Price Waterhouse & CoChoksey Bhargava & Co

Private & Confidential Lovelock & LewesPrice Waterhouse

Checklist - Companies (Auditor's Report) Order, 2003Client: No Reportable Issues

Audit Period: 1-04-06 to 31-03-07 Refer Issue SheetN/A

Clause No. Area/Requirement Guidance and Audit Procedures Conclusion

4(i) (a) Fixed Assets Refer Issue Sheet4(i) (b) Fixed Assets No Reportable Issues4(i)( c) Fixed Assets No Reportable Issues4(ii) (a) Inventories No Reportable Issues4(ii) (b) Inventories No Reportable Issues4(ii) ( c) Inventories No Reportable Issues4(iii) (a) Loans granted No Reportable Issues

Loans taken No Reportable Issues4(iii)(b) Loans granted No Reportable Issues

Loans taken No Reportable Issues4(iii)( c) Loans granted or taken N/A4(iii) (d) Loans granted or taken No Reportable Issues4(iv) Internal Controls No Reportable Issues4(v)(a) & (b) Register under Section 301etc., No Reportable Issues4(vi) Fixed Deposits No Reportable Issues4(vii) Internal Audit No Reportable Issues4(viii) Cost Records No Reportable Issues4(xi) (a) & (b) Statutory dues No Reportable Issues4(x) Accumulated losses etc., No Reportable Issues4(xi) Dues to Banks & Fis etc., No Reportable Issues4(xii) Loans and Advances granted No Reportable Issues4(xiii)(a) Chit Fund company No Reportable Issues4(xiii)(a) to (d) Nidhi/mutual benefit fund/society No Reportable Issues4(xiv) Dealing or Trading in Securities No Reportable Issues4(xv) Guarantees No Reportable Issues4(xvi) Term Loans No Reportable Issues4(xvii) Funds raised No Reportable Issues4(xviii) Allotment of shares No Reportable Issues4(xix) Debentures No Reportable Issues4(xx) Money raised on public issue No Reportable Issues4(xxi) Fraud No Reportable Issues

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Proper recordsPhysical verification-FADisposal of Fixed AssetsPhysical verification- Inv.Procedures of VerificationProper records of InventoryLoans grantedLoans takenLoans grantedLoans takenRepaymentOverdue amountsInternal controls on purchases,sales etc.,301 Register and transactionsPublic depositsInternal AuditMaintenance of Cost RecordsStatutory duesLosses etc.,Default in repayment of duesLoans and Advances granted Chit fund companyNidhi/mutual benefit fund etc.,Dealing etc.,in SecuritiesGuarantees givenUtlisation of Term LoansUtlisation of fundsPreferential allotmentSecurities on DebenturesEnd use of moniesFraud

Issue Sheet

I have staisfied myself that the above checklist has been properly completed ( refered Statement on CARO whereever relevant) and all matters requiring the attention of the Audit Partner are set forth in the Issue sheet.(Refer the No. of the issue sheet).

I have reviewed the work done by the assistant-in charge and have satisfied myself that the above checklist has been satisfactorily completed in line with the Statement on CARO issued by ICAI. Working papers were reviewed and agree with the conclusions above.

1 The home page contains the detailed description of the requirements of CARO under the respective clauses.

2. Please select the name of the audit firm from the dropdown menu on the home page.Please fill in other detailslike name of the client, audit period etc., The home page also contains affirmations as to work done, review madeetc., Please fill in necessary details on completion and review of the checklist.

3. Critical matters and matters for reporting to management and other exceptions should be summarised in the Issue sheet' (last work sheet in the workbook). Issue sheet can also be accessed through the link on home page.

4. Please click on the respective clause under the 'Guidance and Audit Procedures' column on the home page for the detailed checklist containing audit steps to be performed, notes, responses and space for comments, if any, for the respective clauses.The conclusion column on the home page has a drop down menu for choosing the appropriate

5. Please complete the details as to prepared/reviewed by etc., on the individual checklist sheets. You can get back to

6. The Responses column contains a drop down menu with possible responses. Please select the appropriate responsefrom the options as applicable. Create a Working paper for work done under individual clauses or link to working papers,if any, created in MYClient in this regard. Specific representations, where required, should be obtained as a part of

7. This checklist cannot be construed as a substitute for the Statement on CARO issued by ICAI. Reference should be made to the Statement for guidance and help in specific cases.

