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CHAPTER: 1
TAX AUDIT
1.1. MEANING:
A tax audit is an examination of your tax return by the IRS to verify that your income and
deductions are accurate. A tax audit is when the IRS decides to examine your tax return a
little more closely and verify that your income and deductions are accurate.
A tax audit is an examination of an organization's or individual's tax return. Each year
when tax season rolls around, the Internal Revenue Service, as well as state departments
of taxation, kicks into overdrive to meet with the onslaught of tax filings. The purpose of
a tax audit is to verify that the financial information is being reported correctly.
1.2 TAX AUDIT UNDER SECTION 44 AB:
Section 44AB provides for the compulsory audit of accounts of certain persons carrying
on business or profession. Section 44AB reads as under:
44AB. Audit of accounts of certain persons carrying on business or profession.
Every person,(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case
may be, in business exceed or exceeds one crore rupees in nay previous year; or
(b) carrying on profession shall, if his gross receipts in profession exceed twenty-five
lakh rupees in any previous year; or
(c) 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 or section
44AE or section 44AF or section 44BB or section 44BBB, as the case may be, an
he has claimed his income to be lower than the profits or gains so deemed to be
the profits and gains of hi business, as the case may be, in any previous year,
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The Person is carrying on business and his Total Sales/Turnover exceeds Rs. 1
Crore (Limit increased wef 1st April 2012) or
2.
The Person is carrying on Profession, and his Gross Receipts exceed Rs. 25
Lakhs (Limit increased wef 1st April 2012) or
3.
The Due Date of filing the Tax Audit Report under Section 44AB is 30thSeptember of the
Assessment Year. However, for AY 2014-15 the due date for filing Tax Audit Report
has been extended from 30th Sept 2014 to 30th Nov 2014.
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2.
3.
In case where a person has a total turnover of Rs. 98 Lakhs and has sold a Car for
Rs. 8 Lakhs. In such a case, the total amount on adding up becomes Rs. 1.06 Lakhs
i.e. above Rs. 1 Crore. Confusion arose whether the person is liable to get an audit
done in this case and ICAI has clarified that the turnover will not include any amount
on the sale of the fixed asset as it was held by the person for business use and not for
the purpose of sale.
ICAI has further clarified that the amount received from the following items shall not be
included while computing the Total Sales/Total Turnover/ Gross Receipts:TAX AUDIT
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Rental Income
2.
3.
4.
Loss of Accounts because of Fire/Theft etc. beyond the control of the Assessee
5.
Natural Calamities
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3.
In case the Tax Audit report efiled is revised, the Auditor shall state that its a Revised
Report and shall also state the reasons for the same.
CHAPTER: 2
TAX AUDITOR
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7. Statement of Particulars:
The tax auditor should get the statement of particulars, as required in the annexure to me
audit report, authenticated by the assessee before he proceeds to verify the same.
8. Report to be submitted to Assessee:
The tax auditor is required to submit his report to the person appointing him viz. the
assessee.
9. Persons not Eligible:
As per the Code of Conduct by ICAI, a chartered accountant who is in employment of a
concern or in any other concern under the same management or a chartered accountant
who is responsible for writing or the maintenance of the books of account of the assessee
cannot be appointed as tax auditor. The audit of accounts of a professional firm of
chartered accountants, under Section 44AB cannot be conducted by any partner or
employee of such firm. A chartered accountant, who is a tax consultant of the assessee. If
the internal auditor is working in a professional capacity (as an independent chartered
accountant not being an employee of the assessee) he can conduct the tax audit.
10. Removal:
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Assessing assets
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CHAPTER 3
TAX AUDIT PROCEDURES AND AUDIT REPORT
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The primary purpose of an audit usually is to evaluate the level of compliance with
internal and external policies, identity the effectiveness of internal controls, and provide a
report to external and internal audiences. There are a range of different types of audit,
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Typically, the method used to select the data depends on the characteristics of the data
itself. For transactional data that is available electronically, a random selection program
typically is used. It can be very important for the data selection to be random within a
specific classification of data. For example, an audit of safety-report completion over a
three-year period should include the random selection of reports filed throughout the
period, and not a series of sequential reports filed in a short time frame.
Validating the reliability of the data typically requires a series of audit procedures that
focus on tracking the original source of the data, identifying who generated the original
data, and how it was completed. It is important to use an independent verification
method, preferably one that cannot be altered to provide proof that the data is reliable.
This type of information is called an audit trail, and is used to prove who accessed the
data and when.
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CHAPTER 4
TAX AUDIT REPORT IN FORM 3CA AND 3CB
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CHAPTER 5
STATEMENT OF PARTICULARS IN FORM NO. 3CD
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CHAPTER 6
FORMS FOR TAX AUDIT U/S 44AB
FORM NO. 3CA
AUDIT REPORT UNDER SECTION 44B OF THE INCOME-TAX ACT, 1961,
IN A CASE WHERE THE ACCOUNTS OF THE BUSINESS OR
PROFESSION OF A PERSON HAVAE BEEN
AUDITED UNDER ANY OTHER LAW
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me/us/M/sin
pursuance
of
the
provision
of
the
***Signed
Place.
Date
Name :
Address:
FORM NO.3CB
*I/We have examined the balance sheet as at 31 st March and the * profit
and loss account/income and expenditure account for the year ended on that date,
attached herewith, of.(mention name and address of the
assessee with permanent account number)
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the
explanations given to *me/us, they said accounts, read with notes thereon, if any,
gives true and fair view:i. in the case of the balance sheet, of the state of the affairs of the assessee as
ii.
at 31st Marchand
in the case of the * profit and loss account/income expenditure account of
the *profit/loss or*surplus/ deficit of the assessee for the year ended on
that date.
Name:
Date..
Address.
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BIBLIOGRAPHY
WEBSITES:
www.google.com
BOOKS:
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