Simple Statutory Audit Checklist

A. Internal Control verification:-

As Auditor we check the Internal control, just to ascertain whether weak internal controls are materially affecting financial statements. Give separate report on internal control, wherever applicable:-

–  Check processing pattern of company / firm from purchase order placed by company to actual delivery to its customer.

–  If there are too much reversal of accounting entries, then companies internal controls in book keeping are weak, higher chances of accounting error.

–  Procedure followed by company to confirm balances due to / from parties.

–  Control on cash inflow and outflow.

–  Whether the company is complying with other statutes such as Labour laws, MSME Act, etc, wherever it required to.

B. Statutory compliances:-

1. Goods & Services Tax:-

Output tax Liability:-

–  Invoice series from new financial year should have been started from new series.

–  Check whether the nature of tax levied is as per destination of goods.

–  HSN / SAC wise recording of items is required for efficient book keeping. To report in ICFR, if not maintained.

–  To ascertain whether tax deposited on liability arise under reverse charge mechanism (RCM).

–  Reviewing E-way bills in relation to invoices issued, wherever required.

–  Monitor the credit notes issued and there effect in GST returns. It is important to know the reason for issuing of credit note.

–  In case of Zero rated supply, GST has been paid under Letter of     Undertaking, Payment should be booked by debiting GST refundable.

Input Tax Credit:-

–  Check whether invoice received in B2C or B2B.

–  Check whether expense claimed eligible for input tax credit.

–  Ensure that the invoice against which ITC claimed have been paid within 180 days from the date of invoice (aging clause).

–  If Non – GST invoice received, then check the number and volume of invoices received from the same vendor during the year, If volume is high then confirm the applicability of GST on vendor.

–  Reconcile monthly balance in E-ledger with books.

General verification:-

–  Reconcile taxable outward supplies and tax liability thereon with  GSTR 3B and GSTR – 1.

–  Reconcile Input Tax Credit availed as per books with GSTR – 3B. Also to reconcile ITC with GSTR – 2A, This exercise should be done    quarterly, otherwise to be reported in ICFR.

2. Tax deducted at Source:-

Tax payable:-

–  Check whether tax deducted at source under respective head.

–  Tax should be deducted on payment where advance paid to vendor.

–  To reconcile the books with challans and returns.

Tax receivable:-

–  Form 26AS  to be match with Form 16A, Mandatory.

–  Reconcile income and TDS thereon with 26AS.

3. ROC compliances:-

ROC compliances are necessary to know the default status of the company.

–  Form ADT – 1 (For appointment of Auditor)

–  Form AOC – 4 (Filling of statement of accounts)

–  Form MGT – 7 (Filling of Annual Returns)

–  Form MGT – 14 (Filling of resolution and agreement to ROC)

–  Form CRA – 4 (Filling of cost auditor report, wherever applicable)

–  INC – 22 (Director KYC)

–  DPT – 3

–  MSME compliance form.

MSME compliance are also required for tax audit purpose as the   company have to provide interest for non payment to suppliers,   registered under Micro and Small categories, with in 45 days.

4. Other:-

–  If the company pays dividend to its shareholder than liability of     Dividend Distribution Tax arise. Check payment as per prescribed rate   and also to ascertain interest paid, if delay.

–  Provident Fund, ESIC, Gratuity, Bonus and Leave encashment :-

To ascertain the applicability of provisions of various acts and if there is any variation, then to report in Audit report.

C. Other verification:-

1. Cash inflow or outflow:-

–  Company / firm has not paid cash in excess of Rs.10,000.00

–  Company / firm has not received cash in excess of Rs.2,00,000.00 in violation of section 269ST of Income Tax Act, 1961

–  If the company / firm received cash in excess of Rs.50,000.00, in    certain cases, it have to receive PAN number of payer.

2. Loan / advances granted or taken:-

–  Loan / Advances are to be checked with due care, whether the same are permitted by Companies Act, 2013 and income tax Act, 1961.

–  Section 185, 186 and 73 to 76 of Companies Act, 2013 are necessarily to keep in mind while verifying the Loans and Advances.

–  Reporting under Tax audit for loan / Advances under section 269SS must not be forget.

CA Devansh Goyal (Prop.) | Devansh Goyal & Associates | Amritsar (Punjab)