A peculiar case I need to share and an honest opinion is required.
A Resident Welfare Association (RWA) was formed after the builder failed to handover the Assets and Liabilities of the Builder Group. The Association took over the management of the building suo-moto from say beginning of June 2019. The first Statutory Audit Report (2019-20), showed the F/A as NIL and hence no depreciation was there in I&E Account.
The second year, the earlier auditor was removed and a new statutory auditor was appointed. The new Auditor, in his Audit Report of 20-21, included a valuation of the F/A which are physically there in the premises, and included the same as valued at end of 2016-17 and charged depreciation for 4 years starting from 2017-18 to 2020-21 and thereby reflecting the same in the B/S and I&E Account and giving a contra effect on the Liabilities side.
My question is:
What is the system of valuation? and whether this procedure can be adopted