IPCC Auditing Notes

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Summarize Notes
On Audit for CA-I/PCC

Please read your book first and after go through these notes, it is
writing in a summarizing manner, when you read this at the time of
revision, this will help you. Best of luck for your exams. Yogesh Gupta

2013
Yogesh Gupta
http://yogeshguptarohtak.wordpress.com
http://yogeshguptarohtak.blogspot.com
YOGESH GUPTA
Student CA-Final, CS-Executive
Bachelor in Buss. Admn. (June 11)
Tel: +91 80596-35006
Write me at: yogeshgupta.mdu@gmail.com

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CHAPTER-1 (NATURE OF AUDITING)
Audit: Independent Examination of financial information contained in financial statements for expressing
an opinion regarding true & fair view.

Fraud & Errors Detection & preventions duty is by management not by auditor, while auditors
duty to consider the impact of fraud & investigation.

ACCOUNTING AUDITING INVESTIGATION
Concerned with recording of
Transactions and Preparation of
Financial Statements
Independent Examination of financial
information contained in financial
statements.
Systematic, critical examination of records for a
special purpose.
SA 200 (AAS - 1) SA 200A (AAS 2) SA 240 (AAS 4)
Basic Principles Governing an Audit Objectives and Scope of the Audit of
Financial Statements
Auditors Responsibility relating to Fraud in an
Audit of Financial Statements.
GENERAL PURPOSE
FINANCI AL STATEMENTS
TYPES OF AUDI T TYPES OF AUDI TORS QUALI TIES OF AUDITOR
Include:
(a) Balance Sheet
(b) Profit & Loss Account
(c) Cash Flow Statement
(d) Notes on accounts and
Explanatory statements
Statutory Audit
(Required under
Law)
Voluntary Audit
(Not required
under law)

1. Internal Auditor-
Appointed by
Management
2. External Auditor
(Statutory Auditor) -
Appointed by
Company

1. Technical Qualities: Sound knowledge of
accountancy, auditing, taxation &
corporate laws.
2. Personal Qualities: Objectivity, integrity,
independence, confidentiality,
communication skills reliability and trust.
OBJ ECTIVES OF AUDIT
PRIMARY OBJ ECTI VE(SA 200A) SECONDARY OBJ ECTI VE (SA 240)
Expression of Opinion on True & Fair view of Financial
Statements
Consideration of Risk of Material misstatements resulting from Fraud
and Error
SA 200
BASIC PRINCIPLES GOVERNING AN AUDIT
SA 200A (AAS 2)
SCOPE OF AUDIT
I NHERENT LI MI TATIONS OF AUDI T
1. Integrity, Objectivity and Independence
2. Confidentiality
3. Skills and Competence
4. Work performed by others
5. Documentation
6. Planning
7. Audit Evidence
8. Accounting Systems and Internal Controls
9. Conclusion and Reporting

Determined by:
1. The terms of the
engagement
2. The requirements of the
relevant legislation e.g.
CARO 2004
3. The pronouncements of the
Institute (ICAI)

Due to:
1. Use of judgment
2. Use of Test Checking
3. Weaknesses in internal control
4. Persuasive nature of evidence

Last Minute Study Trick

CHAPTER-2 (BASIC CONCEPTS IN AUDITING)

AUDIT EVIDENCE
AUDI TORS
INDEPENDENCE
TRUE AND FAIR VIEW
Meaning:
Any information, verbal or written obtained by the auditor on
which he bases his opinion.
Objective:
Audit evidence is one of the basic principles and requires that
the auditor should obtain sufficient and appropriate audit
evidence through the performance of compliance and
substantive procedures to enable him to draw reasonable
conclusions there from on which to base his opinion on the
financial statements.
Sufficient and Appropriate Audit Evidence:
Sufficiency of evidence refers to quantum of evidence; and
appropriateness refers to relevance and reliability.
Types of Audit Evidence:
Depending upon its source may be classified as: Internal,
and External.
Depending upon nature, may be classified as: Visual,
Documentary, and Oral Evidence
Reliability of Audit Evidence:
(a) External evidence is usually more reliable than internal
evidence.
(b) Internal evidence will be more reliable, when related
internal controls are satisfactory
(c) Evidence obtained by the auditor himself is more
reliable than evidence obtained from entity.
(d) Documentary evidences are more reliable than oral
representations.
Audit procedures:

A) Compliance B) Substantive

A) Existence, Effectiveness & Continuity of the control system)
B) Completeness, Accuracy & Validity of data produced by the
accounting system)
i) Vouching & Verification
ii) Analytical Review Procedures
Methods of Obtaining Audit Evidence:
Inspection, Observation, Inquiry and confirmation, Computation
and Analytical Review.

SA-200 Independence
implies that the judgment of
a person is not subordinate
to the wishes or directions
of another person who
might have engaged him. It
stipulates that the
independence is a condition
of minds and personal
character and should not be
confused with the visible
standards of independence.

Visibility:
Independence of auditors
must not only exist infact,
but should also appear to
exist to all reasonable
persons.

Objective:
The main objective of an
independent audit is to lend
credibility to financial
information contained in
financial statements by
expressing an independent
opinion.

According to Sec-226 of
companies law these are
not authorized as
auditor:
a) Employer
b) Security Holder
c) Indebtness > Rs.
1000/-

The phrase true and fair in
the auditor's report signifies
that the auditor is required
to express his opinion as to
whether the state of affairs
and the results of the entity
as ascertained by him in the
course of his audit are truly
and fairly represented in the
accounts under audit.
What constitutes true and
fair has not been defined in
the legislation.
In specific terms to ensure
truth and fairness, an
auditor has to see:
(i) that the assets
and liabilities are neither
undervalued or overvalued;
(ii) the charge on assets,
if any, is disclosed;
(iii) accounting policies
have been followed
consistently;
(iv) all unusual,
exceptional, non recurring
items have been disclosed
separately;
(v) Accounts have been
drawn as per requirement
of Schedule VI to the
Companies Act & AS.

YOGESH GUPTA
Tel: +91 80596-35006


MATERIALI TY SA-320 DISCLOSURE OF ACCOUNTING POLI CI ES AS 1)
AS-1 - Material items are items, the knowledge of
which might influence the decisions of the users of
the financial statements.
Information is material if its mis-statement could
influence the economic decisions of users taken on
the basis of the financial information.
Factors influencing materiality:
Materiality may be influenced by
Legal and regulatory requirements
Considerations which may have a significant
bearing on the financial information, and
Considerations relating to individual account
balances and relationships.
Relation in audit materiality & audit risk:
INVERSE
High Material error: Low Audit risk
Low Material error: High Audit risk

Auditor has to show separately which are
material in book
Materiality can be judged from two items:
P&L or B/Sheet AND with comparison from
last year.
1) Meaning of Accounting Policies: Specific accounting principles
and the method of applying those principles in the preparation &
presentation of financial statements.
2) Factors affecting accounting policies: Prudence, Substance over form
and Materiality
3) Fundamental Accounting Assumptions: Going Concern, Consistency
and Accrual\
4) Areas in which different accounting policies may be encountered:
Method of depreciation, Treatment of expenditure during
construction Valuation of inventories, Treatment of goodwill,
Valuation of investment etc.
5) Disclosure requirements: AS1 recommends as under:
a) All significant accounting policies adopted in the preparation and
presentation of financial statements should be disclosed.
b) The disclosure should form part of financial statements and
should normally be at one place
c) If the fundamental accounting assumptions are followed, specific
disclosure is not required. If a fundamental accounting
assumption is not followed, the fact should be disclosed.

