Auditing Final Project

7/24/2019 Auditing Final Project

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COMPANY AUDIT AND NEW STANDARDS ON AUDITING

AUDIT OF SHARE CAPITAL

Almost the first f!"tio! of # "om$#!% is to r#ise "#$it#l& E'"e$ti!( # $ri)#te "om$#!%*

e)er% other "om$#!% isses # $ros$e"ts* +hi"h m#% ,e i! the #,ri-(e- form* or #

St#teme!t i! lie of Pros$e"ts* ,efore it $ro"ee-s to #llotme!t* sh#re "#$it#l& The

o,.e"t is to $,li"l% #!!o!"e the "o!-itio!s o! +hi"h #llotme!t +ill ,e m#-e* to s$e"if%

the $ro.e"ts o! +hi"h the

Amo!t r#ise- +ill ,e s$e!t /+he! these h#)e ,ee! -e"i-e- $o! i! #-)#!"e0 #!- to

s$e"if% limits o! "ert#i! e'$e!ses i!"i-e!t#l to r#isi!( of "#$it#l& The re"ei$t of

#$$li"#tio!s for sh#res #!- #llotme!t of sh#res i! $rs#!"e thereto #re t+o im$ort#!t#s$e"ts of e)er% isse of "#$it#l i! so f#r #s these "o!stitte the le(#l ,#sis of the

tr#!s#"tio!s i! the m#tter of $r"h#se of sh#res& These* therefore* shol- re"ei)e #

"#refl #tte!tio! of the #-itor& He #lso mst )erif% th#t e#"h $#rt%* h#s $erforme- his

$#rt of the "o!tr#"t* +ithi! the #llotte- time&

The #-it of sh#re "#$it#l is !e"ess#r% ,oth o! i!"or$or#tio! #!- #fter+#r-s +he!e)er

the -ire"tors -e"i-e to i!"re#se the s,s"ri,e- sh#re "#$it#l& Ho+e)er* e'"e$t +he!

fresh "#$it#l h#s ,ee! isse- -ri!( the %e#r !-er #-it* for )erifi"#tio! of "#$it#l it is

e!o(h if tr#!sfers of sh#res re(istere- -ri!( the %e#r #re )erifie- #!- the tot#l

!m,er #!- )#le of sh#res hel- ,% -iffere!t sh#rehol-ers #re re"o!"ile- +ith the tot#l

$#i-1$ "#$it#l of the "om$#!%&

GENERAL PROGRAMME FOR 2ERIFICATION OF SHARE CAPITAL

AUTHORISED CAPITAL

the #thorise- "#$it#l m#% ,e )erifie- +ith refere!"e to the #mo!t sho+! i! the

memor#!-m of #sso"i#tio!s& Pre)ios %e#r #-ite- ,#l#!"e sheet m#% #lso ,e see!&

ISSUED CAPITAL

)erif% the #mo!t of isse- "#$it#l +ith refere!"e to l#st %e#r #-ite- ,#l#!"e sheet&

Also see +hether the "e!tr#l (o)er!me!t h#s isse- #!% !otifi"#tio! for "o!)ersio! of

-e,e!tre or lo#! i!to e3it% sh#re !-er se"tio! 45#&

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Frther isse of "#$it#l 1 the (e!er#l $oi!ts #re (i)e! #s !-er8

/70 St-% the "o!-itio!s of isse "o!t#i!e- i! the memor#!-m #!- #rti"les of

#sso"i#tio!* $ros$e"ts or st#teme!t i! lie of $ros$e"ts* shelf $ros$e"ts* re-1

herri!( $ros$e"ts #!- i!form#tio! memor#!-m* #s the "#se m#% ,e* #!- see

th#t #ll of them h#)e fll% ,ee! "om$lie- +ith&

/90 2erif% th#t the first #llotme!t +#s !ot m#-e !til the #mo!t of mi!imm

s,s"ri$tio! st#te- i! the $ros$e"ts h#- ,ee! s,s"ri,e- #!- !til the! the

#mo!t re"ei)e- +#s :e$t -e$osite- i! # s"he-le- ,#!: #s re3ire- ,% se"tio!

;4 of the #"t&

/0 As"ert#i! th#t there e'ists #! i!ter!#l "he": o! re"ei$t of #mo!ts #lo!(+ith the

#$$li"#tio! #!- th#t the s#me thro(hot h#s "o!ti!e- to f!"tio!s#tisf#"toril%&



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/40 2erif% "om$li#!"e +ith le(#l $ro)isio! rel#ti!( to isse of sh#res #t $remim

/se"tio! =>0* isse of sh#res #t -is"o!t /se"tio! =40* #!- isse of s+e#t e3it%

sh#res /se"tio! =4A0

SHARES ISSUED FOR CASH8

Us#ll%* there #re three st#(es i! the isse of sh#res for "#sh* )i& 8

Re"ei$t of #$$li"#tio!s for sh#res #lo!(+ith #$$li"#tio! mo!e%B

Allotme!t of sh#res #!- re"ei$t of #llotme!tB #!-

M#:i!( "#lls #!- re"ei$t of "#ll mo!e%&

The $ro(r#mme of +or: to ,e "#rrie- ot i! res$e"t of e#"h of the #,o)e me!tio!e-

three st#(es is st#te- ,elo+8

/70 A$$li"#tio!s

)erif% the #mo!t re"ei)e- #lo!(+ith the #$$li"#tio!s for sh#res i! the follo+i!(

m#!!er8

Che": e!tries i! the #$$li"#tio! #!- #llotme!t ,oo: /or sheets0 +ith the ori(i!#l

#$$li"#tio!sB

Che": e!tries i! the #$$li"#tio! #!- the #llotme!t ,oo: #s re(#r-s -e$osits of mo!e%*

re"ei)e- +ith the #$$li"#tio!s* +ith those i! the "#sh ,oo:B

2o"h #mo!ts ref!-e- to the !s""essfl #$$li"#!ts +ith "o$ies of letters of re(retB

Che": the tot#ls "olm!s i! the #$$li"#tio! #!- #llotme!t ,oo: #!- "o!firm the .or!#l

e!tr% -e,iti!( sh#re #$$li"#tio! #""o!t #!- "re-iti!( sh#re "#$it#l #""o!t&

/90 Allotme!t1

E'#mi!e -ire"tors mi!tes ,oo: to )erif% #$$ro)#l of #llotme!ts&

Com$#re "o$ies of letters of #llotme!t +ith e!tries i! the #$$li"#tio! #!- #llotme!t

,oo:&

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Tr#"e e!tries i! the "#sh ,oo: i!to the #$$li"#tio! #!- #llotme!t ,oo: for the

)erifi"#tio! of #mo!ts "olle"te- o! #llotme!t&

/i)0Tr#"e the #mo!t "olle"te- o! #$$li"#tio! #s +ell #s those o! #llotme!t from

the A$$li"#tio! #!- Allotme!t @oo: i!to the Sh#re Re(ister&

/)0 Che": tot#ls of #mo!ts $#%#,le o! #llotme!t #!- )erif% the .or!#l e!tr%

-e,iti!( Sh#re Allotme!t A""o!t #!- "re-iti!( Sh#re C#$it#l A""o!t&

/


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e!sre th#t #ll o,li(#tio!s !-er the "o!tr#"ts h#)e ,ee! fll% s#tisfie-&

/)0 2o"h $#%me!t of "ommissio! #!- ,ro:er#(e* the first ,% refere!"e to the

!-er+riti!( "o!tr#"t #!- the se"o!- ,% refere!"e to st#m$s of ,ro:ers o!

#$$li"#tio! forms&

/)i0See th#t the "om$#!% h#s -eli)ere- sh#re "ertifi"#tes +ithi! three mo!ths #fter

the #llotme!t of #!% of its sh#res i! #""or-#!"e +ith the $ro"e-re l#i- -o+!

!-er Se"tio! ?= $res"ri,es th#t #

sm e3#l to the #mo!t of the $remim "olle"te- shol- ,e tr#!sferre- to the

Se"rities Premim A""o!t& Si!"e the A"t $ro)i-es th#t the #mo!t of $remim +ill ,e

"o!si-ere- # $#rt of the sh#re "#$it#l #!- th#t the #mo!t of $remim "olle"te- o!

sh#res "#! o!l% ,e re-"e- i! the m#!!er $res"ri,e- for the re-"tio! of "#$it#l* the

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#mo!t of sh#re $remim re"ei)e- "#!!ot ,e forfeite- +he! the sh#res i! res$e"t

thereof #re forfeite-& The #-itor shol- #lso see "om$li#!"e +ith SE@I Gi-eli!es&

SHARES ISSUED AT A DISCOUNT

A "om$#!% "#! isse sh#res #t # -is"o!t o! the follo+i!( "o!-itio!s /Se"tio! =40 8

/i0 The isse shol- ,e #thorise- ,% #! or-i!#r% resoltio! of the "om$#!% #!-

s#!"tio!e- ,% the Ce!tr#l Go)er!me!t&

/ii0 No s"h resoltio! sh#ll ,e s#!"tio!e- ,% the Ce!tr#l Go)er!me!t i! "#se the

m#'imm r#te of -is"o!t shol- e'"ee- 7 $er "e!t !less the Ce!tr#l

Go)er!me!t is of o$i!io! th#t # hi(her r#te for -is"o!t is .stifie- ,% the s$e"i#l

"ir"mst#!"es of the "#se&

/iii0The isse shol- ,e m#-e +ithi! t+o mo!ths of the s#!"tio! ,% the Ce!tr#l

Go)er!me!t ,t !ot e#rlier th#! o!e %e#r #fter the -#te of "omme!"eme!t of

,si!ess&

/i)0The sh#res shol- ,e of # "l#ss #lre#-% isse- ,% the "om$#!%&

It is the -t% of the #-itor to "o!firm th#t #ll the "o!-itio!s #foreme!tio!e- h#)e ,ee!

"om$lie- +ith ,% the "om$#!% #t the time the #llotme!t +#s m#-e& Tho(h there

#$$e#rs to ,e !o o,li(#tio! o! the $#rt of the "om$#!% to +rite off -is"o!t o! the isse

of sh#res* it is !o!etheless #-)is#,le th#t is shol- ,e so -o!e +ithi! # fe+ %e#rs of the

sh#res ,ei!( isse-&

As $er the Re)ise- S"he-le 2I* the !#mortise- -is"o!t o! isse of sh#res shol- ,e

-is"lose- i! the ,#l#!"e sheet !-er the he#-i!( Other No!1Crre!t AssetsCrre!t

#ssets /-e$e!-i!( o! the rem#i!i!( $erio- of #mortis#tio!0&

CALLS PAID IN AD2ANCE

A "om$#!%* if $ermitte- ,% the #rti"les* m#% #""e$t from mem,ers* either the +hole or

$#rt of the #mo!t rem#i!i!( !$#i- o! #!% sh#res hel- ,% him #s "#lls i! #-)#!"eB ,t

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the #mo!t so re"ei)e- "#!!ot ,e tre#te- #s # $#rt of the "#$it#l for the $r$ose of #!%

)oti!( ri(hts !til the s#me ,e"omes $rese!tl% $#%#,le #!- -l% #$$ro$ri#te-& A

"om$#!%* if so #thorise- ,% its Arti"les* m#% $#% -i)i-e!- i! $ro$ortio! to the #mo!t

$#i- $o! e#"h sh#re* +here # l#r(er #mo!t is $#i- $ o! some sh#res th#! th#t o!

other /Se"tio! 4>/90 of T#,le A -oes !ot $ermit "#lls i!

