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SHREE Ganeshaya Namah

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ADVANCED AUDITINGAND

PROFESSIONAL ETHICSC.A. FINAL

CA SURENDRA AGRAWALPH-9313336776

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Contents at a Glance

Chapter Contents Page No.

1 Professional Ethics 1.1-1.11

2 Auditing in computer information systems 2.1-2.4

3 Accounts of companies 3.1-3.3

4 Company audit and company auditor 4.1-.4.4

5 Investigation 5.1-5.2

6 Audit of public sector undrtaking 6.1-6.1

7 audit of co-operative societies 7.1-7.2

8 audit of members of stock exchange 8.1-8.4

9 special aspects 9.1-9.2

10 bank audit 10.1-10.8

11 General insurance 11.1-11.4

12 Audit of fiscal laws 12.1-12.1

13 management & operational audit 13.1-13.2

14 audit of the consolidated financial statements 14.1-14.1

15 corporate governance and clause 49 15.1-15.3

16 peer review 16.1-16.2

17 the sarbanes oxley act,2002 17.1-17.3

18 Cost Audit 18.1-18.2

19 NBFC 19.2-19.2

20 Tax Audit 20.1-20.421 Dividend 21.1-20.3

1.1

THE CHARTERED ACCOUNTANT ACT,1949 AS AMENDED (2006)

Definition of Chartered Accountant-Section 2(1)(b)

Passed the final examination, completed the Article/audit training and GMCS Course

Disabilities For Purpose Of Membership (Section 8)i) Age less than 21 orii) Unsound mind oriii) Undischarged insolvent, oriv) Discharged insolvent, not obtained a certificate from court( stating due to misfortune without any misconduct on his

part, orv) Convicted by competent court of offence moral turpitude, not attracted if he has been granted a pardon or CG has

removed his disability.vi) Removed from membership by ICAI due to misconduct.

Status Of Memberi) Member in Practiceii) Member in Serviceiii) Member(not in practice or not in service, only having degree)

Practice Work

a. Individually In his name(sole practitioner)In his proprietorship

b. Partnership firm

Sec.2 (2): Members deemed to be in practice:

1. A member of ICAI shall be deemed “to be in practice” practice of accountancy,

Audit related services or

Assistance in Matters of accountant interest etc., or,

Mgt. consultancy service(MCS)Member accepting any of (a),(b),(C)

Personal Capacity Employee capacity Professional CapacityNot deemed to be in practice Not deemed to be in practice Salary cum full time

basisElse

Not deemed to be inpractice

deemed to be inpractice

“Management Consultancy and other Services”

The Council has passed a resolution permitting a CA in practice to render entire range of“Management Consultancy and other Services” which shall include the following:a. Financial management planningb. Capital structure planningc. Working capital managementd. Preparing project reports and feasibility studies.e. Preparing cash budget, cash flow statements, profitability statements, statements of

sources and application of funds etc.f. Budgets (capital and revenue).g. Inventory management, material handling and storage.h. Market research and demand studies.i. Price-fixation and other management decision making.j. Management accounting systems, cost control and value analysis.k. Control methods and management information and reporting.l. Personnel recruitment and selection.m. Setting up executive incentive plans, wage incentive plans etc.n. Management and operational audits.

Chapter-1

1.2

o. Valuation of shares & business and advice regarding amalgamation, merger & acquisition.p. Business Policy, corporate planning, organization development, growth & diversification.q. Organization structure & behavior, development of human resources including design & conduct of training programmes, job-description, job evaluation & evaluation of workloads.r. Systems analysis and other professional services relating to EDP.s. Acting as advisor or consultant to an issue (but not activities of broking, underwriting and portfolio management)t. Investment counselingu. Acting as registrar to an issue and for transfer of shares/other securities.v. Quality Audit.w. Environment Audit.x. Energy Audit.y. Acting as Recovery Consultant in the Banking Sector.z. Insurance Financial Advisory Services including Insurance Brokerage.

