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

The auditor of Sundaram Pharma Ltd, a company that is not an investment company or a banking company, finds that during the year it sold some quoted shares held by it for Rs 4,10,000. The shares had cost Rs 5,00,000. Which inquiry under section 143(1) does this raise?

The sale of shares for Rs 4,10,000 against a cost of Rs 5,00,000 attracts the inquiry into whether securities of a non-investment, non-banking company were sold at a price less than the purchase price, a Rs 90,000 shortfall, as provided in section 143(1)(c).

  1. AWhether loans and advances have been shown as deposits
  2. BWhether personal expenses have been charged to revenue account
  3. CWhether the assets consisting of shares, debentures and other securities have been sold at a price less than their purchase priceCorrect
  4. DWhether the transactions represented merely by book entries are prejudicial to the company

Explanation

Section 143(1)(c) requires inquiry into whether securities were sold at less than their purchase price, for a company that is not an investment or banking company. Here the sale gave Rs 4,10,000 against a cost of Rs 5,00,000, a shortfall of Rs 90,000, so this inquiry applies. The other clauses deal with different matters.

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