Page 296 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
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.

(CNO—NBFC.240) AUDIT OF INVESTMENT AND CREDIT COMPANY (NBFC-ICC)
INVESTMENT BUSINESS RELATED POINTS
Buying & selling
Verify the Board Minutes for purchase and sale of investments. Ascertain from the Board resolution or
obtain a management certificate to the effect that the investments so acquired are current investments or
Long-Term Investments.
Test check bills/contract notes received from brokers with reference to the prices vis-à-vis the stock
market quotations on the respective dates.
Conditions while purchasing
Obtain a list of subsidiary/group companies from the management and verify the investments made in
subsidiary/group companies during the year. Ascertain the basis for arriving at the price paid for the
acquisition of such shares.
Check whether investments in unquoted debentures/bonds have not been treated as investments but as
term loans or other credit facilities for the purposes of income recognition and asset classification.
Dividend & Interest
Verify that dividend income wherever declared by a company, has been duly received by an NBFC and
interest wherever due [except in case of NPAs] has been duly accounted for.
NBFC Prudential Norms directions require dividend income on shares of companies and units of mutual
funds to be recognised on cash basis.
However, the NBFC has an option to account for dividend income on accrual basis, if the same has been
declared by the body corporate in its Annual General Meeting and its right to receive the payment has
been established.
Income from bonds/debentures of corporate bodies is to be accounted on accrual basis only if the interest
rate on these instruments is predetermined and interest is serviced regularly and not in arrears.
Verification / Confirmation / Valuation
Physically verify all the shares and securities held by a NBFC. Where any security is lodged with an
institution or a bank, a certificate from the bank/institution to that effect must be verified.
In respect of shares/securities held through a depository, obtain a confirmation from the depository
regarding the shares/securities held by it on behalf of the NBFC.
Check whether the investments have been valued in accordance with the NBFC Prudential Norms
Directions and adequate provision for fall in the market value of securities, wherever applicable, have
been made there against, as required by the Directions.
An auditor will have to ascertain whether the requirements of AS 13 “Accounting for 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.
Verify that securities of the same type or class are received back by the lender/paid by the borrower at the
end of the specified period together with all corporate benefits thereof (i.e. dividends, rights, bonus,

www.auditguru.in 14.40