CHAPTER-3 (PREPARATION FOR AN AUDIT)

AUDIT PROGRAM AUDIT WORKING PAPERS
Detailed plan of work
Prepared by auditor
For carrying out audit

An Audit programme is a detailed plan
of work, prepared by the auditor for
carrying out an audit. It is comprised of
a set of techniques and procedures,
which the auditor plans to apply in the
given audit for forming an opinion
about the clients statement of account.
It not only constitutes the plan of the
work but also provides a basis for the
supervision and control of the audit
work
Meaning: Working papers are written records prepared /kept by the auditor for:
i. aiding in the planning and performance of the audit;
ii. aiding in the supervision and review of the audit work; and
iii. Providing evidence of the audit work performed to support the auditors opinion.

I mportance:
Guidelines to audit staff
Auditor able to fix responsibility on staff member
Evidence
Planning
Type of Audit File:
Permanent Audit File
Current Audit File

PERMANENT AUDIT FI LE CURRENT AUDIT FILE

a) Memorandum and Articles of Association.
b) Copies of important legal documents
c) Details of study & evaluation of internal
controls in the form of narrative record,
questionnaires or flow charts etc.
d) Copies of audited statements of previous
years.
e) Analysis of significant ratios and trends.
f) Copies of management letter, if any
g) Record of communication with the retiring
auditor.
h) Notes regarding significant accounting
policies.
i) Significant audit observations of earlier
years.

Correspondence relating to
acceptance of annual reappointment.
Copies of minutes of Board
Meetings and General Meetings as
are relevant to audit.
Audit Programme
Analysis of transactions and
balances.
Record of the nature, timing, and
extent of audit procedures.
Evidence to show that the work
performed by assistants was
supervised and reviewed.
Copies of communication with other
auditors, experts and other third
parties.
Matters discussed with client

ADVANTAGE DISADVANTAGE
Provide
guideline &
instruction
Clear record of
work
Audit work can
be reviewed
Nil Chance of
duplication
Nil Chance of
overlooking
Easily evidence
Save as guide
for auditor in
future.
Mechanical &
monotonous
work
Partly work
has no value
Initiative of
audit staff is
discouraged if
program is
rigidly
followed.

YOGESH GUPTA
Tel: +91 80596-35006


AUDIT PLANNING AUDITORS ENGAGEMENT:
KNOWLEDGE OF CLIENT
BUSINESS
Scope of Audit Planning:
Plans should be made to cover, among other things
the followings:
Acquiring knowledge of clients business;
Establishing the expected degree of reliance to be
placed on internal control;
Determining the nature, timing and extent of the
audit procedures to be performed;
Coordinating the work to be performed.

Objectives of Audit Planning:
Adequate audit planning facilitates:
Devoting appropriate attention to important areas of
the audit;
Prompt identification of potential problems;
Expeditious completion of work;
Coordination of work done by other auditors &
experts.

Documentation of Audit Plan: The auditor should
document his overall plan. And develop the audit
Programme.
The auditor should send an
engagement letter to the client,
before the commencement of the
engagement, to help avoid any
misunderstanding with respect to
the engagement. It generally
include reference to:
(a) Objective of audit of
financial statements.
(b) Managements
responsibility regarding the
followings:
(c) Scope of Audit
(d) Test nature of audit and
inherent limitations of non-
detection of some material
misstatement resulting
from fraud.
(e) Unrestricted access to
records, documentation
and other information
required.
Knowledge of the business is a
frame of reference within which
the auditor exercises professional
judgment. The auditor can obtain
knowledge of the industry and the
entity from a number of sources.
For example:
Previous experience with the
entity and its industry,
discussion with people with
the entity (for example,
directors & operating
personnel),
discussion with internal audit
personnel; and
review of internal audit
reports, etc.

AUDIT NOTE BOOK AUDIT TECHNIQUES CONTINUOUS AUDIT: AUDIT SAMPLING
An audit note book is
usually a bound book in
which a large variety of
matters observed during
the course of audit are
recorded. Audit note
book form part of audit
working papers and for
each year a fresh audit
note book is maintained
Methods and means
adopted by an auditor
for collection and
evaluation of audit
evidence in different
auditing situations. For
Example: physical
examination,
confirmation, inquiry,
calculation of ratios;
etc.

Concurrent audit, thus, aims to
examine transactions almost
instantaneously as soon as the
transaction occurs leading to
shortening of the time interval
between a transaction and its
examination by an
independent person not
involved in its documentation.
The application of audit procedures to less
than 100% of the items within an account
balance or class of transactions to enable
the auditor to obtain and evaluate audit
evidence about some characteristic of the
items selected in order to form or assist in
forming a conclusion concerning the
population.
Methods of Sampling:
Random Sampling,
Systematic Sampling
Haphazard Sampling.

QUALI TY CONTROL FOR AUDI T WORK SURPRISE CHECK: REPRESENTATION BY MANAGEMENT
AAS-17, "Quality Control for Audit Work" requires
that the audit firm should implement quality control
policies and procedures designed to ensure that all
audits are conducted in accordance with
Statements on Auditing and Assurance Standards
(AASs).
Surprise checks are mainly
intended to ascertain whether
the internal control system is
working effectively, and
whether all accounting and
other records are kept up to
date and as per the statutory
regulations. Such checks and
surprise visit can exercise good
moral checks on the client's
staff.

Management representation constitutes
audit evidence furnished by management to
auditor in respect of any transaction
entered into by the entity. Management
Representation is of great use to the
auditor when other sufficient appropriate
audit evidence cannot reasonably be
expected to exist.


TEST CHECKING AUDI T RISK:
Audit procedure wherein an audit is conducted on the basis of a part
checking.

Precautions in the application of test-checking techniques:
Appropriate classification and stratification of the transactions.
Sequential study of transactions from beginning to end
Evaluation of efficiency and soundness internal control system
Biasness should not enter into the selection.
Identification of the areas where test check may not be done.
The number of transactions to be selected should be
predetermined.

I tems not suitable for test-checking:
Opening and closing entries.
Bank reconciliation statement.
Balance sheet items.
Matters involving estimation as well as computation, e.g.,
depreciation, royalty, etc.
Transactions which may be small in number but may be
important and material.
Transactions which are recognized by law to be looked into by
the auditor carefully, e.g., managerial remuneration, etc.
In case of seasonal industry, the auditor should not resort to
test checking on annual basis.
Transactions of non-recurring nature or exceptional transactions
may not be conducive for test checking.

Audit risk is the risk that an auditor may give an
inappropriate opinion on financial information which is
materially misstated.

COMPONENTS OF AUDIT RISK:
nherent risk,
ontrol Risk
etection Risk.
The inherent and control risks are functions of the
entitys business and its environment and the nature of
the account balances or classes of transactions,
regardless of whether an audit is conducted. Even
though inherent and control risks cannot be controlled
by the auditor, the auditor can assess them and design
his substantive procedures to produce on acceptable
level of detection risk, thereby reducing audit risk to an
acceptable low level.

Elaboration in simple way:
Inherent: Susceptibility of transaction to be
record wrongly or fraudulent activity of mgmt.
Control: Material, but would not be prevented
or quickly detected by the mgmt. control.
Detection: Risk, which is not detected by the
auditor.

RELATIONSHIP BETWEEN MATERIALITY AND
AUDI T RISK
There is an inverse relationship between Materiality and
the degree of audit risk. Higher the materiality level, the
lower the audit risk and vice-versa.

