A company is depreciating its fixed assets on WDV method at a rate higher than the rate prescribed the Income-tax rules.comment as auditor

Auditing and Assurance Revision Questions and Answers

Answer
As per set standards, the company must consider the useful life of the fixed assets i.e. the rate which is adequate to write off the assets over its normal life. If the rate so arrived at is higher than the corresponding rate under the Income Tax rules, the Company should provide depreciation at such higher rate.
The determination of the commercial life of an asset is a technical matter and the decision of the board of directors should ordinarily be accepted the auditor unless he has reasons to believe that such decision is grossly incorrect. The charging of depreciation at a higher rate than the rate prescribed the I.T. Rules, will not impair the true and fair view of the financial statements, unless the rate chosen the directors is considered grossly incorrect the auditor.



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