8. The words 'Act' as used in the checklist refer to the Companies Act,1956 unless otherwise stated.

a. Companies incorporated outside India, which established a place of business in India; b. All the Branches of Companies (section 228 (3) (a) of the Act).

2. This order does not apply to Banking Companies, Insurance Companies, Companies licensed to operate under section 25 of the Act and Private companies

c. no outstanding loans in excess of Rs10 lakhs from banks and financial

d. turnover less than Rs 5 crores ( not to exceed the limit either in the year or in the

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Fixed AssetsAudit Procedures Response Remarks1. Whether records of fixed assets aremaintained showing the followingparticulars:-

a).Year of acquisitionb).Sufficient description of the assetsto make identification possible.c).Classificaton, that is, the head underwhich it is shown in accounts eg. Land,Building, Plant and Machinery etc.d).Locatione).Quantity,i.e number in units.f).Original costg).Adjustment for revaluation or forincrease or decrease in cost consequenton revaluation of Foreign currency Liabilitiesif any.h).Depreciation written off to date.i).Written down value.

m). Whether fixed assets as per Register/Recordsagree with General Ledger balances. If not, note the disagreements in respect of each classof assets e.g.

j)Rate of depreciation and particulars regarding amortisation and impairment

k) Particulars regarding sale, discarding, demolition, destruction etc.

l) Particulars of fixed assets that have been retired from active use and held for disposal.

-       Land freehold-       Land leasehold-       Building-       Land-       Plant and Machinery-       Vehicles-       Furniture and Fixtures-      Office Equipment etc.

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Fixed AssetsAudit Procedures Response1. Has the management carried out a physical verification of fixed assets during the year accordingto the policy of the company? (eg. phased manner,all assets every year etc.,)

2. Obtain the instructions issued to by the management to the staff for the physical verification.

3.Obtain the working papers of physical verification done by the management during the year according to the policy of the company.Confirm and evidence adherance to the instructions issued.

4. Is the frequency of verification reasonable?

5. Ensure whether assets physically verified agreed/reconciled to book figures?

6. Obtain a statement of descrepancies obtainedand consider if they are material, whether the samehave been properly adjusted in the books of account.

YesNoN/ADone

Fixed Assets Price Waterhouse & CoRemarks Choksey Bhargava & Co

Lovelock & Lewes

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Fixed AssetsAudit Procedures Response Remarks1. Has a substantial portion of fixed assets beendisposed off during the year? "Substantial" has to be judged in the backgorund of factors such as proportion of assets disposed off to that category of assets and also total assets of the company in value termsterms.

procedures such as- analysis and discussion with themanagement of the significance of such assets to the company as a whole, reading the minutes of the meetings of the Board of directors and others to understand the entity's future business plans, reviewof the post balance sheet events to analyse the affect of such disposal on the going concern statusof the company.

3. Consider any adverse implications on account of the same in the main report.

2. Determine whether such disposal affected the going concern status of company or not by carrying out

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InventoriesAudit Procedures Response

following items of inventory during the year ? i)Finished Goods ii) Raw Materials and Components iii) Stores & Spares iv) Work-in-Progress v) Maintenance Supplies vi) Consumables and Loose Tools vii) Packing Materials

reasonable.

1. Has the management physically verified the

2. Review firm's completed stock take questionnaire and conclude on the effectiveness of the process and whether the frequency of such verification is

InventoriesRemarks

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InventoriesAudit Procedures Response Remarks

2. If so, have we completed the check list for attendance atphysical stock taking?

3. Are we satisfied that stock taking procedures werereasonable and adequate in relation to the size of theCompany, nature of its business and volume of stock? If not,list out the inadequacies/weaknesses observed by us.

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

5.Do these instructions cover, inter alia, the following keycontrol points--The independence of persons taking stock

-Identification of damages, obsoletes and slow moving stocks

-Checking of the serviceability and adequacy of themeasuring instruments

6. Is there any report/certificate from the client’sofficial-in-charge of stock taking evidencing that the stocktaking instructions were followed? (Attach a copy)

7. In case the client does not have any instructions in writing,is there any report from the client’s official-in-charge of stocktaking outlining the procedures followed during the course ofstock taking? (Attach a copy)

8. On the basis of our findings, are we satisfied that stock taking procedures were reasonable and adequate in relation to the sizeof the Company and nature of its business? If not, list out the inadequacies/weaknesses.

1   Have we observed the physical verification?

- Proper stacking/arrangement of stocks to facilitate identification and counting?

-Usage of counting tags or identification marks etc in order to prevent double counting?

