Transcript Tax Audit:2013-14 - ICAI Visakhapatnam

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Visakhapatnam Branch of SIRC
CPE seminar on
Tax AuditAccounting Standards for Non Corporate
Entities
19th July, 2013
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electronically filing is not a big task or
dangerous
"E" return filing & Audit report filing are not
akin
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Filing of Return by electronically for 44AB
cases
Audit Reports are not required. Only
information about date/ Name of auditor Etc.
Fake Audit reports by Unscrupulous people
To curb this ICAI Pursued for remedy
The result is E filing of Audit reports
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Return : claiming Either Taxable or
Exempted.
Furnishing information Vs Expressing
Opinion
Audit Report : Giving an opinion.
Cannot be cut down to" Digital“
All columns either “Yes” or ‘No”
Sanctity or Proprietary of the opinion is
watered
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It is programmed as No= NIL
There is no place for Not Applicable.
Any Personal Expenditure debited to P & L
a/c
Past Practice of auditee
Past Scrutiny Assessments
Past Appellate orders of same auditee
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Criminal Cases Judgment is digitalized
Accused is Guilty---------- Yes or No
The accused sentenced prison--- Yes or No
--------------------------------If yes whether simple or rigours
If Yes 10 Years ./ 5 Years !!!!!!
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Fill forms manually first
Then enter in the system
Maximum extent avoid Cut/ Copy/Paste
filling
Compare manual & system printout.
Append Digital Signature & upload.
Client will upload this Report along with his
ITR to the Department
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No scope for
Disclaimer
No scope for
Negative opinion
3CB it is a Audit Report . It should be as per
Standards of Auditing.
SA-700 elements??
SA- 700 is postponed to April, 2014! relax
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Audit meaning
Responsibility of auditee
How the audit is conducted
Precise in 2000 words!
Mandatory points
Safeguarding Points
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The 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
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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 misstatement
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An 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.
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We believe that our audit provides a reasonable
basis for our opinion together with the details
stated in Form No.3CD
Safe 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"
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Safe 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
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Safe 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
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Form 3 CD:
Names of Partners % Sharing Ratio
Change of business: ( + ) New business
Change of business: ( - ) Continuing
business
Not allowed
Modification is needed
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Books prescribed 44AA “ Y / N “
Engineers ,Architects - nilFor Doctors:
(i) Daily Case register form no 3C
(ii) Inventory of medicines, drugs,
consumables as on First & Last day of years
The difference can be booked as expenditure
Books Maintained Vs Examined
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Whether computer or manual
What 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 )
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Any Income u/s 44AB, 44AD,& 44AE
Cinema 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 .
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Method of Accounting
Cash or Mercantile. Hybrid is not allowed
Deviation from Method as per Sec 145
Income as per IRAC norms is exception
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Method of Valuation of closing stock
Deviation from145A method
But 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
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Expenditure of Capital nature:
Policy of > Rs. 25000
Expenditure of Personal nature:
Past practice & assessments
Any penalty or fine:
Penal interest is not penalty & compensatory
nature.
SAFEGUARDING NOTE for all above
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Any Income not credited to Profit & Loss
Account
Relevant 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…?
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Delay in remittance of PF, ESI
Genuine 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 ( employer’s share )
No place for reasons. Use your judgment &
decide delay period
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Any scope for NO or Not Applicable ?
Only “NIL”
If we do not mention what is the result:??
The 3 CD is incomplete or even can be
presumed as not true and correct
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Expenditure disallowable u/s 14A
Most common point for proprietary entities.
Dividends from companies
Share of Profit from Partnership firms
Any Exempted income earned by incurring
expenditure. If so mention in Rupees !
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Any Interest payable u/s 15 & 16 of MSMED
Act may be ascertained
This interest is relating to suppliers credit
This will be disallowed u/s 23 of MSMED Act
not under the IT Act !!
Safe guarding point: If details not available
make a note
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Quantitative details
Grams, Kgs, Kilos, Sq. meters
If data is not available or partially available
make a suitable note
Steel, cement dealers, cloth merchants
Departmental stores etc.
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Documentation for our sake. SA-230
Engagement letter. SA -210: any fraud
detection or only statutory ritual?
“This appointment is valid until it is
cancelled”
SA 550 for related parties payments
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Working papers very much essential for—
The latest guidance note has given format of
working notes
> Personal nature of expenses.
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The number of Tax Audit assignments 45
Audits 44AD,44AE& 44AF are excluded
Both Branch & HO are one unit
All Branches of a bank is one unit
Maintain register of Tax Audit assignments as
prescribed by the Council
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FORM OF TAX AUDIT PARTICULARS TO BE
FURNISHED BY MEMBERS/FIRM
Record of Tax Audit Assignments
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Name of the Member accepting the assignment
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Membership No.
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Financial year of audit acceptance
--------------------------------Name and Registration No. of the firm/ firms of
which the member is a proprietor or partner
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Sl.No. Name of Assessment
the
year of the
auditee
auditee
Date of
Date of
appointment acceptance
Name of the
Date of
firm on whose
communc
behalf the
ation with
member has
the
accepted the
previous
assignment
auditor
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(applicable )
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Thank you
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