Page 305 - CA Final PARAM Digital Book.

respect of the company to the concerned Regional Office of the Department of Nonbanking
Supervision of the Bank under whose jurisdiction the registered office of the company is located
as per first Schedule to the Non-Banking Financial Companies Acceptance of Public Deposits
(Reserve Bank) Directions, 2016.

➢ The duty of the Auditor under sub-paragraph (I) shall be to report only the contraventions of the
provisions of RBI Act, 1934, and Directions, Guidelines, instructions referred to in sub-paragraph
(1) and such report shall not contain any statement with respect to compliance of any of those
provisions

QNO Frauds- Old Course – (M14E, M16M, N16R, N16M, PM17, N17R, N17M, N17E,
524.000 TITANIUM CNO—NBFC.220 N17M, M19R, N18M,N20R)
Under what heads can the frauds committed by Non-Banking Financial Companies (NBFCs) be classified?
OR
Classification of frauds by NBFC.

Answer ➢ Classification of Frauds by NBFC (RBI Circular July 2015)
In order to have uniformity in reporting, frauds have been classified as under based mainly on the
provisions of the Indian Penal Code:
• Misappropriation and criminal breach of trust.
• Negligence and cash shortages.
• Fraudulent encashment through forged instruments, manipulation of books of account or
through fictitious accounts and conversion of property.
• Unauthorized credit facilities extended for reward or for illegal gratification.
• Cheating and forgery.
• Irregularities in foreign exchange transactions.
• Any other type of fraud not coming under the specific heads as above.
Cases of ‘negligence and cash shortages’ and ‘irregularities in foreign exchange transactions’
referred to in items (b) and (f) above are to be reported as fraud if the intention to cheat/ defraud
is suspected/ proved. However, the following cases where fraudulent intention is not suspected/
proved, at the time of detection, will be treated as fraud and reported accordingly:
(a) cases of cash shortages more than Rs 10,000/- and
(b) cases of cash shortages more than Rs 5000/- if detected by management/
auditor/ inspecting officer and not reported on the occurrence by the
persons handling cash.

NBFCs having overseas branches/offices should report all frauds perpetrated at such
branches/offices also to the Reserve Bank as per the prescribed format and procedures.

QNO NBFC -Applicability & differences in the presentation Old Course – (N19E, M20R, SM21, M21M,M23E)
525.000 requirements between Division II & Division III New Course –(SM23)
of Schedule III
TITANIUM CNO—NBFC.380
Mr. G has been appointed an auditor of LMP Ltd, T a NBFC company registered with RBI Mr. G is
concerned about whether the format of financial statements prepared by LMP Ltd. is as per notification
issued by the Ministry of Corporate Affaire (MCA) dated October 11, 2018 The notification prescribed the

format in Envision III under Schedule Ill of the Companies Act, 2013 applicable to NBFCs complying with
Ind-AS. Mr. G wants to know the differences in the presentation requirements between Division II and
Division III of Schedule III of the Companies Act, 2013. Help Mr. G.
Answer ➢ Applicability of Indian Accounting Standards (IND- AS) on NBFCS
• Accounting periods beginning 1 April 2018:

Listed and unlisted NBFCs having a net worth of Rs 500 crore or more and holding, subsidiary,
joint venture or associate companies of such NBFCs;

• Accounting periods beginning 1 April 2019:
o All other listed NBFCs, unlisted NBFCs having a net worth of Rs 250 crore or more

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