DOCUMENTATION:
Recording of important
observations and
information in a systematic
manner to enable
formation of audit
conclusions at the end of
audit
PROCEDURES VS AUDIT TECHNIQUE:
Procedures are a BROAD term while audit technique is
method to carrying on the procedures.
Procedures require an examination of documentary
evidence. This job is performed by the other procedures
known as vouching which include techniques of inspection &
checking of documentary evidence.
YOGESH GUPTA
Tel: +91 80596-35006

CHAPTER-4 (INTERNAL CONTROL)
I NTERNAL CONTROL I NTERNAL CHECK INTERNAL AUDI T:
System of internal control may be defined as
the plan of organization, and all the methods
and procedures adopted by the management of
an entity to assist in achieving management's
objective

Review of Internal Control by mgmt:
It is required to ascertain:
Whether the prescribed management
policies are being properly interpreted by the
employees and are faithfully implemented.
Whether the prescribed procedures need a
revision because of changed circumstances
or whether they have becomes obsolete or
cumbersome.
Whether effective measures are taken
promptly when the system appears to break
down.

Review of Internal Control by Auditor:
The auditors objective in studying and
evaluating internal controls is to establish the
reliance he can place thereon in determining the
nature, timing and extent of his substantive audit
procedures.

Methods of collecting information:
Narrative record, Check List, Internal Control
Questionnaire, Flow-chart

Testing of Internal Control System:
It may include:
Inspection of documents supporting
transactions and other events to gain audit
evidence that internal controls have
operated properly.
Inquiries about and observation of internal
controls which leave no audit trail.
Re-performance of internal controls.
Testing of internal controls operating on
specific computerised applications.

Examination in Depth:
It implies examination of a few selected
transactions from the beginning to the end
through the entire flow of the transaction, i.e.,
from initiation to the completion of the
transaction by receipt or payment of cash and
delivery or receipt of the goods.

Internal check has been
defined by the Institute of
Chartered Accountants in
England and Wales, as the
checks on day-to-day
transactions;
which operate
continuously as part of
the routine system;
whereby the work of
one person is proved
independently or
complimentary to the
work of another,
the object being the
prevention or earlier
detection of error or
fraud.

General considerations
in framing a system of
Internal Check:

No single person should
have an independent
control over any
important aspect.
The duties of members
of the staff should be
changed from time to
time.
Persons having physical
custody of assets must
not be permitted to
have access to the
books.
Budgetary control would
enable the management
to review from time to
time the progress of
trading activities.
The financial and
administrative powers
should be distributed
very judiciously.
Procedures should be
laid down for periodical
verification and testing
of different sections of
accounting records to
ensure that they are
accurate.
Independent appraisal activity within an
organisation, for the review of operations as a
service to the organisation. It is a managerial
control which functions by measuring and
evaluating the effectiveness of other controls.

Scope Appraisal
Review of
accounting system
& related internal
controls
Examination for
management of
financial and
operating
information
Examination of the
economy, efficiency
and effectiveness of
operations including
non-financial
controls of an
organisation
Physical
examination and
verification

Organisational
status:
Scope of function
Technical
competence
Due professional
care
Follow up of
recommendations

Relationship between the Statutory Auditor
and I nternal Auditor: is a professional
relationship wherein both can benefit from each
other.

Reliance on the Work of I nternal Auditor: It
is a matter of individual judgment in a given set
of circumstances. The ultimate responsibility for
reporting on the financial statements is that of
the statutory auditor.


CHAPTER-4B (AUDIT IN AN CIS ENVIRONMENT)

MEANING &
OBJ ECTI VE
OBJ ECTI VE AND SCOPE OF
AUDIT IN CI S
ENVIRONMENT:
INTERNAL CONTROL IN
A COMPUTER-BASED
SYSTEM
COMPUTER AIDED AUDIT
TECHNI QUES (CAATs)
Distinction between
computer-based
system of accounting
and conventional
nature:

Absence of Input
documents
Design
Complexity &
Reliability
Organizational
structure
Lack of Visible Audit
Trail

Problems encountered
while shifting from
manual based
accounting records to
computer based
accounting records:

Difficulty in Visual
Observation.
Inability to observe
the processing due to
internal storage
Making changes in
Programmes without
the auditors
knowledge.
Disappearance of
Audit Trail:
Use of High-level
languages:

The overall objective and scope
of an audit does not change in
an CIS environment but the use
of a computer changes the
processing and storage of
financial information and may
affect the organisation and
procedures employed by the
entity to achieve adequate
internal control.

General considerations in
framing a system of Internal
Check:

No single person should have
an independent control over
any important aspect.
The duties of members of the
staff should be changed from
time to time.
Persons having physical
custody of assets must not be
permitted to have access to
the books.
Budgetary control would
enable the management to
review from time to time the
progress of trading activities.
The financial and
administrative powers should
be distributed very judiciously.
Procedures should be laid
down for periodical
verification and testing of
different sections of
accounting records to ensure
that they are accurate.
1. GENERAL CIS
CONTROLS:
2. CIS APPLICATION
CONTROLS:

GENERAL CIS
CONTROLS:
The purpose of general CIS
controls is to establish a
framework of overall control
over the CIS activities and to
provide a reasonable level of
assurance that the overall
objectives of internal control
are achieved. These controls
may include:
Organisation and
management controls
Application systems
development and
maintenance controls
Computer operation
controls
Systems software
controls
Data entry and
program controls
CIS APPLICATION
CONTROLS:
The purpose of CIS
application controls is to
establish specific control
procedures over the
accounting applications to
provide reasonable
assurance that all
transactions are authorised
and recorded, and are
processed completely,
accurately and on a timely
basis. These include:
Controls over input
Controls over
processing and
computer data files
Controls over output
Techniques with the help of which
auditor carried out the work of audit
are known as CAAT. The auditor can
use the computer to test:
the logic and controls existing
within the system, and
the records produced by the
system.

System characteristics resulting
from the nature of CIS
processing that demand the use
of (CAAT) are:
Absence of input documents
Lack of visible transaction trail
Lack of visible output
Ease of Access to data and
computer programmes

Advantages of CAAT:
Audit effectiveness, Savings in time,
Effective test checking and
examination in depth:

Approaches to audit in CI S
environment
Two approaches - auditing around
the computer and auditing through
the computer.

AUDIT TRAIL:
It refers to a situation where it is possible to relate, on a one-to-one basis, the original
input with the final output.
YOGESH GUPTA
Tel: +91 80596-35006

AUDITING AROUND THE COMPUTER VS. AUDITING THROUGH THE COMPUTER

BASE Auditing around the computer Auditing through the computer
Recognition of
computers

Computers are recognised as mechanical aids for
book keeping only.
Computers are recognized as targets of auditing
and are used live for auditing.
Focus of Audit

Compare input vouchers with system outputs to
obtain audit assurance.
To peruse the accounting systems and software
used to provide audit assurance on various
aspects of control.
Use of computers

Computers are used as Black Box only. Computers are used to check calculations,
comparing the contents, analyzing the accounting
ratio by comparing them etc.
Use of CAATs CAATs are not used. CAATs and other audit software tools are used for
auditing.


