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Wednesday, November 23, 2016

Sher Ali Afridi

Sher Ali Afridi (The Hero)

The assassination of Viceroy Lord Mayo by an Afridi convict in Andaman Islands (known in India as Kala Paani – Black Water) was also not due to some grand nationalist ideology but simple Pushtun code of honour was at stake. The attacker Sher Ali had served loyally and bravely in a cavalry regiments  and served during the 1857 Rebellion in Rohilkhand and Oudh. He then joined Peshawar Mounted Police and fought bravely in Ambela Campaign saving the lives of British officers twice. Sher Ali had a blood feud and killed a man in British territory not in tribal area. He was found guilty by Deputy Commissioner and sentenced to transportation for life to the Andaman Islands. Sher Ali addressing the court, narrated all his services to British strangely enough not to beg for his life but for a death sentence rather than transportation to Black Water. It was a dishonour for a Pushtun to be sentenced to life imprisonment. Death penalty will be an honour. The British officer considering the loyal services of the accused was avoiding the capital punishment but the accused himself was demanding a death penalty. When he was told that he would be sent to Black Water, he said, “You will hear of me again, and so will my people”. Surely, everybody all over India and abroad heard him when he killed the British Viceroy of India, Richard Bourke, the 6th Earl of Mayo, who had stopped off to visit the convict settlement at the Andaman Islands.
Sher Ali Afridi in prison
In "Sarguzasht e Mujahideen", Maulana Ghulam Rasool Mahar explains the incident in great detail:

"Sher Ali was a man who would come down to anything to fulfill his ambitions. On one occasion, he had broken his heavy chains and handcuffs that were meant to restrain him and injured a prison guard after snatching his rifle.
After killing the viceroy, he was asked by the courts about who had hired him to do this job. He would simply reply that I killed him by the Order of Allah!"
Lord Mayo
Sher Ali was again tried for murder and was given the death penalty once again. On the 11th of March 1873, when he was brought to the gallows, there was a look of satisfaction in his eyes. He kissed the rope from which he would be hanged and exclaimed, "When I made this intention [of killing the viceroy], I had already envisioned myself over here". He addressed the Muslims who had come to watch the penalty being enforced, "Brothers, I killed your enemy. You be witness that I am a Muslim." With this, he recited the Kalma Shahadah. Twice he was able to complete it. The third time, he was not able to do so because of suffocation.
Sher Ali Khan Afridi

The assassination of Viceroy Lord Mayo by an Afridi convict in Andaman Islands (known in India as Kala Paani – Black Water) was also not due to some grand nationalist ideology but simple Pushtun code of honour was at stake. 
The attacker Sher Ali had served loyally and bravely in a cavalry regiment and served during the 1857 Rebellion in Rohilkhand and Oudh. He then joined Peshawar Mounted Police and fought bravely in Ambela Campaign saving the lives of British officers twice. Sher Ali had a blood feud and killed a man in British territory not in tribal area. He was found guilty by Deputy Commissioner and sentenced to transportation for life to the Andaman Islands. Sher Ali addressing the court, narrated all his services to British strangely enough not to beg for his life but for a death sentence rather than transportation to Black Water. It was a dishonour for a Pushtun to be sentenced to life imprisonment. Death penalty will be an honour. The British officer considering the loyal services of the accused was avoiding the capital punishment but the accused himself was demanding a death penalty. When he was told that he would be sent to Black Water, he said, “You will hear of me again, and so will my people”. Surely, everybody all over India and abroad heard him when he killed the British Viceroy of India, Richard Bourke, the 6th Earl of Mayo, who had stopped off to visit the convict settlement at the Andaman Islands.
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Mir Mast Afridi

Mir Mast Afridi, a forgotten hero (recipient of Germany's Iron Cross)

A forgotten hero in Pakistan is Jemadar Mir Mast Afridi from the 58th Frontier Force (Vaughan’s Rifles). Mir Mast was an Afridi Pashtun from tribal areas of modern Pakistan. In 1914 his unit was shipped to France as part of the Indian Infantry Corps, which played a major role in stopping the German advance in France in 1914 in Ypres Sector.
Mir Mast Afridi seems to have been a far more politically aware and resolute man as compared to many Muslims educated at MAO College Lahore, Aligarh or at many prestigious British universities and Legal Inns! Mir Mast decided that he must not fight the Britisher’s war and crossed over to the German lines on a rainy night in March 1915 along with 14 other Afridi Tribal Pathan. Mir Mast was awarded one of the highest German gallantry award Iron Cross by the German Kaiser Willhelm II.

