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CMA Intermediate · Corporate Accounting and Auditing · Statutory Audit under the Companies Act, 2013

During the audit of Kaveri Textiles Ltd, the auditor suspects that some shares shown in the books as allotted for cash were never paid for. Under section 143(1), what must the auditor inquire into?

Where the books show shares allotted for cash, the auditor must inquire whether cash was actually received. If it was not, the auditor must check whether the position in the account books and balance sheet is correct, regular and not misleading.

  1. AWhether the shares were allotted at a premium above face value
  2. BWhether cash was actually received, and if not, whether the position stated in the books and balance sheet is correct, regular and not misleadingCorrect
  3. CWhether the allottees are related parties of the directors
  4. DWhether the shares were listed on a recognised stock exchange

Explanation

Section 143(1)(f) requires the auditor to inquire, where books state shares were allotted for cash, whether cash was actually received. If it was not, the auditor checks whether the books and balance sheet position is correct, regular and not misleading. The premium, related-party and listing questions are not part of this inquiry.

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