-Control of stock taking sheets/tags (e.g. numerical sequencing) and reconciliation of the sheets/tags at the conclusion of stock taking-Control over movement of stocks during the course of stock taking (Stoppage of movements during stock taking is highly desirable).

-Collection of cut-off details viz. last challan No., GRN No., Excise Gate Pass No. etc.

-Comparison of rough stock sheets with bin cards and preparation of shortage/excess list

- Signing of stock sheets by the client’s staff (both by the counter and by the supervisor)

- Proper segregation of goods invoiced and sold but yet to be despatched and other stocks of third parties

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InventoriesAudit Procedures Response Remarks1.Whether the records of the Inventory show the following particulars:(i) details regarding dates of transactions;(ii) relevant document number and department identification, if any;(iii) identification code of the item;(iv) quantity of the receipts and issues and balances;(v) physical verification quantities;(vi) location;

(vii) valuation details; etc.

2. Are the stock registers are updated as and when thetransactions occur?

3. Verify that the transactions entered in stock registers are dulysupported by relevant documents.

4. Verify whether inventories as per Register/Recordsagree with General Ledger balances.

5. Obtain a statement of descrepancies obtainedand consider if they are material, whether the samehave been properly adjusted in the books of account.

(vii) particulars of the item, like nomenclature, nature, etc.

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Loans grantedAudit Procedures Response Remarks

3. Examine the above statement with necessary

documents and records on a reasonable test check basis.

purpose of the loan, prevailing market rates of interest etc.,

Number of Parties

2. Loan transactions that have been squared up during the year also would get covered under the requirement.

1.Has the company granted any loans to companies,firms and other parties covered in the Register maintained under Section 301 of the Act?

2. Obtain a statement containing the name of the company, firm or other Party, nature of relationship, amounts and dates of loans granted, amounts and dates of loans refunded amounts and dates of interest received, closing balance at year end, particulars of instalments (amount and period outstanding for) of overdue principal and interest together with the details regarding the rate of interest, if any, and brief terms and conditions like security, repayment particulars (principal and interest) etc.,

4. Report information as per the table below in the case of all loans granted.

5. Check and conclude that the rate of interest and other terms and conditions are not prima facie

prejudicial to the interest of the company or otherwise by consideration of factors such as- loan agreements, borrower's financial standing, its ability to lend,

nature of security, the availability of alternative sources of finance, the urgency of borrowing,

Amount involved (In Rupees)

Year end balance (In Rupees)

Notes:1. The requirement of this clause also covers advances which are in the nature of loans.

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Loans takenAudit Procedures Response Remarks

3. Examine the above statement with necessary documents and records on a reasonable test check basis.

all loans taken.

5. Check and conclude that the rate of interest and other terms and conditions are not prima facie prejudicial to the interest of the company or otherwise by consideration of factors such as- loan agreements,company's financial standing, its ability to borrow, nature of security, the availability of alternative sourcesof finance, the urgency of borrowing, purpose of the loan, prevailing market rate of interest etc.,

Number of Parties

2. Loan transactions that have been squared up during the year also would get covered under the requirement.

1.Has the company taken any loans from companies,firms and other parties covered in the Register maintained under Section 301 of the Act?

2. Obtain a statement containing the name of the company, firm or other Party, nature of relationship, amounts and dates of loans taken, amounts and dates of loans repaid, amounts and dates of interest paid, closing balance at year end, particulars of instalments (amount and period outstanding for) of overdue principal and interest together with the details regarding the rate of interest, if any, and brief terms and conditions like security, repayment particulars (principal and interest) etc.,

4. Report information as per the table below in the case of loans

Amount involved (In Rupees)

Year end balance (In Rupees)

Notes:1. The requirement of this clause also covers advances which are in the nature of loans.

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Repayment of LoansAudit Procedures Response Remarks1. The regularity of payment of principalamount and interest should be considered

(In Rupees)

Name of the Party Overdue Principal Overdue Interest Year end Balance

on each anniversary of the loan.2. Where no stipulations have been made for repayment of the loan, the auditor should state his inability to make comments in the absence of terms of repayment.

in the light of procedures such as-review of repayment schedule,loan agreements and other relevant documents, actual dates of payment of principal and interest.

2. The following particulars should considered in reporting the irregularity of principal and interest-

Notes: 1. If a due date for payment of interest is not specified, it would be reasonable to assume that it falls due

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Loans overdueAudit Procedures Response Remarks

2. The reasonableness of steps taken by the company forrecovery and payment should be judged in the light offactors such as issue of reminders, sending advocate's notice, management's representations, follow up with theborrowers, arrangement for raising finances, restructuring proposals, arrangement with lenders for compromise proposals etc., as the case may be.

