Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Audit Report and Reporting under CARO

During the year, Kaveri Pharma Ltd (not a loan-giving company) granted loans totalling Rs 50 crore. Loans of Rs 8 crore that fell due were extended, and fresh loans of Rs 2 crore were granted to the same parties to settle overdues of earlier loans. What should the auditor report under clause 3(iii)(e)?

The aggregate of dues extended (Rs 8 crore) and settled by fresh loans (Rs 2 crore) is Rs 10 crore. As a percentage of the Rs 50 crore of loans granted during the year, this is 20%, and both figures are reported under clause 3(iii)(e).

  1. ARs 8 crore, being 16% of loans granted during the year
  2. BRs 10 crore, being 20% of loans granted during the yearCorrect
  3. CRs 2 crore, being 4% of loans granted during the year
  4. DRs 10 crore, being 25% of loans granted during the year

Explanation

Clause 3(iii)(e) requires the aggregate of dues renewed or extended or settled by fresh loans, with its percentage to total loans granted during the year. Aggregate is 8 + 2 = Rs 10 crore, and 10/50 = 20%. Rs 8 crore alone ignores the fresh loans, and 25% wrongly uses a base of Rs 40 crore.

Did you get it right without looking?

One question tells you little. A timed set on Audit Report and Reporting under CARO shows your real accuracy, how long you take and where you lose marks.

Practise Audit Report and Reporting under CAROFree diagnostic mock

More Audit Report and Reporting under CARO questions