CHAPTER-5 (COMPANY AUDIT-1)

APPOINTMENT &
REMUNERATION OF AN
AUDITOR
APPOINTMENT OF AN
AUDI TOR BY
PASSING SPECIAL
RESOLUTION
PROVISIONS AS TO
APPOINTING/ REMOVI
NG AUDITOR REMOVAL
OF AN AUDITOR AFTER
EXPIRY OF HIS TERM)
QUALI FICATIONS AND
DISQUALI FICATIONS OF AN
AUDI TOR
UNDER SECTION 224 &
SUBSECTION:
( (1 1) ) A Ap pp po oi in nt tm me en nt t b by y
S Sh ha ar re eh ho ol ld de er rs s a at t a an n A AG GM M. .
( (1 1A A) ) I I n nt ti im ma at ti io on n t to o R RO OC C
w wi it th hi in n 3 30 0 d da ay ys s t th hr ro ou ug gh h
F Fo or rm m N No o. . 2 23 3B B. .
( (1 1B B) ) C Ce ei il li in ng g o on n n nu um mb be er r
o of f A Au ud di it t a as ss si ig gn nm me en nt ts s. .
( (2 2) ) R Re e- -a ap pp po oi in nt tm me en nt t o of f
a an n Auditor.
(3) Appointment by
Central Government.
(4)Intimation to ROC for
non-appointment within
7 days from the date of
an AGM.
(5) Appointment of the
First Auditor within 1
month of Reg.
(6) Filling of Casual
Vacancy.
(6A) Filling of Casual
Vacancy by Board of
Directors.
(6B)Tenure of such
appointment till
conclusion of next AGM.
(7) Removal of an
Auditor before expiry of
his term.
(8) Remuneration of an
auditor.
UNDER SECTION
224A:

A Al ll l t th ho os se e c co om mp pa an ni ie es s i in n
w wh hi ic ch h n no ot t l le es ss s t th ha an n 2 25 5% %
o of f t th he e S Su ub bs sc cr ri ib be ed d S Sh ha ar re e
C Ca ap pi it ta al l i is s h he el ld d b by y: :

A A p pu ub bl li ic c f fi in na an nc ci ia al l
i in ns st ti it tu ut ti io on n o or r a a
g go ov ve er rn nm me en nt t c co om mp pa an ny y
o or r C Ce en nt tr ra al l
g go ov ve er rn nm me en nt t o or r a an ny y o of f
t th he e s st ta at te e
g go ov ve er rn nm me en nt t; ;
( (b b) ) A An ny y f fi in na an nc ci ia al l o or r
o ot th he er r i in ns st ti it tu ut ti io on n
e es st ta ab bl li is sh he ed d b by y a an ny y
p pr ro ov vi in nc ci ia al l o or r s st ta at te e
A Ac ct t i in n w wh hi ic ch h a a s st ta at te e
g go ov vt t. . h ho ol ld ds s n no ot t l le es ss s
t th ha an n 5 51 1% % o of f t th he e
s su ub bs sc cr ri ib be ed d s sh ha ar re e
c ca ap pi it ta al l; ;
( (c c) ) A A N Na at ti io on na al li is se ed d
B Ba an nk k o or r a an ny y
I I n ns su ur ra an nc ce e C Co om mp pa an ny y
c ca ar rr ry yi in ng g G Ge en ne er ra al l
I I n ns su ur ra an nc ce e B Bu us si in ne es ss s; ;
( (d d) ) A An ny y o of f t th he e a ab bo ov ve e
c co om mb bi in na at ti io on ns s. .

UNDER SECTION 225 &
SUBSECTION:

1 1. . S Sp pe ec ci ia al l 1 14 4 d da ay ys s n no ot ti ic ce e
i is s t to o b be e g gi iv ve en n t to o a al ll l
t th he e m me em mb be er rs s- -
a a. . A Ap pp po oi i
n nt ti in ng g a an no ot th he er r
p pe er rs so on n a as s a an n
a au ud di it to or r; ;
b b. . P Pr ro op p
o os si in ng g t th ha at t r re et ti ir ri in ng g
a au ud di it to or r s sh ha al ll l n no ot t
b be e r re ea ap pp po oi in nt te ed d. .
2 2. . A A c co op py y o of f s su uc ch h n no ot ti ic ce e
i is s t to o b be e g gi iv ve en n t to o t th he e
r re et ti ir ri in ng g a au ud di it to or r a al ls so o. .
3 3. . P Pr ro oc ce ed du ur re e f fo or r s su uc ch h a a
r re em mo ov va al l a an nd d f fo or r
f fo or rw wa ar rd di in ng g t th he e c co op py y o of f
r re ep pr re es se en nt ta at ti io on n f fr ro om m
t th he e r re et ti ir ri in ng g a au ud di it to or r i in n
a an n A AG GM M. .

U/ S 226 & SUBSECTION:

1 1. . A An n a au ud di it to or r s sh ho ou ul ld d b be e a a
C Ch ha ar rt te er re ed d A Ac cc co ou un nt ta an nt t
d de ef fi in ne ed d u un nd de er r T Th he e
C Ch ha ar rt te er re ed d A Ac cc co ou un nt ta an nt t A Ac ct t o of f
1 19 94 49 9
2 2. . R Re es st tr ri ic ct te ed d S St ta at te e A Au ud di it to or rs s
3 3. . D Di is sq qu ua al li if fi ic ca at ti io on ns s: :
a a. . a a b bo od dy y c co or rp po or ra at te e; ;
b b. . a an n o of ff fi ic ce er r o or r a an n
e em mp pl lo oy ye ee e o of f t th he e
c co om mp pa an ny y; ;
c c. . a a p pe er rs so on n w wh ho o i is s a a
p pa ar rt tn ne er r, , o or r w wh ho o i is s i in n
e em mp pl lo oy ym me en nt t o of f a an n o of ff fi ic ce er r
o or r e em mp pl lo oy ye ee e o of f t th he e
c co om mp pa an ny y; ;
d d. . a a p pe er rs so on n w wh ho o i is s i in nd de eb bt te ed d
t to o t th he e c co om mp pa an ny y f fo or r m mo or re e
t th ha an n R Rs s. .1 1, ,0 00 00 0 o or r w wh ho o
h ha av ve e p pr ro ov vi id de ed d a an ny y
s se ec cu ur ri it ty y o or r g gu ua ar ra an nt te ee e
a ag ga ai in ns st t a a t th hi ir rd d p pe er rs so on n
w wh ho o i is s i in nd de eb bt te ed d t to o t th he e
c co om mp pa an ny y f fo or r m mo or re e t th ha an n
R Rs s. .1 1, ,0 00 00 0; ; a an nd d
e e. . A A p pe er rs so on n w wh ho o h ho ol ld ds s t th he e
s se ec cu ur ri it ty y o of f t th he e c co om mp pa an ny y. .
4 4. . I I f f a a p pe er rs so on n i is s d di is sq qu ua al li if fi ie ed d t to o
b be e a an n a au ud di it to or r o of f a a
s su ub bs si id di ia ar ry y c co om mp pa an ny y, , t th he en n
h he e i is s d di is sq qu ua al li if fi ie ed d t to o b be e
a au ud di it to or r o of f i it ts s H Ho ol ld di in ng g
C Co om mp pa an ny y a an nd d i it ts s o ot th he er r
s su ub bs si id di ia ar ri ie es s
5 5. . I I f f a a p pe er rs so on n i is s d di is sq qu ua al li if fi ie ed d t to o
b be e a an n a au ud di it to or r u un nd de er r s su ub b- -
s se ec ct ti io on ns s ( (3 3) ) a an nd d ( (4 4) ), , t th he en n
h he e h ha av ve e t to o v va ac ca an nt t h hi is s o of ff fi ic ce e

