Co. Audit

A PROJECT ON COMPANY AUDIT
CHAPTER 1
INTRODUCTION
A company is said to be an artificial person created by law having a separate legal entity distinct
from its shareholders. It cannot be directly managed by its owners, i.e., shareholders, because
they are very large in number having small holding and also scattered over a wide area. As such,
the management and control of the affairs of the company is done by other persons generally
known as directors. Hence, it becomes essential for a company to appoint an independent and
qualified person, i.e., an auditor, to verily and certify the truth and fairness of the financial
statements.
History of Audit
Clinical Audit was introduced by Florence Nightingale (1855) during the Crimea War (1853
1855) (Bull 1992). Although the Russians were defeated at the battle of the Alma River (20
September 1854), the Times newspaper criticized the British medical facilities. Sidney Herbert,
the British Secretary for War asked Florence Nightingale a mathematician to become nursing
administrator and oversee the introduction of nurses to military hospitals (Porter N. Regional
Audit Gleanings Issue 16 May 2005). Nightingale at the end of the war was able to show positive
outcomes from quality of care. Few other clinicians at this time used audit.
Qualifications and disqualifications of company auditor:
Auditors qualifications:
According to section-226 of Companies Act, person or firm having the following qualification
can be appointed as an auditor:
1. Person who is the member of Institute of Chartered Accountant.
2. Any firm whose all the partners are serving as chartered accountants in India.
3. A person holding a certificate under the restricted auditors certificate (part B. State)
rules, 1956 can be appointed as an auditor.
Disqualifications of an auditor:
VIVEK COLLEGE OF COMMERCEPage 1

According to section-226(3) of Companies Act, the following person cannot be appointed as an
auditor:
1.
2.
3.
4.
Any registered institute. e.g. Company;

Any salaried officer or employee of the company
Officer of the company, partner of an employee or any person who is serving there;
A person who is indebted to the company for an amount exceeding Rs.1,000 or 5 who has
provided any security in connection with the indebtedness of any third person (party) to
the company for an amount exceeding Rs.1000 cannot be appointed as an auditor.

5. According to section-226(4) of Companies Act, if a person is disqualified with relation to
either a holding company or its sub - Subsidiary Company, he shall be disqualified for
being an auditor of the first company.
If an auditor becomes the subject to any of the disqualification mentioned above, after his
appointment, he shall be deemed to have left his rank (position) as an auditor. Besides provisions
of Companies Act, auditor can be disqualified according to the disqualifications shown in
section-8 of Charter Accountants Act, 1949.
General consideration in company audit:
1. True and fair view
True and fair view in auditing means that the financial statements are free from material
misstatements and faithfully represent the financial performance and position of the entity Although the expression of true and fair view is not strictly defined in the accounting literature,
we may derive the following general conclusions as to its meaning: True suggests that the
financial statements are factually correct and have been prepared according to applicable
reporting framework such as the IFRS and they do not contain any material misstatements that
may mislead the users. Misstatements may result from material errors or omissions of
transactions & balances in the financial statements. Fair implies that the financial statements
present the information faithfully without any element of bias and they reflect the economic
substance of transactions rather than just their legal form. -Preparation of true and fair financial
statements has been expressly recognized as one of the responsibilities of the directors of
companies in the corporate law of several countries such as in the Companies Act 2006 in the
UK. Auditors must therefore consider whether directors have fulfilled their responsibility for the
preparation of true and fair financial statements when providing an audit opinion. Company law

of certain jurisdictions require the auditors to expressly state in their audit report whether in their
opinion the financial statements present a true and fair view of the financial performance and
position of the entity.
2. Accounting Policies
The specific policies and procedures used by a company to prepare its financial statements.
These include any methods, measurement systems and procedures for presenting disclosures.
Accounting policies differ from accounting principles in that the principles are the rules and the
policies are a company's way of adhering to the rules.
Accounting principles are lenient at times, so the policies of a company can be very important.
Looking into a specific company's accounting policies can signal whether management is
conservative or aggressive when reporting earnings. This should be taken into account by
investors when reviewing earnings reports. Also, outside accountants that are hired to review a
company's financial statements should check the company's policies to ensure they conform to
accounting principles.
3. Internal control
Internal control is under the Board of Director's responsibility. Internal control's function is, for
example, to ensure the efficiency and profitability of operations, the reliability of information,
and adhering to rules and regulations. Internal control is a part of day-to-day management and
company administration.
An essential part of internal control is the Internal Audit, which operates as a separate unit under
the CEO and reports its observations to the Board of Directors. The Internal Audit supports the
Group's management in directing operations by inspecting and evaluating the efficiency of
business operations, risk management and internal control, and by producing information and
recommendations to enhance efficiency. Internal Audit also inspects the processes of business
operations and financial reporting. Internal Audit's directive has been approved by Stockmann's
Board of Directors. The operations of the Internal Audit are guided by being risk-focused and
emphasising the development of business operations.
4. Audit Approach

The Audit Approach is a risk analysis methodology that focuses on the combined impact of the
environment in which a client operates, the client's management information and financial
results, and the effectiveness of the client's internal controls. It is based on a thorough, up-to-date
understanding of the client's business and industry, which is obtained through a comprehensive
analysis of the external and internal operating environments. It enables us to design an audit
programme that includes the most effective and efficient combination of test responsive to a
client's unique circumstances. In addition, it provides a uniform method for developing and
documenting the basis for the audit programme.
The Audit Approach enables us to plan our effort to be proportionate to the risk of material error
in specific accounts and transactions. This provides the basis for planning the minimum effort
necessary to limit audit risk in each area to a low level. As a result, every audit procedure has a
specific purpose that is related to the company's particular situation nothing is "routine" and
hence potentially unnecessary. By following this approach we can avoid over auditing and under
auditing, and we can distribute our audit work more evenly throughout the year.
Materiality and Audit Risk
Professional standards require us to consider materiality and audit risk when planning the nature,
timing and extent of our audit procedures, and when evaluating the results of those procedures.
Materiality is determined at two levels during the initial planning stage:
1. An overall level as relates to the accounts taken as a whole planning materiality; and
2. An individual balance or class of transactions level tolerable error.
Audit risk is defined as the risk that an auditor may unknowingly fail to modify his or her
opinion on accounts that are materially misstated. We address materiality and audit risk at an
overall level to help us develop an audit strategy that will provide sufficient evidence to enable
us to evaluate whether the accounts are materially misstated.
At the account balance or class of transactions level, audit risk is the product of the risks that:
1. Factors in a company's internal or external operating environment, before considering the
functioning of internal controls, will lead to a material error inherent risk;
2. A material error will not prevented or detected on a timely basis by the system of internal
control control risk; and

