UNIT-5

1. UNIT-5 • DIVISIBLE PROFITS&DIVIDENDS • INVESTIGATION • AUDIT OF COMPUTERIZED ACCOUNTING

2. An Investigation may be defined as a close examination of accounts and records and a search for the relevant data, with a view to ascertaining any fact for some special purpose... INVESTIGATION

3. CLASSIFICATION OF INVESTGATION • Evaluations. • Reviews • Surveys • Analyses • Special Audits • Statutory Investigation

4. MODE OF INVESTIGATION • General particulars of Business • No. of. Plants and their Location • No. of. Sales centers and their location. • List of share holders. • Names of directors and other executives. • Credit Repots • Area of Business • Manufacturing position • Organization structure • Financial position • Tax liability • Assets • Investments • Liabilities

5. STATUTORY INVESTIGATION An Statutory Investigation into the affairs of the company means an Investigation of all its business affairs • Secs.235-251 of the Companies act deals with the Investigation of the affairs of the company to be made by the Central government;

6. WHEN IT IS MADE • On Report by The Registrar(Sec.235(1)) • On application by the members of the company[Secs.235(2)(a)(b) and 236] • Investigation in other cases[Sec.237] • Where Investigation is Mandatory[Sec 237(a)] • Where investigation is discretionary[Sec.237(b)]

7. INSPECTOR AND HIS POWERS • Only an Individual can be appointed as inspector to conduct an Investigation.-Ashoka Marketing Ltd.vs.Union of India. • To investigate affairs of any other company in same group. • To require officers of the company to produce books, etc., and to assist. • To require any body corporate to give information. • To keep books papers in custody. • To examine officers on oath. • To seize books and papers

8. INSPECTOR REPORT AND IMPORTANCE OF REPORT • The Inspector may and, if so directed by the central government must, make interim report to the government. • Manner of disposal of report by the central government [Sec.241(2)] • Prosecution[Sec.242] • Application to the court for winding up of company[Sec.243] • Expenses of Investigation[Sec.245] • Investigation of ownership of company[sec.247]

9. DIVISIBLE PROFITS • All the profits of the company are not divisible profits. Only those profits which can be legally made available to share holders by the way of dividend. • It is to be noted that divisible profits do not include “profit on revaluation” of fixed assets and other profits of “capital nature” • Sec 205 of the companies act 1956 lays down the rules for computing divisible profits.

10. DETERMINANTS OF DIVISIBLE PROFITS • Memorandum & Articles of Association • The Companies act,1956. • Legal Decisions. • Principles of accountancy. • Regulations for management of companies limited by shares contained in the Table “A” of schedule1 make some provisions in the various clauses i.e. Clause 85-92 of Table “A”

11. DIVIDEND • It refers to that amount of divisible profits which is distributed among the share holders of the company. A member (share holder) is entitled to receive dividend when it is declared by the board of directors as per the provisions of the Article.

12. TYPES OF DIVIDENDS • Preference Dividend • Unclaimed Dividend • Proposed Dividend • Final Dividend • Interim Dividend • Corporate Dividend Tax

13. LEGAL PROVISIONS RELATING TO DIVIDENDS • Sources of dividends.[Sec.205] • Dividends not to be paid out of capital • Payment of dividend in proportion of amount paid up on shares • Dividends in cash only. • Transfer to dividend bank and unclaimed dividend account

14. FACTORS DETERMINIG THE PAYMENT OF DIVIDEND • Nature of earnings • Liquidity. • Future plans • Capital Structure • Share value • Tax Implications