The British in order to equalize the insult awarded Mir Mast’s real brother Mir Dast Afridi (from 55th FF Coke’s Rifles) a Victoria Cross in April 1915. (Forgetton Regiment- Defense Journal)

Mir Mast was sent to Turkey by the Germans, to meet with the Mufti, and by late in the war was back in Afghanistan apparently trying to discourage his Muslim countrymen from joining up to fight for the Raj. (A matter of honor - Philip Mason)

Philip Mason well summed up the loyalty assessment of the Indian Army by saying that "A faint question mark hung over the Pathans throughput the war but the Punjabi Muslims were steady as a rock". Many Pathans defected to the Turkish lines in Mesopotamia and Egypt. Jemadar Mir Mast Afridi deserted to the German lines in France with 14 other Afridi sepoys in France in 1915 and was awarded the German Iron Cross. In retaliation but on some outward pretext the British awarded the Victoria Cross to Mir Mast’s brother Mir Dast who was fighting in the same sector! A unique incident where two brothers were awarded by two different European masters fighting against each other in the same sector! (A.H.Amins)
Mir Dast, brother of Mir Mast
The Turko-German mission failed in 1915 to gain the support of the Afghan government. However, the Mission members succeeded in establishing a centre for the anti-British activities in Bagh (Tirah), in the tribal belt. In June 1916 two Turkish emissaries arrived Tirah; one was Khired Bey, a staff colonel of the Turkish army and the other Mohammad Abid (alias Abidin), an Arab, a former employee of the Turks as a drill' instructor at Kabul. Mir Mast accompanied the Turko-German Mission. He was already busy in propaganda against the British in Tirah, he had already prepared ground for the mission

On their arrival in Tirah, the emissaries were welcomed by Mast. They delivered anti-British speeches and unfurled a flag, a blessed and sent by the Turkish Sultan. By the middle of 1916 a large number of the Pashtun soldiers, mainly deserters from the British Indian army had swelled the ranks of the Turkish emissaries. They started recruitment of the locals as well.. By July 1916, the total number of the Afridi recruits was reported to have reached about four hundreds.. They were posted in three different places and and drilled every day by Mir Mast Khan under the supervision of Kharid Bay, a Turkish Colonel.
  Mir Mast Afridi on extreme left

The Turks also wrote letters to the neighboring tribes, and in the month of August some Turkish emissaries visited the Mohmand areas where Hajji Sahib Turangzai was busy in waging war against the British.

As a result of the growing popularity of the Sultan's army in Tirah, Sir George Roos-Keppel, then Chief Commissioner NVVFP, found the tribes being virtually divided into two camps: anti-British and pro-British. The former consisted of deserters and discharged soldiers from the Indian army and other pro-Afghan elements, while the latter was composed mainly of Maliks and elders who were in favour of maintaining friendly relations with the British in lieu of their allowances and other emoluments from the British Indian government. Roos Keppel believed that the Turkish agents were responsible for creating the troubles in the tribal belt, but he could not ask the Government to take any stern action against them lest he feared aggravation in the already tense situation.


