P Financial Services Ltd. (PFSL) is a leasing & hire purchase company. You, as an auditor of PFSL, are in the process of examining finance lease…

The lease agreement should be examined, and the following points may be noted: (i) the description of the lessor, the lessee, the equipment and the location where the equipment is to be installed. (The stipulation that the equipment shall not be removed from the described location except for repairs. For the sake of identification, the lessor may also require plates or markings to be attached to the equipment). (ii) the amount of tenure of lease, dates of payment, late charges, deposits or advances etc. should be noted. (iii) whether the equipment shall be returned to the lessor on termination of the agreement and the cost shall be borne by the lessee. (iv) whether the agreement prohibits the lessee from subletting the equipment and authorises the lessor to do so.