CARO Checklist

Sudit K. Parekh & Co.
CARO Compliance Checklist

SECTION I APPLICABILITY
Sl.
No
Particulars Yes/No/NA
METHOD OF EXAMIN A!!lica"ilit#
A
Is the entity falling into the following categories:
a) Banking Company
b) Insurance Company as defned in clause (21) of
section 2 of the ct!
c) "ection 2# Company
Sl.
No
d) $ri%ate &imited Company ha%ing
$aid up capital and reser%es is 's( #) lakhs or less
or
ccepted $ublic deposit or
&oan outstanding from any bank or fnancial
institution is less than 's( 1) lakh or
*urno%er is 's( # crore or less(
Assess$e%t / Su$$ar#&
If the answer to any of the blocks for applicability is +,es-. then C'/ does not
Sl.
No
apply to the company( 0owe%er. where the company is a pri%ate company. all the
conditions need to be satisfed for C'/ to be inapplicable( *hat means. in case of
a pri%ate company. if the answer to any of the 1uestions abo%e is +2o-. C'/
would be applicable(
$lease write the conclusion of the abo%e assessment of applicability( In case C'/
is not applicable. then. the audit manager needs to confrm in this section.
whether the following para has been included in the audit report:
+*his report does not include a statement on the matters specifed in paragraph 3
of the Companies (uditor4s 'eport) /rder. 2))5. issued by the 6epartment of
Company 7airs. in terms of "ection 228(3) of the Companies ct. 19#:. since in
Sl.
No
our opinion and according to the information and e;planations gi%en to us. the
said /rder is not applicable to the company(-
<oreo%er. in case C'/ is not applicable to a pri%ate company. the audit fle
should contain. in the audit report section the working papers substantiating the
abo%e fgures(
2ote:
In case of companies to which the order does not apply. it would be su=cient if a
print of o%l# this page is retained in the fle after gi%ing the necessary
Sl.
No
assessment > %iews( *he entire checklist would be inapplicable where the order
does not apply to the company(
SECTION ' CHEC(LIST ON MATTE)S TO BE )EPO)TED *PON
APPLICABLE TO ALL COMPANIES
Sl. No. Particulars Yes/No/NA
FIXED ASSETS
1(1
+i, +a, -.et.er t.e co$!a%# is $ai%tai%i%/ !ro!er recor0s
s.o-i%/ 1ull !articulars2 i%clu0i%/ 3ua%titati4e 0etails a%0
situatio% o1 56e0 assets
( 6o the ?i;ed ssets records contain the following:
a) "u=cient description of the asset to make
identifcation possible@
b) Classifcation i(e( the head under which it is shown
in the accounts@
c) ,ear of ac1uisition@
d) &ocation or details of custody. su=cient to
physically trace the asset@
e) Auantity. i(e( number in units@
f) /riginal cost@
g) dBustment for re%aluation or for any increase or
decrease in cost. if any. e(g(. on re%aluation of
foreign e;change liabilities@
h) 6ate of re%aluation if any@
i) 'ate of depreciation@
B) 6epreciation for the current year@
k) ccumulated depreciation@
l) Critten down %alue@
m) $articulars regarding sale. discarding. demolition.
destruction. etc(
6o the aggregate original cost and depreciation
e;tracted from these detailed records of f;ed assets
under indi%idual heads tally with the fgures as shown
in the books of account@
re there good reasons for the assets to be located at
residential premises of members of the sta7. in case of
assets so located@
Aualifed 'eport ,es 2o
"ubstantiate the Dudgment $artners Comments
"ince all the re1uired details are maintained the
need to 1ualify the report does not arise
6raft 2ote $artners Comments
1(2
+", -.et.er t.ese 56e0 assets .a4e "ee% !.#sicall# 4eri5e0 "#
t.e $a%a/e$e%t at reaso%a"le i%ter4als7 -.et.er a%#
$aterial 0iscre!a%cies -ere %otice0 o% suc. 4eri5catio% a%0 i1
so2 -.et.er t.e sa$e .a4e "ee% !ro!erl# 0ealt -it. i% t.e
"oo8s o1 accou%t7
a) 0a%e the f;ed assets been physically %erifed at
any time during the year@ If so. identify the e;tent
of physical %erifcation(
b) If we ha%e not attended the physical %erifcation.
e;amine the instructions issued to the sta7 by the
management for this purpose to determine the
name and competence of the person who did the
%erifcation(
c) /btain and e;amine the rele%ant documents to
substantiate that the physical %erifcation was
actually carried out(
d) Cere the methods>procedure and fre1uency of
physical %erifcation reasonable in the
circumstances relating to each asset@
e) 0a%e the f;ed assets at all locations been
physically %erifed@
f) E;amine whether the physical %erifcation of the
assets agree>reconcile with the book fgures(
g) /btain and re%iew the details of shortages or
e;cesses noticed on %erifcation(
h) Calculate the gross e;cess and shortage in %alue as
percentage of:
*he gross block of rele%ant class of asset
*he total gross block
i) Calculate the e;cess and shortage percentage for
each location wise assets
B) Chether any other rele%ant yardstick needs to be
used for decision on materiality of discrepancies@
5
+c, i1 a su"sta%tial !art o1 56e0 assets .a4e "ee%
0is!ose0 o9 0uri%/ t.e #ear2 -.et.er it .as
a9ecte0 t.e /oi%/ co%cer%7
a) Chether a substantial part of f;ed assets were sold
during the year!
b) If the answer abo%e is yes. whether the going
concern. can be considered as appropriate
2o maBor sale of f;ed assets ha%e
IN:ENTO)IES
2(1
c)
d)
e)
2(2
a)
b)
c)
d)


e)
f)
2(5
a)
b) If 1uantity records are not maintained for any

category of stocks. whether the closing stock
1uantity can be deri%ed (based on opening stock.
purchases and consumption data)@
c) If the book closing stock 1uantity cannot be
ascertained. is the %alue of such category
immaterial as compared to total in%entory@
d) 0a%e you obtained and re%iewed the details of the
shortages or e;cesses arising from the physical
%erifcation(
e) Chere material discrepancies were noticed. ha%e
these been properly dealt with in the books of
account@