Sec-5 Classes Of Member

Associate Member- register his name in Register of member

Fellow Member- Associate member in continuous practice in India for at least 5 year or Associate member for continuous 5years possessing such qualification as prescribed.

Sec-7 Designation by Chartered Accountant

All Member- CA before name.Member not in practice- Not use designation chartered accountant, they may use any other expression.Member in practice-(designation) can not use other designation other than chartered accountant whether in addition or insubstation thereof.Member in practice-(degree) can write down letter showing membership of approved bodies .ie.they can write down degreesafter nameBut he can not write down company secretary either in addition to or in substitution of chartered accountant. As he is a CA inpractice & thus can use just one designation as chartered accountant.Member in practice who having practicing rights from more than one institution

A member can have more than one COP subject to permission.

But two designation can not used simultaneously.

For matters involving practice as chartered accountant, they should designation chartered accountant

Significance of certificate of Practice:

As per judicial ruling;(i) He can so appear only in his capacity as a C.A.(ii)He can’t practice as I.T. practitioner even if he is having law degree.

Penalty for Falsely claiming to be a Member (Sec 24)Any person, not being CA, represents that he is CA or any person being CA not having COP, represents that heis in practice as a CA, shall be penalized by Rs. 1000/- and on any subsequent conviction fine upto Rs. 5000/- orimprisonment up to 6 months or both.Branch Office (Sec 27)Each office should be in the separate charge of a member of the institute (CA) either as a partner or in whole time employment.Exception (No separate incharge is needed): Each branch must have separate CA in charge, but in followingcases no separate in-charge is required for branch office:(A) Hill Area:1) Temporary office only for maximum 3 month a year.2) The regular office need not be closed during this period.3) Temporary office address not to be mentioned Visiting cards/letter head etc.4) Before opening & close of such temporary office inform ICAI.5) Name board of firm to be displayed at temporary office only for the period allowed as above.(B) Member can be in-charge of two offices if second office located in same premises in which first office (HeadOffice) is situated OR in the same city or within 50 Kms from municipal limits of city in which first office (HeadOffice) situated.

1.3

First Schedule to the Chartered Accountants Act, 1949

Part I Part II Part III Part IVMisconduct Professional Professional Professional OtherApplicability CAs in practice CAs in service CAs in GeneralClause 1 Allowing non-

members topractice in his ownname

Sharingemploymentemoluments withany person(including member)

Not FCA but stylesFCA

Guilty of offenceby civil orcriminal courtinvolvingimprisonmentfor <= 6 months

Clause 2 Paying/allowingshare, commission,brokerage in thefees/ profits withnon-members/non-specifiedpersons

Accepting sharefrom otherprofessionals, CAs,profits/fees orcommission fromany agent orcustomer

Does not supplyrequiredinformation to theCouncil/Board/Committees

Brings disreputeto theprofession orthe institute as aresult of hisaction whetheror not related tohis professionalwork

Clause 3 Accepting profits ofprofessional workfrom non-members/non-specified persons

_ Gives falseinformation whileinviting professionalwork or whileresponding totenders

_

Clause 4 Partnership withnon-member/non-specified persons

_ _ _

Clause 5 Securing workthrough non-members/non-specified persons

_ _ _

Clause 6 Solicitation ofclients orprofessional workexcept frompracticing CA orresponding tospecified tendersetc.