#-)#!"e ,ei!( tre#te- #s #mo!ts $#i- $ o! sh#res for the $r$ose of $#%me!t of

-i)i-e!-s&

U!less the "om$#!% e'er"ises the ri(ht #s #foreme!tio!e-* the sh#rehol-ers +ho h#)e

$#i- "#lls i! #-)#!"e +ol- ,e e!title- to re"ei)e i!terest #t the r#te s$e"ifie- i! the

Arti"les& The i!terest o! "#lls i! #-)#!"e* tho(h "h#r(e#,le #(#i!st $rofits* #lso "#! ,e

$#i- ot of "#$it#l +he! $rofits #re !ot #)#il#,le for s"h # $#%me!t& I! the e)e!t of #

+i!-i!( $* "#lls i! #-)#!"e re$#%#,le #lo!(+ith i!terest #""re- thereo! ,efore #!%

$#rt of the "#$it#l is retr!e- to sh#rehol-ers&

CALLS IN ARREARS

The #mo!ts -e from sh#rehol-ers i! res$e"t of "#lls i! #rre#rs shol- ,e )erifie- ,%

refere!"e to the Sh#re re(ister& If #!% "#lls #re -e from Dire"tors* the% shol- ,e sho+!

se$#r#tel% i! the ,#l#!"e sheet& Ofte! the Arti"les $ro)i-e th#t i!terest ,e "h#r(e- o!

"#lls i! #rre#rs& The #-.stme!t of i!terest i! s"h # "#se shol- ,e )erifie-&

ISSUE AND REDEMPTION OF PREFERENCE SHARES

/#0 Po+er to isse re-eem#,le $refere!"e sh#res8

A "om$#!% limite- ,% sh#res* if #thorie- ,% its #rti"les* m#% isse $refere!"e

sh#res +hi"h #re li#,le to ,e re-eeme- #t the o$tio! of the "om$#!% ,efore or o! #!

#$$oi!te- -#te& Ho+e)er* #fter the "omme!"eme!t of the Com$#!ies /Ame!-me!t0

A"t* 744; !o "om$#!% limite- ,% sh#res sh#ll isse #!% $refere!"e sh#re +hi"h is

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irre-eem#,le or is re-eem#,le #fter the e'$ir% of # $erio- of 9 %e#rs from the -#te

of its isse& So lo!( #s the sh#res #re !ot re-eeme-* the terms of re-em$tio! or

"o!)ersio! mst ,e st#te- i! the ,#l#!"e sheet to(ether +ith the e#rliest -#te of

re-em$tio! or "o!)ersio!&

I! the m#tter of re-em$tio! of sh#res the #-itor shol- "o!firm th#t the

re3ireme!ts of Se"tio! > h#)e ,ee! "om$lie- +ith* )i&8

Th#t the sh#res re-eeme- +ere fll% $#i- $B

Th#t the sh#res +ere re-eeme- ot of $rofit #)#il#,le for -istri,tio! #s

-i)i-e!- or ot of $ro"ee-s of # fresh isse m#-e for $r$ose of re-em$tio!B

Th#t the $remim if #!%* o! re-em$tio!* +#s $ro)i-e- for either ot of the

Se"rities Premim A""o!t or ot of -i)isi,le $rofits of the "om$#!%B #!- Th#t if the sh#res +ere re-eeme- ot of $rofits* other+ise #)#il#,le for -i)i-e!-*

#! #mo!t e3#l to !omi!#l #mo!t of sh#res re-eeme- h#s ,ee! tr#!sferre- to

the C#$it#l Re-em$tio! Reser)e A""o!t&

The C#$it#l Re-em$tio! Reser)e A""o!t is tre#te- #s $#rt of "#$it#l i! the s#me +#%

#s Se"rities Premim A""o!t& It "#!!ot* therefore* ,e #$$lie- e'"e$t for $#%i!( $

!isse- sh#re "#$it#l of the "om$#!% to ,e isse- to mem,ers #s fll% $#i- $ ,o!s

sh#res&

/,0 Re-em$tio! of irre-eem#,le $refere!"e sh#res 8

Se"tio! >1A i!serte- ,% the Com$#!ies /Ame!-me!t0 A"t* 74>> re3ires th#t

irres$e"ti)e of the f#"t #!%thi!( "o!t#i!e- i! the terms of isse of #!% $refere!"e sh#res*

e)er% $refere!"e sh#re isse- ,efore the "omme!"eme!t of this s#i- A"t* +hi"h is

irre-eem#,le sh#ll ,e re-eeme- ,% the "om$#!% +ithi! # $erio- !ot e'"ee-i!( ? %e#rs

from the -#te of -e thereo! i! #""or-#!"e +ith the terms of its isse #!- +hi"h h#- !ot

,ee! re-eeme- ,efore s"h "omme!"eme!t ,e re-eeme- ,% the "om$#!% o! the -#te of

+hi"h s"h sh#re is -e for re-em$tio! or +ithi! # $erio- !ot e'"ee-i!( 7 %e#rs from

s"h "omme!"eme!t +hi"he)er is e#rlier&

Pro)i-e- th#t +here # "om$#!% is !ot i! # $ositio! to re-eem #!% s"h sh#re +ithi! the

$erio- #fores#i- #!- to $#% the -i)i-e!-* if #!%* -e thereo! /s"h sh#res ,ei!(

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herei!#fter refer to #s !re-eeme- $refere!"e sh#res0* the "om$#!% m#% +ith the

"o!se!t of the Tri,!#l o! # $etitio! m#-e ,% it i! this ,eh#lf #!- !ot +ithst#!-i!(

#!%thi!( "o!t#i!e- i! this A"t* isse frther re-eem#,le $refere!"e sh#res e3#l to the

#mo!ts -e to /i!"l-i!( the -i)i-e!- -e thereo!0 i! res$e"t of the !re-eeme-

$refere!"e sh#res #!- o! the isse of s"h frther re-eem#,le $refere!"e sh#res* the

!re-eeme- sh#res sh#ll ,e -eeme- to h#)e ,ee! re-eeme-&

ALTERATION OF SHARE CAPITAL

A "om$#!%* h#)i!( # sh#re "#$it#l* if so #thorie- ,% its Arti"les* m#% #lter its sh#re

"#$it#l ,% #! or-i!#r% resoltio! +ithot "o!firm#tio! of the Cort* i! #!% of them#!!ers #thorie- ,% Se"tio! 45& E#"h #lter#tio! m#-e shol- ,e !ote- i! e)er% "o$%

of the Memor#!-m #!- Arti"les isse- s,se3e!t to -#te of the #lter#tio! /Se"tio!

50& The #-itors -ties i! the "ir"mst#!"es sh#ll ,e8

To )erif% th#t the #lter#tio! of "#$it#l is #thorie- ,% the Arti"lesB

To i!s$e"t the mi!tes of the sh#rehol-ers #thorii!( the #lter#tio!B

To o,t#i! Allotme!t Lists "o!t#i!i!( -et#ils of the !e+ hol-i!(s of sh#re or sto":

,% e#"h mem,er #!- to )erif% the s#me +ith the e!tries&

To i!s$e"t the -ire"tors resoltio! i! re(#r- to #llotme!t* "o!soli-#tio!*

"o!)ersio! or s,1-i)isio! $#sse- $rs#!t to the resoltio! of the mem,ersB

To e'#mi!e the "#!"elle- sh#re "ertifi"#tes* if #!%* #!- #(ree the s#me +ith the

"o!terfoils of !e+ "ertifi"#tes isse-B

To see th#t the $ro"e-re* $res"ri,e- ,% the Arti"les i! this re(#r-* h#s ,ee!

"om$lie- +ithB

To )erif% th#t the sh#re "#$it#l #""o!t is "orre"tl% sho+! i! the @#l#!"e SheetB

#!-



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To see th#t the !e"ess#r% i!tim#tio! to the Re(istr#r "o!tem$l#te- ,% Se"tio! 4?

h#s ,ee! se!t&

REDUCTION IN SHARE CAPITAL /SECTION 70

The -ties of the #-itor i! this re(#r- #re follo+i!(8

2erif%i!( th#t the meeti!( of the sh#rehol-er hel- to $#ss the s$e"i#l resoltio!

+#s $ro$erl% "o!)e!e-B #lso th#t the $ro$os#l +#s "ir"l#rie- i! #-)#!"e

#mo!( the mem,ers&

Co!firmi!( th#t the Arti"les of Asso"i#tio! #thorie re-"tio! of "#$it#l&

E'#mi!i!( the or-er of the Tri,!#l "o!firmi!( the re-"tio! #!- seei!( th#t #

"o$% of the or-er #!- the mi!tes h#)e ,ee! re(istere- #!- file- +ith the

Re(istr#r of Com$#!ies&

I!s$e"ti!( the Re(istr#rs Certifi"#te #s re(#r-s re-"tio! of "#$it#l&

2o"hi!( the .or!#l e!tries re"or-e- to re-"e the "#$it#l #!- to +rite -o+!

the #ssets ,% refere!"e to the resoltio! of sh#rehol-ers #!- other -o"me!t#r%

e)i-e!"eB #lso seei!( th#t the re3ireme!ts of Re)ise- S"he-le 2I* P#rt I* h#)e

,ee! "om$lie- +ith&

Co!firmi!( th#t the re)#l#tio! of #ssets h#)e ,ee! $ro$erl% -is"lose- i! the

@#l#!"e Sheet&

2erif%i!( the #-.stme!t m#-e i! the mem,ers #""o!ts i! the Re(ister of

Mem,ers #!- "o!firmi!( th#t either the $#i- $ #mo!t sho+! o! the ol- sh#re

"ertifi"#tes h#)e ,ee! #ltere- or !e+ "ertifi"#tes h#)e ,ee! isse- i! lie of the

ol-* #!- the ol- o!es h#)e ,ee! "#!"elle-&



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Co!firmi!( th#t the +or-s #!- re-"e-* if re3ire- ,% the or-er of the

Tri,!#l* h#)e ,ee! #--e- to the !#me of the "om$#!% i! the @#l#!"e Sheet&

2erif%i!( th#t the Memor#!-m of Asso"i#tio! of the "om$#!% h#s ,ee! sit#,l%#ltere-&

FORFEITURE AND RE1ISSUE OF SHARES

The #-itor shol- 8

As"ert#i! th#t the Arti"les #thorise the @o#r- of Dire"tors to forfeit sh#res #!-

th#t the $o+er h#s ,ee! e'er"ise- ,% the @o#r- i! the ,est i!terest of the

"om$#!%B

2erif% the #mo!t of "#ll or i!st#lme!t of "#lls +hi"h +#s otst#!-i!( i! res$e"t

of e#"h of the sh#re forfeite-B

As"ert#i! th#t the $ro"e-re i! the Arti"les h#s ,ee! follo+e-* )i&* the !oti"e

(i)e! /75 -#%s* #""or-i!( to T#,le A0 to the -ef#lti!( sh#rehol-ers* +#r!i!(

them th#t i! the e)e!t of !o!1$#%me!t* ,% # s$e"ifie- -#te* of the #mo!t of "#ll

#lre#-% m#-e o! the sh#res st#!-i!( i! their !#mes* to(ether +ith i!terest* if

#!%* the sh#res sh#ll ,e forfeite-B see th#t the $ro$er resoltio!s of Dire"tors*

first #s re(#r-s iss#!"e of !oti"e #!- #fter+#r-s i! res$e"t of forfeitre of

sh#resB #!-

2erif% the e!tries re"or-e- i! the ,oo:s of #""o!t "o!se3e!t $o! forfeitre of

sh#res to "o!firm th#t the $remim* if #!%* re"ei)e- o! the isse of sh#res h#s

!ot ,ee! tr#!sferre- to the Forfeite- Sh#res A""o!t&

Re1isse of Forfeite- Sh#res8

The #-itor shol-8



12/47


As"ert#i! th#t the @o#r- of Dire"tors h#s the #thorit% !-er the Arti"les to re1

isse forfeite- sh#resB

Refer to the resoltio! of the @o#r- of Dire"tors* re#llotti!( forfeite- sh#resB

2o"h the #mo!ts "olle"te- from $erso! to +hom the sh#res h#)e ,ee! #llotte-

#!- )erif% the e!tries re"or-e- from re #llotme!t #!- see th#t the tot#l #mo!t

re"ei)e- o! the sh#re* i!"l-i!( th#t re"ei)e- $rior to forfeitre* is !ot less th#!