3. The auditor's procedures will fail to detect a material error not detected by the system of
internal control detection risk.
The Audit Approach provides a methodology for relating these risk concepts to materiality and
correlating them to the nature, timing, and extent of our audit procedures. This is accomplished
through the Specific Risk Analysis and the Preliminary Audit Approach.
Objectives and Standards
A companys internal accountants are primarily responsible for preparing financial statements. In
contrast, the purpose of the auditor is to express an opinion on the assertions of management
found in financial statements. The auditor arrives at an objective opinion by systematically
obtaining and evaluating evidence in conformity with professional auditing standards. Audits
increase the reliability of financial information and consequently improve the efficiency of
capital markets. Auditing standards require that all audits be conducted by persons having
adequate technical training. This includes formal education, field experience, and continuing
professional training.
Specific Provisions as Regards Accounts in the Companies Act, 1956
The provisions in the matter of books of account which a company is required to maintain are
contained in section 209 of the Companies Act, 1956. They are briefly summarised below:
(1) Every company shall maintain at its registered office proper books of account with regard to:
a) all sums of money received and expended by the company and the matters in respect of
which the receipts and expenditure take place;
b) all sales and purchases of goods by the company;
c) the assets and liabilities of the company; and
d) in case, it is a company engaged in production, processing, manufacturing or mining
activities, particulars relating to utilisation of material or labour or other items of cost,
provided there is such a requirement by the Central Government in respect of the class of
companies to which it belongs.
N.B. - It is permissible, however, for all or any of the books of account may be kept at such place
in India as the Board of directors may decide but, when a decision in this regard is taken, the

company shall file with the Registrar of Companies a notice giving full address of the other
place.
(2) When a company has a branch office, whether in or outside India, to comply with the
aforementioned provisions, the company must maintain proper books of account relating to
transactions effected at the branch office, also arrange to obtain from the branch proper
summarised returns, at intervals of not more than three months, for being kept at the registered
office or the other place.
(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be
deemed to be kept with respect to the matters specified therein :
(a) if there are not kept such books as are necessary to give a true and fair view of the state of
affairs of the company or branch office, as the case may be, and to explain its transactions; and
(b) if such books are not kept on accrual basis and according to the double entry system of
accounting.
(4) The books of account and other books and papers shall be open to inspection by any director
during business hours.
4A) The books of account together with vouchers relevant to any entry made therein for a period
of not less than eight years immediately preceding the current year shall be preserved by the
company in good order.
(5) If any of the persons referred to in sub-section (6), fails to take reasonable steps to secure
compliance with the requirements of law aforementioned or by a willful act causes any default
by the company, he shall be punishable for each offence with imprisonment for a term which
may extend to six months or a fine which may extend to ` 10000 or with both. But he may be
relieved from such a liability if he can show that he has reasonable ground to believe that a
competent and responsible person was charged with the duty of seeing that these requirements
were complied with and he was in a position to discharge that duty.
(6) Where the company has a managing director or manager, such managing director or manager
and all officers and other employees of the company; and where the company has neither a
managing director nor manager, every director of the company.

(7) If a person, not being a person referred to in the foregoing paragraph, who has been charged
with the duty of seeing that requirements of law in regard to the books of account is complied
with, makes a default in doing so, he shall, in respect of each offence, be punishable with a fine
which may extend to ` 10,000.
Audit of Payment
Managerial Remuneration The term remuneration covers the following types of expenditure
incurred by the company for its Director or his family Rent free accommodation; Any
benefit or amenity in respect of accommodation free of charge; Any other benefit or amenity
free of charge at a concessional rate; Any personal obligation; and Insurance on the life of,
or to provide any pension, annuity or gratuity for, any of the director or his /her spouse or child.
But the definition is inclusive one. It covers every amount that the company pays or spends for or
for the benefit of a Director, in whatever form and by whatever name. Applicability: Section 198
and 309 deals with the provisions relating to managerial remuneration. The term managerial
remuneration mentioned in section 198 and 309 covers the remuneration of all Directors and also
its manager. It is applicable to all public companies and private company which is a subsidiary of
public company. Provisions of the above mentioned section are not applicable on government
companies (within the meaning of section 619 of the Act). Ceiling on Managerial Remuneration:
Section 198(1) lays down 11% of net profits of the company computed in the manner as laid
down in section 349 and 350 as the overall ceiling on the total remuneration of the company.
While computing the net profits the remuneration of the Directors shall not be deducted from the
gross profits. The above mentioned limit shall be exclusive of sitting fees payable to the directors
in terms of section 309 (2). Purchase of Goods: Cash purchases should be verified by reference
to cash memos or receipted invoices by suppliers. Payments made against credit purchases
should be vouched with the receipts issued by the suppliers and the credit to their accounts on the
basis of invoices entered in the Purchases Day book. There must be also evidence of the goods
having been received through an entry in the Goods Inward Books or stock ledger. It is
necessary, however, to make a distinction between a payment for goods and an advance against
supplies to be made in future; the latter should be classified as advance recoverable in cash or in
kind or for value to be received. Since the amount shown as an advance paid against goods may
be only a camouflage for assistance to a party, it is necessary for the auditor to confirm that the

advance was paid pursuant to a normal trade practice and supplies were, subsequently, received
with a reasonable period of the advance. Remuneration paid to Directors:
The following points must be considered while vouching the directors remuneration in case of a
public company and private company which is a subsidiary of a public company(i)
Examine the Entitlement: The directors are not automatically entitled to

remuneration. It is paid either according to the term of articles of association or in
(ii)
accordance with a resolution of the general meeting.

