change in the accounting estimate?

4.2 Does it have a material financial impact either in the current period or in future period?

If yes, whether the effect of a change in an


accounting estimate is included in the determination of net profit or loss in

(a) The period of the change, if the change affects the period only; or

(b) The period of the change and future periods, if the change affects both.

4.3 Have you ensured that the effect of a change in an accounting estimate is classified using the same classification in the statement of profit and loss as was used previously for the estimate?

4.4 Is the nature and amount of a change in an accounting estimate which has a material effect in the current period, or which is expected to have a material effect in subsequent periods is disclosed?

4.5 If it is impracticable to quantify the amount whether this fact is disclosed?

5. Accounting Policy

5.1 Obtain the reason for change in accounting policy- verify whether the same is justifiable on grounds of more appropriate presentation of the financial statements of the enterprise.

5.2 If any change in an accounting policy has a material effect, is that fact along with the impact there from and the adjustments resulting from, such change, if material, disclosed in financial statements of the period in which such change is made, to reflect the effect of such change?

5.3 If the effect of such change is not ascertainable, wholly or in part whether such fact is indicated in the financial statement?

5.4 If a change in the accounting policies is reasonably expected to have a material effect in future periods, whether the fact of such change is appropriately disclosed in the period in which the change is adopted?

Done By:………………………..




AS 6 Depreciation Accounting


1. Does the enterprise have a list of all fixed assets?

Useful Life

1. Is the useful life of each fixed asset available on record?

2. Is the depreciable amount for each item of fixed asset defined?

3. Is the useful life of the depreciable asset estimated after considering expected physical wear & tear, obsolescence, legal or other limits on the use of asset. Is documentary evidence available where required?


4. Is the useful life of the depreciable assets reviewed periodically?

5. Is there a revision in the estimated useful life of the assets contemplated by the Management during the year?

6. Is there any unamortised depreciation in respect of such assets?

7. Is the unamortised depreciation in respect thereon charged over the revised remaining useful life?

8. Is depreciation provided on assets added or extended to the existing assets during the year?

9. Is depreciation provided separately on additions/extensions to assets where the estimate of useful life can be made independent of the existing assets?

10. Has depreciation been provided prospectively on any change occurring in the historical value of assets due to exchange fluctuations, price adjustments, changes in duties or similar factors?

Revaluation: Is it applicable to Fixed Assets? If ‘N’, omit 11, 12 & 13.

11. Has depreciation as been charged on the revaluation of assets?

12. Has there been a material effect on the amount of depreciation on revaluation?

13. Has the same been disclosed separately in the year in which revaluation has taken place?

Sale

14. Has there been any sale of depreciable assets during the year?

15. Has the sale of such depreciable asset attracted a surplus or deficiency? If so, whether the surplus or deficiency was material?


16. Has the surplus or deficiency been disclosed separately?

General

17. Is depreciation allocated to depreciable assets systematically? Append Note.

18. Have identical methods for calculation of depreciation been followed from one accounting period to another?

19. Has there been a change in the method of calculation of depreciation during the year?

20. Was the change in the method of calculation due to any change in the statute? Specify.

21. Was the change in the method of calculation required due to a change in an Accounting Standard?

22. Has depreciation been recomputed on the basis of the new method retrospectively from the date from which the asset came in use?

23. Has the surplus or deficiency arising from retrospective recomputation been adjusted in the accounts of the year when the method has changed?

24. Has the surplus or deficiency arising on the change in method been credited or debited to the Profit and Loss Account?

25. Has the change in method been treated as a change in the Accounting Policy?

26. Has the change in the Accounting policy and its effect been quantified?

27. Has the change in the policy been disclosed appropriately in the financial statements?

28. In respect of any changes in accounting policies, has an appropriate disclosure been made as per AS-I?


Disclosure

29. Has the total depreciation for each class of asset been disclosed?

30. Has the depreciation on additions and deductions on each class of asset been disclosed?

31. Have the depreciation methods used been appropriately disclosed? (Append note)

32. Has the variation in rates, if any, as compared to principal rates mentioned in statutes been disclosed?

Done By:………………………..




AS 7 – Accounting for Construction Contracts


1. ApplicabilityDoes the enterprise have any of the activities as follows : Construction Contracts as contracts Services related to contracts (Technical

Assistance in the form of project managers, architects etc.)

Own construction ventures for profits.

2. Types of Construction Contracts Table ‘C’ :Schedule of Contracts in Force.

3.3.1

3.2

3.3

3.4

3.5

3.6

Percentage of Completion Method : (POC)Have you ensured that POC is used only if outcome of the contract can be reasonably estimated.

Is the percentage of completion certified by a technical expert?

Has the overall assessment been carried out to satisfy yourself about the percentage of completion. Append Note.

Has the billing been done satisfactorily?

Has the client raised any objection/Dispute? Have progress payments been made.

Cost Calculation :Fill up Table ‘D’ to ensure that only costs related to work performed and completed are considered in POC application, in respect of EACH CONTRACT.

3.7 Have you ensured that an appropriate allowance has been made for unforeseeable


3.8

3.9

factors?

In respect of Fixed Price contracts have you ensured that at least 25% of the work is complete?

In respect of Cost plus contracts, have you ensured that all costs considered are identifiable or reasonably estimable?

4.

4.1

4.2

4.3

Completed Contract Method : (CC)

Have you ensured that the contract is complete or substantially complete? Technical Certificates/Board Resolutions available?

Fill up Table ‘D’ to ensure that profits are correctly disclosed.

Ensure similar compliance as in POC of 3.4/3.5/3.6.

5.

5.1

5.2

5.3

Change in Policy

Have you quantified the effect of change.

Has it been disclosed as per requirements of AS-1 and AS-5.

If there is a change in method from POC to CC, and the effect is not quantifiable, the amounts of profit reported in earlier years, must be disclosed, of all contracts brought forward from the previous years. Have you previous years. Have you ensured this?

6.

6.1

6.2

Provision for Foreseeable Losses

Has the provision for loss been done, irrespective of extent/percentage of completion of work entirely?

Does the nature and magnitude of the contract require inclusion of indirect costs in the provision? If yes, have you ensured the same?

7.

7.1

Claims and Variations

Have you ensured that claims and variations (such as of increase in prices of cement, steel, labour rates etc.) are recognised only if documentary evidence of acceptance by the client? Have all claims or penalties PAYABLE


been fully provided for? Further, contingent claims are disclosed as per AS-4.

8.

8.1

8.2

Progress Payments, Advances & Retention’s

Have you ensured that Progress Payments/Advances are not included as revenue and are disclosed as liabilities / reduction from contract WIP?

Retention Money : Have these been shown as receivable or at least shown by way of a note.

9.

9.1

9.2

General

In selecting a particular method of accounting is the method of selection consistent, i.e. has the same method been applied for similar contracts?

In case of Fixed price contracts, have you ensured that: Total revenues can be reliably estimated?

Costs and stage of completion/performance can be reasonably estimated?

Costs attributable to the contract can be clearly identified.

Actuals can be compared with budgets.

10

10.1

Disclosure

Have you ensured that the Financial Statements disclose:i. Amount of Construction WIP

ii. Progress Payments / Advances received

10.2

iii. Retention’s with clients (as in 8.2 above)

iv. The amounts receivable in respect of cost plus contracts [NOT INCLUDED IN (i) ABOVE]

Are both POC/CC methods in use?If yes, the amount of contract work described in 10.1 above must be SEPARATELY DISCLOSED FOR EACH.


TABLE ‘C’

SCHEDULE OF CONTRACTS IN FORCE

CLIENT : FYContract Date

Ret.Estimated

PeriodComplete?

Y/NTYPE : Method Date Completion

dateEstimated

Completion Date

FIXED/COST +

POC/CC

Note : POC = Percentage of Completion MethodCC = Completed Contract Method

TABLE ‘D’

CALCULATION OF COSTS/REVENUE IN POC METHOD

Contract Type : (CC/POC) FYUpto PY CY Unabsorbed Total

Total Contract PriceTotal Contract Complete (%)A: COSTS: Direct Costs Materials Labour Other Specify Indirect Cost

% %

Contract Type : (CC/POC) FYUpto PY CY Unabsorbed Total

Overheads Others

TOTAL COSTSB: REVENUES: Sales Bill Raised: Service Bills Raised: OthersTOTAL

Done By:………………………..




AS 8- Accounting for Research and Development


1.

1.1

Identification of Costs

Whether salaries, wages and related cost of personnel are included in the research and development costs?

1.2 Whether costs of materials consumed and services consumed are include in the research and development costs?

1.3 Whether depreciation of building equipment and facilities to the extent used for research and development are included in the research and development costs?

1.4 Whether amortisation of building equipment and facilities to the extent used for research and development are included in the research and development costs?

1.5 Whether overheads costs are included in the research and development costs?

1.6 Whether payments to outside bodies are included in the research and development costs?

1.7 Whether other costs such as amortisation of patents and Licenses are included in the research and development costs?

1.8 Have you ensured that costs relating to production or promotion of sales of existing products are excluded from R&D?

2. Accounting Treatment

2.1 Whether such costs are charged as expenses for the period in which they have been incurred?

2.2 Whether research and development costs have been deferred?

2.3 Whether the following criteria have been satisfied before deferral?

Whether product or process is defined and attributable costs can be identified?

Whether technical feasibility of the product/ process is demonstrated?


Whether management has indicated desire to produce and market the product?

Whether there is a chance that the current and future Research Expenditure are likely to be more than the future benefits?

Whether adequate resources exist or are available to complete the project and market the produce?

2.4 Whether appropriate legal requirements are fulfilled before opting for deferral?

2.5 Whether the organisation is following a standard policy for deferral of research and development expenditure?

2.6 Whether the deferred costs of research and development are allocated to future accounting periods?

2.7 Whether allocation of expenditure to various years is on a systematic basis defined. Append note.

2.8 Whether future sale of products and process are considered for purpose of allocation of expenses?

2.9 Whether constant review of deferred research and development costs are done in order to ensure that the criteria for deferral continues? Is there evidence? Have we verified it?

2.10 Whether the criteria relating to deferred costs are complied?

2.11 Whether there are any cost overruns?

2.12 Whether the cost overruns will exceed the future benefits of research?

2.13 Whether such cost overruns are expensed out?

2.14 Whether any research and development cost was written off?

2.15 Whether such written off costs were reinstated?

3. Disclosure

3.1 Whether research and development costs are charged off and disclosed in the Profit and Loss?


3.2 Whether Deferred Research and Development costs are disclosed under Miscellaneous Expenditure in the Balance Sheet?

Done By:………………………..



AS 9 – Revenue Recognition


ApplicabilityHave you ensured that this standard deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise. The standard is concerned with the recognition of revenue arising in the course of ordinary activities of the enterprise from:(a) The sale of goods,


(b) The rendering of services, and

(c) The use by others of enterprise resources yielding interest, royalties and dividends.

Have you ensured that this Standard does not deal with the following aspects of revenue recognition to which special consideration apply:

(i) Revenue arising from construction contracts;

(ii) Revenue arising from hire purchase, lease agreements;

(iii) Revenue arising from Government grants and other similar subsidies;

(iv) Revenue of Insurance companies arising from Insurance contracts.

Note: The checklist must be suitably, altered or refined to meet the requirement of a given situation.

Revenue items1. List of source and items of revenue should be

made. Append list. Any new items in the current year? If Yes, add them to the list.

2. Have you ensured that recognition of revenue is postponed if it is unreasonable to expect ultimate collection?

Transactions- Sale of goodsIn a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been fulfilled:

(i) The seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and

ii) No significant uncertainty regarding the amount of the consideration that will be derived from the sale of goods.

Transaction – rendering of services


In a transaction involving the rendering of services, performance should be measured either under the completed service contract method or under the proportionate completion method, whichever relates the revenue to the work accomplished. Such performance should be regarded as being achieved when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service.

i) Has the completed service method been followed in respect of service involving a single act or more than act where services not performed are significant enough in relation to all transaction as a whole?

ii) Has the proportionate completion method been followed only if service involves execution of more than one act?UncertaintyHave you ensured that if there is any uncertainty, recognition of revenue has been postponed?Revenue arising from the use by othersRevenue arising from the use by others of enterprise resource yielding interest, royalties and dividends should only be recognised when no significant uncertainty as to measurability or collectability exists. These revenue are recognised on the following bases:

i) Interest: on a time proportion basis taking into account the amount outstanding and the rate applicable.

ii) Royalties: on accrual basis in accordance with the terms of the relevant agreement;

iii) Dividends from investments in shares: when the owner’s right to receive payment is established.Disclosure

Have you ensured compliance of AS 1

Have you ensured that where (uncertainty) was applicable the circumstances in which revenue recognition has been postponed has been disclosed?

Done By:………………………..





AS 10 – Accounting for Fixed Assets


1. IdentificationIs there a list of Fixed Assets? If so is there a fixed assets register? Is it updated? Have you ensured that items included in ‘Fixed Assets’ are fixed assets, i.e. not for sale, but for production or manufacture of goods.

2. Historical costsIn respect of the fixed assets stated at historical cost, have you ensured that it comprises only of:

Purchase price

Costs of Installation or other such costs

Borrowing costs subject to AS 16

Financing costs attributable to construction or acquisition, as long as they relate to periods before the asset is brought into use.

Does it include any other cost? If so specify

If the asset is self constructed have you ensured that only direct attributable or allocates costs are considered?

For assets acquired in Exchange. Have you ensured that the assets have been recorded at the fair market value of the asset given up plus cash payments or payable?

Have you ensured that any subsequent expenditure capitalised is justified in terms of future benefits derivable?

Is there a board resolution to support this?

In respect of retired material items, have they been shown at the lower of the book value/ realizable value? Have they been disclosed separately in financial statements?

In respect of retired/ disposed assets, have you ensured that losses have been provided


for?

3. RevaluationIf applicable, answer the following:

Is the process of revaluation justified? Is it applied to the entire lot of assets? If not is the selection systematic? This basis should be disclosed.

Append Note

Have you ensured that the revaluation in financial statements of a class of assets should not results in the net book value of that class being greater than the recoverable amount of assets of that class.

Have you ensured that in any case of upward revision, the accumulated depreciation has not be credited to the profit and loss statement

Have you ensured that the increase in the net look value is credited to ‘Revaluation Reserve’ (Except where a previously recorded revaluation debited or charged to P&L a/c was greater. In case any decrease in net book value is there, the converse is also true)

In respect of sale/ disposal of revalued assets have you ensured that any credit balance standing in respect of the disposed asset in the revaluation reserve is adjusted or reversed?

4. Hire Purchase fixed assets Have they been shown at ‘Cash Value’

Have they been disclosed in the Balance Sheet with a proper narration that the enterprise does not have full ownership?

5. Jointly owned fixed assetsHave these been disclosed to the extent of the enterprise’s, share proportionately as regards, original cost, depreciation and WDV?


6. Fixed Asses purchased at a consolidated price Have you ensured that allocation of costs to

individual assets is done? Is there a board resolution approving the

same? How the allocation is made – note

7. GoodwillHave you ensured that goodwill has been recorded only if it is purchased or acquired for a consideration?

8. Patents (now covered by AS 26)Have you ensured that ‘Patents’ have capitalized? Have they been written off over the shorter period of the following:- Legal validity period Working life

9. Know-how (now covered by AS 26)Has the amount paid for know-how of specific capital nature such as building, machinery, has it been capitalised appropriately?

If it is general know-how for the manufacturing process, have you ensured that the basis of allocation is satisfactory? Is a board resolution available?

10. Disclosure in financial statementsEnsure that following information should be disclosed in the financial statements?

(i) Gross and net book value of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements.

(ii) Expenditure incurred on account o fixed assets in the course of construction or acquisition ; and

(iii) Revalued amount substituted for historical costs of fixed assets, the method adopted to compute the revalued amounts, the nature of indices used, the year of any appraisal made, and whether an external valuer was involved. In case where fixed assets are stated at revalued amounts.


