Statutory Audit under the Companies Act, 2013
Audit of financial statement is a crucial function which we perform. Statutory Audit is a legally required review of books of accounts of a company and involves expressing an opinion on the true and fair of the accounts. Our audit report is relied upon by the shareholders, lenders, employees, Government agencies and tax authorities and various other stakeholders of the company.
Section 129 of Companies Act, 2013 requires every company to prepare Financial Statements i.e. profit and loss account, balance sheet and cash flow statement, that gives a true and fair view of the state of affairs of the company and comply with the Accounting Standards notified under section 133. The Financial Statements must also be prepared in form specified in Schedule III of the Companies Act. The Financial Statements shall be approved and signed by the Board of Directors.
Section 139 to 147 of the Companies Act provides for procedure for appointment of auditor and the audit of the Financial Statements. The statutory audit has to be carried out by an independent auditor who must be a Chartered Accountant in practice or a firm of Chartered Accountants.
The Statutory Auditor shall, after taking into account the provisions of the Companies Act and rules or order made thereunder, the Accounting and Auditing Standards issued by ICAI, and to the best of his information and knowledge, express an opinion as to whether the accounts of the company give a true and fair view of the state of the company’s affairs as at the end of its financial year and profit or loss and cash flow for the year.
The auditor’s report must be attached with the financial statements along a report by the Board of Directors stating their explanation on qualifications or remarks in the Audit Report.
The financial statements along with audit report and report by Board of Directors shall be laid before the shareholders of the company for its adoption at every Annual General Meeting.
Audit of Trusts, Societies and other non-profit organisations
trust, societies and non-profit organisations are generally floated for the welfare of its members or public at large. The primary objective of such organisations is not to earn any profits although it may carry on business activities incidental to its primary objectives. The activities of trust and societies are exempt from income tax if they are registered under Section 12A of the Income Tax Act, 1961. The exemption is subject to various conditions under the Income Tax Act. If these conditions are not complied, the exemption will be withdrawn. Thus, the primary aim of this audit is to enable the Assessing Officer to satisfy himself about the genuineness of the claim for exemption under section 11 and also whether the institution has complied with all the requirements prescribed by the statute.
The auditor has to verify the income and expenditure account and the balance sheet of the organisation and give an opinion as to whether they give a true and fair view. In addition, he has to express an opinion as to compliance with various provisions under the Act. This entails a detailed verification of constitution of the trust or society, its objects, its rules and by-laws, minutes of meetings, application of fund and compliance with the state trust/societies Act.
Apart from this, the beneficiaries of organisation may be interested in knowing how well the funds have been utilized for achieving its objects. in such cases also, an audit is conducted to know the propriety of the organisation. This becomes all the more important where the Government is also a trustee in such organisation. We are experienced in carrying out the audits of various charitable and religious institution, educational trusts, co-operative societies, residential associations and so on.
Audit under the Income Tax Act 1961
Audit under the Income Tax Act or simply tax audit is one of the core functions which we perform and hence, we are highly specialized in it. We have been performing tax audits of various types of business entities ever since its inception in 1985.
Section 44AB of the Income Tax Act, 1961 mandates every person to get his accounts audited if his turnover or gross receipts exceed the specified limit. In cases of assessees carrying on business, the threshold limit is Rs.1 crore and with effect from 1st April 2020, the threshold limit is Rs.5 crore if 95% of aggregate payments including expenditure is other than in cash, during the previous year. Similarly, in case of assessees carrying on profession, the threshold limit is Rs.50 lakhs.
Those assesses to whom provisions of section 44AD(4) is applicable and their income exceeds basic exemption limit are also required to get their books of accounts audited. Similarly, those assessees who have opted for section 44 ADA and declares income less than the profit/income prescribed under the section is also required to get their books audited.
The tax auditor is required to file the report in Form 3CA or Form 3CB with audit observations and qualifications of tax audit and also an annexure in Form 3CD detailing various particulars relating to compliance of provisions of Income Tax Act.
We are highly skilled and experienced in conducting tax audit of various types of organisations and we have helped them in identification and rectifications of various compliance requirements under the Income Tax Act.
Audit under Goods and Services Tax law
We have been at the forefront since the inception of Goods and Service Tax implementation in 2017 and since then, we have been constantly updating ourselves with finer nuances and complexities of this new and dynamic tax law. One of the services which we render in relation to GST is conducting audit in accordance with the requirements as per CGST-SGST Acts and rules made thereunder.
Section 35(5) of CGST Act, 2017 requires a registered taxable person with turnover of more than Rs.2 crore (now Rs.5 crores) in a financial year to get his books of account audited by a chartered accountant or cost accountant. The due date for submission of audited financial accounts including reconciliation statement for a financial year would be 31st December of subsequent year.
We conduct audit of books of accounts under the GST law involving review of controls relating to GST compliance; review of outward supplies; review of input tax credit claimed on inputs, input services and capital goods; review of classification, rate of tax and exemptions; preparation of reconciliation statements are to be filed along with certification.