Examine Adherence to Legal Provisions: The auditor should examine adherence
torelevant sections of the Act such as - (4) which deals with manner of payment of
managerial remuneration. For payment of remuneration for companies having profits
those having no profits or inadequate profits and companies having negative effective
(iii)
capital.
PERSONAL EXPENSES MEET BY DIRECTOR 1) AUTORIZATION: check article
of association, service contract ,minutes of general meeting to check authorization of
such payment 2) S.227(1A): ensure and enquire that personal expenses are not
camouflaged in any other item as contemplated under section
227(1a)
3) Supporting documents: check the documents to examine the payment reimbursement 4)

CARO 2003: chek the compliance with requirements of CARO 2033 DIRECTOR
COMMISION 1)A/A: see the article of association of company and note the rules regarding the
payment of commission 2) Agreement : examine the terms and condition of the agreement to
find out the rate of commission payable 3) Compliance: check section 198 and 309 also see
calculation as per section 349,350 and 351 of the act 4) calculation :vouch calculation of
commission paid and verify with receipt
Dividends:- The return on investment in share is called dividend. It is the part of the profit
earned by the company. Dividend rate approved in the general meeting by the shareholders.
Duties Of Auditor Relating To Dividends:- Following are the important duties of the auditor :

1. Rules Of Company :- The auditor should check the rules of a company. He should examine
that articles of association and companies ordinance allow the management to propose dividends
out of revenue profits.
2. Rate Of Dividend :- The auditor should check that rate of dividend must not be above the rate
of profit. It should also not exceed the market rate.
3. Reasonable Profit :- The auditor should check that amount of revenue profits is reasonable.
If it is not reasonable then dividend should not be paid.
4. Account :- Dividend amount is payable with in the days. The auditor should check that
dividend account is opened in the bank or not. The amount equal to dividend must be deposited.
5. Tax :- It is also the duty of the auditor that he should check the tax payable or dividend is paid
to the Govt. or not ? The payment of tax is a legal formality.
6. Not Collected :- Sometimes shareholders fail to collect the amount from the banks. The
auditor should check such amount because it is stated in the balance sheet as liability.
7. Profit & Loss Account :- The profit and loss appropriation account must be checked by the
auditor. He should note the amount of dividend recorded in it.
8. Account Statement :- The auditor examines that amount of dividend paid and due prepares
reconciliation statement of dividend account. He should make detailed checking in case of
discrepancy. The errors can be detected. 9. Warrant :- To register the shareholder management
issues dividend warrants. Such amount can be claimed by the shareholders from the bank. The
auditor should check these warrants has been issued or not?
Considerations in Initial Audits

The auditor should undertake the following activities before starting an initial audit:
a. Perform procedures regarding the acceptance of the client relationship and the specific audit
engagement; and

b. Communicate with the predecessor auditor in situations in which there has been a change of
auditors in accordance with AU sec. 315, Communications Between Predecessor and Successor
Auditors.
c. . The purpose and objective of planning the audit are the same for an initial audit or a recurring
audit engagement. However, for an initial audit, the auditor should determine the additional
planning activities necessary to establish an appropriate audit strategy and audit plan, including
determining the audit procedures necessary to obtain sufficient appropriate audit evidence
regarding the opening balances.
The Central Government hereby directs vide General Circular No: 2/2011 (issued by MCA dated
08-02-2011) that provisions of Section 212 shall not apply in relation to subsidiaries of those
companies which full fill the following conditions:(i) The Board of Directors of the Company has by resolution given consent for not attaching the
balance sheet of the subsidiary concerned;
(ii) The company shall present in the annual report, the consolidated financial statements of
holding company and all subsidiaries duly audited by its statutory auditors;
(iii) The consolidated financial statement shall be prepared in strict compliance with applicable
Accounting Standards and, where applicable, Listing Agreement as prescribed by the Security
and Exchange Board of India;
(iv) The company shall disclose in the consolidated balance sheet the following information in
aggregate for each subsidiary including subsidiaries of subsidiaries:(a) capital (b)reserves (c) total assets (d) total liabilities (e) details of investment
(except in case of investment in the subsidiaries) (f) turnover (g) profit before
taxation (h) provision for taxation (i) profit after taxation (j) proposed dividend;
(v) The holding company shall undertake in its annual report that annual accounts of the
subsidiary companies and the related detailed information shall be made available to
shareholders of the holding and subsidiary companies seeking such information at any point of
time. The annual accounts of the subsidiary companies shall also be kept for inspection by any
shareholders in the head office of the holding company and of the subsidiary companies

concerned and a note to the above effect will be included in the annual report of the holding
company. The holding company shall furnish a hard copy of details of accounts of subsidiaries to
any shareholder on demand;
(vi) The holding as well as subsidiary companies in question shall regularly file such data to the
various regulatory and Government authorities as may be required by them;
(vii) The company shall give Indian rupee equivalent of the figures given in foreign currency
appearing in the accounts of the subsidiary companies along with exchange rate as on closing
day of the financial year;
(Note: Students may note that as per section 227 of the Act, the duty of the auditor extends to
expressing an opinion on balance sheet and profit and loss account and all other documents
annexed thereto. Since section 212 requires that particulars of subsidiary company are required
to be attached to balance sheet of holding company, the same shall not be covered by auditors
report. Also refer to section 222 which deals with construction of references to documents
annexed to accounts. The Boards Report under section 217 is also attached to every balance
sheet of a company.
Profit and loss account to be annexed and auditors report to be attached to balance sheet - The
profit and loss account shall be annexed to the balance sheet and the auditors report including
the auditors separate, special or supplementary report, if any shall be attached thereto.
SPECIAL REQUIREMENTS OF COMPANY AUDIT
(i) Verification of the constitution and powers - A company can function within the limits
prescribed by the documents on the basis of which it has been registered. It raises its capital from
the public on certain conditions, specified in the Prospectus. Before commencing business, to
purchase a property or to have subscription to its capital underwritten on this account, it is
essential that the auditor, prior to starting the audit of a company, shall examine:
(a) The Memorandum of Association.
(b) The Articles of Association.
(c) Contracts entered into with vendors and other persons relating to purchase of property,
payment of commission, etc.

A company cannot enter into a contract before it has been registered. What is more, a public
company cannot commence business until the certificate of commencement of business has been
granted to it by the Registrar of Companies. It is, therefore, the duty of the auditor to take into
account, while examining the transaction entered into by the company, the dates when these were
entered into for confirming the validity.
With a view to carrying out the audit effectively, it is necessary that the auditor should know the
authority structure of the company. Under Section 291 of the Act, the Board of Directors of a
company are entitled to exercise all such powers, and to do all such acts and things, as the
company is authorized to do. However, the Board shall not exercise any power or do any act or
thing which is directed or required by any legislation (including the Companies Act) or by the
memorandum or articles of the company, to be exercised or done by the company, in general
meeting.
Section 292 specifies six types of decisions that can be taken by the Board of Directors only in
Boards meetings. These relate to :
(i) making calls on partly paid shares.
(ii) issue of debentures,
(iii) borrowing monies otherwise than on debentures,
(iv) investing the funds of the company, and
(v) making loans.
The transaction barring the first three can be delegated to any of the following:
(a) a committee of directors,
(b) managing director,
(c) manager,
(d) any other principal officer of the company, or
(e) principal officer of the branch office, in relation to the branch.
Apart from the above, a number of other functions are also carried out by the Board. A few of
such functions are stated herein by way of examples :

