Practical aspects in Auditing

CA. PRAMOD JAIN
FCA, FCS, FCMA, LL.B, MIMA, DISA
CA. PRAMOD JAIN
FCA, FCS, FCMA, LL.B, MIMA, DISA
LUNAWAT & CO.
Chartered Accountants
LUNAWAT & CO.
Chartered Accountants
21st November 2016, Agra21st November 2016, Agra
PRACTICAL ASPECTSPRACTICAL ASPECTSPRACTICAL ASPECTSPRACTICAL ASPECTS
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AUDITINGAUDITINGAUDITINGAUDITING
PRACTICAL ASPECTSPRACTICAL ASPECTSPRACTICAL ASPECTSPRACTICAL ASPECTS
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AUDITINGAUDITINGAUDITINGAUDITING

THE PROCESSTHE PROCESSTHE PROCESSTHE PROCESS
Lunawat & Co.
FinancialFinancialFinancialFinancial
StatementsStatementsStatementsStatements
AuditorsAuditorsAuditorsAuditors
ReportReportReportReport
DirectorsDirectorsDirectorsDirectors

Lunawat & Co.
Annual ReportAnnual ReportAnnual ReportAnnual Report
Director’sDirector’sDirector’sDirector’s
Auditor’sAuditor’sAuditor’sAuditor’s
FinancialFinancialFinancialFinancial
statementstatementstatementstatement
ssss
BalanceBalanceBalanceBalance
SheetSheetSheetSheet
Profit /Profit /Profit /Profit /
LossLossLossLoss
Cash FlowCash FlowCash FlowCash Flow NotesNotesNotesNotes

FINANCIAL STATEMENTSFINANCIAL STATEMENTSFINANCIAL STATEMENTSFINANCIAL STATEMENTS
Financial YearFinancial YearFinancial YearFinancial Year –––– 31313131stststst MarchMarchMarchMarch
Cash Flow for all except:Cash Flow for all except:Cash Flow for all except:Cash Flow for all except:
OPCOPCOPCOPC
SCSCSCSC
DCDCDCDC
FS toFS toFS toFS to be in Schedule IIIbe in Schedule IIIbe in Schedule IIIbe in Schedule III
AmendedAmendedAmendedAmended w.e.fw.e.fw.e.fw.e.f. 4.9.15 to include. 4.9.15 to include. 4.9.15 to include. 4.9.15 to include
MSMED details under TradeMSMED details under TradeMSMED details under TradeMSMED details under Trade PayablePayablePayablePayable
Lunawat & Co.

BASICSBASICSBASICSBASICS –––– CURRENT VS. NONCURRENT VS. NONCURRENT VS. NONCURRENT VS. NON----CURRENTCURRENTCURRENTCURRENT
Current AssetCurrent AssetCurrent AssetCurrent Asset ---- satisfies any of following criteria;satisfies any of following criteria;satisfies any of following criteria;satisfies any of following criteria;
In the company’s normal operating cycle it is;In the company’s normal operating cycle it is;In the company’s normal operating cycle it is;In the company’s normal operating cycle it is;
Intended for sale; orIntended for sale; orIntended for sale; orIntended for sale; or
Intended to be consumed; orIntended to be consumed; orIntended to be consumed; orIntended to be consumed; or
Expected to be realized.Expected to be realized.Expected to be realized.Expected to be realized.
Held primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; or
Expected to be realized within 12 months afterExpected to be realized within 12 months afterExpected to be realized within 12 months afterExpected to be realized within 12 months after
reporting date; orreporting date; orreporting date; orreporting date; or
Cash or cash equivalent unless it is restricted fromCash or cash equivalent unless it is restricted fromCash or cash equivalent unless it is restricted fromCash or cash equivalent unless it is restricted from
being exchanged or used to settle a liability for atbeing exchanged or used to settle a liability for atbeing exchanged or used to settle a liability for atbeing exchanged or used to settle a liability for at
least 12 months after reporting date.least 12 months after reporting date.least 12 months after reporting date.least 12 months after reporting date.
Lunawat & Co.

BASICSBASICSBASICSBASICS ---- CURRENT LIABILITYCURRENT LIABILITYCURRENT LIABILITYCURRENT LIABILITY
Current liability if it satisfies any of the followingCurrent liability if it satisfies any of the followingCurrent liability if it satisfies any of the followingCurrent liability if it satisfies any of the following
criteria; if it is :criteria; if it is :criteria; if it is :criteria; if it is :
Expected to be settled in the company’s normalExpected to be settled in the company’s normalExpected to be settled in the company’s normalExpected to be settled in the company’s normal
operating cycle; oroperating cycle; oroperating cycle; oroperating cycle; or
Held primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; orHeld primarily for the purpose of being traded; or
Due to be settled within 12 months after reportingDue to be settled within 12 months after reportingDue to be settled within 12 months after reportingDue to be settled within 12 months after reporting
date; ordate; ordate; ordate; or
The company does not have an unconditional rightThe company does not have an unconditional rightThe company does not have an unconditional rightThe company does not have an unconditional right
to defer settlement of liability for at least 12to defer settlement of liability for at least 12to defer settlement of liability for at least 12to defer settlement of liability for at least 12
months after reporting date. Terms of a liabilitymonths after reporting date. Terms of a liabilitymonths after reporting date. Terms of a liabilitymonths after reporting date. Terms of a liability
that could, at option of counterparty, result in itsthat could, at option of counterparty, result in itsthat could, at option of counterparty, result in itsthat could, at option of counterparty, result in its
settlement by issue of equity do not affect itssettlement by issue of equity do not affect itssettlement by issue of equity do not affect itssettlement by issue of equity do not affect its
classification.classification.classification.classification.
Lunawat & Co.

GENERALGENERALGENERALGENERAL
Balance Sheet TitleBalance Sheet TitleBalance Sheet TitleBalance Sheet Title –––– ‘as at’ or ‘as on’ 31st‘as at’ or ‘as on’ 31st‘as at’ or ‘as on’ 31st‘as at’ or ‘as on’ 31st
MarchMarchMarchMarch
PL TitlePL TitlePL TitlePL Title ---- Statement of Profit & Loss / I & EStatement of Profit & Loss / I & EStatement of Profit & Loss / I & EStatement of Profit & Loss / I & E
Rounding off based on turnover.Rounding off based on turnover.Rounding off based on turnover.Rounding off based on turnover.
<<<< RsRsRsRs. 100 Crores. 100 Crores. 100 Crores. 100 Crores ---- To the nearest hundreds,To the nearest hundreds,To the nearest hundreds,To the nearest hundreds,
thousands, lakhs or millions or decimalthousands, lakhs or millions or decimalthousands, lakhs or millions or decimalthousands, lakhs or millions or decimal
thereofthereofthereofthereof
RsRsRsRs. 100 Crores or more. 100 Crores or more. 100 Crores or more. 100 Crores or more ---- To the nearest lakhsTo the nearest lakhsTo the nearest lakhsTo the nearest lakhs
or millions or crores or decimal thereofor millions or crores or decimal thereofor millions or crores or decimal thereofor millions or crores or decimal thereof
ComparativeComparativeComparativeComparative figuresfiguresfiguresfigures requiredrequiredrequiredrequired to be disclosed forto be disclosed forto be disclosed forto be disclosed for
the last reportingthe last reportingthe last reportingthe last reporting periodperiodperiodperiod
Lunawat & Co.

GENERALGENERALGENERALGENERAL
Linking of notes with B/S & PLLinking of notes with B/S & PLLinking of notes with B/S & PLLinking of notes with B/S & PL
Name , DIN, designation & address ofName , DIN, designation & address ofName , DIN, designation & address ofName , DIN, designation & address of
signatories to any documentsignatories to any documentsignatories to any documentsignatories to any document
uploaded / filed with ROCuploaded / filed with ROCuploaded / filed with ROCuploaded / filed with ROC
B/s & PL on letterhead of AuditorsB/s & PL on letterhead of AuditorsB/s & PL on letterhead of AuditorsB/s & PL on letterhead of Auditors ????????
Date of signingDate of signingDate of signingDate of signing
Payment to shareholders for 2(22)(e)Payment to shareholders for 2(22)(e)Payment to shareholders for 2(22)(e)Payment to shareholders for 2(22)(e)
Lunawat & Co.

