Tax Audit
How to Conduct Tax Audit – Part 1
Analysis of Certain Clauses
Audit under Section 44AB of the Income Tax Act
By Raman Jokhakar, Chartered Accountant
Objective
To understand the purposes of this Form
To learn nuances of the clauses
To understand audit risk
To effectively carry out attestation
To document adequately
To disclose standard notes, limitations and stands
To know inter links between clauses
To be aware of important stands taken by Courts
To understand the objective of the tax department
2
Raman Jokhakar, CA
Tax Audit is an Audit
It’s a process – there are systematic steps and discipline involved To crack it you have to know –
Goal of audit and its components and situations
Gathering reliable data and evidence
Analysis of data
Arriving at the conclusions as per regulation/standards
Cover your RISKS as an auditor
3
Management to prepare and own responsibility
Certified by management
Raman Jokhakar, CA
Tax Audit is an Audit
Review what is done by team to get high quality result –
Prepared by – Reviewed by – 4 eye approach
Remember People and Process are the key – Their rigour, focus on the objectives, imagination to visualise issues, ability to ask right questions, backing up conclusions with evidence, and above all agility to close issues with the client. Qualifications / Comments in audit report?
4
Quantities not matching
Records not maintained, Books not closed
Stat. Auditors have reported adversely
Raman Jokhakar, CA
Remember
NOT DOCUMENTED
=
NOT AUDITED
5
Raman Jokhakar, CA
Audit Approach
Number of questions – 34
Overall view
There is no logical sequence – likes not together
Appears to be outsourcing by IT department of data before the days of outsourcing started
Irrelevant / redundant clauses
Relationships between certain clauses
Risk based
Analysis of Certain Clauses
Audit under Section 44AB of the Income Tax Act
By Raman Jokhakar, Chartered Accountant
Objective
To understand the purposes of this Form
To learn nuances of the clauses
To understand audit risk
To effectively carry out attestation
To document adequately
To disclose standard notes, limitations and stands
To know inter links between clauses
To be aware of important stands taken by Courts
To understand the objective of the tax department
2
Raman Jokhakar, CA
Tax Audit is an Audit
It’s a process – there are systematic steps and discipline involved To crack it you have to know –
Goal of audit and its components and situations
Gathering reliable data and evidence
Analysis of data
Arriving at the conclusions as per regulation/standards
Cover your RISKS as an auditor
3
Management to prepare and own responsibility
Certified by management
Raman Jokhakar, CA
Tax Audit is an Audit
Review what is done by team to get high quality result –
Prepared by – Reviewed by – 4 eye approach
Remember People and Process are the key – Their rigour, focus on the objectives, imagination to visualise issues, ability to ask right questions, backing up conclusions with evidence, and above all agility to close issues with the client. Qualifications / Comments in audit report?
4
Quantities not matching
Records not maintained, Books not closed
Stat. Auditors have reported adversely
Raman Jokhakar, CA
Remember
NOT DOCUMENTED
=
NOT AUDITED
5
Raman Jokhakar, CA
Audit Approach
Number of questions – 34
Overall view
There is no logical sequence – likes not together
Appears to be outsourcing by IT department of data before the days of outsourcing started
Irrelevant / redundant clauses
Relationships between certain clauses
Risk based