(a) Adopting of accounts before the same submitted to the auditor for their report-Section 215.
(b) Appointment of the first auditors and filling of casual vacancy - Section 224.
(c) Investment in shares of companies within the limits specified in Section 372A.
(d) Entering into contracts with persons who are directors of the company or related to or
associated with the directors as are specified in Section 297 of the Act.
Some of the matters which only the shareholders can sanction at a general meeting :
(a) Appointment and fixation of remuneration of auditors in the annual general meeting -Section
224.
(b) Declaration of dividends - Regulation 85, Table A.
(c) Appointment of relatives of directors etc. to an office or place of profit in the company under
Section 314 of the Act.
(d) Sale, lease or a disposal of the whole of the companys undertaking or a substantial part
of it and donations above a certain limits [Section 293(1)].
(ii) Matters which require sanction of the Central Government :
Loans to directors by a company other than a banking or a finance company (Section 295).
For verifying the foregoing transactions and others authorised by the directors or shareholders,
the auditor should refer to the minutes of the meeting at which these have been considered.
Further, for judging the validity or otherwise of section accorded, the relevant provision of law
must be referred to. A few such instances are given below :
(a) Appointment of Directors (Section 256).
(b) Disqualifications of Directors (Section 274).
(c) Conduct of Board Meeting (Sections 285-290).
(d) General powers of Board (Section 291).
(e) Powers which the Board must exercise only at a meeting (Section 292).

(f) Restriction on powers of the Board regarding disposal of the undertaking or part of it etc.
(Section 293).
(g) Prohibitions and restrictions regarding political contributions (Section 293A).
(h) Power of Board and other persons to make contributions to the National Defence Fund, etc.
(Section 293B).
(i) Restriction on advancing loans to Directors, etc. (Section 295).
(j) Restriction on a Director or his relative, a firm in which a director or relative is a partner; or
any other partner of the firm or a private company of which such director is a member or
director to enter into a contract of sale or purchase of goods except with the sanction of the
Board of Directors (Section 297).
(k) Restriction on an interested director in participating in or voting at Boards proceedings
(Section 300).
(l) Disclosure of interest by directors (Section 299).
(m) Register of contracts, Companies or firms in which directors are inspected (Section 301)
(n) Remuneration of directors (Section 309).
(o) Restraint on a directors holding offices or places of profit (Section 314).
(p) Restraint on payment of compensation for loss of office to a director (Sections 318 to 321).
(q) Restriction on loans, etc., to companies under the same management (Section 370).
(r) Regulation of inter-corporate loans and investments (Section 372A).
AUDIT OF LIABILITIES
Liabilities reorganization is the concession items made by a creditor in accordance with the
agreement made with a debtor in financial difficulty or rules of the court. There are four major
forms of liabilities reorganization:

1. To confirm whether the date of liabilities reorganization is accurately defined. The fair market
price of assets varies from date to date, the amount of liabilities payable with interest also varies
from each other. Consequently, the profits and losses of liabilities reorganization and the relevant
records of assets and liabilities recognized in different dates vary from each other. In addition,
the date of liabilities reorganization is also the basis for defining the accounting period. No
matter when the assets transactions were conducted, the reorganization date should be the
accounting cut-off date. Auditors, in carrying out auditing, shall obtain the asset reorganization
agreement files in the first place to identify the date of reorganization. They should then review
the accounting information to check whether the valuation of the assets and liabilities are based
on the reorganization date and the accounting information prepared are within the corresponding
accounting period.
2. To check whether the accounting of the liabilities reorganization is proper. Major tool of such
auditing is to examine on a sample basis the accounting vouchers of liabilities reorganization.
These vouchers are verified against relevant agreement to make sure (1) relevant assets,
liabilities and capital items are consistent with the agreement,- (2) proper accounting items have
been applied and (3) accurate amounts have been recorded. Special attention shall be paid to see
if the capital received and the capital reserve have been classified accurately, if the bad debt
provision of the creditor has been written off and if contingent expenditures have been given due
consideration?
3. To check whether the calculation and recognition of the profits and losses of liabilities
reorganization has been conducted in accordance with relevant requirements. Review of the
calculation of the profits and losses of liabilities reorganization is done through consulting and
examining such information as the reorganization agreement, information provided by
intermediary institutions and market information, the book value of debtor's liabilities, book
value of assets, fair value of assets, fair value of shareholder's equity, future payables, the
creditor's net credit value, future receivables. The calculation of the profits and losses of the
enterprise is then reviewed to make sure data has been applied correctly and correct calculation
has been conducted. Special attention shall be paid to see if the fair market value of assets,
shareholder's equity and the amount of contingent liabilities have been accurately defined on
proper basis and, whether the accounting period of the profits and losses is appropriate.

4. To audit whether the disclosure of reorganization is sufficient. Accounting standards require
that liabilities reorganization be disclosed in the footnotes of the financial statements at the end
of an accounting period, explaining the contents and impact of the reorganization. Such
disclosure aims to make the user of financial statements better informed of the financial
condition of the enterprise. The user of the financial statements will not be able to understand the
full impact of the reorganization on the assets and liabilities, profits and losses of the enterprise,
nor can they study the value for money of the enterprise correctly if the disclosure is not properly
made. It is therefore necessary to observe carefully if complete disclosure has been made by the
enterprise through examining the disclosure of the process of liabilities reorganization.
CHAPTER 2
CONSIDERATION IN COMPANY AUDIT
GENERAL CONSIDERATION IN COMPANY AUDIT

