Balance Sheet

1.Share Capital
 Whether there is any change in Shareholder’s pattern, if yes obtain the certified copies
of the relevant resolution passed at the meeting of Board of directors, shareholders
authorizing the increase/decrease in authorized share capital, if required, or paid-up
share capital.

 In case of change in capital verify whether paid-up share capital as at the year-end is
within the limits of authorized capital.

 Obtain and verify copies of forms filed with MCA (Form-SH-7 for an increase in
authorized share capital, Form PAS-3 for an increase in paid-up capital) and with
Reserve bank Of India Form FCGPR in case of Foreign Direct Investment (FDI) by a
Non-Resident shareholder) and verify the number of securities issued along with the
issue price.

2. Share Application Money

 If there is any receipt of Share Application Money during the year, obtain copies of
Share Application Forms evidencing the receipt of Share Application Money, if any.

 Whether Share application money received in Cash or through the bank?

3. Secured Loans
 Obtain a List of Secured Loan outstanding at year-end & Security details against the
Loan.

 Whether resolution has been passed for Loan in a Board meeting (BR) / General
meeting (SR) as the case may be, compliance with section 179/ 180 of The Companies
Act 2013?

Board resolution
Proposed loan(PL)=PL+Already Loan(AL) <= PC+FR

General Meeting(SR)
Proposed loan(PL)=PL+Already Loan(AL) > PC+FR

Note: Loan does not include temporary Loan like CC

 Whether new secured Loan obtained during the year, obtain a copy of the resolution
authorizing bank borrowing. with the compliance of section 179/ 180 of The Companies
Act 2013.

 Whether the client violates any term of repayment of the Loan? If yes, please prepare a
list of EMI bounced, interest unpaid and period of defaults?
 Whether term loan has been used for which it was obtained?

 Whether the Loan is taken from any NBFC or any institution other than a bank, please
check TDS is deducted on the payment of Interest payment?

4. Unsecured Loans
 Obtain a List of Unsecured Loan outstanding at the year ended & Ledger accounts of all
the loans to be extracted.

 Whether the Company is having Debentures in its books of accounts or issued during
the year? – Please obtain necessary documentation, e.g. Debenture holder agreement,
debenture holders registers, conversion ratio, etc.

5. Duties & Taxes

TDS
 Obtain a Copy of TDS challans about liability outstanding as of March 31st of the year
and previous year liability.

 Obtain TDS return form 24Q, 26Q, 27Q and 27EQ for all the quarters – Consolidated
file from Traces.

 Calculate TDS liability (in total) and its payment by the 7th of every month.

 Whether Company has made any TDS default during the financial year? See Traces
website for default.

 Compute Interest on TDS and TDS delay payments, if any.

PF/ESI
 Check applicability & Calculation of contribution of employer & employee.

 Obtain Copy of all challans/Return, computation to be tallied and reconciled

Bonus Act/ Gratuity Act

 Check applicability & Calculation.

 Obtain a Copy of all Return computations to be tallied and reconciled.

GST
 Reconciliation of GSTR-3B or GST returns with books accounts regarding Output tax
liability and input tax credit obtained.

 Review whether the Company has made payment to its vendors within 180 days from
the date of invoice on which the Company takes ITC.

 Copy of LUT to be obtained for the year under review.

 Reconciliation of Input Credit – invoice-wise with GSTR-2A to be obtained

 Reconciliation of Sales / Service Income – invoice-wise as per books with GSTR-1 to be

obtained.

6. Trade Payable
 List of creditors at year-end.

 List of creditors having Dr Balance as of March 31st and reason for debit balances.

 List out the Old Balance & Non-Moving Balances & whether they are payable or not to
be discussed with the client.

 Obtain Balance Confirmations as of March 31st.

 Whether any creditor filed a legal case suit against the Company. Ask details from
management and legal status of the case and relevant documents for the matter.

 Whether advance to supplier made during the previous year is adjusted in the current
year? – if not, reason thereof and Copy of agreement with a supplier for such advance
to review.

7. Creditors against expenses

 Whether any expenses are due on March 31st, but payment is to be made after March
31st.

 Whether the proper provision of such expenses is made at year-end.

 Example: Salary of march month due is made by Company.

8. Other current Liabilities

 Check whether the Company appropriately portion bifurcated of long term loan into
current maturities of long-term debt.

 Demand EMI sheet of long term loan.

