Because of the close relationship existing between a holding and subsidiary company, it is necessary for an auditor to find out that the debts shown as outstanding from the subsidiary are genuine and have resulted from transactions entered into in the normal course of business. Therefore, the balancenoutstanding should not only be confirmed with the statements of account received from the subsidiary but its basis should also be inquired into. If the debt is covered an agreement, the same should also be referred to. If any security is deposited against due repayment of advances the same should be inspected. Debts due from a subsidiary company should be disclosed duly classified in the same way as sundry debtors.
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