SHARE CAPITAL & RESERVESSHARE CAPITAL & RESERVESSHARE CAPITAL & RESERVESSHARE CAPITAL & RESERVES
AuthorizedAuthorizedAuthorizedAuthorized / Paid up Capital/ Paid up Capital/ Paid up Capital/ Paid up Capital –––– Check withCheck withCheck withCheck with
Master DataMaster DataMaster DataMaster Data
Reconciliation of no of shares outstanding atReconciliation of no of shares outstanding atReconciliation of no of shares outstanding atReconciliation of no of shares outstanding at
beginning and at end of reporting period.beginning and at end of reporting period.beginning and at end of reporting period.beginning and at end of reporting period.
RRRRightsightsightsights, preference & restrictions attaching to, preference & restrictions attaching to, preference & restrictions attaching to, preference & restrictions attaching to
each class of shareseach class of shareseach class of shareseach class of shares etc.etc.etc.etc.
IsIsIsIs conversion of loans into shares in event ofconversion of loans into shares in event ofconversion of loans into shares in event ofconversion of loans into shares in event of
default in repaymentdefault in repaymentdefault in repaymentdefault in repayment –––– NonNonNonNon----cash?cash?cash?cash?
Share Premium A/c??Share Premium A/c??Share Premium A/c??Share Premium A/c??
Lunawat & Co.

BORROWINGSBORROWINGSBORROWINGSBORROWINGS
Long Term vs. ShortLong Term vs. ShortLong Term vs. ShortLong Term vs. Short TermTermTermTerm
Directors??Directors??Directors??Directors??
CC Limits?? Demand Loans??CC Limits?? Demand Loans??CC Limits?? Demand Loans??CC Limits?? Demand Loans??
Secured /unsecuredSecured /unsecuredSecured /unsecuredSecured /unsecured –––– nature of security to benature of security to benature of security to benature of security to be
statedstatedstatedstated &&&& guaranteed by directors to be shownguaranteed by directors to be shownguaranteed by directors to be shownguaranteed by directors to be shown
separately.separately.separately.separately.
Term of repayment of term loans to be givenTerm of repayment of term loans to be givenTerm of repayment of term loans to be givenTerm of repayment of term loans to be given
Period of maturity with respect to B/S datePeriod of maturity with respect to B/S datePeriod of maturity with respect to B/S datePeriod of maturity with respect to B/S date
Number of installmentsNumber of installmentsNumber of installmentsNumber of installments due;due;due;due; AmtAmtAmtAmt of installments dueof installments dueof installments dueof installments due
Applicable rate of interestApplicable rate of interestApplicable rate of interestApplicable rate of interest
PeriodPeriodPeriodPeriod & amount of default in payment of& amount of default in payment of& amount of default in payment of& amount of default in payment of
principalprincipalprincipalprincipal &&&& interest as oninterest as oninterest as oninterest as on B/SB/SB/SB/S datedatedatedate
Lunawat & Co.

OTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIES
The amount shall be classified as:The amount shall be classified as:The amount shall be classified as:The amount shall be classified as:
Current maturities of long term debtsCurrent maturities of long term debtsCurrent maturities of long term debtsCurrent maturities of long term debts
Current maturities of finance lease obligationsCurrent maturities of finance lease obligationsCurrent maturities of finance lease obligationsCurrent maturities of finance lease obligations
Interest accrued but not due on borrowingsInterest accrued but not due on borrowingsInterest accrued but not due on borrowingsInterest accrued but not due on borrowings
Interest accrued and due on borrowingsInterest accrued and due on borrowingsInterest accrued and due on borrowingsInterest accrued and due on borrowings
Income received in advanceIncome received in advanceIncome received in advanceIncome received in advance
Unpaid dividendsUnpaid dividendsUnpaid dividendsUnpaid dividends
Share Application money due for refund and interestShare Application money due for refund and interestShare Application money due for refund and interestShare Application money due for refund and interest
accrued thereon (including advances for allotment ofaccrued thereon (including advances for allotment ofaccrued thereon (including advances for allotment ofaccrued thereon (including advances for allotment of
share Capital)share Capital)share Capital)share Capital)
Unpaid matured deposit and interest thereonUnpaid matured deposit and interest thereonUnpaid matured deposit and interest thereonUnpaid matured deposit and interest thereon
Unpaid matured debentures and interest thereonUnpaid matured debentures and interest thereonUnpaid matured debentures and interest thereonUnpaid matured debentures and interest thereon
Other payablesOther payablesOther payablesOther payables
Lunawat & Co.

OTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIESOTHER CURRENT LIABILITIES
Others payable may include:Others payable may include:Others payable may include:Others payable may include:
Statutory obligations like, ESI, PF, VAT, CST, etc.Statutory obligations like, ESI, PF, VAT, CST, etc.Statutory obligations like, ESI, PF, VAT, CST, etc.Statutory obligations like, ESI, PF, VAT, CST, etc.
Liability for purchase of fixed assetsLiability for purchase of fixed assetsLiability for purchase of fixed assetsLiability for purchase of fixed assets
Contractually reimbursable expensesContractually reimbursable expensesContractually reimbursable expensesContractually reimbursable expenses
Interest accrued on trade payablesInterest accrued on trade payablesInterest accrued on trade payablesInterest accrued on trade payables
Expenses Payable.Expenses Payable.Expenses Payable.Expenses Payable.
TDS PayableTDS PayableTDS PayableTDS Payable
Trade / Security DepositTrade / Security DepositTrade / Security DepositTrade / Security Deposit
MarkMarkMarkMark----totototo----market loss on forward and optionmarket loss on forward and optionmarket loss on forward and optionmarket loss on forward and option
contractscontractscontractscontracts
Retention MoniesRetention MoniesRetention MoniesRetention Monies
Accrued salaries and benefitsAccrued salaries and benefitsAccrued salaries and benefitsAccrued salaries and benefits
Lunawat & Co.

FIXED ASSETSFIXED ASSETSFIXED ASSETSFIXED ASSETS
Fixed Asset on the face of the BalanceFixed Asset on the face of the BalanceFixed Asset on the face of the BalanceFixed Asset on the face of the Balance
Sheet has to be classified as follows:Sheet has to be classified as follows:Sheet has to be classified as follows:Sheet has to be classified as follows:
Tangible AssetsTangible AssetsTangible AssetsTangible Assets
Intangible AssetsIntangible AssetsIntangible AssetsIntangible Assets
SoftwareSoftwareSoftwareSoftware
Capital workCapital workCapital workCapital work----inininin----progressprogressprogressprogress
Intangible assets under developmentIntangible assets under developmentIntangible assets under developmentIntangible assets under development
Capital advancesCapital advancesCapital advancesCapital advances totototo be grouped asbe grouped asbe grouped asbe grouped as
Capital WorkCapital WorkCapital WorkCapital Work----inininin----ProgressProgressProgressProgress or loansor loansor loansor loans andandandand
advancesadvancesadvancesadvances? Long term or short term?? Long term or short term?? Long term or short term?? Long term or short term?
Lunawat & Co.

INVENTORIESINVENTORIESINVENTORIESINVENTORIES
Classification into:Classification into:Classification into:Classification into:
Raw MaterialsRaw MaterialsRaw MaterialsRaw Materials
WorkWorkWorkWork----inininin----progressprogressprogressprogress
Finished goodsFinished goodsFinished goodsFinished goods
StockStockStockStock----inininin----trade (trading goods)trade (trading goods)trade (trading goods)trade (trading goods)
Stores and sparesStores and sparesStores and sparesStores and spares
Loose toolsLoose toolsLoose toolsLoose tools
Others (specifying nature)Others (specifying nature)Others (specifying nature)Others (specifying nature)
Finished goods should include all goods exceptFinished goods should include all goods exceptFinished goods should include all goods exceptFinished goods should include all goods except
acquired for trading purposesacquired for trading purposesacquired for trading purposesacquired for trading purposes
GoodsGoodsGoodsGoods----inininin----transittransittransittransit ----disclose under relevant subdisclose under relevant subdisclose under relevant subdisclose under relevant sub----headheadheadhead
Mode of valuation to be statedMode of valuation to be statedMode of valuation to be statedMode of valuation to be stated
Lunawat & Co.

