Tax Audit:2013-14

Visakhapatnam Branch of SIRCCPE seminar on Tax Audit-Accounting Standards for Non Corporate Entities

19th July, 2013

bharati & co1Tax Audit:2013-14

1bharati & coTax Audit:2013-14electronically filing is not a big task or dangerous "E" return filing & Audit report filing are not akin

bharati & co2Tax Audit:2013-14Filing of Return by electronically for 44AB casesAudit Reports are not required. Only information about date/ Name of auditor Etc.Fake Audit reports by Unscrupulous peopleTo curb this ICAI Pursued for remedyThe result is E filing of Audit reports bharati & co3Tax Audit:2013-14Return : claiming Either Taxable or Exempted.Furnishing information Vs Expressing Opinion

Audit Report : Giving an opinion.Cannot be cut down to" DigitalAll columns either Yes or NoSanctity or Proprietary of the opinion is wateredbharati & co4Tax Audit:2013-14bharati & co4Tax Audit:2013-14 It is programmed as No= NILThere is no place for Not Applicable.Any Personal Expenditure debited to P & L a/cPast Practice of auditeePast Scrutiny AssessmentsPast Appellate orders of same auditeebharati & co5Tax Audit:2013-14bharati & co5Tax Audit:2013-14Criminal Cases Judgment is digitalizedAccused is Guilty---------- Yes or NoThe accused sentenced prison--- Yes or No ---------------------------------If yes whether simple or rigours If Yes 10 Years ./ 5 Years !!!!!!

bharati & co6Tax Audit:2013-14Fill forms manually firstThen enter in the system Maximum extent avoid Cut/ Copy/Paste fillingCompare manual & system printout.Append Digital Signature & upload.Client will upload this Report along with his ITR to the Departmentbharati & co7Tax Audit:2013-14No scope for Disclaimer No scope for Negative opinion3CB it is a Audit Report . It should be as per Standards of Auditing. SA-700 elements??SA- 700 is postponed to April, 2014! relaxbharati & co8Tax Audit:2013-14Audit meaningResponsibility of auditeeHow the audit is conducted Precise in 2000 words!Mandatory pointsSafeguarding Pointsbharati & co9Tax Audit:2013-14The maintenance of Books of Accounts, recording of all receipts and expenditure in the Financial Statements & compliance of all laws is the responsibility of the Management. Our responsibility is to express an opinion on these financial statements based on our audit

bharati & co10Tax Audit:2013-14 We conducted our Audit in accordance with Auditing Standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatementbharati & co11Tax Audit:2013-14An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An Audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation.

bharati & co12Tax Audit:2013-14We believe that our audit provides a reasonable basis for our opinion together with the details stated in Form No.3CDSafe guarding points!!It is not possible to verify whether the payment in excess of Rs. 20,000/- have been made otherwise than by crossed cheque or a bank draft as the necessary evidence is not in the possession of the assessee"bharati & co13Tax Audit:2013-14Safe guarding points!!- Contd

With regards o EMDs& Security Deposits due to numerous accounts only test cheque is carried out ( 269 SS & T)We have verified the compliance with the provisions of chapter XVII-B regarding the deduction of tax at source and the payment thereof to the credit of central government in accordance with the auditing standards generally accepted in India which includes test checks and the concept of materiality. Such audit procedures did not reveal any material non-compliance

bharati & co14Tax Audit:2013-14Safe guarding points!!- Contd

Quantitative details indicating day to day movement of stock are not maintained. In the absence of such data and due to inadequacy of the existing data these particulars could not be given". would be examined

bharati & co15Tax Audit:2013-14Form 3 CD:Names of Partners % Sharing RatioChange of business: ( + ) New businessChange of business: ( - ) Continuing business Not allowedModification is neededbharati & co16Tax Audit:2013-14Books prescribed 44AA Y / N Engineers ,Architects - nil-For Doctors:(i) Daily Case register form no 3C (ii) Inventory of medicines, drugs, consumables as on First & Last day of yearsThe difference can be booked as expenditureBooks Maintained Vs Examinedbharati & co17Tax Audit:2013-14Whether computer or manualWhat are the books that system can generate?Did you examine all the same?Under Tally, any ERP only data is available. Books generation a need based!

