Introduction

Nidhi Companies are financial institutions governed by the Companies Act, 2013 and Nidhi Rules, 2014. As mutual benefit societies, they are responsible for accepting deposits and lending to their members, operating strictly within a defined regulatory framework. To ensure transparency, legal compliance, and financial health, Nidhi Companies must undergo annual audits by qualified professionals. The audit process not only assesses financial records but also verifies compliance with all statutory and regulatory obligations. An audit checklist serves as a structured guide for auditors and management to evaluate all critical aspects of operations. This explanation introduces the key components of a comprehensive audit checklist for Nidhi Companies.

Verification of Incorporation and Registration Documents

The auditor begins by verifying the incorporation certificate, Memorandum of Association, Articles of Association, and Nidhi Company registration status. These documents confirm the legal identity of the company and ensure that it is authorized to conduct Nidhi operations. Any discrepancies or amendments must be reviewed to verify alignment with the statutory framework.

Examination of Membership and Shareholding

A core audit area is the review of the members’ register and shareholding structure. The auditor checks whether the company has maintained the minimum number of members, which should be at least 200 within one year of incorporation. The equity shareholding of each member is verified to ensure that eligibility conditions are met and membership records are up to date and accurate.

Review of Deposits and Interest Payable

The audit checklist includes examining all types of deposits accepted from members, such as savings, fixed, and recurring deposits. The auditor verifies whether deposits have been accepted within permissible limits, not exceeding twenty times the net owned funds. Interest rates offered are checked to ensure they do not exceed the prescribed limits. Deposit maturity records and unclaimed deposits are also reviewed.

Loan Disbursement and Recovery Audit

Loans disbursed during the audit period are examined concerning member eligibility, security offered, and adherence to disbursal limits. The auditor evaluates whether loans were granted only to members and backed by appropriate collateral. Interest rates on loans, repayment schedules, overdue accounts, and recovery efforts are thoroughly reviewed to assess the credit discipline and financial integrity of the company.

Compliance with Statutory Returns and Filings

Auditors must verify whether statutory forms such as NDH-1, NDH-3, AOC-4, MGT-7, and income tax returns have been filed on time. Each filing is checked for accuracy, timeliness, and regulatory compliance. The auditor also reviews Board meeting minutes, AGM records, and director disclosures to confirm adherence to governance standards.

Examination of Books of Accounts and Financial Statements

The audit checklist includes reviewing the general ledger, cash book, bank statements, trial balance, and final accounts, including the profit and loss statement and balance sheet. Entries are verified for accuracy, proper classification, and reconciliation with supporting documents. The auditor ensures that financial statements present a true and fair view of the company’s financial position.

Assessment of Internal Controls and Policies

Internal controls are assessed to determine whether the company has adequate procedures for authorizing transactions, safeguarding assets, and preventing fraud. The auditor reviews policy manuals, a delegation of authority, and staff responsibilities. Gaps in internal control are identified, and recommendations are made to strengthen governance and operational efficiency.

Conclusion

An audit checklist for Nidhi Companies is essential to ensure a systematic, transparent, and compliant review of financial and operational activities. It helps the company identify weaknesses, prevent fraud, and improve internal processes. Through structured verification of documentation, deposits, loans, filings, and controls, the audit serves as a crucial mechanism for accountability and credibility. Adhering to a well-defined audit checklist ensures that Nidhi Companies operate within the regulatory framework and maintain trust among their member base.

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