REVENUE FROM OPERATIONSREVENUE FROM OPERATIONSREVENUE FROM OPERATIONSREVENUE FROM OPERATIONS
For companies other than finance company:For companies other than finance company:For companies other than finance company:For companies other than finance company:
Sale of ProductsSale of ProductsSale of ProductsSale of Products
Sale of ServicesSale of ServicesSale of ServicesSale of Services
Other Operating RevenuesOther Operating RevenuesOther Operating RevenuesOther Operating Revenues
Less: Excise DutyLess: Excise DutyLess: Excise DutyLess: Excise Duty
For Finance company:For Finance company:For Finance company:For Finance company:
InterestInterestInterestInterest
Other Financial servicesOther Financial servicesOther Financial servicesOther Financial services
As per AS 9 presentation for excise dutyAs per AS 9 presentation for excise dutyAs per AS 9 presentation for excise dutyAs per AS 9 presentation for excise duty ---- onononon
face of PLface of PLface of PLface of PL
Lunawat & Co.

OTHER INCOMEOTHER INCOMEOTHER INCOMEOTHER INCOME
To be classified as:To be classified as:To be classified as:To be classified as:
Interest income (other than for finance company)Interest income (other than for finance company)Interest income (other than for finance company)Interest income (other than for finance company)
DividendDividendDividendDividend
Dividend from subsidiary companyDividend from subsidiary companyDividend from subsidiary companyDividend from subsidiary company
Net gain / loss on sale of investmentsNet gain / loss on sale of investmentsNet gain / loss on sale of investmentsNet gain / loss on sale of investments
Other nonOther nonOther nonOther non----operating incomeoperating incomeoperating incomeoperating income
Interest, dividend, etc. to be disclosed separatelyInterest, dividend, etc. to be disclosed separatelyInterest, dividend, etc. to be disclosed separatelyInterest, dividend, etc. to be disclosed separately
for Current as well as Non Current Investmentsfor Current as well as Non Current Investmentsfor Current as well as Non Current Investmentsfor Current as well as Non Current Investments
Lunawat & Co.

EXPENSESEXPENSESEXPENSESEXPENSES
Disclosure on face of the PL:Disclosure on face of the PL:Disclosure on face of the PL:Disclosure on face of the PL:
Cost of material consumedCost of material consumedCost of material consumedCost of material consumed
Purchase of stockPurchase of stockPurchase of stockPurchase of stock----inininin----tradetradetradetrade
Changes in inventories of finished goodsChanges in inventories of finished goodsChanges in inventories of finished goodsChanges in inventories of finished goods
WorkWorkWorkWork----inininin----progress and stock in tradeprogress and stock in tradeprogress and stock in tradeprogress and stock in trade
Employee benefit expensesEmployee benefit expensesEmployee benefit expensesEmployee benefit expenses
Finance costFinance costFinance costFinance cost
Depreciation and amortization expensesDepreciation and amortization expensesDepreciation and amortization expensesDepreciation and amortization expenses
Other expenses.Other expenses.Other expenses.Other expenses.
Lunawat & Co.

FINANCE COSTFINANCE COSTFINANCE COSTFINANCE COST
Interest expenseInterest expenseInterest expenseInterest expense
Interest on borrowings, debentures, bonds, etc.Interest on borrowings, debentures, bonds, etc.Interest on borrowings, debentures, bonds, etc.Interest on borrowings, debentures, bonds, etc.
Finance charges on finance lease are in nature of interestFinance charges on finance lease are in nature of interestFinance charges on finance lease are in nature of interestFinance charges on finance lease are in nature of interest
Other borrowing costsOther borrowing costsOther borrowing costsOther borrowing costs
Commitment chargesCommitment chargesCommitment chargesCommitment charges
Loan processing chargesLoan processing chargesLoan processing chargesLoan processing charges
Guarantee chargesGuarantee chargesGuarantee chargesGuarantee charges
Loan facilitation chargesLoan facilitation chargesLoan facilitation chargesLoan facilitation charges
Discounts/ premium on borrowingsDiscounts/ premium on borrowingsDiscounts/ premium on borrowingsDiscounts/ premium on borrowings
Other ancillaryOther ancillaryOther ancillaryOther ancillary costscostscostscosts
Applicable net loss on foreign currency transactions toApplicable net loss on foreign currency transactions toApplicable net loss on foreign currency transactions toApplicable net loss on foreign currency transactions to
the extent they are regarded as adjust to interest costthe extent they are regarded as adjust to interest costthe extent they are regarded as adjust to interest costthe extent they are regarded as adjust to interest cost
Interest on Tax???Interest on Tax???Interest on Tax???Interest on Tax???
Lunawat & Co.

OTHER EXPENSESOTHER EXPENSESOTHER EXPENSESOTHER EXPENSES
All other expenses will be grouped here. Following to beAll other expenses will be grouped here. Following to beAll other expenses will be grouped here. Following to beAll other expenses will be grouped here. Following to be
disclosed separately:disclosed separately:disclosed separately:disclosed separately:
Consumption of stores and sparesConsumption of stores and sparesConsumption of stores and sparesConsumption of stores and spares
Power and fuelPower and fuelPower and fuelPower and fuel
RentRentRentRent
Repairs to buildingsRepairs to buildingsRepairs to buildingsRepairs to buildings
Repairs to machineryRepairs to machineryRepairs to machineryRepairs to machinery
InsuranceInsuranceInsuranceInsurance
Rates and taxes, excluding taxes on incomeRates and taxes, excluding taxes on incomeRates and taxes, excluding taxes on incomeRates and taxes, excluding taxes on income
Miscellaneous expensesMiscellaneous expensesMiscellaneous expensesMiscellaneous expenses
Any expenditure which exceeds 1% of revenue fromAny expenditure which exceeds 1% of revenue fromAny expenditure which exceeds 1% of revenue fromAny expenditure which exceeds 1% of revenue from
operations or Rs.1 L whichever is higheroperations or Rs.1 L whichever is higheroperations or Rs.1 L whichever is higheroperations or Rs.1 L whichever is higher ---- separateseparateseparateseparate
Lunawat & Co.

Entities that are toEntities that are toEntities that are toEntities that are to
follow ASfollow ASfollow ASfollow AS
CorporateCorporateCorporateCorporate
CompaniesCompaniesCompaniesCompanies
(Accounting(Accounting(Accounting(Accounting
Standards)Standards)Standards)Standards)
Rules, 2006Rules, 2006Rules, 2006Rules, 2006
IndIndIndInd ASASASAS ICDSICDSICDSICDS
NonNonNonNon----
CorporateCorporateCorporateCorporate
AS issuedAS issuedAS issuedAS issued
by ICAIby ICAIby ICAIby ICAI
ICDSICDSICDSICDS
Lunawat & Co.Lunawat & Co.Lunawat & Co.Lunawat & Co.
ACCOUNTING STANDARDSACCOUNTING STANDARDSACCOUNTING STANDARDSACCOUNTING STANDARDS

AS DISCLOSURES IN NOTESAS DISCLOSURES IN NOTESAS DISCLOSURES IN NOTESAS DISCLOSURES IN NOTES
SMC / NonSMC / NonSMC / NonSMC / Non---- SMCSMCSMCSMC
AS 1AS 1AS 1AS 1
FS to be preparedFS to be preparedFS to be preparedFS to be prepared in compliance ofin compliance ofin compliance ofin compliance of
ASASASAS
FS has to be AS compliant:FS has to be AS compliant:FS has to be AS compliant:FS has to be AS compliant:
FS to disclose deviation from ASFS to disclose deviation from ASFS to disclose deviation from ASFS to disclose deviation from AS
Reason for deviationReason for deviationReason for deviationReason for deviation
Financial effect arising of deviationFinancial effect arising of deviationFinancial effect arising of deviationFinancial effect arising of deviation
Lunawat & Co.

