Page 178 - CA Inter Audit PARAM

CA Ravi Taori

were credited by bank subsequently by tallying to the bank statement of subsequent period. For
any instances related to cheques not cleared beyond reasonable time, the auditor should seek
brief descriptions from the management and in case such explanations are found to be
unsatisfactory, the auditor should verify the revenue recognition related to such parties was in
order and as per the Company’s revenue recognition policy.

• Checking of all material reconciling items included under amounts or charges debited/ credited by
bank but not accounted for by requesting for bank statements for the period under audit and
tallying the same. If the amounts are found to be material, the auditor should ensure that the
management records the adjustments for the same in its books of account.

QNO CASH & CASH EQUIVALENT DISCLOSURE Old Course – (M23R/M23M)
AIFS.42 Bhaskar CNO - AIFS-P2.100
What are the required disclosures for cash & Cash equivalents to be made by the company as per Schedule

III (Part I) to Companies Act, 2013?
The following are the required disclosures for cash & Cash equivalents to be made by the company as per
Schedule III (Part I) to Companies Act, 2013:
Cash and cash equivalents
(i) Cash and cash equivalents shall be classified as:
(a) Balances with banks;
(b) Cheques, drafts on hand;
(c) Cash on hand;
(d) Others (specify nature)

(ii) Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated.
(iii) Balances with banks to the extent held as margin money or security against the borrowings, guarantees,
other commitments shall be disclosed separately.
(iv) Repatriation restrictions, if any, in respect of cash and bank balances shall be separately stated.
(v) Bank deposits with more than 12 months’ maturity shall be disclosed separately.

QNO B/S (Loans & Advances + Finished Goods, Valuation) Old Course – (N18E/M20M)
AIFS.45 Bhaskar CNO - AIFS-P2.060/ AIFS-P2.120
Write the audit procedures to be performed as an auditor for valuation (assertion) of following:
(i) Loans and Advances and other current assets.
(ii) Finished goods and goods for resale.
Answer ➢ Valuation of Loans And Advances and Other Current Assets:
(Allowances / Provisions)
Process followed
Review the process followed by the Company to derive an allowance for doubtful accounts.
This will include a consistency comparison with the method used in the last year, and a
determination of whether the method is appropriate for the underlying business
environment.
Ageing report followed by Scrutiny
• Obtain the ageing report of loans and advances, split between not currently due,
30 days old, 30-60 days old, 60- 180 days old,180-365 day sold and more than 365
days old. Also, obtain the list of loans and advances under litigation and compare
with previous year.

• Scrutinize the analysis and identify those loans and advances that appear
doubtful. Discuss with management their reasons, if any of these loans/ advances
are not included in the provision for bad recoverable; Perform further testing
where any disputes exist; Reach a final conclusion regarding the adequacy of the
bad and doubtful loans/ advances provision.
Approval of write-offs or other reductions
Check that write-offs or other reductions in the recoverable balances have been approved
by an appropriate and authorized member of senior management, for example the financial

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