Audit & Assurance

There are primarily four types of audits under the Companies Act, 2013 – statutory audits, internal audits, secretarial and cost audits. For detailed information on these audits, you can read this article https://finenzy.com/audit/what-are-types-of-audits-under-the-companies-act-2013/

A tax audit is applicable to all companies, LLPs, as well as professionals whose turnover crosses a particular threshold limit. Mandatory tax audit limit for different categories of taxpayers:

• Any person carrying on a business, whose income is lower than the income calculated on a presumptive basis under section 44AD of the Income Tax Act. If the cash transactions are up to 5 percent of total gross payments, the threshold limit of turnover for an audit is increased to INR 100 million.

• Any individual carrying on a business whose sales, turnover, or gross receipts of the business exceeds INR 100 million; or

• Any individual carrying on a professional whose gross receipts exceeds INR 5 million; or

• Any person carrying on a business where the profits and gains from business are lower than the income calculated on a presumptive basis under section 44AE or 44BB of the Income Tax Act; or

A tax auditor must submit his report in a prescribed form, which could be Form 3CA or Form 3CB, depending on whether the person carrying on business or profession is already mandated to have his accounts audited under another law.

Form No. 3CB is required to submit when the person engaged in the business or profession is not mandated to have his accounts audited under another law.

The tax auditor must provide the specified particulars in Form No. 3CD, which is part of the audit report, in the event of either of the aforementioned audit reports.

If a person fails to have his accounts audited or fails to provide the audit report, the assessing officer may order him to pay a penalty equivalent to the lesser of 0.5 percent of the total sale, turnover/gross revenues or 1,50,000 rupees. However, that there would be no punishment if the failure was due to a justifiable cause.

The following documents should be maintained:

• A cash book
• Journal, if books of accounts are kept in accordance with the commercial accounting system.
• Ledgers.
• Copies of invoices and carbon copies or counterfoils of receipts produced by the assessee for more than 25 rupees.
• Original bills given to the assessee and receipts for expenditures spent by him;
• Signed vouchers, if no invoices or receipts are given and the spending amount is less than 50 rupees, if the cash book does not have enough details about these expenditures.

A management audit is an assessment of the organization’s management, its strategies and resources. A management audit evaluates whether the management team is working in the interests of shareholders, employees, and the company’s reputation.

• Identify the weaknesses and inefficiencies of management in different functional areas, such as production, sales, finance etc
• Analyze different ways to overcome the inefficiencies or weaknesses
• Review the organization’s structure
• Evaluate the ways for improving the management efficiency and to select the best are some of the objectives of management audit.