AS APPLICABILITYAS APPLICABILITYAS APPLICABILITYAS APPLICABILITY
AS
No.
Short Title Corporate Non- Corporate Entities
Non-SMC SMC Level I Level II Level III
1 Accounting Policies Y Y Y Y Y
2 Inventories Y Y Y Y Y
3 Cash Flow Y N (C) Y N N
4 Events after Balance Sheet date Y Y Y Y Y
5 Prior Period Items & Policies Y Y Y Y Y
6 Depreciation Y Y Y Y Y
7 Construction Y Y Y Y Y
9 Revenue Y Y Y Y Y
10 Fixed Assets Y Y Y Y Y
11 Foreign Exchange Y Y Y Y Y
12 Government Grants Y Y Y Y Y
13 Investments Y Y Y Y Y
14 Amalgamations Y Y Y Y Y
15 Employee Benefits Y Partly Y Partly Partly

AS APPLICABILITYAS APPLICABILITYAS APPLICABILITYAS APPLICABILITY
16 Borrowing Cost Y Y Y Y Y
17 Segment Y N Y N N
18 Related Party Y Y Y Y N
19 Leases Y Partly Y Partly Partly
20 Earning Per Share Y Partly Y Partly Partly
21 Consolidation Y (listed) N (C) Y (listed) N N
22 Deferred Taxes Y Y Y Y Y
23 Consolidated Statements Y (listed) N (C) Y (listed) N N
24 Discontinuing Operation Y Y Y Y N
25 Interim Reporting Y (listed) N** Y (listed) N** N**
26 Intangible Assets Y Y Y Y Y
27 Interest in Joint Ventures Y (listed) N (C) Y (listed) N N
28 Impairment Y Partly Y Partly Partly
29 Contingency Y Partly Y Partly Partly
30- 32 Financial Instruments N*** N*** **** **** ****

IMPORTANT NOTESIMPORTANT NOTESIMPORTANT NOTESIMPORTANT NOTES
Contingent LiabilitiesContingent LiabilitiesContingent LiabilitiesContingent Liabilities / Commitments/ Commitments/ Commitments/ Commitments (to the(to the(to the(to the
extent not provided for)extent not provided for)extent not provided for)extent not provided for)
BroadBroadBroadBroad HeadsHeadsHeadsHeads –––– RM , Income, PurchasesRM , Income, PurchasesRM , Income, PurchasesRM , Income, Purchases
Value of imports made during the year on CIFValue of imports made during the year on CIFValue of imports made during the year on CIFValue of imports made during the year on CIF
basisbasisbasisbasis::::----
Raw MaterialsRaw MaterialsRaw MaterialsRaw Materials
Components (intermediaries & components) &Components (intermediaries & components) &Components (intermediaries & components) &Components (intermediaries & components) &
Spare Parts (for capital equipment)Spare Parts (for capital equipment)Spare Parts (for capital equipment)Spare Parts (for capital equipment)
Capital GoodsCapital GoodsCapital GoodsCapital Goods
Lunawat & Co.

ExpnExpnExpnExpn. in foreign currency (accrual basis) on:. in foreign currency (accrual basis) on:. in foreign currency (accrual basis) on:. in foreign currency (accrual basis) on:
RoyaltyRoyaltyRoyaltyRoyalty
KnowKnowKnowKnow----howhowhowhow
Professional & consultation feeProfessional & consultation feeProfessional & consultation feeProfessional & consultation fee
InterestInterestInterestInterest
OthersOthersOthersOthers
Dividend ifDividend ifDividend ifDividend if paid inpaid inpaid inpaid in FC (cash Basis):FC (cash Basis):FC (cash Basis):FC (cash Basis):
Total amount remitted during the year inTotal amount remitted during the year inTotal amount remitted during the year inTotal amount remitted during the year in FCFCFCFC
TotalTotalTotalTotal no.no.no.no. of nonof nonof nonof non----resident shareholdersresident shareholdersresident shareholdersresident shareholders
NNNNo.o.o.o. of shares held by them on which dividendof shares held by them on which dividendof shares held by them on which dividendof shares held by them on which dividend duedueduedue
Year to which dividend relatesYear to which dividend relatesYear to which dividend relatesYear to which dividend relates
Lunawat & Co.

Foreign Exchange Earnings (AccrualForeign Exchange Earnings (AccrualForeign Exchange Earnings (AccrualForeign Exchange Earnings (Accrual
basis):basis):basis):basis):
Export of goods (calculated on F.O.B. basis)Export of goods (calculated on F.O.B. basis)Export of goods (calculated on F.O.B. basis)Export of goods (calculated on F.O.B. basis)
Royalty, know how, professional andRoyalty, know how, professional andRoyalty, know how, professional andRoyalty, know how, professional and
consultation feesconsultation feesconsultation feesconsultation fees
Interest and dividendsInterest and dividendsInterest and dividendsInterest and dividends
Other income (indicating the nature thereof)Other income (indicating the nature thereof)Other income (indicating the nature thereof)Other income (indicating the nature thereof)
Lunawat & Co.

OTHER DISCLOSURESOTHER DISCLOSURESOTHER DISCLOSURESOTHER DISCLOSURES IN NOTESIN NOTESIN NOTESIN NOTES
To disclose in FS full particulars of:To disclose in FS full particulars of:To disclose in FS full particulars of:To disclose in FS full particulars of:
Loan given;Loan given;Loan given;Loan given;
Investment made;Investment made;Investment made;Investment made;
Guarantee given; orGuarantee given; orGuarantee given; orGuarantee given; or
Security Provided.Security Provided.Security Provided.Security Provided.
Purpose for which loan or guarantee or security isPurpose for which loan or guarantee or security isPurpose for which loan or guarantee or security isPurpose for which loan or guarantee or security is
proposed to beproposed to beproposed to beproposed to be utilisedutilisedutilisedutilised by recipient of loan orby recipient of loan orby recipient of loan orby recipient of loan or
guarantee or security [186(4)]guarantee or security [186(4)]guarantee or security [186(4)]guarantee or security [186(4)]
Contribution duringContribution duringContribution duringContribution during yryryryr to Nationalto Nationalto Nationalto National DefenceDefenceDefenceDefence FundFundFundFund
AAAAmount contributed to Political Party and namemount contributed to Political Party and namemount contributed to Political Party and namemount contributed to Political Party and name
of partyof partyof partyof party [182(3)][182(3)][182(3)][182(3)]
Lunawat & Co.

OTHER DISCLOSURESOTHER DISCLOSURESOTHER DISCLOSURESOTHER DISCLOSURES IN NOTESIN NOTESIN NOTESIN NOTES
Public Companies:Public Companies:Public Companies:Public Companies:
Money received from directorMoney received from directorMoney received from directorMoney received from director
Private companiesPrivate companiesPrivate companiesPrivate companies
Money received from directorMoney received from directorMoney received from directorMoney received from director
Money received fromMoney received fromMoney received fromMoney received from relative of directorrelative of directorrelative of directorrelative of director
Lunawat & Co.

RELATED PARTYRELATED PARTYRELATED PARTYRELATED PARTY
AccountingAccountingAccountingAccounting
StandardsStandardsStandardsStandards
AS 18AS 18AS 18AS 18
ActActActAct
S. 2(76)S. 2(76)S. 2(76)S. 2(76)
S. 184S. 184S. 184S. 184 S. 188S. 188S. 188S. 188
Income TaxIncome TaxIncome TaxIncome Tax
40A(2)(b)40A(2)(b)40A(2)(b)40A(2)(b)
Lunawat & Co.

AUDITAUDITAUDITAUDIT
Lunawat & Co.

