CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA
CA. PRAMOD JAINFCA, FCS, FCMA, LL.B, MIMA, DISA
LUNAWAT & CO.Chartered Accountants
LUNAWAT & CO.Chartered Accountants2nd July 2016, AICAS Student Council2nd July 2016, AICAS Student Council
CARO 2016 & IFCCARO 2016 & IFC
Lunawat & Co.
AUDIT REPORTSAUDIT REPORTSAUDIT REPORTSAUDIT REPORTS�Under Companies ActUnder Companies ActUnder Companies ActUnder Companies Act
�CAROCAROCAROCARO
�NonNonNonNon---- CAROCAROCAROCARO
�OthersOthersOthersOthers
�Tax AuditTax AuditTax AuditTax Audit
�Form 3 CAForm 3 CAForm 3 CAForm 3 CA
�Form 3 CBForm 3 CBForm 3 CBForm 3 CB
�LLPLLPLLPLLP
�SocietySocietySocietySociety
Lunawat & Co.
REPORT REPORT REPORT REPORT ---- COMPANIESCOMPANIESCOMPANIESCOMPANIES� Inquiry u/s 143(1) Inquiry u/s 143(1) Inquiry u/s 143(1) Inquiry u/s 143(1) –––– 6 points 6 points 6 points 6 points –––– only only only only
to be reported when comments to be reported when comments to be reported when comments to be reported when comments
requiredrequiredrequiredrequired
�Report to include:Report to include:Report to include:Report to include:
�Matters specified u/s 143(3) Matters specified u/s 143(3) Matters specified u/s 143(3) Matters specified u/s 143(3) ---- 9 points9 points9 points9 points
�Matters specified in Rules Matters specified in Rules Matters specified in Rules Matters specified in Rules ---- 3 points3 points3 points3 points
�Any Any Any Any order made order made order made order made u/s 143(3) for u/s 143(3) for u/s 143(3) for u/s 143(3) for
specified Companies in consultation specified Companies in consultation specified Companies in consultation specified Companies in consultation
with NFRA with NFRA with NFRA with NFRA –––– CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– 16 points16 points16 points16 points
Lunawat & Co.
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY
�Applicable to all including Foreign Co. Applicable to all including Foreign Co. Applicable to all including Foreign Co. Applicable to all including Foreign Co.
for a/for a/for a/for a/cingcingcingcing period after 1.4.15 except:period after 1.4.15 except:period after 1.4.15 except:period after 1.4.15 except:
�Banking Co. / Insurance Co.Banking Co. / Insurance Co.Banking Co. / Insurance Co.Banking Co. / Insurance Co.
�Section 8 Co.Section 8 Co.Section 8 Co.Section 8 Co.
�OPCOPCOPCOPC
�Small Co.Small Co.Small Co.Small Co.
�Not applicable on CFSNot applicable on CFSNot applicable on CFSNot applicable on CFS
�Branch auditor also covered, if applicable Branch auditor also covered, if applicable Branch auditor also covered, if applicable Branch auditor also covered, if applicable
to co.to co.to co.to co.
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY
�P. Co P. Co P. Co P. Co not being sub. or holding of not being sub. or holding of not being sub. or holding of not being sub. or holding of
Pub. CoPub. CoPub. CoPub. Co. whose:. whose:. whose:. whose:
�Paid up Capital & Reserves < Paid up Capital & Reserves < Paid up Capital & Reserves < Paid up Capital & Reserves < 1 Cr 1 Cr 1 Cr 1 Cr as as as as
at B/s date; andat B/s date; andat B/s date; andat B/s date; and
�Bonus, Pref. shares to be included Bonus, Pref. shares to be included Bonus, Pref. shares to be included Bonus, Pref. shares to be included
�Share Application money !!Share Application money !!Share Application money !!Share Application money !!
�All reserves to be included including All reserves to be included including All reserves to be included including All reserves to be included including
revaluation reserverevaluation reserverevaluation reserverevaluation reserve
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY� P. Co P. Co P. Co P. Co not being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Co. whose:. whose:. whose:. whose:
�Outstanding Loans Outstanding Loans Outstanding Loans Outstanding Loans ---- Bank or FIs < Bank or FIs < Bank or FIs < Bank or FIs < 1 Cr during 1 Cr during 1 Cr during 1 Cr during
FYFYFYFY; and; and; and; and
�All borrowings included All borrowings included All borrowings included All borrowings included –––– non fund based non fund based non fund based non fund based –––– to to to to
extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved extent devolved, invoked guarantees & devolved
LCsLCsLCsLCs
�TL TL TL TL –––– interest accrued & due only to be considered interest accrued & due only to be considered interest accrued & due only to be considered interest accrued & due only to be considered
�CC CC CC CC –––– balance on any day as per booksbalance on any day as per booksbalance on any day as per booksbalance on any day as per books
�OD against FD included OD against FD included OD against FD included OD against FD included
�Outstanding due of Credit card also includedOutstanding due of Credit card also includedOutstanding due of Credit card also includedOutstanding due of Credit card also included
�Foreign banks Foreign banks Foreign banks Foreign banks covered covered covered covered ---- FIs include NBFCFIs include NBFCFIs include NBFCFIs include NBFC
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– APPLICABILITYAPPLICABILITYAPPLICABILITYAPPLICABILITY
�Pvt.Pvt.Pvt.Pvt. Co Co Co Co not being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Conot being sub. or holding of Pub. Co. . . .
whose:whose:whose:whose:
�Total Revenue (including from discontinuing Total Revenue (including from discontinuing Total Revenue (including from discontinuing Total Revenue (including from discontinuing
operations < 10 crores as per Financial operations < 10 crores as per Financial operations < 10 crores as per Financial operations < 10 crores as per Financial
Statements as per Statements as per Statements as per Statements as per SchSchSchSch IIIIIIIIIIII
�Other income includedOther income includedOther income includedOther income included
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�1(a) 1(a) 1(a) 1(a) ---- PPPProper roper roper roper records records records records ---- full particulars, full particulars, full particulars, full particulars,
quantitative details and situation of quantitative details and situation of quantitative details and situation of quantitative details and situation of FA.FA.FA.FA.
� FAR in electronic form if FAR in electronic form if FAR in electronic form if FAR in electronic form if 2 2 2 2 conditions conditions conditions conditions satisfiedsatisfiedsatisfiedsatisfied::::
�CCCControls ontrols ontrols ontrols &&&& security measures in security measures in security measures in security measures in Co. are Co. are Co. are Co. are such that once such that once such that once such that once
finalised, finalised, finalised, finalised, FAR FAR FAR FAR cannot be altered without proper cannot be altered without proper cannot be altered without proper cannot be altered without proper
authorization authorization authorization authorization & & & & audit trail.audit trail.audit trail.audit trail.
�FAR can FAR can FAR can FAR can be retrieved in a legible formbe retrieved in a legible formbe retrieved in a legible formbe retrieved in a legible form....
