Comment with reference to the provisions of CARO, 2020: (b) During the audit, CA Kunal found that physical verification of inventories of the…

As per clause (3)(ii)(a) of CARO, 2020, the auditor is required to report whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed on physical verification conducted by management and if so, whether they have been properly dealt with in the books of account. Computation of % of discrepancies found in physical verification and Books of Accounts Particulars As per physical verification As per books of accounts % Change Raw material 1,160 1,180 1.72% Work-in-progress 410 430 4.87% Finished goods 2,500 2,790 11.6% Stores and spares 220 180 18.18% Since, the discrepancies in the value of finished goods (11.6%) and stores and spares (18.18%) exceed the 10% threshold specified under clause (3)(ii)(a) of CARO, 2020, the auditor should report these discrepancies accordingly.