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What is a Tax Audit?
There are various kinds of audits being conducted under different laws such as company audit/statutory audit conducted under company law provisions, cost audit, stock audit etc. Similarly, income tax law also mandates an audit of certain taxpayers called as ‘Tax Audit’.
Types of Audits
- Financial Audit
- Operational Audit
- Compliance Audit
- Information Systems Audit
Process Of Audit
Planning
Objective Setting: Define the scope and objectives of the audit, including what aspects will be examined and why.
Risk Assessment: Identify potential risks or areas of concern that may affect the audit's outcomes.
Audit Strategy: Develop a plan outlining the audit approach, resources required timeline for completion.
Fieldwork
Gathering Evidence: Collect relevant data, documents, and information related to the audit objectives.
Testing Controls: Assess the effectiveness of internal controls by performing tests and procedures.
Analyzing Transactions: Review transactions and financial statements to ensure applicable standards.
Reporting
Findings Identification: Summarize audit findings, including any discrepancies, weaknesses, or areas for improvement.
Conclusions: Formulate conclusions based on the audit evidence gathered and analyzed.
Audit Report: Prepare a formal report documenting the audit process, findings, conclusions, and recommendations.
Follow-Up
Monitoring Implementation: Track the implementation of audit recommendations and corrective actions.
Feedback: Provide feedback to management on the effectiveness of actions taken in response to audit findings.
Monitoring Implementation: Track the implementation of audit effectiveness internal recommendations and corrective actions.
Frequently Asked Questions
What is an income tax audit under Section 44AB?
Tax audit under section 44AB is an audit conducted by a chartered accountant to verify the books of accounts and other documents of the assessee. It is applicable to individuals, HUFs, firms, etc. with gross receipts exceeding Rs 1 crore in business or Rs 50 lakhs in profession. The purpose is to authenticate the accounts, verify compliance with income tax provisions, and submit a tax audit report with the Income Tax Return.
What are the due dates for a tax audit?
The tax audit report under Section 44AB needs to be submitted one month before the due date for filing Income Tax Return, i.e. on or before September 30th.
What documents are audited under Section 44AB?
The CA audits the books of accounts like the cash book, ledger, journals, bank statements, stock records, and sales/purchase invoices. Authenticates the state of affairs of business as on the last date of the financial year.
What are the consequences of not getting a tax audit done?
If a tax audit is applicable but not conducted, it attracts penal consequences under Section 271B. The Assessing Officer can levy a penalty of Rs 1.5 lakh or 0.5% of turnover, which is lower. Prosecution can also be initiated. Non-submission of audit reports makes the return defective, and provisions for faulty returns apply.
What is the due date for furnishing of tax audit report in case of applicability of transfer pricing report u/s92E?
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