Particulars |
Remarks | ||||
1 | Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets | ||||
a) | Whether records of Fixed Assets (tangible, intangible and leased assets) are maintained showing the following particulars: | ||||
i. | Sufficient description (distinctive numbers, purchase agreement, documents, records and registration references, etc.) of the asset to make identification possible. | ||||
ii. | Classification, that is, the head under which it is shown in the accounts, e.g., plant and machinery, office equipment, etc. componentwise, as applicable | ||||
iii. | Location/situation | ||||
iv. | Quantity, i.e., number of units. | ||||
v. | Original cost. | ||||
vi. | Year of purchase. | ||||
vii. | Adjustment for revaluation or for any increase or decrease in cost, e.g., on revaluation of foreign exchange liabilities. | ||||
viii. | Date of revaluation, if any. | ||||
ix. | Rate and basis of depreciation, useful life, particulars regarding amortisation and impairment. | ||||
x. | Depreciation, amortisation and impairment for the current year. | ||||
xi. | Accumulated depreciation, amortisation and impairment loss. | ||||
xii. | Particulars regarding sale, discarding, demolition, destruction etc. | ||||
xiii. | Particulars of fixed assets that have been retired from active use and held for disposal. | ||||
xiv. | Particulars of fixed assets that have been fully depreciated or amortised or impaired. | ||||
b) | Whether aggregate original cost, depreciation or amortisation to date and impairment loss, if any, as per the register/records agrees with General Ledger balances? If not, note the disagreements in respect of each class of assets. | ||||
Conclusion: | |||||
(i) | 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; | ||||
(a) | i. | Whether Fixed Assets were physically verified at any time during the year or earlier years according to a phased program? | |||
ii. | What is the periodicity of physical verification and whether the same is reasonable? | ||||
iii. | Whether assets physically verified agreed/ reconciled with book figures? If not, note the | ||||
discrepancies against each class of assets in terms of value, and state how the discrepancies have been dealt with. | |||||
iv. | Instructions to officials for carrying out physical verification to include procedures, timing, | ||||
competency of team members, count sheets/tags, formats etc. | |||||
(b) | Physically verify few items from the fixed asset register & vice versa. | ||||
(c) | Whether management representation is obtained confirming that: | ||||
* fixed assets are physically verified by the company in accordance with the policy of the company. | |||||
* periodicity of the physical verification of fixed assets. | |||||
* details of the material discrepancies noticed during the physical verification of the fixed assets. | |||||
* If no discrepancies were noted during physical verification, the same should be clearly mentioned. | |||||
Conclusion: | |||||
(c ) | Whether the title deeds of immovable properties are held in the name of the company. If not, provide the details thereof; | ||||
(a) | Does the company have any immovable properties (land and buildings)? Has the Company identified the land and building on the basis of Fixed Asset Register. | ||||
(b) | Whether the title deeds of these immovable properties are in the name of the company? | ||||
Whether the details as per title deeds reconcile with the details in Fixed assets register, if not, is there any material difference to be reported here | |||||
(c) |
Has the management provided details of immovable properties not held in company’s name (for example, location, description, and reasons for not being held in the company’s name? | ||||
i | In case the title deeds are lost, assess whether the certified copies of such documents are available with the company and what actions have been taken by the management in this | ||||
regard? | |||||
ii | In case the title deeds are mortgaged with the lenders, assess if the confirmation from the | ||||
lenders is obtained for the same. | |||||
iii | The discrepancies observed should be reported in the CARO report. | ||||
2 | Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account; | ||||
(a) | Has the management physically verified the inventory, as defined in AS 2? Inventory normally | ||||
includes- | |||||
* Raw materials and Components | |||||
* Packing materials | |||||
* Maintenance supplies | |||||
* Work in progress | |||||
* Finished Goods | |||||
* Stores and Spares | |||||
* Consumables and Loose tools | |||||
(b) | Whether evidence of physical verification has been seen and reasonableness of periodicity of physical verification evaluated? If yes, verify: | ||||
* written instructions issued by the management. | |||||
* duly authenticated physical verification sheets. | |||||
* duly authenticated summary sheets/ consolidation sheet | |||||
* internal memo etc. regarding issues arising on physical verification. | |||||
