Raunak NathaniRaunak Nathani asked 2 months ago

Isn’t purchasing computer of rs. 25000 from store and adjusting it against audit fees will be deemed as audit fees received in advance resulting in indebtness and disqualification??

1 Answers
RaviRavi Staff answered 2 months ago

Question is silent about timing of purchase of computers from company, whether it is before or after providing services. If it is before then it is advanced and if it is after then it is not advance. So they are not focusing on this aspect. Even if they are focusing on it advance upto 5,00,000 is fine.
Further computer us bought for son so it is not for business purpose. So no business relationship. 
Point is auditor has receivable of audit fees and payable of computer price, so we have to consider gross amount payable by auditor or net amount payable, answer is net amount payable.Which is this case is definitely less than 5,00,000.
Final conclusion

  1. Not a business relationship
  2. May or may not be advance as timing is not given
  3. We have to see net amount payable by auditor
  4. If net amount at any point of time exceeds 5,00,000 then disqualified

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