_ _ _

Clause 7 Use of wrongdesignation

_ _ _

Clause 8 Acceptingappointmentwithoutcommunications

_ _ _

1.4

with previousauditor

Clause 9 Acceptingappointmentagainst sections224 & 225

_ _ _

Clause 10 Charging fees as apercentage ofprofits orcontingent findings

_ _ _

Clause 11 Engage in otheroccupation withoutpermission

_ _ _

Clause 12 Balance Sheet, P&LA/c signed by non-member

_ _ _

Second Schedule to the Chartered Accountants Act, 1949

Part I Part II Part IIIMisconduct Professional Professional OtherApplicability CAs in Practice CAs in generalClause 1 Disclosing information

without client’sconsent/lawrequirement

Contravenes anyprovisions of the Actand/or Regulationsmade thereunder

Guilty of offence by civilor criminal courtinvolving imprisonmentfor > 6 months

Clause 2 Submitting report onfinancial statementswithout examination ofrecords

Disclosing informationwithout employer’sconsent/lawrequirement

_

Clause 3 His association withestimation of forecasts

Gives false informationto the Council/Board/Committees

_

Clause 4 Reporting even if havingsubstantial interest inthe auditee enterprise

Defalcates or embezzlesmoney received in hisprofessional capacity

_

Clause 5 Failure to disclosematerial facts

_ _

Clause 6 Failure to disclosematerial misstatement

_ _

Clause 7 Does not exercise duediligence or is grosslynegligent of hisprofessional duties

_ _

Clause 8 Reporting withoutobtaining sufficientevidence

_ _

Clause 9 Failure to highlightmaterial departurefrom generally acceptedaudit procedure

_ _

Clause 10 Failure to keep/spend _ _

1.5

money of his clientin/from separate bankaccount

COMPLITE YOUR CA FINAL AUDIT IN 18 DAYSBY CA SURENDRA AGRAWAL(M.COM,LLB,ACA)PH-9313336776 4.1

COMPANY AUDIT

Auditor -Qualification[Sec.l41(l)(2)]

1. Chartered Accountants holding Certificate of Practice.2. Firm where Majority of Partners qualified and practicing in India.3. Only Partners who are CAs are authorized to sign in case of Firm(including LLP).

Auditor -Disqualification[Sec.l41(3)(4)]

(a) Body Corporate.(b) Officer / Employee of the Company.(c) Partner / Employee of an Officer or Employee of the Company.(d) Person / Relative / Partner -(i) Holding any Security / Interest in a Company / Holding / Associate /Subsidiary. (Relative may hold Security / Interest in the Company of Facevalue not exceeding RS. 1,00,000).(ii) Indebted to a Company / Holding / Associate / Subsidiary in excessof Rs. 5,00,000.(iii) Given Guarantee / provided any Security to a Company / Holding /Associate / Subsidiary in excess of RS. 1,00,000.(e) Person / Firm having Business Relationship with Company / Holding/ Associate / Subsidiary(f) Person whose Relative is a Director / in employment of the Companyas KMP.(g) (i) Person in full time Employment elsewhere or (ii) Partner / Firmholding more than 20 Company Audits.(h) Person convicted by Court for offence involving fraud, (for 10 yearsfrom the date of conviction),(i) Any Person whose Subsidiary / Associate / or any other form of Entity,is engaged as on the date of appointment, in consulting and specialisedservices as provided in Sec. 144.

BusinessRelationship

Any transaction entered for a commercial purpose. Exceptions are -(a) Commercial Transactions in the nature of Professional Servicespermitted to be rendered by an Auditor or Firm under the Companies Actor CA Act(b) Commercial Transactions in the ordinary course of business at Arm'sLength Price.

Auditor not torender certainServices

1. Auditor can provide onlythose Other Servicesapproved by BOD or AuditCommittee.2. Prohibited Services:(i) Accounting and BookKeeping Services,(ii) Internal Audit, Design &Implementation of any Fin.Info. System,

(iii) Actuarial Services,(iv) Investment Advisory Services,(v) Investment Banking Services,(vi) Rendering of Outsourced FinancialServices,(vii) Management Services, (viii)Otherprescribed Services.

