I have the following aspects to be considered for finalizing a government audit:-
The entity is a SPV formed as a company with equity participation from State
corporation with the main object of improving
the infrastructure and upgradation of road facilities in the industrial estate.The Owners of the estate are also represented as directors along with directors/executives of Development Corporation as exofficio directors of the Company.
The project is completed 3/4 years back.The contractor settlement is pending arbitration award.The company has kept the contributions received in Fixed Deposits with Bank earning interest.
The share of collection received towards parking fees ,Rent ..maintenance from the unit holders has been transferred upto 2010-11 and thereafter not done.
During the audit period 2016-17 a portion of collection as mutually agreed has been credited to the company account by way of Journal.As the company has no technical staff at present the entire share of maintenance charges collected by the Development corporation as the same was done by the latter.
We have insisted the auditee company to include these aspects in Notes forming part of accounts .My query to the Group is that apart from disclosure in the Notes to accounts is the matter of adjustment of maintenance amount require formal adoption in Minutes of the company meetings .
What amount to be disclosed as income Gross amount as income and adjusted amount as Expenses .
There is no mention / record as to Collections realizable from Industrial estate unit holders since the collection ( agreed share) is accounted on receipt basis ,
As statutory Auditors of the Company We had requested the company to ascertain the quantum and feasibility of recovery from the corporation relating period after 2011-12.
While We await the information We seek your views as to the following aspects:-
* The amount shared , in our opinion,requires audit certification from the state enterprise auditors total collections and basis received and the company share portion.
* The feasibility of recovery of collection from State Development Corp for the period after 2011-12 to be explored and quantified.What kind of disclosure required in the Accounts?
* Is the company entitled to interest on amount not received or as may be mutually agreed upon for possible waiver.
* The interest income on deposits and the share of collections will not be sufficient to pay with the current stage of arbitration swinging in favour
Of the contractor.How the deficiency be made good? What is the logical end for the company to apply for voluntary liquidation?
CA S Balasubramanian.
CAclubindia
