K. Ltd. secured a ₹ 700 lakh term loan from a nationalized bank in 2017 for the construction of a factory, with the loan to be repaid in seven equal instalments of ₹ 100 lakhs starting from 31st March 2018. Due to delays

Term loan invested in short term deposits: As per clause (ix) of Para 3 of CARO, 2020, an auditor needs to state in his report that whether the term loans were applied for the purpose for which the loans were obtained. whether the company has defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender, if yes, the period and the amount of default to be reported as per the format below: - Nature of Borrowing including debt securities Name of Lender* Amount not paid on due date Whether Principal or Interest No. of delays or unpaid Remarks if any *Lender wise details to be provided in case of defaults to banks, financial institutions and Government whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported; whether funds raised on short term basis have been utilized for long term purposes, if yes, the nature and amount to be indicated; whether the company has taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures, if so, details thereof with nature of such transactions and the amount in each case; whether the company has raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies, if so, give details thereof and also report if the company has defaulted in repayment of such loans raised. In the present case, the proceeds of the term loan obtained by K. Ltd. have not been put to use for construction activities & have been temporarily invested in short term deposit. Here, the auditor should report the fact in his report that pending utilization of the term loan for construction of a factory, the funds were temporarily used for the purpose other than the purpose for which the loan was sanctioned, as per clause (ix) of Para 3 of CARO, 2020. Reporting for Default in Repayment of Dues: As per clause (ix) of Para 3 of CARO, 2020, the auditor of a company has to report whether the Company has defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender, & if yes, the nature of borrowing, name of lender, period & amount of default to be reported. The Auditor is also required to report whether the company is a declared wilful defaulter by any bank or financial institution or other lender.