{"id":15604,"date":"2020-08-31T14:31:13","date_gmt":"2020-08-31T09:01:13","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=15604"},"modified":"2021-10-22T16:00:37","modified_gmt":"2021-10-22T10:30:37","slug":"glance-of-audit-report-format-for-nbfc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/","title":{"rendered":"Glance of Audit Report Format for NBFC"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The audit report is prepared by the in-house auditors of the company. The audit report reflects the financial prowess of the company that helps investors to make informed decisions. This forces the auditors to pay extra attention while interpreting the data collected during the auditing process to draw a legitimate conclusion. The audit report is generated after a comprehensive evaluation of the company\u2019s financial attributes against the GAAP\u2019s compliances. Any skepticism in the audit report could build up a sense of uncertainty among the investors. The audit report imparts the sense of transparency in the system helping the organization to escalate the growth. In this blog, we will look into the Audit Report Format for  <a href=\"https:\/\/corpbiz.io\/nbfc-registration\"><strong>NBFC<\/strong><\/a>. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"580\" height=\"469\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-131.png\" alt=\" Audit Report Format for NBFC\" class=\"wp-image-15606\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-131.png 580w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/08\/image-131-300x243.png 300w\" sizes=\"(max-width: 580px) 100vw, 580px\" \/><\/figure><\/div>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/internal-and-statutory-audits-in-nbfc\/\">Internal and Statutory Audits in Non-Banking Financial Companies: All You Need To Know<\/a><\/mark><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#What_is_an_NBFC\" >What is an NBFC?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#Significance_of_NBFC_audit_report\" >Significance of NBFC audit\nreport<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#Audit_Report_Format_for_NBFC\" >Audit Report Format for NBFC<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#Key_inclusions_in_NBFC_Auditors_report\" >Key inclusions in NBFC\nAuditor\u2019s report<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#What_is_GAAP\" >What is GAAP?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#Auditors_undertake_the_following_tasks_during_the_auditing_process\" >Auditors undertake the\nfollowing tasks during the auditing process.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/glance-of-audit-report-format-for-nbfc\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_an_NBFC\"><\/span>What is an NBFC? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>A registered company working under the canopy of Companies Act, 2013 involved in:-<\/em><\/strong><\/p>\n\n\n\n<ul><li>Business advances and loans<\/li><li>Acquisition of securities,\nshares, bonds or debenture issues&nbsp; by\nlocal authority or government<\/li><li>shares\/stocks\/bonds\/debentures\/securities\nissued by Government or local authority or other marketable securities of a\nlike nature,<\/li><li>Leasing, Insurance Business,\nHire Purchase, Chit Business <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Significance_of_NBFC_audit_report\"><\/span>Significance of NBFC audit\nreport <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>The audit report doesn\u2019t render any implication regarding the company\u2019s performance. Instead, it is deemed as a critical indicator of the authenticity of the company\u2019s <strong><em>financial statement<\/em><\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Financial_statement\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>. <\/li><li>The auditor report is prepared by the in-house auditor of the company that reflects the company\u2019s financial position based on the auditor\u2019s opinion. <\/li><li>In layman terms, the audit report is a financial stance of the company against the compliances mentioned under the GAAP*. <\/li><li>An unbiased and error-less audit report means the company doesn\u2019t involve in the infringement of the accounting standards. Meanwhile, the unclean report gives the implications of non-compliance and unfair business practice.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Audit_Report_Format_for_NBFC\"><\/span>Audit Report Format for NBFC<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The typical audit report format consolidates the followings information:- <\/em><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Title <\/h3>\n\n\n\n<p>The title of the report declares it has\nbeen prepared by the autonomous auditors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Addressee <\/h3>\n\n\n\n<p>The name of the entity or executives to\nwhom the audit report is being delivered.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Report<\/h3>\n\n\n\n<p>The audit report encloses various financial\ndetails, such as Profit &amp; Loss, balance sheets, and the cash flow\nstatement. Additionally, the audit report also consolidates the summary\nregarding the accounting policies. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Management\u2019s Responsibility for Financial Statements<\/h3>\n\n\n\n<p>Management\u2019s Responsibility for Financial\nStatements aka MRFS is a sort of company\u2019s declaration regarding financial\nstanding. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Auditor\u2019s responsibility <\/h3>\n\n\n\n<p>This section encloses the declaration\nstating the auditor\u2019s opinion on the financial statements.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Opinion <\/h3>\n\n\n\n<p>Such a section indicates the auditor\u2019s\nimpression regarding the financial standing of the company after the completion\nof an audit. In this section, the auditor typically mentioned the audit outcome\nin terms of Modified Opinion and Un-modified Opinion.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Basis of opinion <\/h3>\n\n\n\n<p>Impart the clarification regarding the\ngrounds on which the opinion is being made by the auditor.