Loans and Borrowings Audit Working Paper — ICAI Audit Working Paper
(Following draft may be used as an example)
Background:
XYZ Company Private Limited (The company) is incorporated under the provisions of the Companies Act 2013 and is engaged in the establishment of hospital project at _____. The company is in the need of funds for the same for which the company has taken secured loan from banks during the FY xx-xx.
Objective
The objective of this work-paper is to provide a brief understanding for the loans taken by the company during the year and the procedures performed by us in the capacity of the statutory auditors of the company.
Overview:
The Company is engaged in the establishment of hospital project at _____. The company is in the need of funds for the same for which the company has taken secured loan from during the FY xx-xx.
Understanding of the Types of Loans:
The company has taken loans from basically two main sources:
- Secured loans.
- Secured by way of charge on all the PPE, comprising of all moveable and mortgage of leasehold land of the company. The principle is repayable in 36 monthly instalments starting from April 15, 20xx. However, the payment of interest is made on monthly basis @9.5%.
- Unsecured Loans
- Unsecured Loans have been taken by the company from its related parties on the basis of the unsecured loan agreements entered between them.
Details of the Loans Taken during the Year:
The Company has taken a Loan during the year amounting to INR……, for the establishment of Hospital project at ______.
The disbursement of the loan is made on the basis of the capital expenditure certificate issues by the statutory auditors. The disbursement of Rs. … crores have been made during the FY xx-xx.
Purpose of the Loan:
The Term Loans from the banks have been taken for the following purpose:
As per the terms of the sanction letter of the loans is taken by the company for setting up of 150 bedded multispecialty hospital.
Work Done
- (A) Kick-off Procedures
- Obtained the trial and the ledger for the caption borrowing.
- Obtained the loan sanction letter and the loan agreement for the loans disbursed during the year.
- Obtained an understanding for the purpose for which the loans have been taken.
- Obtained the interest working and the working for the repayments as per the loan schedule.
- Obtained the unsecured loan agreements for the loans taken from the related parties.
- Obtained the bank statement and the loan statement for the FY xx-xx.
- Obtained the Board resolution mentioning the purpose and details of the loans along with the authorised representative of the Company for obtaining loan.
- Checked (in case of Credit Facility) the stock statements submitted with the bank are in agreement with the books of account.
- (B) Verification for the Purpose of Loan taken
- The Purpose for which the Loan was taken has been verified. The Loan has been taken for the construction of the Multispecialty hospital at __________.
- The agreement for the same been duly verified.
- The certificate for the capital expenditure is issued on verification of the capital expenditure.
- (C) Utilization of the Loan for the desired purpose:
The loans taken from bank is utilized for the purpose for which the loan has been taken. The capital expenditure incurred for the construction of the hospital has been verified.