3. If not satisfied about the reasonability of steps taken,consider the name of the party, overdue amount of

principal and interest for reporting.

1. Obtain a statement with the names of the companies, firms or other parties, amount of loan granted or taken, outstanding amount at the year end and steps taken for the recovery or payment thereof.

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Internal controls proceduresAudit Procedures Response Remarks1. On the basis of our understanding, documentation and validation thereof in the Myclient file-control activities in the areas ofInventory cycle,property, plant and equipmentcycle,revenue and receivables cycle, review of internal audit reports are we satisfied that there are adequate internal control procedures commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods? If not document the inadequacies and weaknesses thereof and consider implicationsfor reporting. Yes

2. Review the reports of internal audit, minutesof the Board, Audit committee, management committee, if any and anyother relevant internalreports to identify major weaknesses in internalcontrols and whether there is any continuingfaliure to correct such weaknesses. Done

3. In the case of continuing failure to correctany major weakness identified, report the weakness and steps taken by the management tocorrect such weakness or the failure to correct as the case may be. Done

4. Consider the implications of such controlweaknesses on the nature, extent and timing ofaudit procedures in those areas and implicationsif any on the adequacy or reliability of the books of accounts and the overall report. Done

company or may result in a material misstatement in the financial statements is considered a major weakness.2. Continuing failure should be judged with reference to the weakness that existed at the time of previous year's audit.3. If any major weakness is corrected by the date on which the audit report is issued the fact of suchcorrection subsequently must also be reported.

Notes: 1. Ordinarily, any weakness in internal controls that may result into a significant loss to the

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Completeness of Register maintained under Section 301 of the Act and transactions thereofAudit Procedures Response

3. Check the list for completeness of information with reference to- knowledge from previous year's audit, review of entity's procedures for identification of entries to be made in 301 register, inquiries as to the affiliation of directors and keymanagement personnel, officers with other entities, review ofshareholders records to identify the principal shareholders,review of entity's income tax returns, review of joint venture

4. In the case of transactions exceeding the value of Rs. five lakhs in respect of any party and in any one financial year

parties at the relevant time.

6. The reasonableness of the prices should be determinedtaking into account factors such as delivery period, quality of the product, quantity, credit terms, past performance of the party etc.,

directors of the company are interested in the subsidiary.

1.Has the company entered into transactions that need to be entered into the register maintained under Section 301 of the Act?

2.Obtain a list containing the name of the party, nature of relationship, description of transaction and amount and date of each such transaction individually for all the transactions during the year.

and other relevant agreements, minutes of board meetings, Form 24AAs submitted etc.,

examine information such as price lists, quotations and records relating to prices for similar transactions with other

5.In cases where transactions are entered with sole suppliers examine the reasonableness of prices paid with reference to list prices of the supplier concerned, other trade terms of the supplier, etc. and where required consider the same appropiately in the report.

Notes: 1. The requirement of this clause does not cover transactions with subsidiaries perse unless one or more of the

Completeness of Register maintained under Section 301 of the Act and transactions thereofRemarks

1. The requirement of this clause does not cover transactions with subsidiaries perse unless one or more of the

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Public DepositsAudit Procedures Response Remarks

1. Has the Company accepted any deposits frompublic within the meaning of Section 58A, 58AA andthe rules framed thereunder?

2. Obtain a general understanding of Section 58A, 58AA and the relevant rules and ascertain thesystem and procedures in place to ensure compliance with the provisions of the said sectionsand the rules made thereunder.

3.Check the compliance with the requirements of the Act and the rules framed thereunder by completing

4. Examine the internal controls in place for intimating

the Tribunal (Company Law Board) any default inrepayment of deposit made by small investors or partor any interest thereupon. Based on the understanding so gained, perform a reasonable testcheck of the deposits received from small investors.

5. Enquire of the management possible instances ofnon-compliances with Section 58A, 58AA and relevant rules and about any order passed by the Company Law Board for contravention of Section 58A,58AA and the rules.

6. Examine the correspondence and documents filedwith the Registrar of companies to ascertain whetherthere is any contravention or whether the CompanyLaw Board has passed and order. If an order has beenpassed, examine the steps taken by the company to comply with the order.

the firm's checklist on Acceptance of deposit rules and Companies Act 1956.

