Best Manufacturers Limited is a manufacturing company and has entered into an agreement In February 2017 with CISCA Brothers for buying land in order to set up their new manufacturing unit. As per the agreement, Best Manufacturers were required to pay Rs.20 Lakhs as signing amount and the balance amount was required to be paid in three instalments of Rs.25 lakhs each in the month of May, July and September 2017. The title deed for the land was to be transferred after the payment of second instalment in July 2017, so in the accounts for the year 2016-17 of the Best Manufacturers the payment of signing amount was booked as an expense. Your firm have been appointed as auditor of financial statements of Best Manufacturers Limited for the year 2016-17. There is conflict between Financial Reporting Framework and Legal requirement, so what will be the duty of your firm in such case? - Study24x7
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Finance/CA
40 followers study24x7 05 Apr 2021 04:25 PM study24x7 study24x7

Best Manufacturers Limited is a manufacturing company and has entered into an agreement In February 2017 with CISCA Brothers for buying land in order to set up their new manufacturing unit. As per the agreement, Best Manufacturers were required to pay Rs.20 Lakhs as signing amoun...

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A

Incorporate the changes in financial statements as per the legal requirement.

B

As the title deed has not been transferred in favour of the company in the year 2016-17, there is no need to review the payment in terms of Accounting Standard or any other legal requirement.

C

Take management representation on the same.

D

Discuss the matter with management and ensure disclosure of the same in notes to accounts. In the absence of same, the auditor may consider issuing modified opinion.

MBA/Management CLAT/CE-Law Finance/CA
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