The tribes who were supporting the Turkish emissaries inflicted losses on those who were accused of supporting the British. In retaliation, other tribes also organised themselves under the leadership of Khan Bahadur Zaman Khan Kuki Khel and attacked and burnt the village in which the two Turkish emissaries and their Afghan followers were living in Tirah. This action of the Afridis made them unpopular among the people. The British rewarded the tribes by sanctioning a bonus of one year’s allowances.
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Khushal Khan Khattak

Khushal Khan Khattak (The Hero)
By Henry George Raverty (written in 1862)

Khushal Khan, the renowned chieftain of the powerful Afghan tribe of Khattak - alike a warrior and poet - was born in the year 1022 of the Hijrah (A.D 1613). Shahbaz Khan, his father, having received a wound in a battle with Yusufzis - one of the most numerous and powerful of all the Afghan tribes - from the effects of which he shortly after died, Khushal, who had also been severely wounded in the head and knee, in the same battle, in the year H. 1050 (1640 A.D), with the unanimous consent and approbation of his relations and friends, became chief of his tribe. His father's fief was confirmed to him by the Mughal Emperor, Shah Jahan, together with the charge of protecting the royal road from Attock, on the Indus, to Peshawar; and other duties were entrusted to him by that sovereign, in whose estimation Khushal stood high. He accompanied Sultan Murad Bakhsh, the son of that monarch, on his expedition to Badakhshan in 1645, and was also engaged in other wars of that period.

On the death of Shah Jahan, Khushal continued to serve his son and successor, Aurangzeb, in the same capacity as formerly ; but after some time , through the machinations of his enemies , among whom was Amir Khan, subah-dar or governor of the Kabul province, he fell under the displeasure, or rather suspicion of the monarch, and was sent prisoner to the strong hill fortress of the Gwalior , in upper India (actually it was Ranthambore Fort)  , where he remained in captivity about seven years. At length, at the recommendation of Mahabbat Khan, the second of that name, Aurangzeb released Khushal, and sent him, along with the noble just referred to - who had been lately appointed subah-dar of Kabul - for the purpose of settling the affairs of Peshawar district, which had fallen in to a very distracted state. But the iron had entered into the soul of Khushal, and on reaching his native country, he kept as retired as possible ; ceased to hold any intercourse with the governor of the province, and other subordinate officers ; and declined rendering any assistance to the troops of Emperor.

Ranthambore Fort


Khushal's tribe had been long at feud with many of the other Afghans around Peshawar, amongst whom were the Yusufzais - fighting against whom, as before mentioned, his father lost his life - and was generally engaged in hostilities with one or other of them; but with the Afridis, who were also powerful, the Khattaks maintained a close alliance. Matters, at length, so far between the Khattak chieftain and the Mughal authorities, as to produce an open rupture. Khushal now girded his loins with the sword of courage, and in concert with Aemal Khan and Darya Khan, chiefs of the Afridis, carried on, for seven or eight years, a determined and destructive war with the Mughals, in which the latter were generally defeated.

The whole of the Afghan tribes from Bannu to Jalalabad, seeing the success of their countrymen over the hated Mughals, had been drawn, by degrees, into the confederacy, which now aimed at no less than the total expulsion of the Mughals from Afghanistan. But the Yusufzais, who could have aided so effectively, held aloof; and would render no assistance to their countrymen, through enmity with the Khattaks, notwithstanding that Khushal went in person, even as far as Swat valley, to endeavor to instill into them some of his own and his confederate's patriotic spirit, but without effect - they were deaf to the voice of the charmer.  

Affairs at Peshawar had assumed such a serious aspect , that Aurangzeb considered it necessary to appear in person on the scene ; and for about two years he remained encamped at Atak, superintending the prosecution of the war ; and that wily monarch , finding force unavailable in such a difficult country , began to try the effect of gold. In this he met with success he desired ; and some of the petty clans of the confederacy became fascinated with gold of the Mughals, and submitted to the government; whilst others of the Khushal's friends began either to desert him , or to give him cause to doubt their sincerity ; and Aemal Khan and Darya Khan , his most powerful , and most trusty supporters , having been previously removed , by death, from the scene,  such as effect was produced upon the fine spirit of Khushal - that he became disgusted , and sought to find peace in retirement.