Done By:………………………..




AS 11 – The effects of changes in Foreign exchange rates


1. Have you verified that foreign currency transactions of forward exchange contracts? (Make a list of the various types of transactions entered into by the entity)

2. Have you verified that a foreign currency transaction is recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction?

3. At the balance sheet date have you reviewed that:(a) Foreign currency monetary items are

reported suing the closing rate (e.g. cash receivables and payables)

(b) Non- monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction (e.g. Fixed assets, inventories, and investments in equity shares) and

(c) Non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates existed when the values were determined.

4. Have you verified that the contingent liability denominated in foreign currency at the balance sheet date is disclosed by using the closing date?

5. Have you checked that exchange differences arising on the settlement or monetary items or on reporting an enterprises monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, are recognised as income or as expenses in the period in which they arise?

6. Have you ensured that when the transaction is


settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period? However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each intervening period up to the period of settlement is determined by the change in exchange rates during that period.

7. Have you verified exchange a difference arising on a monetary item that, in substance, forms part of an enterprise’s net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the enterprise’s financial statements until the disposal of the net investment?

Financial Statements of foreign operations8. How are the foreign operations classified

whether as “integral foreign operations” or non-integral foreign operations”?

9. Have you verified that the financial statements of an integral foreign operation are translated as if the transactions of the foreign operation had been those of the reporting enterprise has used the following procedures:

(a) The assets and liabilities, both monetary and non-monetary, of the non-integral foreign operation should be translated at the closing rate;

(b) Income and expense items of the non-integral foreign operation should be translated at exchange rates at the dates of the transactions; and

(c) All resulting exchange differences should be accumulated in a foreign currency translation reserve until the disposal of the net investment.

11. Have you verified that of exchange differences arising from the translation of the financial statements of a non-integral foreign operation are not recognised as income or expenses for the period?

12. Have you ensured that when a non-integral


foreign operation is consolidated but is not wholly owned, accumulated exchange differences arising from translation and attributable to minority interests are allocated to, and reported as part of the minority interest in the consolidated balance sheet?

13. Ensure that any goodwill or capital reserve arising on the acquisition of a non-integral foreign operation is translated at the closing rate?

14. Ensure that contingent liability disclosed in the financial statements of a non-integral foreign operation is translated at the closing rate?

15. For incorporation of the financial statements of a non-integral foreign operation in those of the reporting enterprise have you ensured that procedures mentioned in AS 21 and AS 27 are followed?

16. In consolidation if there arises an exchange differenc on an intra-group monetary item, whether short term or long term and if it cannot be eliminated against corresponding amount arising on other intra group balances then have you checked that in the consolidated financial statements of the reporting enterprise, such an exchange or if it is a exchange differences arising on a monetary item that, in substance, forms part of an enterprise’s net investment in a non integral foreign operation, it is accumulated in a foreign currency translation reserve until the disposal of the net investment?

17. Have you checked that on the disposal of a non-integral foreign operation, the cumulative amount of the exchange differences which have been deferred and which relate to that operation is recognised as income or as expenses in the same period in which the gain or loss on disposal is recognised?

18. Verify that when there is a change in the classification of a foreign operation, the translation procedures applicable to the revised classification should be applied fro the date of the change in the classification?.


19. Ensure that when a foreign operation that is integral to the operations of the reporting enterprise is reclassified as a non-integral foreign operation, exchange differences arising on the translation of non monetary assets at the date of the reclassification are accumulated in a foreign currency translation reserve.

20. Ensure that when a non integral foreign operation is reclassified as an integral foreign operation, the translated amounts for non monetary items at the date of the change are treated as the historical cost for those items in the period of change and subsequent periods. Any exchange differences which have been deferred are not recognised as income or expenses until the disposal of the operation.

21. Make sure that gains and losses on foreign currency transactions and exchange differences arising on the translation of the financial statements of foreign operations which may have associated tax effects are accounted for in accordance with AS 22, Accounting for Taxes on Income.

22. Have you verified that the premium or discount arising at the inception of a forward exchange contract is amortised as expense or income over the life of the contract?

23. Have you checked that the exchange difference on forward exchange contract is recognised in the statement of profit and loss in the reporting period in which the exchange rates change? Any profit or loss arising on cancellation or renewal of such a forward exchange contract should be recognised as income or as expense for the period?

24. Verify that a gain or loss on a forward exchange contract which is not covered above is computed by multiplying the foreign currency amount o the forward exchange contract by the difference between the forward rate available at the reporting date for the remaining maturity of the contract and the contracted forward rate (or the forward rate last used to measure a gain or loss on that contract for an earlier period). Also verify that the gain or loss so computed is


recognised in the statement of profit and loss for the period.; And any premium or discount on the forward exchange contract is not recognised separately?

Disclosure25. Have you verified that an enterprise has

disclosed:

(a) The amount of exchange differences included in the net profit or loss for the period; and

(b) Net exchange differences accumulated in foreign currency translation reserve as a separate component of shareholder’s funds, and a reconciliation of the amount of such exchange differences at the beginning and end of the period.

26. Verify that when the reporting currency is different from the currency of the country in which the enterprise is domiciled, the reason for using a different currency is disclosed. The reason for any change in the reporting currency is also disclosed?

27. Is proper disclosers made when there is a change in the classification of a significant foreign operation, of the following:

(a) The nature of the change in classification;

(b) The reason for the change;

(c) The impact of the change in classification on shareholder’s funds; and

(d) The impact on net profit or loss for each prior period presented had the change in classification occurred at the beginning of the earliest period presented.

Done By:………………………..





AS 12- Accounting for Government Grants


1. Recognition

1.1 Whether the organisation is likely to receive a grant or has received a grant?

1.2 Whether the enterprise will be in a position comply with the conditions attached to the grant?

1.3 Whether the grants will be actually received?

1.4 Whether the receipt of such a grant should then be recognised?

2. Grant against Fixed Assets

2.1 Whether the grant is received against a particular fixed asset?

2.2 Whether the grant so received is shown as a deduction from the gross value of fixed asset?

2.3 Whether such deduction of the grant from fixed asset equals the whole of such fixed asset? If so, whether the asset is shown in the books at nominal value on such full deduction is made?

2.4 Whether in the alternative such grants against fixed assets are treated as deferred income?

2.5 Whether the deferred income has been recognised in the Profit and Loss Account?

2.6 Whether such deferred income is allocated to the Profit and Loss Account on a systematic and rational basis?

2.7 If so, append explanatory note.2.8 Whether such allocations are made over the

useful life of the asset?

2.9 Whether such allocations are made in the proportions in which depreciation is charged?

2.10 Whether the enterprise has received grants against any particular expenditure to be incurred?


2.11 Whether the grant has been credited to income in the same period as such expenditure was to be incurred? In respect of deferred income balance, whether it has been separately shown in t he Balance Sheet?

3. Grants related to Revenue3.1 Whether any Government grants related to

revenue are received?

3.2 Whether these grants were received to compensate against a particular expenditure?

3.3 Whether the grants so received have been deducted from the particular expenditure?

3.4 Whether these grants received are shown separately under Other Income?

4. Grants received against promoters’ contribution & other Grants

4.1 Whether grants are received against promoters contribution?

4.2 Whether such grants have been credited to capital reserve?

4.3 Whether any Government Grant was given in the form of a non-monetary asset? Specify the asset.

4.4 Whether appropriate rate is applied for valuing the non-monetary asset?

4.5 Whether the non-monetary asset is given free of cost? Is documentary or other evidence available?

4.6 Whether the same has been recorded at nominal value?

4.7 Whether Government Grants are receivable as compensation?

4.8 Whether such compensation was for expenses or losses incurred in the previous years?

4.9 Whether compensation so given was for lending immediate financial support to the enterprise?

4.10 Whether such compensation receivable is credited to the Profit and Loss Account?

4.11 Whether such compensation which has been


credited is disclosed as an extraordinary item?

[Attention is invited to AS-5 in this regard for compliance, Specify Y/N]

4.12 Whether a government grant is contingent after it has been recognised? Specify and append note.

4.13 Whether proper disclosure of this contingency is made in the financial statements?


4.14 Whether Government Grants have become refundable? Identify conditions and circumstances, if yes.

4.15 Whether the grants which are refundable have been accounted as an extraordinary item?


4.16 Whether the refunded grant has been adjusted deferred credit remaining against the grant?

4.17 Whether the balance of the above such adjustment has been debited to the Profit and Loss Account?

4.18 Whether grants have become refundable where it has been received against the Fixed Assets?

4.19 Whether the value of the fixed assets have been correspondingly increased for the grant which has been refunded or reducing capital reserve or application of deferred income balance or appropriate?

4.20 Whether depreciation has been charged against such revised value of fixed assets?

4.21 Whether depreciation has been provided prospectively against such Fixed Assets?

5. Disclosure5.1 Whether adequate disclosure has been made

regarding the accounting policy for such grants?

5.2 Whether the nature and extent of grants have been adequately disclosed?

5.3 Whether grants of non-monetary assets given at


a concessional rate have been disclosed?

5.4 Whether grants of non-monetary assets given free of cost have been disclosed?

Done By:………………………..



AS 13- Accounting for Investments


1. Classification of Investments:

Have you ensured that an enterprise has disclosed current investments and long term investment distinctly in its financial statements?

Have you ensured that further classification of current and long term investments are as specified by the statute governing the enterprise? In the absence of statutory requirements, such further classification should disclose, where applicable, investments in:

(a) Government or Trust securities;

(b) Shares, debentures or bonds;


(c) Investment properties;

(d) Other specifying nature.

Have you verified that investments are further classified in Trade and Non-Trade Investments?

2. Cost of Investments

Have you ensured that the cost of an investment include acquisition charges such as brokerage, fee and duties other than securities transaction tax.

If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost should be the fair value of the securities issued (which in appropriate cases may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition cost of the investment should be determined by reference to the fair value of the asset given up. Alternatively, the acquisition cost of the investment may be determined with reference to the fair value of the investment acquired if it is more clearly evident.

3. Investment properties

Have you ensured that an enterprise holding investment properties account for them as long term investments.

4. Carrying amount of investments

Have you ensured that investments classified as current investments are carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment, but not on an overall (or global) basis.

Have you ensured that investments classified as long term investments are carried in the financial


statements at cost. Has a provision for diminution made to recognise a decline, other than temporary, in the value of for each investment individually.

5. Changes in carrying amounts of investments

Have you ensured that any reduction in the carrying amount and any reversals of such reduction are charged or credited to the profit and loss statement?

6. Disposal of investmentsHave you ensured that on disposal of an investment, the difference between the carrying amount and net disposal proceeds are charged or credited to the profit and loss statement?

7. Disclosure

Has the following information been disclosed in the financial statement.

(a) The accounting policies for determination of carrying amount of investments, and

(b) Classification of investments as specified in paragraph one above;

(c) The amounts included in profit and loss statement for:

(i) Interest, dividends, (showing separately dividends from subsidiary companies), and rentals on investments showing separately such income from long term and current investments. Gross income should be stated; the amount of income tax deducted at source being included under Advance Taxes paid.

(ii) Profits and losses on disposal of current investments and changes in the carrying amount of such investments; and


(iii) Profits and losses on disposal of long term investments and changes in the carrying amount of such investments;

(d) Significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal;

(e) The aggregate book value of quoted and unquoted investments;

(f) The aggregate market value of quoted and unquoted investments

(g) Requirements of Schedule VI of the Company Act relating to investments have been fully met

(h) Other disclosures as specifically required by the relevant statute governing the enterprise.

Done By:………………………..




AS 14- Accounting for Amalgamations

1. Definitionsa) Transfer Company : (A) ___________________________b) Transferee Company : (B) ___________________________c) Reserve (free reserves) : Rs. ___________________________

2. Fill up TABLE ‘G’ to determine whether the amalgamation is in the nature of merger or purchase amalgamation is in the nature of merger or purchase.

3. Define total consideration as follows :Aggregate Shares/SecuritiesPlus Payments in Cash/Other Assets ________________ _______________

4. If it is a merger, have you ensured that (Pooling of Interest) POI method is employed. If not, ‘Purchase Method’ needs to be employed.

5.5.15.25.3

5.4

5.5

In case of POI methodHave you ensured that all assets an liabilities are recorded at book value?Has the balance of P&L A/c of A been transferred to the P&L A/c. of B?Fill up Table ‘H’ to quantify effect of conflict in Accounting Policies of A and B.

Have you made appropriate disclosures resulting from 5.3 above in AS-1 (Disclosure of Accounting Policies, AS-4 (Contingencies and Event occurring after balance sheet date. AS-5 (Prior Period and Extraordinary items and changes in accounting policies) as applicable?

Has difference between total consideration (by way of capital issued and other payments or settlements) and the share capital of A, been adjusted in the Reserves?

6.6.1

6.2

6.3

In case of ‘Purchase Method’Have you ensured that only assets and liabilities are incorporated and not the reserves (except statutory reserves)?

Have you ensured that these are at carrying amounts or ‘fair values’ as at the date of amalgamation?

Has the fair value been documented by satisfactory evidence such as :a) Valuation of Immovable property by certified professionals.Valuation of Investments at quoted prices as on the date of amalgamation.

6.4

6.5

c) Valuation of assets per technical certificatesd) Valuation of other assets and liabilities per audited statement.

If the excess of the total consideration over the net assets been disclosed ‘goodwill’? If negative in ‘Capital Reserve’?

If the statutory requirement regarding a particular statutory reserve complied has the debit been given to ‘Amalgamation Adjustment Account’. If is disclosed under ‘Miscellaneous Expenditure’?

7.7.1

Other Common ProceduresIn case the scheme provides for any payment, if the payment is proba.......... has the amount been included in the ‘consideration’ discussed earlier other cases, where amounts are not


determinable, they must be recognised after being determinable.

8.8.1

Treatment of ReservesDoes the scheme furnish any specifications regarding treatment reserves? If so specify whether compliance is done?

9.9.1

9.2

9.3

DisclosureHave the following been disclosed in respect of all amalgamation during the year: Name and general nature of business of A & B Effective Data of Amalgamation Method Accounting used (POI/Purchase) Brief particulars of scheme (statutorily sanctioned)

POI Amalgamations : Whether description of shares issued, with % of both A & B exchanged to effect the amalgamation as per Table ‘I’. Has the difference between the net assets acquired been properly disclosed.

Purchase Method : In case of this method have the following additional disclosures been made :-a) Consideration for the amalgamation and the consideration paid contingently payable.b) In case of debit to goodwill as explained earlier (6.4) is the treatment regarding disclosure

of goodwill (arising from amalgamation) amortising satisfactory?

10. Amalgamation after Balance Sheet DateHas the amalgamation been effected before issuance of Financial Statement either A or B? If yes Disclosure to comply with AS-4 -- is it done?

TABLE G: DETERMINATION OF NATURE OF AMALGAMATION

Transferor Company Status in Transferee Company after Amalgamation

Remark

1. Assets beforeAmalgamationFixed Assets

All assets and liabilities are taken over.

Transferor Company Status in Transferee Company after Amalgamation

Remark

Stocks InvestmentsCash BankTotalLiabilities

2. Share Holdinga) Transferee Co.b) Subsidiaries of (a)c) Nominees of (a)d) OthersTotal Face Value

Others equal least 90% of Face Value, become equity shareholder of B after amalgamation.

3. Consideration Wholly payable by ISSUE of equity shares (except for fractional shares)

4. Business To be carried on

5. Adjustment regarding book None


value. Assets and Liabilities, except to ensure uniformity of Accounting Policies.

If all the remarks in Table ‘E’ are ‘Yes’, then the amalgamation is a merger. If not it is a purchase.

