How the auditor verifies the Leasehold Property?

Leasehold Property means letting out a property for a specified time period. Various steps involved in the verification of leasehold land are:

The auditor should inspect the lease deed and ascertain the amount of premium, if any, paid for securing the lease and its terms and conditions. The lease should be duly registered. A lease exceeding one year is not valid unless it has been granted by a registered instrument under Section 107 of the Transfer of Property Act.

He should ascertain that all the conditions of the lease are duly complied with like payment of ground rent on due date, insurance of property on land, its maintenance etc.

He should examine the counterpart of the tenants agreement, if the part of the leasehold land has been sub-let.

He should ensure that both the outlay and the legal expenses, incurred to acquire the lease are being written off as a rate which would completely wipe off the asset over the unexpired term of the lease.

Where lease rent is paid annually, see that full lease rent for the year has been debited to revenue.

Where no premium has been paid for the acquisition of the leasehold land, see that it does not appear in the books as an asset with a value, even though the concerned land may have considerable value.

The auditor should see that relevant particulars of the lands have been entered in the fixed assets register.

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