Page 197 - CA Final PARAM Digital Book.
P. 197
inter se, and personal expenses were charged to revenue.
Part IV – Conclusion
➢ Therefore, Mr. X, the statutory auditor of ABC Ltd., needs to enquire in light of above provisions,
as a result of the enquiries if he is satisfied then there is no further duty to report on these
matters.
QNO Sec 143--Inquiry Personal Reimbursement to Director Old Course – (M07E, PM17, N20E)
327.000 TITANIUM CNO—CA.020
In the audit of ABC Private Limited, auditor came across cases of payments to Directors, whereby,
expenses of a personal nature were reimbursed. As an auditor, how would you deal with the same?
Answer Part I -- Relevant Section & Laws
▪ Section 143(1)(e) of the Companies Act, 2013
Part II -- Requirements of Relevant Section & Laws
➢ All payments to Directors as remuneration or perquisites whether in the case of a public or private
company are required to be authorized both in accordance with the Companies Act and Articles of
Association of the company?
Articles may provide that such remuneration require sanction of the shareholders either by
ordinary or special resolution while in some cases it may require only approval of Directors.
If the terms of appointment of a Director include payment of expenses of a personal nature, then
such expenses can be incurred by the company; otherwise, no such expense can be incurred or
reimbursed by the company.
Part III – Case Discussion
➢ In the audit of ABC Private Limited, auditor came across cases of payments to Directors, whereby,
expenses of a personal nature were reimbursed.
Part IV – Conclusion
➢ In the instant case the auditor has to ensure that the above is complied with, without which, if
such expenses are paid, he has to disclose the fact in his report, as also in the accounts.
In this regard attention is invited to section 143(1) (e) of the Companies Act, 2013 wherein auditor
has to inquire into whether personal expenses have been charged to revenue.
QNO Sec 143-- Inquiry Multiple Case Studies Old Course – (M21M)
327.500 TITANIUM CNO—CA.020
Mr. Raj, the engagement partner of R.O.K. & Co., in connection with statutory audit of Waria Ltd., had
assigned the responsibility of enquiring into propriety matters of the Company as required by section
143(1) of the Companies Act, 2013, to Mr. Samay, an engagement team member. Mr. Samay while
making such enquiries, was having following queries, as tabulated below, which he ought to get resolved
from Mr. Raj, as follows:- Sr. No. Query of Mr. Samay
1 What documents to be seen in case of loan given by the company in lieu of hypothecation of goods
from lender as a security for the purpose of reporting as per clause (a) of section 143(1) of the
Companies Act, 2013?
2 What shall be the cost of Debentures and Bonus Shares sold by the company for which the cost is not
ascertainable for the purpose of reporting as per clause (c) of section 143(1) of the Companies Act, 2013?
3 Whether the shares allotted by Waria Ltd. against a loan taken by it from a NBFC can be considered to
be allotted for cash for the purpose of reporting as per clause (f) of section 143(1) of the Companies Act,
2013?
Assuming that you are Mr. Raj the engagement partner, please provide answer to the queries of Mr.
Samay?
www.auditguru.in PARAM 7.37 | P a g e