CA. Ravi Patnaik is conducting audit of a company for which reporting requirements under CARO, 2020 are applicable. He finds that cash credit…
CA Intermediate · Auditing and Ethics · MTP · May 2024
CA. Ravi Patnaik is conducting audit of a company for which reporting requirements under CARO, 2020 are applicable. He finds that cash credit facilities amounting to 4 crores were released to the company by branch of a bank for meeting its working capital requirements. He finds that out of above funds, 1 crore have been used by company for installing effluent treatment plant to meet State pollution control Board requirements. Is there any reporting obligation upon him under CARO, 2020?
Suggested Answer and Working Notes:
Clause (ix) (d) of CARO, 2020 whether funds raised on short term basis have been utilised for long term purposes, if yes, the nature and amount to be indicated. In the given situation, funds have been raised for meeting working capital requirements for 4crores. Cash credit facilities for meeting working capital requirements are, by their very nature, short term borrowings. Out of above,1 crore have been used by the company for investment in effluent treatment plant which is ostensibly for a long-term purpose. Hence, the matter needs to be reported in accordance with requirements of Clause (ix) (d) of CARO, 2020.
Topics: Audit Report
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