At length, he resigned the chieftainship of the Khattak tribe, in favor of his eldest son Ashraf, and devoted himself to books and literature. On Ashraf becoming the chief of the clan, Bahram, another son, who appears to have been always regarded with aversion by his father for his degenerate acts , succeeded in gaining over a considerable party to his side, and appeared bent upon bringing misfortune upon his brother. They met in battle several times; and on one occasion, Bahram was taken prisoner, but succeeded, by his artfulness and duplicity, in exciting the pity of his injured brother, who set him at liberty. Khushal, well aware of the disposition of Bahram, was highly incensed with Ashraf for allowing him to escape so easily, and, as it turned out, not without reason; for no sooner was Bahram free, then he again commenced his intrigues against Ashraf, and at length, in the year 1093 H (1681 A.D), he succeeded in betraying him into the hands of the Mughals. Aurangzeb sent him prisoner to the strong fortress of Bijapur, in Southern India, where, after lingering from captivity for about ten years, he died.

Afzal Khan, the younger son of Ashraf, now took up arms in his father's cause, and was installed in the chieftainship by his grandfather, who was still regarded as their natural and rightful chief, by the majority of the tribe; but the youth and inexperience of Afzal - for he was only seventeen years of age - could not yet cope with the wily Bahram, who was also aided, and upheld by the Mughals. Khushal, therefore, taking Afzal's youth into consideration, and in order to prevent his clansmen from shedding the blood of each other, interfered between the contending parties, fearing that the tribe might hesitate to obey one of such inexperience, and allowed Bahram to enjoy the chieftainship, advising Afzal to bide his time, and not lengthen his father's captivity by opposition for the present. Afzal, therefore, retired with his family into the friendly country of Afridis.

Not content with this success in all his schemes, Bahram would not allow his aged father to end his days in peace. Several times he made attempts upon his life. He once dispatched his son Mukarram Khan, with a body of troops, to endeavor to secure the old man's person. Mukarram went, as directed, against his grandfather ; but the brave old chieftain , who had attained his 77th year , having discovered the party from the place of his retreat, advanced to meet them with his drawn sword in his hand, at the same time - to quote the words of Afzal Khan, his grandson, already alluded to , who subsequently wrote a history of these events - exclaiming , "whoever are men amongst you, come to the sword,  if you dare ; but veneration for the aged chieftain was so predominant in every one's breast , that no one would make any attempt to lay hands on him ;" and Mukarram, ashamed, returned as he went. Bahram, his father, enraged at his son's failure, ordered him to return, with directions to kill Khushal with his own hands, if he should refuse to deliver himself up. On Mukarram's return, to carry out this inhuman order of a degenerate son, the old chief again advanced from his place of shelter, and taking his stand upon the crest of the hill, with his good sword in his hand, again dared them to approach; and in this manner is said to have been remained on the watch for several days. But no one amongst the party had either the inclination or the courage to face him, whom they still regarded as their natural chief.

Bahram, however, thinking the prey in his toils, had dispatched a message to the Mughal governor at Peshawar, to the effect that the old lion was at length at bay; and requested him to send a sufficient escort to take charge of him, and conduct him to Peshawar. Khushal, however, having been warned, as soon as night set in, made his escape, after two of the Bahram's party had lost their lives, and by the next morning succeeded in reaching the boundary of Afridi tribe - who had always been his friends - a distance of 90 miles from Akorrah, the scenes of the occurrences just related.



Khushal took up his residence in the Afridi country, and returned no more to the home of his fathers, which he loved so well. He died as he had lived, free, among the mountains of his native land, in the 78th year of his age. Before taking his departure from a world , in which he had drunk so deeply of the bitter cup of treachery and unfaithfulness , he particularly charged those few children and friends, who had remained faithful to him through all his trials and misfortunes , that they should bury him where - to use his own words - "the dust of the hoofs of the Mughal cavalry might not light upon his grave ; " and that "they should carefully conceal his last resting place , lest the Mughals might seek it out , and insult the ashes of him , at whose name , whilst in life, they quailed ; and by whose sword , and that of his clansmen, their best troops had been scattered like chaff before the gale".  A third request was, that in case any of his faithful children should succeed , at any time, in laying hands upon Bahram the Malignant, they should divide his body into two parts , and should burn one half at the head of his grave , and the other at the foot. He was buried, accordingly, at a place named I-surraey, a small hamlet in the Khattak Mountains, where his tomb may still be seen; and, according to his dying request, his last resting place was kept concealed, till all danger of insult from Mughals had passed away.

