Page 342 - CA Final PARAM Digital Book.

o debts due within six months; and
o debts due but not recovered for over six months.

If any debts are due from directors or other officers or employees of the company, the particulars
thereof should be stated. Amounts due from subsidiary and affiliated concerns, as well as those
considered abnormal should be disclosed. The recoveries out of various debts subsequent to the
date of the Balance sheet should be stated.

• Investments–
The schedule of investments should be prepared. It should disclose the date of purchase, cost
and the nominal and market value of each investment. If any investment is pledged as security
for a loan, full particulars of the loan should be given.

• Secured Loans–
Debentures and other loans should be included together in a separate schedule. Against the
debentures and each secured loan, the amounts outstanding for payments along with due dates
of payment should be shown. In case any debentures have been issued as a collateral security,
the fact should be stated. Particulars of assets pledged or those on which a charge has been
created for re-payment of a liability should be disclosed.

• Provision of Taxation–
The previous years up to which taxes have been assessed should be ascertained. If provision for
taxes not assessed appears in be inadequate, the fact should be stated along with the extent of
the shortfall.

• Other Liabilities–
It should be stated whether all the liabilities, actual and contingent, are correctly disclosed. Also,
an analysis according to ages of trade payables should be given to show that the company has
been meeting its obligations in time and has not been depending on trade credit for its working
capital requirements.

• Insurance –
A schedule of insurance policies giving details of risks covered, the date of payment of last
premiums and their value should be attached as an annexure to the statements of assets,
together with a report as to whether or not the insurance -cover appears to be adequate, having
regard to the value of assets.

• Contingent Liabilities-
By making direct enquiries from the borrower company, from members of its staff, perusal of the
files of parties to whom any loan has been advanced those of machinery suppliers and the legal
adviser, for example, the investigating accountant should ascertain particulars of any contingent
liabilities which have not been disclosed. In case, there are any, these should be included in a
schedule and attached to the report.

Finally, the investigating accountant should ascertain whether any application for loan to another
bank or any other party has been made. If so, the result thereof should be examined.
Author’s Note
In QNO 643.000 and 643.020 questions are similar but QNO 643.000 asks about investigation of
borrower in general and QNO 643.020 focuses on investigation of assets and liabilities of borrower.

QNO Investigation of Borrower (Due Diligence) Old Course – (M23M, M23R)
643.030 TITANIUM CNO— Unique New Course – (SM23)
CA. Rajul is acting as Credit manager in branch of DFC Bank Limited. A company has approached the
branch for a request to sanction credit facilities worth `10 crore for meeting usual business
requirements. It is a prospective new client. She checks past history of the company, background of
promoters & directors, shareholding pattern and nature of business. Assessment of financial results of
past years and future projections is also undertaken. She also carries out SWOT analysis of the company.

Besides, assessment of net worth of directors is also undertaken. Status of CIBIL score and position of
name of promoters/directors in RBI defaulter list is also verified.

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