Page 259 - CA Inter Audit PARAM

CA Ravi Taori
indicate if in
dispute
1 2 3 4 5 6

The auditor should state in the Reason (column 6) for not being held in name of company
as follows
“Properties obtained during the year through barter deals and included in the PPE in the
books of accounts on the basis of possession letter only”

QNO Cl 1 & Cl 2 (Theory) Old Course--(M17R/N19R/M22M/N22M)
CARO.09 Bhaskar CNO – CARO.070/CARO.080
Discuss the matters to be included in the auditor's report regarding Plant, Property & Equipment and
inventories as per CARO, 2020.

OR
Discuss the reporting requirements as per CARO, 2020, regarding Inventory
Answer ➢ Matters to be included in the auditor's report- fixed assets and inventories (CARO, 2020) – The
auditor's report on the accounts of a company to which this Order applies shall include a statement
on the following matters, namely: -
• Plant, Property & Equipment
• Refer from QNO CARO.05 above.

• Inventories
• whether physical verification of inventory has been conducted at reasonable intervals
by the management and whether, in the opinion of the auditor, the coverage and
procedure of such verification by the management is appropriate; whether any
discrepancies of 10% or more in the aggregate for each class of inventory were noticed
and if so, whether they have been properly dealt with in the books of account;
• whether during any point of time of the year, the company has been sanctioned
working capital limits in excess of five crore rupees, in aggregate, from banks or
financial institutions on the basis of security of current assets; whether the quarterly
returns or statements filed by the company with such banks or financial institutions are
in agreement with the books of account of the Company, if not, give details;

QNO-- Cl 2 - Case Study Reporting Requirement New Course – (N23E)
CARO.09.50 Bhaskar CNO – CARO.080

UVW Ltd. a biopharma company and global manufacturers of select critical care medical products has been
sanctioned working capital limits of ₹ 5.99 crores from a nationalized bank on the basis of security of
current assets. During the year under audit, the statutory auditor of UVW Ltd. considers that inventory is
material to the financial statements and performs audit procedures over the company's final inventory
records to determine whether they accurately reflect actual inventory count and without any major
discrepancies for each class of inventory. What are the reporting requirements under CARO 2020 in this
case?
Answer The auditor’s report, pursuant to CARO 2020, in respect of physical verification of inventory and in
respect of sanctioned working capital, shall include the statements as follows:

(a) Whether physical verification of inventory has been conducted at reasonable intervals by the
management and whether in the opinion of the auditor, the coverage and procedure of such
verification by the management is appropriate: whether any discrepancies of 10% or more in the
aggregate for each class of inventory were noticed and if so whether such discrepancies have been
properly dealt within the books of account.

(b) whether during any point of time of the year, the company has been sanctioned working capital limits
in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security
of current assets; whether the quarterly returns or statements filed by the company with such banks

www.auditguru.in 8.29