The company act states that an auditor is required to make an enquiry and report if he is not satisfied in respect of the following matters-

(a) whether loans and advances made by the company is properly secured and whether the terms and conditions made are prejudicial to the interests of the company or its members;

(b) whether transactions of the company which are represented merely by book entries are prejudicial to the interests of the company;

(c) where the company not being an investment company or a banking company, whether assets of the company as consist of shares, debentures and other securities have been sold at a price less than that at which they were purchased by the company;

(d) whether loans and advances made by the company have been shown as deposits;

(e) whether personal expenses have been charged to revenue account;

(f) whether detail of cash is maintained properly.