Chapter 7.8
CARO
Question 1
The
Property, Plant
and Equipment of
ABC Ltd. included 25.75 crores of earth removing machines of outdated technology
which
had been
retired from active use and had been kept for disposal after knock down. These
assets
appeared at
residual value and had been last inspected ten years back. As an Auditor, what may
be
your reporting
concern as regards matters specified above?
(PYP 5 Marks, May '18,
MTP 4 Marks, May'20 &
April 21)
Answer 1
Disclosure in Audit Report: The auditor
is
required to
specifically include certain
matters as per CARO, 2016 (CARO
2020) under section 143 of the Companies Act, 2013.
According to clause (i) (a) of CARO, 2016 (CARO
2020)
the auditor
has to comment
whether the company is maintaining proper records showing full particulars,
including
quantitative
details and situation of fixed assets (Property, Plant &
Equipment) and
whether the
company is maintaining proper records showing full particulars of intangible
Assets ;
and as per
clause (i) (b) whether these fixed assets (Property, Plant & Equipment
and
Intangible
Assets) have been physically verified by the management at
reasonable
intervals; whether
any material discrepancies were noticed on such verification and if so, whether
the
same have
been
properly dealt with in the books of account;
EXAMINERS’ COMMENTS ON
THE
PERFORMANCE
OF
EXAMINEES:
CARO Reporting: Examinees
failed to
analyze the
reporting responsibilities of an auditor as per clause (i)(a), and (b) of
paragraph
3 of CARO,
to the given question. Some examinees explained the provisions of
Ind-AS
stating that the
company should treat machinery as an "asset held for disposal".
Chapter 7.8 CARO
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