You have been appointed as the statutory auditor of AMRO Ltd., a listed entity. During the audit for the year ended 31st March 2025, you noticed…
CA Intermediate · Auditing and Ethics · MTP · September 2025
You have been appointed as the statutory auditor of AMRO Ltd., a listed entity. During the audit for the year ended 31st March 2025, you noticed that there are undisputed dues relating to GST and Provident Fund which have been outstanding for more than six months. Additionally, the company has not deposited certain amounts of income tax and excise duty which are under litigation before various appellate authorities. Discuss the reporting requirements of the auditor under Clause (vii) of CARO, 2020. OR CA Sohail, while conducting statutory audit of a company, has noticed that there are items such as computer software, patents appearing in its books of accounts. These are identifiable non-monetary assets, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. He wants to ensure that such items are properly valued in financial statements of the company. Suggest few audit procedures to be performed by him in this regard.
Suggested Answer and Working Notes:
(a) The auditor is required to report under Clause (vii) of Paragraph 3 of CARO 2020 that: (a) whether the company is regular in depositing undisputed statutory dues including Goods and Services Tax, provident fund, employees' state insurance, income tax, sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and any other statutory dues to the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as on the last day of the financial year concerned for a period of more than six months from the date they became payable, shall be indicated; (b) where statutory dues referred to in sub-clause (a) have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending shall be mentioned (a mere representation to the concerned Department shall not be treated as a dispute). OR Computer software and patents are examples of intangible assets. The value of intangible assets may diminish due to efflux of time, use and/ or obsolescence. The diminution of the value represents cost to the entity for earning revenue during a given period. Unless this cost in the form of amortization is charged to the accounts, the profit or loss would not be correctly ascertained, and the values of intangible asset would be shown at higher amounts. The auditor should: - Verify that the entity has charged amortization on all intangible assets;Verify that the amortization method used reflects the pattern in which the asset's future economic benefits are expected to be consumed by the entity.The auditor should also verify whether the management has done an impairment assessment to determine whether an intangible asset is impaired. For this purpose, the auditor needs to verify whether the entity has applied AS 28 Impairment of Assets for determining the manner of reviewing the carrying amount of its intangible asset, determining the recoverable amount of the asset determine impairment loss, if any.
Topics: Audit of Items of Financial Statements, Audit Report
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