LOANS ra%te0 a%0 Ta8e% 1ro$ !arties u%0er Sectio% ;<=
5(1
+iii, +a, .as t.e co$!a%# /ra%te0 a%# loa%s2
secure0 or u%secure0 to co$!a%ies2 5r$s or
ot.er !arties co4ere0 i% t.e re/ister $ai%tai%e0
u%0er sectio% ;<= o1 t.e Act. I1 so2 /i4e t.e
%u$"er o1 !arties a%0 a$ou%t i%4ol4e0 i% t.e
tra%sactio%s.
a) Chether the company has properly maintained the
register re1uired to be maintained by it under
section 5)1@
b) If not. obtain the necessary information regarding
the loans gi%en by the company from companies.
frms or other parties in which the directors are
interested. from the management of the company(
c) "crutinise the schedules of secured and unsecured
loans and other assets (including ?i;ed deposits) to
ensure the completeness of the lists of loans.
secured or unsecured. gi%en to companies under
the same management or companies. frms or other
parties where directors are interested as defned
under section 5)1(
d) If the Company has gi%en any loans. ha%e you gi%en
a summary of the details as gi%en in E;hibit 1 to
this Checklist@

5(2
+", -.et.er t.e rate o1 i%terest a%0 ot.er ter$s
a%0 co%0itio%s o1 loa%s /i4e% "# t.e co$!a%#2
secure0 or u%secure02 are !ri$a 1acie !re>u0icial
to t.e i%terest o1 t.e co$!a%#7
a) /btain the details of the rate of interest recei%able
against each such loan and also note the
corresponding bank rates(
b) *he Fterms4 would include security. period of
repayment and restricti%e co%enants( /btain details
of the same
c) Is the rate of interest and terms at which the loans
are gi%en not signifcantly di7erent than the rate of
interest and terms at which the loan could ha%e
been gi%en@ 6ue consideration should be gi%en to
factors such as company4s fnancial standing. its
ability to borrow. the nature of security. the
a%ailability of alternati%e sources of fnance. the
urgency of borrowing etc(
d) If the rate of interest and terms as mentioned abo%e
are signifcantly di7erent. ha%e you obtained in
writing from the management their e;planations as
to why the company considered that the terms
obtained are not preBudicial to the company in those
instances where better terms could ha%e been
obtained@

5(5 +c, -.et.er recei!t o1 t.e !ri%ci!al a$ou%t a%0
i%terest are also re/ular7
a) *est check the repayments of the principal amounts
with the stipulations to ensure that the party is
repaying the principal amounts as stipulated(
b) Is due date for interest specifed@
c) If so e;amine whether the payment of interest is
regular i(e( paid when it falls due or immediately
thereafter(
d) 0a%e you ensured that where no stipulation has
been made for the repayment of the loan or the
payment of the interest. we ha%e stated the fact in
the report that we ha%e not made any specifc
comments because the terms of repayment and>or
interest ha%e not been stipulated(

5(3 +0, i1 o4er0ue a$ou%t is $ore t.a% o%e la8.2
-.et.er reaso%a"le ste!s .a4e "ee% ta8e% "# t.e
co$!a%# 1or reco4er# o1 t.e !ri%ci!al a%0
i%terest7
a) if the principal or interest amounts are not repaid
regularly make a list of defaulting parties where the
amount o%erdue is e;ceeding 's( 1 lakh( 'efer
E;hibit 2(
b) sk the management to gi%e in writing the steps
which ha%e been taken for reco%ery of these
amounts
c) 0a%e you arri%ed at an opinion as to whether the
steps are reasonable after considering facts like the
amounts in%ol%ed. degree of delay of repayment.
issue of reminders. sending of ad%ocate4s or
solicitor4s notice etc(