the $#r )#leB #!-

2erif% th#t "om$t#tio! of the #mo!t of sr$ls reslti!( o! the reisse of

sh#res "re-ite- to the C#$it#l Reser)e A""o!tB #!-

Where $#rtl% $#i- sh#res #re forfeite- for !o!1$#%me!t of "#ll* #!- #re re1isse-

#s fll% $#i-* the re1isse is tre#te- #s #! #llotme!t #t # -is"o!t @io"hemi"#l #!-

S%!theti" Pro-"ts Lt-& 2& Re(istr#r of Com$#!ies /74;90 7 of the Com$#!ies A"t0B

A(reeme!ts to "o!)ert $refere!"e sh#res i!to e3it% sh#resB #!- Other "o!tr#"ts*



13/47


s"h #s for s$$l% of "#$it#l (oo-s #!-or mer"h#!-ise&

ISSUE OF SWEAT EKUITY SHARES8

The Com$#!ies /Ame!-me!t0 A"t* 7444 re"o(!ise- th#t i! the +#:e of (lo,#li#tio! of

"or$or#te se"tor* the em$lo%ees +ill h#)e to ,e re+#r-e- sit#,l% to sh#re i! the (ro+th

of "om$#!%& @% i!sertio! of se"tio! =4A* the em$lo%ees m#% ,e "om$e!s#te- i! the form

of s+e#t e3it% sh#res& As $er e'$l#!#tio! to Se"tio! =4A* the e'$ressio! s+e#t

e3it% sh#res me#!s e3it% sh#res isse- ,% the "om$#!% to em$lo%ees or -ire"tors #t

# -is"o!t or for "o!si-er#tio! other th#! "#sh for $ro)i-i!( :!o+1ho+ or m#:i!(

#)#il#,le ri(ht i! the !#tre of i!telle"t#l $ro$ert% ri(hts or )#le #--itio!s* ,%+h#te)er !#me "#lle-& The #-itor m#% see th#t the s+e#t e3it% sh#res isse- ,% the

"om$#!% #re of # "l#ss of sh#res #lre#-% isse- #!- follo+i!( "o!-itio!s #re flfille-8

/#0 The isse of s+e#t e3it% sh#res is #thorie- ,% # s$e"i#l resoltio! $#sse- ,% the

"om$#!% i! the (e!er#l meeti!(B

/,0 The resoltio! s$e"ifies the !m,er of sh#res* "rre!t m#r:et $ri"e* "o!si-er#tio!*

if #!%* #!- the "l#ss or "l#sses of -ire"tors or em$lo%ees to +hom s"h e3it% sh#res

#re to ,e isse-B

/"0 Not less th#! o!e %e#r h#s* #t the -#te of the isse el#$se- si!"e the -#te o! +hi"h

the "om$#!% +#s e!title- to "omme!"e ,si!essB

/-0 The s+e#t e3it% sh#res of # "om$#!% +hose e3it% sh#res #re liste- o! #

re"o(!ie- sto": e'"h#!(e #re isse- i! #""or-#!"e +ith the re(l#tio!s m#-e ,%

the Se"rities E'"h#!(e @o#r- of I!-i# i! this ,eh#lf8

Pro)i-e- th#t i! the "#se of # "om$#!% +hose e3it% sh#res #re !ot liste- o! #!%

re"o(!ise- sto": e'"h#!(e* the s+e#t e3it% sh#res #re isse- i! #""or-#!"e +ith the

(i-eli!es #s m#% ,e $res"ri,e-&

For the $r$oses of this s,1se"tio!* the e'$ressio! # "om$#!% me#!s the "om$#!%



14/47


i!"or$or#te-* forme- #!- re(istere- !-er this A"t #!- i!"l-es its s,si-i#r% "om$#!%

i!"or$or#te- i! # "o!tr% otsi-e I!-i#&

SHARES TRANSFER AUDIT

Fre3e!tl%* ,i( "om$#!ies re3ire #-itors to !-ert#:e #-it of sh#re tr#!sfer

re"or-e- ,% the "om$#!% -ri!( the $re)ios %e#r& The o,.e"t of s"h #! #-it is

-ete"tio! of mist#:es i! the re(istr#tio! of tr#!sfers +hi"h m#% h#)e the effe"t of

s#--li!( the "om$#!% +ith the li#,ilit% for -#m#(es "l#ime- ,% # sh#rehol-er o!

#""o!t of losses sffere- i! "o!se3e!"e thereof&

The )#rios ste$s +hi"h #re "o!si-ere- !e"ess#r% for "#rr%i!( ot s"h #! #-it #re

(i)e! ,elo+8

7& As"ert#i! +hether !oti"es +ere se!t i! e)er% "#se to the tr#!sferors #!-* i! "#se of

.oi!t1hol-ers* to e#"h of the hol-ers #!- the o,.e"tio!s* if #!%* r#ise- ,% them +ere

t#:e! i!to "o!si-er#tio! ,efore the tr#!sfers +ere re(istere-&

9& 2erif% th#t i! the "#se of $#rtl% $#i- sh#res* +here the #$$li"#tio! for re(istr#tio!

+#s m#-e ,% the tr#!sferor* # !oti"e i!)#ri#,l% +#s se!t to the tr#!sferee #!- the

tr#!sfer +#s re(istere- o!l% +he! !o o,.e"tio! h#- ,ee! re"ei)e- from him*

+ithi! t+o +ee:s from ser)i"e of !oti"e o! him se"tio! 77/90J&

0 h#-

st#m$e- the -#t# o! +hi"h it +#s $rese!te- to itB #lso th#t it +#s -eli)ere- to the

"om$#!%8

I! "#se of 3ote- sh#res ,efore the re(ister of mem,ers +ere "lose- for

the first time s,se3e!t to the tr#!sfer +ithi! t+el)e mo!ths from the

-#te of $rese!t#tio! of the #$$li"#tio! to the $res"ri,e- #thorit%

+hi"he)er is l#terB



15/47


I! #!% other "#se +ithi! t+o mo!ths from the -#te of s"h $rese!t#tio!B

/,0 Th#t e#"h tr#!sfer form is $ro$erl% e'e"te- #!- ,e#rs the #$$ro$ri#te st#m$-t%B

/"0 Th#t the !#me of the "om$#!% is "orre"tl% st#te- o! the formB

/-0 Th#t +here the "o!si-er#tio! for tr#!sfer #$$e#rs to ,e i!#-e3#te* #! e!3ir%

+#s m#-e ,% the "om$#!% for #s"ert#i!i!( the re#so!s therefore& /this is !ot

!e"ess#r% if the tr#!sfer form ,e#rs the se#l of the "olle"tor of st#m$s0B

/e0 Th#t the #lter#tio!s* if #!%* h#)e ,ee! sit#,l% i!iti#le-B #!-

/f0 Th#t the !#me #!- #--ress of the tr#!sferee h#)e ,ee! re"or-e- "om$letel% #!-

fll% for $r$oses of "orres$o!-e!"e&

5& Com$#re the si(!#tre of e#"h tr#!sferor form +ith his si(!#tre o! the ori(i!#l

#$$li"#tio! for sh#res or o! the tr#!sfer form /+he! sh#res +ere #"3ire- o! #

tr#!sfer0&

?& As"ert#i! th#t !o!e of the tr#!sferees is -is3#lifie- from hol-i!( sh#res i! the

"om$#!%&

;& 2o"h the e!tries i! the sh#re tr#!sfer .or!#l ,% refere!"e to the tr#!sfer forms*

!oti!( i! e#"h "#se8

/#0 The !#me of tr#!sferorB

/,0 The !#me #!- #--ress of the tr#!sfereeB

/"0 The !m,er #!- "l#ss of sh#res tr#!sferre-B #!-

/-0 The -isti!"ti)e !m,er* if #!%* of the sh#re tr#!sfer&

The tr#!sfer forms* #fter the% h#)e ,ee! "he":e-* shol- ,e m#r:e- #!- the

tr#!sferors sh#re "ertifi"#te "#!"elle- to $re)e!t the s#me ,ei!( $rese!te- o!"e

SHETH N&6&T&T COLLEGE OF COMMERCE PAGE 7?


16/47


#(#i! i! s$$ort of #!other tr#!sfer& The -isti!"ti)e !m,er of sh#res* if #!%* o! the

sh#res "ertifi"#te srre!-ere-* shol- ,e )erifie- ,% refere!"e to the -isti!"ti)e

!m,ers re"or-e- i! the mem,ers re(ister&

I! the "#se of # tr#!sfer re(istere- i! the #,se!"e of sh#re "ertifi"#te* the letter of

i!-em!it% or #!% other -o"me!t#r% e)i-e!"e o! the ,#sis of +hi"h the tr#!sfer h#s

,ee! re(istere- shol- ,e i!s$e"te-&

=& 2erif% ,% refere!"e to the mi!te ,oo: of the ,o#r- of -ire"tors th#t #ll the tr#!sfer

re"or-e- i! the tr#!sfer .or!#l h#)e ,ee! #$$ro)e- ,% the ,o#r-&

>& Co!firm th#t e)er% "ler: +ho +#s e!trste- +ith "ert#i! -ties #s re(#r-s the

re(istr#tio! of tr#!sfers h#s i!iti#le- the -o"me!ts )erifie- ,% him&

4& Che": the $osti!(s of -isti!"ti)e !m,ers of sh#res tr#!sferre- #!- the !#me of

tr#!sferors #!- tr#!sferees i!to the re(ister of mem,ers from the sh#re tr#!sfer

.or!#l&

7& 2erif% the $#rti"l#rs e!tere- o! "o!terfoils of sh#res "ertifi"#te isse- to the

tr#!sferees i! $rs#!"e of the tr#!sfers re(istere- ,% refere!"e to -ire"tors

mi!te ,oo:& I! "#se +here o!l% # $#rt of the sh#res h#)e ,ee! tr#!sferre- ot of

those me!tio!e- i! # Sh#re Certifi"#te* )erif% the isse of @#l#!"e Certifi"#tes to

the tr#!sferor #!- "o!firm th#t the -isti!"ti)e !m,ers of sh#res #re "orre"tl%

st#te-&

77& 2erif% th#t e)er% -$li"#te Sh#res Certifi"#te i! lie of the o!e lost or -estro%e-

h#s ,ee! isse- !-er the "o!se!t of the @o#r- #!- o! the "o!-itio!s $res"ri,e- ,%

the @o#r- #s re(#r-s $ro-"tio! of e)i-e!"e or e'e"tio! of # @o!- of I!-em!it%&

79& As"ert#i!* i! "#ses +here sh#re "ertifi"#tes h#)e ,ee! isse- i! re$l#"eme!t of

ol- "ertifi"#tes* +hether s"h # f#"t +#s e!tere- o! the f#"e of the Certifi"#te #!-

#lso +hether s"h # f#"t +#s e!tere- o! the st, of the "o!terfoil& Frther* th#t i!