TABLE ‘H’

Area of Accounting Policy Accounting Policy in A Accounting Policy in B

Financial Impart

Depreciation Goodwill Translation of ForeignCurrency Employee benefits OthersTotal effect other amalgamation

TABLE ‘I’ : EXCHANGE RATIO FOR AMALGAMATION

A B PercentageTotal Shares (Type)Face ValueAmountShares Transferred

Total SharesFace ValueAmountShares IssuedRatio of shares of B to A

%%

Done By:………………………..



AS 15 – Accounting for Retirement Benefits


1. Scope

Have you ensured that this accounting standard does not apply to those retirement benefits for which the employer’s obligation cannot be reasonably estimated; e.g., ahoc ex-gratia payments made to employees on retirement.


2. Retirement BenefitsWhether the organization has any benefit plans for its employees?

List them as under and append explanatory note?

(a) Provident Fund

(b) Superannuation pension

(c) Gratuity

(d) Leave encashment benefit retirement

(e) Post retirement health and welfare schemes

(f) Other retirement benefits

Whether the benefit plans can be grouped under defined contribution scheme or defined benefit scheme?

Whether a trust has been created for making contributions in respect of defined contribution scheme?

Whether there is any shortfall or excess of contribution as compared to the amount payable?

Whether the shortfall has been accounted by means of an provision in the Profit & Loss Account?

Whether the excess of contribution has been treated as a prepayment in the balance sheet?

3. Accounting Treatment

If the employer has chosen to make payment for retirement benefits out of own funds, whether an appropriate charge to the statement of profit and loss for the year is made through a provision for the accruing liability.

Whether the accruing liability has been calculated on the basis of actuarial valuation or any other rational method e.g. method based on the assumption that such benefits are payable to


all employees at the end of the accounting year.

In case the liability for Retirement benefit is found through creation of a trust.

Whether a trust has been created for making contributions in respect of defined benefit scheme?

Whether the contribution valuation is done once in three years, if not done annually?

Whether the actuary’s report specifies the amount to be contributed during the inter valuation period?


Where the contribution paid during a year is lower than the amount required to be contributed during the year to meet the accrued liability as certified by the actuary, the shortfall is charged to the statement of profit and loss for the year.

Where the contribution paid during a year is in excess of the amount required to be contributed during the year to meet the accrued liability as certified by the actuary, the excess is treated as a prepayment.

In case the liability for retirement benefits is funded through a scheme administered by an insurer.

Whether the employer has made an arrangement through an insurer for payment of defined benefit scheme?

Whether the appropriate accrual of the liability has been made by the employer?


Where the contribution paid during a year is lower than the amount required to be contributed during the year to meet the accrued liability as


certified by the actuary or confirmed or confirmed by the insurer, as the case may be, the shortfall is charged to the statement of profit and loss of the year.

Where the contribution paid during a year is in excess of the amount required tobe contributed during the year to meet the accrued liability as certified by the actuary or confirmed by the insurer, as the case may be, the excess is treated as a prepayment.

Alterations

Whether there is an alteration of a retirement benefit scheme, or an improvement to an existing scheme?

Whether the charge has been created in the Profit & Loss A/c?

Whether this has been shown as a prior period and extraordinary item?

Whether there is a modification of a retirement benefit scheme?

Whether there is a change in actuarial valuation method of assumptions adopted?

If so whether AS-5 & AS-1 have been complied with? Append note

If any additional benefit has arisen to employees, have you ensured that costs are accounted for as listed above?Disclosures

Whether the financial statements disclose the method of determining retirement cost for the period?

Whether actuarial valuation method used for determining retirement benefits under the defied benefit scheme has been disclosed?

In case the costs related to gratuity and other defined benefit schemes are based on an actuarial valuation, the financial statements


should also disclose whether the actuarial valuation was made at the end of the period or at an earlier date.

Whether the date of such valuation has been disclosed?

Whether the statement of accounts reflect accrual for the period?

Whether disclosure has been made if the above has not been followed?Where any other method has been applied.

Done By:………………………..



AS 16 Borrowing Costs


1 Borrowing Costs:

1.1 Has the enterprise incurred any borrowing costs during the year / period under review?(Refer to appendix for items which may be included as part of borrowing costs)

1.2 Are any of the borrowing costs incurred for acquisition of specific qualifying assets?

1.3 Ensure that dividend / interest on preference shares is not considered as part of borrowing costs.

2 Qualifying Assets:

2.1 Does the enterprise have any qualifying assets?


2.2 Ensure that only those assets, which take a substantial period of time to get ready for intended use or sale, are considered as qualifying assets.

2.3 Does the enterprise have any of the following types of assets?

Tangible fixed assets which are under construction or which, when acquired, are not ready for use or resale.

Intangible assets which are under development or which, when acquired, are not ready for use or resale.

Investment properties.

Inventories, which require substantially longer production time (generally longer than the normal accounting period of the enterprise).

2.4 Ensure that out of the above, only assets which meet the criteria of qualifying assets are considered as eligible for capitalization of borrowing costs.

2.5 Ensure that investments other than investment properties are not considered as qualifying assets.

3 Capitalization of Borrowing Costs:

a) Specific Borrowings:

3.1 Does the enterprise have any borrowings that are directly attributable to the acquisition of qualifying assets?

3.2 Ensure that any borrowing costs in respect of the above are considered for capitalization.


3.3 Has the enterprise earned any income from temporary investment of such surplus funds?

3.4 If the answer to 3.3 above is in the affirmative, ensure that the said income is deducted from the borrowing costs considered for capitalization.

b) General Borrowings:

3.5 Does the enterprise have any general borrowings?

3.6 Ensure that such costs are capitalised based on a capitalization rate determined on weighted average of the borrowing costs.

3.7 Ensure that the specific borrowings are excluded whilst determining the capitalization rate.

3.8 In respect of both (a) and (b) above, ensure that prior to capitalization the qualifying assets would result in future economic benefits to the enterprise and the costs thereof can be measured reliably.

3.9 Ensure that the borrowing costs capitalised do not exceed the borrowing costs incurred during the period.

4 Commencement and Suspension of Capitalization:

4.1 Ensure that the following conditions are satisfied prior to commencement of capitalization:

The expenditure for acquisition, construction or production of the qualifying asset has been incurred.

The borrowing cost has been incurred.


The activities necessary for the intended use of the qualifying asset are in progress. (Temporary stoppages which are unavoidable would not normally warrant suspension of capitalization)

4.2 Ensure that any advance/ progress payments received and grant received towards cost incurred for the qualifying assets are deducted.

4.3 Is active development of any of the qualifying assets interrupted for extended periods of time?

4.4 If the answer to the above is in the affirmative, ensure that capitalization of borrowing costs is suspended during such periods for the relevant qualifying assets.

5 Cessation of Capitalization:

5.1 Ensure whether all the activities necessary for intended use or sale of a qualifying asset are substantially completed.

5.2 If the answer to the above is in the affirmative, ensure whether the capitalization of the borrowing costs has ceased and subsequent costs have been expensed.

5.3 Does the enterprise have any qualifying assets where the construction is carried out in phases or parts, which can be used independently?

5.4 If the answer to the above is in the affirmative, ensure whether the capitalization ceases when the activities necessary for the use or sale of each phase or part are substantially completed?

6. Disclosures:


6.1 Ensure that the following disclosures are made as part of the financial statements:

The accounting policy adopted for borrowing costs.

The amount of borrowing costs capitalised during the period.

APPENDIX TO AS 16 BORROWING COSTS

The following may be considered as part of borrowing costs:

Interest and commitment charges on bank borrowings and other term loans.

Amortization of discount and premium and other ancillary costs relating to borrowings. (Only the amortised costs to be considered).

Finance charges in respect of assets acquired under finance leases.

Exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to interest costs.

Done By:………………………..




AS 17 – Segment Accounting


1. Applicability:(Refer the AS for exemptions and notes on applicability)

2. Have you verified that the entity has disclosed separate segments for different types of products and services the entity is dealing in?

3. Have you verified that if the entity operates in different geographical areas which have to be reported as different segments, they have been so declared?


4. While identifying the reportable segments have you verified which is the primary segment and which is the Secondary segment reporting formats?

5. Have you checked that the identification of the amounts with particular segment is correctly done to measure the segment revenue, segment expense, segment assets and liabilities of reportable segments?

6. Have you checked that the segment expense doesn’t include the following items:

(a) Extraordinary items; Netprofit/ loss for the period; Prior period items and changes in accounting policies;

(b) Interest expenses;(c) Losses on sale of investments. Loses on

extinguishments of loans from other segments;

(d) Income tax expense;(e) General administrative expenses, head

office exp. etc.

7. Have you checked that if the expense of a particular asset; i.e. amortisation, depreciation etc. is allocated to a particular segment, then the related asset is also included in the particular segment?

8. Have you checked that the Segment revenue should include only the following:

(a) The portion of enterprise revenue that is directly attributable to a segment,

(b) A portion of revenue attributable to particular segment

(c) Revenue from transactions with other segments, should be shown separately

10. Have you verified that if the segment result includes interest or dividend income, its segment assets include the related receivables, loans, investment, or other interest or dividend generating assets?

11. Have you checked that segment assets and liabilities do not include income tax assets and


liabilities?

12. Ensure that segment assets are determined after deducting related allowances/ provisions that are reported as direct offsets in the balance sheet of the enterprise?

13. Verify that segment liabilities are those operating liabilities that result from the operating activities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis?

14. Verify that if the segment result includes interest expense, its segment liabilities include the related interest bearing liabiltities?

15. Ensure that segment information is prepared in conformity with the accounting policies adopted for preparing and presenting the financial statements of the enterprise as a whole.

16. Have you verified that assets and liabilities that relate jointly to two or more segments are allocated to segments if, and only if, their related revenues and expenses also are allocated to those segments.

17. Disclosure requirements:(a) Have the enterprise disclosed following

things for each reportable segment?(i) Segment revenue distinguishing

between revenue from sales to external customers and from transactions with other segments;

(ii) Segment result;(iii) Amount of segment assets and

segment liabilities(iv) Cost incurred to acquire segment

assets;(v) Amount of expenses included for

depreciation and amortisation in respect of segment assets;

(vi) Amount of non cash expenses (other than depreciation and amortisation) that are included in segment expenses and deducted in measuring segment result.


18. Have you checked the reconciliation between:(a) Reportable segment and aggregated

information in financial statements? I.e.

(i) Segment revenue with enterprise revenue;

(ii) Segment result with enterprise net profit or loss;

(iii) Segment assets with enterprise assets; and

(iv) Segment liabilities with enterprise liabilities.

19. Have you seen that in measuring the reporting segment revenue from transactions with other segments, inter segment transfers have been measured on the basis that the enterprise actually used to price those transfers. The basis of pricing inter segment and any change therein has been disclosed in financial statements?

20. Ensure that changes in accounting policies adopted for segment reporting that have a material effect on segment information are disclosed. Also verify that such disclosure includes a description of the nature of the change, and the financial effect of the change if it is reasonably determinable?

Done By:………………………..




AS18- Related Party Disclosures


1. Related Party relationships:

1.1 Obtain a certified list of all related parties as identified by the enterprise.

1.2 Has the above list been approved / notified by the Board of Directors and / or the Audit Committee?

1.3 Ensure that the related parties as identified above are related based on any of the following criteria:

Ability to control the other party (holding companies, subsidiaries and fellow subsidiaries)

Ability to exercise significant influence over the other party. (i.e. an associate)

Joint ventures.

Key managerial personnel and their relatives and enterprises over which such persons have ability to exercise significant influence.

1.4 Ensure that a representation has been obtained from the Management regarding the completeness and authenticity of the related parties.

2. Ability to Control:

2.1 Ascertain whether the enterprise has the ability to control any other parties by any of the following means:

Control of ownership through more than 50% of the voting power, either directly or indirectly. (i.e. holding company, subsidiaries and fellow subsidiaries).


Control over composition of the Board of Directors or other governing body.

Control of substantial interest.

2.2 Does the enterprise have control over the composition of the Board of Directors or other governing body which is evidenced by one or more of the following: Power to appoint or remove a majority of

the Board of Directors without consent or concurrence of any other person as evidenced by the Memorandum or Articles of Association, Board Resolution, agreement or any other written documentary evidence.

Power of the governing board of a non-corporate entity to appoint or remove a majority of the members without the consent or concurrence of any other person as evidenced by the Rules or Bye-Laws, agreement or any other written documentary evidence.

2.3 Does the enterprise have control through substantial interest, which is evidenced by one or more of the following?

Owning directly or indirectly more than 20% of the voting power of the enterprise.

Power to direct by statute or agreement the financial and / or operating policies of the enterprise.

3. Ability to exercise significant influence:

3.1 Does the enterprise have the ability to exercise significant influence over any other enterprise, which is evidenced by one or more of the following:


Share ownership which is normally through 20% or more of the voting power, unless absence of significant influence is demonstrated through any of the other factors indicated hereunder:

Representation on the board of directors.

Participation in the policy making process.

Material inter-company transactions.

Inter-change of managerial personnel.

Dependence on technical information.

3.2 Ensure that all or any of the above matters are evidenced by an agreement or any other written documentary evidence.

4. Joint Ventures:

4.1 Obtain the list of all joint ventures entered into by the enterprise.

4.2 Ensure that only those contractual arrangements wherein an economic activity, which is subject to joint control, are considered.

4.3 Ensure that a joint venture agreement has been entered into or an “in principle” Board approval been obtained in respect of the above.

5. Key Management Personnel:

5.1 Does the enterprise have an organization chart identifying the key management personnel?


5.2 Ensure that only those persons who have the authority and responsibility for planning, directing and controlling the activities of the enterprise are considered for reporting purposes.

(E.g. In the case of a company, the managing director(s), whole-time director(s), manager)

5.3 Have particulars of relatives been obtained from each of the persons identified in 5.2 above?

5.4 Ensure that only the following relatives are considered:

Spouse.

Son and daughter.

Brother and sister.

Father and mother.

5.5 Ensure that out of the above, only those relatives who have dealings with or can influence dealings with the enterprise are considered for reporting.

5.6 Has a board resolution has been passed to identify the key management personnel and their relatives?

6. Exclusions:

6.1 Ensure that the following related party relationships are excluded for reporting:

Companies having common directors (unless the director is able to exercise significant influence in both the companies).

A single customer, supplier, franchiser, distributor or general agent.

Providers of finance.


Trade unions.

Public utilities.

Government departments.

7. Disclosures:

7.1 Ensure that the names of all the related parties identified based on the above are disclosed together with the nature of the relationship, irrespective of whether there are any transactions.

7.2 Obtain the details of all transactions entered into with related parties during the period.

7.3 Ensure that the following particulars are disclosed in respect of transactions with related parties: Nature of the transaction.

Volume of transactions either by amount or proportion.

Any element of the transaction necessary for understanding the financial statements.

Amount or appropriate proportion of the outstandings and provision for doubtful debts.

Amount written off or written back in respect of debts due during the period.

7.4 Ensure that similar items are aggregated by type of related parties for disclosure purposes.

7.5 The requirements of this Standard apply to each reporting enterprise as also to consolidated financial statements presented by a holding company.

Done By:………………………..




AS-19- Accounting for Leases


1. Finance Lease and Operating Lease:

1.1 Obtain the details of the nature of leasing arrangements entered into by the enterprise.

1.2 Have these been classified into finance and operating leases?

1.3 Do the lease arrangements have any of the following characteristics:


All the risks and rewards incidental to ownership have been substantially transferred.

The lessee will get ownership of the asset at the end of the lease term.

The lessee has the option to acquire the asset at a price, which is sufficiently lower than the fair value.

The lease term covers a major part of the economic life of the asset.

The present value of the minimum lease payments at the inception of the lease covers substantially the initial fair value.

The asset is of a specialized nature such that only the lessee can use it.

The lessee has to bear the losses that arise to the lessor in case of cancellation of the lease agreement by the lessee.

The lessee can continue the lease for the secondary period at a rent, which is substantially lower than the market rent.

1.4 If the answer to the above is in the affirmative, ensure that the lease is classified as a finance lease or else it would be an operating lease.