Khushal Khan was father of fifty seven sons, beside several daughters; but, with the exception of four or five of the former, they do not appear to have been particularly worthy of their parent's affection.

Khushal from all accounts was voluminous author , and is said to have composed about three hundred and fifty different works. This, however, must be greatly exaggerated ; nevertheless he is the author of numerous works , which i have myself seen , both in Persian, and in the Pashto , or Afghan, consisting of Poetry , Medicine,  Ethics, Religious Jurisprudence, Philosophy, Falconry, etc., together with an account of the events of his own chequered life. It is greatly to be regretted, however, that his descendants after his death, had not the opportunity to collect all his writings together; and the upshot is, that many are known only by name. Amongst those which have thus been lost or dispersed is, the autobiography I have referred to.

Some of the Khushal's poetical effusions , written during his exile in India, and whilst struggling against the power of Aurangzeb, will, I think , be considered highly of, even in the form of a literal translation, and in an English dress, as coming from the pen of an Afghan chief, cotemporary with the times of our Charles I, evincing, as they do, a spirit of patriotism, and love of home and country , not usual in the oriental heart , but such as we might look for in the Scottish highlander , or Swiss mountaineer, of bygone days, whom the hardy Afghans strongly resemble .

Upon the time of Khushal's chieftainship, the bounds of the Khattak country were not well-defined; and that is to say, each family of the tribe had no fixed lands allotted to them. Khushal caused a survey to be made of all available land; fixed the boundaries, entered them in a register; and; according to the number of each man's family, assigned a corresponding quantity of land for cultivation. This arrangement is still in force, and hitherto has not, that I am aware of, been deviated from; and many small towers of stone, erected to mark the different boundaries, still remain. 


Source: "Selections from the poetry of the Afghans: from the sixteenth to the nineteenth century" by H.G.raverty, from page 142 to 148. Barmazid-67

Business Resolution

Business Resolution
What is a Resolution?
The matter of business that are transacted at a general meeting are presented in the form of motions. These motions are taken up for discussion and decision. If the motion is approved by the required majority of members present, it becomes a resolution.
Types of Resolutions
There are two types of resolution. There are:
1.       Ordinary Resolution
2.       Special Resolution
Ordinary Resolution
The resolutions which are passed at a general meeting by a simple majority are called ordinary resolutions. The votes can be cast by members or by proxy. The resolution can be passed either by show of hand or by poll.
Matters decided
The following matters can be decided by an ordinary resolution:
1.       Adoption of statutory report.
2.       Appointment of first directors who are liable to retire by rotation.
3.       Appointment of auditors and fixation of their remuneration.
4.       Appointment of a managing director.
5.       Removal of a director and appointment of a director in his place.
6.       Approval of final accounts.
7.       Alteration of share capital.
8.       Creation of reserve fund etc.
Special Resolution
A special resolution is one which requires at least 3/4th majority of the members voting on it at the General Meeting. The voting can be by a show of hands or by poll. A notice has to be given at least 21 days before the meeting in which a special resolution is passed. The notice must clearly state the resolution to be moved is a special resolution.
Purpose of Special resolutions
Special resolution is required to be passed for the following purposes:
1.       Alteration of a company’s name.
2.       Alteration of the objects clause in the Memorandum of Association.
3.       Alteration of the articles of the company.
4.       Reduction of share capital.
5.       Variation of shareholders rights.
6.       Change of registered office from one state to another state.
7.       Making the liability of directors unlimited.
8.       Voluntary winding up.
Distinction between ordinary and special resolution
Basis of distinction
Ordinary Resolution
Special Resolution
Majority
It can be passed with simple majority
It requires at least 3/4th majority for it to be passed.
Notice
Prior notice is not required for passing an ordinary resolution.
21 days notice must be given before the meeting in which such a resolution is to be passed.
Registration
It does not require to be filed with the Registrar.
A copy of the special resolution must be filed with the Registrar within 30 days from the date of its passing.
Objective
It is required to transact ordinary business.
It is required to transact special business.


