09 June 2010
Dear Sir, Please consider the example: XYZ is a private Ltd company,who follows the Depreciation method's according to the Income tax Act and not as per Companies Act from the date of Incorporation of Company itself. This is the Third year of company in operation. Query: 1.If management not willing to provide Depreciation as per companies Act, How should Auditor Quantify and Qualify the Audit Report? 2. As a statutory Auditor how should deal this issue according to CARO? Assume CARO is applicable to this company? 3. If company willing to provide Depreciation at the inception of operation itself What is the effect of Adjustmnet in Opening Reserve and Deferred tax Adjustment?
09 June 2010
The rate of depreciation given in the Companies Act are only indicative. The management has the option to charge depreciation at other rates. Hence, in view, the matter is not to be highlighted anywhere.
09 June 2010
Dear sir, The rate of Depreciation can be changed at the option of the Management; However, Higher Rate only be allowed and not lower rate than prescribed under Schedule XIV of the Companies Act. My argument was the company is not following the method of depreciation under the companies Act and they followed Income tax Act. So, here the violation of Section 350 read with section 205(2). My query was how should Auditor should qualify this issue in terms of materiality?
CAclubindia
