Chapter 8 and 11 - Audits Flashcards

Question

what does the law say in relation to participation of outsiders in the meetings of audit committee ?

Answer 1

under COA 2013 - Auditors and KMP of the company have right to attend the meetings when the auditors report is being considered under SEBI LODR - the audit committee may at its discretion invite any executives whether internal or external to the organization to be present at the meeting.

Answer 2

pneumonic - ARE - O ! (A - 2) A- Auditors :- a) recommendation b) Appointment c) remuneration A - Approvals :- a) RPTs b) appointment of financial executives in the entity. R - Reviewing :- a) Annual and Quarterly financial statements and auditors report with special focus on : - RPT - Directors - changes in accounting policies - major entries & significant adjustments - Auditors opinion b) auditors independence c) effectiveness of audit process d) performance of auditors e) adequacy of audit function f) Findings of the audit g) whistle blower mechanism E- Evaluation of :- a) internal financial controls b) risk management systems O - Overseeing :- a) financial disclosures & reporting to ensure - credibility, accuracy and sufficiency.

Answer 3

CGA checklist consist of 5 aspects that need to be checked with respect to the auditee, they are as follows :- 1. Accountability :- it involves to check whether :- a) separation between ownership and control b) management accountable to board c) board accountable to shareholders d) ID's have independence e) auditors have access to information f) sufficient meeting were held 2. Fairness :- it involves to check whether :- a) shareholders treated equally b) defined procedure for grievance redressal c) fair pricing policy d) fair market practices 3. Transparency :- it involves to check whether :- a) timely, accurate disclosures on material matters are made b) company has a policy on political contributions c) company provides information to all its investors with regards to rights associated with shares before they invest. d) changes in voting rights is subjected to the approval of those affected by it. e) any compensation schemes in the form of shares is subjected to the approval of existing shareholders. 4. Responsibility :- it involves to check whether :- a) Company has a policy on stakeholders rights b) -||- on social responsibility c) -||- on business sustainability d) board's responsibility includes :- i) risk management ii) reviewing corporate performance. 5. Shareholder interest :- it involves to check whether :- a) shareholders have the right to participate in and be informed about fundamental corporate changes such as :- i) alteration in charter documents ii) corporate restructuring iii) alteration in share capital iv) changes in ownership rights. b) disclosures are made to shareholders in events of disproportion of control to that of their equity holding. c) Minority shareholders protected from the abusive actions of the majority. d) disclosure of boards interest in any material transaction.

Answer 4

the primary purpose is to :- a) identify environmental, societal and governance risks faced by the organisation AND b) to evaluate managerial performance of the organisation in respect of those risks.

Answer 5

mnemonic - {C - FILM} (I - 2) 1. to ensure compliance with the provisions of COA 2013 wrt to CSR activities. 2. To facilitate transparent monitoring mechanism for the CSR activities 3. To implement CSR policy 4. To evaluate internal control and governance framework 5. to assess life cycle of CSR projects. 6. to conduct financial review of CSR projects and evaluate and confirm the utilization of budget allocated for CSR purposes

Answer 6

not mandatory

Answer 7

as per sec 135 every company meeting the following criteria shall constitute a CSR committee as a committee of board :- 1. NW - 500 cr or more 2. T/o - 1000 cr or more 3. Net profit - 5 cr or more during the immediately preceding FY

Answer 8

the CSR committee shall consist of :- 1. 3 or more directors out of which at least 1 shall be independent 2. if the company is not required to appoint ID as per sec 149 (4) 2 or more directors.

Answer 9

the board of every company which is required to constitute CSR committee as per sec 135 (1) shall ensure that the company spends in every FY at least 2 % of the average net profits during the immediately preceding 3 FYs in pursuance of its CSR policy.

Answer 10

1. constitute CSR committee 2. adopt a CSR policy 3. spend in every FY at least 2% of the AVNP during the imd preceding 3 FYs

Answer 11

to measure the Actual social performance against the social objectives set by the company.