Remunerationof Auditors

First Auditors & Casual vacancy other than resignation: Remunerationfixed by BOD Others: Remuneration fixed by Members in GM in manneras determined at the GM. Auditor's Remuneration to be disclosed in P & Las- (a) Auditor, (b) Tax Matters, (c) Company Law Matters, (d) Other

Chapter-4


Services, (e) Reimbursement of Expenses.BranchAuditors -Appointment

1. Local Branches: Company's Auditor appointed u/s 139, or personqualified for appointment as an Auditor u/s 139.2. Foreign Branches: Company's Auditor appointed u/s 139, or anAccountant duly qualified to act as an Auditor in accordance with the lawsof that foreign country.

Ceiling Limit 1. 20 Company Audits per person / Partner (in case of Partnership Firm).2. 30 Company Audits including Private Companies - ICAI Notification.

Appointment ofFirst Auditors

Refer Class chart

Appointment ofAuditors ofGovtCompanies

1. Appointee: Auditor duly qualified to be appointed as Auditor under theAct.2. Appointment by: Comptroller and Auditor General (C&AG) of India.3. Time Limit: Within 180 days from the commencement of the financialyear.4. Tenure: To hold office till the conclusion of the AGM.

Appointment ofAuditors atAGM

1. Appointment includes re-appointment.2. Every Company shall appoint an Individual or a Firm as Auditor of theCompany, at its 1st AGM.3. Tenure: From the conclusion of 1st AGM to till the conclusion of its 6thAGM and thereafter till the conclusion of every 6th AGM.4. Appointment to be ratified by members at every AGM.5. Duties of Company: (a) Written Consent of Auditor, (b) Form ADT1 toROC within 15 days of GM.6. Effect of no appointment at AGM: If at any AGM, the Auditor is notappointed or re-appointed, the Existing Auditor shall continue to be theAuditor of the Company. [Sec.l39(10)]

AuditCommittee u/s177 required for

(a) All Listed Companies,(b) All Public Companies having -(i) Paid Up Capital > Rs. 10 Crores,(ii) Turnover > Rs. 100 Crores,(iii) Aggregate O/s Loans/ Borrowings/Debentures/ Deposits > Rs. 50Crores

Casual Vacancy 1. Auditor ceasing to act after he was validly appointed and theappointment was accepted.2. Appointment: (a) For Companies whose accounts are subject C&AGAudit:(i) C&AG shall fill the Casual Vacancy, within 30 days.(ii) If C&AG fails to do, BOD shall fill within next 30 days.(b) For Others: (i) BOD shall fill Vacancy within 30 days, (ii) If vacancy isdue to resignation, appointment to be approved by the Company at a GMwithin 3 months of BOD recommendation.3. Refusal of new Auditor to accept appointment: Casual vacancycontinues.

Re-appointmentof RetiringAuditor

Subject to Sec. 139(1), the Retiring Auditor may be re-appointed at anAGM, if -1. If the Retiring Auditor is not disqualified for re-appointment,2. If the Retiring Auditor has not given the Company a notice in writing ofhis unwillingness to be re-appointed,

as perlastauditedFinancialStatements


3. If a Special Resolution has not been passed at that AGM, appointinganother Auditor instead of the Retiring Auditor or providing expresslythat the Retiring Auditor shall not be re-appointed.

Rotation ofAuditors

A, Applicable to:1. Listed Companies,2. All Unlisted Public Companies having Paid Up Share Capital > Rs. 10Crores,3. All Private Limited Companies having Paid Up Share Capital > Rs.20Crores,4. All Companies having Paid Up Share Capital below above specifiedlimits, but having Public Borrowings from Financial Institutions, Banks orPublic Deposits > Rs.50 Crores.Note: Excluded Companies - (a) One Person Company, and (b) SmallCompany.B. Tenure: The above Companies shall not appoint / re-appoint -1. An Individual as Auditor, for more than 1 term of 5 consecutive years,and2. An Audit Firm as Auditor, for more than 2 terms of 5 consecutive years.

Removal ofAuditors beforethe Expiry ofterm

1. BOD to pass Resolution for removal of Auditors.2. Application to CG in Form ADT 2, within 30 days of BOD Resolution.3. Previous Approval of CG in response to ADT 24. GM within 60 days of receipt of CG Approval.5. Special Resolution to be passed in above GM for removal.6. Auditor shall be given reasonable opportunity of being heard.