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Internal AuditAudit Procedures Response Remarks

1. Is the company a listed company or having paid up capitaland reserves exceeding Rs. 50 lakhs as at the commencementof the financial concerned or having an average annualturnover exceeding five crores rupees for a period of threeconsecutive financial years immediately preceding the financial year?

2.Consider the following factors to determine whether theinternal audit system is commensurate with the size of the and the nature of its business--Size of the internal audit department;- Qualifications of the internal audit staff;-Reporting levels of internal audit;- Areas of coverage;-Adequacy of technical assitance available to the internal audit department;-Reports submitted by the internal audit and follow upprocedures thereof.

2. While evaluating the adequacy of internal audit system, existence or otherwise of other forms of internal controls must alsobe taken into account.

Notes: 1. The date of the balance sheet must be considered in reckoning the listing status of the company.

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Maintenance of Cost RecordsAudit Procedures Response Remarks1. Has maintenance of cost records prescribedby central government under Section 209(1)(d)to the company?

2. Obtain a list of books and records madeand maintained by the company under Section209(1)(d) of the Companies Act,1956.

3. Conduct a general review of the cost recordsto ensure that the records as prescribed are made and maintained.

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Statutory DuesAudit Procedures Response Remarks

2. Obtain a general understanding of various statutes governing the entities and dues payableunder those statutes. Make enquiries of the management about the statutes under whichthe company is required to pay dues and the policies and procedures in place for identifying and payment of such dues.

3. Verify the statement under 1 above, with the general understanding obtained and gained,underlying documents and records.Compile the

-Name of the statute- Nature of the dues- Amount - Due date-Date of payment

5. In the case of disputed statutory dues, compilethe following details-- Name of the Statute- Nature of the dues- Amount- Forum where dispute is pending

Information under this clause should be givenseparately for each period eventhough the

required to be paid regularly to a body.2. Reporting under this clause is required irrespective of the fact whether or not there are anyarrears as at the balance sheet date.3. For a matter to be considered as "disputed" there must be a positive evidence or actionon the part of the company to show that it has not accepted the demand for payment of duty or tax. Auditor need not make a judgement about the sustainability or otherwise of the claim. A mere representation to the department shall not constitute a dispute.4. Penalites or interest would be covered under "amounts payable".

1. Obtain a statement containing the list of various statutes under which the company is required to make payments to appropriate authorities, the nature and amounts of payments under each statute, the due dates for making such payments, the dates on which the payments were made by the Company, the arrears due for more than six months as at the Balance Sheet date and the date and amount of subsequent payments, if any made out of such arrears.

the following details in the case of arrears of statutory dues-

4.Whether the Company has been generally regular in depositing statutory dues or otherwise, report the same appropriately.

dispute relates to the same nature of statutory dues, like income taxes etc.,

Notes: 1. The scope under this clause is restricted to only those statutory dues which are

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Accumulated Losses etc.,Audit Procedures Response Remarks1.Has the company been registered for a period of five ormore years as at the balance sheet date?

whether the accumulated losses as at that date are morethan 50% of company's net worth.

3. Compute and check whether the company has incurredcash losses for the period under review and in theimmediately preceding financial year.

net worth, as at the balance sheet date and in arriving at the cash losses. The fact of such adjustment must be indicatedin reporting under this clause.Where the qualifications are not quantifiable, the report should state the fact that the effect of such unquantified qualifications has not been taken into consideration in computing the above amounts.2. Net worth is the sum total of paid up capital and free reserves after deducting the provisions or expenses as may be prescribed. Free reserves means all reserves created out of profits and share premium account but does not include revaluation reserve, write back of depreciation provisions and amalgamation.3. Loss shown by the profit and loss account is adjusted for the effects of transactions of a non-cash nature such as Depreciation, amoritisation, any deferrals or accruals of past or future cash receipts or payments in determining the cash losses.

2.Compute the accumulated losses and net worth of the company as at the end of the financial year. Verify

Notes: 1.The impact of qualifications which can be quantified must be adjusted in computing the accumulated losses and

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Default in repayment of dues to Banks,Financial Institutions or debentureholdersAudit Procedures Response Remarks

1. Obtain a statement containing the names of the institution/bank/debenture holder, the periodand amounts of default, due dates thereof and

dates and amounts of subsequent payments, if any.

defaults have occurred.2. Dues cover all amounts including interest and principal.3. Applications for reschedulement/resturcturing will not be binding unless approved. 4. Dues not paid by the company on account of unilateral disputes tantamount to default.

