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Audit Report: A brief Introduction and Types of Audit Reports

Mar 21, 2022

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The audit report is the end result of the audit process and one of the most important aspects of the Audit process. In simple terms, it is a document prepared by an auditor where he/she has expressed an opinion with respect to performance, financial status, and other parameters. The preparation of this report should be taken care-off with no degree of bias. 

This report stands as one of the crucial aspects as it stands as one of the important documents of reference in making any decisions with respect to the company. 

The threshold limit of Rs 1 crore for a tax audit is proposed to be increased to Rs 5 crore with effect from AY 2021-22 (FY 2020-21) if the taxpayer’s cash receipts are limited to 5% of the gross receipts or turnover, and if the taxpayer’s cash payments are limited to 5% of the aggregate payments.

The crux of any Audit report lies in the two pieces of information such as Unmodified and Modified opinion. The former one is also known as Clear Report which signifies that financial statements are made in true and fair means whereas the latter one indicates financial statements contain some degree of mistake or insufficient evidence is found while preparing financial statements.

For the latter one of the three kinds of opinion is provided, like, Adverse, Qualified, and Disclaimer.  

So to more in detail about the audit report aspect and audit framework contact HA for the same. 

Tax Audit Report

 Before knowing what Tax Audit Report is understanding Tax Audit is one of the important aspects. Tax Audit in easy terms is the cross-examination of the Books of Accounts and other related documents by the certified Charted Accountants. 

For some of the entities, it is mandatory to carry out the Auditing but for others, it is not necessary. Even if it is not mandatory to enroll for auditing they can plan for it. 

There are three forms for the auditing purpose, such as 3CA, 3CB, and 3CD. Tax payment between the period June and September is one the most stressful as financial data needs to be filled up. The tax audit form is either as per Form 3CA or Form 3CB. The former Form is for individuals whose account has been audited by other laws apart from the Income Tax Law and the latter one is for the individuals whose account has not been audited by any authority. Whereas Form 3CD is called “Statements of Particulars” which has 44 clauses mentioned and the Form has been divided into 2 sections, are, Part A & Part B. 

For not carrying out the tax auditing, a penalty under Section 271B is imposed which can be around 0.5% of the turnover /total sales or gross receipts. But in case one has a reasonable reason then the penalty can be ignored. 

So, to get to know more about the Tax Audit or Tax Audit Report contact HA, our team is here to provide leverage to our clients in their business.

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Secretarial Audit

It is an audit that is done by a Secretarial Auditor, who expresses his/ her opinion with respect to the system and processes whether it is in proportion to the size and operation of the organization. Applicable laws, rules regulations, guidelines, and compliances are checked.

It is one of the mandatory compliance which is carried out by the companies as per the Companies Act 2013, Section 204 (1). The Section suggests that companies need to obtain a Secretarial Audit report from the Secretarial Auditor.

Companies such as-

  • Companies having borrowing of 100 crores or more than that
  • public company having turnover of more than Rs. 250 crore or more
  • A public company having paid-up share capital of Rs. 50 crore or more
  • Every Listed Company

This is one for which Secretarial Auditing is mandatory.

Three major conditions have to be met before going for Secretarial Audit-

  1. Company Secretary Appointment
  2. Format of Form MR 3 has to be used
  3. As per Annexure, Board Report should be put forth

Statutory laws under which audit governs are:

  • Companies Act 2013
  • Securities Contracts Regulation Act 1956 (SCRA)
  • Depositories Act 1996
  • Regulations and Byelaws
  • Foreign Exchange Management Act 1999 and Overseas Direct Investment
  • Foreign Direct Investment and other associated laws
  • Regulations under the Securities Exchange Board of India (SEBI)

The Secretarial Auditor who is appointed should be a member of the Institute of Company Secretaries of India and should hold a valid certificate of practice.

Directors, Prospective Investors, Promoters, Non- Executive Directors, and Government & Legal Authorities are some of the major entities which are benefitted from this audit.

For any other further assistance and query related to it, contact HA. We are here to help our clients to get Secretarial Audit done successfully.

Internal Audit in GST

Internal Audit under GST means that accounts that are recorded under the GST registered business are checked thoroughly. The internal audit team looking after the GST should check the records in the GST account and in case of any mismatch should rectify the records.

5 major points that should be taken care of while carrying out an Internal Audit are:

  • GSTR 3B should match with the GSTR 1 and GSTR 2A
  • GST Compliant Invoices should be recorded correctly
  • The gap in the GSTR 1 should be checked
  • Records should be categorized as per the product or service

Some of the benefits of internal audit are:

  • Insights of the company are obtained
  • Risk decreases
  • Improved Leadership
  • Business Management is improved

The audit is applicable to Organisation which is listed on Stock Exchange, Non-Listed organization (with an annual turnover of 200 crores/ has paid-up equity of 50 crores/ has borrowed loan more than 100 crores/ has unpaid deposits over 250 crores ) or any private organization with an annual turnover of Rs. 200 crores or more.

The internal audit is carried out by the Chartered Accountant (CA) or Cost and Work Accountant (CWA). The report prepared is called an Internal Audit Report which is in turn submitted to the top management.

The report consists of some points such as-

  1. Problem Identification Point
  2. The reason behind the problem
  3. Consequences that may come up because of the problem
  4. Corrective measures which can be taken up
  5. And finally the auditor’s opinion

Apart from the above information, the benefits from this auditing are immense. To carry out this auditing with peace of mind contact HA.

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