CA Ramandeep Singh Bhatia
These FAQs are specifically design to create understanding for appointment of Auditor for GST Audit.
Answer: Provisions of Section 35(5) read with Section 2(23) and section 2(35) other related provision, only chartered accountants and cost accountants can be appointed as GST Auditors. A company secretary cannot be appointed as GST auditor.
Answer: In terms of section 6 of The Chartered Accountants Act: No member of the Institute shall be entitled to practice whether in India or elsewhere unless he has obtained from the Council a certificate of practice.
Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules provides that in certain circumstances the accounts are to be audited by a chartered accountant. In terms of the above definition and as per the provisions of The Chartered Accountants Act, no member can practice without holding a certificate of practice. Therefore, only a chartered accountant holding certificate of practice can audit accounts.
Answer: The Council at its 242nd Meeting has passed a Resolution, effective from 1st April 2005, that any member in part time practice (holding certificate of practice and also engaging himself in other business or occupation) is not entitled to perform attest function. The audit under the GST Laws being an attest function, the resolution of the Council is applicable for such audit also. Therefore, any member in part time practice cannot perform an audit under the GST Laws.
Answer: It is possible for the registered person to appoint two or more chartered accountants as joint auditors under the GST Laws in which case the audit report will have to be signed by all the joint auditors. In case of disagreement, they can give their report separately. In this regard, attention is invited to SA 299 — Responsibility of the Joint Auditors. The responsibility of Joint Auditors under the GST Laws will be the same as in the case of other audits e.g. audit under the Companies Act or the Income- tax Act.
Answer: It is also possible for a registered person to appoint separate auditor(s) under the GST Laws for conducting the audit in respect of any distinct person / branch / division / additional place of business / business vertical etc., [within the same State or Union Territory or in different States or Union Territories] and there could be separate auditor(s) for a principal place of business.
In such a case, the branch auditor(s) will have to submit report(s) / certificates to the management or, if directed, to the auditor(s) appointed for conducting the audit for the principal place of business and such reports will have to be considered and dealt with appropriately by such auditor(s) while consolidating the report for the business as a whole.
Answer: The GST Laws do not prohibit, however, be noted that as per the decision of the Council (reported in the Code of Conduct under clause (4) of Part I of Second Schedule), a chartered accountant who is in the employment of a concern or in any other concern under the same management cannot be appointed as auditor of that concern. Therefore, an employee of the registered person or an employee of a concern under the same management cannot audit the accounts of the registered person under Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.
Second Schedule to the Chartered Accountants Act, if a member furnishes / gives an audit report in the case of a concern in which he and / or his relatives have substantial interest, it will be necessary for him to disclose his interest in the audit report. This is equally applicable to audit under section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.
Relative means the spouse, brother or sister or any lineal ascendant or descendent of the member. Please refer to the definition of “Relative” given in the CA Regulation, 1988.
Answer: A view has been published in the ‘A Guide to MVAT Audit’ in chapter III, para 11 that “an internal auditor of the dealer cannot conduct audit because vat audit being an audit under a statute, the same principle will apply”. Similarly, on announcement is made on 28th September 2018 clarifying that the council of the Institute of Chartered Accountants of India, in its 378th meeting clarified that “an Internal Auditor of an entity cannot undertake GST Audit of the same entity. This is based on similar view taken in the context of audit under Income-tax Act.
Answer: Section 144 of the Companies Act restricts Auditor not to render certain services. This is a new provision in the Companies Act. One of the restricted services is Section 144(h) – Management Services. The Companies Act does not define what constitutes Management Services. But in common parlance it is understood that, what services the management has to do, are the management services. Since, audit under GST Act is an audit under a statute, the restriction imposed by section 144(h) for an Auditor, not to render certain services, shall not be applicable. Hence statutory auditors can be appointed as GST Auditors.
Answer: A chartered accountant should not accept the audit of a registered person to whom he is indebted for more than rupees ten thousand. Reference can be made to compilation of Ethical Standard Board, whereby a member of the Institute of Chartered Accountants of India shall be deemed to be guilty of professional misconduct if he accepts appointment as auditor of a concern while he is indebted to the concern or has given any guarantee or provided any security in connection with the indebtedness of any third person to the concern, for limits fixed in the statute and in other cases for amount exceeding rupees ten thousand. For this purpose, the limit of Rs. 10,000/- shall be the aggregate amount in respect of the proprietor and/or the partner/s of the firm of chartered accountants.
Answer: The Council has issued a Notification No. 1-CA(7)/60/2002 dated 8th March 2002 effective 1st April 2002 (Appendix 7) whereby a member of the Institute in practice shall be deemed to be guilty of professional misconduct, if he accepts the appointment as statutory auditor of Public Sector Undertaking/ Government Company/Listed Company and other Public Company having turnover of Rs. 50 crores or more in a year and accepts any other work or assignment or service in regard to the same undertaking/Company on a remuneration which in total exceeds the fee payable for carrying out the statutory audit of the same undertaking/Company.
The term “other work(s)” or “service(s)” or “assignment(s)” shall include Management Consultancy and all other professional services permitted by the Council pursuant to section 2(2)(iv) of the Chartered Accountants Act, 1949 but shall not include:—
(i) audit under any other statute;
(ii) Certification work required to be done by the statutory auditor and
(iii) Any representation before an authority.
Since GST Audit will be considered as an “audit under any other statute” for the purpose of this notification and thus the above restriction shall not apply in respect of audit fees.
Disclaimers: The above FAQs have been prepared based on the prevailing law/provisions notification / circulars and clarification available as on date of publishing. There are personal interpretations involved in some of the situations which may vary.
Source: Technical guide of on GST Audit issued by ICAI dated 17-10-2018.
(Author is also a Faculty of NACIN , ICAI for GST and may be contacted at [email protected] or on +91 9827152729)