New MVAT Audit Form 704
- Additional responsibilities as an Auditor
- Additional features to be reported in New Form 704
- Issues and Difficulties
- Welcome Changes and Redundant Sections in Old Form 704
Additional responsibilities as an Auditor
- Carefully prepare Reconciliation Sheet with balance Sheet figures
- Add back all amounts debited to Sales and then allow the deductions considering the facts and circumstances of the case
- While allowing set off, correct treatment w.r.t Purchase Returns, rate difference, etc. needs to be verified
- Whether Stock Register is to be maintained
- Verification of PT returns filed & payments made under PTRC
- Verification of PT returns filed & payments made under PTEC
- Determination of Cash sales made during the year. Cash sales means sales against which cash has been received
- etermination of Cash purchases made during the year. Cash purchases means sales against which cash has been paid
- Verification of Bank statements for the year along with the BRS statements and supporting for items pending in BRS
- Verification of refund received after the year of audit
- List of Vendors from whom Purchases are effected for the first time under the period of audit
Additional Features to be reported in new Form 704
- E-mail address
- Details Of Bank accounts along with Account No, Branch & Branch BSR Codes
- Audited Previous & Current Year’s Financial Statements With Statutory Audit Reports And Tax Audit Report
- Stock Register along with the appropriate records
- Refund Application made in Form 501
- Refund received/granted by the Department for the period under audit
- Additional places of business
- Whether separate books of accounts are maintained at those places
- Name & version of the Accounting Software in use
- Change in product line in comparison to previous year
- Place of business where books of accounts are normally kept
- New business activity commenced during the year if any
- Opening Stock (including WIP in Maharashtra)
- Closing Stock (including WIP in Maharashtra)
Issues and Difficulties
1. Part-1 Point B (m):
- Examination of Bank Statements
- Intention of examining Bank Statements needs to be understood
- Can STANDARD on Auditing SA 600 (Using the work of another Auditor) be relied on?
2. Part-1 Point B (n):
- Maintenance of Stock Register
- There is ambiguity with regard to the meaning of Stock.
- In case of a Works Contractor how can Stock be verified as
Work-in-progress= Material+ Labour
3. Part-1, Table 2, Sr. No. 6:
- Refund already granted to dealer
- For the Financial year 2008-09, refund is received in the year 2009-10. Should it be considered while auditing for the year 2008-09?
- In case of small traders, if refund is deposited in the Financial year 2009-10 and the Bank reconciliation Statement is prepared annually, how would the same be verified?
4. Part-2 Point C (iv):
- Change in Product Line
- Ambiguity in what encompasses a Product Line
5. Part-2, Point G
- Part-2, Point G (2): Is it necessary to verify whether the deductions under PTRC is correct or not?
6. Part-2 Point M and N:
- Financial Ratios for the year under audit
- How will one provide Gross Profit ratio, Net Profit ratio and other ratios if books are not maintained as per Income tax Act?
7. Part-2 Point N (2):
- Cash Sales
- Accounting Definition of Cash Sale
- What is the intention of the Department in inserting this requirement?
8. Part-2 Point N (3):
- Cash Purchases
- What is the treatment for imprest or expenses debited to Profit & Loss Account?
9. Part-2 Point N (8):
- Tax to Turnover of Net Sales
- If Net Sales is excluding taxes would the required ratio be Tax/Net Sales?
- Another issue being whether tax also includes CST Collection?
10. Point b in Schedules I, III, IV and V and Point 2 in Schedule II:
- Turnover of sales including inter-State consignment transfers / branch transfers
- Clarity is required on the above Point.
11. Annexure-1 Point C (2):
1. The new Form 704 is mainly split into three parts:
- Part I: Audit & Certification
- Part II: General Information, Ratios, Remarks & Observation etc
- Part III: Schedules & Annexure.
2. The form is aligned with the returns filed
Redundant Sections in old Form 704
1. SECTION P: Details of Purchases on Form C in Contravention of the CST Act, 1956.
2. SECTION Q: Details of Purchases of Rs. 10000/- Or More, From Dealers/ Persons Not Registered under MVAT Act 2002.
3. SECTION U: Stock Account of Declaration Collected and Utilized During the Period of Review.