* any other documents evidencing physical verification. | |||||
(c) |
Whether the original physical verification sheets have been reviewed and selected items traced into the final inventories? (including the more valuable ones as per ABC classification) | ||||
(d) | Whether the comparison of final inventories with stock has been done? Whether records and other corroborative evidence, e.g. inventory statements submitted to banks? | ||||
(e) | In case of continuous stock taking method, whether management: | ||||
i) | maintains adequate and up-to-date stock records; | ||||
ii) | has established adequate procedures for physical verification of inventories, so that in the | ||||
normal circumstances, the programme of physical verification will cover all material items of inventory at least once during the year; and | |||||
iii) | check/examine thoroughly and corrects all material differences between the book records | ||||
and the physical counts. | |||||
(f) | Whether stock register is updated and value of inventory extracted from it tally with the books of account. | ||||
(g) | If any material discrepancies were found as compared to stock records, what were the extent of discrepancies (in terms of value) and how the same have been dealt with in the books of account as well as in the stock records? | ||||
Conclusion: | |||||
3 | (a) | Whether the company has granted any loans, secured or unsecured to companies, firms, Limited Liability Partnerships or other parties covered in the register maintained under section 189 of the Companies Act, 2013. If so, whether the terms and conditions of the grant of such loans are not prejudicial to the company’s interest; | |||
(i) | Has the Company granted any loans (Secured or Unsecured) to companies, firms, limited liability partnerships or other parties covered in the register maintained under Section 189 of the Companies Act 2013? | ||||
(ii) | Where the company has granted any loans to parties covered in the register maintained under section 189 of the Act and squared off during the year, obtain details of such transactions. | ||||
(iii) | Whether the terms of the above loans are prima facie prejudicial, due consideration to be given to the factors mentioned below: | ||||
* terms & condition of the loan repayment, rate of interest, restrictive covenants etc., | |||||
* company’s financial standing, its ability to lend, and terms of its borrowings | |||||
* borrower’s financial standing | |||||
* the nature of the security, | |||||
* prevailing rate of interest, etc. | |||||
(b) | Whether the schedule of repayment of principal and payment of interest has been stipulated | ||||
and whether the repayments or receipts are regular; | |||||
(i) | Whether the schedule of repayment of principal and payment of interest has been stipulated in the loan agreements / mutually agreed letter of arrangement at the time of sanction? | ||||
(ii) | Whether repayment of principal amount and interest thereon are received regularly on the | ||||
due date or immediately thereafter? | |||||
(iii) | If not, the fact and details should be Obtained | ||||
Conclusion: | |||||
© | If the amount is overdue, state the total amount overdue for more than ninety days, and whether reasonable steps have been taken by the company for recovery of the principal and | ||||
interest; | |||||
(i) | Whether list of overdue amount has been prepared & recorded and reasonable steps taken for recovery of amount of loan which is overdue more than ninety days? | ||||
(ii) | Following documents may be seen for verification of reasonableness of steps taken by the company for recovery of principal and accrued interest on loan granted: | ||||
* Facts of each case including amounts involved | |||||
* Issue of reminder | |||||
* Sending of advocates or solicitor’s notice In absence of legal steps whether auditor is satisfied | |||||
that reasonable steps have been taken | |||||
(iii) | Obtain management’s representation regarding steps that have been taken for recovery of total amount overdue more than ninety days. | ||||
Conclusion | |||||
4 | In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof. | ||||
(a) | Where Companies has given loans to directors etc.: | ||||
i) | Whether any loans given to directors or any other person in whom the director is interested, or given any guarantee or provided any security in connection with any loan taken by directors or such other person? | ||||
ii) | Whether any of the transaction is attracting the provisions of section 185? | ||||
iii) | Whether any of such transactions are covered under the exceptions provided under section 185? If so, obtain the relevant evidences ensuring such exemption. | ||||
(b) | Where company has made loan/ investment | ||||
i) | Obtain the details of loans and investment made by the Company including opening balances | ||||
ii) | Whether company has made investment through more than two layers of investment companies? | ||||