� In case In case In case In case above conditions not satisfiedabove conditions not satisfiedabove conditions not satisfiedabove conditions not satisfied, , , , to obtain to obtain to obtain to obtain a a a a
duly authenticated printduly authenticated printduly authenticated printduly authenticated print----out of out of out of out of FAR. FAR. FAR. FAR. In case In case In case In case auditor auditor auditor auditor
decides to rely on decides to rely on decides to rely on decides to rely on electronically FAR electronically FAR electronically FAR electronically FAR ---- to maintain to maintain to maintain to maintain
adequate documentation adequate documentation adequate documentation adequate documentation evidencing evaluation evidencing evaluation evidencing evaluation evidencing evaluation of of of of
controls that seek to ensure controls that seek to ensure controls that seek to ensure controls that seek to ensure completenesscompletenesscompletenesscompleteness, accuracy , accuracy , accuracy , accuracy
& security & security & security & security of of of of registerregisterregisterregister.
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�1(b) 1(b) 1(b) 1(b) –––– Physical verification Physical verification Physical verification Physical verification –––– material material material material
discrepancydiscrepancydiscrepancydiscrepancy
�1(c1(c1(c1(c) ) ) ) ---- Whether Whether Whether Whether title deeds of immovable title deeds of immovable title deeds of immovable title deeds of immovable
properties properties properties properties are held in the name of the are held in the name of the are held in the name of the are held in the name of the
company. If not, provide details thereof company. If not, provide details thereof company. If not, provide details thereof company. If not, provide details thereof
� TDR / TDR / TDR / TDR / PltPltPltPlt & Mach imbedded in land not & Mach imbedded in land not & Mach imbedded in land not & Mach imbedded in land not immimmimmimm. Prop.. Prop.. Prop.. Prop.
� In case of conversionIn case of conversionIn case of conversionIn case of conversion
� In case of mortgage In case of mortgage In case of mortgage In case of mortgage –––– banksbanksbanksbanks
�Online if availableOnline if availableOnline if availableOnline if available
�Details Details Details Details –––– no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net no. of cases, leasehold/freehold, gross/net
block, remarksblock, remarksblock, remarksblock, remarks
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�2(a2(a2(a2(a)(b)(c) merged into 2 )(b)(c) merged into 2 )(b)(c) merged into 2 )(b)(c) merged into 2 ---- Whether physical Whether physical Whether physical Whether physical
verification of inventory has been verification of inventory has been verification of inventory has been verification of inventory has been
conducted at reasonable intervals by the conducted at reasonable intervals by the conducted at reasonable intervals by the conducted at reasonable intervals by the
management management management management & & & & whether any material whether any material whether any material whether any material
discrepancies were noticed and if so, how discrepancies were noticed and if so, how discrepancies were noticed and if so, how discrepancies were noticed and if so, how
they have been dealt with in they have been dealt with in they have been dealt with in they have been dealt with in books books books books of of of of a/ca/ca/ca/c
�3 3 3 3 ---- Whether company has granted any Whether company has granted any Whether company has granted any Whether company has granted any
loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms, loans, secured or unsecured to cos, firms,
LLPLLPLLPLLP or other parties covered is registered or other parties covered is registered or other parties covered is registered or other parties covered is registered
maintained u/s 189maintained u/s 189maintained u/s 189maintained u/s 189....[MBP[MBP[MBP[MBP----4] 4] 4] 4] –––– 184(2)/188184(2)/188184(2)/188184(2)/188
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�3 3 3 3 –––– MBP 4 MBP 4 MBP 4 MBP 4 ---- If If If If so, so, so, so,
� (a) (a) (a) (a) Whether Whether Whether Whether terms terms terms terms & conditions of grant of such & conditions of grant of such & conditions of grant of such & conditions of grant of such
loans are not prejudicial to loans are not prejudicial to loans are not prejudicial to loans are not prejudicial to company’s interestcompany’s interestcompany’s interestcompany’s interest; ; ; ;
�CY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standingCY only, terms s. 186(7), ability to lend, borrower standing
� (b) (b) (b) (b) Whether the schedule of repayment of principal & Whether the schedule of repayment of principal & Whether the schedule of repayment of principal & Whether the schedule of repayment of principal &
interest is stipulated interest is stipulated interest is stipulated interest is stipulated & whether repayments & & whether repayments & & whether repayments & & whether repayments &
interest are regular. interest are regular. interest are regular. interest are regular.
�Opening + CY, squared up loans covered Opening + CY, squared up loans covered Opening + CY, squared up loans covered Opening + CY, squared up loans covered –––– no. of cases no. of cases no. of cases no. of cases
� (c) If overdue amount (c) If overdue amount (c) If overdue amount (c) If overdue amount for more than 90 daysfor more than 90 daysfor more than 90 daysfor more than 90 days, whether , whether , whether , whether
reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the reasonable steps taken by Co. for recovery of the
principal & interest principal & interest principal & interest principal & interest
�Opening Opening Opening Opening + + + + CY CY CY CY –––– no. of cases, principal no. of cases, principal no. of cases, principal no. of cases, principal amtamtamtamt overdue, overdue, overdue, overdue, inttinttinttintt
overdue, steps takenoverdue, steps takenoverdue, steps takenoverdue, steps taken
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�4 4 4 4 –––– Internal control on purchase Internal control on purchase Internal control on purchase Internal control on purchase etcetcetcetc not not not not
requiredrequiredrequiredrequired
�4 4 4 4 ---- In respect of loans, investments and In respect of loans, investments and In respect of loans, investments and In respect of loans, investments and
guarantees, whether provisions of Section guarantees, whether provisions of Section guarantees, whether provisions of Section guarantees, whether provisions of Section
185 and 186 185 and 186 185 and 186 185 and 186 have have have have been complied with. If been complied with. If been complied with. If been complied with. If
not, provide details thereofnot, provide details thereofnot, provide details thereofnot, provide details thereof.
� 185 Details 185 Details 185 Details 185 Details –––– maximum amount and closing Bal.maximum amount and closing Bal.maximum amount and closing Bal.maximum amount and closing Bal.
� 186 186 186 186 –––– more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of more than 2 layers, exceeding limits, rate of
interest, other defaultsinterest, other defaultsinterest, other defaultsinterest, other defaults
5 5 5 5 –––– Deposits Deposits Deposits Deposits –––– no no no no change 73change 73change 73change 73----76767676
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�6 6 6 6 –––– Cost Records Cost Records Cost Records Cost Records –––– no no no no changechangechangechange
�7 7 7 7 –––– Statutory Dues Statutory Dues Statutory Dues Statutory Dues –––– Wealth tax Wealth tax Wealth tax Wealth tax (c) (c) (c) (c) IEPFIEPFIEPFIEPF
� Statutory Statutory Statutory Statutory due due due due arises arises arises arises out of a statuteout of a statuteout of a statuteout of a statute, rather , rather , rather , rather than than than than on on on on
an independent contractual or legal relationshipan independent contractual or legal relationshipan independent contractual or legal relationshipan independent contractual or legal relationship
� Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if Advance tax, TDS, Custom duty… if inttinttinttintt –––– irregular. irregular. irregular. irregular.