"#se of -$li"#te isse- i! lie of the o!e lost or -estro%e- the !-er me!tio!e-

st#teme!t +#s e!tere- o! the -$li"#te Sh#re Certifi"#tes #!- #lso st#te- o! the

st, of the "o!terfoilB D$li"#te isse- i! lie of Sh#re Certifi"#te No& &&&&&&

SHETH N&6&T&T COLLEGE OF COMMERCE PAGE 7;


17/47


7


18/47


Tr#!smissio! of sh#res is (e!er#ll% (o)er!e- ,% the $ro)isio! "o!t#i!e- i! the Arti"les

of Asso"i#tio!& Se"tio! 74A i!serte- ,% the Com$#!ies /Ame!-me!t0 A"t* 7444

$ro)i-es for the f#"ilit% of !omi!#tio!& The !omi!ee "#! either ,e i!-i)i-#l or #

"om$#!%& Se"tio! 74@ #""or-i!(l% -e#ls +ith re(istr#tio! of !omi!ee sh#rehol-er* his

ri(hts #!- -ties&

Ge!er#l8

/i0 Re"o!"ile the #mo!t of tr#!sfer fees "olle"te- +ith tot#l !m,er of tr#!sfers

lo-(e- #!- )erif% th#t the #mo!ts of tr#!sfer fees h#)e ,ee! #""o!te- for&

/ii0 Re"o!"ile the tot#l !m,er of sh#res of -iffere!t "l#sses isse- ,% the "om$#!% +ith

the tot#l #mo!t of "#$it#l isse- #!- its s,1-i)isio!s ,% e'tr#"ti!( ,#l#!"e of

sh#res hel- ,% -iffere!t mem,ers from the Mem,ers Re(ister&

/iii0 Co!firm th#t* i! "#se of tr#!sfer re(istr#tio! +hereof +#s refse-* the !oti"e of

refs#l +#s se!t to the tr#!sferor #!- the tr#!sferee +ithi! # $erio- of t+o mo!ths

/Se"tio! 7770&

Frther se"tio! 777A rel#ti!( to re"tifi"#tio! of re(ister $rs#!t to the

De$ositories A"t* 744;* "o!t#i!s rele)#!t $ro)isio! e!#,li!( the Tri,!#l to -ire"t

re"tifi"#tio! of re(isters&

/i)0Co!firm th#t* i! "#se #!% sh#res hel- ,% Dire"tors h#)e ,ee! tr#!sferre- ,% them*

"orres$o!-i!( e!tries h#)e ,ee! m#-e i! the Re(ister of Dire"tors sh#rehol-i!(&

/)0 Co!firm th#t if # "om$#!% h#s refse- to re(ister the tr#!sfer of or the

tr#!smissio! ,% o$er#tio! of l#+ the ri(ht to #!% sh#res +ithi! 9 mo!ths from the

-#te o! +hi"h the i!strme!t of tr#!sfer or the i!tim#tio! of s"h tr#!smissio! +#s

-eli)ere- to the "om$#!% h#s se!t !oti"e of the refs#l to the tr#!sferee #!- the

tr#!sferor or the $erso! (i)i!( i!tim#tio! of s"h tr#!smissio! #s the "#se m#% ,e

(i)i!( re#so!s for s"h refs#l&

SHETH N&6&T&T COLLEGE OF COMMERCE PAGE 7>


19/47


Note1 St-e!ts shol- #lso refer to st-% m#teri#l o! "om$#!% L#+ for restri"tio!s o!

tr#!sfer of sh#res& Frther* it m#% ,e !ote- th#t se"tio!s 7>A to 7>G +hi"h i!te!-e-

to restri"t #"3isitio! #!- tr#!sfer of sh#res of or ,% "om$#!ies shifte- to the MRTP

A"t* 74;4 h#)e ,ee! tr#!sferre- ,#": to the Com$#!ies A"t* 74?;

ISSUE OF @ONUS SHARES

Prim#ril%* it shol- ,e #s"ert#i!e- +hether the Arti"les $ermit "#$it#lis#tio! of $rofitsB

#lso +hether the "om$#!% h#- # sffi"ie!t !m,er of !isse- sh#res for #llotme!t #s

,o!s sh#res& I! #--itio!* the follo+i!( ste$s shol- ,e t#:e!8

/#0 I!s$e"t the Mi!te ,oo: of Sh#rehol-ers for the resoltio! #thorisi!( -e"l#r#tio!

of the @o!s #!- Dire"tors Mi!te for the resoltio! #$$ro$ri#ti!( $rofits for

,ei!( #$$lie- i! $#%me!t of sh#res to ,e #llotte- to sh#rehol-ers #s ,o!s sh#resB

/,0 Tr#"e the #llotme!t of sh#res #s $er $#rti"l#rs "o!t#i!e- i! the Allotme!t @oo: or

sheets i!to the Re(ister of Mem,ersB #!-

/"0 Co!firm th#t #ll st#ttor% re3ireme!ts rele)#!t to the isse of sh#res h#)e ,ee!

"om$lie- +ith* )i&* the fili!( of the $#rti"l#rs of the ,o!s sh#res #llotte- +ith the

Re(istr#r to(ether +ith # "o$% of the resoltio! $rs#!t to +hi"h #llotme!t h#s

,ee! m#-e&

/-0 Co!firm th#t the isse of fll% $#i- $ ,o!s sh#res i! $rs#!"e of s,1se"tio! /


20/47


A""o!t #!- C#$it#l Re-em$tio! Reser)e A""o!t* +hi"h #re !ot #)#il#,le for

-istri,tio! #s -i)i-e!-* "#! ,e tilie- for #llotme!t of fll% $#i- ,o!s sh#res to the

mem,ers #!- the ,#l#!"e i! the #,o)e1me!tio!e- #""o!t #re s#ll% first tilie- for

the $r$ose&

All #$$li"#tio!s for ,o!s isse h#)e to ,e si(!e- ,% # $erso! !ot ,elo+ the r#!: of #

Dire"tor to(ether +ith # "ertifi"#te i!-i"#ti!( th#t the i!form#tio! fr!ishe- is tre #!-

"orre"t #!- th#t #ll the -#t# #"3ire- i! the #$$li"#tio! form #!- (i-eli!es h#s ,ee!

fr!ishe-&

POWER OF COMPANY TO PURCHASE ITS OWN SECURITIES8

The Com$#!ies /Ame!-me!t0 A"t* 7444 "o!t#i!s el#,or#te $ro)isio!s e!#,li!( #

"om$#!% to ,%1,#": its o+! se"rities& The +orse"rit% here i!"l-es em$lo%ee sto":

o$tio!* i.e.,s+e#t e3it% sh#re or #!% other se"rit% !otifie- ,% the (o)er!me!t& The

+orse"rit% i!"l-es ,oth e3it% #!- $refere!"e sh#re& @t $refere!"e sh#re "#! ,e

re-eeme-B $erh#$s the reform is i!te!-e- to e3it% sh#re o!l%& As $er se"tio! ==A* #

"om$#!% m#% $r"h#se its o+! sh#res or other s$e"ifie- se"rities /herei!#fter referre-

to #s ,%1,#":0 ot of

/i0 its free reser)esB or

/ii0 the se"rities $remim #""o!tB or

/iii0 the $ro"ee-s of #!% e#rlier isse other th#! from isse of sh#res m#-e s$e"ifi"#ll%

for ,%1,#": $r$oses&

/70 No "om$#!% sh#ll $r"h#se its o+! sh#res or other s$e"ifie- se"rities !less

/#0 the ,%1,#": is #thorie- ,% its #rti"lesB

/,0 # s$e"i#l resoltio! h#s ,ee! $#sse- i! (e!er#l meeti!( of the "om$#!%

#thorii!( the ,%1,#":B Pro)i-e- th#t !othi!( "o!t#i!e- i! this "l#se sh#ll

#$$l% i! #!% "#se +here /i0 the ,%1,#": is or less th#! 7 $er"e!t of the tot#l



21/47


$#i-1$ e3it% "#$it#l #!- free reser)e of the "om$#!% #!- /ii0 s"h ,%1,#":

h#s ,ee! #thorie- ,% the @o#r- ,% me#!s of # resoltio! $#sse- #t its

meeti!(&

/"0 the ,%1,#": is or less th#! t+e!t%1fi)e $er "e!t* of the tot#l $#i-1$ "#$it#l

/e3it% sh#res #!- $refere!"e sh#res0 #!- free reser)es of the "om$#!%B

/-0 The -e,t1e3it% r#tio is !ot more th#! 9 8 7 #fter s"h ,%1,#": 8

E'$l#!#tio!.For the $r$oses of this "l#se* the e'$ressio! -e,t i!"l-es

#ll#mo!ts of !se"re- #!- se"re- -e,tsB

/e0 #ll the sh#res or other s$e"ifie- se"rities #re fll% $#i-1$B

/f0 the ,%1,#": of the sh#res or other s$e"ifie- se"rities liste- o! #!% re"o(!ise-

sto": e'"h#!(e is i! #""or-#!"e +ith the re(l#tio!s m#-e ,% the Se"rities #!-

E'"h#!(e @o#r- of I!-i#B

/(0 the ,%1,#": i! res$e"t of sh#res or other s$e"ifie- se"rities other th#! those

s$e"ifie- i! "l#se /f0 is i! #""or-#!"e +ith the (i-eli!es #s m#% ,e $res"ri,e-&

/90 The !oti"e of the meeti!( #t +hi"h s$e"i#l resoltio! is $ro$ose- to ,e $#sse- sh#ll

,e #""om$#!ie- ,% #! e'$l#!#tor% st#teme!t st#ti!(

/#0 # fll #!- "om$lete -is"losre of #ll m#teri#l f#"tsB

/,0 the !e"essit% for the ,%1,#":B

/"0 the "l#ss of se"rit% i!te!-e- to ,e $r"h#se-B

/-0 the #mo!t to ,e i!)este-B #!-

/e0 the time limit for "om$letio! of ,%1,#":&

/


22/47


/50 The ,%1,#": !-er s,1se"tio! /70 m#% ,e

/#0 from the e'isti!( se"rit% hol-ers o! # $ro$ortio!#te ,#sisB or

/,0 from the o$e! m#r:etB or

/"0 from o-- lots*

/-0 ,% $r"h#si!( the se"rities isse- to em$lo%ees of the "om$#!% $rs#!t to #

s"heme of sto": o$tio! or s+e#t e3it%&

/?0 A sol)e!"% "ertifi"#te to ,e file- ,efore m#:i!( ,%1,#":&

/;0 A "om$#!% ,%1,#": its o+! se"rities* it sh#ll e'ti!(ish #!- $h%si"#ll% -estro%

the se"rities so ,o(ht1,#": +ithi! se)e! -#%s of the l#st -#te of "om$letio! of

,%1,#":&

/=0 A "om$#!% sh#ll !ot m#:e frther isse of s#me :i!- of sh#res /i!"l-i!( #llotme!t

of frther sh#res !-er "l#se /a0 of s,1se"tio! /70 of se"tio! >70 or other s$e"ifie-

se"rities +ithi! # $erio- of si' mo!ths e'"e$t ,% +#% of ,o!s isse or i! the

-is"h#r(e of s,sisti!( o,li(#tio!s s"h #s "o!)ersio! of +#rr#!ts* sto": o$tio!

s"hemes* s+e#t e3it% or "o!)ersio! of $refere!"e sh#res or -e,e!tres i!to e3it%

sh#res&

/>0 A "om$#!% m#i!t#i!s # re(ister of the se"rities so ,o(ht* the "o!si-er#tio! $#i-

for the se"rities ,o(ht1,#":* the -#te of "#!"ell#tio! of se"rities* the -#te of

e'isti!( #!- $h%si"#ll% -estro%i!( of se"rities #!- s"h other $#rti"l#rs #s m#% ,e

