Companies (Auditor's Report) Order, 2016

Clause

Heads

Matters

Documentation

3(i)

Fixed Assets

(a) Proper Records: Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets;

(b) Physical Verification: Whether these fixed assets have been physically verified by the management at reasonable intervals; Whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;

(c) Title Deeds: Whether the title deeds of immovable properties are held in the name of the company. If       not, provide the details thereof;

(a) updated fixed assets register

(b) evidence of physical verification

(c) list of freehold immovable properties with title deeds, name of property, location etc.

3(ii)

Inventory

Whether physical verification of inventory has been conducted at reasonable intervals by the management; Whether any material discrepancies were noticed on such verification and if so, whether the same have been properly dealt with in the books of account;

(a) evidence of physical verification

(b) adjustment of discrepancies

3(iii)

Loans given by company

Whether the company has granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships (LLP) or other parties covered in the register maintained under Section 189 of the Act. If so,

(a) Terms and Conditions: Whether the terms and conditions of the grant of such loans  are not prejudicial to the company’s interest.

(b) Regular Recovery: Whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular;

(c) Steps for Recovery: If the amount is overdue, state the total amount overdue for more than 90 days, and whether reasonable steps have been taken by the company for recovery of the principal and interest.

(a) verification of copy of Section 189 register

(b) whether repayment of principal and interest is regular

3(iv)

Loan to Directors and investment by company

In respect of loans, investments, guarantees, and security whether provisions of Section 185 and 186 of the Act have been complied with. If not, provide the details thereof.

(a) compliance of Section 185 & 186

(b) refer PKF company law checklist

3(v)

Deposits

In case, the company has accepted deposits, whether the following has been complied with:

• Directives issued by the Reserve Bank of India (RBI);
• The provisions of Sections 73 to 76 or any other relevant provisions of the Act and the rules framed thereunder; and
• If an order has been passed by Company Law Board (CLB) or National Company Law Tribunal (NCLT) or Reserve Bank of India (RBI) or any court or any other tribunal.

However, if any of the above not complied with, the nature of contraventions should be stated.

(a) compliance with RBI directives

(b) compliance with Sections 73 to 76

(c) whether order has been passed by CLB, NCLT, RBI

3(vi)

Cost Records

If the Central Government has specified maintenance of cost records under Section 148 of the Act whether such accounts and records have been made and maintained.

(a) verification of cost records and accounts

3(vii)

Statutory Dues

Following matters shall be reported for statutory dues and disputes for tax and duties.

(a) Statutory Dues for more than 6 Months: Whether the company is regular in depositing undisputed statutory dues with the appropriate authorities including:

• Provident fund;
•  Employees’ state insurance;
•  Income tax;
•  Sales tax (VAT);
•  Service tax;
•  Duty of customs;
•  Duty of excise;
•  Value Added Tax (VAT);
•  Cess; and
•  Any other statutory dues.

If the company is not regular in depositing such statutory dues, the extent of the arrears of outstanding statutory dues as at the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated by the auditor.

(b) Dispute for Tax and Duty: In case dues of income tax or sales tax or service tax or duty of customs or duty of excise or value added tax have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned.

Note that a mere representation to the concerned Department shall not constitute a dispute.

(a) list of statutory dues

(b) check due dates and actual remittance dates

(c) check if there are arrears of dues as on balance sheet date

(d) identify legal tax related disputes

3(viii)

Repayment of Loans

Whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to debenture holders? If yes, the period and the amount of default to be reported.

Note that in case of defaults to banks, financial institutions, and Government, lender wise details to be provided.

(a) if loan restructured or default has been made good, the fact is to be disclosed

(b) lender-wise details in case of default to banks/FIs

3(ix)

Utilisation of IPO and FPO

Whether moneys raised by way of Initial Public Offer (IPO) or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported;

(a) take copies of prospectus etc.

(b) whether actual spending is in line with the purpose specified in prospectus etc.

3(x)

Reporting of Fraud

Whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated;

(a) review internal audit reports

(b) enquiry from management about frauds

3(xi)

Approval of Managerial Remuneration

Whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Act? If not, state the amount involved and steps taken by the company for securing refund of the same;

(a) review secretarial audit report

(b) check resolutions of Remuneration Committee, Board and menbers

3(xii)

Nidhi Company

Whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1:20 to meet out the liability and whether the Nidhi Company is maintaining 10% unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability;

(a) check whether ratios are maintained

3(xiii)

Related Party Transactions

Whether all transactions with the related parties are in compliance with Sections 177 and 188 of the Act where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards;

(a) ensure transcations have been below the limit

(b) cross-check disclosures of RPT as per ASs

3(xiv)

Private Placement or Preferential Issue

Whether the company has made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of Section 42 of the Act have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance;

(a) check purpose of issue and if same is complied with

(b) check compliance with Section 42

(c) list all exceptions

3(xv)

Non-cash transactions

Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of Section 192 of the Act have been complied with;

(a) whether there are acquisition of assets from/by directors or connected persons

(b) check board minutes

3(xvi)

Registration under RBI Act, 1934

Whether the company is required to be registered under Section 45IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained.

(a) get a copy of registration certificate