� Instalments granted by authority, penalty/Instalments granted by authority, penalty/Instalments granted by authority, penalty/Instalments granted by authority, penalty/inttinttinttintt coveredcoveredcoveredcovered
� Irregularity vs. due more than 6 monthsIrregularity vs. due more than 6 monthsIrregularity vs. due more than 6 monthsIrregularity vs. due more than 6 months
�Mere show cause Mere show cause Mere show cause Mere show cause –––– not disputed, S. 154 not disputed, S. 154 not disputed, S. 154 not disputed, S. 154 –––– disputeddisputeddisputeddisputed
� If no appeal filed If no appeal filed If no appeal filed If no appeal filed –––– undisputed duesundisputed duesundisputed duesundisputed dues
�Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or Disclose disputed amounts even if provision made or
amount deposited under protestamount deposited under protestamount deposited under protestamount deposited under protest
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�8 8 8 8 –––– AccumAccumAccumAccum. /cash losses. /cash losses. /cash losses. /cash losses–––– not requirednot requirednot requirednot required
�8 8 8 8 –––– Earlier 9 Earlier 9 Earlier 9 Earlier 9 –––– Default to Bank, FIs, Default to Bank, FIs, Default to Bank, FIs, Default to Bank, FIs, Govt.Govt.Govt.Govt. & & & &
debenture holders debenture holders debenture holders debenture holders ---- (in case of (in case of (in case of (in case of banks, banks, banks, banks, Govt. Govt. Govt. Govt.
and and and and FIs, FIs, FIs, FIs, lender wise details to be provided). lender wise details to be provided). lender wise details to be provided). lender wise details to be provided).
�Default Default Default Default –––– non payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCsnon payment of dues, FIs include NBFCs
� Period of default and amount lender wisePeriod of default and amount lender wisePeriod of default and amount lender wisePeriod of default and amount lender wise
� All defaults existing on B/S date All defaults existing on B/S date All defaults existing on B/S date All defaults existing on B/S date –––– even earlier yearseven earlier yearseven earlier yearseven earlier years
�Debentures Debentures Debentures Debentures –––– lenderlenderlenderlender----wise detail not requiredwise detail not requiredwise detail not requiredwise detail not required
�Govt. does not include Govt. does not include Govt. does not include Govt. does not include –––– Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU, Foreign govt., Govt. Co, PSU,
Boards, Boards, Boards, Boards, CCCCorporationsorporationsorporationsorporations
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES� 9 9 9 9 –––– NewNewNewNew ---- Whether moneys raised by way of Whether moneys raised by way of Whether moneys raised by way of Whether moneys raised by way of IPO IPO IPO IPO
/ FPO (including / FPO (including / FPO (including / FPO (including debt instruments) &debt instruments) &debt instruments) &debt instruments) & term loans term loans term loans term loans
were applied for were applied for were applied for were applied for purposes purposes purposes purposes for which those are for which those are for which those are for which those are
raised. If not, raised. If not, raised. If not, raised. If not, details details details details together with delays / together with delays / together with delays / together with delays /
default default default default & & & & subsequent subsequent subsequent subsequent rectification.rectification.rectification.rectification.
�Default Default Default Default ---- amount involved amount involved amount involved amount involved , nature , nature , nature , nature of of of of default, delay default, delay default, delay default, delay in in in in
utilizationutilizationutilizationutilization
� Co. to disclose end Co. to disclose end Co. to disclose end Co. to disclose end use of use of use of use of IPO/FPO in notes & auditor IPO/FPO in notes & auditor IPO/FPO in notes & auditor IPO/FPO in notes & auditor
to to to to verify verify verify verify –––– see see see see SEBI (Listing SEBI (Listing SEBI (Listing SEBI (Listing Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.Obl. & Dis. Req.) Reg.
� Temporary investment (FDR) to be reportedTemporary investment (FDR) to be reportedTemporary investment (FDR) to be reportedTemporary investment (FDR) to be reported
� Term Loans from Private PartiesTerm Loans from Private PartiesTerm Loans from Private PartiesTerm Loans from Private Parties
� If against property, FDR, If against property, FDR, If against property, FDR, If against property, FDR, etcetcetcetc –––– no specific purposeno specific purposeno specific purposeno specific purpose
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– CHANGESCHANGESCHANGESCHANGES�10 10 10 10 ---- Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud Whether any fraud by Co. or any fraud
on Co. by its on Co. by its on Co. by its on Co. by its officers/ employees officers/ employees officers/ employees officers/ employees has been has been has been has been
noticed or reported during the year; If yes, noticed or reported during the year; If yes, noticed or reported during the year; If yes, noticed or reported during the year; If yes,
nature and amount involved be indicatednature and amount involved be indicatednature and amount involved be indicatednature and amount involved be indicated
�Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. Only to report ‘noticed or reported’ frauds. 143(12143(12143(12143(12) ) ) )
frauds to frauds to frauds to frauds to CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be CG/AC. Reported frauds u/s 143(12) to be
reported not suspected fraudsreported not suspected fraudsreported not suspected fraudsreported not suspected frauds
�Management fraud vs. Employee fraud Management fraud vs. Employee fraud Management fraud vs. Employee fraud Management fraud vs. Employee fraud
� Fraudulent Fraudulent Fraudulent Fraudulent Financial Reporting Financial Reporting Financial Reporting Financial Reporting vs. Misappropriation vs. Misappropriation vs. Misappropriation vs. Misappropriation
of assetsof assetsof assetsof assets
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES� 11 11 11 11 –––– NewNewNewNew ---- Whether Whether Whether Whether managerial remuneration managerial remuneration managerial remuneration managerial remuneration
has been paid / provided in accordance with the has been paid / provided in accordance with the has been paid / provided in accordance with the has been paid / provided in accordance with the
requisite approvals mandated by the provisions requisite approvals mandated by the provisions requisite approvals mandated by the provisions requisite approvals mandated by the provisions
of of of of s. s. s. s. 197 197 197 197 r.w.r.w.r.w.r.w. schedule schedule schedule schedule V? V? V? V? If not, state the If not, state the If not, state the If not, state the
amount involved amount involved amount involved amount involved & & & & steps taken steps taken steps taken steps taken for for for for securing securing securing securing
refund of the same. refund of the same. refund of the same. refund of the same.
�Only Public CosOnly Public CosOnly Public CosOnly Public Cos
� Exclusion Exclusion Exclusion Exclusion –––– sitting sitting sitting sitting fee, fee, fee, fee, for professional servicesfor professional servicesfor professional servicesfor professional services
� Entitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approvalEntitled persons, limits, procedure and approval
�Reporting Reporting Reporting Reporting –––– payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager, payment to MD, WTD, MD, Manager,
Excess amount Excess amount Excess amount Excess amount paid/ provided, Due for recovery &paid/ provided, Due for recovery &paid/ provided, Due for recovery &paid/ provided, Due for recovery &
steps takensteps takensteps takensteps taken
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�12 12 12 12 –––– NidhiNidhiNidhiNidhi Co.. Co.. Co.. Co..
�13 13 13 13 –––– NewNewNewNew ---- Whether Whether Whether Whether all transactions with all transactions with all transactions with all transactions with
related parties are in compliance with S. related parties are in compliance with S. related parties are in compliance with S. related parties are in compliance with S.
