The document provides guidance on conducting investigations for various parties in business transactions. It outlines the key points an investigator should focus on when investigating a client's accounts on behalf of a bank loan application. These include verifying liabilities, assets, profits, competition, and financial position. It also describes investigating accounts when a client intends to join an established business or when investigating on behalf of a purchaser, incoming partner, or lender of money. The investigator should examine factors like business trends, securities, use of funds, and reputation.

1. Investigation Page 1
Assignment - 7
Company Law
Date of Submission: 23 September,2015
Submitted by: Sonali
Class: BBA
Roll No: BBA/13/913
Email:snlkkrj000@gmail.com

2. Investigation Page 2
1 A bank has received an application for loan from his client. You have to
investigate the accounts of the client on the behalf of the bank. How would
you proceed with matter?
An investigation refers to a detailed verification and clarification of any doubts that may have occurred
regarding any form of transaction, which have been made by the accounts department of an organisation
or company. This usually involves the investigation of ‘large’ purchases such as property and other assets
that are deemed large.
Furthermore, the purpose of the investigation is to establish the effectiveness, efficiency and the economy
of the processes of the businesses transactions and to further analyse the effectiveness of their control
over the company’s income. This evidence will be extracted from such information as: Oral statements,
documents, records and the auditor’s own observations. The auditor must ensure that the evidence that is
collaborated must be not only relevant to the purpose of the audit, but similarly, the evidence should be
accurately documented in the audit records and then it must be subject to verification.
The auditor collects the majority of the evidence through an interview process, but it is essential that the
auditor confirms oral statements by asking the auditee to verify the facts. This verification may come in
the form of documents or other records in order to support the facts that have been claimed. In some
cases, where there is no documentary evidence, it may be necessary for the auditor to ask the same
question to several interviewees for corroboration.
An investigation is essential to any company in order to keep updated with the different transactions of
the company; this is to ensure control and resourcefulness of the company’s transactions.

3. Investigation Page 3
Process of investigation

4. Investigation Page 4
Consumer campaigners are urging the regulator to investigate concerns that customers of major banks
have been sent Wonga-style letters chasing them for payments.
Customers of Lloyds, Halifax, Royal Bank of Scotland (RBS), NatWest, Ulster Bank, Barclaycard and
HSBC received letters which were from either lawyers or debt collectors which were actually brands
operating within these respective banking groups.
Banks said it was made clear in these letters that the firms sending them were based in-house. But
concerns have been raised that, as in the case of payday lender Wonga, some people may still have
wrongly got the impression that the debt had been escalated to an outside third party, making them feel
under pressure to pay up.
Banks said they have since stopped using the different brand names altogether or are phasing them out. It
also emerged that some utility firms have also chased debts using the names of different brands based
within their companies.
A key distinction between the letters sent on behalf of the banks and utility firms and those from Wonga
is that the letters involving banks and utility companies were from real organisations, while the Wonga
letters were from firms which did not exist.

5. Investigation Page 5
2 A client of yours intends to join established business as a partner &
request you to investigate the accounts of the firm. Indicates the points to
which you would specially direct attention.
INVESTIGATION ON BEHALF OF TH PURCHASER OF THE RUNNING BUSINESS:-
The purchaser of the business wants to know the real position of the business. Keeping in view the
business condition he has to decide whether he should purchase the business on that price or not ?
So the investigator should pay special attention on the following points :
1. Cause Of Selling :-
The investigator should pay special attention to this point that why the seller wants to sell the business?
He should see that it is a genuine case of sale.
2. Examine The Trend Of Business :-
Investigator should examine carefully the trend of business whether it is going on the road of prosperity
or not. In this regard he should compare expenses revenue and profit of the previous years.
3. Checking Of Liabilities :-
Investigator should verify that liabilities of the business are properly valued. It should be compared the
figures shown and decide that it is correct or not.
4. Value Of Assets :-
Investigator should check that the assets have been properly valued and sufficient depreciation has been
provided on these assets.
5. Verify The Goodwill :-
Investigator should also check that good will of the business that is properly valued or not? He should
also examine that sufficient provisions have been made for doubtful debts or not?
6. Checking Of Auditors Report :-
Investigator should also examine the auditors report if it is previously audited.
7. Verify The Profits :-
Investigator should verify the profits of previous years which might have been inflated by inflation of
closing stock.
8. Competition Situation :-

