85. Preparation/Matters to be included in the Audit Report
1. Fixed Assets:
The auditor’s report shall include statements on the following matters:
a. Whether the company is maintaining the proper records showing particulars, including quantitative details and situations of fixed assets.
b. Whether these 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 within the books of accounts.
c. If a substantial part of fixed assets has been disposed off during the year, Whether it has affected the going concern.
2. Inventories:
The auditor has to make the following three specific statements on verification and valuation of inventories:
a. Whether the physical verification of inventory has been conducted at reasonable intervals by the management.
b. Are the procedures of physical verification of inventories followed by management reasonable and adequate in relation to the size of the company and the nature of its business? If not the inadequacies in such procedures should be reported.
c. Whether the company is maintaining proper records of inventory and whether any material discrepancies have been noticed on physical verification and if so, whether the same have been properly dealt in within the books of account.
3. Loans taken from/granted to parties covered under section 189:
The auditor ha to made four specific statements as under
Has the company either granted or taken any loan, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 189 of the Act. If so give the number of parties and amount involved in the transactions.
a. Whether rate of interest and other terms and conditions of loans given or taken by the company, secured or unsecured are primafacie prejudicial to the interest of the company
b. Whether the payment of principal amount and interest are also irregular
c. If overdue amount is more than 1 lakh, whether reasonable steps has been taken by the company for recovery/payment of principal and interest.
4. Internal control on purchase of assets and sale of goods:
The auditor has to commit on the following:
Is there an adequate internal control procedure commensurate with the size of the company and the nature of its business for the purchase of inventory and fixed assets and for the sale of goods?
Whether there is continuing failure to correct major weaknesses in internal control.
5. Maintenance
Tags:
Auditing Broad Questions