1.5 Verify the terms and conditions of the lease with the lease agreement and other related correspondence.

2. Accounting for Finance Lease:

a) Books of the lessee:

2.1 Ensure that lessee recognizes the lease as an asset as well as a liability at the lower of the following:


Fair value at the inception of the lease.

Present value of the minimum lease payments discounted using the implicit interest rate.

2.2 Ensure that the fair value of the asset has been determined on the basis of similar transactions on an arm’s length basis and review the same for reasonableness based on appropriate documentary evidence.

2.3 Check the computation of the minimum lease payments based on the lease agreement and other documentary evidence and ensure that the following are excluded:

Contingent rent (based on a factor other than passage of time).

Costs for services and taxes to be paid by and reimbursed to the lessor.

2.4 If the lessee has an option to purchase the asset at the end of the lease period at a price which is lower than the fair value (i.e. guaranteed residual value) ensure that the same is included as part of the minimum lease payments.

2.5 Check the computation of the implicit interest rate based on the minimum lease payments and guaranteed residual value as determined above.

2.6 If the implicit rate of interest cannot be determined based on 2.5 above or it is not practicable to do so, ensure that lessee’s incremental borrowing rate is considered.

2.7 Ensure that the lessee’s incremental borrowing rate is considered based on either of the following and review the same based on the relevant documentary evidence:


Rate of interest the lessee would pay on a similar lease.

Rate of interest at the inception of the lease, which a lessee would incur to borrow over a similar term with the same security to purchase the asset.

2.8 Ensure that each lease payment is apportioned between finance charge and reduction of the outstanding liability.

2.9 Ensure that the finance charge is allocated over the lease term at the implicit rate of return so as to produce a constant rate of return on the remaining principal balance.

2.10 Ensure that the enterprise has charged depreciation at a rate, which is consistent with owned assets.

2.11 If there is uncertainty that the lessee will obtain ownership of the asset ensure that depreciation is provided over the lease term or useful life, whichever is shorter.

b) Books of the Lessor:

2.12 Ensure that the enterprise has recognised the asset as a receivable at an amount equal to the net investment in the lease. (Refer to appendix for mode of computation of net investment in the lease)

2.13 Ensure that the finance income is allocated over the lease term at the implicit rate of return so as to produce a constant rate of return on the net investment in the lease.

2.14 Verify the computation of the gross investment in the lease and the net investment in the lease with the lease agreements and other documentary evidence.

2.15 Has the enterprise incurred any initial direct costs for entering into the lease?


2.16 Check whether the same is expensed immediately or deferred over the lease term.

2.17 If the same are deferred, ensure that the amortization reflects the pattern of the finance income.

c) Books of Manufacturer / Dealer Lessor:

2.18 Obtain the terms and conditions of assets leased by the enterprise as a manufacturer or dealer.

2.19 Ensure that the profit or loss equivalent to the normal sales price is recognised in accordance with the policy adopted by the enterprise for recognition of revenue.

2.20 Ensure that the sales revenue is derived based on the fair value of the asset.

2.21 If artificially low rates of interest are used for discounting the cash flow, ensure that the commercial rates are applied to determine the fair value based on which the profit / loss should be determined.

2.22 Ensure that the initial direct costs are expensed immediately.

4. Accounting for Operating Leases:

a) Books of the Lessee:

4.1 Ensure that the lease payments are charged to the profit and loss account on a straight-line basis over the lease term.

b) Books of the Lessor:

4.2 Ensure that the enterprise has recognised the fair value of the asset and accounted the same as a fixed asset and depreciation has been provided in accordance with AS-6.


4.3 Ensure that the lease income is recognised in proportion to the value of the leased asset outstanding.

4.4 Ensure that the initial direct costs and the other operating costs are expensed off in the year of incurrence.

5. Sale and Lease Back transactions:

5.1 Obtain the terms of the sale and leaseback transactions entered into by the enterprise.

5.2 Ascertain whether the transactions result into a finance lease or operating lease.

5.3 If the transaction results into a finance lease, ensure that profit or loss is amortised in proportion to the depreciation.

5.4 Ensure that the profit or loss is measured as the difference between the carrying amount (net of depreciation) and the sale proceeds.

5.5 If the transaction results into an operating lease, ensure that the profit or loss is recognised depending upon the fair value based on the details as indicated in the Appendix.

6. Disclosures:

a) Finance Lease:

i) Books of the Lessee:

6.1 Ensure that the following disclosures have been made by the enterprise in addition to the requirements of AS-6, AS-10 and the governing statute:

Assets acquired under finance lease as segregated from own assets together with the net carrying amount.


Reconciliation between the total minimum lease payments as on the balance sheet date and their present value.

Total minimum lease payments and their present value for each of the following future periods:

Not later than one year.

Later than one year but not later than five years.

later than five years.

Contingent rent recognised as an expense.

Total minimum sub-lease payments expected to be received under non-cancelable sub-leases.

General description of the significant leasing arrangement with specific reference to the following:

Basis of determination of contingent rent payments.

Existence of terms of renewal or purchase options and escalation clauses.

Any restrictive covenants like dividend, additional debt, further leasing etc.

6.2 Obtain the details of all non-cancelable sub-leases entered into by the enterprise as the lessor (sub lessee):

6.3 Ensure whether only the following types of arrangements are considered as non-cancelable sub-leases:


The lease is cancelable only upon the occurrence of some remote contingency.

The lease is cancelable only with the permission of the lessor.

The lease is cancelable only if the lessee enters into a new lease for the same equivalent asset with the same lessor.

The lease is cancelable only upon

payment by the lessee of an additional amount, which is reasonably certain for the continuation of the lease at its inception.

6.4 Verify the details as per 6.3 above, with the lease agreement and other documentary evidence.

ii) Books of the Lessor:

6.5 Ensure that the following disclosures have been made by the enterprise:

Reconciliation between the gross investment in the lease and the present value of minimum lease payment as at the balance sheet date.

Total gross investment in the lease and the present value of the minimum lease payments receivable for each of the following future periods:

Not later than one year.


Later than five years.

Unearned finance income.

Unguaranteed residual value.


Total provision for uncollectible minimum lease payments.

Contingent rents recognised in the profit and loss account.

General description of the significant leasing arrangements.

Accounting policy adopted for initial direct costs.

b) Operating Lease:

i) Books of the Lessee:

6.6 Ensure that the following disclosures have been made by the enterprise:

Lease payments recognised in the profit and loss account showing separately the minimum lease payments and contingent rents.

Total future minimum sub-lease payments under non-cancelable operating leases in the aggregate and for each of the following future periods: Not later than one year.



Total future minimum sub-lease payments expected to be received as at the balance sheet date.

Sub-lease payments receivable recognised in the profit and loss account.

General description of the significant leasing arrangement with specific reference to the following:


Basis of determination of contingent rent payments.

Existence of terms of renewal or purchase options and escalation clauses.

Any restrictive covenants like dividend, additional debt, further leasing etc.

6.7 Ensure that an operating lease is considered as non-cancelable only if the conditions specified under 6.3 above are satisfied.

ii) Books of Lessor:

6.8 Ensure that the following disclosures have been made by the enterprise in addition to the requirements of AS-6, AS-10 and the governing statute:

The gross carrying amount accumulated depreciation and accumulated impairment losses as at the balance sheet date for each class of asset.

Total future minimum sub-lease payments non - cancelable under operating leases in the aggregate and for each of the following future periods: Not later than one year.



Contingent rents recognised in the profit and loss account.

General description of the significant leasing arrangements.

Accounting policy adopted for initial direct costs.

Done By:………………………..




AS 20 – Earnings per Share


1. Applicability:[Refer the AS for exemptions and notes on applicability]

Objective:-

2. Does the enterprise present basic and diluted earning per share on the face of the statement of profit and loss for each class of equity shares that has a different right to share in the net profit for the period?

3. Is the above earning per share presented with equal prominence for all periods presented?

4. Is equity per share per presented even it there is loss or the amounts disclosed are negative?

5. Have you verified the calculations based on the movement in share capital during the year?

6. In case an enterprise has more than one class of equity shares, is net profit or loss for the period apportioned over the different classes of shares in accordance with their dividend rights?

7. Have you verified the date has been taken as of conversion of any liability (equity shares) as per contract?

8. For the purpose of calculating diluted earning per share, is the amount of net profit or loss for the period attributable to equity share holders adjusted by the following:-

(a) Any dividends on dilutive potential equity


shares, which have been deducted in arriving at the net profit attributable to equity shareholders?

(b) Interest recognised in the period for the dilutive potential equity shares

(c) Any other changes in expenses or income that would result from the conversion of the dilutive potential equity shares

9. Have you disclosed the calculations of earnings as per share, both basic and diluted?

Done By:………………………..




AS 21 –Consolidated Financial Statements


1. Whether the CFSs which are the financial statements of a group presented as those of a single entity; the group comprising of a parent and its subsidiaries includes:

(a) Consolidated balance sheets;(b) Consolidated statement of profit and loss

and notes;(c) Explanatory material;(d) Consolidated Cash Flow Statement

2. Have you obtained a list of subsidiaries, subsidiaries of subsidiary, associate companies and JVs and included the financial information of the components in the Consolidated Financial Statements?

3. Whether the parent has identified reportable segments for segmental reporting?

4. Whether the parent has identified related parties and related parties transactions for reporting?

5. Whether the parent has obtained accurate and complete financial information from components?

6. Whether you have ascertained that the consolidated financial statements are prepared in accordance with the following:

a) Accounting Standard 21 – Consolidated Financial Statementsb) Accounting Standard 23- Accounting for Investments in Associate in Consolidated Financial Statementsc) Accounting Standard 27- Financial Reporting of Interests in Joint Ventures.

7. Have you obtained an understanding of the accounting and internal control system sufficient to plan the audit and determine the nature, timing and extent of his audit procedures?


8. Have you used your professional judgment to assess audit risk and to design audit procedures to ensure that the risk is reduced to an acceptable level?

9. Whether consolidated financial statements include other financial information, which might not be covered by the separate financial statements of these entities such as:

a) List of subsidiaries, associates and joint venturesb) Proportion of items included in the consolidated financial statements to which different accounting policies have been applied.

c) Adjustments made for the effects of significant transactions or other events that occur between the financial statements of subsidiaries, associates or joint ventures and the parent.

10. Whether you have obtained the reports of other auditors’ where he is not the auditor of those entities and has considered the opinion of true and fair view presented by the other auditor while giving the opinion on consolidated financial statements?

11. Whether you have planned your work to understand the accounting policies of the parent, subsidiaries, associates and joint ventures for conducting an effective audit in efficient and timely manner?

12. Whether you have identified the changes in the shareholding that might have taken place since the last audit?

13. If a subsidiary or an associate or a jointly controlled entity has been excluded from the consolidated financial statements then have you satisfied yourself that the exclusions fall within these two categories viz.

(a) The relationship of parent with the subsidiary, associate or jointly controlled entity is intended to be temporary or

(b) The subsidiary, associate or the joint venture operates under several long term restrictions which significantly impair its


ability to transfer funds to the parent.

14. Whether you have verified that the intention of the parent to dispose of the subsidiary investment in associate or interest in jointly controlled entity, in the near future, existed at the time of acquisition of the subsidiary, making investment in associate or jointly controlled entity in case of temporary relationship of the parent with the concerned entity?

15. Have you considered the effect on his report to be issued in case of exclusion of any entity from the consolidated financial statements for reasons other than the ones allowed by the relevant AS?

16. Have you examined that:

(a) Any subsidiary, associate or jointly controlled entity has ceased to be a subsidiary, associate or jointly controlled entity during the period under audit;

(b) The above changes have been appropriately accounted for in the consolidated statements as required by the respective Accounting Standard.

17. Have you verified the preparation of the consolidated financial statements and also considered that the financial statement of the parent and its subsidiaries are combined on a line by line basis by adding together:

(a) Like items of assets, liabilities, income and expenses

(b) Certain calculations like determination of goodwill or capital reserve, minorities interest.

(c) Adjustments like elimination of intra group transactions, balances and unrealized profits.

18. Whether adjustments for consolidation have been properly classified as Permanent Consolidation Adjustment and Current Period Consolidation Adjustments?

19. Have you verified that under the classification of Permanent Consolidation Adjustments only


those adjustments that are made o the first occasion of the preparation and presentation of consolidated financial statement are covered: for example:

(a) Determination of excess or deficit of the cost to the parent of its investment in a subsidiary over the parents investment in the subsidiary is made.

(b) Determination of the amount of equity attributable to minorities at the date on which investment in subsidiary is made and

(c) Determination of goodwill or capital reserve arising on application of equity method to account for investments in associates in consolidated financial statements.

20. Whether the gross amount of goodwill and capital reserve has been disclosed in the notes to the consolidated financial statements to reflect the excess/ shortage over the parent’s portion of the subsidiary’s equity?

21. Whether the Current period consolidation adjustments have been properly adjusted and reflected in the consolidated financial statements, these being adjustments that are made in the accounting period for which the consolidation of financial statements has been done? These adjustments primarily relate to elimination of intra-group transactions and account balances including:

(a) Intra-group interest paid and received, or management fees, etc.

(b) Unrealised intra-group profits on assets acquired from other subsidiaries

(c) Intra group indebtedness(d) Adjustments related to harmonizing the

different accounting policies followed by the parent enterprise and its subsidiaries.

(e) Adjustments made for the effects of significant transactions or other events that occur between the date of the financial statements of the patent and one or more of the components, if the financial statements to be used for consolidation are not drawn up to the same reporting date and

(f) Determination of movement in equity attributable to the minorities since the date


of acquisition of the subsidiary.

22. Whether the adjustment required for preparation of consolidated financial statements have been made in memorandum records kept for the purpose by the parent?

23. Have you reviewed the memorandum records? Also, apart from reviewing memorandum records, have you;

(a) Verified that the inter group transactions and account balances have been eliminated;

(b) Verified that the consolidated financial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances;

(c) Verified that adequate disclosures have been made in the consolidated financial statement of application of different accounting policies in case, it was impracticable to do so;

(d) Verified the adjustments made to harmonise the different accounting policies and

(e) Verified that the calculation of minority interest has been correctly done.

24. Have you verified that where minority interests share of the losses exceeds its share of equity, the excess, and any further losses applicable to the minority interest, have been accounted for in accordance with the relevant accounting standards?

25. Whether the parent’s and the components have different financial reporting dates” if yes, have you reviewed the significant changes such as investment or other events that have taken place during the intervening period which is needed to be reflected in the consolidated financial statements?

26. Have you verified that the principles enunciated by the general clarification (AS 15) on Notes to Consolidated Financial Statements issued by the Accounting Standards Board of the ICAI have been followed?

27. Have you obtained from parent management


written representations on matters material to the consolidated financial statements?

28. In case you are not the auditor of its subsidiaries, whether you have considered the requirement of AAS 10 ‘Using the work of another auditor?

29. Whether the auditors report has clearly disclosed the magnitude of the portion of the financial statements audited by the other auditors?

30. Whether the responsibility has been carried out by the auditor or expressing an opinion whether the consolidated financial statement are prepared, in all material respects, in accordance with the financial reporting framework under which the parent prepares the consolidated financial statement?

Done By:………………………..




AS 22 – Accounting for Taxes on Income


1. Are there any differences between Accounting income (loss) and taxable income (loss)?

Note: Accounting income (loss) = Net Profit/ Loss for the period before tax as reported in Profit/ Loss Account Taxable income (loss) = determined in accordance with tax laws based on which tax is determined. If the answer ‘Yes’ then this Accounting Standard comes to practicability.

2. Are the timing differences and permanent differences ascertained?

Note: Timing differences = Difference between taxable income and accounting income for a period that originate in one period and are capable of reversal in one or more subsequent periods. Also includes Unabsorbed depreciation and carry forward of loss which can be set off against future taxable income subject to consideration of prudence.

