TAXAJ

All you need to know about Auditing

Definition. An audit is the thorough checking of books of accounts by an auditor, mostly a qualified chartered accountant. CA also conducts physical checking of bills and vouchers to ensure that all departments follow a robust documented accounting system. The primary purpose of Auditing is to verify the accuracy of book s of accounts of any organisation.


Description: Audit can be done internally by employees or heads of a particular department and externally by an outside firm or an independent auditor. The idea is to check and verify the accounts by an independent authority to ensure that all books of accounts are fairly done. That accountant has done No misrepresentation or fraud.


All the public listed firms have to get their accounts audited by an independent auditor before declaring their results for any quarter.

Who can perform an audit?
There are designated bodies in each country that conducts audit. In India, ICAI is the body whose members conducts audits here. CA's are entitled and equipped with all the know-how of performing an successful audit here. Similarly, in USA they have CPA i.e. Certified Public Accountant who are their CA kind of professionals. Likewise every country has his own super-brains who are entitled for these kinds of works

Audit is an extensive procedure that is completed in various step, viz.
a. To define the scope of work.
b. To plan the audit, details of deadlines, departments, etc
c. To compile the information like the accounts, key financial statements, etc.
d. The auditor’s report

Assurance

Assurance services are an independent review of specific deals, documents or transactions that can prove their reliability, correctness, and validity. Team Taxaj provides its clients with a clear picture of the financial risks and steps to prepare themselves. The process involves an independent examination to help the client make an informed decision. The focus of our assurance services is to help our clients achieve their desired business goals with transactions that support and boost their business.

Financial Statement Audit

We, Team Taxaj, has a deep understanding of your business. With this approach as an audit firm, it becomes smooth and easy for the industry you operate in to gets acquainted with the practices going on in the industry. The Cohesity enables us to design an effective audit plan. Our procedure is designed to accommodate all the accounting guidelines and principles issued by the regulatory board regularly.

IFRS transition & Implementation Services

IFRS has become the global accounting reporting standard. However, many companies seem unaware or unprepared for the complexities this change represents. Business transformation to IFRS affects almost all the business functions of an enterprise, such as Organisation structure, Legal contracts, accounting and finance, taxation, corporate responsibilities, and executive compensation. Conversion to IFRS is a big challenge for companies. At Team Taxaj, we aim to add value to this conversion process and help our clients realise many of the opportunities this change presents. We assist in developing plans for implementing the necessary changes By assessing the likely impact of this conversion across all the business functions

Compliance Management Audit

Every organisation today faces a very complex compliance environment irrespective of its size. Any non-compliance will lead to penalties, fines and, more importantly, risk of harm to its reputation. In this scenario, a well experienced and competent compliance management team comes into play.

We at Team TaxaJ work with our clients to understand the business and industry they operate and form an integrated strategy to ensure that all the compliance requirements get fulfilled in due time. Our efficient working allows the organisation and management to focus on other essential areas and not waste time and efforts on complicated compliance.

GST Audit

Audit under GST involves examining records, returns and other documents maintained by a GST registered person. GST Audit ensures the correctness of turnover declared, taxes paid, refund claimed, input tax credit availed and assess other such compliance under GST Act to be checked by an authorised expert.

GST is a trust-based taxation regime wherein a taxpayer must self-assess his tax liability, pay taxes and file returns. Thus, to ensure whether the taxpayer has self-assessed his tax liability correctly, a robust audit mechanism is a must. The government takes various measures for the proper implementation of GST, and audit is one of them.

Tax Audit Services

Tax Audit is verification of a business income or individual taxable income following the Income Tax Act or not. A tax Audit is a declaration of all the computable income or entitled to certain tax deductions or any tax offsets they had claimed in their tax return. Our taxation advisory team assist our clients in filing their tax audit returns in time.

Our Audit procedure has been designed to comply with Income Tax Act 1961.

Risk Advisory Services

Risk Advisory is a mechanism to manoeuvre through a challenging course. It helps a business to plan to minimize the risk. It also helps to identify the potential risk and mitigate that risk. It consists of services designed in fulfilling the strategic goals of an organization. It provides ready help to anticipate the risk and meet regulatory compliance requirements. We Taxaj assist our clients on various aspects like controls, calculated-risk, efficient processes, governance and timely compliance requirements. We also support our clients with identifying potential risk and further manage that risk. We also assist them in dealing with the consequences in cases where risk becomes a reality.

Internal Audit Services

At present times, internal Audit is seen and implemented as a critical strategic tool for the company. A well-structured internal audit functions to reduce the challenges for management and audit committee. It serves the purpose for all other stakeholders as well. On the other hand, it adds value to the company in terms of books and records. We Taxaj, as an internal audit firm in India, ensure precisely that for our clients.  Internal Audit is a third-party evaluation of an entity's operations to improve performance, develop a strategy to manage the risks, maximise the entity's value, and identify an opportunity for improvement. Management often does Internal Audit as a procedure to clarify the effectiveness of the internal controls in place.

Information Technology (I.T.) Audit

Gone are the days of files and wardrobes. Today every company works in emails, and most of the departments have also gone cent per cent online. An apparent condition Information Technology & I.T.E.S. is the new regular and mandatory part of the operations at any organizations, which makes an I.T. audit a crucial step in maintaining stability in an organization. Assessment of I.T. is an examination of the Information technology infrastructure to assess its effectiveness. Audit performance has its alignment with the objective of the entity. It is crucial to ensure that the I.T. controls are in place and are enough to protect the organization’s assets, data, and information, or if any further improvement is required.