Tuesday, November 22, 2016

Audit Procedure

Verification and Valuation of Liabilities and Guidelines for auditors

Verification of liabilities is equally important as that of verification of assets. The Balance Sheet will reveal the true and fair view of the state of affairs of the business concerns only when the liabilities as well as assets are properly valued and verified.

Verification of liabilities aims at ascertaining whether all the liabilities of the business are properly disclosed, valued, classified, and shown in the Balance Sheet. The auditor should see that they are correctly stated in the Balance Sheet. He should obtain a certificate from the responsible official as to the correctness of liabilities.
This was held in the case of Westminster Road Construction and Engineering Co. Ltd.
In short, the auditor should have to examine and see that,
  1. All the liabilities have been clearly stated in the liability side of the Balance Sheet.
  2. They are all relate to the business itself.
  3. They are all correct and authorized by the responsible official.
  4. They are shown in the Balance Sheet at their actual figures.
We shall now discuss the verification and valuation of various liabilities.
Verification and Valuation of Trade Creditors
  1. The correctness of liabilities depends upon the correctness of purchases. Hence, the auditor should compare the percentage of gross profits to purchase with that of the previous years to verify the correctness of purchases.
  2. The auditor should obtain a Schedule of creditors and verify them with the balances of ledger accounts and statements of account received from creditors.
  3. He should check the Purchases Book and Purchases Returns Book with the help of invoices, credit notes, etc. He should also check the postings into the Ledger.
  4. He should examine the Goods Inward Book to ensure that the goods purchased have been actually received.
  5. He should see that all the purchases made during the year have been accounted for especially at the end of the year.
  6. He should examine the discount allowed to creditors during the period and see that these substantiate the credit balances.
  7. In case of hire purchases, the auditor should see that the conditions of Hire Purchase Agreement are properly complied with.
  8. He should examine the entries made at the beginning as well as at the end of year to check the employees have passed any fictitious entries in this regard.
  9. If any debt is found unpaid for a long time, an inquiry should be made since it is possible that instead of paying to the creditor, the amount might have been misappropriated.
Verification and Valuation of Bills Payable
In case of bills payable, the auditor should follow the following verification procedure:
  1. The auditor should obtain a Schedule of bills payable and its totals should be compared with the Bills Payable Book and Bills Payable Account.
  2. The bills paid after the Balance Sheet date should be examined with the entries passed in the Cashbook.
  3. The auditor should obtain confirmatory statements from the drawers directly with the permission of his client.
  4. He should pay special attention to the bills that have been paid between the date of the Balance Sheet and the date of his audit have been duly written in the books.
Verification and Valuation of Loans
  1. The auditor should verify the existence of loans, if any. In case of a company he should examine the correspondence, contracts, and Directors’ Minute Book.
  2. The auditor should ascertain the terms of loan, amount of loan, period and nature of loan, etc. by referring to the loan agreement.
  3. He should confirm the balances of the unpaid loans directly from the creditors of the company with the permission of his client.
  4. In case of loans or overdrafts taken from a bank, an agreement with the bank and a certificate to that effect should be obtained and examined.
  5. The auditor should see whether the interest due has been paid or not. If the interest is due but not paid till the date of the Balance Sheet, he should see whether the same has been clearly shown as liability therein.
  6. In case of a Joint Stock Company, the auditor should examine the borrowing powers of the company. He should also examine the Register of Charges, and should see that a charge created has been registered with the Registrar.
  7. It should be seen that the interest on loans has been paid up to date. If not he should see whether the amount due is recorded as unpaid in the books of accounts.
Verification and Valuation of Outstanding Liabilities for Expenses
1.       In case of outstanding liabilities, the auditor should obtain a certificate from a responsible officer of the company stating that all expenses become payable have been brought into account.
2.     He should see whether necessary provision for all the outstanding expenses have been made by checking receipts and other vouchers.
3.         He should compare the expenses shown as unpaid during the current year with those of the last year and if he finds any difference, the same should be enquired into.