Prescribed-maintained-examined = equal !! ( variation )bharati & co18Tax Audit:2013-14Any Income u/s 44AB, 44AD,& 44AECinema Halls, Lodges, guest houses 44AD is applicable?Proprietors Payment to Contractor for residential house construction Interest on loans for above house Professional fees to Doctor / engineer . bharati & co19Tax Audit:2013-14Method of Accounting Cash or Mercantile. Hybrid is not allowed Deviation from Method as per Sec 145Income as per IRAC norms is exception

bharati & co20Tax Audit:2013-14Method of Valuation of closing stockDeviation from145A methodBut it prescribes method of Valuation of (1). Purchases (2) Sales (3) Inventory It prescribes that Tax , Duty, cess also to be included in all the

bharati & co21Tax Audit:2013-14Expenditure of Capital nature: Policy of > Rs. 25000Expenditure of Personal nature: Past practice & assessmentsAny penalty or fine:Penal interest is not penalty & compensatory nature.SAFEGUARDING NOTE for all abovebharati & co22Tax Audit:2013-14Any Income not credited to Profit & Loss AccountRelevant to Proprietary Units.---- Interest or salary from Firm----- Gifts which are taxable u/s 56----- Commission etc to cover cushion !!Can we say refer Statement?bharati & co23Tax Audit:2013-14Delay in remittance of PF, ESIGenuine reason in delay ; PF number not allotted Consideration of grace period ? Last day happens to be public holiday Paid after audit but before 139 due date ( employers share ) No place for reasons. Use your judgment & decide delay periodbharati & co24Tax Audit:2013-14Any scope for NO or Not Applicable ? Only NILIf we do not mention what is the result:?? The 3 CD is incomplete or even can be presumed as not true and correctbharati & co25Tax Audit:2013-14Expenditure disallowable u/s 14AMost common point for proprietary entities.Dividends from companiesShare of Profit from Partnership firmsAny Exempted income earned by incurring expenditure. If so mention in Rupees !bharati & co26Tax Audit:2013-14Any Interest payable u/s 15 & 16 of MSMED Act may be ascertainedThis interest is relating to suppliers creditThis will be disallowed u/s 23 of MSMED Act not under the IT Act !!Safe guarding point: If details not available make a notebharati & co27Tax Audit:2013-14Quantitative details Grams, Kgs, Kilos, Sq. metersIf data is not available or partially available make a suitable noteSteel, cement dealers, cloth merchants Departmental stores etc.

bharati & co28Tax Audit:2013-14Documentation for our sake. SA-230Engagement letter. SA -210: any fraud detection or only statutory ritual?This appointment is valid until it is cancelledSA 550 for related parties paymentsbharati & co29Tax Audit:2013-14Working papers very much essential forThe latest guidance note has given format of working notes

> Personal nature of expenses.bharati & co30Tax Audit:2013-14The number of Tax Audit assignments 45Audits 44AD,44AE& 44AF are excludedBoth Branch & HO are one unitAll Branches of a bank is one unitMaintain register of Tax Audit assignments as prescribed by the Councilbharati & co31Tax Audit:2013-14FORM OF TAX AUDIT PARTICULARS TO BE FURNISHED BY MEMBERS/FIRMRecord of Tax Audit Assignments

Name of the Member accepting the assignment

Membership No. Financial year of audit acceptance ---------------------------------Name and Registration No. of the firm/ firms of which the member is a proprietor or partnerbharati & co32Tax Audit:2013-14bharati & co33Sl.No.Name ofAssessmentDate ofDate ofName of theDate oftheyear of theappointmentacceptancefirm on whosecommunc-auditeeauditeebehalf theation withmember hastheaccepted thepreviousassignmentauditor (applicable)11234567 Thank you

bharati & co34