Answer 12

mnemonic - MRI M - Monitoring :- CSR related activities and conduct of the affairs of the company in that respect. R - Reviewing :- CSR policy and projects CSR committee Governance Structure CSR strategies CSR expenditure Compliance of CSR rules and provisions as prescribed under the COA 2013 beneficiaries of the CSR project Budget allocation for CSR activities I - Interacting with :- beneficiaries of CSR project Project team other stakeholders

Answer 13

internally ; External agencies ; Expertise

Answer 14

Schedule VII of COA 2013 gives an illustrative list of activities which fall under the purview of CSR and a company may include it for the purposes of CSR. The list contains the following activities :- Eradication of hunger, poverty, malnutrition Education promotion Rural development Slum area Development preservation of national heritage, arts or culture promoting gender equality environment sustainability promoting sports contribution to PM CARES fund or Public funded universities disaster management

Answer 15

To check whether :- 1. Constitution of CSR committee u/s 135 of COA 2013 is applicable to the company 2. company has constituted CSR committee as per the requirements of the COA 2013 if applicable 3. Company has adopted CSR policy approved by CSR committee 4. CSR projects undertaken are within the purview of Schedule VII of COA 2013 5. Company has established a transparent monitoring mechanism for CSR projects 6. CSR activities are undertaken as per CSR policy 7. Company has made relevant disclosures wrt to CSR as per the requirements of COA 2013 8. Company has complied with all the CSR requirements prescribed under the COA 2013 and rules related thereto.

Answer 16

The CSR audit tells us how the company has :- 1. identified major socio economic changes caused by its presence/ operations/ conduct 2. conducted social surveys before undertaking any CSR activity 3. identified the possible impacts of its CSR activities on the society 4. undertaken the impact assessment of its CSR activities.

Answer 17

1. to provide results to the investor that the acquisition is executed in the most effective way 2. to provide a cost benefit analysis of the long term investment strategy

Answer 18

Takeover audit can be done in 3 parts :- 1. pre acquisition 2. post acquisition 3. sell side

Answer 19

internal auditors or professionals

Answer 20

1. new business opportunities 2. risk minimization

Answer 21

it generally includes :- 1. identification and categorization of acquirer group 2. ensuring timely disclosures made by acquirer group 3. monitoring the holdings of acquirer group and taking necessary actions. 4. ensuring timely intimations given to SE as required under SEBI SAST reg. 5. filing of timely reports with SE 6. examining T/O regulations and verifying its compliance

Answer 22

actions taken by SEBI inter alia includes :- 1. Debarring persons from accessing capital markets or dealing in securities 2. Directing :- a. divestment of shares acquired b. target co/depository not to give effect to any transfer c. acquirer to make a open offer at price determined by SEBI d. acquirer not to make a open offer if failed to pay open offer consideration (OOC) e. acquirer to pay interest for delayed payment of OOC

Answer 23

are actions of director, agents, employee or other officers of listed entity to use inside information for profitably speculating in the securities of such entity.

Answer 24

It occurs due to :- Possession of information regarding changes in the economic conditions of the company before everybody.

Answer 25

monitor ; regulate ; compliance officer ; Audit committee

Answer 26

1. to adopt code of conduct in lies with PIT regulations. 2. Appointment of compliance officer 3. prior approvals for trading 4. preservation of price sensitive information 5.reporting requirements by dir/off/emp 6. complete awareness with respect to rules and regulations framed in relation to ITA

Answer 27

1.Submission of trading plans 2.Appointment of compliance officer 3.Pre-clearance for trading 4.adoption of Codes of fair disclosure and conduct 5.Manner of dealing with UPSI 6.Disclosure requirements :- a. Initial disclosures - to be made internally by promoters, KMP, dir. b. continual disclosures - to be made by promoter, employee, dir. if value of trade in a calendar quarter exceeds 10 lac rupees and such disclosures to be notified to SE within 2 trading days.

Answer 28

To check whether :- 1. The company has appointed a compliance officer. 2. The company has maintained structured digital database containing the nature of unpublished price sensitive information 3. the structured digital database is preserved for a period of not less than eight years. 4. The company has designated an officer to administer the code of conduct and other requirements under Insider trading regulations. 5. The Board of Directors of has formulated a code of conducts as per Insider trading regulations`. 6. The Code has been hosted on the website of the company 7. The code of conduct has stipulated the sanctions and disciplinary actions for its violations and contravention. 8. Every such code of conduct and documents thereto has been promptly intimated to the stock exchange where the securities are listed. 9. Company has formulated trading plan in compliance with regulations. 10. Compliance officer has fulfilled his following roles and responsibilities :- a) reviewing/ monitoring trading plans b) notification of trading plan to SE c) providing reports of trading to chairman of Audit committee 11. company has preserved records/ disclosures for a min period of 5 years. 12. Any other modes of preventing and containing insider trading activities adopted by the company.