YOGESH GUPTA
Tel: +91 80596-35006


POWERS AND DUTIES OF AN AUDI TOR AUDIT OF ACCOUNTS OF
BRANCH OFFICE OF THE
COMPANY
UNDER SECTION 227 & SUBSECTION:
227(1) Right of access to books of accounts & right to require information and
explanation from officers.
Duties of an Auditor:
Loans & Advances made by the company secured & prejudicial to the
interest of the company,
Whether transactions of the company which are represented merely by book
entries are not prejudicial to the interests of the company.
Where the company is not an Investment Company as defined in Sec.372 or
Banking Company, which sells its assets & securities at the price less than its
purchase price.
Loans & Advances have been shown as deposits.
Whether personal expenses have been charged to revenue account.
If no cash has been received in respect of shares then whether the position
stated in balance sheet is correct, regular and not misleading.
(Auditor have to give reason for both negative & positive remarks)
227(2) Auditors should report whether the said accounts complies with all the
compliances of The Companies Act, 1956.
227(2bb) If proper returns as required by auditor of the branches not visited by him
are not received by him then he must state this fact in his audit report.
227(3) The auditor should report on the following matters:
a) Whether he has obtained all the information and explanations which to the
best of his knowledge and belief were necessary for his audit.
b) Whether in his opinion proper books of accounts as required by law are
kept by the company and proper returns have been received by him of the
branches not visited by him.
(bb) Whether the reports on accounts of any branch offices audited u/s 228
have been forwarded to him as required u/s 228(3) (c) & the manner in
which he have dealt with it for preparing auditors report.
c) Whether the companys Balance Sheet & P/L Account are in agreement
with the books of accounts & returns.
d) Whether in his opinion Balance Sheet & P/L A/c complies with the
accounting standards u/s 211(3c).
e) The auditor has highlighted adverse effects in companies functioning by
thick or italic type.
f) Whether any director has been disqualified from being appointed as
director u/s 274(1) (g).
g) Whether cess payable u/s 441A (levy & collection of cess on turnover or
gross receipts of the company) has been paid, if not, details of amount not
so paid.
Issuance of Companies (Auditors Report) Order, 2003, (CARO, 2003) vide
notification no. G.S.R 480(E) dated J une 12th, 2003
(Auditor must state the reasons only for negative remarks made by him in his report).

UNDER SECTION 228 &
SUBSECTION:

1 1) ) A Au ud di it t o of f a ac cc co ou un nt ts s o of f b br ra an nc ch h
o of ff fi ic ce e o of f t th he e c co om mp pa an ny y c ca an n b be e
c co on nd du uc ct te ed d b by y t th he e p pe er rs so on n
a ap pp po oi in nt te ed d u u/ /s s 2 22 24 4 o or r t th he e
p pe er rs so on n q qu ua al li if fi ie ed d u u/ /s s 2 22 26 6 o or r, , i if f
b br ra an nc ch h i is s i in n f fo or re ei ig gn n c co ou un nt tr ry y
t th he en n b by y a an ny y c co om mp pe et te en nt t p pe er rs so on n
q qu ua al li if fi ie ed d t to o d do o t th he e a au ud di it t a as s p pe er r
t th he e r ru ul le es s o of f t th ha at t n na at ti io on n. .
2 2) ) I I f f t th he e a ac cc co ou un nt ts s o of f t th he e b br ra an nc ch h
o of ff fi ic ce e a ar re e a au ud di it te ed d b by y t th he e p pe er rs so on n
o ot th he er r t th ha an n t th he e c co om mp pa an ni ie es s
a au ud di it to or r, , t th he en n t th he e l la at tt te er r h ha av ve e
r ri ig gh ht t t to o v vi is si it t t th he e b br ra an nc ch h o of ff fi ic ce e & &
t to o a ac cc ce es ss s t to o t th he e b bo oo ok ks s o of f
a ac cc co ou un nt ts s, , e ex xc ce ep pt t i in n c ca as se e o of f t th he e
b ba an nk ki in ng g c co om mp pa an ni ie es s h ha av vi in ng g
f fo or re ei ig gn n b br ra an nc ch h o of ff fi ic ce es s, , t th he e
a ac cc co ou un nt ts s o of f s su uc ch h b br ra an nc ch he es s m ma ay y
b be e t tr ra an ns sm mi it tt te ed d t to o t th he e h he ea ad d
o of ff fi ic ce e i in n I I n nd di ia a f fo or r t th he e a au ud di it to or r s s
i in ns sp pe ec ct ti io on n. .
3 3) ) I I t t w wi il ll l b be e d du ut ty y o of f t th he e b br ra an nc ch h
a au ud di it to or r t to o p pr re ep pa ar re e t th he e a au ud di it t
r re ep po or rt t f fo or r t th ha at t b br ra an nc ch h & &
f fo or rw wa ar rd d i it t t to o t th he e c co om mp pa an ny y s s
a au ud di it to or r, , w wh ho o s sh ha al ll l w wh hi il le e
p pr re ep pa ar ri in ng g h hi is s r re ep po os st t d de el l w wi it th h
t th he e s sa am me e i in n t th he e m ma an nn ne er r h he e
c co on ns si id de er rs s n ne ec ce es ss sa ar ry y. .
4 4) ) P Po ow we er r o of f C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t
t to o e ex xe em mp pt t t th he e b br ra an nc ch h o of ff fi ic ce es s
f fr ro om m a au ud di it t t to o t th he e e ex xt te en nt t a as s
s sp pe ec ci if fi ie ed d i in n r ru ul le es s, , e en nt ti it tl le ed d T Th he e
C Co om mp pa an ni ie es s ( (B Br ra an nc ch h A Au ud di it t
E Ex xe em mp pt ti io on n) ) R Ru ul le es s, , 1 19 96 61 1 . .


2 22 29 9
S Si ig gn ni in ng g o of f t th he e A Au ud di it t R Re ep po or rt t
W Wh he en n a a s si in ng gl le e C C. .A A i is s p pr ra ac ct ti is si in ng g, , t th he er re e c ca an n t t b be e a an ny y q qu ue es st ti io on n o of f a an ny y f fi ir rm m n na am me e. .
W Wh he en n a a f fi ir rm m o of f a a C C. .A A i is s a ap pp po oi in nt te ed d a as s a an n a au ud di it to or r, , t th he en n o on nl ly y a a p pa ar rt tn ne er r m ma ay y s si ig gn n t th he e r re ep po or rt t. .

2 23 30 0

R Re ea ad di in ng g a an nd d I I n ns sp pe ec ct ti io on n o of f t th he e A Au ud di it to or r s s R Re ep po or rt t
A Au ud di it t r re ep po or rt t o of f t th he e c co om mp pa an ny y m mu us st t b be e r re ea ad d o ou ut t b be ef fo or re e t th he e s sh ha ar re eh ho ol ld de er rs s a at t a an n a an nn nu ua al l G Ge en ne er ra al l M Me ee et ti in ng g a an nd d
s sh ho ou ul ld d b be e k ke ep pt t f fo or r i in ns sp pe ec ct ti io on n a at t t th he e c co om mp pa an ny y s s r re eg gi is st te er re ed d o of ff fi ic ce e f fo or r t th he e i in ns sp pe ec ct ti io on n o of f e ev ve er ry y m me em mb be er r o of f
t th he e c co om mp pa an ny y. .