These have to be determined on a consideration of :
(a) objectives of audit;
(b) various provisions in the Companies Act, 1956, especially those concerning accounts and
audit; and
(c) the scope of the report that the auditor of a company is required to make in pursuance of the
provisions contained in section 227 of the Act.
The objectives of an audit are :
(i) Verification of statements of account so as to express an opinion;
(ii) Detection of errors and frauds; and
(iii) Prevention of occurrence of errors and frauds.
Detection and prevention of frauds and errors were originally regarded as the main objectives of
an audit.
While conducting the audit, the auditor is expected to bear in mind the possibility of existence of
a fraud or other irregularity in accounts. Nonetheless, he is not expected to conduct the audit with
the objective of discovering all frauds or irregularities, for if that is to be done, the audit would
take an unduly long time and the cost of it would be quite out of proportion to its benefit.
Nevertheless, it is expected that the auditor would be vigilant and watchful and whenever he
comes across a circumstance which arouses his suspicion, he should find out whether a fraud, or
irregularity, in fact does exist and, if so, whether it is sufficiently material to necessitate
qualifications of the audit report.
It is generally accepted that the auditor is not an insurer and does not guarantee that the books of
account truly reflect the companys affairs.
The auditor, thus, is principally responsible for carrying out his duties by exercising due care and
skill in consonance with the professional standards. If, despite the fact, any fraud or irregularity
in accounts remains undetected, he cannot be held liable for the failure to detect it. Moreover,
since the management is primarily responsible for safeguarding the assets and property of the

company, the auditor, while framing his audit program, is entitled to rely upon the internal
controls in this regard instituted by the management based on a proper evaluation.
It would be observed that Companies Act, 1956 also does not contemplate that an auditor is
responsible for the detection of errors and frauds, except when they are so material as to vitiate
the opinion expressed by him that statements of account exhibit a true and fair state of affairs.
The auditor is required to verify the final statements of account; also to check or verify all the
matters affecting them so as to ensure fully that they exhibit a true and fair state of affairs of the
business of the company. For the purpose, he may either carry out a detailed examination of the
books or relying on the internal control measures in operation, after testing their strength, merely
test the accuracy of transaction recorded therein.
It is permissible for an auditor to verify the accuracy of transactions recorded in the books of
account by the application of test checks, if he is satisfied that the system of internal control, in
operation, is adequate and satisfactory.
2. CONSTITUTIONAL DOCUMENTS
The auditor, before commencing a company audit, shall undertake Verification of the
constitution and powers. This he can verify from various documents, decisions taken in board
meeting, decisions in shareholders meeting etc.
Any companys functions and powers are limited to the documents on the basis of which it has
been registered. Prospectus is the most important document that the company requires to raise
capital from public. The auditor also needs to check various transactions taken place before
commencement of business eg, any property purchased etc. thus, prior to setting any audit, the
auditor shall examine following constitutional documents :
1.
Memorandum of association
2.
Articles of association
3.
Contracts entered into with vendors and other persons relating to purchase of property,
payment of commission etc.

4.
Certificate of commencement by business

5.
Certificate of registration etc.
A company, before registration, cannot enter into contract also without obtaining Certificate of
Commencement of business from the registrar of Companies. Therefore, the auditor is required
to take into account his duty to examine the transactions entered into by the company; the dates
when these were entered into for confirming the validity. The auditor should be aware of the
authority structure of the company so as to carry out audit effectively. Section 291 empowers the
Board of Directors to exercise all such powers and undertake all such Acts, the company is
authorized to do. But, the auditor should see to it that the Board has not done any ultra-vires Acts
i.e. not exercised any power nor done any act which is not permitted by Memorandum or Articles
of the company.
3. BUY BACK OF SHARES
The provisions regulating buy back of shares are contained in Section 77A, 77AA and 77B of the
Companies Act,1956. These were inserted by the Companies (Amendment) Act,1999. The
Securities and Exchange Board of India (SEBI) framed the SEBI(Buy Back of Securities)
Regulations,1999 and the Department of Company Affairs framed the Private Limited Company
and Unlisted Public company (Buy Back of Securities) rules,1999 pursuant to Section 77A(2)(f)
and (g) respectively.
The repurchase of outstanding shares (repurchase) by a company in order to reduce the number
of shares on the market. Companies will buy back shares either to increase the value of shares
still available (reducing supply), or to eliminate any threats by shareholders who may be looking
for a controlling stake.
A buyback allows companies to invest in themselves. By reducing the number of shares
outstanding on the market, buybacks increase the proportion of shares a company owns.
Buybacks can be carried out in two ways:
1. Shareholders may be presented with a tender offer whereby they have the option to submit (or
tender) a portion or all of their shares within a certain time frame and at a premium to the current
market price. This premium compensates investors for tendering their shares rather than holding
on to them.
2. Companies buy back shares on the open market over an extended period of time.

3.1) Objectives of Buy Back:
Shares may be bought back by the company on account of one or more of the following reasons
i.
To increase promoters holding
ii.
Increase earning per share
iii.
Rationalise the capital structure by writing off capital not represented by available assets.
iv.
Support share value
v.
To thwart takeover bid
vi.
To pay surplus cash not required by business
Infact the best strategy to maintain the share price in a bear run is to buy back the shares from the
open market at a premium over the prevailing market price.
3.2) Resources of Buy Back
A Company can purchase its own shares from
(i)
Free reserves; Where a company purchases its own shares out of free reserves, then a
sum equal to the nominal value of the share so purchased shall be transferred to the capital
redemption reserve and details of such transfer shall be disclosed in the balance-sheet or
(ii)
Securities premium account; or
(iii)
Proceeds of any shares or other specified securities. A Company cannot buyback its
shares or other specified securities out of the proceeds of an earlier issue of the same kind of
shares or specified securities.
3.3) Conditions of Buy Back

(a)
The buy-back is authorised by the Articles of association of the Company;
(b)
A special resolution has been passed in the general meeting of the company authorising
the buy-back. In the case of a listed company, this approval is required by means of a postal
ballot. Also, the shares for buy back should be free from lock in period/non transferability. The

buyback can be made by a Board resolution If the quantity of buyback is or less than ten percent
of the paid up capital and free reserves;
(c)
The buy-back is of less than twenty-five per cent of the total paid-up capital and fee
reserves of the company and that the buy-back of equity shares in any financial year shall not
exceed twenty-five per cent of its total paid-up equity capital in that financial year;
(d)
The ratio of the debt owed by the company is not more than twice the capital and its free
reserves after such buy-back;

(e)
There has been no default in any of the following
i.
In repayment of deposit or interest payable thereon,
ii.
Redemption of debentures, or preference shares or
iii.
Payment of dividend, if declared, to all shareholders within the stipulated time of 30 days
from the date of declaration of dividend or

iv.
Repayment of any term loan or interest payable thereon to any financial institution or
bank;
(f)
There has been no default in complying with the provisions of filing of Annual Return,
Payment of Dividend, and form and contents of Annual Accounts;

(g)
All the shares or other specified securities for buy-back are fully paid-up;
(h)
The buy-back of the shares or other specified securities listed on any recognised stock
exchange shall be in accordance with the regulations made by the Securities and Exchange Board
of India in this behalf; and
(i)
The buy-back in respect of shares or other specified securities of private and closely held
companies is in accordance with the guidelines as may be prescribed.