Removal ofAuditors at theAGM

1. Special Notice for resolution at AGM providing expressly RetiringAuditor shall not be reappointed.2. Copy of above shall be sent to Retiring Auditor.3. Retiring Auditor has the right to represent, such representation shall becirculated and read out at AGM and he be heard orally at AGM.

Change ofAuditors basedon Tribunal'sDirection

1. Situation: Tribunal is satisfied that the Auditor of a Company has actedin fraudulent manner or abetted or colluded in any fraud.2. Basis for Findings: suo motu, Application made to Tribunal by CG orany person concerned.3. Order of Tribunal: Tribunal can order Company to change its Auditors,on above grounds.4. Effect of Tribunal's Final Order: Firm / Individual against whom finalorder passes u/s 140 -not eligible to be appointed as Auditor of anyCompany for 5 years from the date of Order.

Resignation ofAuditors

1. Auditor has the right to resign before expiry of his term.2. Resigning Auditor to file Form ADT 3 within 30 days of resignation.

Powers ofCompanyAuditors

1. To access books and vouchers. 4. Right to receive Remuneration.2. To obtain information and explanations. 5. Right to haveQualification, etc. read out at GM.3. To visit Branch Offices & access Branch A/cs 6. To receive notices andto attend General Meetings.

Duties of theAuditors

1. Inquiry u/s 143(1)2. Reporting as to True and Fair.3. Reporting Requirements:(i) Obtaining info. &

(vi) Director's Disqualification u/s164(2)(vii) Qualification, Reservation orAdverse Remark.


explanations(ii) Proper Books of Accounts.(iii) Dealing with BranchAuditor Report.(iv) Financial Statementsagreeing with books of accounts.(v) Financial Statements tocomply with AS

(viii)Adequacy of Internal FinancialControls (ix) Other Matters (PendingLitigations, etc.)4. Reasons for Negative / Qualification.5. Compliance with AuditingStandards.6. Additional Reporting matters as perNAFRA.7. Reporting of Frauds.

Punishment forContravention

1. Contravention of Sec.139 to 146: Company - Fine: Min Rs.25,000, MaxRs. 5,00,000, Every officer in default - Imprisonment - Max 1 year, or FineMin Rs. 10,000, Max Rs. 1,00,000, or both.2. Contravention of Sec.139, 143, 144, 145: Auditor-(a) Normal: Fine Min Rs. 25,000, Max Rs. 5,00,000,(b) with intention to deceive: Imprisonment of Max 1 year, or Fine Min Rs.1,00,000, Max .Rs 25,00,000, or both, (c) If Auditor is convicted under (b)above he shall refund the remuneration and pay for damages, (d) Joint andSeveral Liability in case of Audit Firm.

BY CA SURENDRA AGRAWAL(M.COM,LLB,ACA)PH-9313336776 6.1

Audit of Public Sector Undertaking

Appointment of Auditors (C&AG).( U/s 139(5) or 139(7) of company act 2013)Supplementary Audit143(6) Within 60 days, the C&AG is authorized, addition to the regular professional

audit. Authorized(C&AG ) Comment (C&AG) Directives(performance of their function) form and content Concentrate more on efficiency aspects Same powers as auditors,Not comment(directors)

OBJECTIVES OF AUDIT OFPSU

Interest Public Public fund Lavishly (used by management) Auditor check (Public Welfare, propriety norms, substance of transaction )

PROPRIETY AUDIT verification of transactions on the test of public interest, commonly accepted customs &standards of conduct

• verification of transactions(public interest)• Substance of transaction(not to transactions intended to exploit, misuse or frustrate)• more than( expenses as own money)• Authority• benefit of a particular person/group• Apart from agreed remuneration

PROPRIETY ELMENT u/s.143(1)