Permanent Difference = Difference between taxable and accounting income for a period that originate in one period and do not reverse subsequently

3. Is deferred tax calculated?

Are deferred tax assets and liabilities measured using the tax rates and tax laws that have been enacted or substantively enacted as at the Balance Sheet date?

Note:- Deferred tax is tax effect of timing difference.

If the net effect of timing Difference is resulting in the increase of taxable income then it is recognised in the books as a differed tax asset (amount of timing difference X tax rate) Vice versa for differed tax liability.


4. Is the current tax determined? Is current tax measured at the amount expected to be paid or recovered from the taxation authorities using the applicable tax rates and tax laws?

Note:-Current Tax = Income tax determined in respect for taxable income/ loss for a period.

5. Is the deferred tax asset liability included in balance sheet under as Separate head in the main Balance Sheet below Net Current Assets?

6. Is there a note prepared or representation taken from the management regarding reasonable certainty of sufficient taxable income against which the deferred tax assets can be realized?

7. Are past records of the enterprise have been examined and realistic estimates of profits worked out for the future taxable income? Are they taken on record in the working paper file.

8. Is deferred tax asset recognised only to the extent that there a virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized?

9. Is nature of evidence as per point 14 above been disclosed in the Notes to Accounts?

Review /Reassessment of deferred tax assets10. Are previously unrecognized deferred tax assets

reviewed subject to the consideration of prudence?

11. Is the carrying amount of deferred tax asset written down subject to the consideration of prudence?

12. Are brought forward deferred tax assets reassessed/ reviewed as at balance sheet date?

Presentation and disclosure13. Does enterprise, offset the assets and liabilities

representing current tax?

14. Does the enterprise has a legal enforceable right to setoff assets against liabilities representing


current tax?

15. Are deferred tax assets and liabilities distinguished from assets and liabilities representing current tax for the period in the Notes to Accounts?

Note: in the main Balance Sheet there will be a net figure.

16. Are deferred tax assets and liabilities disclosed under a separate heading in the balance sheet separately from current assets and current liabilities? I.e.,

(a) Deferred tax liability – After Unsecured loans(b) Deferred tax asset – After investments

18. Is the nature of the evidence supporting the recognition of deferred tax asset disclosed, when the enterprise has unabsorbed depreciation or carry forward of losses under tax laws?

Done By:………………………..



AS 23 – Accounting for Investments in Associates in Consolidated Financial Statements


1. Does the enterprise prepare & present Consolidated Financial Statements (CFS)?

2. Has a list of enterprises over which the enterprise exercises significant influence been prepared?


3. Have you checked that the investment in the associates is not accounted under Equity method if following conditions have been satisfied?

- The investments is acquired and held exclusively with a view to its subsequent disposal in the near future

- The associate operates under severe long term restrictions that significantly impair its ability to transfer funds to the investor

4. If above conditions are not satisfied, has the investment in the associate been accounted as per the provision of AS23?

5. Are the reasons for not applying the equity method in accounting for investments in an associate disclosed in the consolidated financial statements?

6. Has goodwill/ capital reserve computed on the investment in an associate as the difference between in an associate disclosed in the consolidated financial statements?

7. Has the goodwill/ capital reserve computed above been adjusted in the carrying amount of the investment in the net assets of the associate?

8. Has the goodwill/ capital reserve appearing in the CFS prepared by the associate been included in the net assets of the associate?

9. Has the investing enterprise share of operating results of the associate from the date of acquisition been included in the carrying amount of the investments?

10. Has the gross share of P&L as above been credited/ debited to Consolidated P&L A/c?

11. Have the deposits received from the associate been reduced to Consolidated p&L A/c?

12. Has it been ensured that the dividend proposed


in the financial statement of the associate has not been taken into a/c in computing the investing enterprise’s share of result?

13. Have the changes in equity not included in the P&L of the associate (e.g., revaluation profits) been directly adjusted in the carrying amount of investment without routing through the P&L /c and has the corresponding debit/ credit been made in and disclosed in the relevant head of equity interest in the consolidated balance sheet?

14. Has the appropriation to mandatory reserves been included in the results of the associate?

15. Has the associate made an operating loss? Does the share of loss exceed the value of investment?

16. If yes has the adjustment of share of loss been limited to the value of the investment?

17. If the associate has uncalled capital, has the excess loss been recognised only to the extent of unpaid capital, if any?

18. Have the unrealized profits and losses resulting from transactions between the reporting enterprise and the consolidated subsidiaries and the associate to the extent of the investor’s interest in the associate been eliminated?

19. If the enterprise made two or more investments in the associate at different dates, was the significant influence eventually obtained?

20. If yes, has it been ensured that CFS are presented by applying equity method for investment in associate only from the date on which investor-associate relationship comes into existence?

21. Has the equity of the associate as on the date of investment been determined on a step by step basis?

22. Does the reporting date of any associate vary with the reporting enterprise’s reporting date?


23. If yes, is it practicable to draw up the financial statements of such associates to the reporting date of the enterprise?Note: The differences cannot be more than 6 months.

24. If no, have the financial statements drawn up to different reporting dates been consolidated?

25. If yes, have the effects of the significant transactions or other events that occur between those dates and the date of the parent’s financial statements been adjusted?

26. Does the associate use accounting policies other than those adopted in CFS? If yes, have appropriate adjustments been made to its financial statements before consolidation?

27. If any associate has outstanding cumulative preference shares held outside the group has the has the investing enterprise share of profit/ losses been computed after adjusting for the associates preference dividend whether or not dividends have been declared?

Disclosure28. Is appropriate listing and description of

associates including the proportion of voting power held disclosed and if different, the proportion of voting power held is disclosed separately in the consolidated balance sheet?

29. Is investments in associates accounted for using the equity method is classified as long term investments and disclosed separately in the consolidated balance sheet?

30. Is investors share of P&L disclosed separately in the consolidated P&L a/c?

31. Is investors share of extraordinary/ prior period items disclosed separately?

32. Are the names of the associates of which reporting dates is/ are different from that of the financial statements of an investor & the differences in the reporting dates disclosed in the CFS?


33. In case an associate uses accounting policies other than those adopted for the CFS for the like transactions and events in similar circumstances and it is not practicable to make appropriate adjustments to the associates financial statements, in such case is such fact, along with a differences in the accounting policies disclosed?

34. Is goodwill/ Capital Reserve arising on the acquisition of an associate disclosed?

35. Is investors share of contingencies and capital commitments of an associate for which it is also contingently liable disclosed?

36. Is contingencies that arise because the investor is severally liable for the liabilities of the associate disclosed?

Done By:………………………..


Reviewed by:…………………… AS 26 – Intangible Assets

Audit Procedure Y/N Remarks1. Does the company have in its books any intangible

assets?

2. Is the intangible capable of being identified separately?

3. Has the enterprise expended resources or incurred liabilities on (a) Acquisition

(b) Development

(c) Enhancement

Of intangible resources such as:

(i) Scientific or technical knowledge

(ii) Design and implementation of new process


(iii) Licenses or licensing agreements (e.g., motion picture films, video recordings)

(iv) Intellectual property (e.g. computer software)

(v) Market Knowledge

(vi) Trade marks, Copyrights, Patents

4. Where the intangible asset has been acquired separately, does the cost comprise the following?(a) Purchase price

(b) Import duties and other taxes (other than those recoverable)

(c) Any directly attributable expenditure on making the asset ready for intended use.

(d) Any trade discount and rebate

5. Where the intangible asset has been acquired in exchange for shares or other securities, has the intangible asset been recorded as its far value or the fair value of the securities issues, whichever is more clearly evident.

6. Where the intangible asset is acquired as a part of an amalgamation has the enterprise accounted the intangible asset in accordance with AS14?

7. Has the cost of intangible asset been determined on the basis of the following?

a) Quoted market price in an active market

b) Amount that would have been paid by an enterprise in an arm’s length transaction.

c) Appropriate accepted techniques like discounted cash flows etc.

d) If the ans to any of the above is no, has the value of such intangible asset been included with goodwill?

8. Where an intangible asset is acquired by way of Government grant has the intangible asset been recognised at nominal value/ acquisition cost?


9. Has it been ensured that the enterprise has not recognised internally generated as intangible assets:

(a) Brands

(b) Customer List

(c) Goodwill

(d) Start-up cost

(e) Advertising and Promotional activities

(f) Relocating or reorganizing part of all of the enterprise

(g) Voluntary retirement separation

(h) Product launching expenses

(i) Preliminary expenses

11. Has it been ensured that the enterprise has not recognised as intangible asset any expenditure on research?

12. Where the enterprise has recognised any expenditure on development as an intangible asset, can the enterprise demonstrate all of the following?

(a) The technical feasibility of completing the intangible asset so that it will be available for use or sale.

(b) Its intention to complete the intangible

(c) Its ability to use and sell the intangible asset

(d) An assurance that the asset will generate future economic benefit.

(e) The availability of adequate technical, financial and other resources to complete the development and to use or sell the asset, and

(f) Its ability to measure the expenditure attributable to the intangible asset during its development reliably.

13. If the answer to any of the above is no, has the


enterprise recognised the intangible asset

14. Is the intangible asset amortised

(a) Over the best estimate of its useful life?

(b) If not as per (a), over 10 years?

(c) If not as per (a) or (b) , then as per persuasive evidence that the useful life longer than ten yeas?

15. Has the amortisation period and the amortisation method been reviewed at the financial year end? If the expected value of the asset is significantly different from the previous estimates, has the amortisation period been changed accordingly?

16. (a) Has the enterprise not recognised as part of the cost of an intangible asset at a later date, in respect of expenditure that was initially recognised as expense in previous annual financial statements or interim financial reports?

(b) Has the enterprise revalued intangible assets?

17. Has subsequent expenditure on an intangible asset after its purchase or its completion been properly capitalised, by applying of measurability of cost and incremental economic benefits?

18. In addition to the requirements of AS 28, does the enterprise estimate the recoverable amount of the following intangible assets at each financial year and even if there is no indication that the assets is impaired?

(a) An intangible asset that is not yet available for use; and

(b) An intangible asset that is amortised over a period exceeding ten years from the date the asset is available for use.

19. Have any gains or losses arising from the disposal of an intangible asset determined as the difference between the net disposal and the carrying amount of the asset been recognised as income or expense in the P&L a/c

20. Do the financial statements disclose the following for


each class of intangible assets, distinguishing between internally generated items, and other items?

(a) The useful lives or the amortisation rates used;

(b) The amortisation methods used;

(c) The gross carrying amount and the accumulated amortisation at the beginning and end of the period.

(d) A reconciliation of the carrying amount at the beginning and end of the period showing:

(i) Additions indicating separately intangible assets generated internally and through amalgamation.

(ii) Retirements and disposals

(iii) Impairment losses recognised in the P&L A/c during the period.

(iv) Impairment losses reversed in the P&L a/c during the period

(v) Amortisation recognised during the period; and

(vi) Other changes in the carrying amount during the period.

21. Do the financial statements also disclose the following?

(a) Intangible asset amortised over more than 10 years, the reasons why it is presumed that the useful life of an intangible asset will exceed 10 years from the date when the asset is available for use;

(b) A description, the carrying amount and remaining amortisation period of any individual intangible asset that is material to the financial statements of the enterprise as a whole;

(c) The existence and the carrying amounts of the intangible whose title is restricted and the carrying amounts of intangible assets pledged as security for liabilities;

(d) The amount of commitments for the acquisition of intangible assets; and


(e) Intangible assets fully amortised but still in use.Done By:………………………..


Reviewed by:…………………… AS 28 – Impairment of Assets

Audit Procedure Y/N Remarks1. Has the enterprise assessed at the balance sheet

date whether there is any of the following indications that indicate impairment of an asset.

(a) Significant decline in market value of an asset?(b) Significant changes with adverse effect in the

technological, market, economic or legal environment in which the enterprise operates?

(c) Increase in market rates or market rate of return of Investment that is likely to affect the discount rate used in calculating an asset’s value in use and decrease the assets’s recoverable amount materially?

(d) Carrying amount of the net assets of the enterprise is more than its market capitalization.

(e) Evidence available of obsolescence or physical damage of an asset.

(f) Significant change with adverse effect in the extent to which or manner in which an asset is expected to be used such as plan to discontinue or restructure operations, or dispose of an asset before the previously expected date?

(g) Evidence that the economic performance of an asset is or will be worse than expected?

2. (a) Is the following determined of as an asset:(i) Net selling price?(ii) Value in use of an asset determined

(b) Is the carrying amount of an asset lower than (i) The net selling price(ii) The value in use

(c) If yes to (b) above, is the amount by which the carrying amount of an asset exceeds recoverable amount (higher of (b) (I) (ii) considered as an impairement loss?

d. Is the net selling price of an asset determined based


on(a) A binding sale agreement?(b) Market price?(c) Best information available to reflect the amount

that an enterprise could obtain, at the balance sheet date?

4. Is the value in use of an asset measured based on

(a) Cash flow projections (based on recent financial budgets forecasts) upto a maximum period of five years?

(b) Cash flows projections using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified.

(c) Cash Flow projections which use a pre tax discount rate that takes into adjustment specific risks associated with projected cash flow and takes into account either of the following rates:

(i) The enterprise’s weighted average cost of a capital asset pricing model

(ii) Enterprise’s incremental borrowing rate? And(iii) Other market borrowing rates?

5. Have the following not been considered in estimating future cash flows

(a) A future restructuring to which enterprise is not yet committed?

(b) A future capital expenditure that will improve or enhance the asset in excess of its originally assessed standard of performance?

(c) Cash inflows and outflows from financing activities?

(d) Income tax receipts or payments?

6. (a) Is the impairment loss for an individual asset or for a cash generating unit?

(b) If the impairment loss for an individual asset, has the following been recognised and measured

(i) The carrying amount of an asset reduced to its recoverable amont?

(ii) Impairement loss recognised as an expense in the statement of profit and loss immediately.

(iii) Impairment loss on a revalued asset is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount held in revaluation surplus?

(iv) Is depreciation for the asset adjusted in future


periods to allocate the assets revised carrying amount less its residual value (if any) on a systematic basis over its remaining useful life?

7. (a) Cash generating unit(i) Asset’s value in use cannot be estimated to be

close its net selling price? And(ii) The asset does not generate cash flows

from continuing use that are largely independent of those from other assets?

(b) If no to above, has the enterprise identified the recoverable amount of the lowest aggregation of assets (cash generating unit) that generate largely independent cash flows from continuing use?

8. (a) Is good will recognised in the financial statement?

(b) Can good will be allocated on a reasonable and consistent basis to the cash generating unit for impairment (bottom up approach)

(c) If not to (b) above, has the smallest cash generating unit that includes the cash generating unit for impairment and to which good will can be allocated on reasonable basis been identified (top down approach)

(d) Is impairment loss first allocated to reduce the carrying amount of goodwill allocated to the cash generating unit and then to other assets of the unit?

9. (a) Has the enterprise assessed at each balance sheet date whether there is any indication that an inpairment loss recognised for an asset in prior accounting period may no longer exist or may have decreased?

(b) If yes, to (a) above has the enterprise estimated the recoverable amount of that asset?

(c) If the recoverable amount is more than the reduced carrying amount is the carrying amount increased to its recoverable unit?

(d) Is the increased carrying amount (due to reversal of impairment) for an individual asset not exceeding the carrying amount that would have been determined (net of depreciation ) had no impairment loss been recognised for the asset prior accounting periods?

(e) SS the reversal of impairment of loss for an asset recognised as income immediately in the statement of profit or loss except in cases of


revalued asset in which case is any reversal of an impairment loss on a revalued asset treated as a revaluation increase.

(f) Is depreciation charge after reversal of an impairment loss, adjusted in future periods to allocate the assets revised carrying amount less its residual value (if any) on a systematic basis over its remaining useful life?

(g) Is the reversal of an impairment loss for a cash generating unit?