$res"ri,e-&

/40 A "om$#!% sh#ll* #fter "om$letio! of the ,%1,#": !-er this se"tio!* file +ith the

Re(istr#r #!- the Se"rities #!- E'"h#!(e @o#r- of I!-i#* # retr! "o!t#i!i!( s"h

$#rti"l#rs rel#ti!( to the ,%1,#": +ithi! thirt% -#%s of s"h "om$letio!* #s m#%

,e $res"ri,e-8 Pro)i-e- th#t !o retr! sh#ll ,e file- +ith the Se"rities #!-



23/47


E'"h#!(e @o#r- of I!-i# ,% # "om$#!% +hose sh#res #re !ot liste- o! #!%

re"o(!ie- sto": e'"h#!(e& The #-itor shol- e!sre th#t the $ro$er #""o!ti!(

e!tries h#)e ,ee! $#sse- imme-i#tel% #fter the ,%1,#":& Frther $rohi,itio! to

,%1,#": sh#res is "o!t#i!e- i! se"tio! ==@&

AUDIT OF DE@ENTURES

ALLOTMENT OF DE@ENTURES8

As i! the "#se of sh#res* i! the "#se of -e,e!tres #lso* it is !e"ess#r% for the #-itor to

)erif% +hether #llotme!t +#s m#-e h#)i!( re(#r- to the terms #!- "o!-itio!s "o!t#i!e-

i! the $ros$e"ts or the st#teme!t i! lie of $ros$e"ts& The "om$#!ies /#me!-me!t0

#"t* 74>> h#s m#-e it "om$lsor% for e)er% "om$#!% i!te!-i!( to offer -e,e!tres to

the $,li" for s,s"ri$tio! ,% the isse of # $ros$e"ts sh#ll* ,efore s"h isse* m#:e #!

#$$li"#tio! to o!e or more re"o(!ie- sto": e'"h#!(es for $ermissio! for the -e,e!tres



24/47


i!te!-i!( to ,e so offere- to ,e -e#lt +ith i! the sto": e'"h#!(e or e#"h s"h sto":

e'"h#!(e&

The #-itor #lso mst #s"ert#i! th#t the -ire"tors* +hile issi!( the -e,e!tres* h#-

#"te- +ithi! their $o+ers h#)i!( re(#r- to restri"tio!s "o!t#i!e- i! se"tio! 94< #!- #!%

frther restri"tio!s +hi"h m#% ,e "o!t#i!e- i! the #rti"les of #sso"i#tio!& Se"tio! 77=#

h#s !o+ m#-e it "om$lsor% for fili!( of -e,e!tre trst -ee- #!- "re#tio! of -e,e!tre

re-em$tio! reser)e #s $er se"tio! 77=,& It is s$e"ifie- th#t -e,e!tre trst -ee- sh#ll ,e

o$e! for i!s$e"tio! #!- "#! ,e m#-e #)#il#,le o! $#%me!t& The "re#tio! of -e,e!tre

re-em$tio! reser)e is "om$lsor% #!- it is frther s$e"ifie- th#t this #mo!t "#!!ot ,e

tilie- for #!% other $r$ose e'"e$t for re-em$tio! of -e,e!tres& Se"tio! 77=, h#s

#lso m#-e it "om$lsor% #$$oi!tme!t of -e,e!tre trstees #!- s$e"ifie- their -ties&

The follo+i!( #re the ste$s th#t shol- ,e t#:e! for s"h )erifi"#tio!8

2erif% th#t the $ros$e"ts or the st#teme!t i! lie of $ros$e"ts h#- ,ee! -l%

file- +ith the re(istr#r ,efore the -#te of #llotme!t&

Che": the #$$li"#tio!s for -e,e!tres +ith the #$$li"#tio! #!- #llotme!t ,oo: to

)erif% th#t the !#me* #--ress of the #$$li"#!ts #!- the !m,er of -e,e!tres

#$$lie- for #re "orre"tl% re"or-e-&

2erif% the #llotme!t of -e,e!tres ,% refere!"e to the -ire"tors mi!te ,oo:&

2o"h the #mo!ts "olle"te- #s #re e!tere- i! the "#sh ,oo: +ith the "o!terfoils

of re"ei$ts isse- to the #$$li"#!tsB #lso tr#"e the #mo!ts i!to the #$$li"#tio!

#!- #llotme!t ,oo:&

Che": $osti!(s of #llotme!ts of -e,e!tres #!- the #mo!ts re"ei)e- i! res$e"t

thereof from the #$$li"#tio! #!- #llotme!t ,oo:* i!to the -e,e!tres re(ister&

2erif% the e!tries o! the "o!terfoils of -e,e!tres isse- +ith the -e,e!tres

re(ister&

E'tr#"t ,#l#!"es i! the -e,e!tres re(ister i! res$e"t of #mo!ts $#i- ,% the

-e,e!tre hol-ers #!- #(ree their tot#l +ith the ,#l#!"e i! the -e,e!tres

#""o!t i! the (e!er#l le-(er&

E'#mi!e # "o$% of the -e,e!tre trst -ee- #!- !ote the "o!-itio!s i!"l-i!(

"re#tio! of -e,e!tre re-em$tio! reser)e "o!t#i!e- therei! #s to isse #!-

re$#%me!t&

If the -e,e!tres #re "o)ere- ,% # mort(#(e or "h#r(e* it shol- ,e )erifie- th#t

the "h#r(e h#s ,ee! "orre"tl% re"or-e- i! the re(ister of mort(#(es #!- "h#r(es



25/47


#!- th#t it h#s #lso ,ee! re(istere- +ith the re(istr#r of "om$#!ies& Frther* th#t

the "h#r(e is "le#rl% -is"lose- i! the ,#l#!"e sheet&

Com$li#!"e +ith se,i (i-eli!es shol- #lso ,e see!& Where -e,e!tres h#)e

,ee! isse- #s fll% $#i- $ to )e!-ors #s # $#rt of the $r"h#se "o!si-er#tio!*

the "o!tr#"t i! this re(#r- shol- ,e referre- to&

ISSUE OF DE@ENTURES8

De,e!tres m#% ,e isse- #t $#r or #t # $remim or #t # -is"o!t& Whe! these #re

isse- #t # $remim* the #mo!t of $remim "olle"te- shol- ,e "re-ite- to Premim

o! De,e!tre A""o!t& Si!"e it +ol- ,e # "#$it#l $rofit* the ,#l#!"e to the "re-it of this

#""o!t s,se3e!tl% shol- ,e tr#!sferre- to the C#$it#l Reser)e A""o!t&

Where -e,e!tres h#)e ,ee! isse- #t # -is"o!t* the #mo!t of -is"o!t shol- ,e

-e,ite- to Dis"o!t o! De,e!tre A""o!t so th#t the De,e!tre A""o!t is "re-ite-

+ith the fll !orm#l )#le of -e,e!tres& The ,#l#!"e i! this #""o!t sh#ll #$$e#r i! the

@#l#!"e Sheet !til +ritte! off& Us#ll%* the -e,e!tres +ill "o!ti!e to st#!- i! the

,oo:s of the "om$#!%& Where* ho+e)er* the -e,e!tres #re irre-eem#,le* the #mo!t of

-is"o!t shol- ,e +ritte! off o)er # re#so!#,le $erio- of the time&

REDEMPTION OF DE@ENTURES AT A PREMIUM8

The $ro)isio! for the $remim $#%#,le o! re-em$tio! of -e,e!tres m#% ,e m#-e i!

either of the follo+i!( t+o +#%s8

/i0 The tot#l #mo!t of $remim $#%#,le o! re-em$tio! m#% ,e -e,ite- to #! #""o!t

-e!omi!#te- #s Loss o! Isse of De,e!tres #!- "re-ite- to Premim $#%#,le o!

Re-em$tio! of De,e!tres A""o!t or s,se3e!tl%* the -e,it ,#l#!"e i! the first

me!tio!e- #""o!t shol- ,e "#rrie- for+#r- till it is +ritte! off* +hile the l#tter

#""o!t +ol- ,e "lose- o! $#%me!t of the $remim* o! re-em$tio! of -e,e!tres&

/ii0 The f#"t th#t the -e,e!tres +ill h#)e to ,e re-eeme- #t # $remim m#% ,e

-is"lose- ,% +#% of # !ote i! the @#l#!"e Sheet #lo!( +ith the -#te of re-em$tio!



26/47


#!-* #s #!- +he! re-em$tio! is m#-e* the #mo!t $#i- #s # $remim shol- ,e

-e,ite- to the Premim o! Re-em$tio! of De,e!tres A""o!ts&

It m#% ,e !ote- th#t the se"o!- metho- is o!l% # sli(ht )#ri#tio! of the first i! so f#r

th#t* i! the l#tter "#se* the $remim $#i- o! -e,e!tres is +ritte! off s,se3e!t to

the re-em$tio!&

INTEREST ON DE@ENTURES8

The $#%me!t of i!terest shol- ,e )o"he- +ith the #":!o+le-(me!t of the -e,e!tre

hol-ers* e!-orse- +#rr#!ts #!- i! the "#se of ,e#rer -e,e!tres* +ith the "o$o!ssrre!-ere-& The tot#l #mo!t $#i- shol- ,e re"o!"ile- +ith the tot#l #mo!t -e #!-

$#%#,le +ith the #mo!t of i!terest otst#!-i!( for $#%me!t& I!terest o! -e,e!tres is

$#%#,le +hether or !ot #!% $rofit is m#-e& Therefore* # $ro)isio! shol- ,e m#-e !less

it h#s ,ee! s$e"i#ll% #(ree- +ith the -e,e!tre hol-ers th#t i!terest i! s"h # "#se

+ol- ,e +#i)e- ,% them& The i!terest $#i- o! -e,e!tres* li:e th#t o! other fi'e-

lo#!s* mst ,e -is"lose- #s # se$#r#te item i! the Profit #!- Loss A""o!t&

RE1ISSUE OF REDEEMED DE@ENTURES8

A "om$#!% m#% isse -e,e!tres $re)iosl% re-eeme-* either ,% reissi!( the

-e,e!tres or ,% issi!( others i! their $l#"e !less the Arti"les or # "o!tr#"t or

resoltio!* re"or-e- #t # Ge!er#l Meeti!(* or terms of isse or some other #"t of the

"om$#!% e'$ressl% or im$lie-l% m#!ifest the i!te!tio! th#t* o! re-em$tio!* the

-e,e!tres sh#ll ,e "#!"elle-& Ho+e)er* the re1isse of re-eeme- -e,e!tres or the isse

of others i! their $l#"e is tre#te- #s # !e+ isse for the $r$ose of st#m$ -t% #!- the

ri(hts #!- $ri)ile(es #tt#"hi!( to the -e,e!tres th#t re1isse- sh#ll ,e the s#me #s if

the -e,e!tres h#- !e)er ,ee! re-eeme-& O! these "o!si-er#tio!s* it is !e"ess#r% for the

#-itor to )erif% the re1isse of -e,e!tres i! the s#me m#!!er #s those isse- for the

first time&

RE1ISSUE AS COLLATERAL SECURITY8

SHETH N&6&T&T COLLEGE OF COMMERCE PAGE 9;


27/47


Kite fre3e!tl% -e,e!tres #re isse- #s "oll#ter#l se"rit% to "re-itors* ,#!:ers or

other $#rties& The !omi!#l )#le of the -e,e!tres -e$osite- #s se"rit% (e!er#ll%

e'"ee-s the #mo!ts of the lo#! ,% 7 or 9 $er "e!t& I! s"h # "#se* the li#,ilit% of the

"om$#!% ,ei!( limite- to the #mo!t of the lo#! #!- !ot the f#"e )#le of the

-e,e!tres +hi"h h#)e ,ee! isse-* o!l% #s # "oll#ter#l /se"o!-#r% or #--itio!#l0

se"rit%* the #mo!t of -e,e!tres is sho+! o!l% i! #! i!!er "olm! i! the @#l#!"e

Sheet& The "oll#ter#l se"rit% ,e"omes effe"ti)e o!l% i! the e)e!t of -ef#lt or the lo#!