5(# +e, .as t.e co$!a%# ta8e% a%# loa%s2 secure0 or
u%secure0 1ro$ co$!a%ies2 5r$s or ot.er !arties
co4ere0 i% t.e re/ister $ai%tai%e0 u%0er sectio%
;<= o1 t.e Act. I1 so2 /i4e t.e %u$"er o1 !arties a%0
a$ou%t i%4ol4e0 i% t.e tra%sactio%s.
Chether the company has properly maintained the
register re1uired to be maintained by it under section
5)1@
If not. obtain the necessary information regarding the
loans taken by the company from companies. frms or
other parties in which the directors are interested. from
the management of the company(
"crutinise the schedules of secured and unsecured loans
and other assets (including ?i;ed deposits) to ensure the
completeness of the lists of loans. secured or unsecured.
taken from companies under the same management or
companies. frms or other parties where directors are
interested as defned under section 5)1(
If the Company has taken any loans. ha%e you gi%en a
summary of the details as gi%en in E;hibit 1 to this
Checklist@
5(: +1, -.et.er t.e rate o1 i%terest a%0 ot.er ter$s a%0
co%0itio%s o1 loa%s ta8e% "# t.e co$!a%#2 secure0
or u%secure02 are !ri$a 1acie !re>u0icial to t.e
i%terest o1 t.e co$!a%#7
/btain the details of the rate of interest payable against
each such loan and also note the corresponding bank
rates(
*he Fterms4 would include security. period of repayment
and restricti%e co%enants( /btain details of the same
Is the rate of interest and terms at which the loans are
taken not signifcantly di7erent than the rate of interest
and terms at which the loan could ha%e been taken@ 6ue
consideration should be gi%en to factors such as
company4s fnancial standing. its ability to borrow. the
nature of security. the a%ailability of alternati%e sources of
fnance. the urgency of borrowing etc(
If the rate of interest and terms as mentioned abo%e are
signifcantly di7erent. ha%e you obtained in writing from
the management their e;planations as to why the
company considered that the terms obtained are not
preBudicial to the company in those instances where
better terms could ha%e been obtained@
5(8 +/, -.et.er !a#$e%t o1 t.e !ri%ci!al a$ou%t a%0
i%terest are also re/ular7
*est check the repayments of the principal amounts with
the stipulations to ensure that the party is repaying the
principal amounts as stipulated(
Is due date for interest specifed@
If so e;amine whether the payment of interest is regular
i(e( paid when it falls due or immediately thereafter(
0a%e you ensured that where no stipulation has been
made for the repayment of the loan or the payment of the
interest. we ha%e stated the fact in the report that we
ha%e not made any specifc comments because the terms
of repayment and>or interest ha%e not been stipulated(
INTE)NAL CONT)OLS
3(1 +i4, is t.ere a% a0e3uate i%ter%al co%trol s#ste$
co$$e%surate -it. t.e si?e o1 t.e co$!a%# a%0
t.e %ature o1 its "usi%ess2 1or t.e !urc.ase o1
i%4e%tor# a%0 56e0 assets a%0 1or t.e sale o1
/oo0s. @.et.er t.ere is a co%ti%ui%/ 1ailure to
correct $a>or -ea8%esses i% i%ter%al co%trol
s#ste$7
a) E;amine the ade1uacy of the internal control
systems for the purchase and sale of in%entories
and f;ed assets and test the systems through an in
depth check of selected transactions and identify
any weaknesses distinguishing between maBor and
minor(
b) $repare summary statements for each section
showing the weaknesses in the system which call
for our reser%ations after gi%ing due consideration
to the siGe of the company. nature of its business.
organisational structure etc(
c) 0as the internal auditor commented on the maBor
weaknesses in internal control and the period for
which the management has not rectifed the same@
d) 0a%e you come across any maBor weaknesses in the
internal controls during the current audit. which
were also reported to the management in the earlier
audits@ 0as the management failed to rectify them@
e) If you ha%e come across maBor weaknesses in the
internal control which could ha%e serious
implications on the ade1uacy or reliability of the
books of account of the company. ha%e you
considered modifying the audit report on the
fnancial statements@

T)ANSACTIONS @ITH PA)TIES MENTIONED */S ;<=
#(1 +4, +a, -.et.er !articulars o1 co%tracts or
arra%/e$e%ts re1erre0 to i% sectio% ;<= o1 t.e
Act .a4e "ee% e%tere0 i% t.e re/ister re3uire0 to
"e $ai%tai%e0 u%0er t.at sectio%7
a) 0a%e you obtained a written representation from
the management concerning the completeness of
the information so pro%ided to the auditor(
b) 0a%e you re%iewed working papers for the prior
years for names of known companies. frms or other
parties the particulars of whom are re1uired to be
entered in the register maintained under section
5)1 of the ct!
c) 0a%e you re%iewed the entity4s procedures for
identifcation of companies. frms or other parties
the particulars of whom are re1uired to be entered
in the register maintained under section 5)1 of the
ct!
d) 0a%e you in1uired and documented as to the
a=liation of directors and key management
personnel. o=cers with other entities!
e) 0a%e you re%iewed shareholder records to
determine the names of principal shareholders or. if
appropriate. obtain a list of principal shareholders
from the share register!
f) 0a%e you re%iewed the entity4s income ta; returns
and other information supplied to regulatory
agencies! and
g) 0a%e you re%iewed the Boint %enture and other
rele%ant agreements entered into by the entity(
"ubstantiate the Dudgment $artners
Comments

6raft 2ote $artners
Comments
#(2 +", -.et.er tra%sactio%s $a0e i% !ursua%ce o1
suc. co%tracts a%0 arra%/e$e%ts .a4e "ee%
$a0e at !rices -.ic. are reaso%a"le .a4i%/
re/ar0 to t.e !re4aili%/ $ar8et !rices at t.e
rele4a%t ti$e7
a) /btain a partyHwise statement summariGing the
transactions that ha%e been entered during the year
for the sale. purchase or supply of any goods.
materials or ser%ices(
b) ?or the transactions check > discuss
Chether prices paid>charged are reasonable
compared to the prices of other
parties>charged to the customers. price lists.
1uotations etc@( 6ue consideration needs to be
gi%en to factors such as deli%ery period.
schedule of implementation. the 1uality of the
product > ser%ice. the 1uantity. the credit
terms. the pre%ious record of the supplier >
buyer > client etc(
Chere purchases of goods and materials ha%e
been made from sole suppliers. e;amine the
reasonableness with reference to list prices of
the supplier. other trade terms of the supplier