6. Investigation Page 6
He should also check the competition situation which the concerned firm is facing in the market.
9. Examine The Capital :-
Investigator should examine that working capital of the business is sufficient or not?
10. Proper Vouching :-
Investigator should check that capital, expenditure, and revenue is properly vouched or not ? He also pay
proper attention to the deferred revenue and expenditure.
11. Examination Of Machinery :-
Investigator should check the condition of machinery. Whether it is new, old or replaceable.
INVESTIGATION ON BEHALF OF THE INCOMING PARTNER :-
When the investigator makes an investigation he should pay proper attention to the following points :
1. Examine The Cause :-
Investigator should try to know the cause that why the new partner is to be taken into the business?
2. Study The Documents :-
Investigator should study all the partnership deeds to know that they have no adverse effect on the interest
of his client.
3. Examine The Financial Position :-
He should examine the financial position of business proprietor or partners who wish to take his client as
a partner.
4. Case Of Deceased Partner :-
In the above case, he should examine that his client possesses the skill and experience of the old partner.
If not then it may suffer a loss.
5. Reasonable Profit :-
Investigator should also check that the share of profit is reasonable or not.
6. Use Of Client Capital :-
Investigator should also check that for which purpose the capital of his client will be used. It will he used
for paying the liabilities or for the working capital.
7. Consideration Of Salary :-
The investigator should consider the salary of a retired person while computing the future profit.

7. Investigation Page 7
8. Examine The Good Will :-
He should examine the good will of his client which is to be paid is reasonable or not.
9. Any Partner Facing Crises :-
Investigator should report to his client if he finds that any partner of the business is facing the financial
crises.
10. Checking Of Incomplete Contracts :-
He should examine that incomplete contracts which will also be transferred to the reconstituted firm will
be a liability or loss.
INVESTIGATION ON BEHALF OF LENDER OF MONEY :-
Generally banks require complete and detailed informations about the borrower's. The lender of money
wants complete satisfaction of repayment. So investigation is made on the behalf of the lender.
Investigator should pay special attention to the following points :
1. Reason For Loan :-
Investigator should know the real cause that why the borrower is demanding the additional loan for the
business.
2. Use Of Loan :-
Investigator should also examine that for which purpose loan will be used. It should be used properly for
that object for which it is demanded.
3. Character Of The Borrower :-
Investigator should also investigate about the character of the borrower. If borrower is honest, efficient
and a man of character then he will repay the loan in time.
4. Examine The Security :-
He should also examine the securities offered against loan. Are these sufficient or not?
5. Loans Against General Assets :-
If the loans are to be advanced against the general assets of the company then he should examine the net
value of the assets.
6. Description Of Property :-
Investigator should give full description about the real property, plant, building and decoration.
7. A List Of Investment :-

8. Investigation Page 8
He should give the list of all the investment shown in the books which market value.
8. Earning Capacity :-
Investigator should check the earning capacity of the borrowers. He should verify the profit and loss
accounts of the past several years. If earning capacity is better then repaying capacity will also be better.
9. Reputation Of The Firm :-
Investigator should examine the reputation of repayment of loan in the past if any party has refused to
advance the loan then what were the reasons.
INVESTIGATION ON BEHALF OF THE CLIENT WHO WANTS TO PURCHASE THE
SHARES:-
PRIVATE LIMITED COMPANY :
Following rules should be adopted by the investigator in case of private limited company :
1. The shares will be valued at the break up value.
2. The difference should be calculated between book value of the assets and liabilities of the company.
3. From the breaks value discount of 15% will be allowed.
4. If dividend have not been declared by the company early years then discount may be increased upto
25%.
PUBLIC LIMITED COMPANY :-
1. Investigator should find out the purchasing and selling price of the share in the past.
2. He may calculate the value of shares on the basis of the average profits in the previous years.
3. He may calculate the value of shares on the basis of the net assets of the company and may guide his
client to purchase the shares.