2 23 31 1

R Ri ig gh ht t o of f a an n a au ud di it to or r t to o a at tt te en nd d a an n A An nn nu ua al l G Ge en ne er ra al l M Me ee et ti in ng g
T Th he e a au ud di it to or r c ca an n a at tt te en nd d a an ny y A An nn nu ua al l G Ge en ne er ra al l M Me ee et ti in ng g o of f t th he e c co om mp pa an ny y ( (n no ot t r re es st tr ri ic ct te ed d t to o t th ho os se e a at t w wh hi ic ch h t th he e
a ac cc co ou un nt ts s a au ud di it te ed d b by y t th he em m a ar re e t to o b be e d di is sc cu us ss se ed d) ) a an nd d i is s e en nt ti it tl le ed d t to o a al ll l t th he e n no ot ti ic ce es s a an nd d o ot th he er r c co om mm mu un ni ic ca at ti io on ns s
r re el la at te ed d t to o t th he e g ge en ne er ra al l m me ee et ti in ng g f fo or r w wh hi ic ch h a a m me em mb be er r o of f t th ha at t c co om mp pa an ny y i is s e en nt ti it tl le ed d, , b bu ut t i it t i is s n no ot t o ob bl li ig ga at to or ry y a at t
h hi is s p pa ar rt t t to o a at tt te en nd d t th he e A AG GM M. . H He e c ca an n h he ea ar r i in n t th he e m me ee et ti in ng g b bu ut t c ca an n t t t ta ak ke e p pa ar rt t i in n t th he e d di is sc cu us ss si io on ns s. .

2 23 32 2

P Pe en na al lt ty y f fo or r n no on n- -c co om mp pl li ia an nc ce e w wi it th h S Se ec ct ti io on ns s 2 22 25 5- -2 23 31 1
F Fo or r n no on n- -c co om mp pl li ia an nc ce e o of f S Se ec ct ti io on ns s 2 22 25 5- -2 23 31 1, , t th he e c co om mp pa an ny y, , a an nd d e ev ve er ry y o of ff fi ic ce er r o of f t th he e c co om mp pa an ny y w wh ho o i is s i in n
d de ef fa au ul lt t, , w wi il ll l b be e l li ia ab bl le e t to o t th he e f fi in ne e w wh hi ic ch h m ma ay y e ex xt te en nd d u up p t to o R Rs s. .5 5, ,0 00 00 0/ /- -. .

2 23 33 3

P Pe en na al lt ty y f fo or r n no on n- -c co om mp pl li ia an nc ce e b by y t th he e a au ud di it to or r w wi it th h S Se ec ct ti io on n 2 22 27 7 a an nd d 2 22 29 9
A An n a au ud di it to or r m ma ay y b be e p pe en na al li is se ed d a at t t th he e e ex xt te en nt t o of f R Rs s. .1 10 0, ,0 00 00 0/ /- - f fo or r n no on n- -c co om mp pl li ia an nc ce e o of f t th he e S Se ec ct ti io on ns s 2 22 27 7 a an nd d
2 22 29 9. .

2 23 33 3A A

( (1 1) ) & & ( (2 2) )

( (3 3) )

( (4 4) )

( (5 5) )

( (6 6) )
P Po ow we er rs s o of f C Ce en nt tr ra al l G Go ov vt t. . t to o d di ir re ec ct t s sp pe ec ci ia al l a au ud di it t i in n c ce er rt ta ai in n c ca as se es s
T Th he e a au ud di it t m ma ay y b be e c co on nd du uc ct te ed d b by y t th he e c co om mp pa an ny y s s a au ud di it to or r o or r b by y a an ny y C C. .A A, , w wh ho o m ma ay y o or r m ma ay y n no ot t b be e
e en ng ga ag ge ed d i in n p pr ra ac ct ti is si in ng g. .
A Au ud di it to or r s so o a ap pp po oi in nt te ed d i is s c co on nf fe er rr re ed d w wi it th h a al ll l t th ho os se e p po ow we er rs s a as s m me en nt ti io on ne ed d u u/ /s s 2 22 27 7, , e ex xc ce ep pt t h he e h ha av ve e
t to o r re ep po or rt t t to o t th he e C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t i in ns st te ea ad d o of f t th he e m me em mb be er rs s o of f t th he e c co om mp pa an ny y. .
S Sp pe ec ci ia al l a au ud di it to or r s s r re ep po or rt t m mu us st t i in nc cl lu ud de e a al ll l t th he e m ma at tt te er r t th ha at t i is s c co on nt ta ai in ne ed d i in n t th he e n no or rm ma al l a au ud di it t r re ep po or rt t & &
a al ls so o t th he e s st ta at te em me en nt t o on n a an ny y m ma at tt te er rs s a as s r re eq qu ui ir re ed d b by y t th he e g go ov ve er rn nm me en nt t. .
A Au ud di it to or r w wi il ll l b be e p pe en na al li is se ed d f fo or r R Rs s. .5 50 00 0/ /- - f fo or r n no on n- -c co om mp pl li ia an nc ce e o of f t th he e o or rd de er r t th ha at t i is s i is ss su ue ed d b by y t th he e
c ce en nt tr ra al l g go ov ve er rn nm me en nt t. .
A Al ll l t th he e e ex xp pe en ns se es s f fo or r c co on nd du uc ct ti in ng g s su uc ch h s sp pe ec ci ia al l a au ud di it t a al lo on ng g w wi it th h t th he e a au ud di it to or r s s r re em mu un ne er ra at ti io on n s sh ho ou ul ld d
b be e p pa ai id d b by y t th he e c co om mp pa an ny y a an nd d i if f t th he e c co om mp pa an ny y f fa ai il ls s t to o m ma ak ke e s su uc ch h p pa ay ym me en nt t t th he en n s su uc ch h a am mo ou un nt t c ca an n
b be e r re ec co ov ve er re ed d f fr ro om m t th he e c co om mp pa an ny y a as s a ar rr re ea ar rs s o of f l la an nd d r re ev ve en nu ue e. .

2 23 33 3B B

( (1 1) )

( (2 2) )

( (4 4) )
A Au ud di it t o of f C Co os st t A Ac cc co ou un nt ts s i in n c ce er rt ta ai in n c ca as se es s
A An n a au ud di it to or r i is s e ex xp pe ec ct te ed d t to o c co on nd du uc ct t t th he e a au ud di it t i in n m ma an nn ne er r a as s m ma ay y b be e s sp pe ec ci if fi ie ed d i in n t th he e o or rd de er r i is ss su ue ed d b by y
t th he e C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t. .
C Co os st t a au ud di it to or r s sh ha al ll l b be e a ap pp po oi in nt te ed d b by y t th he e B Bo oa ar rd d o of f D Di ir re ec ct to or rs s w wi it th h t th he e p pr ri io or r a ap pp pr ro ov va al l o of f t th he e C Ce en nt tr ra al l
G Go ov ve er rn nm me en nt t. .
T Th he e c co os st t a au ud di it to or r m mu us st t f fo or rw wa ar rd d h hi is s r re ep po or rt t t to o t th he e C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t a an nd d t th he e r re es sp pe ec ct ti iv ve e c co om mp pa an ny y
w wi it th hi in n 1 12 20 0 d da ay ys s o of f c co om mp pl le et ti io on n o of f h hi is s a au ud di it t. .

6 61 17 7

A Ap pp po oi in nt tm me en nt t o of f a an n a au ud di it to or r b by y C Co om mp pt tr ro ol ll le er r a an nd d A Au ud di it to or r G Ge en ne er ra al l o of f I I n nd di ia a f fo or r a an ny y g go ov ve er rn nm me en nt t
c co om mp pa an ny y d de ef fi in ne ed d u u/ /s s 6 61 19 9 a an nd d f fo or r a al ll l t th ho os se e c co om mp pa an ni ie es s d de ef fi in ne ed d u u/ /s s 6 61 19 9B B. .