(h) If yes to (g) above is the increase allocated in the following order?

i) First assets other than goodwill

ii) the to goodwill, if impairment loss was caused by a specific external event of an exceptional nature that is not expected to recur and subsequent external events have occurred that reverse the effect that event?

(i) Is the carrying amount for a cash generating unit increased lower ofi) its recoverable amount? And

ii) the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised for the asset in prior accounting periods?

10. (a) Have the following disclosures in financial statements for each class of assets made?i) Amount of impairment losses recognised in the statement of profit and loss during the period and line item (s) of the statement of profit and loss in which those impairment losses are included?

ii) Amount of reversal of impairment losses recognised in statement of profit and loss during the period and the line item (s) of the statement of profit and loss in which those impairment losses are reversed?

iii) The amount of impairment losses recognised directly against revaluation surplus during the period? And

iv) the amount of reversal of impairment losses


recognised directly in revaluation of surplus during the period?

(b) Has the enterprise that applies AS 17, Segment reporting disclosed the following for each reportable segment based on primary format?

i) amount of impairment losses recognised in the statement of profit and loss and directly against revaluation surplus during the period? And

ii) amount of reversal of impairment losses recognised in the statement of profit and loss and directly in revaluation surplus during the period?

(c) If impairment loss for an individual asset or a cash generating unit recognised or reversed during the period is material to the financial statement, as a whole, has the enterprise disclosed.

i) the event and circumstances that led to the recognition or reversal of the impairment loss?

ii) amount of the impairment loss recognised or reversed?

iii) For Individual asset - the nature of the asset? And - the reportable segment to which the asset belongs based on the enterprise’s primary segment?iv) For a cash generating unit- - a description of the cash generating unit (produce line, a plant, a business operation, a geographical area, a reportable segment as defined in AS 17) - the amount of the impairment loss recognised or reversed by class of assets and by reportable segment based on the enterprise’s primary format (AS-17) - If the aggregating of assets for identifying the cash generating unit has changed since the previous estimate the enterprise should describe the current and former way


of aggregating and the reasons for changing the way the cash generating unit is identified? v) Whether the recoverable amount of the asset (cash generating unit) is its net selling price? Or its value in use?

vi) if recoverable amount is net selling price the basis used to determine net selling price?

vii) if recoverable amount is value in use the discount rate used in the current estimate (if any) of value in use?

(d) If impairment losses recognised (reversed) during the period are material in aggregate to the financial statement as a whole has the enterprise disclosed a brief description of the following?

i) the main classes of assets, affected by impairment losses (reversal) for which no information is disclosed under Para 10(c)

ii) the main events and circumstances that led to the recognition (reversal) of these impairment losses for which no information is disclosed under Paragraph 10 (c ).

(e) Has the enterprise disclosed key assumptions used to determine the recoverable amount of assets (cash generating units) during the period (Optional disclosure).

11. Has the enterprise determined impairment loss in respect of any cash generating unit on the date when AS 28 becomes mandatory and made the provision-

(a) Against the opening balance of Revenue reverse.

(b) Against the opening balance of revaluation reverse in case of revalued assets.

Done By:………………………..




AS 29 – Provisions, Contingent Liabilities and Contingent Assets

Audit Procedure Y/N/NA Remarks1. Have you checked the applicability of this standard to

the enterprise?

2. Ensure that this standard is not applied to provisions and cont. liabilities and cont. assets as under:

(a) Those resulting from financial instruments that are carried at fair value;

(b) Thos resulting from executory contracts;

(c) Thos arising in insurance enterprises from contracts with policy-holders; and

(d) Those covered by another Accounting Standards (7,15,19,22).

3. Have you taken a list of various liabilities & provisions are not “Liabilities”

(Refer the definition. Where an item has to be measured by using a substantial degree of estimation, it should be classified as “Provisions”)

5. Ensure that a provision is recognised only when all of the following conditions are present:

(a) An enterprise has a present obligation as a result of a past event;

(b) It is probable that there will be an outflow of resources (money etc.) for goods/ services etc. received already (economic benefit) to settle such obligation/s; and

(c) A reliable estimate can be made of the amount of the obligation.

6. Obtain a list of Provisions where any (one or more) of the above conditions are not met? Append a list.

7. If any of the conditions mentioned in point 4 above are not met, have you verified that provision is not recognised?

8. In cases where there is a dispute for ascertaining a past event has occurred or not or whether a present


obligation has arisen then has the enterprise resolved the dispute by taking account of all available evidence, including, for example, the opinion of experts, any additional evidence provided by events after the balance sheet date?

9. If on the basis of evidence obtained as mentioned above:

(a) Where it is more likely than not that a present obligation exists at the balance sheet date is provisions recognised (if the recognition criteria are met)? And

(b) Where it is more likely that no present obligation exists at the balance sheet date is it disclosed as a contingent liability, if the possibility of an outflow of resources embodying economic benefits is not remote?

10. In cases where there are a number of similar obligations (e.g. product warranties or similar contracts); have you ensured that the probability of an outflow will be necessary in settlement and is quantified by considering the class of obligations as a whole?

Further, have you verified that where the likelihood of outflow for an one item is small, some outflow will still be needed to settle the class of obligations as a whole? In such cases, make a provision (if the other recognition criteria are met)

11. Have you listed cases where no reliable estimate of the obligation can be made? In any of the cases if a liability exists and not recognised as a Provision then it must be shown as a contingent liability.

12. Have you identified liabilities in which the enterprise is jointly and severally liable for an obligation?

13. In each of the above cases is there a fair chance that the outflow is probable, then have ensured that a provision is made?

14. In cases where the outflow is not probable then disclose the items as Contingent liabilities.

15. In cases of any item/s previously dealt as a contingent liability, have you verified its status and where it becomes probable that an outflow will be


required have you ensured that it is recognised as a provision in the financial statements of the period in which the change in probability occurs?

16. Have you checked that contingent assets are not recognised in the financial statements unless the realization of income is virtually certain?

17. Have you confirmed that a contingent asset is disclosed in the report of the approving authority (Board of Directors in the case of a company, and, the corresponding approving authority in the case of any other enterprise), where an inflow of economic benefits is probable and not included in the financial statements?

18. Have you ensured that where contingent assets are assessed continually and if it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements of the period in which the change occurs?

19. Have you ensured that the amount recognised as a provision is the best estimate of the expenditure required to settle the present obligation at the balance sheet date and also check that the amount of a provision is not discounted to its present value?

20. Have you checked that in reaching the best estimate of a provision the risks and uncertainties that inevitably surround may events and circumstances is also taken into account?

21. Ensure that future events that may affect the amount required settling an obligation is reflected in the amount of a provision where there is sufficient objective evidence that they will occur. [for example, an enterprise may believe that the cost of cleaning up a site at the end of its life will be reduced by future changes in technology]

22. Ensure that gains from the expected disposal of assets is not taken into account in measuring a provision even if the expected disposal is closely linked to the event giving rise to the provision.

23. Where some or all of the expenditure required settling a provision is expected to be reimbursed by another party, is the amount of reimbursement


recognised only if it is virtually certain that reimbursement will be received if the enterprise settles the obligation?

In which case, have you verified that amount of reimbursement is recognised as a separate asset and the amount recognised for the reimbursement is exceeding the amount of the provision.

24. Check that in the statement of profit and loss, the expense relating to a provision is presented net of the amount recognised for a reimbursement.

25. Are provisions reviewed at each balance sheet date and adjusted to reflect the current best estimate?

If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, have you checked that the provision is reversed?

26. Make sure that only expenditures that relate to the original provision are adjusted against it. (adjusting expenditures against a provision that was originally) recognised for another purpose would conceal the impact of two different events).

27. Have you ensured that provisions is not recognised for future operating losses as future operating losses do not meet the definition of a liability and the general recognition criteria?

28. Have you checked that provision for restructuring cost is recognised only when the recognition criteria for provisions set out in this standard are met?

29. Have you ensured that a restructuring provision includes only the direct expenditures arising from the restructuring, which satisfy the conditions below:

(a) necessarily entailed by the restructuring ; and(b) not associated with the ongoing activities of the

enterprise.

30. Ensure that identifiable future operating losses upto the date of a restructuring are not included in a provision.

31. Have you verified that the gains on the expected disposal of assets are not taken into account in


measuring a restructuring provision, even if the sale of assets is envisaged as part of the restructuring?

32. For each class of provision, whether an enterprise has disclosed:

(a) the carrying amount at the beginning and end of the period;

(b) additional provisions made in the period; including increases to existing provisions;

(c) amounts used (i.e. incurred and charged against the provision) during the period; and

(d) unused amounts reversed during the period.

33. Whether an enterprise has disclosed the following for each class of provision:

(a) a brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits;

(b) an identification of the uncertainties about those outflows. Where necessary to provide adequate information, an enterprise should disclose the major assumptions made concerning future events; and

(c) the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement

34. If the possibility of any outflow in settlement, stating the amount of any asset that has been recognised for that expected reimbursement.(a) An estimate of its financial effect,

(b) An indication of the uncertainties relating to any outflow; and

(c) The possibility of any reimbursement.

35. Where any of the information required as above is not disclosed because it is not practicable to do so, is that facts is stated?

36. In extremely rare cases, disclosure of some or all of the information as required above can be expected to prejudice seriously the position of the enterprise in a dispute with other parties on the subject matter of the provision or contingent liability. In such cases, an


enterprise need not disclose the information, but whether it has disclosed the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed?

Done By:………………………..



Tax Audit

Checklist for Tax Audit

CHECK LIST FOR THE AUDIT UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961.NAME OF THE CLIENT_____________________________________________________

Current year Previous yearName of the person in chargeName of the Assistants / Articled ClerkAssessment year :

YES / NO / N.AA. Have you obtained the letter of appointment for Tax Audit from the

assessee as follows: In case of corporate assessee, by Board Resolution or letter of Managing Director, if authorized by the Board.

B. Have you communicated with :a) Previous Tax Auditor


b) Statutory Auditor

C. In case the Tax Auditor is different from the Statutory Auditor, have you obtained two certified copies of the audited statements of account and the Auditors Report of the Statutory Auditor ?

D. Have you obtained the statements of particulars in Form No 3CD with exhibits and supporting details duly authenticated by the assessee ?

E. If the branch accounts are audited by another Tax Auditor, have you received the audited accounts and the Tax Audit Report from the Branch Auditor and referred to the same in your Audit Report ?If there are any qualifications in the report which affect the true and fair view of items mentioned in Form No. 3CD the same should be stated / referred to in the Tax Audit Report itself with the reasons thereof.If any item of income or expenditure is observed in more than one clause of the statement, suitable cross reference should be made to such item at the appropriate places.Have you read and understood all the Sections of the Income tax Act and Rules under Income Tax Rules etc, mentioned in the Form No.3CD.

STATEMENT OF PARTICULARS IN THE FORM :

PART B YES / NO / N.AClause 7

a In case of firms or association of persons, have you obtained the copy of partnership deed to verify the names of partners / member and their profit sharing ratios ?

b Is there any change in the partners / members or their profit sharing ratios ? Give particulars of such change.Clause 9

a Have you checked whether books of account as are prescribed under Section 44AA ? If yes , have you obtained from the assessee the list of books of account prescribed under Section 44AA ?

b Have you obtained from the assessee the list of books of account maintained ? In case books of account are maintained in a computer system, mention the books of accounts generated by that system

c Have you affixed appropriate marks of identification on each and every book and records examined by you ?

d Are the books of account incomplete or deficient?Clause 11

a Whether the details of change if any, in the method of accounting compared to the previous year have been given ?


b Is there any deviation in the method of accounting employed in the previous year from Accounting Standard (AS) prescribed under Section 145 of the Act and details of deviation given :NOTE: Presently prescribed :AS-I Disclosure of Accounting PoliciesAS-V Disclosure of Prior Period and Extra Ordinary Items and Changes in Accounting PoliciesClause 12

a In case the Statutory Auditor is different from the Tax Auditor :i) Have you verified the inventories of stock-in-trade with the

stock register and checked the method of valuation of stock-in-trade ?

ii) Whether there is any change in the method of valuation of stock-in-trade as prescribed under section 145A and whether the effect of change on the profit or loss is given?

b In case the Statutory Auditor and Tax Auditor are the same, verify whether any remark has been made in the Audit Report or the Notes forming part of the accounts for any change in the method of valuationClause 13 YES / NO / N.A

a Have you verified the items of income (mainly on account of profit on sale of a licence, cash assistance against exports, Duty Drawbacks etc.) falling under Section 28 but not credited to the profit and loss account ?

b Have you obtained from the assessee a certificate of claims made by the assessee in respect of the following items and admitted by the authorities during the year and also verified the same with reference to the relevant files and records:-

i) Drawbacks or Refund of Customs Dutyii) Refund of Excise Dutyiii) Refund of Sales Taxiv) Other Proforma credits

If the above mentioned amounts are not credited to profit and loss Account ,whether the particulars have been given.Clause 14

a Have you verified the following particulars of depreciation allowable (i.e. allowed) as per Act in respect of each asset or block of assets ?

Description of asset / block of assetsa) Rate of depreciationb) Actual cost or Written Down Value (WDV)c) Date of additions / deletions during the year

b Date of put to use in case of addition (Refer Note No. 1 given herein below)

c Modified valued added tax (MODVAT) claimed under excise records i.e.RG23A Part I and also whether the same has been


allowed (i.e. allowable) by the excise authorities (In case of assets acquired on or after 1st March,1994)

d Have you verified the details of pending excise duty matters to determine whether there is any disallowance of Modvat ?

e Whether there is any change in the addition of an asset due to exchange rate fluctuation ?

f Have you verified the subsidy, grant or reimbursement, if any, adjusted against addition of assets

1. Where the asset is acquired by the assessee during the previous year and is put to use for the purpose of business or profession for a period of less than one hundred and eighty days (i.e. after 2nd October) in that previous year, the deduction in respect of such assets shall be restricted to fifty percent of the amount calculated at the percentage prescribed for an assets.

2. Also Refer Section 32 (Depreciation)3. All the above details should be presented in a tabular format

Clause 15 YES / NO / N.AHave you verified the amount of deduction allowable under the following Sections and amount debited or not debited to the profit and loss account ?(Indicate separately for each section)SECTION PARTICULARS33AB Tea Development Account33ABA Site Restoration Fund33AC Reserves for Shipping Business35* Expenditure on Scientific Research

35ABB Expenditure for obtaining License to Operate Telecommunication Services

35AC Expenditure on eligible Projects or Schemes

35CCA Expenditure by way of payment to association and institutions for carrying out rural development programme

35CCB Expenditure by way of payment to associations and institution for carrying out programmes of conservations of natural resources

35D Amortization of certain preliminary expenses

35E Deduction for expenditure on prospecting, etc., certain minerals

Clause 16a Have you verified that the claim of deduction made by the


Company for the amount of bonus or commission paid to employees is exclusively for his services rendered to the Company and not related with any profit Bonus or Dividend ?

b Have you reported the following payments alongwith due date and actual date of payment to the concerned authorities

1) Contribution to provident fund (including employees)- Due date i.e.15th of next month.

2) Contribution to Superannuation fund Due date i.e. As per agreement.