3.4) Disclosures in the explanatory statement
The notice of the meeting at which special resolution is proposed to be passed shall be
accompanied by an explanatory statement stating
a full and complete disclosure of all material facts;

the necessity for the buy-back;
the class of security intended to be purchased under the buy-back;

the amount to be invested under the buy-back; and
the time-limit for completion of buy-back
3.5) Sources from where the shares will be purchased

The securities can be bought back from
(a) existing security-holders on a proportionate basis;
Buyback of shares may be made by a tender offer through a letter of offer from the holders of
shares of the company or
(b) the open market through
i.
book building process;
ii.
stock exchanges or
(c) odd lots, that is to say, where the lot of securities of a public company, whose shares are listed
on a recognized stock exchange, is smaller than such marketable lot, as may be specified by the
stock exchange; or
(d) purchasing the securities issued to employees of the company pursuant to a scheme of stock
option or sweat equity.
3.6) Register of Securities Bought Back
After completion of buyback, a company shall maintain a register of the securities/shares so
bought and enter therein the following particulars
a.
The consideration paid for the securities bought-back,
b.
The date of cancellation of securities,
c.
The date of extinguishing and physically destroying of securities and
d.
Such other particulars as may be prescribed
Where a company buys-back its own securities, it shall extinguish and physically destroy the
securities so bought-back within seven days of the last date of completion of buy-back.
3.7) Issue of further shares after Buy back

Every buy-back shall be completed within twelve months from the date of passing the special
resolution or Board resolution as the case may be.
A company which has bought back any security cannot make any issue of the same kind of
securities in any manner whether by way of public issue, rights issue up to six months from the
date of completion of buy back.
3.8) Filing of return with the Regulator

A Company shall, after the completion of the buy-back file with the Registrar and the Securities
and Exchange Board of India, a return in form 4 C containing such particulars relating to the
buy-back within thirty days of such completion.
No return shall be filed with the Securities and Exchange Board of India by an unlisted company.
3.9) Prohibition of Buy Back

A company shall not directly or indirectly purchase its own shares or other specified securities (a)
Through any subsidiary company including its own subsidiary companies; or
(b)
Through any investment company or group of investment companies;
3.10) Procedure for buy back

a.
Where a company proposes to buy back its shares, it shall, after passing of the
special/Board resolution make a public announcement at least one English National Daily, one
Hindi National daily and Regional Language Daily at the place where the registered office of the
company is situated.

b.
The public announcement shall specify a date, which shall be specified date for the
purpose of determining the names of shareholders to whom the letter of offer has to be sent.
c.
A public notice shall be given containing disclosures as specified in Schedule I of the
SEBI regulations.
d.
A draft letter of offer shall be filed with SEBI through a merchant Banker. The letter of
offer shall then be dispatched to the members of the company.

e.
A copy of the Board resolution authorising the buy back shall be filed with the SEBI and
stock exchanges.
f.
The date of opening of the offer shall not be earlier than seven days or later than 30 days
after the specified date

g.
The buy back offer shall remain open for a period of not less than 15 days and not more
than 30 days.
h.
A company opting for buy back through the public offer or tender offer shall open an
escrow Account.
3.11) Penalty
If a company makes default in complying with the provisions the company or any officer of the
company who is in default shall be punishable with imprisonment for a term which may extend
to two years, or with fine which may extend to fifty thousand rupees, or with both. The offences
are, of course compoundable under Section 621A of the Companies Act,1956.
4) TRANSMISSION OF SHARES
Share transmission is a mechanism by which the title to shares is devolved other than by transfer.
This is typically applicable for:
Devolution by death
Succession
Inheritance
Bankruptcy
Marriage
Ownership: On registration of the transmission of shares, the person entitled to transmission of

shares becomes the shareholder of the company and is entitled to all rights and subject to all
liabilities as such shareholder.
Method: While transfer of shares is brought about by delivery of a proper instrument of transfer
(viz, transfer deed) duly stamped and executed, transmission of shares is done by forwarding the
necessary documents (such as a notarised copy of death certificate) to the company.
5) SA 200
Overall Objectives of the Independent Auditor and The Conduct of an Audit in
Accordance with Standards on Auditing
5.1) Scope of this SA: This Standard on Auditing (SA) establishes the independent auditors
overall
responsibilities when conducting an audit of FS in accordance with SAs.
Specifically, it sets out the overall objectives of the independent auditor, and
expains the
nature and scope of an audit designed to enable the independent auditor to meet those.
5.2) Overall Objectives of the Auditor:

In conducting an audit of financial statements, the overall objectives of the auditor are
(a) To obtain reasonable assurance about whether the FS as a whole are free from material
misstatement, and
(b) To report on the financial statements, and communicate as required by the SAs, in accordance
with the auditors findings.
5.3) Requirements

i) Ethical Requirements Relating to an Audit of FS
The auditor shall comply with relevant ethical requirements, including those
independence, relating to financial statement audit engagements.
pertaining to
Relevant ethical
requirements ordinarily comprise the Code of Ethics issued by the Institute of Chartered
Accountants of India. The Code establishes the following as the fundamental principles of
professional ethics relevant to the auditor
(a) Integrity;
(b) Objectivity;
(c) Independence
(d) Professional competence and due care
(e) Confidentiality; and
(f) Professional behavior.
ii) Professional Skepticism
(a)The auditor shall plan and perform an audit with professional skepticism
recognising
that circumstances may exist that cause the financial statements to be materially misstated.
(b) Professional skepticism includes being alert to, for example
Audit evidence that contradicts other audit evidence obtained.
Conditions that may indicate possible fraud.
iii) Professional Judgment
The auditor shall exercise professional judgment in planning and performing an audit of financial
statements. Professional judgment is essential to the proper conduct of an audit. Professional
judgment is necessary in particular regarding
decisions about:
Materiality and audit risk.