YOGESH GUPTA
Tel: +91 80596-35006


CHAPTER-5B (COMPANY AUDIT-2)
S SE EC CT TI I O ON N P PR RO OV VI I S SI I O ON N / / C CO ON NT TE EN NT TS S
2 20 09 9
( (1 1) )
( (2 2) )

( (3 3) )

( (4 4) )

( (4 4A A) )

( (5 5) )

( (6 6) )

( (7 7) )
M MA AI I N NT TE EN NA AN NC CE E O OF F B BO OO OK KS S O OF F A AC CC CO OU UN NT TS S B BY Y T TH HE E C CO OM MP PA AN NY Y
E Ev ve er ry y c co om mp pa an ny y m mu us st t m ma ai in nt te en na an nc ce e p pr ro op pe er r B Bo oo ok ks s o of f A Ac cc co ou un nt ts s a at t i it ts s r re eg gi is st te er re ed d o of ff fi ic ce e. .
P Pr ro op pe er r b bo oo ok ks s o of f a ac cc co ou un nt ts s o of f b br ra an nc ch h o of ff fi ic ce es s s sh ho ou ul ld d a al ls so o b be e m ma ai in nt ta ai in ne ed d b by y t th he e c co om mp pa an ny y & &
r re et tu ur rn ns s o of f t th ho os se e b br ra an nc ch h o of ff fi ic ce es s s sh ho ou ul ld d b be e f fo or rw wa ar rd de ed d t to o t th he e h he ea ad d o of ff fi ic ce es s a af ft te er r s su ui it ta ab bl le e i in nt te er rv va al ls s
w wh hi ic ch h s sh ho ou ul ld d n no ot t e ex xc ce ee ed d t th hr re ee e m mo on nt th hs s. .
F Fo or r t th he e p pu ur rp po os se e o of f s su ub b- -s se ec c. .( (1 1) ) & & ( (2 2) ), , p pr ro op pe er r b bo oo ok ks s o of f a ac cc co ou un nt ts s s sh ha al ll l n no ot t b be e d de ee em me ed d t to o b be e k ke ep pt t
i if f: :
o o t th he e b bo oo ok ks s d do oe es sn n t t e ex xh hi ib bi it ts s t tr ru ue e a an nd d f fa ai ir r v vi ie ew w o of f t th he e s st ta at te e o of f a af ff fa ai ir rs s o of f t th he e c co om mp pa an ny y; ;
o o I I f f s su uc ch h b bo oo ok ks s a ar re e n no ot t m ma ai in nt ta ai in ne ed d o on n A Ac cc cr ru ua al l B Ba as si is s a an nd d D Do ou ub bl le e E En nt tr ry y A Ac cc co ou un nt ti in ng g
s sy ys st te em m. .
B Bo oo ok ks s o of f A Ac cc co ou un nt ts s a an nd d o ot th he er r p pa ap pe er rs s s sh ha al ll l b be e k ke ep pt t o op pe en n f fo or r i in ns sp pe ec ct ti io on n b by y a an ny y d di ir re ec ct to or r a at t
b bu us si in ne es ss s h ho ou ur rs s. .
B Bo oo ok ks s o of f A Ac cc co ou un nt ts s & & a al ll l t th he e r re el le ev va an nt t v vo ou uc ch he er rs s f fo or r p pr re ec ce ed di in ng g e ei ig gh ht t y ye ea ar rs s f fr ro om m t th he e c cu ur rr re en nt t y ye ea ar r
s sh ho ou ul ld d b be e k ke ep pt t s sa af fe el ly y b by y t th he e c co om mp pa an ny y i in n g go oo od d c co on nd di it ti io on n. .
I I f f t th he e p pe er rs so on n a as s m me en nt ti io on ne ed d i in n s se ec ct ti io on n 2 20 09 9( (6 6) ) f fa ai il ls s t to o c co om mp pl ly y w wi it th h t th he e a af fo or re em me en nt ti io on ne ed d s su ub b
s se ec ct ti io on ns s, , t th he en n h he e s sh ha al ll l b be e p pu un ni is sh ha ab bl le e f fo or r e ea ac ch h o of ff fe en nc ce e w wi it th h i im mp pr ri is so on nm me en nt t f fo or r s si ix x m mo on nt th hs s
a an nd d f fi in ne e w wh hi ic ch h m ma ay y e ex xt te en nd d t to o R Rs s. .1 10 0, ,0 00 00 0/ / - - o or r w wi it th h b bo ot th h. .
( (H He e m ma ay y b be e r re el li ie ev ve ed d f fr ro om m s su uc ch h l li ia ab bi il li it ty y, , i if f o on n r re ea as so on na ab bl le e g gr ro ou un nd ds s h he e p pr ro ov ve es s t th ha at t a an ny y c co om mp pe et te en nt t p pe er rs so on n
w wa as s a ap pp po oi in nt te ed d f fo or r s su uc ch h c co om mp pl li ia an nc ce es s) ). .
R Re es sp po on ns si ib bi il li it ty y o of f t th he e a af fo or re em me en nt ti io on ne ed d c co om mp pl li ia an nc ce es s v ve es st ts s w wi it th h: :
o o A Al ll l t th he e o of ff fi ic ce er rs s & & o ot th he er r e em mp pl lo oy ye ee es s o of f t th he e c co om mp pa an ny y a al lo on ng g w wi it th h M Ma an na ag gi in ng g D Di ir re ec ct to or r
o or r M Ma an na ag ge er r, , i if f t th he e c co om mp pa an ny y h ha as s a a M Ma an na ag gi in ng g D Di ir re ec ct to or r o or r M Ma an na ag ge er r. .
o o E Ev ve er ry y d di ir re ec ct to or r o of f t th he e c co om mp pa an ny y, , i if f n no o M Ma an na ag gi in ng g D Di ir re ec ct to or r o or r m ma an na ag ge er r. .
I I f f t th he e r re es sp po on ns si ib bi il li it ty y f fo or r c co om mp pl li ia an nc ce e o of f l le eg ga al l r re eq qu ui ir re em me en nt ts s w wi it th h r re eg ga ar rd ds s t to o t th he e b bo oo ok ks s o of f a ac cc co ou un nt ts s
v ve es st ts s w wi it th h a an ny y o ot th he er r p pe er rs so on n o ot th he er r t th ha an n a as s m me en nt ti io on ne ed d i in n s se ec ct ti io on n 2 20 09 9( (6 6) ) a an nd d i if f h he e f fa ai il ls s t to o c co om mp pl ly y
a al ll l l le eg ga al l r re eq qu ui ir re em me en nt ts s, , t th he en n h he e s sh ha al ll l b be e p pe en na al li is se ed d w wi it th h t th he e f fi in ne e w wh hi ic ch h m ma ay y e ex xt te en nd d t to o
R Rs s. .1 10 0, ,0 00 00 0/ /- - f fo or r e ea ac ch h s su uc ch h o of ff fe en nc ce e. .

