December 29, 2021

The objective of AS-5 on the above subject is to prescribe the classification and disclosure of certain items in the statement of profit and loss so that all enterprises prepare and present such a statement on a uniform basis. This enhances the comparability of the financial statements of an enterprise over time and with the […]

Accounting Standard – 4 on “Contingencies and Events occurring after the Balance Sheet Date” deals with the treatment of contingencies and events occurring after the balance sheet date in financial statements. According to it, events occurring after the balance sheet date are those significant events, both favourable and unfavourable, that occur between the balance sheet

Accounting Standard 29 issued by the ICAI deals with the “Provisions, Contingent Liabilities and Contingent Assets”. According to it a contingent liability is  a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within

Directors of a company in exercise of the powers vested in them may raise a loan by issue of debentures with or without creating a charge on the assets of the company. Debenture holders do not carry any voting right. When a charge is created over some of the assets, debentures are described as mortgage

There are seven clauses under paragraph 4(iii) of the Order. It is clarified that the auditor’s comments on all the seven clauses are to be made with reference to the companies, firms or other parties covered in the register maintained under section 301 of the Act. 1. Has the company granted any loans, secured or

In addition to the procedures described above, the auditor· should also employ the following procedures in the case of audit of a company. In determining whether the loans obtained by the company are within its powers, the auditor should scrutinise its memorandum and articles of association and also examine whether the provisions of sections 292

In addition to the audit procedures discussed above, the following analytical review procedures may often be helpful as a means of obtaining audit evidence regarding the various assertions:  comparison of closing balances of loans and borrowings, creditors, etc., with the corresponding figures for the previous year;  comparison of the relationship between current year creditor balances

The auditor should satisfy himself that the liabilities have been disclosed properly in the financial statements. Where the relevant statute lays down any disclosure requirements in this behalf, the auditor should examine whether the same have been complied with. In some cases loans are guaranteed by third parties in whose favour the assets of the

The term ‘contingent liabilities’ refers to obligations relating to past transactions or other events or conditions that may arise in consequence of one or more future events which are presently deemed possible but not probable. Contingent liabilities may or may not crystallize into actual liabilities. If they do become actual liabilities, they give rise to

The term ‘provision’ means amounts retained by way of providing for depreciation or diminution in value of assets or retained by way of providing for any known liability the amount of which cannot be determined with substantial accuracy. Provisions include those in respect of depreciation or diminution in the value of assets, product warranties, service

Verification of liabilities may be carried out by employing the following procedures:  examination of records;  direct confirmation procedure;  examination of disclosure;  analytical review procedures, obtaining management representations. The nature, timing and extent of substantive procedures to be performed is, however, a matter of professional judgement of the auditor which is based, inter alia, on the

General Considerations Liabilities are the financial obligations of an enterprise other than owners’ funds. Liabilities include loans and borrowings, trade creditors and other current liabilities, deferred payment credits, instalments, payable under hire purchase agreements, and provisions. Besides liabilities, this Guidance Note also deals with contingent liabilities, i.e., obligations relating to past transactions or other events