Audit under Different
Statute
As of we all know that every act has its own type of audit
like VAT Act has VAT audit, Service Tax Service Tax Audit, Excise act Excise
audit, 2000 and income tax act has Tax Audit. These all are tax audits but
every audit has different aspects for it and only the audit done u/s44AB of
income tax act is known as Tax Audit.
In every statute/ act there are some specific sections which
defines the criteria and limit applicable to any entity falls in the preview of
that statute/act. Like income tax act
speaks about tax audit of business and profession u/s 44 AB, Excise act also
prescribe Audit under it likewise all other statute VAT ,Service Tax Company Act has specific
sections directing an Audit.
2. Excise Audit
4. VAT Audit
Income Tax Audit Sec.44AB
Income Tax Audit u/s 44AB in common parlance or layman language also
known as Tax Audit.
As per section 44AB of the Income Tax Act, 1961 every business and
profession has to undertake compulsory tax audit in case turnover from such
business exceeds Rs 1 crs for business and in case of profession gross receipt
exceeds Rs 25 lakhs from such profession. In case if turnover/receipt is less
than given limit assessee can opt for deemed income provision and profit and
gain from such business and profession has to be minimum of 8% of such
Turnover/Gross Receipt.
Reference: Section 44AB of the Income Tax Act, 1961
Audit of accounts of certain
persons carrying on business or profession
Every person,—carrying on business shall, if his total sales, turnover
or gross receipts, as the case
may be, in business exceed or
exceeds 100 lakh ( 1 crore) rupees in any previous year or carrying on
profession shall, if his gross receipts in profession exceed twenty five
lakh rupees in any previous year; or carrying on the business shall, if
the profits and gains from the business are deemed to be the profits and gains
of such person under section 44AE or section 44BB or section 44BBB, as the case
may be, and he has claimed his income to be lower than the profits or gains so
deemed to be the profits and gains of his business, as the case may be, in any
previous year; or carrying on the business shall, if the profits and gains from
the business are deemed to be the profits and gains of such person under
section 44AD and he has claimed such income to be lower than the profits and
gains so deemed to be the profits and gains of his business and his income
exceeds the maximum
amount which is not chargeable to income-tax in any previous year, get his
accounts of such previous year audited by an accountant before the specified
date and furnish by that date the report of such audit in the prescribed form
duly signed and verified by such accountant and setting forth such particulars
as may be prescribed :
Provided that this section shall not apply to the person, who
derives income of the nature referred to in section 44B or section 44BBA, on
and from the 1st day of April, 1985 or, as the case may be, the date on which
the relevant section came into force, whichever is later:
Provided further that in a case where such person is required by
or under any other law to get his accounts audited, it shall be sufficient
compliance with the provisions of this section if such person gets the accounts
of such business or profession audited under such law before the specified date
and furnishes by that date the report of the audit as required under such other
law and a further report by an accountant in the form prescribed under this
section.
Explanation.—for the purposes of this section,—
“Accountant” shall have the same meaning as in the Explanation below
sub-section (2) of section 288;
“Specified date”, in relation to the accounts of the assessee of the
previous year relevant to an assessment year, means the due date for
furnishing the return of income under sub-section (1) of section 139
Excise Audit 2000
EA Audit a new system of audit was initiated from 1st
December 1999 by replacing traditional audit system in excise. This system was implemented
in case of all assessees paying cash duty of over Rs.5 crores
per annum. In September 2000, the Central Board of Excise and
Customs made this audit applicable in case of all assessees paying
cash duty of over Rs. 1 crore per annum. At present, in addition to
audit of such units, those units which pay cash duty
of Rs. 10 lakhs or more but less than Rs.1 Crore will be audited once in two years. Not more than 20% of the Units paying
cash duty less than Rs.10lakhs are to be audited in a year.
Statutory Audit under CEA
Sections 14A and 14AA have been
inserted in the CEA, by the Finance Act, 1995 and Finance Act, 1997, enacting
provisions relating to Statutory Audit under specified circumstances.