DEPOSITS
:(1 +4i, i% case t.e co$!a%# .as acce!te0 0e!osits
1ro$ t.e !u"lic2 -.et.er t.e 0irecti4es issue0 "#
t.e )eser4e Ba%8 o1 I%0ia a%0 t.e !ro4isio%s o1
sectio%s ABA2 ABAA or a%# ot.er rele4a%t
!ro4isio%s o1 t.e Act a%0 t.e rules 1ra$e0 t.ere
u%0er2 -.ere a!!lica"le2 .a4e "ee% co$!lie0
-it.. I1 %ot2 t.e %ature o1 co%tra4e%tio%s s.oul0
"e state07 I1 a% or0er .as "ee% !asse0 "#
Co$!a%# La- Boar0 or Natio%al Co$!a%# La-
Tri"u%al or reser4e "a%8 o1 I%0ia or a%# Court or
a%# ot.er tri"u%al -.et.er t.e sa$e .as "ee%
co$!lie0 -it. or %otC
a) E;amine the system by which deposits are accepted
and records are maintained and make a reasonable
test check to ensure that the system operates(
E;amine whether compliance has been made with
regard to all the matters specifed in the rules and
not merely to the limits of the deposits with
reference to mainly :
the form of deposits which may be accepted and
the terms thereof
the limits up to which the deposits can be
accepted
the form and particulars of ad%ertisement for
deposits
the form of application for deposits
the furnishing of receipts to depositors
the maintenance of registers of depositors
the general pro%isions regarding the repayment
of deposits and payment of interest
b) Chether compliance has been made with regard to
all the matters specifed in the rele%ant directi%es of
the 'eser%e Bank of India@
c) Chether any nonHcompliance has been obser%ed@ If
yes ha%e you documented the nature of nonH
compliance@ 'eport the nature of contra%entions in
case the company has not complied with the
rele%ant directi%es of the 'eser%e Bank of India or
pro%isions of section #I. #I or any other
rele%ant pro%isions of the ct(
d) Chether any order was passed by the C&B or
2ational Company &aw *ribunal or 'BI or any Court
or any other *ribunal@ Chether the re1uirements of
the order of C&B or 2ational Company &aw *ribunal
or 'BI or any Court or any other *ribunal ha%e been
complied with the Company@

INTE)NAL A*DIT
8(1 +4ii, i% t.e case o1 liste0 co$!a%ies a%0 / or ot.er
co$!a%ies .a4i%/ a !ai0u! ca!ital a%0 reser4es
e6cee0i%/ )s.A< la8.s as at t.e co$$e%ce$e%t
o1 t.e 5%a%cial #ear co%cer%e02 or .a4i%/ a%
a4era/e a%%ual tur%o4er e6cee0i%/ 54e crore
ru!ees 1or a !erio0 o1 t.ree co%secuti4e 5%a%cial
#ears i$$e0iatel# !rece0i%/ t.e 5%a%cial #ear
co%cer%e02 -.et.er t.e co$!a%# .as a% i%ter%al
au0it s#ste$ co$$e%surate -it. its si?e a%0
%ature o1 its "usi%ess7
a) Chether the Company is a &isted Company! /r
b) Chether company has total paidHup capital
e;ceeding 's( #) lakhs as at the commencement of
the fnancial year concerned@ /r
c) Chether an a%erage annual turno%er (including
sales of scrap) e;ceeds 's( # crores for a period of
three consecuti%e years immediately preceding the
fnancial year concerned@
d) Chether the company has its own (or of group)
internal audit department@
e) If not. whether the company has entrusted the work
of internal audit to outside agency@
f) Chether the siGe of the internal audit department is
ade1uate@ 6ue consideration to be gi%en to the
nature of the business. the number of operating
points. the e;tent to which control is decentralised.
the e7ecti%eness of other forms of internal control
etc(
g) Check if the internal audit department is
independent of <anagement inJuence:
Is the head of the internal audit independent of
operational management@
If so. does he ha%e direct access to the Chairman
of the Board. <anaging 6irector or the Chief
E;ecuti%e. if not. describe how independence
from operational management4s inJuence is
assured@
Is the Internal udit 6epartment and e%ery
member thereof independent of accounting
and recording functions relating to internal
checks and procedures! and if they are called
h) re the personnel who undertake the internal audit
1ualifed and professionally competent@
i) 6o the areas co%ered include e;amination of the
operating systems to ensure that the systems are
ade1uate and functioning in practice@ /btain the
programme of internal auditor4s work(
B) Is the internal audit department assigned any
specifc in%estigations from time to time like:
*aking or witnessing physical in%entory of f;ed
assets. fnished goods. stores. spare parts and
raw materials and reconciling the same with
book records@
'e%iewing the internal control o%er purchases
from interconnected companies or frms@
Ensuring compliance with the regulations relating
to acceptance of deposits@
'e%iewing actual e;penses in comparison with
budgets and e;amining causes for signifcant
%ariances@
'e%iewing E6$ controls in appropriate cases@
k) Is the Internal udit department kept informed of
the 1ueries raised by the statutory auditors@
l) 6o the internal auditors ha%e ade1uate technical
assistance if the company4s operations are highly
technical in nature@
m) Chether any reports are submitted by the internal
auditor or any other e%idence is there of his work@
E;amine the reports submitted by internal auditor(
Is there a standard form in which the report is to
be submitted@
6o the internal audit reports identify weaknesses
and recommend impro%ements@
6oes a senior authorised person take action to
see that the internal auditor4s
recommendations are properly considered@
n) re there standing instructions in case of a serious
breakdown@
*hat the internal audit sta7 should at once alert
the head of their department(
*hat the internal audit manager is to be ad%ised
of any known or suspected theft or defalcation
which came to the attention of client4s sta7(
*hat the head of internal audit should report to
the Chief E;ecuti%e /=cer in cases which
come to their knowledge in%ol%ing unusual or
unsupported cash payments. any transactions
of 1uestionable property. and any signifcant
%iolations4 of internal control procedures(
*hat the head of internal audit should make an
immediate re%iew when such a situation is
reported and then report to higher authorities
so that correcti%e action can be taken as well
as inform the statutory auditors of the same(
o) Is there any follow up on the defciencies reported
by the internal auditor to ensure that the errors
pointed out are corrected and remedial action is
taken@