• Investment(sold at a price lower than its cost)• personal expenses(charged to revenue)• loans and secured advances(not prejudicial )• Transactions(book entries )• S-share

PROPRIETY ELEMENTUNDER COST AUDIT REPORT

• Principle,Factors,Company’s funds

PROPRIETY AUDIT-PROBLEMS

• moral term.• verifiable propositions is very difficult• subjectivity.• judgment of auditor shouldn’t be subjective

COMMITTEES ON PUBICUNDERTAKINGS

• set up under the rule of LOK SABHA• Examine the Audit reports on PSU.• select some enterprises each year• doesn’t however examine mattes of major Government policy or day-to-day

administration• gives its findings and recommendations in its report which are presented to

Parliament / State Legislatures.Types of Audits (1) Professional,(2) Supplementary Audit u/s 143(6),(3)Comprehensive auditCOMPREHENSIVE AUDIT • examination in detail of various aspects of PSU to ascertain its efficiency and

effectivness.Considerations by auditor investment decision internal control systems timely basis(decision) minimum wastages Operation(efficient manner) Repair and maintenance programs(timely basis) effective way(R&D ) under-utilization(capacity) Economy and efficiency(project formulation)

Performance Audit: • It aims to ascertain that government programmes• have achieved the desired objectives at the lowest cost and given the intended

benefits. It includes:• Efficiency audit:• constant comparison is made between the input and output. The object of efficiency

audit is to find out the extent to which operations are carried out in an efficientmanner.

• Economy audit:• It finds out whether the government has acquired the financial, human and physical

resources in the most economic manner.• Effectiveness audit:• It is aimed at carrying out an appraisal of the performance of programmes, schemes

and projects with reference to over all objectives.

Chapter-6

21.1COMPLITE YOUR CA FINAL AUDIT IN 18 DAYS

BY CA SURENDRA AGRAWAL(M.COM,LLB,ACA)PH-9313336776

Dividend

WHAT IS DIVIDEND As per section 2(35) of the Companies Act, 2013, "Dividend includesinterim dividend"

SOURCES OFDIVIDEND

Dividend can be paid out of following sources: Out of current year's profit. Out of past year's profit lying in profit

& loss account. I Out of past year profit earned and transferred to reserves. IOut of money provided by central government or state

government for payment of dividend.Lets understand the various provisions discussed under the Companies Act,2013

DECLARATION OFDIVIDEND OUT OF

PROFITS

Dividend should be paid out of- The profit of the company for the financial year; or Profit(s) for the previous financial years(s) which have not been

transferred to reserves; or Out of both.

Note:1. Dividend shall be declared/paid only after providing for depreciation inaccordance with Schedule II of the Companies Act, 2013.Before declaration of dividend out of profit in any financial year, Companymay transfer a percentage of its profits to reserves of the company (at itsdiscretion) for that financial year.Notes:

(1) 1.Earlier Companies Act, 1956, imposes burden to transfer certainpercentage of profit to reserve before declaration of dividend inany financial year.

(2) However, Companies Act, 2013 introduced a liberal provision inthis regard to transfer such percentage of profit to reserves of thecompany as company may consider appropriate.

(3) Dividend shall not be declared/paid by a company from itsreserves other than free reserves.

Notes:(1) In Simple words, Dividend should not be declared out of the

securities premium account or the Capital redemption reserveaccount or revaluation reserve or Amalgamation reserve or outprofit on re-issue of forfeited shares or out of profit earned profitto the incorporation of the company.

(2) "Free Reserve" means such reserves which, as per the latestaudited balance sheet of a company, are available for distributionas dividend:Provided that—

(i) any amount representing unrealised gains, notional gains orrevaluation of assets, whether shown as a reserve or otherwise, or

Chapter-21



(ii) any change in carrying amount of an asset or of a liabilityrecognised in equity, including surplus in profit and loss account onmeasurement of the asset or the liability at fair value, shall not betreated as free reserves.

