CA FINAL – AUDIT

AUDIT – AMENDMENTS from RTP May 1

199 + RTP Nov 18 + RTP May 18
18)

MAY 19 RTP Amendments

“AMENDMENTS” highlighted in RED
(Covers Amendments from RTP May 19 + RTP Nov 18 + RTP May 18)

CA FINAL ““AUDIT
AUDIT”
AUDIT”
63.75% REGULAR &
Results FAST TRACK
BATCHES
“NOV 18” Test Series

69 in
Law

76 in
Audit
AUDIT SAGA by
by
CA SANIDHYA
40 & 42
SARAF
Rank

www. APNAMENTOR.com
(Old
(Old/New
/New Course - MAY 19
19))
For Revisionary Voice Clips & Pendrive Classes: - Contact Author at
at 7838061193

__”ONE STOP SOLUTION” FOR CA FINAL AUDIT

AUDIT REVISION”
 CA FINAL – AUDIT
AUDIT – AMENDMENTS from RTP May 1
199 + RTP Nov 18 + RTP May 18
18)

APNA MENTOR

_____“ONE STOP SOLUTION” FOR CA FINAL AUDIT REVISION______

_____“ONE
Also for Detai
Detailed
led Analysis & understanding Students may refer to below by Author: -
* Question Bank * PENDRIVE Class
* Main Book * Free Voice Revision Clippings
* 4 - 5 Day Crash Course * Revision Classes

All rights reserved. No part of these Notes may be reprodu

reproduced,
ced, stored in retrieval system or transmitted
in any form or by any means, Electronic, Mechanical, Photocopying, Recording, or Otherwise without
prior permission from the Publisher.
Although author and publisher have made every effort to ensure that info
information
rmation in these Charts was
correct at press time, author and publisher do not assume and hereby disclaim any liability to any party
for any loss, damage, or disruption caused by errors or omissions, whether such errors or omissions
result from negligence, accident, or any other cause
 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

“AUDIT UNDER FISCAL LAWS”

A = AUDIT UNDER INDIRECT TAX LAWS
• RP must get accounts audited by CA/ Cost Accountant if Aggregate Turnover in FY > 2 Cr..
ACCOUNTS
AUDIT OF

• Such RP is required to furnish electronically on common portal with Annual Return a copy of: -
- Audited Annual Accounts
- A Reconciliation Statement to reconcile value of supplies declared in return furnished for
FY with Audited Annual FS & such other particulars as prescribed

RP can be directed to get his records including BOA = examined & audited by CA or Cost Accountant
in any stage of scrutiny, inquiry, investigation or other proceedings; depending on complexity of case.

Special audit can be directed in 2 circumstances i.e. where: -

TYPES OF GST AUDIT

* Value not correctly declared or * Credit availed not in normal limits.

SPECIAL AUDIT U/S 66

Circumstances for Notice for Special Audit: - AC who nurses opinion on above 2 aspects, after
commencing & before completion of any scrutiny, enquiry, investigation or other proceedings under Act,
may direct RP to get his books of accounts audited by expert. Identifying the expert is not left to the
registered person whose audit is to be conducted but the expert is to be nominated by the Commissioner.

• Assistant Commissioner to obtain prior permission of Commissioner to issue such direction in FORM
GST ADT-03 to RP by getting his books audited by Expert.
• CA or Cost Accountant so appointed = submit audit report, mentioning specified particulars in 90 days
in FORM GST ADT-04 which can be further extended by 90 days, if sufficient cause
• RP to be provided an opportunity of being heard in respect of any material gathered in Special Audit
which is proposed to be used in any proceedings under this act.

Audit by Tax Authorities (likely a routine audit but not special audit) wherein Commissioner or any
AUDIT
u/s 65

officer authorised by him, can undertake audit of any registered person for such period, at such frequency
& in manner as may be prescribed.

Auditors should obtain Understanding of organization Internal Process of: -

(a) Accounting of Transactions
(b) Reporting to the GSTN Portal
(c) Reconciliation of filed data and
Audit
(d) Internal control systems implemented
Planning
To plan audit & develop effective audit approach to meet audit requirements. In planning portions of
audit which may be affected by Client's CIS environment = auditors should obtain understanding of
significance and complexity of CIS activities & availability of data for use in audit.