Valuation Audit – Section 14A provides that if at
any stage of enquiry investigation or any other proceeding, the Officers not
below the rank of ACCE having regard to the nature of the case and interest of
revenue is of the opinion that the value of the goods have not been correctly
declared or determined by the manufacturer or any other person, he may, with
the prior approval of the Chief CCE direct such manufacturer or such person to
get the accounts of his factory, office, depot, distribution or any other place
audited by the cost accountant nominated by the Chief CCE. The said cost
account and shall submit the report within the period specified by the CCE duly
signed and certified by him mentioning therein particulars as may be specified.
Special CENVAT Audit – Section 14AA provides that if the CCE has reasons to
believe that a manufacturer has availed or utilized credit of duty under the
Rules which is not within the normal limit having regard to nature of excisable
goods produced or manufactured the type of inputs used and other relevant
factors as he may deem appropriate or has availed duty by reason of fraud,
collusion or willful misstatement or suppression of facts, he may direct such
manufacturer to get the accounts of his establishment audited by a Cost
Accountant nominated by him. The Cost Accountant so nominated shall submit a
report for such audit duly signed and certified by him to the said CCE.
Internal Audit by Assessee’s under CEA
In view of introduction of
reforms in Central Excise procedures and consequent shifting of responsibility
from CED to the assessee for determination of correct excise duty liability,
conduct of regular audits by an assessee himself has gained increased
significance.
Internal Central Excise Audit
maybe conducted
i.
Departmentally by an assessee’s organisation itself or
ii.
By an independent firm of professionals viz., Chartered
Accountants/Cost Accountants/Company Secretaries.
Such audits could be carried out:
On a continuous basis, on a periodic basis, for a specific area/activity. To
illustrate: CENVAT Scheme, New Projects, Exports, Job Work, Inventory, Refunds
etc.
The types of functional areas
which can be subject matter of Audit in relation to Central Excise are
Concepts, Exemptions, Valuation, Procedures, Documentation and Records.
Company Law Audit
Company act 1956 discussed in details about the appointment
of company auditor its rights duties and obligations, it also discussed about
the appointment of auditor in different sections for various types of company.
In company act 1956 they defined two kind of audit Financial and cost audit.
Company Act 1956 says that every company registered under
this act is liable for audit under company’s act. Company act also mention that
every company or type of company will fall under cost audit on issuance of cost
audit order by MCA.
Cost Audit under Company Act
Cost Accounting Record Rules are applicable as per MCA
notification dt.3rd June, 2011 or 30th June, 2011 or 24th
January, 2012 to every company including
a foreign company as defined u/s 591 of the Act which is engaged in
Manufacturing, Production, Processing, Mining Activities and wherein: ‐
1. Aggregate value of net worth on the last day of preceding
financial year was more than ` 5 crores. Or
2. Aggregate value of the turnover of sales and other
activity of all the products exceeds 20 crores in the
preceding year. Or
3. The debt or equity securities of the company are listed
or are in process of getting listed on any
of the stock exchanges in India or outside India.
VAT Audit
The overall objective of audit is to bridge the gap between
tax legally due to state and tax actually paid by tax payers. In other words,
maximization of Tax Revenue and improvement in self tax compliance by VAT
dealers. VAT Audit is conducted by VAT department they have certain criteria
for that if assessee meets those then VAT audit is performed in majority
LTU’s(Large Tax payer units ) will fall in to the preview of VAT Audit .
Although they delegate the VAT audit to a professional degree holder like CA or
CWA.
As VAT rules and regulations for every state is different so
do they have different set of rules and perimeter for VAT Audit.
Service Tax Audit
The overall objective of audit is to bridge the gap between
tax legally due and tax actually paid by tax payers. In other words,
maximization of Tax Revenue and improvement in self tax compliance. Service tax
audit is conducted by department itself .They entrusted a CEO with the
authority to conduct audit.
The Auditor
has to aim at detection of non compliance, procedural irregularities and
leakage of revenue due to deliberate action or ignorance on the part of the
taxpayer. At the same time, the Auditor should keep in view the prevalent
transactional and professional practices, as also the practical difficulties
faced by a taxpayer. Service tax Audit will mandatorily apply on those units which pay cash duty of Rs. 10 lakhs or more or those units
which are paying less than 10 lakh cash duty but can be potential tax.
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