Page 210 - CA Final PARAM Digital Book.

been made in cash on different dates during the year 2020-21. XMP Pvt. Ltd. has purchased gold from
such collections and these transactions are not recorded. Company surrendered and disclosed these
transactions before the assessing officer and paid taxes thereon. However, company has not recorded
those transactions in books of account even after surrender before Income Tax authorities.

You want to report the above matters in CARO, but the management requested you not to report them.
Comment with respect to auditor's response to the management and his reporting requirements to the
shareholders.
Clause (xviii) of Paragraph 3 of CARO, 2020:
In the given situation of XMP Pvt Ltd, the auditors RS & Co. resigned due to concerns on the accounting
matters of the company. However, all the compliances regarding resignation and appointments discussed in
section 139 and 140 of the Companies Act, 2013 are also being complied with. The auditor would be
required to report the same in CARO, 2020 as per Clause (xviii) of Paragraph 3 of CARO, 2020 given
hereunder:

Clause (xviii) of Paragraph 3 of CARO, 2020 requires the auditor to report whether there has been any
resignation of the statutory auditors during the year, if so, whether the auditor has taken into consideration
the issues, objections or concerns raised by the outgoing auditors.

Clause (viii) of Paragraph 3 of CARO, 2020:
Further, the auditors noticed that a survey was conducted by the Income Tax Department and unrecorded
sales of Rs 5 Lakhs were unearthed which had been made in cash on different dates during the year. XMP
Pvt Ltd. has also purchased gold and the transactions remained unrecorded. Though Company surrendered
and disclosed these transactions before the Assessing Officer and paid taxes thereon. The auditor would be
required to report in CARO as per Clause (viii) of Paragraph 3 of CARO, 2020.

Clause (viii) of Paragraph 3 of CARO, 2020 requires the auditor to report -whether any transactions not
recorded in the books of account have been surrendered or disclosed as income during the year in the tax
assessments under the Income Tax Act, 1961 (43 of 1961), if so, whether the previously unrecorded income
has been properly recorded in the books of account during the year.

Since it is a statutory obligation on the part of the auditor to report in terms of CARO, 2020 as given above
and consequently management’s request to the auditor that not to report the above transactions is not
tenable.

QNO Cl 9--Default in Repayment (Amount Repaid after Year End) Old Course – (M13E, N14E, M16M,
403.000 TITANIUM CNO—CARO.200 PM17, M18R)
C Limited has defaulted in repayment of dues to a financial institution during the financial year 2016-17
and the same remained outstanding as at March 31, 2017. However, the Company settled the total

outstanding dues including interest in April, 2017 subsequent to the year end and before completion of
the audit. Discuss how you would deal with this matter and draft a suitable Auditor's Report.
Answer Part I -- Relevant Standards & Laws
▪ Schedule III to the Companies Act, 2013
▪ Clause (ix) of Para 3 of CARO,2020
Part II -- Requirements of Relevant Standards & Laws
➢ Schedule III to the Companies Act, 2013
Reporting for Default in Repayment of Dues: As per the general instructions for preparation of
Balance Sheet, provided under Schedule III to the Companies Act, 2013, terms of repayment of
term loans and other loans is required to be disclosed in the notes to accounts. It also requires
specifying the period and amount of continuing default as on the balance sheet date in repayment
of loans and interest, separately in each case.

➢ Clause (ix) of Para 3 of CARO
Whether the company has defaulted in repayment of loans or other borrowings or in the payment
of interest thereon to any lender, if yes, the period and the amount of default to be reported as
below:
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