Page 340 - CA Final PARAM Digital Book.

• Using the work of Experts:
He should also consider whether assistance of other experts like engineers, lawyers, etc., is
necessary in the interest of a comprehensive and full proof examination of the documents
and information.

• Legal requirements and investigation Report:
Only after he has completed the steps in the investigation programme and has marshalled all
the information that he needed should he prepare his report. He, however, can also make
interim report. The findings should be completed and exhaustive. Before he makes his final
report he should obtain and keep on record the evidences relied upon by him. By the nature
of things, such evidence should be as conclusive as possible depending on circumstances of
the case. He should make his report in accordance with the provisions of the Companies Act,
2013.
The general approach for investigations under Sections 210 and 213 should, therefore, be
formulated having regard to the terms of reference, scope, the period, the programme and
procedure of the investigation and the attending legal requirements specified above.

Investigation of Borrower Old Course- (M12R, M13R, N15R, PM17, SM17, M18M, M18E, N18R,
QNO TITANIUM CNO – INTG.120 M20R, SM21)
643.000
New Course-- (SM23)
A nationalised bank received an application from an export company seeking sanction of a term loan to
expand the existing sea food processing plant. In this connection, the General Manager, who is in charge
of Advances, approaches you to conduct a thorough investigation of this limited company and submit a
confidential report based on which he will decide whether to sanction this loan or not. Decide the points
you will cover in your investigation before submitting your report to the General Manager.
Answer ➢ Purpose: -
• Reason for obtaining the loan

• Determining of sources of repayment.
• Availability of security, if borrower fails to repay.

➢ Collection of Information: -
Investigator is required to collect the information with respect to;
• The financial standing and reputation for business integrity enjoyed by directors and
officers of the company.
• History of growth and development of the company and its performance during the past
5 years.

• Authorization under Memorandum or the Articles of Association to borrow money for the
purpose for which the loan will be used.

• The purpose for which the loan is required.
• Manner in which the borrower proposes to invest the amount of the loan.

• Schedule of repayment of loan submitted by the borrower, particularly the assumptions
made therein as regards amounts of profits that will be earned in cash and the amount of
cash that would be available for the repayment of loan to confirm that they are reasonable
and valid in the circumstances of the case.
➢ Examination of Financial Statements: -
• From the Statement of Profit and Loss for the previous five years, showing separately
therein various items of income and expenses, the amounts of gross and net profits earned,
and taxes paid annually during each of the five years.
• The purpose is to ascertain strengths of profitability
➢ Computation of relevant Ratios: -
• Equity to Fixed Assets.

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