iii) | Whether the company has exceeded the limit of sixty per cent of its paid-up share capital, free reserves and securities premium account or one hundred per cent of its free reserves and | ||||
securities premium account, whichever is more? | |||||
iv) | If so, whether prior approval by means of a special resolution passed at a general meeting has been obtained? | ||||
v) | Whether the rate of interest charges is more or at par to the rates specified in subsection (7) of section 186 of the Act, if not, the reasons thereof, | ||||
Conclusion: | |||||
5 | In case, the company has accepted deposits,whether the directives issued by the Reserve Bank of India and the provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed thereunder, where applicable, have been complied with? If not, the nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other tribunal, whether the same has been complied with or not? | ||||
(a) | If the Company has accepted deposits from the public state whether: | ||||
i) | The directives issued by the Reserve Bank of India have been complied with and also that: | ||||
ii) | The provisions of Section 73 to 76 of the Companies Act, 2013 and the rules framed there under have been complied with. | ||||
iii) | List out contraventions, if any. | ||||
Where an order has been passed by the CLB or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in respect of above, examine the steps taken by the company to comply with the order, and if not, report briefly stating there in the nature of contravention and the fact that Company has not complied with the order. | |||||
Conclusion | |||||
6 | Whether maintenance of cost records has been specified by the Central Government under subsection (1) of section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and maintained. | ||||
(a) | Whether cost accounting records have been prescribed for the company under section 148(1) of the Companies Ac, 2013? If so verify whether proper cost accounts and records are made and maintained by the Company as specified. | ||||
Conclusion: | |||||
7 | Whether the company is regular in depositing undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on 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; | ||||
a) | Whether a list of statutory dues which company is required to deposit regularly has been obtained. | ||||
b) | In case where there are no arrears on the balance sheet date but the company has been irregular during the year in depositing the statutory dues, the fact should be stated. | ||||
c) | Whether the Company has been generally regular in depositing statutory dues or otherwise, indicate the same. | ||||
Note: A matter is disputed where there is a positive evidence or action on the part of the company to show that it has not accepted the demand for payment of tax or duty, e.g., where it has gone into appeal. | |||||
d) | Whether penalty and/or interest levied under the respective law is included under amounts payable. | ||||
e) | Ensure that disclosure is restricted to the actual arrears and should not include the amounts which have not fallen due for deposit and have been shown as arrears at the balance sheet date. | ||||
f) | Whether the information about arrears of outstanding statutory dues is provided in the format: | ||||
* Name of the Statute | |||||
* Nature of the dues | |||||
* Amount (Rs.) | |||||
* Period to which amount relates | |||||
* Due date | |||||
* Date of Payment | |||||
g) | Whether a written representation with reference to the date of the balance sheet from the | ||||
management obtained: | |||||
* specifying the cases and the amounts considered disputed; | |||||
* containing a list of the cases and the amounts in respect of the statutory dues which are undisputed and have remained outstanding for a period of more than six months from the date they became payable; | |||||
* containing a statement as to the completeness of the information provided by the management. Whether any register of significant laws with which the entity has to comply within its particular industry and a record of complaints in respect of noncompliance been maintained | |||||
Conclusion: | |||||
(b) | Where 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. (A mere representation to the concerned department shall not be treated as a dispute.) | ||||
a) | Review internal audit report, minutes of the meeting of the board of Directors and audit committee | ||||
b) | Ensure that information about arrears of disputed statutory dues is provided in the format: | ||||
* Name of the Statute | |||||
* Nature of the dues | |||||
* Amount (Rs.) | |||||
* Period to which mount relates | |||||
* Forum where dispute is pending | |||||
Conclusion: | |||||
8 | Whether the company has defaulted in repayment of loans or borrowings to a financial institution, bank, government or dues to debenture holders? If yes, the period and the amount of default to be reported (in case of defaults to banks, financial institutions, and government, lender wise details to be provided). | ||||