The nature, timing, and extent of audit procedures used to meet the requirements of the SAs and
gather audit evidence.
Evaluating whether sufficient appropriate audit evidence has been obtained.

iv) Sufficient Appropriate Audit Evidence and Audit Risk
To obtain reasonable assurance, the auditor shall obtain sufficient appropriate audit evidence to
reduce audit risk to an acceptably low level and thereby enable the auditor to draw reasonable
conclusions on which to base the auditors opinion.
a) Audit evidence is necessary to support the auditors opinion and report. It is cumulative in
nature and is primarily obtained from audit procedures performed during the course of the audit.
b) The sufficiency and appropriateness of audit evidence are interrelated. Sufficiency is the
measure of the quantity of audit evidence. The quantity of audit evidence needed is affected by
the auditors assessment of the risks of misstatement (the higher the assessed risks, the more
audit evidence is likely to be required) and also by the quality of such audit evidence (the higher
the quality, the less may be required). Obtaining more audit evidence, however, may not
compensate for its poor quality.
c)Appropriateness is the measure of the quality of audit evidence; that is, its relevance and its
reliability in providing support for the conclusions on which the auditors opinion is based. The
reliability of evidence is influenced by it source and by its nature, and is dependent on the
individual circumstances under which it is obtained.
d)Whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an
acceptably low level, and thereby enable the auditor to draw reasonable conclusions on which to
base the auditors opinion, is a matter of professional judgment.
CHAPTER 3
CONDUCT OF AN AUDIT IN ACCORDANCE WITH SAS
1. Complying with SAs Relevant to the Audit
a.The auditor shall comply with all SAs relevant to the audit. An SA is relevant to the audit when
the SA is in effect and the circumstances address by the SA exist.

b.The auditor shall have an understanding of the entire text of an SA, including its application
and other explanatory material, to understand its objectives and to apply its requirements
properly.
c.The auditor shall not represent compliance with SAs in the auditors report unless the auditor
has complied with the requirements of this SA and all other SAs relevant to the audit.
2. Objectives Stated in IndividuaI SAs

To achieve the overall objectives of the auditor, the auditor shall use the Objectives stated in
relevant SAs in planning and performing the audit, having regard to the interrelationships among
the SAs,
(a) Determine whether any audit procedures in addition to those required by the SAs are
necessary in pursuance of the objectives stated in the SAs; and
(b)Evaluate whether sufficient appropriate audit evidence has been obtained.
3. Complying with Relevant Requirements

The auditor shall comply with requirement of an SA unless, in the circumstances of the audit:
(a) The entire SA is not relevant; or
(b)The requirement is not relevant because it is conditional and the condition
does not exist.
4. Failure to Achieve an Objective

If an objective in a relevant SA cannot be achieved, the auditor shall evaluate
whether this
prevents the auditor from achieving the overall objectives of the auditor and thereby requires the
auditor, in accordance with the SAs, to modify the
auditors opinion or withdraw frm the

engagement. Failure to achieve an objective represents a significant matter requiring
documentation in accordance with SA 230
6) SA 200 AObjectives and scope of Audit of Financial Statements

The auditors opinion on the financial statements deals with whether the financial
statements are prepared, in all material respects, in accordance with the applicable financial
reporting framework. Such an opinion is common to all audits of financial statements. The
auditors opinion therefore does not assure, for example, the future viability of the entity nor the
efficiency or effectiveness with which management has conducted the affairs of the entity.
In some cases, however, the applicable laws and regulations may require auditors to provide
opinions on other specific matters, such as the effectiveness of internal control, or the
consistency of a separate management report with the financial statements. While the SAs
include requirements and guidance in relation to such matters to the extent that they are relevant
to forming an opinion on the financial statements, the auditor would be required to undertake
further work if the auditor had additional responsibilities to provide such opinions.
6.1) Preparation of the Financial Statements

An audit in accordance with SAs is conducted on the premise that management and, where
appropriate, those charged with governance have responsibility:
(a) For the preparation and presentation of the financial statements in accordance with the
applicable financial reporting framework; this includes the design, implementation and
maintenance of internal control relevant to the preparation and presentation of financial
statements that are free from material misstatement, whether due to fraud or error; and
(b) To provide the auditor with:
(i) All information, such as records and documentation, and other matters that are relevant to the
preparation and presentation of the financial statements;

(ii) Any additional information that the auditor may request from management and, where
appropriate, those charged with governance; and
(iii) Unrestricted access to those within the entity from whom the auditor determines it necessary
to obtain audit evidence.
As part of their responsibility for the preparation and presentation of the financial
statements, management and, where appropriate, those charged with governance are responsible
for:
The identification of the applicable financial reporting framework, in the context of any
relevant laws or regulations.

The preparation and presentation of the financial statements in accordance with that
framework.
An adequate description of that framework in the financial statements.
The preparation of the financial statements requires management to exercise judgment in making
accounting estimates that are reasonable in the circumstances, as well as to select and apply
appropriate accounting policies. These judgments are made in the context of the applicable
financial reporting framework.
6.2) Ethical Requirements Relating to an Audit of Financial Statements
The auditor is subject to relevant ethical requirements, including those pertaining to

independence, relating to financial statement audit engagements. Relevant ethical requirements
ordinarily comprise the Code of Ethics issued by the Institute of Chartered Accountants of India.
The Code establishes the following as the fundamental principles of professional ethics relevant
to the auditor when conducting an audit of financial statements and provides a conceptual
framework for applying those principles;
(a) Integrity;
(b) Objectivity;
(c) Professional competence and due care;

(d) Confidentiality; and
(e) Professional behavior.
In the case of an audit engagement it is in the public interest and, therefore, required by the Code
of Ethics, that the auditor be independent of the entity subject to the audit. The Code describes
independence as comprising both independence of mind and independence in appearance. The
auditors independence from the entity safeguards the auditors ability to form an audit opinion
without being affected by influences that might compromise that opinion. Independence
enhances the auditors ability to act with integrity, to be objective and to maintain an attitude of
professional skepticism.
6.3) Professional Skepticism
Professional skepticism includes being alert to, for example:
Audit evidence that contradicts other audit evidence obtained.
Information that brings into question the reliability of documents and
responses to inquiries to
be used as audit evidence.

Conditions that may indicate possible fraud.
Circumstances that suggest the need for audit procedures in addition to those required by the
SAs.
Maintaining professional skepticism throughout the audit is necessary if the auditor is, for
example, to reduce the risks of:
Overlooking unusual circumstances.
Over generalising when drawing conclusions from audit observations.
Using inappropriate assumptions in determining the nature, timing, and extent of the audit
procedures and evaluating the results thereof.
Professional skepticism is necessary to the critical assessment of audit evidence. This includes
questioning contradictory audit evidence and the reliability of documents and responses to
inquiries and other information obtained from management and those charged with governance.