!ot ,ei!( re$#i- +he! -e& As soo! #s the lo#! is re$#i-* the -e,e!tres #re

#tom#ti"#ll% free-&

SA 971 AGREEING THE TERMS OF AUDIT ENGAGEMENTS

INTRODUCTION

SCOPE OF THIS SA

This St#!-#r- o! A-iti!( /SA0 -e#ls +ith the #-itors res$o!si,ilities i! #(reei!( the

terms of the #-it e!(#(eme!t +ith m#!#(eme!t #!-* +here #$$ro$ri#te* those "h#r(e-

+ith (o)er!#!"e& This i!"l-es est#,lishi!( th#t "ert#i! $re"o!-itio!s for #! #-it*

res$o!si,ilit% for +hi"h rests +ith m#!#(eme!t #!-* +here #$$ro$ri#te* those "h#r(e-

+ith (o)er!#!"e* #re $rese!t& SA 99


28/47


This SA is effe"ti)e for #-its of fi!#!"i#l st#teme!ts for $erio-s ,e(i!!i!( o! or #fter

A$ril 7* 97&

O@ECTI2E

The o,.e"ti)e of the #-itor is to #""e$t or "o!ti!e #! #-it e!(#(eme!t o!l% +he! the

,#sis $o! +hi"h it is to ,e $erforme- h#s ,ee! #(ree-* thro(h8

/#0 Est#,lishi!( +hether the $re"o!-itio!s for #! #-it #re $rese!tB #!-

/,0 Co!firmi!( th#t there is # "ommo! !-erst#!-i!( ,et+ee! the #-itor #!-

m#!#(eme!t #!-* +here #$$ro$ri#te* those "h#r(e- +ith (o)er!#!"e of the terms

of the #-it e!(#(eme!t&

DEFINITIONS

For $r$oses of the SAs* the follo+i!( term h#s the me#!i!( #ttri,te- ,elo+8

Pre"o!-itio!s for #! #-it The se ,% m#!#(eme!t of #! #""e$t#,le fi!#!"i#l

re$orti!( fr#me+or:5i! the $re$#r#tio! of the fi!#!"i#l st#teme!ts #!- the #(reeme!t

of m#!#(eme!t #!-* +here #$$ro$ri#te* those "h#r(e- +ith (o)er!#!"e to the $remise?

o! +hi"h #! #-it is "o!-"te-&

For the $r$oses of this SA* refere!"es to m#!#(eme!t shol- ,e re#- here#fter #s

m#!#(eme!t #!-* +here #$$ro$ri#te* those "h#r(e- +ith (o)er!#!"e&

REKUIREMENTS

PRECONDITIONS FOR AN AUDIT

I! or-er to est#,lish +hether the $re"o!-itio!s for #! #-it #re $rese!t* the #-itor

sh#ll8

SHETH N&6&T&T COLLEGE OF COMMERCE PAGE 9>


29/47


30/47


OTHER FACTORS AFFECTING AUDIT ENGAGEMENT ACCEPTANCE

>& If the $re"o!-itio!s for #! #-it #re !ot $rese!t* the #-itor sh#ll -is"ss the m#tter

+ith m#!#(eme!t& U!less re3ire- ,% l#+ or re(l#tio! to -o so* the #-itor sh#ll !ot

#""e$t the $ro$ose- #-it e!(#(eme!t8

/#0 If the #-itor h#s -etermi!e- th#t the fi!#!"i#l re$orti!( fr#me+or: to ,e #$$lie-

i! the $re$#r#tio! of the fi!#!"i#l st#teme!ts is !#""e$t#,le* e'"e$t #s $ro)i-e- i!

$#r#(r#$h 74B or

/,0 If the #(reeme!t referre- to i! $#r#(r#$h ;/,0 h#s !ot ,ee! o,t#i!e-&

AGREEMENT ON AUDIT ENGAGEMENT TERMS

The #-itor sh#ll #(ree the terms of the #-it e!(#(eme!t +ith m#!#(eme!t or those

"h#r(e- +ith (o)er!#!"e* #s #$$ro$ri#te& S,.e"t to $#r#(r#$h 77* the #(ree- terms of

the #-it e!(#(eme!t sh#ll ,e re"or-e- i! #! #-it e!(#(eme!t letter or other sit#,le

form of +ritte! #(reeme!t #!- sh#ll i!"l-e8 /Ref8 P#r#& A971A950

/#0 The o,.e"ti)e #!- s"o$e of the #-it of the fi!#!"i#l st#teme!tsB

/,0 The res$o!si,ilities of the #-itorB

/"0 The res$o!si,ilities of m#!#(eme!tB

/-0 I-e!tifi"#tio! of the #$$li"#,le fi!#!"i#l re$orti!( fr#me+or: for the $re$#r#tio!

of the fi!#!"i#l st#teme!tsB #!-

/e0 Refere!"e to the e'$e"te- form #!- "o!te!t of #!% re$orts to ,e isse- ,% the

#-itor #!- # st#teme!t th#t there m#% ,e "ir"mst#!"es i! +hi"h # re$ort m#%

-iffer from its e'$e"te- form #!- "o!te!t&



31/47


RECURRING AUDITS

O! re"rri!( #-its* the #-itor sh#ll #ssess +hether "ir"mst#!"es re3ire the terms of

the #-it e!(#(eme!t to ,e re)ise- #!- +hether there is # !ee- to remi!- the e!tit% of

the e'isti!( terms of the #-it e!(#(eme!t&

ACCEPTANCE OF A CHANGE IN THE TERMS OF THE AUDIT ENGAGEMENT

The #-itor sh#ll !ot #(ree to # "h#!(e i! the terms of the #-it e!(#(eme!t +here

there is !o re#so!#,le .stifi"#tio! for -oi!( so& If* $rior to "om$leti!( the #-it

e!(#(eme!t* the #-itor is re3este- to "h#!(e the #-it e!(#(eme!t to #! e!(#(eme!tth#t "o!)e%s # lo+er le)el of #ssr#!"e* the #-itor sh#ll -etermi!e +hether there is

re#so!#,le .stifi"#tio! for -oi!( so& If the terms of the #-it e!(#(eme!t #re "h#!(e-*

the #-itor #!- m#!#(eme!t sh#ll #(ree o! #!- re"or- the !e+ terms of the

e!(#(eme!t i! #! e!(#(eme!t letter or other sit#,le form of +ritte! #(reeme!t& If the

#-itor is !#,le to #(ree to # "h#!(e of the terms of the #-it e!(#(eme!t #!- is !ot

$ermitte- ,% m#!#(eme!t to "o!ti!e the ori(i!#l #-it e!(#(eme!t* the #-itor sh#ll8

/#0 With-r#+ from the #-it e!(#(eme!t +here $ossi,le !-er #$$li"#,le l#+ or

re(l#tio!B #!-

/,0 Determi!e +hether there is #!% o,li(#tio!* either "o!tr#"t#l or other+ise* to

re$ort the "ir"mst#!"es to other $#rties* s"h #s those "h#r(e- +ith (o)er!#!"e*

o+!ers or re(l#tors&

FINANCIAL REPORTING STANDARDS; SUPPLEMENTED @Y LAW OR

REGULATION

If fi!#!"i#l re$orti!( st#!-#r-s est#,lishe- ,% #! #thorie- or re"o(!ie- st#!-#r-s

setti!( or(#!i#tio! #re s$$leme!te- ,% l#+ or re(l#tio!* the #-itor sh#ll -etermi!e

+hether there #re #!% "o!fli"ts ,et+ee! the fi!#!"i#l re$orti!( st#!-#r-s #!- the

#--itio!#l re3ireme!ts& If s"h "o!fli"ts e'ist* the #-itor sh#ll -is"ss +ith

m#!#(eme!t the !#tre of the #--itio!#l re3ireme!ts #!- sh#ll #(ree +hether8



32/47


/#0 The #--itio!#l re3ireme!ts "#! ,e met thro(h #--itio!#l -is"losres i! the

fi!#!"i#l st#teme!tsB or

/,0 The -es"ri$tio! of the #$$li"#,le fi!#!"i#l re$orti!( fr#me+or: i! the fi!#!"i#l

st#teme!ts "#! ,e #me!-e- #""or-i!(l%& If !either of the #,o)e #"tio!s is $ossi,le*

the #-itor sh#ll -etermi!e +hether it +ill ,e !e"ess#r% to mo-if% the #-itors

o$i!io! i! #""or-#!"e +ith SA =?/re)ise-0

FINANCIAL REPORTING FRAMEWOR6 PRESCRI@ED @Y LAW OR

REGULATION

If the #-itor h#s -etermi!e- th#t the fi!#!"i#l re$orti!( fr#me+or: $res"ri,e- ,% l#+

or re(l#tio! +ol- ,e !#""e$t#,le ,t for the f#"t th#t it is $res"ri,e- ,% l#+ or

re(l#tio!* the #-itor sh#ll #""e$t the #-it e!(#(eme!t o!l% if the follo+i!( "o!-itio!s

#re $rese!t8

/#0 M#!#(eme!t #(rees to $ro)i-e #--itio!#l -is"losres i! the fi!#!"i#l st#teme!ts

re3ire- to #)oi- the fi!#!"i#l st#teme!ts ,ei!( misle#-i!(B #!-

/,0 It is re"o(!ie- i! the terms of the #-it e!(#(eme!t th#t8

/i0 The #-itors re$ort o! the fi!#!"i#l st#teme!ts +ill i!"or$or#te #! Em$h#sis

of M#tter $#r#(r#$h* -r#+i!( sers #tte!tio! to the #--itio!#l -is"losres* i!

#""or-#!"e +ith SA =; /re)ise-0 B #!-

/ii0 U!less the #-itor is re3ire- ,% l#+ or re(l#tio! to e'$ress the

A-itors o$i!io! o! the fi!#!"i#l st#teme!ts ,% si!( the $hr#ses $rese!t

f#irl%* i! #ll m#teri#l res$e"ts* or (i)e # tre #!- f#ir )ie+ i! #""or-#!"e

+ith the #$$li"#,le fi!#!"i#l re$orti!( fr#me+or:* the #-itors o$i!io! o! the

fi!#!"i#l st#teme!ts +ill !ot i!"l-e s"h $hr#ses& If the "o!-itio!s otli!e- i!