COST ACCO*NTIN )ECO)DS
I(1 +4iii, -.ere $ai%te%a%ce o1 cost recor0s .as "ee%
!rescri"e0 "# t.e Ce%tral o4er%$e%t u%0er
clause +0, o1 su"Dsectio% +=, o1 sectio% '<E o1 t.e
Act2 -.et.er suc. accou%ts a%0 recor0s .a4e
"ee% $a0e a%0 $ai%tai%e07
a) Cost ccounting 'ecord 'ules apply to the following
industries:
Cycle Industry
Cement Industry
utomobile Battery Industry
*yre and *ube Industry
*ractor Industry
<otor Kehicles Industry
'oom irHconditioner Industry
'efrigerator Industry
Electric &amp Industry
Electric ?an Industry
Caustic "oda Industry
Electric <otors Industry
luminum Industry
Kanaspati Industry
Bulk 6rug Industry
Infant <ilk ?oods
Industrial lcohol
"ugar Industry
2ylon Industry
"oda sh Industry
6yes Industry
Dute Industry $aper Industry
Cotton *e;tile Industry
'ayon Industry
6ry Cell Battery Industry
$ower 6ri%en $ump L 6iesel Engine Industry
Electrical Cables and Conductors Industry
"ulphuric cid Industry
"teel *ubes L $ipes Industry
?ormulation Industry
?ertiliser Industry
Insecticides (*echnical Mrade) Industry
$olyster Industry
Bearings Industry
Chemical Industry
"oaps L 6etergents
Cosmetics L *oiletries
?ootwear Industry
"teel (Nnder "teel $lant)
<ilk ?ood
"ha%ings "ystems Industry
Industrial Mases
b) /btain a written representation from the
management stating:
whether cost records are re1uired to be
maintained for any product(s) of the company
under section 2)9(1)(d)! and
Chether cost accounts and records are being
made and maintained regularly(
c) /btain a list of all the books > records to be made
and maintained as per cost accounting rules and
carry out a general re%iew of records to ensure that
the records as prescribed are made and maintained
without making a detailed e;amination as to their
accuracy(

PAYMENT OF STAT*TO)Y D*ES
9(1
+i6, +a, is t.e co$!a%# re/ular i% 0e!ositi%/
u%0is!ute0 statutor# 0ues i%clu0i%/ Pro4i0e%t
Fu%02 I%4estor E0ucatio% a%0 Protectio% Fu%02
e$!lo#eesF State I%sura%ce2 I%co$eDta62 SalesD
ta62 @ealt. Ta62 Ser4ice ta6 Custo$ Dut#2 E6cise
Dut#2 cess a%0 a%# ot.er statutor# 0ues -it. t.e
a!!ro!riate aut.orities a%0 i1 %ot2 t.e e6te%t o1
t.e arrears o1 outsta%0i%/ statutor# 0ues as at
t.e last 0a# o1 t.e 5%a%cial #ear co%cer%e0 1or a
!erio0 o1 $ore t.a% si6 $o%t.s 1ro$ t.e 0ate
t.e# "eca$e !a#a"le2 s.all "e i%0icate0 "# t.e
au0itor.
a) 0a%e you made a list of all statutory payments that
are to be made by the Company@
b) Cith regard to "tatutory 6ues that ha%e been
collected for deposit with the authorities (e;ample:
$?. E;cise. "er%ice *a;. "ales *a;. etc() obtain a
statement from the company stating the following:
6ues dates and amount by which the amounts
collected were re1uired to be deposited with
the uthorities
6ates on which the same ha%e been deposited
If any delay is noticed. whether generally the
deposits ha%e been regular@
c) /btain a written representation with reference to the
date of the balance sheet from the management(
specifying the cases and the amounts considered
disputed and positi%e e%idence showing that
the company has not accepted the demand for
payment of ta; or duty! and
containing a list of the cases and the amounts in
respect of the specifed ta;es and duties which
are undisputed and ha%e remained outstanding
for a period e;ceeding si; months from the
date they became payable i(e( as at the date of
the e;piry of the stay granted by the
authorities or the date on which default occurs
and the amount becomes payable to
d) "crutinise yearHwise "tatutory dues position
schedules. current liabilities schedule and other
rele%ant working papers to confrm the abo%e
statement(
e) 0a%e you ensured that where undisputed amounts
payable in respect of statutory dues were
outsta%0i%/ as at the last date of the fnancial year
concerned 1or a !erio0 o1 $ore t.a% si6 $o%t.s
1ro$ t.e 0ate t.e# "eca$e !a#a"le the amount
in%ol%ed of such outstanding dues ha%e been
indicated in the report( ?urther. ensure that.
where%er possible. the fact of subse1uent clearance
or otherwise ha%e been indicated in the report(