Types of GST Audit

Types Performed by When Initiated
Turnover based audit Chartered Accountant or Cost Accountant appointed by the taxpayer If the Turnover exceeds 2 crores^ the taxpayer has to get his accounts & records audited
 Normal audit/ General AuditCommissioner of CGST/SGST or any Officer authorised by him On order of Commissioner by giving 15 days prior notice
 Special Audit A Chartered Accountant or Cost Accountant, nominated by Commissioner On order of Deputy/Assistant Commissioner with prior approval of Commissioner

Turnover-based Audit under Section 35(5) of CGST Act

Account auditing is mandatory If the annual turnover of a registered taxpayer is more than Rs. 2 crores^ in a financial year. This audit report has to be certified by a Chartered Accountant or Cost Accountant every year.

A financial year covers the 12 months from April of a calendar year to March of the following calendar year.

Aggregate turnover is calculated as follows:

Aggregate turnover = Value of taxable (inter-state and intra-state)supplies + exempt supplies + export supplies of all goods and services

 

The total turnover calculation must be PAN-based, which means that once the turnover under the PAN is more than Rs. 2 crores^, all business entities registered under GST for that PAN will be liable for GST audit for a financial year.

Items included while calculating turnover:

👉 All taxable (inter-state and intra-state) supplies other than supplies on which reverse charge is applicable.

👉 Supplies between separate business verticals.

👉 Goods supplied to/received from job worker on principal to principal basis.

👉 Value of all export/zero-rated supplies.

👉 Supplies of agents/ job worker on behalf of the principal.

👉 All exempt supplies. E.g. Agricultural produce supplied along with branded ready-to-eat food.

👉 All taxes other than those covered under GST Eg: Entertainment Tax paid on the sale of movie tickets.

Items Excluded while calculating turnover:

👉 Inward supplies on which tax is paid under reverse charge.

👉 All taxes and cess charged under Goods and Service Tax like CGST, SGST or IGST, Compensation Cess.

👉 Goods supplied to or received back from a Job Worker.

👉 Activities which are neither supply of goods nor service under schedule III of CGST Act.

Compliances for GST Audit:

Qualification of GST Auditor & Eligibility 

Only a Chartered Accountant or a Cost Accountant can perform a GST Audit u/s 35.


Points to Note:

  1. An internal auditor can't serve as a GST Auditor at the same time.
  2. The GST Act does not allow a GST practitioner to perform the Audit. The power to Audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants. Therefore, a Chartered Accountant must not be registered as a GST practitioner to issue the Audit Report.
  3. Where an organization or an entity has multiple branches registered under GST in different states/UTs, the total aggregate turnover of all such branches summed up together while calculating the threshold limit of Rs. 2 crores^. So, suppose the cumulative turnover of all the branches exceeds Rs. 2 crores^. Here, a GST audit applies to all branches, irrespective of whether the turnover of a particular branch is less than the threshold. In such cases, one can appoint either one dedicated Auditor for all branches or a separate Auditor for each branch. Where multiple branches have different auditors, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors may apply for reporting GST Audit observations & Reporting.

Conducting GST Audit & Issue of GST Audit report

Appointment of GST Auditor:

A proprietor, partner or Board of Directors in case of a Company should appoint a GST Auditor at the beginning of the financial year.
Accounts to be to be reviewed by GST Auditor:

Following are important accounts or records for review:

  👉 Sales Register
  👉 Stock Register
  👉 Purchase Register and Expenses ledgers
  👉 Input tax credit availed and utilized
  👉 Output tax payable and paid
  👉 E-way bills generated during the period under Audit, if in compliance with rules.
  👉 Any documents that record communications from the GST department relating to the year.

Compliances for GST Audit:

Forms for Annual return and GST Audit:

Review of comments by GST Auditor:

The Auditor must report any tax liability pending for payment by the taxpayer, identified through the reconciliation exercise and observations made on GST audit. Taxpayers can settle taxes as recommended by the auditor in Form DRC-03.

Documents to be furnished by the taxpayer:

👉 Audited financial statements (which is PAN-based)
👉 Annual return in form GSTR-9 (for every GSTIN)GSTR-9 (for every GSTIN)

👉 Certified reconciliation statement in Form GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 compared to audited financials in Part-A, along with the Audit report in Part-B.GSTR-9C, reflecting reconciled values of supplies and tax amounts declared in GSTR-9 compared to audited financials in Part-A, along with the Audit report in Part-B.

Submission of GST Audit report & Annual return:

The finalized GSTR-9C can be certified by the same CA who conducted the GST audit or it can also be certified by any other CA who did not conduct the GST Audit for that particular GSTIN.

The following must be reported and certified by the GST Auditor or the certifier:

👉 Whether or not all the requisite accounts or records are maintained.

👉 Whether or not the Financial Statements are prepared as per the books of accounts maintained at the principal place of business or additional place of business of the taxpayer.

👉 Certify the accuracy of information in GSTR-9C.

👉 To list down the audit observations or reservations or comments, if any.

^For businesses with an annual turnover of less than Rs. 5 crore, filing of GSTR-9C for FY 2018-19 is waived off.

Read our article on Contents of GSTR-9C for further details. Contents of GSTR-9C for further details.