177 177 177 177 and and and and 188 and 188 and 188 and 188 and details have been details have been details have been details have been
disclosed in FS disclosed in FS disclosed in FS disclosed in FS etcetcetcetc as required by as required by as required by as required by
applicable AS. applicable AS. applicable AS. applicable AS.
� To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18To see s. 177 & 188 and AS 18
� S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on S. 188 applicable to all companies other than on
arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary arm’s length transactions entered into in ordinary
course of businesscourse of businesscourse of businesscourse of business
�May test May test May test May test on TP mechanism per on TP mechanism per on TP mechanism per on TP mechanism per IT ActIT ActIT ActIT Act
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES�14 14 14 14 ––––NewNewNewNew ---- Whether Co. has made Whether Co. has made Whether Co. has made Whether Co. has made
preferential allotment / PP of shares or preferential allotment / PP of shares or preferential allotment / PP of shares or preferential allotment / PP of shares or
fully or partly fully or partly fully or partly fully or partly convertible convertible convertible convertible deb. during deb. during deb. during deb. during yryryryr. . . .
Whether Whether Whether Whether SSSS. 42 complied & . 42 complied & . 42 complied & . 42 complied & amount amount amount amount raised raised raised raised
used for purposes for which funds were used for purposes for which funds were used for purposes for which funds were used for purposes for which funds were
raised. raised. raised. raised.
� If not, details of amount involved and If not, details of amount involved and If not, details of amount involved and If not, details of amount involved and
nature of nonnature of nonnature of nonnature of non----compliance.compliance.compliance.compliance.
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES
�15 15 15 15 –––– NewNewNewNew ---- Whether Whether Whether Whether the company has the company has the company has the company has
entered into any nonentered into any nonentered into any nonentered into any non----cash transactions with cash transactions with cash transactions with cash transactions with
directors or persons connected with him directors or persons connected with him directors or persons connected with him directors or persons connected with him
and if so, whether provisions of and if so, whether provisions of and if so, whether provisions of and if so, whether provisions of S. 192 S. 192 S. 192 S. 192
complied complied complied complied withwithwithwith
� Persons connected Persons connected Persons connected Persons connected ---- 185(1) 185(1) 185(1) 185(1) ExplExplExplExpl. . . . –––– check MBP 1check MBP 1check MBP 1check MBP 1
� Loan, guarantee, Loan, guarantee, Loan, guarantee, Loan, guarantee, etcetcetcetc –––– MBP 2; Contracts MBP 2; Contracts MBP 2; Contracts MBP 2; Contracts –––– MBP 4MBP 4MBP 4MBP 4
� FAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGMFAR, BOD Meetings, EGM, AGM
�Merger under court schemes Merger under court schemes Merger under court schemes Merger under court schemes –––– Not nonNot nonNot nonNot non----cashcashcashcash
� Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability Acquisition of asset in one year, settlement of liability
in another year in another year in another year in another year –––– Not nonNot nonNot nonNot non----cashcashcashcash
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 ---- CLAUSESCLAUSESCLAUSESCLAUSES
�16 16 16 16 –––– NewNewNewNew ---- Whether Co is required to be Whether Co is required to be Whether Co is required to be Whether Co is required to be
registered u/s 45registered u/s 45registered u/s 45registered u/s 45----IA of RBI and if so IA of RBI and if so IA of RBI and if so IA of RBI and if so
whether the registration has been obtained whether the registration has been obtained whether the registration has been obtained whether the registration has been obtained
� Understanding business, if principal business is Understanding business, if principal business is Understanding business, if principal business is Understanding business, if principal business is
Financing activityFinancing activityFinancing activityFinancing activity
� 50505050----50 Test 50 Test 50 Test 50 Test ---- Financial Assets > 50% of total assets Financial Assets > 50% of total assets Financial Assets > 50% of total assets Financial Assets > 50% of total assets
and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross and income from Financial assets > 50% of Gross
IncomeIncomeIncomeIncome
� If required and registration not obtained reasons to If required and registration not obtained reasons to If required and registration not obtained reasons to If required and registration not obtained reasons to
be statedbe statedbe statedbe stated
Lunawat & Co.
CARO 2016 CARO 2016 CARO 2016 CARO 2016 –––– FINER POINTSFINER POINTSFINER POINTSFINER POINTS
�Comply SAsComply SAsComply SAsComply SAs–––– DDDDocumentation, Materialityocumentation, Materialityocumentation, Materialityocumentation, Materiality
�Assess Assess Assess Assess the the the the effect effect effect effect of failure to complyof failure to complyof failure to complyof failure to comply
� It’s not It’s not It’s not It’s not a separate audit engagementa separate audit engagementa separate audit engagementa separate audit engagement
�Have Check Have Check Have Check Have Check lists lists lists lists
�Need to document basis of reaching at Need to document basis of reaching at Need to document basis of reaching at Need to document basis of reaching at
adverse opinionadverse opinionadverse opinionadverse opinion
�Management RepresentationManagement RepresentationManagement RepresentationManagement Representation
�Cross check with Board ReportCross check with Board ReportCross check with Board ReportCross check with Board Report
Lunawat & Co.
Lunawat & Co.
IFC / IFC / IFC / IFC / ICFRICFRICFRICFRLunawat & Co.
S.S.S.S. ResponsibleResponsibleResponsibleResponsible RemarksRemarksRemarksRemarks
134134134134 Director Director Director Director
ResponsibilityResponsibilityResponsibilityResponsibility
StatementStatementStatementStatement
ListedListedListedListed Co Co Co Co –––– Directors have Directors have Directors have Directors have
laid down IFC to be followed laid down IFC to be followed laid down IFC to be followed laid down IFC to be followed
by the Co. & that such by the Co. & that such by the Co. & that such by the Co. & that such
controls are adequate & controls are adequate & controls are adequate & controls are adequate &
operating effectivelyoperating effectivelyoperating effectivelyoperating effectively
R. R. R. R.
8(5)(viii) 8(5)(viii) 8(5)(viii) 8(5)(viii)
Director Director Director Director
ReportReportReportReport
Details in respect of Details in respect of Details in respect of Details in respect of
adequacy of Internal adequacy of Internal adequacy of Internal adequacy of Internal
Financial controls with Financial controls with Financial controls with Financial controls with
reference to the Financial reference to the Financial reference to the Financial reference to the Financial
Statements Statements Statements Statements
IFC / IFC / IFC / IFC / ICFRICFRICFRICFRLunawat & Co.
S.S.S.S. ResponsibleResponsibleResponsibleResponsible RemarksRemarksRemarksRemarks
177 177 177 177
(4) (4) (4) (4)
(vii) & (vii) & (vii) & (vii) &
(5)(5)(5)(5)
Audit Audit Audit Audit
CommitteeCommitteeCommitteeCommittee
AC may call for comments of AC may call for comments of AC may call for comments of AC may call for comments of
auditors about IFC before their auditors about IFC before their auditors about IFC before their auditors about IFC before their
submission to Board & may also submission to Board & may also submission to Board & may also submission to Board & may also
discuss related issues with discuss related issues with discuss related issues with discuss related issues with
internal & statutory auditors & internal & statutory auditors & internal & statutory auditors & internal & statutory auditors &
management of Co.management of Co.management of Co.management of Co.