9(2 +", i% case 0ues o1 i%co$e ta6 / sales ta6 / -ealt.
ta6 / ser4ice ta6 /Custo$ 0ut# /e6cise 0ut# / cess
.a4e %ot "ee% 0e!osite0 o% accou%t o1 a%#
0is!ute2 t.e% t.e a$ou%ts i%4ol4e0 a%0 t.e
1oru$ -.ere 0is!ute is !e%0i%/ $a# !lease "e
$e%tio%e0.
a) 0a%e you obtained a list of all cases that are being
disputed by the Company with the authorities@
b) Chether they can be considered genuinely as
disputes or whether they constitute mere
representation@
c) In case they constitute a dispute. has the company
1uantifed the amount that has not been deposited
on account of the dispute and also indicated the
forum where it is currently being disputed@

SIC(NESS / LOSSES
1)(1 +6, -.et.er i% case o1 a co$!a%# -.ic. .as "ee%
re/istere0 1or a !erio0 %ot less t.a% 54e #ears2 its
accu$ulate0 losses at t.e e%0 o1 t.e 5%a%cial
#ear are %ot less t.a% 51t# !er ce%t o1 its %et
-ort. a%0 -.et.er it .as i%curre0 cas. losses i%
t.e 5%a%cial #ear i$$e0iatel# !rece0i%/ suc.
5%a%cial #ear7
a) Chether the Company has been registered for more
than # years@
b) Chether the accumulated loss is greater than or
e1ual to #)O of its net worth@
c) Chether the company has incurred cash losses in
the year under audit and its immediately preceding
year@
Comments

6raft 2ote $artners
Comments
)EPAYMENT OF D*ES TO FINANCIAL INSTIT*TIONS
11(1
+6i, -.et.er t.e co$!a%# .as 0e1aulte0 i%
re!a#$e%t o1 0ues to a 5%a%cial i%stitutio% or
"a%8 or 0e"e%ture .ol0ersC I1 #es2 t.e !erio0 a%0
a$ou%t o1 0e1ault to "e re!orte07
a) Chether you ha%e obtained copies of loan
agreements with banks > fnancial institutions >
debenture holders@
b) Chether the company has adhered to the loan
co%enants dealing with the repayment of dues@
c) If the company has defaulted. ha%e you 1uantifed
the amount and period for which such default has
persisted@
)ECO)DS OF SEC*)ITIES FO) LOANS / AD:ANCES )ANTED
12(1 +6ii, -.et.er a0e3uate 0ocu$e%ts a%0 recor0s
are $ai%tai%e0 i% cases -.ere t.e co$!a%# .as
/ra%te0 loa%s a%0 a04a%ces o% t.e "asis o1
securit# "# -a# o1 !le0/e o1 s.ares2 0e"e%tures
a%0 ot.er securities7 I1 %ot2 t.e 0e5cie%cies to "e
!oi%te0 out.
a) Chether the Company has granted any loans and
ad%ances for which. as per the terms agreed. the
security to be pledged has been either
"hares
6ebentures
/ther "ecurities
b) Chether the Company has obtained as per the terms
of the grant of ad%ance > loan the security indicated@
c) Chether the company has ade1uate documents and
records for the same@ Chether the company also
has ade1uate controls o%er these securities@
d) Chether the records generally include the following:
*he full name and address of the borrower(
*he amount of the loan or ad%ance(
"tipulations regarding period of repayment. the
rate of interest. the security to be pledged and
all other terms of the loan or ad%ance(
*he record of the disbursements. repayments
towards the loan or ad%ance and reco%ery of
interest(
?ull particulars of the security pledged(
*he documents needed to transfer the ownership
of the security in case of need(
$eriodical acknowledgments from the parties
confrming the balances due(
$roof that the party has power to borrow(
Information about market %alue of securities(
Chether records and documents maintained gi%e
the abo%e details@
e) Chere any defciencies were noticed. whether the
same ha%e been reported@

DEALIN IN SEC*)ITIES
13(1 +6i4, i1 t.e co$!a%# is 0eali%/ or tra0i%/ i%
s.ares2 securities2 0e"e%tures a%0 ot.er
i%4est$e%ts2 -.et.er !ro!er recor0s .a4e "ee%
$ai%tai%e0 o1 t.e tra%sactio%s a%0 co%tracts a%0
-.et.er ti$el# e%tries .a4e "ee% $a0e t.erei%7
also -.et.er t.e s.ares2 securities2 0e"e%tures
a%0 ot.er i%4est$e%ts .a4e "ee% .el0 "# t.e
co$!a%#2 i% its o-% %a$e e6ce!t to t.e e6te%t o1
t.e e6e$!tio%2 i1 a%#2 /ra%te0 u%0er sectio% GE
o1 t.e Act7
a) 6etermine whether the company is dealing or
trading in in%estments which implied purchase or
sale with a %iew to make proft or whether it is
merely holding in%estments and earning income
from di%idend or interest thereon(
b) E;amine whether the form in which records are
maintained is ade1uate and also if they are properly
written and preser%ed( *he ade1uacy of the records
has to be tested in the light of their ability to gi%e
details of:
c) $urchases and sale and the proft or loss arising on
sale :
d) the particulars about the person from whom or to
whom the purchase or sale was made
e) the rate at which the purchase or sale was made
f) the number of shares or other in%estments with full
details regarding class. distincti%e numbers.
numbers of certifcates etc.
g) the document e(g( bought note or sale note the
adBustment. if any. necessary when securities are
purchased or sold and whether the 1uotations are
e;clusi%e of interest accrued. or. when shares are
purchased or sold e;Hdi%idend whether di%idend has
to be paid or recei%ed
h) *he stock of in%estments and their %aluation. and
the
i) details of holdings in indi%idual companies
B) the details of holdings in indi%idual companies
k) the classes of in%estments
l) the basis on which the closing stock is %alued and
m) the proft or loss on sale is to be computed
n) the recording of shares recei%ed as bonus shares
o) the accounting of rights subscribed for or sold
p) *he amounts due for sales and payable for
purchases indi%idual accounts of the parties and
settlements made there against(
1) 0a%e you e;amined the <ethod of %aluation of
in%estments for balance sheet purposes@ (?or
e;ample. if in%estments are %alued at cost. the
indication would be that the company is not an
in%estment company( If. howe%er. in%estments are
%alued at lower of cost and market %alue. or if
in%estments are %alued at market %alue. the
indication would be that the company is dealing or
trading in in%estments()
r) lso e;amine the status gi%en to the company in its
ta; assessments. that is. whether it is treated as a
dealer in in%estments (profts being subBected to ta;
as business profts) or whether it is treated as an
in%estor (profts being subBected to ta; as capital
gains)(
s) Chether the securities ha%e been held by the
Company in its own name@ *here are possibilities
that in%estments which are intended or contracted
to be sold immediately may not ha%e been
transferred to the company4s own name( Chether
the failure to transfer the in%estments to the
company4s name is understandable@

