“Making client ready for tax audit”
Introduction : It is of at most important that every client who is required to get his books of accounts audited, obtains audit report well within time. This will allow him to avoid penalty and other consequence that he may suffer due to non-obtaining of audit report in time. In October the due date of tax audit is falling i.e. if the person required to get his books of account audited, he shall furnish audit report for financial year 2019-20 (i.e. 01/04/2019 to 31/03/20) on or before 31st October, 2020. What are the points that shall be considered so that audit can be completed in rapid manner or how to make client ready for tax audit is the big question; here are some list of points that will allow auditor and assessee to complete the audit activity:
- Preparation of Bank Reconciliation : It shall be advised to all the clients that they shall be ready with bank reconciliation statements for the bank accounts they have operated during the year. This will allow the auditor to match all bank account balances as per books maintained by client with balance as per bank statement.
- Collecting Statement of accounts from giant Customers/Suppliers : It is advisable to entity that they shall collect statement of accounts from giant customers and suppliers and reconcile there closing balance with books of accounts this will help the auditor to verify external party balances which are lying in books of accounts as creditor or debtor.
- Matching TDS and Income amount with 26AS : Entity shall obtain 26AS and shall match the amount which has been shown as income under 26AS with the amount which has been recognized by the entity as income. Along with is another reconciliation that can be prepared by entity is amount which has been shown as TDS in 26AS and TDS recognized in books of account by them.
- Collecting other audit reports and certificate obtained during the year : If during the year any auditor has provided entity with any audit report required under any other law e.g. Cost audit report, GST audit report, company audit report or if entity has obtained any certificates then copy of the same shall ne furnish to auditor. This will reduce substantial work of auditor and will allow him to act in rapid manner.
- Related Party transaction and payment : Entity shall make a report about transaction which has been undertaken by him during the year with its related party or related party of any of his promoter/director/partner/proprietor describing nature of relationship, nature of transaction, date of transaction and amount of transaction. This will help the auditor in reporting requirements.
- Sending detailed trail balance : Entity shall share detailed trail-balance with auditor which will allow the auditor to verify opening balances which will help the auditor to identify any variances in opening balance.
- Reconciliation of stock : Entity shall provide auditor with detailed working in relation stock which is lying at the premises of entity, if entity has a branch than it shall verify balance which is lying as stock with another branch. Along with this is business of entity is of such nature that it sells goods on sale or approval basis then it shall provide list of parties along with amount of stock lying at there premise. In this regard it is advisable to entity that third-party confirmations are also obtained about the condition of stock.
- Keep all the register upto date: Along with all the points entity shall keep all the register such as Fixed Asset Register, Cash Expense Register (If maintained separately), Stock Register, Purchase Register, Sales Register and Journal Register along with Copy of relevant Credit Notes and Debit Note up to date for relevant audit period which will help auditor to complete the vouching process in rapid manner.
These are some of the points which will allow the auditor to conduct the audit in rapid and fruitful manner; and this will also ensure that due to audit procedure entity’s routine business is not impacted.