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25 or 30 lac cash balance in a audit firm

11 October 2019

Dear All,

i just want to clear that, one audited proprietorship firm have 25 or 30 lac rs in cash balance, is it ok to show that much cash balance in audit. ?

please clear this doubt

thank you.

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Bharat Bohra (306 Points)
Replied 20 October 2019

It depends on the nature of business being carried out
suppose if a business is a dealer doing only cash sales then it's one of the possibility to have huge cash in hand..
but generally you should check out the balance sheet to ascertain whether such a huge amount of cash maintained is justifiable or not
for instance
1. check unsecured loans if the business is having unsecured loans then you should raise a query seeking reply for not paying in spite of having huge cash balance
2. payment to creditors are being made if amount is outstanding for many no of days and still payment is not made then you should ask a clarification on it
3. generally no one maintains such a huge amount of cash in hand except in some exceptional circumstances since it involves lost of opportunity cost hence query should be raised on the same why such a huge amount is kept idle

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