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Home » » Companies (Auditor's Report)(Amendment) Order, 2004 - Clause 4(iii)(d)

Companies (Auditor's Report)(Amendment) Order, 2004 - Clause 4(iii)(d)

Written By Admin on Sunday, 1 April 2012 | Sunday, April 01, 2012

Clause 4(iii)(d)

if overdue amount is more than rupees one lakh, whether reasonable steps have been taken by the company for recovery/payment of the principal and interest;  


1) This clause requires the auditor to state whether reasonable steps have been taken by the company for recovery of the principal and interest, wherever the overdue amount is more than rupees one lakh. A loan is considered to be overdue when the payment has not been received on the due date as per the lending arrangements. In such cases, the auditor has to examine the steps, if any, taken for recovery of this amount. It may, however, be noted that the scope of the auditor’s inquiry under this clause is restricted to loans given by the company to parties covered in the register maintained under section 301 of the Act.

2) In making this examination, the auditor would have to consider the facts and circumstances of each case, including the amounts involved. It is not necessary that steps to be taken must necessarily be legal steps. Depending upon the circumstances, the degree of delay in recovery and other similar factors, issue of reminders or the sending of an advocate’s or solicitor’s notice, may amount to “reasonable steps” even though no legal action is taken. The auditor is not, therefore, required to comment adversely on the mere absence of legal steps if he is otherwise satisfied that reasonable steps have been taken by the company. The auditor should ask the management to give in writing, the steps which have been taken. The auditor should arrive at his opinion only after consideration of the management’s representations.

3) The auditor should obtain sufficient appropriate audit evidence to support the fact that reasonable steps have been taken for recovery of the principal and interest of loans taken/granted by the company. 


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