3) Contribution to gratuity fund4) Contribution to any other welfare fund as prescribed under

Section 2 (24) (x)NOTE: E.S.I.C should also be covered. - Due date whereof is 21st of next month

Clause 17(a) YES / NO / N.AWhether any capital expenditure is debited to profit and loss account. In particular, the capital expenditures on scientific research, books for professional purposes where 100% depreciation is allowed as per the Companies Act,1956 and other assets written off.Clause 17(b)

1 Have you taken out the particulars of personal expenses debited to any of the revenue accounts for reporting under this clause e.g. :- Staff welfare - Motor car expenses- Sales promotion expenses- Traveling expenses- Electricity charges- Telephone charges- Entertainment expenses- Club bills- Rent & Maintenance charges for residential premises- Hotel bills- General / Miscellaneous expenses

2 Whether the past assessment order has been verified to ascertain the personal expenses disallowed by the Income Tax officer and accepted by the assessee

3 If the question relating to disallowance of personal expenses is in dispute in the earlier years, the fact should be stated and the amount disallowable as per the stand taken by the assessee should be statedClause 17(c)

Have you ascertained the expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the published by any political party for reporting under this clause ?NOTE:Obtain a certificate to the effect that no advertisement


expenses other than what is already specified in the clause have been incurred by the assessee.Clause 17 (d)

1 Have you determined the payments to club by way of :a) Entrance feesb) Annual subscriptionsc) Periodical club bills for catering and other services

2 Have you ascertained whether any such payments are of a personal nature and if any, the same has also to be shown under clause 17 (b) ?

YES / NO / N.A

Clause 17(e)1 Have you come across any expenditure incurred in the nature of

penalty or fine for violation of any law i.e. Excise Law , Custom Law , Income Tax, Sales Tax, FERA, MRTP etc. for the time being in force ?

2 Any other penalty or fine other than those mentioned in para (1) above

3 Have you come across any expenditure incurred for any purpose and the same is prohibited by law ?

4 Have you scrutinize the following account heads to determine the above referred expenses :- Legal and professional expenses- Miscellaneous expenses- Motor car expenses- Electricity expenses- Rates & Taxes

Clause 17(f) and (g)Have you verified the payments not deductible or inadmissible under following section?

SECTION

PARTICULARS

40(a) In case of a companyi) Any interest, royalty, fees or technical

services etc. which is payable outside India, on which tax has not been paid nor deducted.

ii) Income Tax

iii) Wealth Tax

iv) Salary payable outside India and if tax has not been paid nor deducted.


v) Payment to Provident Fund or other fund,(over and above the exempted amount ) unless the assessee has made effective arrangement to secure that tax shall be deducted at source.

40 (b) In case of firm40 (ba) In case of association of persons

Clause 17(h) YES / NO / N.A1 Have you obtained from the assessee a list of Payment

exceeding Rs.20,000 Made in cashMade by cheque and demand drafts,which are not crossed

2 Have you verified the above list of cash payments above Rs.20,000 with reference to the cash book ?

3 Have you excluded payments made in cash in excess of Rs.20,000 falling within the exceptions provided under rule 6DD (a) to (i)

4 Have you verified whether an invoice exceeding Rs.20,000 is bifurcated into instalment of less than Rs.20,000 each on the same day and made a list of such payments ?NOTE:a) In respect of payments above Rs. 20,000 if the evidence

about crossed cheque or Bank Draft is not available with the assessee, it is advisable to make the following comment against this clause :-“It is not possible for me / us to verify whether the payments in excess of Rs. 20,000 have been made otherwise than by cross cheque or Bank Draft, as the necessary evidence is not in the possession of the assessee”.Obtain a certificate from the management that all payments made by crossed cheques other than those mentioned in (1) above.

Clause 17(i)a Have you obtained from the assessee, the order of the

commissioner of the Income Tax granting recognition to Gratuity Fund and verified the date from which it is effective and whether the provisions has been made as per the Trust Deed ?

b Have you checked any other provision for gratuity, which has become payable during the year (in case where there is no Gratuity Fund) should be separately statedNOTE:Obtain a certificate from the assessee that contribution made does not exceed permissible limits under Rules 103 and 104 of Income Tax Rules, 1962Clause 17(j)Have you reported under this clause any payment by an


employer towards the setting up or formation of or as contribution to any fund, Trust, Company, Association of persons, Body of individual, Society registered under the societies Registration Act or Institutions other than Recognized Provident Fund, Approved Superannuation Fund or Gratuity Fund ?

YES / NO / N.AClause 17 (k)

1 Have you scrutinized the various accounts like outstanding liabilities, provision etc. to ascertain whether the provision for expenses are of contingent nature ?The necessary correspondence in connection with the same should be verified.

2 Have you checked the list of contingent liabilities of the earlier year in order to determine whether or not any item charged to the profit and loss account of the current year is of contingent nature ?

3 Have you obtained from the assessee a list of contingent liabilities to be shown in the Balances Sheet by way of note ?(Also refer to AS-4 “ Contingencies and Events occurring after the balance sheet date.”)Clause 18

1 Have you obtained from the assessee a list of persons specified in section 40A (2) (b), being relatives and other association ?

2 Have you obtained a list of all revenue payments (for goods services and facilities) made by the assessee to such persons ?

3 Have you scrutinized such list by references to :

a) Salaries paid to such personsb) Contracts or arrangements entered with such personsc) Purchase made from such persons:- On credit by reference to creditors ledger.- On cashd) Expenses paid to such persons :

- On credit basis by reference to expenses ledger- On cash

Clause 19Have you verified the provisions under following Sections in relation to deemed profit?

SECTIONS PARTICULARS

33AB Tea Development Account

ABA Site Restoration Fund

33AC Reserves for Shipping Business

Clause 20


Have you checked the items covered under Section 41 and amounts to profit chargeable to tax ? \Clause 21 (43B) YES / NO / N.A

1 a) Have you ascertained amount of liabilities as atthe beginning of the previous year but was not allowed in the assessment of any preceding previous year and was paid or not paid during the previous year for the following aspects :

- Have you reported under this clause details for Sales tax, Excise duty, Municipal taxes, Cess etc. ?

- Have you verified that any sum payable as bonus or commission to employees for services rendered in the capacity of an employee.

- Have you verified that any sum payable as interest on any loan or borrowing from any public financial institutions or a state financial corporation or a state industrial corporation ?

- Have you verified that any sum payable as interest on any term loan from a scheduled Bank.

b) Have you ascertained whether out of the existing liabilities at the beginning of the previous year and liabilities for the previous year were paid on or before the due date for furnishing the return of the income of the previous year under Section 139 (1) (Refer Note mentioned hereinbelow)

2 Have you ascertained the following details for the liabilities as at the beginning and at the end of the previous year for the sum payable by the assessee to the employees by way of contribution to provident fund, gratuity, or Superannuation fund or any other fund for the welfare of the employees ?

- Nature of liabilities- Due date of payment- Actual date of payment- If paid otherwise than in cash, whether the sum has been

realized within 15 days of the due date.

NOTE:State whether sales tax, customs duty, excise duty or any other indirect tax, levy, Cess, import etc. is passed through the profit and loss account.


Clause 22(a) YES / NO / N.Aa Have you verified the statement of modvat credit availed and /

or utilized during the year from the books of account and excise records ?

b Have you checked the treatment of modvat credit availed in the books of account ?

c Have you verified the treatment of modvat credit unutilized at the year end in the books of account.Clause 22 (b)

1 If the assessee is following the mercantile system of accounting , have you shown in this clause , the particulars of expenditure / income of any earlier year debited / credited to the profit and loss account of the year under report ?

2 If the assessee is followed the cash system of accounting , the expenses debited or the income credited to the profit and loss account would be the current years expenses or income , though relating to earlier year, therefore, would not be covered by this clause ?

3 Have you considered whether expenditure of an earlier year, debited to the profit and loss account crystallized during the relevant year on account of the claim being preferred by the party concerned during the year and in such cases excluded such amounts from this clause ?( Also refer AS-5 “ Prior period and extraordinary items and changes in accounting policies “ )

Clause 23

1 Have you obtained from the assessee a list of the amounts borrowed on hundi and of its repayments (including interest ) to any person other than by an account payee cheque ?

2 Have you verified the above list of borrowings and repayments in cash with the cash book ?

3 Have you shown hereunder the details of amount borrowed on hundi from or any amount due thereon ( including interest on the amount borrowed ) repaid to any person otherwise than by a cheque i.e. cash ?

4 Have you excluded the borrowings on Darshani hundies etc. referred to in CBDT circular no. 208 dated 15.11.1976 ?

5 In case of difficulty in verifying the loans taken repaid on hundi by cheque and in the absence of evidence about receipts and payments by cheque, have you made a suitable comment under this clause as suggested in clause 17 (h) ?

Clause 24 (a) YES / NO / N.A

Have you obtained a complete list of each loan or deposit of Rs


20000 or more taken or accepted by the assessee in the following form :a)Name , address and permanent account number of the

lender / depositor

b)Amount of loan or deposit taken or accepted

c)Whether the loan or deposit was squared up during the year ?

d)Maximum amount outstanding at any time during the year

e)Whether loan or deposit was taken or accepted otherwise than by an account payee cheque or an account payee bank draft ?

Clause 24(b)Have you obtained a complete list of each loan or deposit of Rs 20,000 or more ( excluding loans to bank ) repaid by the assessee in the following form :

a) Name , address and permanent account number of the lender / depositor

b) Amount of loan or deposit repaid c) Maximum amount outstanding at any time during the yeard) Whether loan or deposit was repaid otherwise than by an

account payee cheque or account payee bank draft ? NOTE :

a) Have you checked the above particulars of the loans with reference to the books of account and other documents ?

b) It is to be noted that the information under item (e) above is required to be given only if such loans are received or repaid in cash and it is not necessary to indicate whether such receipts or repayments are made by account payee cheque.

c) In case of difficulty in verifying the loans taken or accepted and repayment of loan or deposit by cheque , have you made a suitable comment under this clause as suggested in clause 17 (h) ?

( Not applicable in case of a government company ,banking company or a corporation established by a central , state or provincial act )Clause 25 YES / NO / N.AHave you obtained the details of any loss or depreciation allowance brought forward in the following format :

Sr No

Asst Year

Nature of Loss/Allowance

Amount as returned

Amount as assessed

Remarks


* Give reference to the relevant order.Clause 26Have you ascertained the total amount of deduction to be made in Computing total income . viz. Deduction under section 80 A to 80 U ( Chapter VI A )NOTE :Aggregate amount of deduction under this chapter shall not exceed the gross total incomeClause 27Have you verified from the books and records whether the tax has been deducted at source by the assessee and paid the amount so deducted to the credit of the Central Government in accordance with the provisions of chapter XVIII-B of the Act in respect of the following payments viz :a) Salary

b) Interest other than interest on securities

c) Interest on securities

d) Rent

e) Winnings from lottery or Cross – Word Puzzles

f) Winning from Horse Races

g) Payments to contractors / sub – contractors

h) Fees for professional or technical services

i) Insurance commission

j) Payments to non – resident

The details about the delay in payment of tax deducted at sources is only required to be given in the following form :Particulars of the delay in payment of tax deducted at sourcesSl Particul

arsof payment

Amountof T.D.S

Due date forremittance toGovt.

Details of payment Amount (Rs) Date

Delay Days

YES / NO / N.AClause 281)Have you obtained the statement showing full quantitative details of principal items of raw materials and finished products as indicated below :

Raw Materials :

a) Opening stock

b) Purchases during the year


c) Consumption during the year

d) Sales during the year

e) Closing stock

f) Yield of finished products

g) Percentage of yield

h) Shortage / Excess, if any

Finished Products / By Products

a) Opening stock

b) Purchases during the year

c) Quantity manufactured during the year

d) Sales during the year

e) Closing stock

f) Shortage / Excess, if any

NOTE :Normally, items which contribute more than 10% of the aggregate value of purchases, consumption or turnover may be classified as principal items.

ii In case stock records are not maintained by the assessee , the details may be given in respect of the above particulars as prepared from the books of account which may be indicated clearly under this clause.iii) The information about yield, percentage of yield & shortage / excess of raw materials as well as shortage / excess of finished products may be given to the extent that the same is available from the records of the assessee. If these particulars are not available , the fact should be stated.

Iv)Have you verified the inventories with the stock records both regarding the quantities and valuation thereof as per the method of valuation followed by the assessee and ensured the correctness of the information furnished ?

v) In case , it is not possible to verify the inventories completely , have you verified the items on a sampling method to the extent it may be necessary in the facts and circumstances of the cases so as to satisfy yourself about the correctness of the figure ?

vi) In case of the Company , have you cross checked the information with the quantitative details furnished in the notes forming part of the audited accounts, as required by Part II of Schedule VI of the Companies Act, 1956 ?


NOTE :Obtain a statement giving particulars of inventories duly signed by the Managing Director, Partner or Proprietor , as the case may be .

Clause 29Have you collected following details regarding Corporate Dividend Tax ( Refer Section 115 O)a) Total dividend declared and paid i.e. distributed profitsb) Total tax paid on (a)c) Dates of payment with amountsClause 30If cost audit was carried out , whether a certified copy of the Cost Audit Report has been obtainedClause 31If any audit was carried out under the Central Excise Act, 1944 , whether a certified copy of the report of such audit has been obtained .Clause 32

Have you verified the relevant figures to arrive the following ratios :

RATIO FORMULA

a) Gross Profit / Turnover

Gross Profit x 100Net Sales

b) Net Profit / Turnover Net Profit x 100Net Sales

c) Stock in trade / Turnover

Net SalesAverage finished goods Stock

d) Material Consumed / Finished goods produced

Material Consumed Cost of finished Goods produced

NOTE:1. Net profit may be either Operating Net Profit , Profit

before tax, or Profit after tax.2. Ratio in case of (d) above should be calculated for major

items only.

NAME AND SIGNATURE OF AUDIT INCHARGE


General Management Representation Letter for Tax Audit

Date (signing of the Tax Audit Report)

To,MGB & CoChartered Accountants,101A, Jolly Bhavan No.2,7, New Marine Lines, ChurchgateMumbai - 400 020.

Sub: Tax Audit under Section 44AB of the Income Tax Act, 1961 for the year ended-----------.

Dear Sir,

We confirm that the following representations were made to you in respect of tax audit of ……. LIMITED for the year ended---------.relevant to Assessment Year----------.

1. The books of account maintained and generated by computer system which were made available to you for your examination are as per given in “Annexure -------” to Form 3CD.


2. The provisions of Section 44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB or any other relevant Section relating to computation of profits and gains on presumptive basis are not applicable to the company.

3. The Company has employed the mercantile system of accounting in the previous year as referred in the significant accounting policy to the annual accounts.

4. There has been no change in the method of accounting as compared to that prevalent in the immediately preceding year as referred in significant accounting policy to the annual accounts.

5. There is no deviation in the method of accounting employed in the previous year from the accounting Standards prescribed under Section 145.

6. The Company is not eligible to claim Modvat or any other benefits as specified under Section 145A of the Act.

7. The stock of spares, stores and merchandise, food & beverages are valued at lower of cost and net realizable value.

8. a) There are no amounts falling within Section 28 other than those credited to profit and loss account.

b) No amounts are credited to Profit and Loss account being proforma credits, drawbacks, refunds of customs or excise duty, or refunds of sales tax, escalation claims, capital receipt or any other item of income are outstanding as on-----------.

9. The additions/ deductions to the fixed assets during the previous year are enclosed in “Annexure – 3”.

10. There are no amounts admissible under Section 33AB, 3ABA, 33AC, 35ABB, 35AC, 35CCA, 35CCB, 35E. The amount admissible under Section 35D is stated in clause 15(a) to the Form 3CD.

11. There are no sums paid to an employee as bonus or commission for services rendered, where such was otherwise payable to him as profits or dividend.

12. Any sum received from employees towards contribution to any PF, or super annuation fund or any other fund as mentioned in Sec. 2(24)(x) are deposited with concerned authorities as referred in “Annexure –--------”.

13. No expenditure of capital nature have been debited to the profit and loss account except 100% depreciation provided on assets costing less than Rs5000 of Rs --------- as per “Annexure----- ”.

14. There are no personal expenses debited to the Profit and Loss account except those payable under contractual obligations and in accordance with generally accepted business practice.


15. No expenditure has been incurred on advertisement in any souvenir, brochure, tract, pamphlet or the like, published by a political party.

16. No expenditure has been incurred at clubs as entrance fees or for services.

17. a) There has been no expenditure by way of penalty or fine for violation of any law for the time being in force or by way of any other penalty or fine except those stated in clause 17(e)(ii) of the Form 3CD.

b) There has been no expenditure incurred for any purpose which is an offence or which is prohibited by law.

