The audit conducted by a chartered accountant, as mandated by the Companies Act or the LLP Act, is referred to as a statutory audit. Similarly, tax audits under the Income Tax Act or GST audits are required for certain specific taxpayers. We provide assistance in facilitating CA audits.
As per the Income Tax Act, 1961, if a taxpayer's turnover is ₹1 crore or more from business, or ₹50 lakh or more from a profession, a tax audit under Section 44AB is mandatory. This audit must be conducted by a practicing chartered accountant.
A tax audit is an independent review conducted by a full-time practicing chartered accountant, focusing exclusively on matters related to taxation. The audit ensures that there is no concealment of income by the taxpayer and verifies that all tax liabilities have been paid on time. This audit is a statutory obligation for taxpayers whose turnover or gross receipts exceed the limits prescribed under Section 44AB of the Income Tax Act for the relevant assessment year.
The tax audit report must be filed by 30th September of the assessment year. Failure to submit the report within the due date results in a penalty equal to 1.5% of the gross receipts/turnover, subject to a maximum fine of ₹1.5 lakh.
The tax auditor may either be the same individual conducting the statutory audit of the company or an independent practicing chartered accountant. The appointment can be made by the members of the company during the annual general meeting, the board of directors, or the managing director if authorized by the board. For LLPs and partnership firms, any partner of the firm can nominate a tax auditor, while an individual assessee must appoint the auditor personally. The tax auditor is responsible for conducting the audit and filing the tax audit report directly on the Income Tax Department’s portal, which requires the taxpayer’s approval. The report is prepared in one of three forms, depending on the type of tax audit undertaken.
The tax audit report must be prepared in the prescribed Form 3CA if the assessee is also required to have their books of accounts audited under any other law. For example, companies are mandated to audit their books under the Companies Act, 2013.
If the assessee or taxpayer is not required to have their books of accounts audited under any other law, the tax audit report must be prepared in the prescribed Form 3CB. For instance, this applies to salaried individuals or firms with an income exceeding ₹1 crore.
Form 3CD serves as an annexure to Form 3CA or 3CB, depending on the case. It requires the tax auditor to provide detailed particulars of the taxpayer for whom the tax audit was conducted. Form 3CD acts as an information memorandum and is an integral part of the audit report under Section 44AB.
Every company registered in India under the Companies Act, 2013, is required to have its books of accounts audited, regardless of its turnover. This audit involves a comprehensive examination of the books of accounts, vouchers, and supporting documents, enabling the auditor to express their opinion as mandated by law.
Under the LLP Act, 2008, only those LLPs are required to have their books audited where the contribution or capital is ₹25 lakh or more, or where the turnover has reached or exceeded ₹40 lakh. The scope of the audit is similar to that of a company audit and is also referred to as the statutory audit for LLPs.
The Goods and Services Tax (GST) Act imposes a universal audit requirement on all persons registered under GST if their turnover is ₹1 crore or more. This audit involves a detailed reconciliation report, which must be prepared and certified by a practicing chartered accountant, in accordance with the GST Act.
There are various types of audits prescribed in India under different legislations. The audit required under the Income Tax Act specifically focuses on compliance with the provisions of the Income Tax Act. Notably, all the audits discussed here must be conducted by a practicing chartered accountant. A taxpayer can choose to have all their certifications done by a single CA, or multiple auditors or auditing firms can be engaged for the task. Below are three other types of audits, and understanding these distinctions is crucial to appreciating the differences between a tax audit and a statutory audit.
There are various types of audits prescribed in India under different legislations. The audit required under the Income Tax Act specifically focuses on compliance with the provisions of the Income Tax Act. Notably, all the audits discussed here must be conducted by a practicing chartered accountant. A taxpayer can choose to have all their certifications done by a single CA, or multiple auditors or auditing firms can be engaged for the task. Below are three other types of audits, and understanding these distinctions is crucial to appreciating the differences between a tax audit and a statutory audit.
Every company registered in India under the Companies Act, 2013, is required to have its books of accounts audited, regardless of its turnover. This audit involves a comprehensive examination of the books of accounts, vouchers, and supporting documents, enabling the auditor to express their opinion as mandated by law.
Under the LLP Act, 2008, only those LLPs are required to have their books audited where the contribution or capital is ₹25 lakh or more, or where the turnover has reached or exceeded ₹40 lakh. The scope of the audit is similar to that of a company audit and is also referred to as the statutory audit for LLPs.
The Goods and Services Tax (GST) Act imposes a universal audit requirement on all persons registered under GST if their turnover is ₹1 crore or more. This audit involves a detailed reconciliation report, which must be prepared and certified by a practicing chartered accountant, in accordance with the GST Act.
While the statutory audit required under the Companies Act, 2013, or the Limited Liability Partnership Act, 2008, is general and comprehensive, the scope of work involves a detailed examination of the books of account maintained by the company or LLP. The statutory auditor is legally required to express a written opinion on whether the books of account and records of the company or LLP present a true and fair view of the business's affairs. In contrast, the tax audit under the Income Tax Act serves a different purpose. The tax auditor is tasked with preparing a detailed report in a specified format (i.e., 3CA/3CB and 3CD), focusing on the taxpayer's compliance with various provisions of the Income Tax Act. Therefore, the tax audit has a narrower scope compared to the statutory audit.
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