Audit certification is not merely an attestation function. Our team is highly skilled in audits and updated with all the relevant provisions in the CGST-SGST Act, CGST-SGST rules, Notifications, Circulars, Orders and Press releases which has enabled us to add great value to our clients by identifying and rectifying lapses in compliance. We strive to achieve value addition for our client in addition to performing the statutory obligation of conducting audit as mandated under the GST law.
Internal audit
Apart from statutory audits required under various laws, we also perform internal audit services to provide an assurance that an organisation’s risk management, governance and internal control processes are in place and are operating effectively. Typically, the internal audit is custom designed to fit in the requirements of an organisation.
We as internal auditors deal with issues that are fundamentally important to the survival and prosperity of the organisation. We look beyond the financial statements to consider wider perspective such as the compliance with laws and regulation, CSR activities, environmental impact of the organisation and the way it treats its employees. We provide an unbiased and objective view on these aspects.
All organisations face risks. he key to an organisation’s success is to manage those risks effectively – more effectively than competitors and as effectively as stakeholders demand. A core aspect of internal audit is to assess the risk of an enterprise. To evaluate how well risks are being managed, we as an internal auditor, will assess the quality of risk management processes, systems of internal control and corporate governance processes, across all parts of an organisation and report this directly and independently to the most senior level of executive management and to the board’s audit committee.
By reporting to executive management that important risks have been evaluated and highlighting where improvements are necessary, we help the executive management and boards to demonstrate that they are managing the organisation effectively on behalf of their stakeholders.
In short, our objective is to help our clients succeed and grow. We do this through a combination of assurance and consulting. The assurance part of our work involves telling managers and officers, how well the systems and processes designed to keep the organisation on track are working. Apart from this, we offer consulting help to improve those systems and processes where necessary and act as a catalyst for improvement in an organisation’s practices. Our in-depth knowledge of business laws and practices combined with experience of working with clients in various industries provide as a critical edge while carrying our internal audit engagements.
Bank audit and audit of NBFCs
The banking industry is the backbone of any economy as it is essential for sustainable socio-economic growth and financial stability in the economy. There are different types of banking institutions prevailing in India, namely Commercial Banks, Regional Rural Banks, Co-operative Banks, Development Banks (more commonly known as ‘Term-Lending Institutions’), Foreign Banks, Payment Banks, Small Finance Banks and EXIM Bank. Of these banks, commercial banks are the most wide spread banking institutions in India. Commercial banks provide a number of products and services to general public and other segments of economy. Two of the main functions of commercial banks are (1) accepting deposits and (2) granting advances. In addition to their main banking activities, commercial banks also undertake certain eligible Para-Banking activities which are governed by the RBI guidelines on Para-Banking activities. Section 6 of the Banking Regulation Act, 1949, lists down the forms of business in which banking companies may engage.
RBI is responsible for development and supervision of the constituents of the Indian financial system (which comprises banks and non-banking financial institutions) as well as for determining, in conjunction with the Central Government, the monetary and credit policies keeping in with the need of the hour. Important functions of RBI are issuance of currency; regulation of currency issue; acting as banker to the central and state governments; and acting as banker to commercial and other types of banks including term-lending institutions.
The provisions regarding the financial statements of banks are governed by the Banking Regulation Act, 1949. The Third schedule to the aforesaid Act, prescribes the forms of balance sheet and profit and loss account in case of banks. Further, in case of banking companies, the requirements of the Companies Act, 2013, relating to the balance sheet, profit and loss
account and cash flow statement of a company, in so far as they are not inconsistent with the Banking Regulation Act, 1949, also apply to the financial statements, as the case may be, of a banking company. However, these provisions does not apply to Nationalised Banks, State Bank of India, its Subsidiaries and Regional Rural Banks (RRBs).
The provisions regarding audit of Nationalised Banks are governed by the Banking Regulation Act, 1949 and the RBI Guidelines. The provisions regarding audit of Banking Companies are governed by the Banking Regulation Act, 1949, RBI Guidelines and the provisions of the Companies Act, 2013.
Information Systems audit
Information systems are very important for running a large business. Earlier information systems were used only for recording business transactions but now they are used for taking complex business decisions. It has become a primary enabler to various production and service process. Artificial intelligence, big data, block chain technology has significantly changed the way in which business operations are performed in the computerised environment.
With the increased use of technology, the awareness and requirement for control has also increased significantly. IT General Control (ITGC) are those controls which are pervasive to all systems, processes, and data for any organisation or IT environment. The objective of ITGC are to ensure the proper development and implementation of applications, as well as the integrity of programs, data files, and computer operations.
In order to ensure that controls are in place and that they are working properly, information system audit is required. It is the future of the accounting and auditing scenario. Information System audit play a crucial role in evaluating the performance of information system in an organisation. It adds security, reliability and accuracy to the information systems.
Information Systems Audit involves:
- Understanding the organisations internal control environment and financial reporting processes.
- Identification of information technology systems related to processing financial data including capturing, authorizing, storing and processing, summarizing and classifying, and reporting financial data.
- Identification of key controls which addresses specific financial risk.
- Understanding the design and implementation of internal controls related to information system.
- Verification of documentation and testing of IT controls.
- Ensuring that IT controls are updated and changed, to address the necessary and corresponding changes in financial reporting process.
- Periodic monitoring mechanism of IT controls for effective operations over time.