Scam under section 227(4A)

227(4A) this section tells you about the duties of an Auditor in respect of CARO.

CARO contains 21 points. Auditor shall comment on all the points in every case where CARO is applicable for the company.

In these points Auditor is required to tell the members whether the operations of the company are conducted by the management in the best interest of the company and as per laws or not.

It is the duty of the Auditor to comment on the following points u/s 227(4A):

1.             Fixed assets

2.            Inventories

3.            Loan to parties covered under register u/s 301

4.            Internal control

5.            Transactions with parties u/s 301

6.            Companies accepting public deposit

7.            Internal audit

8.            Cost audit

9.            statutory dues

10.       company registered >= 5 yrs

11.       Defaulted

12.       loan/advance

13.       SPECIAL STATUTES TO CHIT FUND

14.       Company trading/dealing in shares/securities

15.       Guarantee to bank

16.       Term loan

17.       Short term funds

18.       Preferential allotment to parties u/s 301

19.       Security/charge

20.       End use

21.       Fraud



So Auditor is required to report on Companies’ Chit Fund Scheme every time in all the cases after considering following points.

1.       Net Owned Fund/Deposit Liability  > 1/20 as at balance sheet

2.      Companies complied with prudential norms

3.      Adequate procedure for credit appraisal

4.      Repayment schedule based on repayment capacity

Because of some corrupt Auditors the whole picture of scam comes into existence which has further deteriorated the value of CAs.

Shocking Facts about SARADHA CHIT FUND SCAM:

• The Saradha scam came into force after the collapse of a "Ponzi scheme" run by the Saradha group, a collaboration of over 200 companies running a wide variety of collective investment schemes mainly in West Bengal, Assam and Odissa.
• The group came to end in April 2013, resulting an estimated loss of about 10,000 Crore to over 1.7 million depositors
• As some of them lost their job and some themselves kicked their job just to earn money sitting at one place.
•  The Bengal government instituted an inquiry commission to probe the scam and set up a Rs. 500-crore fund to ensure that low-income investors got back some part of their investments.
• According to latest news it was found that Saradha funds were used by fundamentalist outfits in Bangladesh against the Awami League before general elections in the country.
• This means Bangladesh was involved in this scam by West Bengal govt for creating a support in west Bengal.

Same Old Story Repeated so many times- SIMILAR SCAM

• Similar case happened years ago "SPEAK ASIA"
• In this people were asked to deposit 11000 in starting and 52000 annually and they guarantee that you will recover it within 3 months.
• Innocent people to increase their wealth in just a night invested there all collected money.
• The directors and managers ran away taking away all the money and leaving behind 2.4 million investors shattered by shutting down there business and leaving the footprints behind.

Shubham Gupta

Writer CA Connect