 Whether Company passed entry of interest accrued but not due on borrowings.

 Unearned Income – whether the Company has received any income in advance -,
please obtain a copy of the invoice next year to review whether it is about the year
under review or next year?

 Imprest with employees – review on a sample basis of imprest of all employees and
keep the same in audit file to ensure all the expenses/reimbursement upto March 31st
of the year is considered in books.

9. Provision
 Computation of Provision for Gratuity where employee limit exceeds 10. Whether
Actuarial Valuation is obtained by the client for the same.
 Whether the Company has got registered its Gratuity Trust with Income Tax Authorities

 Disclosure of retirement benefit to be done in notes to Account of the balance sheet

 Whether The Company does leave encashment – please obtain a Copy of leave policy,
if any.

 The Company makes provision for encashable leave as per its computation or actuarial
valuation.

 Whether the Company has invested such funds from provision created in any
investment?

10. Deferred Tax Assets / Liabilities

 Working of Opening DTA/DTL to be verified for its reversal items, if any

 Computation for DTA/DTL as of March 31st for the year under review to be computed in
last.

11. Fixed Assets:-

 List of additions in fixed assets during the year under review and Copy of each invoice
to be obtained from the client and to be documented and Copy of Ledger to be taken.

 Obtain Updated Fixed Assets Registers as of March 31st

 Whether The Company conducts physical Verification of Fixed Assets or not?

 If there is any variation in physical verification and as per books – whether the proper
entry is passed in books or not

 Depreciation calculation sheet & Method of depreciation used? To be tallied with FAR –
if available.

 Is there any change in the Method of dep.? If yes, then ask the reason for the change.

 Check whether any decrease or increase in value has been adjusted correctly in books
of accounts due to a change in depreciation method.

 Whether Residual Value is 5% in all cases of Fixed Assets? – if not, please specify the
reason

 The useful life of assets complies with Schedule VII of the Companies Act or not? – if
not, has the Company obtained technical advice for the same or not?

12. Investments
 Obtain a list of all investments held by the Company.

 In respect of investments in shares, verify the year’s balance sheets under audit in
respect of Invested Companies.
 In case of investment in listed shares – Copy of all contract notes from the brokers to be
obtained

 Capital Gain / (loss) computation to be obtained and to be tallied with books of accounts

 Whether investment in shares in any related party complies with Companies Act, 2013

13. Sundry debtors

 Obtain the list of debtors for receivable more than six months from the due date of
invoice and less than six months

 Obtain the Copy of agreements with significant debtors.

 Is there any credit policy in writing? Basis and limits (quantitative or financial) upto
which credit sale can be contracted

 Debtors more than six months are doubtful? If yes, make provision for doubtful debts or
bad debts as the case may be.

 Is there a procedure for obtaining balance confirmation and reconciliation of customers

accounts at periodic intervals

 Whether there any receivable which has been written off during the year with the
approval of management? Reasons to be noted?

 Subsequent realization from the debtor post-March 31st upto the date of audit to be
obtained (invoice-wise)

 Need to review whether the Company receives amount receivable from the debtor as of
March 31st in Subsequent years upto the audit date.

14. Loans and advances

 Is there any loan granted to Directors? If yes, obtain the list in a detailed format.

(Loan cannot be given to director & any person to whom director is interested as per
section 185 of Company Act, 2013.)

 Whether Loan has been granted to related party and relatives

 Any loan has been given to Shareholders or any other person under section 186, Is
there any violation of this provision of the Companies Act?

 Board resolutions copy for Loan granted to any director & persons whom director is
interested as per section 185 & 186 of the Companies Act 2013

 Whether it is required to report under CARO UNDER 3(III)?

 Verify that provision of sec 2(22)(e) applies to co.? If yes, work out the amount covered
u/s.
 Whether BOD and Copy of agreement appropriately authorize Loan and advance made
to other.

 Suppose loans and advances are made to others, whether good interest or return
received from such party. TDS deducted by party reflected in 26AS of the Company.

 In case of default in repayment of principal and interest on Loan and advances, whether
the Company takes proper action against the party.

15. Security
 In case the Company gives security to the party, obtain a security agreement from the
party.

 Verify security is refundable or not. Verify the agreement whether there is an agreement
regarding returns on security and such return recognized in the book of Account.

16. Advance to Employee

 Advance to an employee is appropriately authorized and adjusted adequately from the
Salary.