It also includes consideration of the sufficiency and appropriateness of audit evidence obtained in
the light of the circumstances, for example in the case where fraud risk factors exist and a single
document, of a nature that is susceptible to fraud, is the sole supporting evidence for a material
financial statement amount.
CHAPTER 4
7. SA 230(REVISED): AUDIT DOCUMENTATION
7.1) Scope of this SA

This Standard on Auditing (SA) deals with the auditors responsibility to prepare audit
documentation for an audit of financial statements. It is to be adapted as necessary in the
circumstances when applied to audits of other historical financial information. The specific

documentation requirements of other SAs do not limit the application of this SA. Laws or
regulations may establish additional documentation requirements.
7.2) Nature and Purposes of Audit Documentation
Audit documentation that meets the requirements of this SA and the specific
documentation requirements of other relevant SAs provides:
(a) Evidence of the auditors basis for a conclusion about the achievement of the overall
objective of the auditor; and
(b) Evidence that the audit was planned and performed in accordance with SAs and
applicable legal and regulatory requirements.
7.3) Audit documentation serves a number of additional purposes, including the following:
Assisting the engagement team to plan and perform the audit.
Assisting members of the engagement team responsible for supervision to direct and supervise
the audit work, and to discharge their review responsibilities in accordance with Proposed SA
220 (Revised)1.
Enabling the engagement team to be accountable for its work.
Retaining a record of matters of continuing significance to future audits.
Enabling the conduct of quality control reviews and inspections in accordance with SQC 1.
Enabling the conduct of external inspections in accordance with applicable legal, regulatory or
other requirements.
7.4) Effective Date

This SA is effective for audits of financial statements for periods beginning on or after April 1,
2009.
7.5) Objective
The objective of the auditor is to prepare documentation that provides:

(a) A sufficient and appropriate record of the basis for the auditors report; and
(b) Evidence that the audit was planned and performed in accordance with SAs and
applicable legal and regulatory requirements.
7.6) Definitions
For purposes of the SAs, the following terms have the meanings attributed below:
(a) Audit documentation The record of audit procedures performed, relevant audit evidence
obtained, and conclusions the auditor reached (terms such as working papers or workpapers
are also sometimes used).
(b) Audit file One or more folders or other storage media, in physical or electronic form,
containing the records that comprise the audit documentation for a specific engagement.
(c) Experienced auditor An individual (whether internal or external to the firm) who has
practical audit experience, and a reasonable understanding of:
(i) Audit processes;
(ii) SAs and applicable legal and regulatory requirements;
(iii) The business environment in which the entity operates; and
(iv) Auditing and financial reporting issues relevant to the entitys industry.
7.7) Requirements
1) Timely Preparation of Audit Documentation
The auditor shall prepare audit documentation on a timely basis.
2) Form, Content and Extent of Audit Documentation
The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor,
having no previous connection with the audit, to understand:
(a) The nature, timing, and extent of the audit procedures performed to comply with the SAs and
applicable legal and regulatory requirements;

(b) The results of the audit procedures performed, and the audit evidence obtained; and
(c) Significant matters arising during the audit, the conclusions reached thereon, and significant
professional judgments made in reaching those conclusions.
3) Departure from a Relevant Requirement
If, in exceptional circumstances, the auditor judges it necessary to depart from a relevant
requirement in a SA, the auditor shall document how the alternative audit procedures performed
achieve the aim of that requirement, and the reasons for the departure.
4) Matters Arising after the Date of the Auditors Report
If, in exceptional circumstances, the auditor performs new or additional audit procedures or
draws new conclusions after the date of the auditors report, the auditor shall document:
(a) The circumstances encountered;
(b) The new or additional audit procedures performed, audit evidence obtained, and conclusions
reached, and their effect on the auditors report; and
(c) When and by whom the resulting changes to audit documentation were made and reviewed.
5) Assembly of the Final Audit File
The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis after the date of the
auditors report.
After the assembly of the final audit file has been completed, the auditor shall not delete or
discard audit documentation of any nature before the end of its retention period.
In circumstances other than those envisaged in paragraph 13 where the auditor finds it necessary
to modify existing audit documentation or add new audit documentation after the assembly of the
final audit file has been completed, the auditor shall, regardless of the nature of the modifications
or additions, document:
(a) The specific reasons for making them; and
(b) When and by whom they were made and reviewed.
CONCLUSION
Every Company registered under Companies Act 1956, need to do its audit every year, which is
known as statutory audit. During the company audit, the auditor discusses his observations with
those charged with governance, such as the audit committee of the company, before finalising the
report. The auditor should be firm in his opinion, and exercise his independence at this level.
This part of the audit is critical, and calls for resilience on the part of the auditor. An audit report,
being a public document, should be drafted skilfully. The code of conduct prohibits an auditor
from divulging any information received by him in the course of his professional assignment,
unless legally required so to do. Therefore, the auditor shouldn't hesitate to take the help of a

legal expert on whether to include certain comments in his report. And at last he submit the
reports with adverse , modified or with qualified opinion.
BIBLIOGRAPHY
www.google.com
.
www.yahoo.com
.
www.economictimes.com
.
www.searchindia.com

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A PROJECT ON COMPANY AUDIT

VIVEK COLLEGE OF COMMERCEPage 1

A PROJECT ON COMPANY AUDIT

Any registered institute. e.g. Company;

the company for an amount exceeding Rs.1000 cannot be appointed as an auditor.

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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Examine the Entitlement: The directors are not automatically entitled to

accordance with a resolution of the general meeting.

3) Supporting documents: check the documents to examine the payment reimbursement 4)

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Considerations in Initial Audits

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

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A PROJECT ON COMPANY AUDIT

GENERAL CONSIDERATION IN COMPANY AUDIT

VIVEK COLLEGE OF COMMERCEPage 16

A PROJECT ON COMPANY AUDIT

VIVEK COLLEGE OF COMMERCEPage 17

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payment of commission etc.

Certificate of commencement by business

VIVEK COLLEGE OF COMMERCEPage 18

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Certificate of registration etc.

VIVEK COLLEGE OF COMMERCEPage 19

A PROJECT ON COMPANY AUDIT

To increase promoters holding

Increase earning per share

Support share value

To thwart takeover bid

To pay surplus cash not required by business

Securities premium account; or

3.3) Conditions of Buy Back

The buy-back is authorised by the Articles of association of the Company;

VIVEK COLLEGE OF COMMERCEPage 20

A PROJECT ON COMPANY AUDIT

reserves after such buy-back;

There has been no default in any of the following

In repayment of deposit or interest payable thereon,

Redemption of debentures, or preference shares or

from the date of declaration of dividend or