2. Verify the statement in 1 above, with documents such as agreements, other terms and conditions, debenture trust deed as the case may be. Identify the period and amount of default for reporting.

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

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Maintenace of documents and records for loans and advances grantedAudit Procedures Response Remarks1. Whether the company has granted any loans and advances on the basis of securityby way of pledge of shares, debentures andother securities?

2. If yes, examine whether documents and records include details such as- name and address of the borrower, amount, terms and conditions such as period, rate of interest,security etc.,; disbursements, repayments,recovery of interest; full particulars of security- names of the companies, number andclass of shares, distinctive numbers, particulars as to title etc; documents needed for transfer,details as to periodical ackowledgements of the parties, proof to establish the power of the party to borrow- e.g. board resolution etc.,

3. Obtain a statement containing the details of such loans granted-name of the party, amountof loan/advance granted, amount outstandingas the balance sheet date and type and nature ofsecurity and verify the same on a reasonable test check basis with documents and recordsmentioned in 2 above.

4. Verify the securities pledged by reference tophysical securities or statements from depository participants.In the case of dematerialized form of securities confirm thatthe company has a valid right to sell the shares in the event of default.

6. List the deficiencies for reporting.

5.Whether security is in the custody of company and market value of security is adequate to cover the outstanding amount of loan and interest?

Notes: 1. The requirement of this clause does not extend to other forms of security like

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hypothecation, guarantee etc.,2. Other securities may be construed to mean bonds or promissory notes issued by a governmentor semi-government authority.

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Chit Fund CompanyAudit Procedures Response Remarks1. Is the Company a chit fund company?

2. Gain an understanding of the relevant Acts and the rules applicable to the company situated in a particularstate/union territory.

3. Test check compliance with the requirements underthe Act and the rules as applicable.

3. Ensure that the requirements of the rules regardingthe records to be maintained, returns to be filed etc.,are complied with, where applicable.

as they have application to the accounts of the chit fund company.2. If the company's branches are situated in more than one state, legal opinion may be sought regarding the applicability and compliance with the relevant provisions of the Acts/Rules.

Notes: 1. The requirement only applies to checking compliance with the provisions of special statutes in so far

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Nidhi/mutual benefit fund/societiesAudit Procedures Response Remarks1. Is the Company a nidhi/mutual benefit fund/society?

2. Check complaince with the following-

a) whether the net ownedfunds to depositliability ratio is more than 1:20 as on thedate of balance sheet;

b) whether the company has complied withthe prudential norms on income recognitionand provisioning against sub-standard /default / loss assets;

c) Whether the company has adequateprocedures for appraisal of credit proposals/ requests, assessment of credit needs andrepayment capacity of the borrowers by examinationof the policies and procedures a reasonable test check of the transactions effected during the year with relevant documents such as individual borrower files, loan application forms,supporting documentation, sanctions, security documents etc.,

d) Whether the repayment schedule ofvarious loans granted by the nidhi is basedon the repayment capacity of the borrowerand would be conducive to recovery of theloan amount by examination of the system ofgranting of loans and making a reasonable test check of transactions.

3. Ensure that the requirements of the rules regardingthe records to be maintained, returns to be filed etc.,are complied with, where applicable.

4. Consider the implications of non-compliances under 2 a) and b) above also in the auditors' reporton the financial statements.

by accumulated losses and intangible assets appearing in the last audited balance sheet of the companyi.e. balance sheet of the current year.

Notes: 1. Net owned funds means the aggregate of paid up equity capital and free reserves as reduced

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2. Deposit liability would mean aggregate of deposits accepted by the company.

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Dealing or Trading in SecuritiesAudit Procedures Response Remarks1.Is the company dealing or trading in shares, securities,debentures and other investments?

2.Whether the records of the Investments show the following particulars:(i) details regarding dates of transactions-purchases and sales.(ii) classes of investments(iii) distinctive numbers and the face value ;(iv) quantity of the receipts and issues and balances;(v) physical verification quantities;(vi) cost, valuation details;(vii) profit/loss arising on sale(viii) amounts receivable/payable.

3. Examine the timeliness of updation of the records by adpoting procedures such as surprise inspection of the records, system of internal controls over updation, review of internal audit and otherreports for exceptions, if any, in this regard.