Sch. Sch. Sch. Sch.
IVIVIVIV
Independent Independent Independent Independent
DirectorsDirectorsDirectorsDirectors
To satisfy themselves on integrity To satisfy themselves on integrity To satisfy themselves on integrity To satisfy themselves on integrity
of financial information & ensure of financial information & ensure of financial information & ensure of financial information & ensure
that financial controls & systems that financial controls & systems that financial controls & systems that financial controls & systems
of risk management are robust & of risk management are robust & of risk management are robust & of risk management are robust &
defensibledefensibledefensibledefensible
IFC / IFC / IFC / IFC / ICFRICFRICFRICFRLunawat & Co.
S.S.S.S. ResponsibleResponsibleResponsibleResponsible RemarksRemarksRemarksRemarks
143 143 143 143
(3)((3)((3)((3)(iiii))))
Auditor Auditor Auditor Auditor
ReportReportReportReport
The Company has adequate IFC The Company has adequate IFC The Company has adequate IFC The Company has adequate IFC
system and operatingsystem and operatingsystem and operatingsystem and operating
effectivenesseffectivenesseffectivenesseffectiveness of such controlsof such controlsof such controlsof such controls
ICAIICAIICAIICAI AuditorAuditorAuditorAuditor Guidance Note by ICAI in Guidance Note by ICAI in Guidance Note by ICAI in Guidance Note by ICAI in
September 2015September 2015September 2015September 2015
129(4)129(4)129(4)129(4) Auditor Auditor Auditor Auditor
ReportReportReportReport
CFSCFSCFSCFS
Provisions applicable to Provisions applicable to Provisions applicable to Provisions applicable to
preparation, adoption & audit preparation, adoption & audit preparation, adoption & audit preparation, adoption & audit
of FS of a holding co. shall, of FS of a holding co. shall, of FS of a holding co. shall, of FS of a holding co. shall,
mutatis mutandis, apply to mutatis mutandis, apply to mutatis mutandis, apply to mutatis mutandis, apply to
CFS.CFS.CFS.CFS.
1956 ACT1956 ACT1956 ACT1956 ACT
� CARO CARO CARO CARO –––– HHHHas adequate Internal Control procedure as adequate Internal Control procedure as adequate Internal Control procedure as adequate Internal Control procedure
commensurate with the size of Co. and nature of commensurate with the size of Co. and nature of commensurate with the size of Co. and nature of commensurate with the size of Co. and nature of
its business for Purchase of inventory and fixed its business for Purchase of inventory and fixed its business for Purchase of inventory and fixed its business for Purchase of inventory and fixed
assets and for sale of goods & servicesassets and for sale of goods & servicesassets and for sale of goods & servicesassets and for sale of goods & services
� SSSS.... 217217217217((((2222AAAAAAAA)))) ---- DirectorsDirectorsDirectorsDirectors’’’’ ResponsibilityResponsibilityResponsibilityResponsibility StatementStatementStatementStatement
---- havehavehavehave takentakentakentaken properproperproperproper &&&& sufficientsufficientsufficientsufficient carecarecarecare forforforfor
maintenancemaintenancemaintenancemaintenance ofofofof adequateadequateadequateadequate accountingaccountingaccountingaccounting recordsrecordsrecordsrecords inininin
accordanceaccordanceaccordanceaccordance withwithwithwith provisionsprovisionsprovisionsprovisions ofofofof ActActActAct,,,,
� forforforfor safeguardingsafeguardingsafeguardingsafeguarding assetsassetsassetsassets ofofofof CoCoCoCo....
� forforforfor preventingpreventingpreventingpreventing &&&& detectingdetectingdetectingdetecting fraudfraudfraudfraud
� otherotherotherother irregularitiesirregularitiesirregularitiesirregularities.
Lunawat & Co.
INTERNAL FINANCIAL CONTROLINTERNAL FINANCIAL CONTROLINTERNAL FINANCIAL CONTROLINTERNAL FINANCIAL CONTROL
� IFC means IFC means IFC means IFC means policies & policies & policies & policies & procedures adopted procedures adopted procedures adopted procedures adopted
by by by by Company for ensuring : Company for ensuring : Company for ensuring : Company for ensuring :
�Orderly Orderly Orderly Orderly & efficient conduct of its business, & efficient conduct of its business, & efficient conduct of its business, & efficient conduct of its business,
including adherence to company’s policiesincluding adherence to company’s policiesincluding adherence to company’s policiesincluding adherence to company’s policies, , , ,
�Safeguarding Safeguarding Safeguarding Safeguarding of its assets, of its assets, of its assets, of its assets,
�Prevention Prevention Prevention Prevention and detection of frauds and detection of frauds and detection of frauds and detection of frauds and errorsand errorsand errorsand errors, , , ,
�Accuracy Accuracy Accuracy Accuracy and and and and completeness completeness completeness completeness of the accounting of the accounting of the accounting of the accounting
records, records, records, records,
�Timely preparation Timely preparation Timely preparation Timely preparation of reliable financial of reliable financial of reliable financial of reliable financial
informationinformationinformationinformation
Lunawat & Co.
ICFRICFRICFRICFR –––– ICAIICAIICAIICAI GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE –––– 9/20159/20159/20159/2015
� TTTTerm erm erm erm ‘IFC’ ‘IFC’ ‘IFC’ ‘IFC’ in in in in S. 143(3)(S. 143(3)(S. 143(3)(S. 143(3)(iiii) would relate to ) would relate to ) would relate to ) would relate to ‘IFC ‘IFC ‘IFC ‘IFC
over Fover Fover Fover Financial inancial inancial inancial RRRReportingeportingeportingeporting’’’’ in accordance with in accordance with in accordance with in accordance with
objectives objectives objectives objectives of an audit stated in SA 200 “Overall of an audit stated in SA 200 “Overall of an audit stated in SA 200 “Overall of an audit stated in SA 200 “Overall
Objectives of the Independent Auditor and the Objectives of the Independent Auditor and the Objectives of the Independent Auditor and the Objectives of the Independent Auditor and the
Conduct of an Audit in Accordance with Conduct of an Audit in Accordance with Conduct of an Audit in Accordance with Conduct of an Audit in Accordance with
Standards on Standards on Standards on Standards on Auditing”Auditing”Auditing”Auditing”
� Auditor needs to obtain reasonable assurance to Auditor needs to obtain reasonable assurance to Auditor needs to obtain reasonable assurance to Auditor needs to obtain reasonable assurance to
state:state:state:state:
�WWWWhether hether hether hether an adequate IFC system was an adequate IFC system was an adequate IFC system was an adequate IFC system was maintainedmaintainedmaintainedmaintained &&&&
�WWWWhether hether hether hether such IFC system such IFC system such IFC system such IFC system operated effectively operated effectively operated effectively operated effectively in in in in co. co. co. co.
in all material respects with respect to financial in all material respects with respect to financial in all material respects with respect to financial in all material respects with respect to financial
reporting only.reporting only.reporting only.reporting only.
Lunawat & Co.