a) | Whether all defaults existing at the balance sheet date are reported irrespective of when those defaults have occurred. | ||||
b) | (b) In case of defaults to banks, financial institutions, and government, whether lender ise details reported? | ||||
c) | If application of reschedulement of loan has been made/accepted or default has been made good during the accounting period, whether the fact has been stated. | ||||
d) | Whether the disputes between the company and the lender on various issues give rise to disclaimer stating the fact there is a dispute between the company and the lender and auditor is unable to determine whether there is a default in repayment of dues to the lender concerned. | ||||
Conclusion: | |||||
9 | Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and the term loans were applied for the purposes for which those were raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported; | ||||
a) | Whether the company raised money by way of initial public offer or further public offer of equity shares, convertible securities and debt securities? | ||||
b) | Examine the terms and conditions stated in the offer document subject to which the company has raised the above mentioned money. | ||||
c) | Whether the end use of the money raised (as mentioned above) is capable of being determined? If not state the fact. | ||||
d) | Whether the said end-use of money disclosed in the financial statements by way of a Note is significantly different from the actual end use? If so, state the fact. | ||||
e) | Examine the various documents submitted to SEBI, offer document and also examine the report of board of directors, if available, to find out whether funds raised have been utilized for the purpose for which they were raised. | ||||
f) | Whether a representation of the management has been obtained as to the completeness of the disclosures with regard to the end-use of moneys raised by initial public offer and further public offer? | ||||
g) | Whether the fund flow statement has been reviewed where one to one correlation is not possible. | ||||
h) | Whether the company has taken any term loan? | ||||
i) | Examine the terms and conditions subject to which the company has obtained the term loans including purpose for which term loans were sanctioned? | ||||
j) | Compare the purpose for which term loans were sanctioned with the actual utilisation of the loans and obtain sufficient appropriate audit evidence regarding the utilisation of the amounts | ||||
raised. | |||||
k) | In case during a construction phase surplus funds were temporarily invested, however, subsequently the same are utilised for the stated objectives, mention the fact that the funds were temporarily used for the purpose other than for which the loan was sanctioned but were ultimately utilised for the stated end-use. | ||||
l) | Whether term loans taken were not applied for stated purpose during the year for any reason? If yes, mention the facts and amount. Also disclose the fact about utilization of term oan of earlier year in current year. | ||||
m) | Whether the fund flow statement has been reviewed where one to one correlation was not possible. | ||||
Conclusion: | |||||
10 | 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) Has SA 240 been complied with? (Attach the check list for compliance of SA 240 with this check list also). | |||||
(b) Examine the following to ascertain whether any fraud has been reported or noticed by the | |||||
management? | |||||
* the reports of the internal Audit | |||||
* the auditor should enquire from the management about any frauds by the company or any fraud on the company by its officers or employees, that it has noticed or that have been reported to it. | |||||
* discuss the matter with other employees including officers of the company. | |||||
* examine the minutes book of the board meeting, audit committee etc., of the company in this regard. | |||||
(c) Where any fraud by the company or any fraud on the company by its officers or employees has been noticed or reported, determine the nature and amount of frauds and disclose the same. Obtain management representation to this effect. | |||||
(d) Whether any fraud has been reported by the auditor during the year under section 143(12)? If so, determine whether that same would be reported under this clause? | |||||
Conclusion: | |||||
11 | 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 Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same; | ||||
a) | Has the company paid or provided for any managerial remuneration? | ||||
b) | Obtain from management the details of managerial remuneration paid/ provided by the Company Ensure that the computation of managerial remuneration is done in accordance with the provisions of section 197 read with Schedule V of Companies Act, 2013 The remuneration does not include : | ||||