Before starting his wok, GST Auditor shall conduct Preliminary Review to assess CIS controls &
risks that could impact work by considering the following points: -
Preliminary
Review
• Knowledge of the Business • Understanding thetechnologydeployed
• Understsnding Internal Control System • Risk assessmentand Materiality

By CA SANIDHYA SARAF 3|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

* Inform concerned assessee about applicability of GST audit;

Preparation * Confirm eligibility to be GST auditor under related legislation;
for GST * Understand nature of business, products or services, requirements of records to be maintained &
Audit/ advise auditee to maintain accounts and records so required, beforehand;
Steps * Prepare a questionnaire to understand the operations / activities of auditee & specifically develop
auditor can questions on those issues on which GST law would have a bearing
take * Preparation of detailed auditprogram & list of records to be verified
* Host of relevant reconciliations.

Fail to 47(2) provides that if failure to submit annual return in specified time = Late fee leviable @100/day
Submit during which such failure continues subject to max of 0.25% of turnover in State/UT & Equal amount
Annual of late fee under respective State/UT GST law.
Return & not No specific penalty in GST Law for not getting accounts audited by CA or Cost Accountan = Sec 125
getting A/C of CGST Act subjected to penalty upto 25,000 = General penalty that gets attracted where any person,
audited who contravenes any of provisions this Act or rules for which no penalty is separately provided..

No prescribed or specified approaches for conducting audit under GST. GST Auditor not required to express his
opinion on truth and fairness of financials when it is audited by others. In any case, he is required to certify
correctness and completeness of certain reconciled data. Verification to be substantially more than opinion on truth
and fairness.
AUDIT APPROACH

Certain time-tested methods of conducting audit evolved into guidelines, which among others are: -
* Obtaining prior knowledge of business & comparing them with similar businesses
* Preparing master file of clients (permanent master file)
* Discussing on with audit team on the methodology to proceed with the audit
* Studying and evaluating systems (including business systems) and internal control of business entity
* Assessing audit risks and deploying of suitable personnel * Assessing Risk appetite of business entity
* Preparing of an audit plan / audit program and conducting the audit accordingly
* Reviewing meetings with audit team
* Drawing conclusions on basis of audit evidence obtained in audit & discuss with client observations& findings
* Discussing with RP & obtaining various management certificates
* Reporting observations in the prescribed statutory format, if any, or evolving a suitable format of reporting
* Maintaining Audit working papers file (Filing of documents either in permanent file or working papers file)
* Concluding audit and intimating the management.

Auditor to take into account AS followed at preparation of financial statements. There could be differences in
manner of accounting treatment of certain transactions as per AS in financial statementsvis-à-vis treatment in GST.

SOME OF DIFFERENCES ARE: -

AS v/s GST

* AS = Supplies on behalf of principal are not reflected in financial statements of agent & only commission is
shown as Revenue of agent.
GST Law = Such turnover treated as part of agent’s turnover.
* AS 19 = in finance lease, in books of lessor, cost of asset is recorded as receivable whereas in books of lessee, it
be recorded as asset purchased.
GST = cost of asset recorded as a purchase & fair value not be recorded in books of lessee as purchase.
* AS = If lessor, only financial charges treated as revenue
GST = entire amount treated Revenue.
* AS = In lessee = lease rentals bifurcated into interest charges and liability
GST = Entire lease rentals treated as expense.

By CA SANIDHYA SARAF 4|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

GST Audit in Computerised
Environment
Compliances under GST depend on technology because transactions are numerous. In GST regime, Info
Systems become integral to enterprise day-today operation, such as Return filing, Payment of taxes,
Rectification of returns filed, Reconciliation of returns, e-Way Bill, GSTR 9 etc.
* Primary responsibilityof GST Auditor is to assess entire Computerized Info System (CIS) environment & get

macro perspective ofdata availability and systems reliability.

* Traditionally manual process of checking and verification
* GST audit processes for larger assesses is carried out by using Computer Systems and Technology
* Example - Verification for matching of ITC availed with Outward
* Supply by supplier being large in numbers, can’t be done manually & computerized tools & methods used.
* Auditor is aware of such computerized environment i.e. CIS Environment & audit risks involved therein.
* GST Auditor try to know whether computer of any type or size used by entity for processing financial info is
important for audit & if it is operated by entity or by 3rd party.