ICFRICFRICFRICFR –––– ICAIICAIICAIICAI GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE –––– 9/20159/20159/20159/2015
� “IFC over “IFC over “IFC over “IFC over Financial Financial Financial Financial RRRReportingeportingeportingeporting” shall mean ” shall mean ” shall mean ” shall mean
� ““““A process designed to provide reasonable A process designed to provide reasonable A process designed to provide reasonable A process designed to provide reasonable
assurance regarding the reliability of financial assurance regarding the reliability of financial assurance regarding the reliability of financial assurance regarding the reliability of financial
reporting and the preparation of financial reporting and the preparation of financial reporting and the preparation of financial reporting and the preparation of financial
statements for external purposes in accordance with statements for external purposes in accordance with statements for external purposes in accordance with statements for external purposes in accordance with
generally accepted accounting principles. generally accepted accounting principles. generally accepted accounting principles. generally accepted accounting principles.
� A A A A company's company's company's company's IFC IFC IFC IFC over financial reporting includes over financial reporting includes over financial reporting includes over financial reporting includes
those policies and procedures those policies and procedures those policies and procedures those policies and procedures that:that:that:that:
1.1.1.1. PPPPertain ertain ertain ertain to the maintenance of records that, in to the maintenance of records that, in to the maintenance of records that, in to the maintenance of records that, in
reasonable detail, accurately and fairly reflect reasonable detail, accurately and fairly reflect reasonable detail, accurately and fairly reflect reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets the transactions and dispositions of the assets the transactions and dispositions of the assets the transactions and dispositions of the assets
of the companyof the companyof the companyof the company;;;;
Lunawat & Co.
ICFRICFRICFRICFR –––– ICAIICAIICAIICAI GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE GUIDANCE NOTE –––– 9/20159/20159/20159/2015
2.2.2.2. Provide reasonable assurance that transactions Provide reasonable assurance that transactions Provide reasonable assurance that transactions Provide reasonable assurance that transactions
are recorded as necessary to permit preparation of are recorded as necessary to permit preparation of are recorded as necessary to permit preparation of are recorded as necessary to permit preparation of
financial statements in accordance with generally financial statements in accordance with generally financial statements in accordance with generally financial statements in accordance with generally
accepted accounting principles, and that receipts accepted accounting principles, and that receipts accepted accounting principles, and that receipts accepted accounting principles, and that receipts
and expenditures of the company are being made and expenditures of the company are being made and expenditures of the company are being made and expenditures of the company are being made
only in accordance with authorisations of only in accordance with authorisations of only in accordance with authorisations of only in accordance with authorisations of
management and directors of the company; andmanagement and directors of the company; andmanagement and directors of the company; andmanagement and directors of the company; and
3.3.3.3. Provide Provide Provide Provide reasonable assurance regarding reasonable assurance regarding reasonable assurance regarding reasonable assurance regarding
prevention or timely detection of unauthorised prevention or timely detection of unauthorised prevention or timely detection of unauthorised prevention or timely detection of unauthorised
acquisition, use, or disposition of the company's acquisition, use, or disposition of the company's acquisition, use, or disposition of the company's acquisition, use, or disposition of the company's
assets that could have a material effect on the assets that could have a material effect on the assets that could have a material effect on the assets that could have a material effect on the
financial statementsfinancial statementsfinancial statementsfinancial statements.
Lunawat & Co.
IFCIFCIFCIFC VS. VS. VS. VS. ICFRICFRICFRICFRLunawat & Co.
ICFRICFRICFRICFR
Operations Operations Operations Operations ControlControlControlControl
Fraud Fraud Fraud Fraud PreventionPreventionPreventionPrevention
IFCIFCIFCIFC
IFCIFCIFCIFC EXAMPLEEXAMPLEEXAMPLEEXAMPLELunawat & Co.
ICFRICFRICFRICFR
Sales Sales Sales Sales realizatiorealizatiorealizatiorealizatio
n is n is n is n is correctly correctly correctly correctly recorded recorded recorded recorded in FSin FSin FSin FS
Operations Operations Operations Operations ControlControlControlControl
Discount Discount Discount Discount on sales is on sales is on sales is on sales is
as per as per as per as per Company Company Company Company Policy & Policy & Policy & Policy &
adherence adherence adherence adherence to policy is to policy is to policy is to policy is monitoredmonitoredmonitoredmonitored
Fraud Fraud Fraud Fraud PreventionPreventionPreventionPrevention
UnauthorisUnauthorisUnauthorisUnauthorised change ed change ed change ed change in master in master in master in master
price price price price (Access (Access (Access (Access Controls)Controls)Controls)Controls)
IFCIFCIFCIFC
Lunawat & Co.
ICFRICFRICFRICFR
Maintenance Maintenance Maintenance Maintenance of Financial of Financial of Financial of Financial Records Records Records Records (Details / (Details / (Details / (Details / Accuracy)Accuracy)Accuracy)Accuracy)
Authorization Authorization Authorization Authorization of Transactions of Transactions of Transactions of Transactions (As per GAAP)(As per GAAP)(As per GAAP)(As per GAAP)
Safeguarding Safeguarding Safeguarding Safeguarding of assets of of assets of of assets of of assets of companycompanycompanycompany
ICFRICFRICFRICFR –––– AUDITOR’S REQUIREMENTAUDITOR’S REQUIREMENTAUDITOR’S REQUIREMENTAUDITOR’S REQUIREMENT
� Auditor should report if company Auditor should report if company Auditor should report if company Auditor should report if company has:has:has:has:
� adequate adequate adequate adequate internal control systems in internal control systems in internal control systems in internal control systems in place; andplace; andplace; andplace; and
�whether whether whether whether they were operating effectively they were operating effectively they were operating effectively they were operating effectively asasasas at at at at
balance sheet date.balance sheet date.balance sheet date.balance sheet date.
� Not applicable on interim financial statements, Not applicable on interim financial statements, Not applicable on interim financial statements, Not applicable on interim financial statements,
such as quarterly or halfsuch as quarterly or halfsuch as quarterly or halfsuch as quarterly or half----yearly financial yearly financial yearly financial yearly financial
statements, unless such reporting is required statements, unless such reporting is required statements, unless such reporting is required statements, unless such reporting is required
under any other law or under any other law or under any other law or under any other law or regulationregulationregulationregulation
� Should use a topShould use a topShould use a topShould use a top----down approach to select the down approach to select the down approach to select the down approach to select the
controls to controls to controls to controls to test. It is not test. It is not test. It is not test. It is not necessarily necessarily necessarily necessarily the order the order the order the order in in in in
which which which which auditor auditor auditor auditor will perform will perform will perform will perform auditing auditing auditing auditing proceduresproceduresproceduresprocedures.
Lunawat & Co.
TOPTOPTOPTOP----DOWN APPROACHDOWN APPROACHDOWN APPROACHDOWN APPROACHLunawat & Co.