Lunawat & Co.
AUDIT PROCEDUREAUDIT PROCEDUREAUDIT PROCEDUREAUDIT PROCEDURE
AppointmentAppointmentAppointmentAppointment EngagementEngagementEngagementEngagement UnderstandingUnderstandingUnderstandingUnderstanding
the Clientthe Clientthe Clientthe Client
PlanningPlanningPlanningPlanning
• MaterialityMaterialityMaterialityMateriality
• Risk AssessmentRisk AssessmentRisk AssessmentRisk Assessment
ExecutionExecutionExecutionExecution
•Audit ProgramAudit ProgramAudit ProgramAudit Program
•ChecklistsChecklistsChecklistsChecklists
•SAsSAsSAsSAs
RepresentationsRepresentationsRepresentationsRepresentations
•MRMRMRMR
•CertificatesCertificatesCertificatesCertificates
ReportingReportingReportingReporting
Billings /Billings /Billings /Billings /
CollectionsCollectionsCollectionsCollections

Lunawat & Co.
PROCEDURE FOR 1PROCEDURE FOR 1PROCEDURE FOR 1PROCEDURE FOR 1STSTSTST APPOINTMENTAPPOINTMENTAPPOINTMENTAPPOINTMENT
Board/AC toBoard/AC toBoard/AC toBoard/AC to
considerconsiderconsiderconsider
qualification &qualification &qualification &qualification &
experience ofexperience ofexperience ofexperience of
auditorauditorauditorauditor –––– To beTo beTo beTo be
commensurate withcommensurate withcommensurate withcommensurate with
size & requirementssize & requirementssize & requirementssize & requirements
of coof coof coof co
consider completedconsider completedconsider completedconsider completed
& pending& pending& pending& pending
proceedings againstproceedings againstproceedings againstproceedings against
auditor before ICAI /auditor before ICAI /auditor before ICAI /auditor before ICAI /
NFRA / Tribunal /NFRA / Tribunal /NFRA / Tribunal /NFRA / Tribunal /
Other Court.Other Court.Other Court.Other Court.
Obtain writtenObtain writtenObtain writtenObtain written
consent +consent +consent +consent +
certificate fromcertificate fromcertificate fromcertificate from
proposed auditor.proposed auditor.proposed auditor.proposed auditor.
Certificate to includeCertificate to includeCertificate to includeCertificate to include
satisfaction of s.satisfaction of s.satisfaction of s.satisfaction of s.
141 conditions by141 conditions by141 conditions by141 conditions by
auditorauditorauditorauditor
Board to appointBoard to appointBoard to appointBoard to appoint
within 30 days ofwithin 30 days ofwithin 30 days ofwithin 30 days of
incorporationincorporationincorporationincorporation
If Board fails,If Board fails,If Board fails,If Board fails,
appoint in EGMappoint in EGMappoint in EGMappoint in EGM
Board informingBoard informingBoard informingBoard informing
membersmembersmembersmembers
Inform auditor andInform auditor andInform auditor andInform auditor and
option to file ADT 1option to file ADT 1option to file ADT 1option to file ADT 1
with ROC within 15with ROC within 15with ROC within 15with ROC within 15
daysdaysdaysdays

Lunawat & Co.
PROCEDURE FOR APPOINTMENTPROCEDURE FOR APPOINTMENTPROCEDURE FOR APPOINTMENTPROCEDURE FOR APPOINTMENT
Board/AC to consider qualification &Board/AC to consider qualification &Board/AC to consider qualification &Board/AC to consider qualification &
experience of auditorexperience of auditorexperience of auditorexperience of auditor –––– To be commensurateTo be commensurateTo be commensurateTo be commensurate
with size & requirements of cowith size & requirements of cowith size & requirements of cowith size & requirements of co
Board/AC to consider completed & pendingBoard/AC to consider completed & pendingBoard/AC to consider completed & pendingBoard/AC to consider completed & pending
proceedings against auditor before ICAI /proceedings against auditor before ICAI /proceedings against auditor before ICAI /proceedings against auditor before ICAI /
NFRA / Tribunal / Other Court.NFRA / Tribunal / Other Court.NFRA / Tribunal / Other Court.NFRA / Tribunal / Other Court.
Obtain written consent + certificate fromObtain written consent + certificate fromObtain written consent + certificate fromObtain written consent + certificate from
proposed auditor. Certificate to includeproposed auditor. Certificate to includeproposed auditor. Certificate to includeproposed auditor. Certificate to include
satisfaction of s. 141 conditions by auditorsatisfaction of s. 141 conditions by auditorsatisfaction of s. 141 conditions by auditorsatisfaction of s. 141 conditions by auditor
Appointment is to be done in AGM for 5Appointment is to be done in AGM for 5Appointment is to be done in AGM for 5Appointment is to be done in AGM for 5
years. Ratification to be done annually.years. Ratification to be done annually.years. Ratification to be done annually.years. Ratification to be done annually.
Inform auditor and file ADT 1 with ROC withinInform auditor and file ADT 1 with ROC withinInform auditor and file ADT 1 with ROC withinInform auditor and file ADT 1 with ROC within
15 days of appointment15 days of appointment15 days of appointment15 days of appointment

Lunawat & Co.
CASUAL VACANCYCASUAL VACANCYCASUAL VACANCYCASUAL VACANCY
considerconsiderconsiderconsider
qualification &qualification &qualification &qualification &
experience , etc..experience , etc..experience , etc..experience , etc..
And pendingAnd pendingAnd pendingAnd pending
proceedingsproceedingsproceedingsproceedings
Obtain writtenObtain writtenObtain writtenObtain written
consent +consent +consent +consent +
certificate fromcertificate fromcertificate fromcertificate from
proposed auditor.proposed auditor.proposed auditor.proposed auditor.
Certificate to includeCertificate to includeCertificate to includeCertificate to include
satisfaction of s.satisfaction of s.satisfaction of s.satisfaction of s.
141 conditions by141 conditions by141 conditions by141 conditions by
auditorauditorauditorauditor
Board to fill withinBoard to fill withinBoard to fill withinBoard to fill within
30 days of vacancy30 days of vacancy30 days of vacancy30 days of vacancy
If vacancy due toIf vacancy due toIf vacancy due toIf vacancy due to
resignation,resignation,resignation,resignation,
approval alsoapproval alsoapproval alsoapproval also
required in EGMrequired in EGMrequired in EGMrequired in EGM
Board’sBoard’sBoard’sBoard’s
recommendationrecommendationrecommendationrecommendation
Inform auditor andInform auditor andInform auditor andInform auditor and
option to file ADT 1option to file ADT 1option to file ADT 1option to file ADT 1
in 15 days with ROCin 15 days with ROCin 15 days with ROCin 15 days with ROC

RESIGNATIONRESIGNATIONRESIGNATIONRESIGNATION
Auditor may resign before his term.Auditor may resign before his term.Auditor may resign before his term.Auditor may resign before his term.
To file a statement with ROC in ADTTo file a statement with ROC in ADTTo file a statement with ROC in ADTTo file a statement with ROC in ADT----3 as3 as3 as3 as
well as the Co.well as the Co.well as the Co.well as the Co. within 30 days, indicatingwithin 30 days, indicatingwithin 30 days, indicatingwithin 30 days, indicating
reasonsreasonsreasonsreasons
In case of Government companies to beIn case of Government companies to beIn case of Government companies to beIn case of Government companies to be
filed with CAG too.filed with CAG too.filed with CAG too.filed with CAG too.
Non complianceNon complianceNon complianceNon compliance –––– fine on auditor:fine on auditor:fine on auditor:fine on auditor:
MinimumMinimumMinimumMinimum –––– 50K50K50K50K
MaximumMaximumMaximumMaximum ---- 500K500K500K500K
Lunawat & Co.

