LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Audit of Drawing Power (DP) w.r.t Working Capital

25 August 2022

Whenever we are auditing drawing power w.r.t working capital loans, we calculate it based on quarterly statements submitted by the company to banks. My question is how to verify the figures mentioned in such quarterly statements with books?

Also, what is the resolution if discrepancies arise between the values as per books & quarterly statements?

Reply
Follow
Share

2 Replies

sabyasachi mukherjee (26057 Points)
Replied 25 August 2022

If the discrepancies are materially larger in compared to the quantum of the loan then it's better to withhold and report and disclose as per standards.

Chirag Agarwal (Student) (25 Points)
Replied 25 August 2022

Nice Queston.

To verify following points must be taken into consideration:

1. Verify the opening balances of Books of Accounts with the Audit report of borrower.

2. Check bank statements to ensure that entries have been passed into correct party account.

3. One may also check party balances with the Thirty party statements or balance confirmation certificates.

4. Check whether physical balances of stocks tallied with Books.

5. Check other elements of Current Assets and Current Liabilities to ensure their correctness level.

If after checking any discrepancies appears, then one must report to the bank or lender. But before that, as a professional courtesy it must be discussed with the management first.