(a) State the duties of an Auditor with regard to payment of dividend. Discuss the audit procedure to be followed by the Auditor…

(a)

The auditor’s duty on dividend is to ensure that the amount paid is lawful, properly authorised and paid to the right members. The auditor should also consider whether the dividend is paid only to members appearing on the record date and whether any shares are pledged, encumbered or subject to a court order. Section 123 of the Companies Act 2013 restricts dividend to profits after providing depreciation, so the auditor must verify that the profit and loss account, prior period losses, depreciation, statutory dues and reserves leave sufficient distributable profit. Section 123(4) contains the five-day deposit requirement and Section 127 the 30-day payment requirement, while Section 124 deals with unclaimed dividend and transfer to the IEPF. The auditor should therefore check board and AGM resolutions, the rate, record date and amount; reconcile the dividend register with the register of members; verify warrants or electronic credits; and examine the treatment of unclaimed dividend. The audit procedure is to obtain the minutes and confirm that declaration is within powers; recompute distributable profit after depreciation and losses; agree dividend per share to the resolution and register; inspect warrants and bank statements for timely payment; trace unclaimed amounts to the Unpaid Dividend Account and any IEPF transfer; and confirm the disclosures in the financial statements. This gives assurance that dividend is not paid out of capital or in breach of the Act.

(b)

An investigation is broader and more flexible than a routine audit because it is directed at a specific purpose: a statutory investigation ordered by the Central Government (sections 210 and 212, including the SFIO) or on an NCLT order (section 213) into fraud or mismanagement, or a non-statutory investigation for a prospective buyer, lender or the management. At the beginning, the investigator must fix the terms of reference, scope, period, document access, legal powers, confidentiality and fee; secure records before tampering; assess the risk of destruction of evidence and preserve digital records; identify directors, banks, registries and third parties; plan interviews; and set up a secure working-paper file. During the investigation, the investigator should gather ledgers, contracts, bank statements and e-mail trails; maintain chain of custody; interview directors, managers, employees and outsiders separately; cross-verify explanations with documents; test samples where the population is large; update findings continuously; note limitations or non-cooperation; and observe legal privilege and data protection. The report should be drafted as a factual, objective and balanced document: state the appointment, scope and methodology; describe evidence examined; present findings with references to documents and interviews; distinguish facts from inferences; give conclusions on each term of reference; and make practical recommendations for recovery, prosecution, governance or accounting correction. It should be clear, concise, supported by annexures, and avoid unsupported accusations. The draft should be reviewed for accuracy, legal sufficiency and consistency with the working papers before finalisation.

(c)

Assuming the 30% profit is on selling price, Beta’s sales are 50 × ₹120 = ₹6,000. Profit = 30% × 6,000 = ₹1,800, so total cost of Beta = ₹4,200. The expense data used are: joint expenses ₹19,500, Alpha's separate expenses ₹12,500 and Beta's separate (further-processing) expenses ₹3,100. Cost of Beta: sales ₹6,000 less profit ₹1,800 gives total cost ₹4,200; less further processing ₹3,100 gives joint cost at split-off ₹1,100. This amount is credited to the joint cost account because Beta is a by-product, not a co-product. Cost of Alpha: joint expenses ₹19,500 less Beta’s split-off value ₹1,100 gives ₹18,400; add Alpha’s separate expenses ₹12,500 gives total cost ₹30,900. For 100 kg, Alpha’s cost is ₹309/kg. Beta’s cost is ₹4,200/50 = ₹84/kg. If the 30% profit were on cost, Beta’s cost would be 6,000/1.30 = ₹4,615.38, joint share ₹1,515.38, Alpha total ₹30,484.62 and per kg ₹304.85, while Beta would be ₹92.31/kg. The account therefore shows Alpha at ₹309/kg and Beta at ₹84/kg.