AUDITING STANDARDSAUDITING STANDARDSAUDITING STANDARDSAUDITING STANDARDS
Auditor to comply with auditing standardsAuditor to comply with auditing standardsAuditor to comply with auditing standardsAuditor to comply with auditing standards
NFRA to notify auditing standards. Till NFRANFRA to notify auditing standards. Till NFRANFRA to notify auditing standards. Till NFRANFRA to notify auditing standards. Till NFRA
doesdoesdoesdoes –––– as by ICAIas by ICAIas by ICAIas by ICAI
Total 38 SAsTotal 38 SAsTotal 38 SAsTotal 38 SAs
Lunawat & Co.
SA. No.SA. No.SA. No.SA. No. SubSubSubSub----divisiondivisiondivisiondivision No.No.No.No.
100100100100----199199199199 Introductory MattersIntroductory MattersIntroductory MattersIntroductory Matters 0000
200200200200----299299299299 General Principles & ResponsibilitiesGeneral Principles & ResponsibilitiesGeneral Principles & ResponsibilitiesGeneral Principles & Responsibilities 9999
300300300300----499499499499 Risk Assessment and Response to Assessed RisksRisk Assessment and Response to Assessed RisksRisk Assessment and Response to Assessed RisksRisk Assessment and Response to Assessed Risks 6666
500500500500----599599599599 Audit EvidenceAudit EvidenceAudit EvidenceAudit Evidence 11111111
600600600600----699699699699 Using Work of OthersUsing Work of OthersUsing Work of OthersUsing Work of Others 3333
700700700700----799799799799 Audit Conclusions and ReportingAudit Conclusions and ReportingAudit Conclusions and ReportingAudit Conclusions and Reporting 6666
800800800800----899899899899 Specialized AreasSpecialized AreasSpecialized AreasSpecialized Areas 3333

Lunawat & Co.
Audit ReportsAudit ReportsAudit ReportsAudit Reports
ActActActAct
CAROCAROCAROCARO
NonNonNonNon----
CAROCAROCAROCARO
Other ActsOther ActsOther ActsOther Acts
TaxTaxTaxTax
AuditAuditAuditAudit
FormFormFormForm
3CA3CA3CA3CA
FormFormFormForm
3CB3CB3CB3CB
LLPLLPLLPLLP SocietySocietySocietySociety

COMPNY’SCOMPNY’SCOMPNY’SCOMPNY’S AUDIT REPORTAUDIT REPORTAUDIT REPORTAUDIT REPORT
Inquiry u/s 143(1)Inquiry u/s 143(1)Inquiry u/s 143(1)Inquiry u/s 143(1) –––– 6 points6 points6 points6 points
To be reported when commentsTo be reported when commentsTo be reported when commentsTo be reported when comments
requiredrequiredrequiredrequired
Report to also include:Report to also include:Report to also include:Report to also 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 RulesMatters specified in RulesMatters specified in RulesMatters specified in Rules ---- 3 points3 points3 points3 points
AnyAnyAnyAny order madeorder madeorder madeorder made u/s 143(3) foru/s 143(3) foru/s 143(3) foru/s 143(3) for
specified Companies in consultationspecified Companies in consultationspecified Companies in consultationspecified Companies in consultation
with NFRAwith NFRAwith NFRAwith NFRA –––– CARO 2016CARO 2016CARO 2016CARO 2016 –––– 16 points16 points16 points16 points
Lunawat & Co.

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING
Lunawat & Co.
CompanyCompanyCompanyCompany
SmallSmallSmallSmall
ComplexComplexComplexComplex
SeparateSeparateSeparateSeparate
LessLessLessLess
CombinedCombinedCombinedCombined
LargeLargeLargeLarge
SeparateSeparateSeparateSeparate
LessLessLessLess
CombinedCombinedCombinedCombined

LESS COMPLEXLESS COMPLEXLESS COMPLEXLESS COMPLEX
Concentration of ownershipConcentration of ownershipConcentration of ownershipConcentration of ownership &&&& management in a smallmanagement in a smallmanagement in a smallmanagement in a small
number of individuals;number of individuals;number of individuals;number of individuals;
StraightforwardStraightforwardStraightforwardStraightforward or uncomplicated transactions;or uncomplicated transactions;or uncomplicated transactions;or uncomplicated transactions;
SimpleSimpleSimpleSimple recordrecordrecordrecord----keeping/centralized accounting;keeping/centralized accounting;keeping/centralized accounting;keeping/centralized accounting;
FewFewFewFew lines of business &lines of business &lines of business &lines of business & few products within businessfew products within businessfew products within businessfew products within business
lineslineslineslines;;;;
FewFewFewFew internal controls;internal controls;internal controls;internal controls;
FewFewFewFew levels of management with responsibility for alevels of management with responsibility for alevels of management with responsibility for alevels of management with responsibility for a
broad range of controls;broad range of controls;broad range of controls;broad range of controls;
FewFewFewFew personnel, many having a wide range of duties;personnel, many having a wide range of duties;personnel, many having a wide range of duties;personnel, many having a wide range of duties;
UseUseUseUse of less complex IT systems;of less complex IT systems;of less complex IT systems;of less complex IT systems;
ExtensiveExtensiveExtensiveExtensive involvement byinvolvement byinvolvement byinvolvement by owners &owners &owners &owners & senior managementsenior managementsenior managementsenior management
in the dayin the dayin the dayin the day----totototo----day activities of the businessday activities of the businessday activities of the businessday activities of the business.
Lunawat & Co.

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 / Combined ReportIssue Separate / Combined ReportIssue Separate / Combined ReportIssue Separate / Combined Report
UnmodifiedUnmodifiedUnmodifiedUnmodified
ModifiedModifiedModifiedModified
QualifiedQualifiedQualifiedQualified
AdverseAdverseAdverseAdverse
DisclaimerDisclaimerDisclaimerDisclaimer
Lunawat & Co.

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING ---- QUALIFIEDQUALIFIEDQUALIFIEDQUALIFIED
Lunawat & Co.
Due toDue toDue toDue to adequacyadequacyadequacyadequacy
(and therefore(and therefore(and therefore(and therefore
operatingoperatingoperatingoperating
effectiveness)effectiveness)effectiveness)effectiveness)
• The CompanyThe CompanyThe CompanyThe Company did not have an appropriatedid not have an appropriatedid not have an appropriatedid not have an appropriate
internal control systeminternal control systeminternal control systeminternal control system for customer acceptance,for customer acceptance,for customer acceptance,for customer acceptance,
credit evaluation and establishing customercredit evaluation and establishing customercredit evaluation and establishing customercredit evaluation and establishing customer
credit limits for sales, which could potentiallycredit limits for sales, which could potentiallycredit limits for sales, which could potentiallycredit limits for sales, which could potentially
result in the Company recognising revenueresult in the Company recognising revenueresult in the Company recognising revenueresult in the Company recognising revenue
without establishing reasonable certainty ofwithout establishing reasonable certainty ofwithout establishing reasonable certainty ofwithout establishing reasonable certainty of
ultimate collectionultimate collectionultimate collectionultimate collection
• ..except for the effects/possible effects of the..except for the effects/possible effects of the..except for the effects/possible effects of the..except for the effects/possible effects of the
material weakness/material weakness/material weakness/material weakness/eseseses described above on thedescribed above on thedescribed above on thedescribed above on the
achievement of the objectives of the controlachievement of the objectives of the controlachievement of the objectives of the controlachievement of the objectives of the control
criteria,criteria,criteria,criteria, the Company has maintained, in allthe Company has maintained, in allthe Company has maintained, in allthe Company has maintained, in all
material respects, adequate internal financialmaterial respects, adequate internal financialmaterial respects, adequate internal financialmaterial respects, adequate internal financial
controls over financial reporting as on..controls over financial reporting as on..controls over financial reporting as on..controls over financial reporting as on..
• …these material weakness/…these material weakness/…these material weakness/…these material weakness/eseseses do not affect ourdo not affect ourdo not affect ourdo not affect our
opinion on the standalone financial statementsopinion on the standalone financial statementsopinion on the standalone financial statementsopinion on the standalone financial statements
of the Companyof the Companyof the Companyof the Company