 Check whether advance adjusted in case of employee resigned the Company.

 Obtain balance confirmation from an employee regarding the closing balance due to the
employee.

17. Balance with the revenue authority

 List of Amount Receivable from Revenue Authorities and verify its recoverability

 Check whether income tax refund of any preceding year is processed by IT department
and matched. Check income Tax site.

 Obtain Copy of advance income tax challan paid.

 Check validity and possibility of any refund due from govt.

18. TDS Receivable

 Reconciliation of TDS and Service Income and Interest as per Form 26AS vis-à-vis
Profit and Loss account and its respective TDS receivable.

19. Prepaid Expenses

 Opening Prepaid Booked – expensed off during the year or not?

 List of prepaid expenses – computation of prepaid expenses.

20. Cash
 State the periodicity for keeping denomination-wise details by the Cashier – whether at
the closing as on March 31st
 Cash Expenses More than Rs 10,000 to one party in a day is not allowed under section
40A(3) of Income Tax 1961 is to be noted ( For Tax Audit)

 Cash Receipt of more than Rs 2,00,000 from one party in a day is not allowed under
section 269ST of Income Tax Act 1961 & is to be noted.

 Are cash collections deposited into banks daily or every week?

 Daily Closing Cash should have Dr Balance.

 Signed Cash Balance Certificate to be obtained from Cashier and Director as well as on
March 31st

21. Bank
 Prepare Reconciliation details

 Bank Confirmation in original to be obtained as of March 31st in respect of Current

Account balance, Fixed Deposit Balance, Loan outstanding balance, and interest
accrued thereon, if any.

 In case of cheques deposited but not credited by the bank for more than three months,
furnish details of date, party’s name and amount.

 In case of cheques issued but not responded by the bank for more than 3 months,
whether they are transferred to Unclaimed Deposits or entries are reversed.

22. Inventory
 Whether Physical Verification of inventory is conducted at regular intervals? – if yes,
report for the physical verification required.

 whether the proper entry has been passed for any variance in books of accounts

 Whether inventory has been shown on Cost or net realizable value, whichever is lower
(As per AS 2)?

 Is there any of Non-Moving Stock or slow-moving stock? If yes, then a provision is

made thereon or not?

 NRV Test- Finished goods / Traded Goods to be verified by its selling price post-March
31st vis-à-vis cost taken on March 31st. If SP is low, then NRV should be done –
Invoices for few Major Items and few non-moving items to be obtained and
documented.

 FIFO Basis Test – Value of Stock to be verified with latest purchase prices – valuation
cost should be equal to that value based on the FIFO method

 Direct Cost – such as Inward Freight, Electricity exp. (in case of Manufacturing) are
being considered in the valuation of inventories or not?

 Whether inventories contain any stock transfer from the branch office of the Company –
whether any mark-up is embeded in the valuation of inventories
 Quantitative details of principal items of goods traded (For Tax Audit purposes)

Profit and Loss Account

1. Revenue from Operations
 Obtain Invoice-wise sales register required

 Check GST compliance on advances received from debtors & whether a proper entry
has been made in Account books.
 Copy of invoices at least 15 to 20 to be obtained for various months for records.

 Copy of agreement with customers to be reviewed and to be reconciled with Milestone

invoicing for that year.

 Unbilled Income to compute

 Copy of Sales invoices and its delivery acknowledgement from the customer or freight
receipt for the last week of March to be reviewed – in respect of cut off sale transaction
– AS-9.

2. FD Interest Income
 Obtain Interest Certificate from management?

 Calculate the accrued interest on FD?

 Whether proper TDS receivable is booked?

3. Dividend Income
 Verify the holding through the DEMAT Account?

 Who is the actual beneficiary & whether an investment is in the name of the Company?

 Check the Bank statement on which the Dividend income was received?

4. Profit/{Loss} on sale of fixed assets

 Management approval for selling or disposal of Fixed Assets?

5. Discount Received
 Whether discount received booked by any Dr Note or based on agreement policy?

 Go through the agreement with a vendor to understand the discount policy?

 Whether proper entry has been made in the books of accounts?

6. Foreign currency fluctuation

 List out the Outstanding Balance at year-end.

7. Purchase
 Obtain the major agreements with the party & go through this
 Whether the list of suppliers is maintained for regular items

 Whether Company is sending an enquiry for more than one vendor

 The purchase order should be there for every purchase.

