Draft Observations for Tax Audit Report
Reetu | Sep 6, 2023 |
Draft Observations for Tax Audit Report
CA Nitin Kanwar has prepared Draft Observation in Case of Tax Audit.
Audits are undertaken under various laws, such as company audits/statutory audits conducted under company law requirements, cost audits, stock audits, and so on. Similarly, income tax legislation requires a ‘Tax Audit‘ audit.
Tax audit, as the name implies, is an inspection or review of the accounts of any business or profession carried out by taxpayers from an income tax standpoint. It simplifies the process of calculating income for the purpose of submitting income tax returns.
DRAFT OBSERVATION IN CASE OF TAX AUDIT
Assessee’s Responsibility
1. The assessee is responsible for the preparation of the aforesaid financial statements that give a true and fair view of the financial position and financial performance (if applicable) in accordance with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
2. The assessee is also responsible for the preparation of the statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 annexed herewith in Form No. 3CD read with Rule 6G(1)(b) of Income Tax Rules, 1962 that give true and correct particulars as per the provisions of the Income-tax Act, 1961 read with Rules, Notifications , circulars etc. that are to be included in the Statement.
Tax Auditor’s Responsibility
3. My/ Our responsibility is to express an opinion on these financial statements based on my/our audit. I/We have conducted this audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purposes of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
5. I/We believe that the audit evidence I/we have obtained is sufficient and appropriate to provide a basis for my/our audit opinion.
6. I/We are also responsible for verifying the statement of particulars required to be furnished under section 44AB of the Income-tax Act, 1961 annexed herewith in Form No. 3CD read with Rule 6G (1) (b) of Income-tax Rules, 1962. I/ We have conducted my/our verification of the statement in accordance with Guidance Note on Tax Audit under section 44AB of the Income-tax Act, 1961, issued by the Institute of Chartered Accountants of India.”
7. All the information and explanations which to the best of my/our knowledge and belief were necessary for the purpose of my/our audit has not been provided by the assessee.
8. Documents necessary to verify the reportable transaction were not made available.
9. Proper Stock records are not provided by the assessee.
10. Valuation of closing stock is not possible. Stock has been taken valued and certified by the assessee.
11. Yield/percentage of wastage is not ascertainable.
12. Records necessary to verify personal nature of expenses not maintained by assessee.
13. TDS returns could not be verified with the books of account.
14. Records produced for verification of payments through account payee check were not sufficient.
15. Amount of expenses related to exempt income u/s 14A of Income-tax Act, 1961 could not be ascertained.
16. Creditors under Micro, Small and Medium Enterprises Development Act, 2006 are not ascertainable.
17. Prior period expenses are not ascertainable from books of account.
18. Fair market value of shares u/s 56 (2) (viia)/(viib) is not ascertainable.
19. Reports of audit carried by Excise/Service tax Department were not made available.
20. GP Ratio is not ascertainable from the financial statements prepared by the assessee.
21. Information regarding demand raised or refund issued during the previous year under any tax laws other than Income-tax Act, 1961 and Wealth tax Act, 1957 was not made available.
22. Personal balances including Unsecured Loans, Sundry Debtors, loans & Advances are subject to confirmation.
23. Certain voucher for expenses are not properly supported.
24. Compliance with GST returns Filed are subject to reconciliation with the ledger balances.
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