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING ---- ADVERSEADVERSEADVERSEADVERSE
Lunawat & Co.
Due toDue toDue toDue to adequacyadequacyadequacyadequacy
(and therefore(and therefore(and therefore(and therefore
effectiveness)effectiveness)effectiveness)effectiveness)
internal control systeminternal control systeminternal control systeminternal control system for customer acceptance,for customer acceptance,for customer acceptance,for customer acceptance,
credit evaluation and …...credit evaluation and …...credit evaluation and …...credit evaluation and …...
internal control system for inventoryinternal control system for inventoryinternal control system for inventoryinternal control system for inventory with regardwith regardwith regardwith regard
to receipts, issue for production and physicalto receipts, issue for production and physicalto receipts, issue for production and physicalto receipts, issue for production and physical
verification. Further, the internal control systemverification. Further, the internal control systemverification. Further, the internal control systemverification. Further, the internal control system
for identification and allocation of overheads tofor identification and allocation of overheads tofor identification and allocation of overheads tofor identification and allocation of overheads to
inventory was also not adequate. These couldinventory was also not adequate. These couldinventory was also not adequate. These couldinventory was also not adequate. These could
potentially result in material misstatements inpotentially result in material misstatements inpotentially result in material misstatements inpotentially result in material misstatements in
the Company’s trade payables, consumption,the Company’s trade payables, consumption,the Company’s trade payables, consumption,the Company’s trade payables, consumption,
inventory and expense account balances.inventory and expense account balances.inventory and expense account balances.inventory and expense account balances.
• …the Company…the Company…the Company…the Company has not maintained adequatehas not maintained adequatehas not maintained adequatehas not maintained adequate
internal financial controlsinternal financial controlsinternal financial controlsinternal financial controls over financial reportingover financial reportingover financial reportingover financial reporting
opinion on the financial statements of theopinion on the financial statements of theopinion on the financial statements of theopinion on the financial statements of the

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING ---- QUALIFIEDQUALIFIEDQUALIFIEDQUALIFIED
Lunawat & Co.
QualifiedQualifiedQualifiedQualified ---- Due toDue toDue toDue to
effectivenesseffectivenesseffectivenesseffectiveness
UnmodifiedUnmodifiedUnmodifiedUnmodified –––– OnOnOnOn
AdequacyAdequacyAdequacyAdequacy
• The Company’sThe Company’sThe Company’sThe Company’s internal financial controls overinternal financial controls overinternal financial controls overinternal financial controls over
customer acceptancecustomer acceptancecustomer acceptancecustomer acceptance, credit evaluation and, credit evaluation and, credit evaluation and, credit evaluation and
establishing customer credit limits for sales,establishing customer credit limits for sales,establishing customer credit limits for sales,establishing customer credit limits for sales,
were not operating effectivelywere not operating effectivelywere not operating effectivelywere not operating effectively which couldwhich couldwhich couldwhich could
potentially result in the Company recognisingpotentially result in the Company recognisingpotentially result in the Company recognisingpotentially result in the Company recognising
revenue without establishing reasonablerevenue without establishing reasonablerevenue without establishing reasonablerevenue without establishing reasonable
certainty of ultimate collectioncertainty of ultimate collectioncertainty of ultimate collectioncertainty of ultimate collection
• ..except for the effects/possible effects of the..except for the effects/possible effects of the..except for the effects/possible effects of the..except for the effects/possible effects of the
material weakness/material weakness/material weakness/material weakness/eseseses described above on thedescribed above on thedescribed above on thedescribed above on the
criteria,criteria,criteria,criteria, the Company’s internal financial controlsthe Company’s internal financial controlsthe Company’s internal financial controlsthe Company’s internal financial controls
over financial reporting were operatingover financial reporting were operatingover financial reporting were operatingover financial reporting were operating
effectively as on..effectively as on..effectively as on..effectively as on..
of the Companyof the Companyof the Companyof the Company

Lunawat & Co.
Due toDue toDue toDue to operatingoperatingoperatingoperating
effectivenesseffectivenesseffectivenesseffectiveness
UnmodifiedUnmodifiedUnmodifiedUnmodified –––– OnOnOnOn
AdequacyAdequacyAdequacyAdequacy
• The Company’sThe Company’sThe Company’sThe Company’s internal financial controls overinternal financial controls overinternal financial controls overinternal financial controls over
customer acceptancecustomer acceptancecustomer acceptancecustomer acceptance, credit evaluation and, credit evaluation and, credit evaluation and, credit evaluation and
establishing customer credit limits for sales,establishing customer credit limits for sales,establishing customer credit limits for sales,establishing customer credit limits for sales,
were not operating effectivelywere not operating effectivelywere not operating effectivelywere not operating effectively which couldwhich couldwhich couldwhich could
potentially result in the Company ….potentially result in the Company ….potentially result in the Company ….potentially result in the Company ….
• The Company’sThe Company’sThe Company’sThe Company’s internal control systeminternal control systeminternal control systeminternal control system forforforfor
inventory with regard to receipts, issue forinventory with regard to receipts, issue forinventory with regard to receipts, issue forinventory with regard to receipts, issue for
production and physical verificationproduction and physical verificationproduction and physical verificationproduction and physical verification were notwere notwere notwere not
operating effectivelyoperating effectivelyoperating effectivelyoperating effectively. Further, the internal control. Further, the internal control. Further, the internal control. Further, the internal control
system for identification and allocation ofsystem for identification and allocation ofsystem for identification and allocation ofsystem for identification and allocation of
overheads to inventoryoverheads to inventoryoverheads to inventoryoverheads to inventory was also not operatingwas also not operatingwas also not operatingwas also not operating
effectively.effectively.effectively.effectively. These could potentially result ….These could potentially result ….These could potentially result ….These could potentially result ….
• …Company’s internal financial controls over…Company’s internal financial controls over…Company’s internal financial controls over…Company’s internal financial controls over
financial reportingfinancial reportingfinancial reportingfinancial reporting were not operating effectivelywere not operating effectivelywere not operating effectivelywere not operating effectively
opinion on the financial statements of Companyopinion on the financial statements of Companyopinion on the financial statements of Companyopinion on the financial statements of Company

Lunawat & Co.
Due toDue toDue toDue to ---- EssentialEssentialEssentialEssential
components ofcomponents ofcomponents ofcomponents of
internal controlsinternal controlsinternal controlsinternal controls
not adequatelynot adequatelynot adequatelynot adequately
consideredconsideredconsideredconsidered
in the internalin the internalin the internalin the internal
financial controlsfinancial controlsfinancial controlsfinancial controls
established by theestablished by theestablished by theestablished by the
companycompanycompanycompany
internal financial control system over financialinternal financial control system over financialinternal financial control system over financialinternal financial control system over financial
reportingreportingreportingreporting since the internal controls adopted bysince the internal controls adopted bysince the internal controls adopted bysince the internal controls adopted by
the Company didthe Company didthe Company didthe Company did not adequately consider risknot adequately consider risknot adequately consider risknot adequately consider risk
assessment,assessment,assessment,assessment, which is one of the essentialwhich is one of the essentialwhich is one of the essentialwhich is one of the essential
components of internal control, with regard tocomponents of internal control, with regard tocomponents of internal control, with regard tocomponents of internal control, with regard to
the potential for fraud when performing riskthe potential for fraud when performing riskthe potential for fraud when performing riskthe potential for fraud when performing risk
assessmentassessmentassessmentassessment
• …the Company…the Company…the Company…the Company has not maintained adequatehas not maintained adequatehas not maintained adequatehas not maintained adequate
and effective internal financial controls overand effective internal financial controls overand effective internal financial controls overand effective internal financial controls over
financial reportingfinancial reportingfinancial reportingfinancial reporting as on..as on..as on..as on..
• …these material weaknesses…these material weaknesses…these material weaknesses…these material weaknesses do not affect ourdo not affect ourdo not affect ourdo not affect our
opinion on the financial statements of theopinion on the financial statements of theopinion on the financial statements of theopinion on the financial statements of the

Lunawat & Co.
Resulting inResulting inResulting inResulting in
modified opinionmodified opinionmodified opinionmodified opinion
of standaloneof standaloneof standaloneof standalone
financialfinancialfinancialfinancial
statementsstatementsstatementsstatements
• The CompanyThe CompanyThe CompanyThe Company did not have appropriate internaldid not have appropriate internaldid not have appropriate internaldid not have appropriate internal
controls for reconciliation of physically inventorycontrols for reconciliation of physically inventorycontrols for reconciliation of physically inventorycontrols for reconciliation of physically inventory
with the inventory records, which has resulted inwith the inventory records, which has resulted inwith the inventory records, which has resulted inwith the inventory records, which has resulted in
misstatement of inventory values in the books ofmisstatement of inventory values in the books ofmisstatement of inventory values in the books ofmisstatement of inventory values in the books of
account.…account.…account.…account.…
• because of the effect of the materialbecause of the effect of the materialbecause of the effect of the materialbecause of the effect of the material
weaknesses described above on theweaknesses described above on theweaknesses described above on theweaknesses described above on the
criteria, the Companycriteria, the Companycriteria, the Companycriteria, the Company has not maintainedhas not maintainedhas not maintainedhas not maintained
adequate and effective internal financial controlsadequate and effective internal financial controlsadequate and effective internal financial controlsadequate and effective internal financial controls
over financial reporting as of..over financial reporting as of..over financial reporting as of..over financial reporting as of..
• …these material weakness/…these material weakness/…these material weakness/…these material weakness/eseseses has affected ourhas affected ourhas affected ourhas affected our
of the Company and we have issued a qualifiedof the Company and we have issued a qualifiedof the Company and we have issued a qualifiedof the Company and we have issued a qualified
(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion(/ adverse / disclaimer of) opinion on theon theon theon the
standalone financial statements.standalone financial statements.standalone financial statements.standalone financial statements.