$#r#(r#$h 74 #re !ot $rese!t #!- the #-itor is re3ire- ,% l#+ or re(l#tio!

to !-ert#:e the #-it e!(#(eme!t* the #-itor sh#ll8



33/47


/#0 E)#l#te the effe"t of the misle#-i!( !#tre of the fi!#!"i#l st#teme!ts o! the

#-itors re$ortB #!-

/,0 I!"l-e #$$ro$ri#te refere!"e to this m#tter i! the terms of the #-it e!(#(eme!t&

AUDITORS REPORT PRESCRI@ED @Y LAW OR REGULATION

I! some "#ses* the l#+ or re(l#tio! #$$li"#,le to the e!tit% $res"ri,es the l#%ot or

+or-i!( of the #-itors re$ort i! # form or i! terms th#t #re si(!ifi"#!tl% -iffere!t

from the re3ireme!ts of SAs& I! these "ir"mst#!"es* the #-itor sh#ll e)#l#te8

/#0 Whether sers mi(ht mis!-erst#!- the #ssr#!"e o,t#i!e- from the #-it of the

fi!#!"i#l st#teme!ts #!-* if so*

/,0 Whether #--itio!#l e'$l#!#tio! i! the #-itors re$ort "#! miti(#te $ossi,le

mis!-erst#!-i!(&

If the #-itor "o!"l-es th#t #--itio!#l e'$l#!#tio! i! the #-itors re$ort "#!!ot

miti(#te $ossi,le mis!-erst#!-i!(* the #-itor sh#ll !ot #""e$t the #-it e!(#(eme!t*

!less re3ire- ,% l#+ or re(l#tio! to -o so& A! #-it "o!-"te- i! #""or-#!"e +ith

s"h l#+ or re(l#tio! -oes !ot "om$l% +ith SAs& A""or-i!(l%* the #-itor sh#ll !ot

i!"l-e #!% refere!"e +ithi! the #-itors re$ort to the #-it h#)i!( ,ee! "o!-"te- i!

#""or-#!"e +ith SAs&



34/47


SA


35/47


REKUIREMENTS81

7& IN2OL2EMENT OF 6EY ENGAGEMENT TEAM MEM@ERS

The e!(#(eme!t $#rt!er #!- other :e% mem,ers of the e!(#(eme!t te#m sh#ll ,e

i!)ol)e- i! $l#!!i!( the #-it* i!"l-i!( $l#!!i!( #!- $#rti"i$#ti!( i! the -is"ssio!

#mo!( e!(#(eme!t te#m mem,ers&

9& PRELIMINARY ENGAGEMENT ACTI2ITIES

The #-itor sh#ll !-ert#:e the follo+i!( #"ti)ities #t the ,e(i!!i!( of the "rre!t #-it

e!(#(eme!t8

Performi!( $ro"e-res re3ire- ,% SA 99


36/47


As"ert#i! the re$orti!( o,.e"ti)es of the e!(#(eme!t to $l#! the timi!( of the

#-it #!- the !#tre of the "omm!i"#tio!s re3ire-B

Co!si-er the f#"tors th#t* i! the #-itors $rofessio!#l .-(me!t* #re si(!ifi"#!t

i! -ire"ti!( the e!(#(eme!t te#ms effortsB

Co!si-er the reslts of $relimi!#r% e!(#(eme!t #"ti)ities #!-* +here #$$li"#,le*

+hether :!o+le-(e (#i!e- o! other e!(#(eme!ts $erforme- ,% the e!(#(eme!t

$#rt!er for the e!tit% is rele)#!tB #!-

As"ert#i! the !#tre* timi!( #!- e'te!t

@& AUDIT PLAN8

The #-itor sh#ll -e)elo$ #! #-it $l#! th#t sh#ll i!"l-e # -es"ri$tio! of8

The !#tre* timi!( #!- e'te!t of $l#!!e- ris: #ssessme!t $ro"e-res* #s

-etermi!e- !-er SA


37/47


The #-itor sh#ll -o"me!t81

The o)er#ll #-it str#te(%

The #-it $l#!B #!-

A!% si(!ifi"#!t "h#!(es m#-e -ri!( the #-it e!(#(eme!t to the o)er#ll #-it

str#te(% or the #-it $l#!* #!- the re#so!s for s"h "h#!(es& /Ref8 P#r#& A7=1

A90

F& ADDITIONAL CONSIDERATION IN INITIAL AUDIT ENGAGEMENTS

The #-itor sh#ll !-ert#:e the follo+i!( #"ti)ities $rior to st#rti!( #! i!iti#l #-it8

Performi!( $ro"e-res re3ire- ,% SA 99 re(#r-i!( the #""e$t#!"e of the "lie!t

rel#tio!shi$ #!- the s$e"ifi" #-it e!(#(eme!tB #!-

Comm!i"#ti!( +ith the $re-e"essor #-itor* +here there h#s ,ee! # "h#!(e of

#-itors* i! "om$li#!"e +ith rele)#!t ethi"#l re3ireme!ts&

APPLICATION AND OTHER EQPLANATORY MATERIAL

7& ROLE AND TIMING OF PLANNING

A& ROLE

A-e3#te $l#!!i!( ,e!efits the #-it of fi!#!"i#l st#teme!ts i! se)er#l +#%s* i!"l-i!(

the follo+i!(8

Hel$i!( the #-itor to -e)ote #$$ro$ri#te #tte!tio! to im$ort#!t #re#s of the

#-it&

Hel$i!( the #-itor i-e!tif% #!- resol)e $ote!ti#l $ro,lems o! # timel% ,#sis&

Hel$i!( the #-itor $ro$erl% or(#!ise #!- m#!#(e the #-it e!(#(eme!t so th#t

it is $erforme- i! #! effe"ti)e #!- effi"ie!t m#!!er&

Assisti!( i! the sele"tio! of e!(#(eme!t te#m mem,ers +ith #$$ro$ri#te le)els of

"#$#,ilities #!- "om$ete!"e to res$o!- to #!ti"i$#te- ris:s* #!- the $ro$er

#ssi(!me!t of +or: to them&



38/47


F#"ilit#ti!( the -ire"tio! #!- s$er)isio! of e!(#(eme!t te#m mem,ers #!- the

re)ie+ of their +or:&

Assisti!(* +here #$$li"#,le* i! "oor-i!#tio! of +or: -o!e ,% #-itors of

"om$o!e!ts= #!- e'$erts&

@& FACTOR

The !#tre #!- e'te!t of $l#!!i!( #"ti)ities +ill )#r% #""or-i!( to the sie #!-

"om$le'it% of the e!tit%* the :e% e!(#(eme!t te#m mem,ers $re)ios e'$erie!"e +ith

the e!tit%* #!- "h#!(es i! "ir"mst#!"es th#t o""r -ri!( the #-it e!(#(eme!t&

C& TIMING

Pl#!!i!( is !ot # -is"rete $h#se of #! #-it* ,t r#ther # "o!ti!#l #!- iter#ti)e $ro"ess

th#t ofte! ,e(i!s shortl% #fter /or i! "o!!e"tio! +ith0 the "om$letio! of the $re)ios

#-it #!- "o!ti!es !til the "om$letio! of the "rre!t #-it e!(#(eme!t& Pl#!!i!(*

ho+e)er* i!"l-es "o!si-er#tio! of the timi!( of "ert#i! #"ti)ities #!- #-it $ro"e-res

th#t !ee- to ,e "om$lete- $rior to the $erform#!"e of frther #-it $ro"e-res& For

e'#m$le* $l#!!i!( i!"l-es the !ee- to "o!si-er* $rior to the #-itors i-e!tifi"#tio! #!-

#ssessme!t of the ris:s of m#teri#l misst#teme!t* s"h m#tters #s8

The #!#l%ti"#l $ro"e-res to ,e #$$lie- #s ris: #ssessme!t $ro"e-res&

O,t#i!i!( # (e!er#l !-erst#!-i!( of the le(#l #!- re(l#tor% fr#me+or:

#$$li"#,le to the e!tit% #!- ho+ the e!tit% is "om$l%i!( +ith th#t fr#me+or:&

The -etermi!#tio! of m#teri#lit%&

The i!)ol)eme!t of e'$erts&

The $erform#!"e of other ris: #ssessme!t $ro"e-res&

D& DISCUSSIONS WITH MANAGEMENT81



39/47


The #-itor m#% -e"i-e to -is"ss eleme!ts of $l#!!i!( +ith the e!tit%s

m#!#(eme!t to f#"ilit#te the "o!-"t #!- m#!#(eme!t of the #-it e!(#(eme!t /for

e'#m$le* to "oor-i!#te some of the $l#!!e- #-it $ro"e-res +ith the +or: of the

e!tit%s $erso!!el0& Altho(h these -is"ssio!s ofte! o""r* the o)er#ll #-it str#te(%

#!- the #-it $l#! rem#i! the #-itors res$o!si,ilit%& Whe! -is"ssi!( m#tters

i!"l-e- i! the o)er#ll #-it str#te(% or #-it $l#!* "#re is re3ire- i! or-er !ot to

"om$romise the effe"ti)e!ess of the #-it& For e'#m$le* -is"ssi!( the !#tre #!-

timi!( of -et#ile- #-it $ro"e-res +ith m#!#(eme!t m#% "om$romise the

effe"ti)e!ess of the #-it ,% m#:i!( the #-it $ro"e-res too $re-i"t#,le&

9& PRELIMINARY ENGAGEMENT ACTI2ITIES81

NEED81

Performi!( the $relimi!#r% e!(#(eme!t #"ti)ities s$e"ifie- i! $#r#(r#$h ? #t the

,e(i!!i!( of the "rre!t #-it e!(#(eme!t #ssists the #-itor i! i-e!tif%i!( #!-

e)#l#ti!( e)e!ts or "ir"mst#!"es th#t m#% #-)ersel% #ffe"t the #-itors #,ilit% to

$l#! #!- $erform the #-it e!(#(eme!t&

@ENEFITS81

Performi!( these $relimi!#r% e!(#(eme!t #"ti)ities e!#,les the #-itor to $l#! #! #-it

e!(#(eme!t for +hi"h* for e'#m$le8

The #-itor m#i!t#i!s the !e"ess#r% i!-e$e!-e!"e #!- #,ilit% to $erform the

e!(#(eme!t&

There #re !o isses +ith m#!#(eme!t i!te(rit% th#t m#% #ffe"t the #-itors

+illi!(!ess to "o!ti!e the e!(#(eme!t&

There is !o mis!-erst#!-i!( +ith the "lie!t #s to the terms of the e!(#(eme!t&

Performi!( i!iti#l $ro"e-res o! ,oth "lie!t "o!ti!#!"e #!- e)#l#tio! of

ethi"#l re3ireme!ts /i!"l-i!( i!-e$e!-e!"e0 #t the ,e(i!!i!( of the "rre!t



40/47


#-it e!(#(eme!t me#!s th#t the% #re "om$lete- $rior to the $erform#!"e of

other si(!ifi"#!t #"ti)ities for the "rre!t #-it e!(#(eme!t& For "o!ti!i!(

#-it e!(#(eme!ts* s"h i!iti#l $ro"e-res ofte! o""r shortl% #fter /or i!

