The auditor should satisfy himself that debtors, loans and advances 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. According to Part I of Schedule VI to the Companies Act, 1956, debts outstanding for more than six months have to be shown separately. Further, all the sundry debtors; loans/advances including those advanced to subsidiary companies are required to be classified as under :

  1. Debts considered good in respect of which the company is fully secured.
  2.  Debts considered good for which the company holds no security other than the debtor’s personal security.
  3.  Debts considered doubtful or bad.

In addition, disclosure is also required of debts due by directors or other officers of the company or any of them either severally or jointly with any other person or debts due by firms or private companies respectively in which any director is partner or a director or a member. Debts due from other companies
deemed to be under the same management have to be disclosed along with the name of the companies. Further, a note should be appended to show the maximum amount due by directors or other officers of the company at any time during the year.

(Visited 121 times, 1 visits today)
Share this:

Written by