Internal Financial Control FrameworkInternal Financial Control FrameworkInternal Financial Control FrameworkInternal Financial Control Framework
Financial ReportingFinancial ReportingFinancial ReportingFinancial Reporting
FS ASSERTIONSFS ASSERTIONSFS ASSERTIONSFS ASSERTIONS (Completeness, Existence or (Completeness, Existence or (Completeness, Existence or (Completeness, Existence or Occurrence, Rights & Obligations, Valuations Occurrence, Rights & Obligations, Valuations Occurrence, Rights & Obligations, Valuations Occurrence, Rights & Obligations, Valuations
Presentation & Disclosure) Presentation & Disclosure) Presentation & Disclosure) Presentation & Disclosure) & & & & CONTROLSCONTROLSCONTROLSCONTROLS (Authorisation, (Authorisation, (Authorisation, (Authorisation, Safeguarding of Assets & Maintenance of Records)Safeguarding of Assets & Maintenance of Records)Safeguarding of Assets & Maintenance of Records)Safeguarding of Assets & Maintenance of Records)
Business CyclesBusiness CyclesBusiness CyclesBusiness Cycles
SubSubSubSub---- processesprocessesprocessesprocesses
ObjectivesObjectivesObjectivesObjectives
ActivitiesActivitiesActivitiesActivities
ICFR AUDIT ICFR AUDIT ICFR AUDIT ICFR AUDIT –––– ICAIICAIICAIICAI GUIDANCE NOTEGUIDANCE NOTEGUIDANCE NOTEGUIDANCE NOTELunawat & Co.
PlanningPlanningPlanningPlanning 1.1.1.1. Identify significant account balances / disclosure itemsIdentify significant account balances / disclosure itemsIdentify significant account balances / disclosure itemsIdentify significant account balances / disclosure items
2.2.2.2. Identify & understand significant flows of transactionsIdentify & understand significant flows of transactionsIdentify & understand significant flows of transactionsIdentify & understand significant flows of transactions
3.3.3.3. Identify risk of material misstatementsIdentify risk of material misstatementsIdentify risk of material misstatementsIdentify risk of material misstatements
4.4.4.4. IdentifyIdentifyIdentifyIdentify controls which address risk of material misstatementscontrols which address risk of material misstatementscontrols which address risk of material misstatementscontrols which address risk of material misstatements
5.5.5.5. Identify applications, associated IT environment, ITGCIdentify applications, associated IT environment, ITGCIdentify applications, associated IT environment, ITGCIdentify applications, associated IT environment, ITGC
Design & Design & Design & Design &
ImplementImplementImplementImplement
ationationationation
6.6.6.6. Assess the design of controlsAssess the design of controlsAssess the design of controlsAssess the design of controls
7.7.7.7. AssessAssessAssessAssess the implementation of controlsthe implementation of controlsthe implementation of controlsthe implementation of controls
Appropriate design & implementation controlsAppropriate design & implementation controlsAppropriate design & implementation controlsAppropriate design & implementation controls
8.8.8.8. Assess audit impact & plan other suitable proceduresAssess audit impact & plan other suitable proceduresAssess audit impact & plan other suitable proceduresAssess audit impact & plan other suitable procedures
9.9.9.9. Plan operative effectiveness testingPlan operative effectiveness testingPlan operative effectiveness testingPlan operative effectiveness testing
Operating Operating Operating Operating
EffectiveneEffectiveneEffectiveneEffectivene
ssssssss
10.10.10.10. Plan nature, timing & extent of testing operating effectivenessPlan nature, timing & extent of testing operating effectivenessPlan nature, timing & extent of testing operating effectivenessPlan nature, timing & extent of testing operating effectiveness
11.11.11.11. Perform operative effectiveness testingPerform operative effectiveness testingPerform operative effectiveness testingPerform operative effectiveness testing
12.12.12.12. Assess findings & conclude on effective effectivenessAssess findings & conclude on effective effectivenessAssess findings & conclude on effective effectivenessAssess findings & conclude on effective effectiveness
13.13.13.13. Form opinion on IFCForm opinion on IFCForm opinion on IFCForm opinion on IFC
ReportingReportingReportingReporting 14.14.14.14. Assess impact on Audit OpinionAssess impact on Audit OpinionAssess impact on Audit OpinionAssess impact on Audit Opinion
15.15.15.15. Form audit opinion on financial statementsForm audit opinion on financial statementsForm audit opinion on financial statementsForm audit opinion on financial statements
Prepare and control audit documentationPrepare and control audit documentationPrepare and control audit documentationPrepare and control audit documentation
ContinuousContinuousContinuousContinuous focus on audit qualityfocus on audit qualityfocus on audit qualityfocus on audit quality
COMPONENTS OF INTERNAL CONTROLCOMPONENTS OF INTERNAL CONTROLCOMPONENTS OF INTERNAL CONTROLCOMPONENTS OF INTERNAL CONTROLLunawat & Co.
COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL –––– SA 315SA 315SA 315SA 315Lunawat & Co.
S. No.S. No.S. No.S. No. ComponentComponentComponentComponent ElementsElementsElementsElements
1111 Control Control Control Control
EnvironmentEnvironmentEnvironmentEnvironment
1.1.1.1. Communication and enforcement of integrity and Communication and enforcement of integrity and Communication and enforcement of integrity and Communication and enforcement of integrity and
ethical Valuesethical Valuesethical Valuesethical Values
2.2.2.2. Commitment to competenceCommitment to competenceCommitment to competenceCommitment to competence
3.3.3.3. Participation by those charged with governanceParticipation by those charged with governanceParticipation by those charged with governanceParticipation by those charged with governance
4.4.4.4. Management’s philosophy and operating styleManagement’s philosophy and operating styleManagement’s philosophy and operating styleManagement’s philosophy and operating style
5.5.5.5. Organisational structureOrganisational structureOrganisational structureOrganisational structure
6.6.6.6. Assignment of authority and responsibilityAssignment of authority and responsibilityAssignment of authority and responsibilityAssignment of authority and responsibility
7.7.7.7. Human resource policies and practicesHuman resource policies and practicesHuman resource policies and practicesHuman resource policies and practices
2222 Entity’s Risk Entity’s Risk Entity’s Risk Entity’s Risk
Assessment Assessment Assessment Assessment
ProcessProcessProcessProcess
1.1.1.1. Management identification of business risks Management identification of business risks Management identification of business risks Management identification of business risks
relevant to the preparation of financial relevant to the preparation of financial relevant to the preparation of financial relevant to the preparation of financial
statementsstatementsstatementsstatements
2.2.2.2. External and internal events, transactions or External and internal events, transactions or External and internal events, transactions or External and internal events, transactions or
circumstances that may occur and adversely circumstances that may occur and adversely circumstances that may occur and adversely circumstances that may occur and adversely
affect an entity’s ability to initiate, record, affect an entity’s ability to initiate, record, affect an entity’s ability to initiate, record, affect an entity’s ability to initiate, record,
process, and report financial data consistent with process, and report financial data consistent with process, and report financial data consistent with process, and report financial data consistent with
the assertions of management in the financial the assertions of management in the financial the assertions of management in the financial the assertions of management in the financial
statementsstatementsstatementsstatements
COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL –––– SA 315SA 315SA 315SA 315Lunawat & Co.