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Additional Reporting Responsibility <\/h3>\n\n\n\n<p>Such a section comes into existence when the auditor needs some additional reporting regarding the regulatory and legal requirements. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Signature of the auditor<\/h3>\n\n\n\n<p>The auditor signature is required to\nauthenticate the audit report. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Place of sign<\/h3>\n\n\n\n<p>Here the auditor incorporates the city\u2019s\nname in which the report has been signed. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Date<\/h3>\n\n\n\n<p>The date on which the report is signed. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_inclusions_in_NBFC_Auditors_report\"><\/span>Key inclusions in NBFC\nAuditor\u2019s report <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Physical verification of the\nfirm\u2019s securities and shares. <\/li><li>NBFC Prudential Norms\nincorporated or not. <\/li><li>The number of loans availed by\nthe firm against the shares. <\/li><li>Whether KYC protocol is\nfollowed not.<\/li><li>Cover up loans- a financial aid\navail by the firm to counteract the existing liabilities. <\/li><li>Checking if the firm has\ncomplied with the AS 13 \u201cAccounting for Investments\u201d or not.<\/li><li>Checking balance confirmation.<\/li><li>Checking follow up on loans and\nadvances<\/li><li>Checking if payment for asset\nacquisition is made to the supplier or not.&nbsp;\nIn addition to that, the original invoice for the same has been drawn\nout in the NBFC\u2019s name. <\/li><li>Confirming that the assets\nconferred on hire purchase are insured against it<\/li><li>Ascertaining appraisal system\nof the NBFC for extending the equipment leasing finance<\/li><li>Verifying that the lease\nagreement. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_GAAP\"><\/span>What is GAAP?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Generally Accepted Accounting Principles\n(GAAP) consolidates fundamental accounting principles that act as a framework\nfor more refined accounting rules &amp; industry-oriented accounting practices.\nFor instance, the Financial Accounting Standards Board (FASB) take advantages\nof GAAP to lay down their own accounting standards. Thus; we can now conclude\nthe GAAP contains<\/p>\n\n\n\n<ul><li><em>Standard accounting guidelines. <\/em><\/li><li><em>The apex body of the country furnishes Accounting Standards.<\/em><\/li><li><em>Industry-oriented accounting practices encompass vague and unorthodox scenarios.<\/em><\/li><\/ul>\n\n\n\n<p>In India, GAAP consolidates an array of\nprovisions and guidelines that form an auditing framework. The preparation of\nthe financial statements is done on the basis of the rule laid down by the\nInstitute of Chartered Accountants of India (ICAI). The ICAI rolled out\nperiodic updates rendering clarity on the accounting process. Well, that\u2019s all\nabout the Audit Report Format for NBFC. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Auditors_undertake_the_following_tasks_during_the_auditing_process\"><\/span>Auditors undertake the\nfollowing tasks during the auditing process. <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Investigate the <a href=\"https:\/\/corpbiz.io\/learning\/alteration-of-memorandum-of-association-moa\/\"><strong>Memorandum of Association<\/strong><\/a> to pinpoint the nature, objective, and principal business activities of the corporation.<\/li><\/ul>\n\n\n\n<ul><li>The auditor may scrutinize the\nminutes of the meeting, conduct meetings with the core executives to ascertain\nthe business plan and principal business activities. <\/li><\/ul>\n\n\n\n<ul><li>Verification of the share and\nsecurity held by the NBFC.<\/li><\/ul>\n\n\n\n<ul><li>Declaration from the entity\nholding security of the NBFC. <\/li><\/ul>\n\n\n\n<ul><li>Verification of the credit\nfacilities and the investment made by the firm against the predetermined\nceiling. <\/li><\/ul>\n\n\n\n<ul><li>Ascertaining Trading of\ninvestment by examining the board resolution or meeting documents. <\/li><\/ul>\n\n\n\n<ul><li>Cross-examining the value of\ninvestments against NBFC prudential norms directions. <\/li><\/ul>\n\n\n\n<ul><li>Validating investment injected\nin the subsidiary companies. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>It boils down to the transparency that an entity has to maintain to buildup trustworthiness among the investors. Any NBFCs who seek prompt growth need to build a framework that supports the provisions for periodic auditing to maintain transparency within the system. Having said that, the auditing protocol is good enough to ensure the financial wellbeing of the company. Precisely, Internal Audits are done voluntarily as it is not mandatory by law.&nbsp; The internal auditor can conduct a comprehensive audit periodically and pinpoint the area of improvement. It helps the company to target the pain point and obliterate them with a relevant solution.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/step-by-step-nbfc-registration-procedure\/\">NBFC Registration: Step by Step Procedure\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The audit report is prepared by the in-house auditors of the company. The audit report reflects the financial prowess of the company that helps investors to make informed decisions. This forces the auditors to pay extra attention while interpreting the data collected during the auditing process to draw a legitimate conclusion. The audit report is [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":15607,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[91],"tags":[941],"acf":{"service_id":"8"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":8540,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/15604"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=15604"}],"version-history":[{"count":7,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/15604\/revisions"}],"predecessor-version":[{"id":36874,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/15604\/revisions\/36874"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/15607"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=15604"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=15604"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=15604"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}