DIVIDEND DECLAREDOUT OF RESERVES

In a year in which the profits are inadequate or there are no profits, thecompany may declare and pay dividend out of past year profit earned andtransferred to reserves subject to the provision of the Companies(Declaration And Payment of dividend) Rules, 2014.Notes:1. For the purpose of declaration of dividend out of reserves,Companyshall have to fulfils following Conditions:

(i) The rate of dividend shall not exceed the average of 3 yearsimmediately preceding that year.Note:Above condition shall not apply to the company which has notdeclared any dividend in each of the 3 years immediatelypreceding that year.

(ii) The total amount to be drawn from such accumulated profit shallnot exceed 1/10th of the sum of its paid-up share capital and freereserves as appearing in the latest audited financial statement.

(iii) The amount so widrawn shall first be utilised to set off the lossesincurred in the financial year in which dividend is declared beforeany dividend in respect of equity shares is declared.

(iv) The balance of reserves after such withdrawal shall not fall below15% of its paid up share capital as appearing in the latest auditedfinancial statement.

(v) No company shall declare dividend unless previous losses anddepreciation not provided in previous year or years are set offagainst profit of the company of the current year.

STEPSSTEP1- MAXIMUM DIVIDEND RATE Average of 3 years immediately

preceding that year.STEP 2- MAXIMUM AMOUNT DRAWN FROM ACCUMULATED PROFIT1/10* Of Paid Up Share Capital & Free ReservesSTEP3-MAXIMUM AMOUNT DRAWN FOR DIVIDEND MINUS(-)lossesincurred in the financial year in which dividend is declared

CHECKPOINT – 1. Balance of reserves after such withdrawal (In 2nd) Step) shall notfall below 15% of its paid up share capital.

2. Set off entire previous losses and depreciation not provided inprevious year or years

DECLARATIONOFDIVIDEND

Dividend shall be declared only on the recommendation of theboard, made at a meeting of the board.

Dividend shall be declared only at Annual General meeting of thecompany.

Company shall not declare dividend exceeding the raterecommended by the board. However, member in such meetingmay reduced the rate of dividend as recommended by Board.



Dividend shall not be declared if company fails to comply with theprovision of sections 73 & 74 and such failure continues till thedate.

INTERIM DIVIDEND As we know that Dividend includes interim dividend, it meansentire provisions related to declaration of dividend shall beapplicable to interim dividend unless otherwise specificallyprovided the provisions in this regards. The board of director of the company may declare interim

dividend. Such dividend shall be declared out of- Surplus profit in the profit & loss account; and Profits of the financial year in which such interim dividend

is sought to be declared.

DEPOSIT THE AMOUNTOF DIVIDEND

Company shall deposit amount of dividend (including interimdividend) in separate account with a scheduled bank.

Such amount must be deposited within 5 days from the date ofdeclaration of dividend.

Dividend must be paid within 30 days from the date of declarationof dividend.

Dividend shall be paid in cash i.e.it shall not be paid in kind.Note:1. It should be noted that 'Dividend payable in cash' may be paidthrough following modes to shareholders who are entitled toreceive dividend :-

a. By cheque; orb. By warrant; orc. Through any electronic mode

Calls in arrears and other sum due from a member may be adjustedagainst dividend payable to the member.

Company shall not issue any bonus share in lieu of dividend.Dividend should be paid proportionately on the paid up value ofshares.

ENTITLEMENT TODIVIDEND

Only the registered holders of shares are entitled to Dividend.Dividend may also be paid to his banker or to the order of theregistered holder of shares.Company should pay dividend to preference share holders beforedividend is paid to the equity shareholders of the company.Dividend on equity shares should be paid in accordance with theright of the respective classes.if any, of such shares.

ADDRESS TO PAYDIVIDEND (In casepayment made by

cheque or warrant)

CHEQUE OR WARRANTSHARE HOLD IN SINGLENAME

sent through the post to theregistered address of theshareholder.

