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Q. > Please Help: Audit
The Society land conveyance deed was executed in favor of the society on 01.Oct 2019 i.e. during the FY 2019-20. The Land now becomes asset of the Society. However, while preparing the financial statements, neither the Managing Committee nor the Auditor considered this fact to include this land as an asset of the Society. There are few more assets which are also not considered while preparing the financial statements. When brought it to the notice of both, the auditor is of the opinion that this is a technical error and will be corrected in future years. My question is that, does this amount to negligence on the part of Auditor? Can it be referred to disciplinary committee? Thanks
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Hitesh M Shah
24-Aug-2021 , 07:59:42 pmGenerally Land is acquired by the builders / developers and he is duty bound to convey the land ownership title once the occupation certificate is received and society is registered. If the society has incurred any expenses for conveyance say stamp duty, registration fees and lawyers charges then obviously the said expenditure would have been capitalized as Land & Building. If not then what. An auditor can not be held professionally negligent since it is the improvement of rights and not the acquisition of assets by the society itself. Moreover even if it is considered as technical error it can not be inferred as mis-statement of material nature if it can be overcome in subsequent period. Secondly the preparation and presentation of the financial statement is the responsibility of management or the body of governance and not the auditor. To my mind yes if the cost of acquisition then in the double entry book keeping it can not escape the attention of the auditor. If no cost of acquisition is involved then tell me how will it enter the books of accounts except a proper notes to account to that effect. I am of the opinion that this is not a fit case to refer to Disciplinary Directorate. If the society is in Maharashtra then please refer to Section 77 of the Maharashtra State Cooperative Societies Act, 1960 which says that such an act would not invalidate the financial statement. etc.