Page 298 - CA Final PARAM Digital Book.

Investments” (to the extent they are not inconsistent with the Directions) have been duly
complied with by the NBFC.

(Securities Lending / Borrowing)
➢ Verify charges received or paid in respect of securities lend/borrowed.
➢ Obtain a confirmation from the approved intermediary regarding securities deposited with/
borrowed from it as at they earned.

QNO Hire Purchase Co (Audit)- Old Course – (M09E, N13R, SM17, PM17, M17R)
518.000 TITANIUM CNO—NBFC.280
You are appointed as the auditor of a Hire-Purchase Finance Company. Enumerate the verification

procedures in relation to audit of such Non-Banking Financial Company.
Answer HIRE PURCHASE FINANCE COMPANY
(Internal Control System)
➢ Ascertain whether the NBFC has an adequate appraisal system for extending hire purchase
finance. The system of appraisal is basically concerned with obtaining information regarding the
credit worthiness of the hirer, his experience in the field, assets owned, his past track record and
future projections of his income.

(Acquisition of Asset)
➢ Verify that the payment for acquiring an asset should be made directly to the supplier/dealer and
that the original invoice has been drawn out in the name of the NBFC.

(Registration Certificate)
➢ If the hire purchase finance is against vehicles, check whether the registration certificate contains
an endorsement in favour of the hire purchase company.
(Insurance)
➢ Verify that the assets given on hire purchase have been adequately insured against.

(Installation & Valuation Report)
➢ In the case of high value hire purchase items relating to machinery/equipment, an auditor should
ascertain whether the valuation reports and installation reports are called for. In case of some
high value items, he should also physically verify the asset in possession of the hirers, particularly
in a situation where he has any doubts as regards the genuineness of the transaction.
(Instalments)
➢ Check whether hire purchase instalments are being received regularly as and when they fall due.
Check whether adequate provision has been made for overdue hire purchase instalments as
required by the NBFC Prudential Norms directions.
(Method of Accounting)
➢ Examine the method of accounting followed by the hire purchase finance company for
appropriation of finance charges over the period of the hire purchase contract. Ascertain that
there is no change in the method of accounting as compared to the immediately preceding
previous year.
(Verification)
➢ The auditor should verify whether the NBFC has a system in place for verifying the hire purchase
assets periodically to ensure that the hirers have not sold the assets or otherwise encumbered
them.

QNO Equipment Leasing Co (Audit)- Old Course – (M07E, M10E,N10R, N15R, M16M, PM17)
519.000 TITANIUM CNO—NBFC.300
Write a short note on the special points that may be covered in the audit of equipment leasing finance

company.
Answer EQUIPMENT LEASING FINANCE COMPANY
(Internal Control System)
➢ Ascertain whether the NBFC has an adequate appraisal system for extending equipment leasing
finance.
(Agreement)

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