*A)ANTEES I:EN
1#(1 +64, -.et.er t.e co$!a%# .as /i4e% a%#
/uara%tee 1or loa%s ta8e% "# ot.ers 1ro$ "a%8 or
5%a%cial i%stitutio%s2 t.e ter$s a%0 co%0itio%s
-.ereo1 are !re>u0icial to t.e i%terest o1 t.e
co$!a%#7
a) Chether the Company has gi%en any guarantees for
loans taken by others form banks and fnancial
institutions@ 0a%e you taken a representation in this
regard from the management stating the following:
ll obligations in respect of guarantees ha%e
been duly recorded and disclosed!
*here are no guarantees issued up to the yearH
end which are yet to be recorded! and
*he disclosed contingent liabilities do not include
any contingencies which are likely to result in a
loss and which. therefore. re1uire adBustment
of assets or liabilities(
b) 0a%e you performed substanti%e audit tests to
establish the completeness of the guarantees
recorded@ 0a%e you re1uested for confrmation of
guarantees by the issuing parties@
c) 0a%e you re%iewed the terms and conditions of the
guarantee to establish the reasonableness thereof in
the light of pre%ious e;perience and knowledge of
the current yearPs acti%ities( In determining whether
the terms of the loans are +prima facie- preBudicial.
ha%e you gi%en due consideration to a number of
factors connected with the guarantee. including the
following:
fnancial standing of the party for which the
company has gi%en the guarantee. its ability to
borrow.
the nature of the security o7ered by the party.
*angible > intangible benefts accruing to the
company. the a%ailability of alternati%e sources
of fnance.
*he urgency of the borrowing for which the
company has gi%en guarantee and so on( (If
one comes to the conclusion that better terms
could ha%e been placed for making the
guarantee but unless the di7erence in the
terms which ha%e been placed and the terms
which could ha%e been placed is so signifcant
that no reasonable person would ha%e agreed
to pro%ide guarantee on the terms on which
the guarantee has been gi%en. it would be
di=cult to conclude that the terms and
conditions of the guarantee are preBudicial()
Comments

6raft 2ote $artners
Comments
APPLICATION OF TE)M LOANS
1:(1 +64i, -.et.er ter$ loa%s -ere a!!lie0 1or t.e
!ur!ose 1or -.ic. t.e loa%s
-ere o"tai%e07
a) 0a%e you obtained a list of all term loans obtained
by the entity along with the sanction letter issued by
the lender@ (&oans with repayment periods beyond
5: months are usually called +term loans-()
b) 0a%e you e;amined the terms and conditions subBect
to which the company has obtained the term loans(
c) 0a%e you compared the end use of the funds raised
by term loans with the purpose mentioned in the
sanction letter or documents containing the terms
and conditions of the loan( Chere the funds were
used for the purpose for which they were borrowed.
has your report stated the fact@
d) In case where the funds were temporarily used for
the purpose other than for which the loan was
sanctioned but were ultimately utilised for the stated
endHuse. whether your report has indicated the fact@

APPLICATION O1 F*NDS @.et.er s.ort ter$ 1u%0s a!!lie0 1or lo%/
ter$ !ur!osesC
18(1
@.et.er t.e 1u%0s raise0 o% s.ortDter$ "asis
.a4e "ee% use0 1or lo%/Dter$ i%4est$e%t. I1 #es2
t.e %ature a%0 a$ou%t is to "e i%0icate0.
HPara/ra!. G +64ii,I
Note& ?or the purpose of this clause. the term funds
refer to cash. cash e1ui%alents or working capital(
a) 0a%e you prepared a ?unds ?low "tatement@
b) 0a%e you Auantifed for the period:
&ong *erm "ources of ?unds
"hort *erm "ources of ?unds
&ong *erm pplication of ?unds
"hort *erm pplication of ?unds
c) Chether the short term sources and application of
funds match@ If not. ha%e you indicated the
di7erence@
d) Chether the &ong term sources and application of
funds match@ If not. ha%e you indicated the
di7erence@
e) 0a%e you %erifed the relationship between the
particular funds and the assets@ 0a%e you %erifed
the mo%ement of funds for the period co%ered by
audit@
f) Chere it is not possible to determine the %ature o1
a!!licatio% o1 1u%0s because of nonHa%ailability of
rele%ant information in this regard. ha%e you gi%en a
disclaimer while commenting on this aspect@