2 20 09 9A A

I I N NS SP PE EC CT TI I O ON N O OF F T TH HE E C CO OM MP PA AN NY Y S S B BO OO OK KS S O OF F A AC CC CO OU UN NT TS S
C Co om mp pa an ny y s s b bo oo ok ks s o of f a ac cc co ou un nt ts s, , o ot th he er r b bo oo ok ks s a an nd d p pa ap pe er rs s s sh ha al ll l b be e k ke ep pt t o op pe en n f fo or r i in ns sp pe ec ct ti io on n b by y: :
o o R Re eg gi is st tr ra ar r; ;
o o a an n o of ff fi ic ce er r a au ut th ho or ri is se ed d b by y C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t; ; a an nd d
o o A An ny y o of ff fi ic ce er r a au ut th ho or ri is se ed d b by y S SE EB BI I . .
( (N No o p pr ri io or r n no ot ti ic ce e o or r i in nt ti im ma at ti io on n i is s r re eq qu ui ir re ed d t to o b be e g gi iv ve en n b by y s su uc ch h a au ut th ho or ri it ti ie es s f fo or r s su uc ch h a an n i in ns sp pe ec ct ti io on n) )
I I t t s sh ha al ll l b be e t th he e d du ut ty y o of f e ev ve er ry y d di ir re ec ct to or r, , o ot th he er r o of ff fi ic ce er r o or r a an n e em mp pl lo oy ye ee e o of f t th he e c co om mp pa an ny y t to o f fu ur rn ni is sh h
a an ny y s st ta at te em me en nt t, , e ex xp pl la an na at ti io on ns s, , i in nf fo or rm ma at ti io on n a an nd d a as ss si is st ta an nc ce e t to o s su uc ch h a an n a au ut th ho or ri it ty y w wh hi il le e i in ns sp pe ec ct ti io on n, ,
a as s r re eq qu ui ir re ed d b by y t th he em m. .
T Th he e p pe er rs so on n m ma ak ki in ng g i in ns sp pe ec ct ti io on n i is s a al ls so o e em mp po ow we er re ed d t to o m ma ak ke e c co op pi ie es s o of f b bo oo ok ks s o of f a ac cc co ou un nt ts s a an nd d
o ot th he er r p pa ap pe er rs s a an nd d p pu ut t a an ny y m ma ar rk k o of f i id de en nt ti if fi ic ca at ti io on n o on n t th he e b bo oo ok ks s o or r p pa ap pe er rs s. .


2 21 10 0

D Du ut ty y o of f B Bo oa ar rd d t to o p pr re es se en nt t t th he e A An nn nu ua al l A Ac cc co ou un nt ts s & & B Ba al la an nc ce e S Sh he ee et t a at t a an n A An nn nu ua al l G Ge en ne er ra al l
M Me ee et ti in ng g
T Th he e b bo oa ar rd d s sh ho ou ul ld d p pr re es se en nt t b be ef fo or re e A AG GM M, , t th he e B Ba al la an nc ce e S Sh he ee et t a an nd d P Pr ro of fi it t & & L Lo os ss s A Ac cc co ou un nt t f fo or r t th he e p pe er ri io od d o of f: :
I I n n c ca as se e o of f f fi ir rs st t A AG GM M, , p pe er ri io od d b be eg gi in nn ni in ng g w wi it th h i in nc co or rp po or ra at ti io on n a an nd d e en nd di in ng g w wi it th h t th he e p pr re ec ce ed di in ng g d da ay y o of f a an n
A AG GM M. .
I I n n c ca as se e o of f s su ub bs se eq qu ue en nt t A AG GM M, , p pe er ri io od d f fr ro om m t th he e b be eg gi in nn ni in ng g o of f t th he e f fi in na an nc ci ia al l y ye ea ar r a an nd d e en nd di in ng g w wi it th h t th he e
p pr re ec ce ed di in ng g d da ay y o of f a an n A AG GM M. .
( (A An n A AG GM M s sh ho ou ul ld d b be e h he el ld d w wi it th hi in n s si ix x m mo on nt th hs s o of f t th he e c co om mp pl le et ti io on n o of f f fi in na an nc ci ia al l y ye ea ar r, , e ex xt te en ns si io on n o of f t th hr re ee e
m mo on nt th hs s c ca an n b be e t ta ak ke en n w wi it th h t th he e p pe er rm mi is ss si io on n o of f t th he e r re eg gi is st tr ra ar r o of f c co om mp pa an ni ie es s. . D Di if ff fe er re en nc ce e b be et tw we ee en n t to o
s su uc cc ce es ss si iv ve e A AG GM M s sh ho ou ul ld d n no ot t e ex xc ce ee ed d f fi if ft te ee en n m mo on nt th hs s ( (E Ei ig gh ht te ee en n m mo on nt th hs s i in n c ca as se e o of f a an n e ex xt te en ns si io on n) ). .

2 21 10 0A A

H He ea ad d

C Co on ns st ti it tu ut ti io on n o of f N Na at ti io on na al l A Ad dv vi is so or ry y C Co om mm mi it tt te ee e o on n A Ac cc co ou un nt ti in ng g S St ta an nd da ar rd ds s
T Th he e C Co om mp pa an ni ie es s ( (A Am me en nd dm me en nt t) ) A Ac ct t 1 19 99 99 9, , p pr ro ov vi id de es s c ce en nt tr ra al l g go ov ve er rn nm me en nt t t th ha at t i it t m ma ay y c co on ns st ti it tu ut te e a a N Na at ti io on na al l
A Ad dv vi is so or ry y C Co om mm mi it tt te ee e o on n A Ac cc co ou un nt ti in ng g S St ta an nd da ar rd ds s b by y i is ss su ui in ng g a a n no ot ti if fi ic ca at ti io on n i in n a an n o of ff fi ic ci ia al l g ga az ze et tt te e t to o a ad dv vi is se e
t th he e c ce en nt tr ra al l g go ov ve er rn nm me en nt t o on n f fo or rm mu ul la at ti io on n a an nd d l la ay yi in ng g d do ow wn n o of f a ac cc co ou un nt ti in ng g s st ta an nd da ar rd ds s f fo or r a ad do op pt ti io on n o of f
c co om mp pa an ni ie es s o or r c cl la as ss s o of f c co om mp pa an ni ie es s u un nd de er r t th he e C Co om mp pa an ni ie es s A Ac ct t, , 1 19 95 56 6
( (A A n no ot ti if fi ic ca at ti io on n f fo or r c co on ns st ti it tu ut ti io on n o of f N Na at ti io on na al l A Ad dv vi is so or ry y C Co om mm mi it tt te ee e o on n A Ac cc co ou un nt ti in ng g S St ta an nd da ar rd ds s w wa as s i is ss su ue ed d b by y
t th he e C Ce en nt tr ra al l G Go ov ve er rn nm me en nt t i in n J J u ul ly y 2 20 00 01 1) ). .

YOGESH GUPTA
Tel: +91 80596-35006

How to Learn CARO:



About the Author:
Hey friends, myself Yogesh Gupta, pursuing Chartered Accountancy
and company secretary Course. Im not so much minded as some other
people; I just share my notes which help me in cracking my exams. I passed
senior secondary in 2008 in first division, after I passed Graduation Degree in
Business Administration (BBA) in June 2011.
There are some difficulties in my life thats why I cant do CA after
senior secondary. But Jo bhi hota hai, ache ke liye hi hota hai, to mujhe is
baat ki koi tensions nahi hai. In December, 2010 in passed CA-CPT & CS-
Foundation in first attempt, In November 2011; I gave both groups for CA-
IPCC, but only one group was cleared. So, I wrote papers in May 2012 for
Group-2, and cleared also second group. In December 2012, also clear the CS-
Executive in first sitting. Now, turn of crack inter stage of CShope for the
best.
I also feel happy in preparing notes for my friends & studymates. Im
always working on my motto sirf apne liye hi to sab jeete hm different
so, kuch dusro ke liye b kru!
Im also a student, and Im always waiting for yours reviews. If you
have any complaint or suggestion about it, so please feel free to write me.

info.yogeshgupta@gmail.com http://fb.com/mr.yogeshgupta
http://fb.com/CAYogeshGuptaa http://yogeshguptarohtak.blogspot.com

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