18. There are no amounts inadmissible under Section 40 (a).

19. The provisions of Section 40(b), 40(ba) are not applicable to the Company.

20. There are no amounts inadmissible under Section 40A (3) read with rule 6DD. In respect of payments exceeding Rs 20,000, no record is kept whether the cheque is a crossed bank draft or a bearer cheque.

21. Provision for gratuity Rs ---------- debited to Profit and Loss A/c which are disallowable under section 40A(7).

22. There are no sum paid by the company as an employer which is not allowable under section 40A (9).

23. There are no particulars of any liability of a contingent nature debited to Profit & Loss Account.

24. The particulars of payments made to persons specified under section 40A(2)(b) is as per “Annexure -----”.

25. The provisions of Sections 33AB, 33ABA, and 33AC are not applicable to the company.

26. Balances written back chargeable to Tax under Section 41 is considered in Profit & Loss A/c as Income.

27. The sum referred to in clause (a), (c), (d) or (e) of Section 43B pre-existed on the first day of the previous year which was not allowed in the assessment of any preceding year are as per “Annexure – ----”.

28. The sum referred to in clause (a),(c),(d) or (e) of Section 43 B have been paid before due date of furnishing the return of income of the previous year under Section 139 (1) as per “Annexure –-----”.

29. The sum referred to in clause (b) of Section 43B which pre-existed on the first day of the previous year which was not allowed in the assessment of any preceding year as per “ Annexure – ---”.


30. The sum referred to in clause (b) of Section 43 B have been deposited with the relevant authorities within the due date except stated in the “Annexure -------– ”.

31. The amount of Modified Value Added Tax credits availed or utilized during the previous year and its treatment in the profit and loss account and treatment of outstanding modified value added tax credits in the accounts are as not applicable to the Company.

32. The particulars of Income or Expenditure of prior period credited or debited to the Profit and Loss account as per “Annexure –----”.

33. No loans or deposit in an amount exceeding the limit specified in Section 269SS is accepted by the company except as stated in the “Annexure ------”.

34. No loans or deposit in an amount exceeding the limit specified in Section 269T is repaid by the company except as stated in the “ Annexure ------”.

35. The amount of brought forward loss or depreciation allowance from the earlier years available for set off against future profits as stated in the “ Annexure ------”.

36. Section-wise detail of deductions, if any, admissible under Chapter VI A as stated in the “ Annexure -------- “.

37. The Company has deducted tax at source and paid the amount so deducted to the credit of the Central Government in accordance with the provisions of Chapter XVII-B, except as stated in “Annexure ------”.

38. The company is engaged in business of ---------??????.

39. The provision of Section 115O not applicable to the Company.

40. The provisions of Section 233B of the Companies Act, 1956 relating to conduct of cost audit do not apply to the company.

41. No audit has been conducted under the Central Excise Act, 1944 during the year.

42. The Company is engaged in the business of -------------------??????.

Thanking you, Yours faithfully, ……………………….Limited

Managing Director


Limited Review

General assurance for Limited Review of Financial Statements

Sr No Particulars Remarks1 Final Trial Balance - All Divisions2 Columnar Balance Sheet3 Common Transactions / Adjustments / Working.4 Two Columnar Balance Sheet5 Detailed Groupings.6 Interest Provision Chart with reference to Loans.7 Fixed Assets – Additions Chart with Depreciation

calculations.8 Cash & Bank Balances – Certification

- Bank Reconciliation Statements9 Details of Advance / Deposit with purpose.10 Loans given and Interest working / confirmations if any.11 Inventories with Divisional Policies and its working.12 Debtors - Ageing Schedule with summary

- Doubtful debts / Bad debts if any.13 Creditors’ Summary with purpose14 Investments - Physical Certificates/ verification

- Income accounting if any.15 Changes in Share Capital ROC Records/ Formalities/

Resolutions.(if any)16 Accrued Liabilities and Schedule of Outstanding

Liabilities and its working.17 Income and other taxes – Status

Pre-paid expenses - List18 Subsequent events, extraordinary items, if any.19 Litigations – Summary of cases.20 Application of all Mandatory accounting standards.21 Relevant Secretarial Records.22 List of Divisions operational in Current accounting period.

New divisions/ Activity started if any.23 Appropriate Charts for Balance Sheet.


24 Standalone analysis to be made for each schedule

Checklist for Limited Review

Limited Review of ………………………………………………………………………… for the quarter ended …………….This checklist should be referred to during the planning stage as well as during the audit execution so as to ensure that no part is missed out at the time of audit completion.GENERAL

Particulars Remarks (Y/N/NA) and where required detailed remark

1. Issue the engagement letter and obtain the copy of it indicating acceptance by the client

2. Obtain knowledge of the Company’s business, the accounting systems, organization chart etc.

3. Obtain details of changes in the Client’s business from the last audit period.

4. Obtain information on qualifications/disclaimers in the earlier years (e.g. diminution in the book value of investments, overdue debts, advances, non-moving/obsolete inventories and claims against the Company requiring provisioning etc.) and take a note on subsequent developments in respect of each such items and also for similar cases arising during the period.

5. Obtain information from the client as to whether there has been any change in accounting policies for the period under consideration in comparison to those followed in the preceding year. The information of effects on account of change in accounting policies has to be separately disclosed.

6. Significant financial matters in the minutes of shareholders and the Board/Committees should be summarized and considered.

7. Obtain trial balances (with movements) viz. Debtors, Creditors, fixed deposits taken, loan and advances etc. These Trial balances should agree with the general ledger and the financial statements.

8. Obtain a comparative statement of the current financial results with the corresponding earlier half-year i.e. half year ended 30 th

September and reasons for the significant variations.9. Prepare a statement showing significant changes in the entity

from the previous year (e.g. changes in the ownership, changes


in capital structure, plans for disposal of assets or business segments etc.).

SUGGESTED AUDIT PROCEDURESFIXED ASSETS Remarks (Y/N/NA) and

where required detailed remark

1. Obtain a schedule of fixed assets and verify the following:

Whether opening figures tally with previous year’s audited accounts?Whether the additions/disposals during the period have been properly accounted for?Whether depreciation has been provided proportionately for the six months?Whether depreciation has been provided on the same basis as in earlier years?Whether in respect of assets taken on lease by the Company, treatment prescribed by the accounting standard been complied?

2. In respect of assets retired or held for disposal, please check whether proper provision has been made for the diminution in the value of assets.

3. Where there is a sale of a division or purchase of a business from third parties, check whether suitable note has been given in the half yearly results.

4. Whether Capital Work in Progress includes any item which should have been capitalized or charged to revenue?

INVESTMENTS5. Obtain a schedule of the investments at the balance sheet date

and determine whether it agrees with the trial balance.6. Verify the correctness of accounting for investments added / sold

during the period.7. Verify the market value / fair value of the investments as at the

date of the half yearly accounts and check whether provision has been made for permanent diminution in value, if any.

8. In respect of current investments, particularly mutual funds, verify whether provision has been made for difference in book value and current market value / fair value.

INVENTORIES9. Has the company physically verified the inventories?10. Whether proper cut-off procedures have been applied for arriving

at the stock quantities?11. Whether the stock quantities are reconciled with secondary

records like excise?12. Whether the stock quantities are broadly in agreement if

analytical ratios, like yield, standard consumption etc are applied?

Remarks (Y/N/NA) and


where required detailed remark

13. Whether the method applied for valuation of inventory is in accordance with AS-2 requirements?

14. Whether the valuation method and procedures are the same as in the immediately preceding year?

15. Whether adequate provision for damaged / unusable stocks have been made in the accounts?

CASH & BANK BALANCES16. Obtain and verify up-to-date Bank Reconciliation and obtain

explanations for outstanding old or unusual items. SUNDRY DEBTORS17. Obtain age-wise analysis and invoice-wise details of the

outstanding debit and credit balances in Sundry Debtors Accounts,

18. Analyze subsequent recovery there against and obtain explanations from the Marketing Department for all overdue debtors.

19. Inquire about procedures applied to ensure that a proper cut-off of sales transactions and sales returns has been achieved.

20. Inquire about the accounting policies and procedures regarding recording of receivables. Are there any subsequent allowances being given and how has the cut-off been ensured for such allowances?

21. Obtain and consider explanations of significant variations in account balances from previous periods or from those anticipated.

22. List of outstanding claims of customers as on date against which credit notes are yet to be issued/decisions are pending.

LOANS & ADVANCES23. Obtain detailed statement of pre-paid expenses, deposits, loans

and advances, explanations for the overdue amounts, age-wise analysis details of subsequent recovery.

24. Inquire about the basis of estimating the pre-paid portions. Are these estimation procedures bases on reasonable judgments and are backed by suitable calculations?

CURRENT LIABILITIES & PROVISIONS25. Inquire about the accounting policies and procedures regarding

recording of trade payables. In case any subsequent allowances / benefits are to be received, how has the cut-off been ensured for such allowances?

26. Obtain and consider explanations of significant variations in account balances from previous periods or from those anticipated.

27. Obtain a list of creditors and tally with the general ledger control account.

28. Verify whether cut-off procedures have been followed and liability created for all goods and services received upto the date of the


financial statements.29. Verify that provision has been made for all known liabilities

based on discussions with the management and verification of relevant records.

PROFIT & LOSS ITEMS30. Verify whether proper cut-off procedures have been applied for

accounting of sales / income from services.31. Ascertain whether revenue recognition has been done on the

same basis as for annual reporting purposes. 32. Compare the sales with the previous period and the annual

figures to ascertain any abnormal variations.33. Analyze the sales to major customers or major segments in

relation to corresponding previous figures and ascertain the reasons for any abnormal variations.

34. Verify whether proper cut-off procedures have been applied for accounting of purchases of materials, stores and spares etc.

35. Ensure that all volume discounts, commissions etc. have been properly recorded.

36. Ensure that all personnel expenses have been recorded in the same manner as for annual reporting purposes.

37. While verifying personnel costs, check whether provision has been made for gratuity and leave encashment.

38. Future expected increase in personnel costs / remuneration should not be accounted for.

39. All major expenses like power & fuel, excise duty, stores consumption etc. should be accounted for in the same manner as for annual reporting purposes.

40. In case of all fixed expenses like rent, telephone etc. ensure that expenses for the full six months have been provided in the accounts.

41. Ensure that all expenses provided for on estimated basis are reasonable and adequate. Please prepare a summary of all major expenses provided for on estimate basis. This summary should be scrutinized and approved by a senior audit staff.

42. Verify whether the appropriate portion of pre-paid expenses have been charged off.

43. In case of repair expenses, ensure that only the expenses which have already occurred have been accounted for. In case situations so exist that major repair expenditure may be recognized until and unless the obligation has already crystallized.

44. Ensure that costs that are incurred unevenly during an enterprise’s financial year have been anticipated or deferred for interim reporting purposes if, and only if, it is also appropriate to anticipate or defer that type of cost at the end of the financial year.

45. Ensure that costs which are planned but are discretionary in nature have been recognized in the interim period when incurred and not equalized over the interim periods.


46. Verify that profit or loss on sale / disposal of assets has been accounted for only at the time of actual sale.

47. Check whether interest has been provided for the six month period as per the terms of the respective loan agreements or in case of cash credits / overdrafts, based on the respective bank statements.

48. Ensure that depreciation for the interim period is based only on assets owned and capitalized during the period. Future capitalization should not be taken cognizance of.

49. Check whether the tax provision has been made for regular as well as deferred tax.

50. The tax provision should be made by applying the estimated average effective annual tax rate to the pre-tax income of the interim period.

51. Verify the correctness of the estimated tax rate by reference to applicability to otherwise of the relevant deductions u/s. 80HHC, 80I etc

52. Ensure that foreign currency translation has been done for all monetary assets and liabilities in the same manner as is done at the time of annual reporting.

53. Carry out a ratio analysis for all significant items, particularly the ratios given in Annexure 2 attached.

Particulars of Persons handling the assignment Name Signature Date

Partner-in-Charge

Manager

Qualified Assistant

AssistantsAssistantsAssistantsAssistants


DISCLOSURES REQUIREMENTSRemarks (Y/N/NA) and where required detailed remark

1. The prescribed format is given in Annexure 12. Material Events

Any event or transaction that is material to an understanding of the results for the quarter including completion of expansion and diversification programs, strikes, lock-outs, change in management, change in capital structure etc, shall be disclosed.Material event or transactions subsequent to the end of the quarter, the effect whereof is not reflected in the results for the quarter shall also be disclosed.

3. All material non-recurring/abnormal income/gain and expenditure/loss and effect of all changes in accounting practices affecting the profits materially must be disclosed separately.

4. In case of companies whose revenues are subject to material seasonal variations, they shall disclose the seasonal nature of their activities.

5. In respect of dividend paid or recommended for the year including interim dividends declared:i. Amounts of Dividend distributed or proposed distinguishing

between different classes of shares and Dividend per share also indicating nominal value per share.

ii. Where Dividend is paid or proposed pro-rata for shares allotted during the year, the date of allotment, number of shares allotted pro-rata amount of dividend per share and the aggregate amount of dividend paid or proposed on pro-rata basis.

6. The effect of changes in composition of the company during the quarter, including business combinations, acquisitions or disposal of subsidiaries and long term investments, restructuring and discontinuing operations shall be disclosed.

7. If there is any qualifications in respect of the previous accounting year which has a material impact on the profit disclosed in such accounts, then the company shall disclose the same long with the unaudited quarterly results and give explanation as to how such qualifications has been addressed in the unaudited financial results.

8. The un-audited results sent to Stock Exchange/s and published in newspapers should be based on the same set of accounting policies as those followed in the previous year. In case, there are changes in the accounting policies, the results of previous year will be recast as per the present accounting policies, to make it comparable with current year results.

File Maintenance and Completion


File Maintenance: -

The documents to be maintained in the file should be:-

Routine File:- A note on the business of the Company, note on each area audited with observations, all routine queries duly resolved. No other papers in routine audit file should be kept. Only final papers should be kept and others should be disposed off. Agreements or any other vouchers taken for review should not be kept in the file. Only important agreements must be kept in a separate agreement file with gist of each agreement.

Finalization File:- It should first contain the Contents of File, Final balance sheet with groupings, Final Trial Balance, Checklist, Analysis of balance sheet, file note for any qualification and Management Representation Letters. Then the schedule wise documents should be filed, documents relating to notes to accounts should be filed (no ledger accounts to be filed, only relevant papers to be filed), CARO documents as mentioned above to be filed, all index to board minutes, audit committee remuneration committee etc, with minute copies, 274 (1)(g) of directors, Form 24AA, List of documents filed with ROC, Important Resolution etc to be filed.

Finally all documents should be duly signed .



Name of the client : ___________________________ I hereby confirm that

i) I do not have investment in shares/debentures of the client nor I will invest in any such shares/debentures in future so long as I am in MGB & Co. I will not disclose/ share any confidential information acquired by me during the process of audit amounting to Insider Trading.


ii) I do not have any indirect investment (for e.g. as a beneficiary of a Trust) in the said client.

iii) I haven’t received any benefit by way of goods or services or hospitality from the client nor I would receive the same in future.

iv) I and/or my relatives do not hold any directorships in the said client nor of its holding companies, its subsidiaries or fellow subsidiaries. None of my close family members is employed by the client’s in the accounting roles or providing financial services.

v) I haven’t given any guarantee or provided any security in connection with the indebtedness of any third person to the clients.

vi) I do not have any loans to or from any of the clients.

vii) I do not have any personal relationship with the client nor do I serve as an officer, director or employee of the client’s companies, nor do I act as partner and officer, director or employee of any officer or employee of the client’s companies.

viii) I hereby confirm that the information given above is true and correct to the best of my knowledge. In case any of these restrictions become applicable at any time hereafter it will be my responsibility to promptly inform the firm.

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