Page 209 - CA Final PARAM Digital Book.

presume that the demand by Income Tax authority is without any basis.
Conclusion
➢ Therefore, As per AS 29 partly to the extent the company considered that the demand is based on
some logical basis, that amount may be provided for and the remaining may be disclosed as the
contingent liability.

Further, it should be brought to notice of members by reporting under Clause (vii)(b) of Para 3 of
CARO, 2020
Author’s Note
• In the question instead of Custom duty had there been GST then it would also have attracted
reporting under clause (vii) (a) since GST being a periodical payment.
• Clause (vii)(a) includes statutory dues related to 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

QNO Cl 7--Statutory Due (PF Not Deposited) Old Course – (M04E, M08E, N11R, M12R, N15R,
401.000 TITANIUM CNO—CARO.160 M16E, PM17, N17M, M18M, N18M)
During the course of audit of CT Ltd. for the financial year 2016-17, it has been noticed that Rs. 2.00 lakhs
of employee contribution and Rs. 9.50 lakhs of employer contribution towards employee state insurance
contribution have been accounted in the books of accounts in respective heads. Whereas it was found
that Rs. 4.00 lakhs only have been deposited with ESIC department during the year ended 31st March
2017. The Finance Manager informed the auditor that due to financial crunch they have not deposited
the amount due but will deposit the amount overdue along with interest as and when financial position
improves. Comment as a statutory auditor.
Answer Part I -- Relevant Standards & Laws
▪ SA 250 “Consideration of Laws and Regulations”
▪ Clause (vii)(a) of Para 3 of CARO, 2020
Part II -- Requirements of Relevant Standards & Laws
➢ Clause (vii)(a) of Para 3 of CARO, 2020

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

➢ Requirements of SA 250 “Consideration of Laws and Regulations”
Refer from QNO 399.000
Part III– Case Discussion
➢ Rs. 2.00 lakhs of employee contribution and Rs. 9.50 lakhs of employer contribution towards
employee state insurance contribution have been accounted in the books of accounts but only Rs.
4.00 lakhs only has been deposited with ESIC department during the year ended 31st March, 2017.
Conclusion
➢ In the instant case, even though accrual principles have been followed, disclosure of non-payment
is necessary. The auditor should disclose the fact of non-payment of rupees 7.50 lakhs in his report.

QNO Cl 8 & 18 Case Study Old Course – (N22E)
402.500 TITANIUM CNO— CARO.180
You are appointed as the Auditor of XMP Pvt. Ltd. for financial year 2021-22 after the resignation of RS &
Co. Chartered Accountants, as statutory auditor of the company. RS & Co., had certain concerns on the
accounting matters of the company, leading to change of auditors. All the compliances under Sections 139
and 140 are made by the company with regard to resignation and appointment.

During the course of audit, it came to your notice that a survey has been conducted on December 7, 2021
by the Income Tax Department and department has unearthed unrecorded sales of ` 5 lakhs which had
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