"o!!e"tio! +ith0 the "om$letio! of the $re)ios #-it&


41/47


The #-it $l#! is more -et#ile- th#! the o)er#ll #-it str#te(% th#t i!"l-es the

!#tre* timi!( #!- e'te!t of #-it $ro"e-res ,% e!(#(eme!t te#m mem,ers&

Pl#!!i!( for these #-it $ro"e-res t#:es $l#"e o)er the "orse of the #-it #s

the #-it $l#! for the e!(#(eme!t -e)elo$s& For e'#m$le* $l#!!i!( of the

#-itors #ssessme!t $ro"e-res o""rs e#rl% i! the #-it $ro"ess& Ho+e)er*

$l#!!i!( the !#tre* timi!( #!- e'te!t of s$e"ifi" frther #-it $ro"e-res

-e$e!-s o! the ot"ome of ris: #ssessme!t $ro"e-res& I! #--itio!* the #-itor

m#% ,e(i! the e'e"tio! of frther #-it $ro"e-res for some "l#sses of

tr#!s#"tio!s* #""o!t ,#l#!"es #!- -is"losres ,efore $l#!!i!( #ll rem#i!i!(

frther #-it $ro"e-res&

?& CHANGES TO PLANNING DECISIONS DURING THE COURSE OF THEAUDIT

As # reslt of !e'$e"te- e)e!ts* "h#!(es i! "o!-itio!s* or the #-it e)i-e!"e

o,t#i!e- from the reslts of #-it $ro"e-res* the #-itor m#% !ee- to mo-if% the

o)er#ll #-it str#te(% #!- #-it $l#! #!- there,% the reslti!( $l#!!e- !#tre*

timi!( #!- e'te!t of frther #-it $ro"e-res* ,#se- o! the re)ise- "o!si-er#tio! of

#ssesse- ris:s& This m#% ,e the "#se +he! i!form#tio! "omes to the #-itors

#tte!tio! th#t -iffers si(!ifi"#!tl% from the i!form#tio! #)#il#,le +he! the #-itor

$l#!!e- the #-it $ro"e-res& For e'#m$le* #-it e)i-e!"e o,t#i!e- thro(h the

$erform#!"e of s,st#!ti)e $ro"e-res m#% "o!tr#-i"t the #-it e)i-e!"e o,t#i!e-

thro(h tests of "o!trols&

;& DIRECTION* SUPER2ISION AND RE2IEW

The !#tre* timi!( #!- e'te!t of the -ire"tio! #!- s$er)isio! of e!(#(eme!t te#m

mem,ers #!- re)ie+ of their +or: )#r% -e$e!-i!( o! m#!% f#"tors* i!"l-i!(8

The sie #!- "om$le'it% of the e!tit%&



42/47


The #re# of the #-it&

The #ssesse- ris:s of m#teri#l misst#teme!t /for e'#m$le* #! i!"re#se i! the

#ssesse- ris: of m#teri#l misst#teme!t for # (i)e! #re# of the i #-it or-i!#ril%

re3ires # "orres$o!-i!( i!"re#se i! the e'te!t #!- timeli!ess of -ire"tio! #!-

s$er)isio! of e!(#(eme!t te#m mem,ers* #!- # more -et#ile- re)ie+ of their

+or:0&

The "#$#,ilities #!- "om$ete!"e of the i!-i)i-#l te#m mem,ers $erformi!( the

#-it +or:&

SA 99 "o!t#i!s frther (i-#!"e o! the -ire"tio!* s$er)isio! #!- re)ie+ of #-it

+or:&

=& DOCUMENTATION

RECORD OF DECISIONS

The -o"me!t#tio! of the o)er#ll #-it str#te(% is # re"or- of the :e% -e"isio!s

"o!si-ere- !e"ess#r% to $ro$erl% $l#! the #-it #!- to "omm!i"#te si(!ifi"#!t m#tters

to the e!(#(eme!t te#m& For e'#m$le* the #-itor m#% smm#rie the o)er#ll #-it

str#te(% i! the form of # memor#!-m th#t "o!t#i!s :e% -e"isio!s re(#r-i!( the o)er#ll

s"o$e* timi!( #!- "o!-"t of the #-it&

RECORD OF PROCEDURE

The -o"me!t#tio! of the #-it $l#! is # re"or- of the $l#!!e- !#tre* timi!( #!-

e'te!t of ris: #ssessme!t $ro"e-res #!- frther #-it $ro"e-res #t the #ssertio! le)el

i! res$o!se to the #ssesse- ris:s& It #lso ser)es #s # re"or- of the $ro$er $l#!!i!( of the

#-it $ro"e-res th#t "#! ,e re)ie+e- #!- #$$ro)e- $rior to their $erform#!"e& The

#-itor m#% se st#!-#r- #-it $ro(r#ms #!-or #-it "om$letio! "he":lists* t#ilore-

#s !ee-e- to refle"t the $#rti"l#r e!(#(eme!t "ir"mst#!"es&

RECORD OF CHANGES



43/47


A re"or- of the si(!ifi"#!t "h#!(es to the o)er#ll #-it str#te(% #!- the #-it $l#!* #!-

reslti!( "h#!(es to the $l#!!e- !#tre* timi!( #!- e'te!t of #-it $ro"e-res* e'$l#i!s

+h% the si(!ifi"#!t "h#!(es +ere m#-e* #!- the o)er#ll str#te(% #!- #-it $l#! fi!#ll%

#-o$te- for the #-it& It #lso refle"ts the #$$ro$ri#te res$o!se to the si(!ifi"#!t "h#!(es

o""rri!( -ri!( the #-it&

>& ADDITIONAL CONSIDERATIONS IN INITIAL AUDIT ENGAGEMENTS

For i!iti#l #-its* #--itio!#l m#tters the #-itor m#% "o!si-er i! est#,lishi!( the

o)er#ll #-it str#te(% #!- #-it $l#! i!"l-e the follo+i!(8

U!less $rohi,ite- ,% l#+ or re(l#tio!* #rr#!(eme!ts to ,e m#-e +ith the

$re-e"essor #-itor* for e'#m$le* to re)ie+ the $re-e"essor #-itors +or:i!(

$#$ers& A!% m#.or isses /i!"l-i!( the #$$li"#tio! of #""o!ti!( $ri!"i$les or of

#-iti!( #!- re$orti!( st#!-#r-s0 -is"sse- +ith m#!#(eme!t i! "o!!e"tio!

+ith the i!iti#l sele"tio! #s #-itor* the "omm!i"#tio! of these m#tters to those

"h#r(e- +ith (o)er!#!"e #!- ho+ these m#tters #ffe"t the o)er#ll #-it str#te(%

#!- #-it $l#!&

The #-it $ro"e-res !e"ess#r% to o,t#i! sffi"ie!t #$$ro$ri#te #-it e)i-e!"e

re(#r-i!( o$e!i!( ,#l#!"es /see SA ?777* 7!iti#l E!(#(eme!ts 11 O$e!i!(

@#l#!"es0&

Other $ro"e-res re3ire- ,% the firms s%stem of 3#lit% "o!trol for i!iti#l

#-it e!(#(eme!ts /for e'#m$le* the firms s%stem of 3#lit% "o!trol m#% re3ire

the i!)ol)eme!t of #!other $#rt!er or se!ior i!-i)i-#l to re)ie+ the o)er#ll

#-it str#te(% $rior to "omme!"i!( si(!ifi"#!t #-it $ro"e-res or to re)ie+

re$orts $rior to their iss#!"e0&

4& SMALLER ENTITIES

A& RE2IEW OF WOR6

Whe! #! #-it is "#rrie- ot e!tirel% ,% the e!(#(eme!t $#rt!er* 3estio!s of -ire"tio!



44/47


45/47


The -is"ssio! +ith m#!#(eme!t #!- those "h#r(e- +ith (o)er!#!"e re(#r-i!(

the e'$e"te- t%$e #!- timi!( of re$orts to ,e isse- #!- other "omm!i"#tio!s*

,oth +ritte! #!- or#l* i!"l-i!( the #-itors re$ort* m#!#(eme!t letters #!-

"omm!i"#tio!s to those "h#r(e- +ith (o)er!#!"e&

The -is"ssio! +ith m#!#(eme!t re(#r-i!( the e'$e"te- "omm!i"#tio!s o! the

st#ts of #-it +or: thro(hot the e!(#(eme!t&

Comm!i"#tio! +ith #-itors of "om$o!e!ts re(#r-i!( the e'$e"te- t%$es #!-

timi!( of re$orts to ,e isse- #!- other "omm!i"#tio!s i! "o!!e"tio! +ith the

#-it of "om$o!e!ts&

The e'$e"te- !#tre #!- timi!( of "omm!i"#tio!s #mo!( e!(#(eme!t te#m

mem,ers* i!"l-i!( the !#tre #!- timi!( of te#m meeti!(s #!- timi!( of the

re)ie+ of +or: $erforme-&

Whether there #re #!% other e'$e"te- "omm!i"#tio!s +ith thir- $#rties*

i!"l-i!( #!% st#ttor% or "o!tr#"t#l re$orti!( res$o!si,ilities #risi!( from the

#-it&

9& SIGNIFICANT FACTORS* PRELIMINARY ENGAGEMENT ACTI2ITIES*

AND 6NOWLEDGE GAINED ON OTHER ENGAGEMENTS

The -etermi!#tio! of #$$ro$ri#te m#teri#lit% le)els* i!"l-i!(8

1 Setti!( m#teri#lit% for $l#!!i!( $r$oses&

1 Setti!( #!- "omm!i"#ti!( m#teri#lit% for #-itors of "om$o!e!ts&

1 Re"o!si-eri!( m#teri#lit% #s #-it $ro"e-res #re $erforme- -ri!( the "orse

of the #-it&

1 Prelimi!#r% i-e!tifi"#tio! of m#teri#l "om$o!e!ts #!- #""o!t ,#l#!"es&

1 Prelimi!#r% i-e!tifi"#tio! of #re#s +here there m#% ,e # hi(her ris: of m#teri#l

misst#teme!t&



46/47


1 The im$#"t of the #ssesse- ris: of m#teri#l misst#teme!t #t the o)er#ll fi!#!"i#l

st#teme!t le)el o! -ire"tio!* s$er)isio! #!- re)ie+&

The m#!!er i! +hi"h the #-itor em$h#sies to e!(#(eme!t te#m mem,ers the

!ee- to m#i!t#i! # 3estio!i!( mi!- #!- to e'er"ise $rofessio!#l s:e$tism i!

(#theri!( #!- e)#l#ti!( #-it e)i-e!"e&

Reslts of $re)ios #-its th#t i!)ol)e- e)#l#ti!( the o$er#ti!( effe"ti)e!ess of

i!ter!#l "o!trol* i!"l-i!( the !#tre of i-e!tifie- +e#:!ess #!- #"tio! t#:e! to

#--ress them&

The -is"ssio! of m#tters th#t m#% #ffe"t the #-it +ith firm $erso!!el

res$o!si,le for $erformi!( other ser)i"es to the e!tit%&

E)i-e!"e of m#!#(eme!ts "ommitme!t to the -esi(!* im$leme!t#tio! #!-

m#i!te!#!"e of so!- i!ter!#l "o!trol* i!"l-i!( e)i-e!"e of #$$ro$ri#te

-o"me!t#tio! of s"h i!ter!#l "o!trol&

2olme of tr#!s#"tio!s* +hi"h m#% -etermi!e +hether it is more effi"ie!t for the

#-itor to rel% o! i!ter!#l "o!trol&

Im$ort#!"e #tt#"he- to i!ter!#l "o!trol thro(hot the e!tit% to the s""essfl

o$er#tio! of the ,si!ess&

Si(!ifi"#!t ,si!ess -e)elo$me!ts #ffe"ti!( the e!tit%* i!"l-i!( "h#!(es i!

i!form#tio! te"h!olo(% #!- ,si!ess $ro"esses* "h#!(es i! :e% m#!#(eme!t* #!-

#"3isitio!s* mer(ers #!- -i)estme!ts&

Si(!ifi"#!t i!-str% -e)elo$me!ts s"h #s "h#!(es i! i!-str% re(l#tio!s #!-

!e+ re$orti!( re3ireme!ts&

Si(!ifi"#!t "h#!(es i! the fi!#!"i#l re$orti!( fr#me+or:* s"h #s "h#!(es i!

#""o!ti!( st#!-#r-s&

Other si(!ifi"#!t rele)#!t -e)elo$me!ts* s"h #s "h#!(es i! the le(#l

e!)iro!me!t #ffe"ti!( the e!tit%&


47/47


The sele"tio! of the e!(#(eme!t te#m /i!"l-i!(* +here !e"ess#r%* the e!(#(eme!t

3#lit% "o!trol re)ie+er0 #!- the #ssi(!me!t of #$$ro$ri#tel% e'$erie!"e- te#m

mem,ers to #re#s +here there m#% ,e hi(her ris:s of m#teri#l misst#teme!ts&

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