how should qualify a audit report.
This query is : Resolved
23 July 2010
My Client received an order from court according to which he will receive interest of Rs. Approx 1Cr.(order was Under Interest on delayed payments to small scale and ancillary industrial under takings act, 1993.)
The order was received on june 2010,
1. HOW SHOULD WE DISCLOSE IT IN BALANCE SHEET OF 2009. ( AS CASE WAS 90% IN FAVOIRABLE CONDITION ON THAT DATE).
2.IF ASSESSEE CONSIDER IT INCOME OF 2009 THAN HOW SHOULD WE QUALIFY THE REPORT.
The order was received on june 2010,
1. HOW SHOULD WE DISCLOSE IT IN BALANCE SHEET OF 2009. ( AS CASE WAS 90% IN FAVOIRABLE CONDITION ON THAT DATE).
2.IF ASSESSEE CONSIDER IT INCOME OF 2009 THAN HOW SHOULD WE QUALIFY THE REPORT.
31 July 2010
it has nothing to do with 90% or 99.99% or even 100% favourability.
amount receivable is a contingent asset in your case, which is neither recognised nor disclosed. you need to wait untill the court's final order. and then account for the same.
however it is advisable that the same is accounted on receipt. as the other party will always have a right to proceed against the order, so that the uncertainity in the recognition of such income will not be there.
in your case, if the same has been taken as an income without being the order was received, then you have to give a note in the notes to accounts and draw attention in your audit report, or qualify your audit report with such note, stating that there is uncertainity in the recoverability of such income.
amount receivable is a contingent asset in your case, which is neither recognised nor disclosed. you need to wait untill the court's final order. and then account for the same.
however it is advisable that the same is accounted on receipt. as the other party will always have a right to proceed against the order, so that the uncertainity in the recognition of such income will not be there.
in your case, if the same has been taken as an income without being the order was received, then you have to give a note in the notes to accounts and draw attention in your audit report, or qualify your audit report with such note, stating that there is uncertainity in the recoverability of such income.
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