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An accounting policy note states: "Balances of debtors, creditors and loans and advances are subject to reconciliations and confirmations." Under good financial reporting practice, this disclosure is:
AProblematic — it raises uncertainty about whether the balances are appropriately stated AND about the audit process; better practice is to indicate the materiality of unreconciled amounts and the status
BAcceptable as a standard accounting policy disclosure
CMandatory under SEBI LODR for all listed companies
DRequired by Ind AS 1 in every set of financial statements
Answer & Solution
Correct answer: A. Problematic — it raises uncertainty about whether the balances are appropriately stated AND about the audit process; better practice is to indicate the materiality of unreconciled amounts and the status
A vague disclosure that all key balance-sheet items are subject to reconciliation undermines the reliability of the financial statements and the audit process. Best practice is to specify the materiality of unreconciled balances, the steps being taken, and the expected timeline. Generic boilerplate language like this should be avoided — Schedule III and Ind AS demand specific, meaningful disclosure.
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