ICFR REPORTINGICFR REPORTINGICFR REPORTINGICFR REPORTING ---- DISCLAIMERDISCLAIMERDISCLAIMERDISCLAIMER
Lunawat & Co.
Due toDue toDue toDue to ----
Framework forFramework forFramework forFramework for
internal financialinternal financialinternal financialinternal financial
control overcontrol overcontrol overcontrol over
financial reportingfinancial reportingfinancial reportingfinancial reporting
notnotnotnot
established butestablished butestablished butestablished but
does not impactdoes not impactdoes not impactdoes not impact
the audit opinionthe audit opinionthe audit opinionthe audit opinion
on financialon financialon financialon financial
• the Companythe Companythe Companythe Company has not established its internalhas not established its internalhas not established its internalhas not established its internal
financial control over financial reporting onfinancial control over financial reporting onfinancial control over financial reporting onfinancial control over financial reporting on
criteria based on or considering the essentialcriteria based on or considering the essentialcriteria based on or considering the essentialcriteria based on or considering the essential
componentscomponentscomponentscomponents of internal control stated in theof internal control stated in theof internal control stated in theof internal control stated in the
Guidance Note on Audit ofGuidance Note on Audit ofGuidance Note on Audit ofGuidance Note on Audit of IFCoFRIFCoFRIFCoFRIFCoFR issued by theissued by theissued by theissued by the
ICAI. Because of this reason,ICAI. Because of this reason,ICAI. Because of this reason,ICAI. Because of this reason, we are unable towe are unable towe are unable towe are unable to
obtain sufficient appropriate audit evidence toobtain sufficient appropriate audit evidence toobtain sufficient appropriate audit evidence toobtain sufficient appropriate audit evidence to
provide a basis for our opinionprovide a basis for our opinionprovide a basis for our opinionprovide a basis for our opinion whether thewhether thewhether thewhether the
Company had adequate internal financialCompany had adequate internal financialCompany had adequate internal financialCompany had adequate internal financial
controls over financial reporting and whethercontrols over financial reporting and whethercontrols over financial reporting and whethercontrols over financial reporting and whether
such internal financial controls were operatingsuch internal financial controls were operatingsuch internal financial controls were operatingsuch internal financial controls were operating
effectively as at…effectively as at…effectively as at…effectively as at…
• …the…the…the…the disclaimer does notdisclaimer does notdisclaimer does notdisclaimer does not affectaffectaffectaffect our opinion onour opinion onour opinion onour opinion on
the financial statements of the Companythe financial statements of the Companythe financial statements of the Companythe financial statements of the Company

Lunawat & Co.
Due toDue toDue toDue to ----AuditorAuditorAuditorAuditor
unable to obtainunable to obtainunable to obtainunable to obtain
sufficientsufficientsufficientsufficient
appropriate auditappropriate auditappropriate auditappropriate audit
evidence onevidence onevidence onevidence on
controls overcontrols overcontrols overcontrols over
but does notbut does notbut does notbut does not
impact auditimpact auditimpact auditimpact audit
opinion on theopinion on theopinion on theopinion on the
• The system of internal financial controls overThe system of internal financial controls overThe system of internal financial controls overThe system of internal financial controls over
financial reporting with regard tofinancial reporting with regard tofinancial reporting with regard tofinancial reporting with regard to one of theone of theone of theone of the
significant branches of the Company at _____significant branches of the Company at _____significant branches of the Company at _____significant branches of the Company at _____
were not made available to uswere not made available to uswere not made available to uswere not made available to us to enable us toto enable us toto enable us toto enable us to
determine if the Company has establisheddetermine if the Company has establisheddetermine if the Company has establisheddetermine if the Company has established
adequate internal financial control over financialadequate internal financial control over financialadequate internal financial control over financialadequate internal financial control over financial
reporting at the aforesaid branch and whetherreporting at the aforesaid branch and whetherreporting at the aforesaid branch and whetherreporting at the aforesaid branch and whether
such internal financial controls were operatingsuch internal financial controls were operatingsuch internal financial controls were operatingsuch internal financial controls were operating
effectively as at…effectively as at…effectively as at…effectively as at…
• …the…the…the…the disclaimer does notdisclaimer does notdisclaimer does notdisclaimer does not affectaffectaffectaffect our opinion onour opinion onour opinion onour opinion on
the financial statements of the Companythe financial statements of the Companythe financial statements of the Companythe financial statements of the Company

Lunawat & Co.
Due toDue toDue toDue to ----AuditorAuditorAuditorAuditor
unable to obtainunable to obtainunable to obtainunable to obtain
sufficientsufficientsufficientsufficient
appropriate auditappropriate auditappropriate auditappropriate audit
evidence onevidence onevidence onevidence on
controls overcontrols overcontrols overcontrols over
and impactingand impactingand impactingand impacting
auditauditauditaudit
opinion on theopinion on theopinion on theopinion on the
• The system of internal financial controls overThe system of internal financial controls overThe system of internal financial controls overThe system of internal financial controls over
financial reporting with regard tofinancial reporting with regard tofinancial reporting with regard tofinancial reporting with regard to the Companythe Companythe Companythe Company
were not made available to uswere not made available to uswere not made available to uswere not made available to us to enable us toto enable us toto enable us toto enable us to
determine if the Company has establisheddetermine if the Company has establisheddetermine if the Company has establisheddetermine if the Company has established
adequate internal financial control over financialadequate internal financial control over financialadequate internal financial control over financialadequate internal financial control over financial
reporting and whether such internal financialreporting and whether such internal financialreporting and whether such internal financialreporting and whether such internal financial
controls were operating effectively as at…controls were operating effectively as at…controls were operating effectively as at…controls were operating effectively as at…
• … the disclaimer has affected our opinion on the… the disclaimer has affected our opinion on the… the disclaimer has affected our opinion on the… the disclaimer has affected our opinion on the
financial statements of the standalone Companyfinancial statements of the standalone Companyfinancial statements of the standalone Companyfinancial statements of the standalone Company
andandandand we have issued a qualified (/ adverse /we have issued a qualified (/ adverse /we have issued a qualified (/ adverse /we have issued a qualified (/ adverse /
disclaimer of) opinion ondisclaimer of) opinion ondisclaimer of) opinion ondisclaimer of) opinion on the financialthe financialthe financialthe financial
statements.statements.statements.statements.

Lunawat & Co.
THE ONLY WAYTHE ONLY WAYTHE ONLY WAYTHE ONLY WAY

CA. Pramod JainCA. Pramod JainCA. Pramod JainCA. Pramod Jain
LUNAWAT & CO.LUNAWAT & CO.LUNAWAT & CO.LUNAWAT & CO.
pramodjain@lunawat.compramodjain@lunawat.compramodjain@lunawat.compramodjain@lunawat.com
+91 9811073867+91 9811073867+91 9811073867+91 9811073867
© 2016 CA. Pramod Jain, Lunawat & Co© 2016 CA. Pramod Jain, Lunawat & Co© 2016 CA. Pramod Jain, Lunawat & Co© 2016 CA. Pramod Jain, Lunawat & Co

Practical aspects in Auditing

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