4. Verify that the transactions entered in the registers are dulysupported by relevant documents.

5. Verify whether the aggregate of balance as per the Registers/Records agrees with General Ledger balances.

6. Obtain a statement containing details of investments not held in the name of the company and those where exemption under Section 49 is available. Check the statement with necessary supporting documents as in 4 above and with the requirements of Section 49 of the Act.

investments with a view to hold such investments and earn income from dividend or interest.Factors to consider to decide in this regard include-objects of the company, period for which investments are normally held, reasons for purchase/sale,internal approvals covering such purchase and sale, method of valuation-cost or lower of cost or market value, treatment of profits/gains in the tax assessments etc.,

7.In case investments which are intended to be sold immediately may not have been transferred in the name of the company, whether, in the circumstances of each case, the failure to transfer the investments to the company’s name is understandable.

Notes:1. The requirement does not apply to companies which are not dealing or trading in investments but purchase

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Guarantees givenAudit Procedures Response Remarks

2. Obtain a list containing the name of the party, natureof relationship, if any, amount of loans taken, closing balance as at the balance sheet date together with brief terms and conditions like description of security given, estimated amount of such security, default action conditions, if any.

3. Understand and document the internal controls over issue of guarantees and confirm its operation during the year. Consider implications, if any, on reporting or in management letter.

4. Verify the above statement with documents such asmemorandum of association- to confirm whether the company can issue guarantees, maximum permissable amounts, the parties in respect of whom and the typesof guarantees that can be given; minutes of the board of

295/372A of the Companies Act, letters of borrowing parties requesting the guarantee, company's letters, guarantee documents etc.,

5. If the company has issued a guarantee in contraventionof the clauses of the memorandum of association, considerthe same appropriately in reporting.

7. If in judgement and conclusion it was established that the terms are prejudicial to the interest of the company,obtain an explanation from the company why the company considers the same as not prejudicial.

8. If not convinced by management's explanation, consider appropriately in reporting disclosing the amount of suchguarantee.

1. Has the company given any guarantees for loans taken by others from bank or financial institutions?

directors, compliance with the requirements of Section 372A of the Companies Act, letters of borrowing parties requesting the

6.Whether the tangible/ intangible benefits flowing to the company due to furnishing of guarantee are commensurate with risk undertaken by the company in doing so?

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financial institutions and not from other sources.2. The requirement only relates to guarantees given during the year.3. In determining whether the any guarantees given are prejudicial to the interest of the company, factors such as financial standing of the party, its ability to borrow, nature of security offered, availability of alternate sources of finance, urgency of the borrowing for which the guarantee was given etc.,

Notes:1. The requirement only applies to guarantees given for loans taken by others from banks or

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Utlisation of Term LoansAudit Procedures Response Remarks

2.Obtain a statement containing the specific terms ofloans and the details of application-amounts, dates andthe purpose.

3.Verify the statement with documents such as sanctionletters and other documents containing the terms and conditions and those relating to actual utilisation.

4. If term loans were not applied for the purpose for which they were obtained, indicate the amount and thepurpose for which it was ultimately utilised.

5. In the case of temporary application of funds for otherpurposes before they were utilised for the stated purpose,mention such fact in the report.

1. Has the company obtained any term loans or made any utilisation during the year?

6.Whether the funds flow statement has been reviewed where one to one correlation is not possible?

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Utlisation of FundsAudit Procedures Response Remarks1.Obtain a statement containing the specific terms of funds and details of use-amounts andnature.

2. Compare the quantum of long term fundswith the long term application of funds.

3. Compare the quantum of short term fundswith the short term application of funds.

4. If the differences point towards use of shortterm funds for long term investment and viceversa , consider appropriately in reporting.

for depreciation, long term debt securities, long term loans. Long term application of funds would include investment in fixed assets, long term investments and other assets of similar nature, repayment of long term loans and advances or redemption of debt securities, use for core working capital etc., Short term sources of funds include temporary credit facilities like cash credits, overdraft, reduction in current assets or increase in current liabilities etc., Short term application of funds includes all application otherwise than for long term use, increase in current assets or decrease in current liabilities etc.,2. The requirement has to be determined on the basis of the overall picture of the sources and application of funds based on the balance sheet of the company unless a one to one direct relationship can be established between a particluar source and application.

Notes: 1. Long-term sources of funds would include share capital, reserves and surplus, provision

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Preferential allotment of sharesAudit Procedures Response Remarks1. Has the company made any preferential allotment of shares toparties and companies covered in the Register maintained underSection 301 of the Companies Act,1956?

