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RaviRavi Staff answered 1 year ago

Q4 (a)
As an auditor, how will you report under CARO in each of the following situation?

 

(i) Since more than seven months, payment of electricity bills to company established under statue is outstanding. — Electricity payment is under agreement with government entities and not law so no reporting required.

 

(ii) The company had imported goods 5 years back and were placed in bonded warehouse till the end of financial year under Audit. The company has not paid import duty as goods have not been removed from such warehouse. The company has also not paid rent and interest expenditure payable on the amount of custom duty. — We highlight this point while teaching CARO. Import duty is not payable as goods are not yet removed so no default. But rent & interest ae payable as per customs act & rules, it is statutory due, we will have to report irregularity in payment and also amount outstanding more than 6 months as on balance sheet date. Further custom duty is not periodical payment (like tds, gst etc) so no comment required regarding regularity but rent & interest need monthly payment under custom laws hence they are periodical and we will have to comment on regularity.

(iii) The company has received income tax assessment order along with demand notice from Assessing officer. The company has not paid dues payable as the same is not acceptable to the company. The company has neither preferred appeal against the order nor an application for rectification of mistake has been made. The company has just merely represented to the Assessing Officer. — Company says it is not acceptable that means they are disputing it, if they have evidence to prove there is dispute and if they have time limit available to file case then it is sufficient to consider it as disputed and report it in disputes under statutory due clause. Official appeal or application is not must, it can be filed over period of time, representation to AO if first step towards it.

 

Further if time limit is gone, no case can be filed then it will be considered undisputed and we will have to see whether it is outstanding more than 6 months as on balance sheet date.

 

(iv) The company in view of voluminous pay-roll data consistently follows the method of making lump sum deposit of estimated amount of ESI collections and adjust the excess or deficit against next following months’ deposit and the difference of the said
amount always remains insignificant — In CARO reporting we have to see materiality of matters. In given case if amounts are insignificant then no reporting is required.

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