# Corporate Social Responsibility (CSR) - Disclosure Requirements
Where a company is covered under Section 135 of the Companies Act, 2013, the auditor must verify that the prescribed CSR-related disclosures are made in the financial statements.
## A. Applicability – Section 135 Triggers
A company must comply with CSR provisions if, during any preceding financial year, it has:
- Net worth of ₹500 crores or more, OR
- Turnover of ₹1,000 crores or more, OR
- Net profit of ₹5 crores or more
Such company must spend at least 2% of average net profits of the immediately preceding three financial years.
## B. Mandatory Disclosures the Auditor Must Verify
Where the Company is covered under Section 135, the following shall be disclosed with regard to CSR activities:
1. Amount required to be spent by the Company during the year (2% of average net profits of preceding 3 years)
2. Amount of expenditure incurred during the year
3. Shortfall at the end of the year (Required - Actual)
4. Total of previous years' shortfall (cumulative unspent amount carried forward)
5. Reason for shortfall (if any)
6. Nature of CSR activities (e.g., education, healthcare, environment as per Schedule VII)
7. Details of related party transactions in relation to CSR (e.g., contributions to a foundation in which a director is a trustee)
8. Provision Movements – Where provision is made with respect to liability incurred by entering into a contractual obligation, the movements in the provision during the year should be shown separately.
## C. Auditor's Verification Approach
1. Confirm Section 135 applicability by examining net worth, turnover, and profit thresholds for preceding FYs.
2. Verify computation of 2% spending requirement based on average net profits of preceding 3 years (computed as per Section 198).
3. Examine the CSR policy approved by the Board and the CSR Committee composition.
4. Vouch CSR expenditure against approved CSR projects.
5. Verify if unspent amount has been transferred to a Schedule VII fund (for non-ongoing projects) or to an Unspent CSR Account (for ongoing projects).
6. Check related party disclosures relating to CSR.
7. Verify movement in any CSR provision created for contractual obligations.