Know The Auditor’s Duty Of How To Consider The Contingent Liabilities And Taxation Records Of The Business

Know The Auditor’s Duty Of How To Consider The Contingent Liabilities And Taxation Records Of The Business

An Auditor should keenly check with the different contingent liabilities made the business company. This is possible by examining in detail the Articles of Association which lay the definite rules and possibilities with respect to this regard and the due provisions that should be made for such a liability.

Apart from this, there exist certain special liabilities where no single provision is detailed on the books but a note is made at the foot of the balance sheet. For example, the case of Bills receivable which have been discounted and is not matured at the date as per the balance sheet and also the arrears that appear on the cumulative dividends and so on.

  • All these should be examined by the Auditor and he should definitely ascertain the sum to be reserved for this purpose.
  • On this regard, he can analyze the Director’s Minute book on account of the correspondence made with the legal advisers and also, the data collected from the various executives of the business.
  • Thus, he has to confirm if adequate provisions had been made with this regard for all those special liabilities and if in case the Auditor is not satisfied with the reports, he must document it in his report.

While inspecting it has to be seen that the desires of the Company Act regarding contingent liabilities comply with the Balance sheet on the liabilities side.

An Auditor’s role in taxation scheme of a business company

Taxation provisions are important for every business company. Still, the point that needs to be noted is that the taxation records cannot be determined accurately until the final liability on this account is evaluated. At least, a rough estimate for the liability is necessary.

  • It is the duty of the auditor to evaluate the amount accounted to arrive at the provision that is expected to be made.
  • Also, after the completion of the whole assessment process, the Auditor must recognize if the excess or short provision is appropriately attuned in the book of record.
  • In case of the pending appeal and the liability being challenged, this situation should be properly studied by the Auditor and should be detailed in the balance sheet.

If any misappropriate work or false information is being documented in the company’s record book, a reasonable answer should be obtained from the corresponding official and thereby, all the Auditor’s doubts should be solved accordingly.