SHARE HOLD IN JOINT NAME sent through the post to the



registered address of one ofthe joint holder who is firstnamed on the register ofmembers

IN ANY OTHER CASE sent through the post to thesuch address as the holder orjoint holder may in writing.

UNPAID DIVIDEND The amount of dividend which remains unpaid or unclaimed after 30 daysfrom the date of declaration should be transferred to a special dividendaccount of the company. Account shall be called 'Unpaid Dividend Account' opened by the

company in any scheduled bank. Amount of unpaid dividend shall be transferred to 'Unpaid

Dividend Account' within seven days from the date of expiry of the30 days period provided for payment of dividend.

The company shall prepare a statement related to persons towhom unpaid dividend are to be paid and such statement shallplace on the website of the company or any other website asapproved by the Central Government.

Such statement shall contain following information’s- Names of such persons to whom unpaid dividend are to be

paid; and Their last known address; and Amount of unpaid dividend.

After transferring the unpaid dividend to 'Unpaid DividendAccount', Any person (who is entailed to claim such money) mayapply to the company for payment of money so claimed.

Any amount in the Unpaid Dividend Account of the companywhich remains unclaimed and unpaid for a period of seven yearsfrom the date of transfer of such amount to the Unpaid DividendAccount should be transferred to the Investor Education andProtection Fund.

Any interest earned on the Unpaid Dividend Account should betransferred to the investors Education and Protection Fund.

The company shall send a statement containing details of suchtransfer to the authority which administers the Fund and suchauthority shall issue a receipt to the company as evidence.

DIVIDEND IN ABYANCE The amount of dividend in respect of shares for which an instrument oftransfer has been transferred to company but which have not beenregistered for any valid reason should be transferred to Unpaid DividendAccount.

DISCLOSURESREQUIREMENT

The Balance Sheet of the company should disclose under the head'current liabilities and provisions', the amount lying in the UnpaidDividend Account together with interest accrued thereon, if any.



The annual report of the company should disclose the total amountlying in the Unpaid Dividend Account of the company in respect of thelast seven years. The amount of dividend, if any, transferred by thecompany to the investor Education and Protection Fund during theyear should also be disclosed.

The annual return of the company should mention that the amount ofdividend remaining unpaid or unclaimed for a period of seven yearsfrom the date such dividend became payable by the company,together with interest accrued thereon, if any, has been credited to theinvestor Education and Protection Fund.

PUNISHMENT FOR FAILURE TO DISTRIBUTE DIVIDENDS

Dividend declared BUT has

not been paid or dividend

warrant has not been posted

within 30 days from the date of

declaration

Every director of the company, if knowing a party to the defaultPUNISHABLE WITH Imprisonment - which may extend to 2 years; and

Fine - At least Rs. 1,000 for every day during which such defaultcontinues; AND Company shall be liable to pay simple interest at therate of 18% p.a. during the period for which such default continues.

NO PUNISHMENT

FOR FAILURE TO

DISTRIBUTE DIVIDENDS

UNDER SPECIFIED CASES

(i) DIVIDEND COULD NOT BE PAID DUE TO OPERATION OF ANYLAW

(ii) DIVIDEND COULD NOT BE PAID DUE TO ANY DEFAULT WHICHWAS NOT ON THE PART OF THE COMPANY

(iii) EXCEPTION TO PUNISHMENT FOR FAILURE TO DISTRIBUTE IDIVIDENDS

(iv) DIVIDEND HAS BEEN DULY ADJUSTED AGAINST ANY DUESFROM SHAREHOLDERS

(v) ANY DISPUTE REGARDING RIGHT TO RECEIVE THE DIVIDEND

(vi) DIRECTION OF SHAREHOLDER TO PAY DIVIDEND CAN NOT BECOMPILED WITH & SAME HAS BEEN COMMUNICATED TOHIM

SHREE Ganeshaya Namah

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