P)EFE)ENTIAL ALLOTMENT OF SHA)ES
1I(1
@.et.er t.e co$!a%# .as $a0e a%# !re1ere%tial
allot$e%t o1 s.ares to !arties a%0 co$!a%ies
co4ere0 i% t.e )e/ister $ai%tai%e0 u%0er Sectio%
;<= o1 t.e Act2 a%0 i1 so -.et.er t.e !rice at
-.ic. s.ares .a4e "ee% issue0 is !re>u0icial to
t.e i%terest o1 t.e co$!a%#. HPara/ra!. G+64iii,I
a) Chether the company is an unlisted public
company@ (this clause is not rele%ant in the case of a
pri%ate limited company nor in the case of a listed
company)
b) Chether it has made any preferential allotment of
shares under section I1(1) to parties mentioned
under section 5)1@
c) 0a%e you e;amined the method used for %aluation of
shares of the company and also ascertained the
reasonableness of the assumptions underlying the
calculation@
d) /n an e;amination of the methods and %arious
factors. ha%e you come to a conclusion that better
price for share issued could ha%e been obtained@
e) Chere the Mo%ernment is satisfed in this regard and
has issued an /rder under this "ection. which you
ha%e relied upon to come to a conclusion that the
prices charged ha%e not been preBudicial to the
interests of the company. ha%e you mentioned in the
report that audit opinion is based on the /rder
issued by the Mo%ernment@

C)EATION OF SEC*)ITY INTE)EST FO) DEBENT*)ES
19(1
+6i6, -.et.er securit# or c.ar/e .a4e "ee%
create0 i% res!ect o1 0e"e%tures issue0C
a) Chether the Company has issued any debentures@
b) If yes. whether the company has created a
debenture redemption reser%e@
c) 0a%e you e;amined and kept a copy in the fle of the
debenture trust deed@
d) Chether an ade1uate amount is credited to the
debenture redemption reser%e each year so as to
co%er the redemption of debentures as and when it
falls due@
e) 0a%e you %erifed whether proper securities ha%e
been created in fa%our of the debenture trust@
f) if the security is an immo%able property. ha%e you
%erifed the security creation by e;amining the
rele%ant documents creating the charge in fa%our of
the trust duly registered in the concerned 'egistrar4s
o=ce@

END *SE OF MONEY )AISED TH)O*H P*BLIC ISS*ES
2)(1
+66, -.et.er t.e $a%a/e$e%t .as 0isclose0 o%
t.e e%0 use o1 $o%e# raise0 "# !u"lic issues a%0
t.e sa$e .as "ee% 4eri5e07
a) Chether the company has made any public issue@
b) If yes. ha%e you obtained a copy of the prospectus to
e;amine the end use mentioned@
c) 0as the management disclosed the end use of
funds@
d) 0a%e you %erifed that the actual use of the funds is
not signifcantly di7erent from that indicated by the
management@
e) 6o you feel that the management has not made
complete disclosure with regard to the end use of
money@
f) If yes. ha%e you mentioned in the audit report the
information that should ha%e been disclosed by the
management@

F)A*D
21(1 +66i, -.et.er a%# 1rau0 o% or "# t.e co$!a%#
.as "ee% %otice0 or re!orte0 0uri%/ t.e #ear7 I1
#es2 t.e %ature a%0 t.e a$ou%t i%4ol4e0 is to "e
i%0icate0.
a) 0a%e you complied with the re1uirements of " 3 Q
+*he uditor4s 'esponsibility to Consider ?raud and
Error in an udit of ?inancial "tatements-
b) Cith regard to fraud. ha%e you e;amined > in1uired
the following:
E;amined the reports of the internal auditor
En1uired of the management about any frauds
on or by the company that its has noticed or
that ha%e been reported to it
6iscussed the matter with other employees of
the company
E;amined the minute book of the board meeting
c) Chere any frauds ha%e been noticed or reported.
ha%e you determined the nature and amount of
frauds and disclosed the same in the audit report@
Comments

6raft 2ote $artners
Comments
SECTION ; CHEC(LIST ON MATTE)S TO BE )EPO)TED *PON
ADDITIONALLY IN THE CASE OF NIDHI / M*T*AL BENEFIT
F*ND/SOCIETIES
MATTE)S APPLICABLE TO NIDHIFS / CHIT F*NDS
+6iii, @.et.er t.e !ro4isio%s o1 a%# s!ecial statute
a!!lica"le to c.it 1u%0 .a4e "ee% 0ul# co$!lie0
-it.C I% res!ect o1 %i0.i/ $utual "e%e5t
1u%0/societies7
a) whether the netHowned funds to deposit liability ratio is
more than 1:2) as on the date of balance sheet!
b) whether the company has complied with the prudential
norms on income recognition and pro%isioning against
subHstandard>doubtful>loss assets!
c) whether the company has ade1uate procedures for
appraisal of credit proposals>re1uests. assessment of
credit needs and repayment capacity of the borrowers!
d) whether the repayment schedule of %arious loans
granted by the nidhi is based on the repayment
capacity of the borrower!
e) 0a%e you e;amined the aforesaid matters@ Is there any
matter where you ha%e a reser%ation@


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