Verification and Valuation of Capital
Capital is not the liability of an entity but still the auditor is required to verify it in order to report the genuineness and correctness of the Balance Sheet. In case of a firm, the auditor should verify capital with the help of Partnership Deed, Cashbook and the Passbook. He should see that it has been properly recorded in the books of account. In the case of a company, verification of capital can be discussed under the two heads:
First Audit
In case of first audit, the auditor should examine the Memorandum of Association to see what is the maximum capital, which the company is authorized to raise. He should also check the Articles of Association.

The Cashbook, Passbook, and Minute book of the Board of directors should be examined by the auditor in order to find the amount of shares and different classes issued, the amount collected on each shares, and the balance due from the shareholders in respect of calls, etc.


The shares allotted to vendors, should be examined with the contract between the vendors and the company.

Subsequent Audit

Normally, in case of subsequent years, the share capital would be the same as in the previous year unless the company has made any alteration or addition by fresh issue or otherwise. If he come across any change, he should see that the relevant provisions of Secs. 94, 95 and 100 to 105 of the Companies Act have been duly complied with.
Verification and Valuation of Reserves and Fund
Reserves and funds are appropriations out of profits. The directors of a company determine the amount of reserves and funds to be created taking into account the circumstances of the business. The reserve and funds are to be shown on the liability side of the Balance Sheet with footnotes.
Verification and Valuation of Debentures
  1. In case of debentures, the auditor should verify the Memorandum of Association and the Articles of Association of the company and ascertain the power of the company to issue debentures. He should find out what is the borrowing limit and ensure that the company has not exceeded the same.
  2. He should verify the Debenture Trust Deed to verify the amount of debentures issued and securities offered. If necessary, he can obtain a certificate from the debenture holders to verify the amount of debentures issued.
  3. He should enquire as to what arrangement has been made for the redemption of debentures. In case debenture redemption fund has been created, he should verify the Articles of Association.
  4. If the debentures are issued at premium or at discount, the auditor should see that the debenture premium and discount on issue of debenture are properly dealt with in the books of account.
  5. He should verify Register of Charges and Register of Debenture Holders to see that the debentures shown in the Balance Sheet agree with the debentures recorded in the books of account.
Verification and Valuation of Income Received in Advance
Sometimes the firm receives some amount in advance, which is to be actually received in the next year. It is treated as a liability and should be shown in the liability side of the Balance Sheet. The auditor should verify whether the items of incomes received in advance are recorded in books. The auditor should obtain a Certified Schedule of income received in advance and verify the same. He should ensure that income received in advance is fully shown in the liability side of the Balance Sheet.
Verification and Valuation of Employees Deposits
In commercial and industrial establishments, it is usual to require the employees. who deal with cash or stores to give security deposit. It acts as a safeguard against some possible misappropriation or pilferage on the part of such employees. Sometimes, the employees instead of paying cash as security deposit endorse trustee securities in favor of the employers. In such cases, the auditor should see whether such a security in cash or in securities deposited separately in the bank. He should see whether they are shown distinctly in the liabilities side of the Balance Sheet. He should verify the amount of deposits by reference to the Certified Schedule received from the client.
Verification and Valuation of Taxation Liability
Now-a-days, taxation has become an important liability and so the companies are required to make full provision in the accounts in this regard. The auditor should see whether the provision made therefor is sufficient to meet the estimated liability. Usually, auditors are required to advise on the adequacy of the liability and in such a case, they work as tax consultant.
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