 Vouching for April, May and March for the year under review and April & May for Next
year to be done.

 Copy of invoices at least 15 to 20 to be obtained for various months for records along
with a Copy of GR receipt.

 Please review whether relevant purchases/expenses for sales made in March month
are accounted for in books or not.

8. Salary
 Go through the HR Policy & Randomly examine the Salary as per CTC structure.

 Check the TDS Compliance and cross-examine the investments claimed as a deduction
in the computation of employees’ tax.

 Whether Personnel Department has maintained individual Employees files? If Yes,

Check whether the file contained all the documentation of identity and another
regulatory requirement for the individual.

 Whether Salary is paid by Cash or through Banking channel? List out the payments
made through Cash.

 Whether Payslip issued to employees shows the breakup of the Salary & all the
deduction over therein?

9. ESI/PF/Bonus /Contribution Funds

 Check PF/ESI/Bonus/Pension Act applicable to the Company

Verify the Employer/Employee Contribution to fund (eg.-PF & ESI )& check the
Calculation

 for the whole year or a month .

 Verify the challans of ESI/PF/other Statutory funds & trace entries in books of accounts
(Obtain Copy of challans).

 Prepare the details of all statutory Payments (also Used in Tax Audit).

10. Legal Cases

 Obtain the list of legal obligations pending as of March 31st & examine whether liability
is required to be shown under Provisions or Contingent Liability.

11. Gratuity/Leave Encashment/ Other Benefits long term

 Whether a provision is made for gratuity/Leave Encashment/ other employees benefits?
If Yes, then verify the basis on which provision is made?
 Obtain the Actuarial valuation report, LIC or actual Calculation from the client, if any &
go through with the assumptions made by the actuary?

12. Full & Final settlement

 Obtain the list of employees who joined during the year and resigned during the year

 Please review F&F settlement payable or recoverable properly disclosed in books or not
in case of employee resigned before March, but F&F is done post-March.

13. Actuarial Certificate

 Please review the database provided to Actuarial for verifying data, for example,
number of employees, their salaries, increment assumption – other actuarial
assumptions.

14. Finance Cost

 Check the Apportionment of Principal & Interest amount as per Loan Amortisation
Schedule.

 Whether TDS under section 194A has been deducted on the interest payment to NBFC
or Individuals or corporates?

 Whether proper entry has been made in the books of accounts?

 Verify Company has charged other borrowing costs (loan processing fees) charged in
finance costs?

 If Company taken Loan in foreign currency whether applicable net gain/loss on foreign
currency transactions and translation taken in books of Account.

 Whether Borrowing Cost about capital expenditure – adequately capitalized or not?

 Whether Unutilized funds during the construction period of assets reduced from the
value of assets – should not be credited to Profit and Loss Account

 Interest accrued but not due up to March 31st should be accounted for in books.

15. Expenses
 List out the prior period Expenses which are booked during the year.

 List out the expenses on which GST reverse charge applied & entered adequately in
books of accounts.

 Checking of TDS Compliance concerning expenses under Chapter XVII

 Prepare the list of expenses on which prepaid is made.

 Vouching of Expenses, Whether expenses are correctly signed, dated, serial number,
invoice wise, tax invoice type to claim GST input etc.

 List of Unsupported Voucher, Ask management to arrange the invoice; otherwise, such
expenses cannot be booked into Account.
 Personal Nature/Charity donation/club Expenses (For tax audit purpose)

 Examine expense occurs regularly., For Ex. Electricity Exp. Booked every month or
Salary exp. Booked every month.

 Examine whether Company had made expense due entry at the year-end, For Ex.
Salary of march month booked.

 Examine whether Company passed expenses entry on a due basis. If Company passed
entry through bank/cash, then ask management to first due to the expenses entry.

 Check any expenditure of capital nature charge in revenue expenses.

 Check whether GST tax input claim on any expenses.

 Check such input claim in GST return in GSTR 3b.

 Identify the expenses which are disallowed under Income Tax Act, 1961.

 Standard Sizing Ratio and another management ratio to be computed for analysis
purposes.

Notes to Account
 Prepare the working of Foreign Income and Expenditure incurred during the FY (For
Notes to Account)

 Prepare the Related Party Transactions during the FY.

An aforesaid statutory audit checklist is just an illustrative list, and more

information/documents may be added or removed based on judgement, experience and
legal requirements.