3. In the case of listed companies check whether the pricefor shares issued on a preferential basis is not less thanhigher of the following--the average of the weekly high and low of the closing pricesof the related shares quoted on the stock exchange during thesix months preceding the relevant date.- the average of the weekly high and low of the closing pricesof the related shares quoted on the stock exchange during thetwo weeks preceding the relevant date.

4. In the case of listed companies, confirm and verify that thecompany has complied with the requirements of guidelineslaid down in this regard by SEBI.

5. In the case of private company and an unlisted public company ,examine the method used for valuation of the shares and also ascertain the reasonableness of the assumptions underlying the calculation.

6.If in the judgement and conclusion it was eastablished that the pricecharged is not fair, obtain a representation from the management as to why such price charged is not prejuducial to the interest of the company and consider appropriately in reporting.

7. Consider compliance with the requirements of AAS-9 "Using thework of an Expert" if the valuation report of an expert is used as the basis.

8. If the company has made preferential issue by passing an ordinaryresolution, also examine the relevant order of the Government passedin this regard. If on the basis of order it is concluded that the price charged is not prejudicial, state the fact of reliance on such orderfor the purpose of reporting.

2. In the case of a listed company allotment of shares under Section 81(1A) of the Companies Act,1956 is known as preferential allotment of shares.

2. Obtain a statement containing the names of the parties and companies, nature of relationship, description of allotments made-equity/preference, number of shares, price and terms and conditions of the allotments made during the year.

Notes: 1.The term "shares" includes both preference as well as Equity.

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Securites for Debentures Audit Procedures Response Remarks

2.Verify the debenture trust deed executed under Section117A of the Act in respect of debentures issued during theyear with particular reference to security requirements.

3.Verify whether such security is created as required undersection 125 and 130 of the Act by examining the documents

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

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End use of Public issue MoniesAudit Procedures Response

2.Obtain a statement containing the quantum of money raised on public issue of any security made by the company during the year and details of end use of money so raised.

3. Verify such statement with reference to end use as setout in the Prospectus. Where the issue exceeds Rs. 500Crores, refer the half yearly reports of the monitoringagency as submitted to SEBI.

4. Verify the disclosure made by the company in the financial statements in this regard.

5. If we are not satisfied with the disclosures made in thefinancial statements, consider the matter for reportingsetting out clearly the information which should havebeen dislosed.

6.Whether the cash flow statement has been reviewed whereone to one correlation is not possible?

7. If we are unable to determine the end use of money raised from public issues state the fact together with thereasons thereof in our report.

1. Has the company made any public issue or made utilisation during the year?

End use of Public issue MoniesRemarks

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FraudAudit Procedures Response Remarks

1.Complete our understanding and assessment of fraud considerations as per steps given under "Fraud Risk" in MYClient file.

2. On the basis of work carried out as above, are we satisfied that there are no indicationsof fraud on or by the company noticed or reportedduring the year?

3. If any fraud is noticed or if there is a doubt about theexistence of fraud, carry out procedures as mentionedin AAS-4 "The Auditor's Responsibility to considerfraud and error in an audit of Financial Statements"

4.If the response to 2 above is "No" determine the .nature and extent of such frauds and implications on our reporting.Note: The following are the indicative sources relating to identification of Fraud- i. the reports of internal reviews conducted, if any.ii.Inquiries of the management about any frauds on or by the company that its has noticed or that have been reported to it. iii. discussions with other employees of the company. iv. Examination of the minutes book of the meetings of Board, audit committee etc.,

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Clause No. Area/Requirement Brief Description of the Issue How addressed in the Audit

4(i) (a) Fixed Assets4(i) (b) Fixed Assets4(i)( c) Fixed Assets4(ii) (a) Inventories4(ii) (b) Inventories4(ii) ( c) Inventories4(iii) (a) Loans granted

Loans taken4(iii)(b) Loans granted

Loans taken4(iii)( c) Loans granted or taken4(iii) (d) Loans granted or taken4(iv) Internal Controls4(v)(a) & (b) Register under Section 301etc.,4(vi) Fixed Deposits4(vii) Internal Audit4(viii) Cost Records4(xi) (a) & (b) Statutory dues4(x) Accumulated losses etc.,4(xi) Dues to Banks & Fis etc.,4(xii) Loans and Advances granted4(xiii)(a) Chit Fund company4(xiii)(a) to (d) Nidhi/mutual benefit fund/society4(xiv) Dealing or Trading in Securities4(xv) Guarantees4(xvi) Term Loans4(xvii) Funds raised4(xviii) Allotment of shares4(xix) Debentures4(xx) Money raised on public issue4(xxi) Fraud

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