* Sitting Fees (within prescribed limits) (sub section 2 and 5 of Section 197) | |||||
* Remuneration for professional services rendered (Sub section 4 of Section 197) | |||||
c) | Obtain a general understanding of Section 197 read with Schedule V to the Act. Ascertain the | ||||
Guidance Note on CARO 2016 162 system and procedures of the company to ensure compliance with the provisions of section 197 and Schedule V | |||||
d) | Based on the understanding so gained, perform a reasonable test check of compliance with the aforesaid requirements of the Act. | ||||
e) | Examine the steps taken by the company to comply with requirements of the Act with respect to managerial remuneration. Examine the correspondence and documents filed with the Registrar of Companies, Company Law Board, legal correspondence for orders passed, minutes of the meetings of the Board and shareholders. | ||||
f) | Examine whether the Company has obtained requisite approvals mandated by section 197 | ||||
read with Schedule V to the Act. | |||||
g) | Obtain a listing of managerial remuneration rejected/ partially approved. Examine the same with underlying documents and obtain understanding of the steps taken by the Company for refund of unapproved managerial remuneration for reporting along with the amount involved. Assess if the management has waived recovery of the excess amount paid over and above the prescribed limit. | ||||
h) | Consider the implications of non-compliances above also in the auditors’ opinion on the financial statements. In case of non-compliance, the amount involved would be the total amount involved which is in excess of the limit prescribed even though during the year the company may have recovered or partially recovered such amount. Obtain, examine and record the steps taken to secure the refund also. | ||||
12 | 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 ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability; | ||||
a) | Is the Company a nidhi company? Assess if the Company is registered as a Nidhi Company as per provisions of Section 406 of the Companies Act 2013 or Section 620A of the Companies Act, 1956. | ||||
b) | To check compliance with the following: | ||||
a) | Whether the net owned funds to deposits ratio is more than 1:20 to meet out the liability as on the date of balance sheet? | ||||
b) | Examine whether the Nidhi Company is maintaining ten per cent unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability. | ||||
Whether the calculation of net owned funds is done as per Rule 3(d) which includes equity share capital, and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet: | |||||
Assess if the proceeds of issue of preference shares have been included in the net owned funds. Ensure that ratio is computed by using the figures of net owned funds and deposit liability computed in accordance with as stated under this clause. | |||||
Conclusion: | |||||
13 | Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards; | ||||
a) | Obtain a statement ontaining details of transactions with related parties. | ||||
* Obtain a list of companies, firms or other parties, the particulars of which are required to be entered in the register maintained under section 189 of the Act. | |||||
* Obtain declarations made by the directors in Form MBP-1 i.e., general notice received from a director under Rule 9(1) of The Companies (Meetings of Board and Power) Rules, 2014 | |||||
* Verify the entries made in the register under section 189 with such statement from management and declarations received from directors. | |||||
* Assess the additions/ deletions to such list for appropriateness based on relevant declarations | |||||
b) | Obtain understanding of requirements of section 177 and 188 of the Act in relation to related party transactions | ||||
c) | Perform reasonable check to ascertain completeness and accuracy of details in the statement. | ||||
d) | Ascertain the system and procedures of the company to ensure compliance with the provisions of section 177 and 188 of the Act Including the assessment of identification of related parties and whether the transaction is at arm’s length and basis of such conclusion. | ||||
e) | Based on the understanding so gained, perform a reasonable test check of compliance with the aforesaid requirements of the Act. | ||||
f) | Examine minutes of meetings of the audit committee and agreements underlying related party transactions to ascertain audit committee approval for the transactions. | ||||
g) | Examine the minutes of Board meetings to ascertain whether requisite approvals of Board is | ||||
obtained for certain related party transactions as required under section 188 of the Act. | |||||
h) | Where shareholders’ approval is required, check whether the requisite approvals have been | ||||
obtained as required under Section 188 of the Act | |||||