S. No.S. No.S. No.S. No. ComponentComponentComponentComponent ElementsElementsElementsElements
3333 ControlControlControlControl
ActivitiesActivitiesActivitiesActivities
1.1.1.1. Performance reviewsPerformance reviewsPerformance reviewsPerformance reviews
2.2.2.2. Information processingInformation processingInformation processingInformation processing
3.3.3.3. Physical controlsPhysical controlsPhysical controlsPhysical controls
4.4.4.4. Segregation of dutiesSegregation of dutiesSegregation of dutiesSegregation of duties
5.5.5.5. Authorisation controlsAuthorisation controlsAuthorisation controlsAuthorisation controls
4444 Information Information Information Information
System and System and System and System and
CommunicationCommunicationCommunicationCommunication
1.1.1.1. Information system that:Information system that:Information system that:Information system that:1.1.1.1. Identify and record all valid transactionsIdentify and record all valid transactionsIdentify and record all valid transactionsIdentify and record all valid transactions
2.2.2.2. Describe on timely basis transactions in sufficient Describe on timely basis transactions in sufficient Describe on timely basis transactions in sufficient Describe on timely basis transactions in sufficient
detail to permit proper classification of transactions detail to permit proper classification of transactions detail to permit proper classification of transactions detail to permit proper classification of transactions
for financial reportingfor financial reportingfor financial reportingfor financial reporting
3.3.3.3. Measure value of transactions in a manner that Measure value of transactions in a manner that Measure value of transactions in a manner that Measure value of transactions in a manner that
permits recording their proper monetary value in permits recording their proper monetary value in permits recording their proper monetary value in permits recording their proper monetary value in
financial Statements financial Statements financial Statements financial Statements
4.4.4.4. Determine time period in which transactions Determine time period in which transactions Determine time period in which transactions Determine time period in which transactions
occurred to permit recording of transactions in occurred to permit recording of transactions in occurred to permit recording of transactions in occurred to permit recording of transactions in
proper accounting Period proper accounting Period proper accounting Period proper accounting Period
5.5.5.5. Present properly transactions and related disclosures Present properly transactions and related disclosures Present properly transactions and related disclosures Present properly transactions and related disclosures
in financial statementsin financial statementsin financial statementsin financial statements
COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL COMPONENTS OF INTERNAL CONTROL –––– SA 315SA 315SA 315SA 315Lunawat & Co.
S. No.S. No.S. No.S. No. ComponentComponentComponentComponent ElementsElementsElementsElements
4444 Information Information Information Information
System and System and System and System and
CommunicationCommunicationCommunicationCommunication
2.2.2.2. Communicating individual roles and Communicating individual roles and Communicating individual roles and Communicating individual roles and
responsibilitiesresponsibilitiesresponsibilitiesresponsibilities
5555 Monitoring of Monitoring of Monitoring of Monitoring of
ControlsControlsControlsControls
1.1.1.1. Evaluating presence and functioning of Evaluating presence and functioning of Evaluating presence and functioning of Evaluating presence and functioning of
components of internal control.components of internal control.components of internal control.components of internal control.
2.2.2.2. Evaluating and communicating internal Evaluating and communicating internal Evaluating and communicating internal Evaluating and communicating internal
control deficienciescontrol deficienciescontrol deficienciescontrol deficiencies.
ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING�Take Engagement LetterTake Engagement LetterTake Engagement LetterTake Engagement Letter
�Perform proceduresPerform proceduresPerform proceduresPerform procedures
�Take Representation LetterTake Representation LetterTake Representation LetterTake Representation Letter
�Issue Separate ReportIssue Separate ReportIssue Separate ReportIssue Separate Report
�UnmodifiedUnmodifiedUnmodifiedUnmodified
�ModifiedModifiedModifiedModified
�QualifiedQualifiedQualifiedQualified
�AdverseAdverseAdverseAdverse
�DisclaimerDisclaimerDisclaimerDisclaimer
Lunawat & Co.
ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING�QQQQualified ualified ualified ualified or an or an or an or an adverse opinion if adverse opinion if adverse opinion if adverse opinion if material material material material weaknesses weaknesses weaknesses weaknesses identified as identified as identified as identified as part of audit. part of audit. part of audit. part of audit.
�Material Material Material Material weaknesses is a deficiency or a weaknesses is a deficiency or a weaknesses is a deficiency or a weaknesses is a deficiency or a combination of combination of combination of combination of deficiencies deficiencies deficiencies deficiencies in in in in ICFR, ICFR, ICFR, ICFR, such such such such that material misstatement of co.’s annual that material misstatement of co.’s annual that material misstatement of co.’s annual that material misstatement of co.’s annual FS FS FS FS not prevented/detected on timely not prevented/detected on timely not prevented/detected on timely not prevented/detected on timely basisbasisbasisbasis
�Adverse Adverse Adverse Adverse opinion opinion opinion opinion ---- if matters are pervasive if matters are pervasive if matters are pervasive if matters are pervasive to to to to FS FS FS FS i.e. they impact various elements, i.e. they impact various elements, i.e. they impact various elements, i.e. they impact various elements, accounts or a substantial portion of FS. accounts or a substantial portion of FS. accounts or a substantial portion of FS. accounts or a substantial portion of FS. Additionally, significant control Additionally, significant control Additionally, significant control Additionally, significant control deficiencies reported to audit committeedeficiencies reported to audit committeedeficiencies reported to audit committeedeficiencies reported to audit committee
Lunawat & Co.
ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING�Auditor to disclaim opinion Auditor to disclaim opinion Auditor to disclaim opinion Auditor to disclaim opinion on on on on co.’s ICFR:co.’s ICFR:co.’s ICFR:co.’s ICFR:
� if if if if company has not established its system of IFC over company has not established its system of IFC over company has not established its system of IFC over company has not established its system of IFC over
financial reporting considering essential financial reporting considering essential financial reporting considering essential financial reporting considering essential
components of internal control ; components of internal control ; components of internal control ; components of internal control ; orororor
� auditor is unable to obtain sufficient appropriate auditor is unable to obtain sufficient appropriate auditor is unable to obtain sufficient appropriate auditor is unable to obtain sufficient appropriate
audit evidence to express an opinion audit evidence to express an opinion audit evidence to express an opinion audit evidence to express an opinion on ICFR but on ICFR but on ICFR but on ICFR but is is is is
able to perform appropriate substantive procedures able to perform appropriate substantive procedures able to perform appropriate substantive procedures able to perform appropriate substantive procedures
to express an opinion on to express an opinion on to express an opinion on to express an opinion on FS; FS; FS; FS; orororor
� system of system of system of system of ICFR were ICFR were ICFR were ICFR were not made available to not made available to not made available to not made available to auditor auditor auditor auditor to to to to
enable enable enable enable them them them them to determine if to determine if to determine if to determine if Co. has Co. has Co. has Co. has established established established established
adequate adequate adequate adequate ICFR ICFR ICFR ICFR and whether such internal financial and whether such internal financial and whether such internal financial and whether such internal financial
controls were operating effectively controls were operating effectively controls were operating effectively controls were operating effectively
Lunawat & Co.
CA. Pramod JainCA. Pramod JainCA. Pramod JainCA. Pramod [email protected]@[email protected]@lunawat.com
+91 9811073867+91 9811073867+91 9811073867+91 9811073867
© 2016 CA. Pramod Jain, Lunawat & Co