Q. Provision for Gratuity not provided in Books of Accounts?

Question

Company having employed more than 50 employees is currently in 2nd year of operations. Company has no policy for payment of Gratuity to its employees nor any contribution is made to any Approved Gratuity Fund. What is responsibility of auditor in such a case?

Will the situation be different if the company is in 6-7th year of its operations and employees have served 5 years of period of employment with the company??

Answer 1

The company has to provide for the connectivity from the first year itself as it is following the accrual basis of accounting. In case the gratuity is not provided on actual valuation then the auditor will have to modify his auditors report accordingly