i) | Examine whether related party disclosures are made in the financial statements as per the requirements of Accounting Standard 18 | ||||
j) | Examine whether disclosure related to contracts or arrangements with related parties as mandated by section 188 are made in Board’s report Including the assessment of identification of related parties and whether the transaction is at arm’s length and basis of such | ||||
conclusion. | |||||
k) | Consider the implications of non-compliances above also in the auditors’ opinionon the financial statements. | ||||
14 | 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 Companies Act, 2013 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 noncompliance | ||||
a) | Has the Company made any preferential allotment or private placement of shares or fully convertible debentures during the year. | ||||
b) | Obtain a statement containing the specific terms of offer for private placement, including | ||||
purpose for which funds were raised, and the details of subsequent applicationamounts, | |||||
dates and the purpose. | |||||
c) | Ascertain whether the offer and allotment of securities referred in 1 above are in compliance with the requirements mandated by section 42 of the Act. | ||||
d) | Based on the understanding so gained, perform a reasonable test check of compliance with | ||||
the requirements of the Act. | |||||
e) | Consider the implications of non-compliances above also in the auditors’ report on the financial statements. | ||||
Note: Reporting under this Clause is required also in instances where the amounts have been raised in earlier year(s) and is being utilized under the year under review. | |||||
15 | 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 Companies Act, 2013 have been complied with; | ||||
a) | Obtain a statement containing list of directors of the company, its holding company, subsidiary and associate companies and persons connected with the directors | ||||
b) | Scrutinise the following books of account, records and documents could provide source of such audit evidence to the auditor as to the existence of such non-cash transactions as well as | ||||
persons connected with the | |||||
Directors: | |||||
i | Form No. MBP 1, Notice of Interest by Director, filed pursuant to the Companies (Meetings | ||||
of Board and Its Powers) Rules, 2014 | |||||
ii | Form No. MBP 2, Register of Loans, Guarantee, Security and Acquisition Made by the Company, filed pursuant to the Companies (Meetings of Board and Its Powers) Rules, 2014 | ||||
iii | Form No. MBP 4, Register of Contracts with Related Party and Contracts and Bodies etc. | ||||
in which Directors are Interested, filed pursuant to the Companies (Meetings of Board and Its Powers) Rules, 2014 | |||||
iv | Movements in the Fixed Asset Register | ||||
v | Minutes book of the General Meeting and Meetings of Directors | ||||
vi | Report on Annual General Meeting pursuant to Companies (Management and Administration) Rules, 2014 Minutes of meetings of Board of Directors and Audit committee | ||||
c) | Obtain a statement from management containing transactions between the Company and director(s) referred to above | ||||
d) | Perform reasonable check to ascertain non cash transactions | ||||
e) | Obtain understanding of requirements of section 192 of the Act. | ||||
f) | Based on the understanding so gained, perform a reasonable test check of compliance with | ||||
the aforesaid requirements of the Act. | |||||
g) | Consider the implications of non-compliances above also in the auditors’ opinion on the financial statements. | ||||
16 | Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained. | ||||
a) | Examine the financial statements of the Company and assess whether the company has financial assets and financial income | ||||
Note: According to the RBI press release 1998- 99/1269 dated 08.04.1999, a company will be treated as NBFC if its financial assets are more than 50% of its total assets (netted off by intangible assets) and income from financial assets should be more than 50% of its gross income. | |||||
b) | Check whether the company has financing activity as a principal business of the Company. | ||||
c) | Obtain understanding of the requirements of section 45- IA of RBI Act, 1934 with regard to registration of the company with RBI | ||||
d) | Examine whether the Company is carrying out NBFC activity / Core investment company. | ||||
e) | Examine the steps taken by the company to comply with requirements of the RBI Act, 1934 with respect to registration as a NBFC. | ||||
Also examine the correspondence and documents filed with the RBI, minutes of the Board | |||||
meeting. | |||||
f) | Examine whether the Company has obtained Certificate of Registration from RBI in terms of section 45-IA of the RBI Act, 1934. | ||||
g) | Consider the implications of non-compliances above also in the auditors’ opinion on the financial statements. |
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