Following are the various forms to be filed under GST Act

Various Returns

• GSTR 9 = GSTR 9 should be filed by the regular taxpayers filing GSTR 1, GSTR 2, GSTR 3
Under GST

• GSTR 9A = GSTR 9Ashould be filed by the personsregistered under composition schemeunder GST.
• GSTR 9B = To be filed by e-commerce operators
• GSTR 9C = Should be by the taxpayers whose annual turnover exceeds 2 Crores during the financial year. All
such taxpayers are also required to get their accounts audited and file a copy of audited annual accounts and
reconciliation statementof tax alreadypaid and tax payable as per audited accounts alongwith GSTR 9C.

* Annual return filed once in year by RP under GST including those registered under composition levy.
Format, Eligibility
GSTR 9 - Annual

* Consists details regarding supplies made & received in yr under tax heads i.e. CGST, SGST & IGST.
Return Filing,

* It consolidates the information furnished in the monthly/ quarterly returns during the year.
& Rules

* All Registered taxable persons in GST must file GSTR9 form.

Below not required to file GSTR 9: -

• Casual Taxable Person • Input service distributors
• Non-resident taxable persons • Persons paying TDS under section 51 of GST Act.
Details
required in 1. Inward outward supplies 2. ITC declared in returns filed during the FY.
GSTR-9 3. Details of Taxes paid during the F.Y. 4. Other details.

Part A- Reconciliation Statement: -

Part 1 = Basic details

1.Financial year
2.GSTIN
3 A.Legal name
3 B.Trade Name(if any)
Analysis of GSTR-9C

3. Are you liable to audit under any act

Part 2 = Recounciation of turnover declared in audited Annual Financial Statements with the turnover
declared in Annual Return (GSTR9)

Part B- Certification: -

1. We have examined: -
(a) B/s as on..
(b) P/L for period..
(c) Cash flow statement for period..
2. Based on our audit we report that Registered person has maintained/not maintained books of accounts, records
& documents as required by IGST/CGST Act, 2017 & rules/notifications thereunder.
3. The discrepancies hereby observed are…

By CA SANIDHYA SARAF 5|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

What are the important deductions /additions to be made from the Annual
Turnover as per the financials to arrive at the Turnover as per GSTR9?
Differences due to fluctuation in Foreign Exchange Rate ie. = { RBI Rate - CBEC Rate} * Value of goods
Illustration 1: - PQR Ltd has exported goods to a Company located in USA. The value of goods is $ 100000.
The exchange rate on the date of filing of shipping bill is: - CBEC Notified = Rs 65 &
RBI Reference Rate = Rs 68 & At time of receiving money, bank exchanged foreign currency at Rs 70.
What would be answer, if at time of receiving money,the bank exchanged the foreign currency at Rs 66.
Answer: -
For GST returns, Exchange rate= Rs 65 and exports to be disclosed in GST Returns would be Rs 65,00,000.
For Accounting Purpose, Exchange rate= Rs 65 and exports to be disclosed in Accounts would be Rs 68,00,000.
The difference in revenue of Rs 300000 would be reduced from the Annual turnover as per the financials to
arrive at revenue as Per GSTR.
Additionally, if at time of receiving money, bank exchanged the foreign currency at Rs 70,Amount actually
received is Rs 70,00000 whereas shown in books is Rs 68,00,000. So Rs 2,00,000 would be credited to P/L
Account as Forex Gain which again needs to be reduced from the Annual turnover as per the financials to arrive
at revenue as Per GSTR9.

In the same question, if at the if at time of receiving money, bank exchanged the foreign currency at Rs 66,
Amount actually received is Rs 66,00,000 whereas shown in books is Rs 68,00,000. So Rs 2,00,000 would be
debited to P/L Account as Forex loss which again needs to be added from the Annual turnover as per the
financials to arrive at revenue as Per GSTR9.

Illustration 2: - Goods sold on approval basis and returned by the supplier.

Answer: - The value of such supplies would not be included in turnover in audited F/S. So question of deducting
it does not arise.

Illustration 3: - Goods cleared from one branch to another and then sold from the other branch.
Answer: - In cases of branch transfer, goods would not form part of turnover as per F/S. It would stand reflected
as branch transfers under State Level Vat laws.
{ Do remember dates are to be considered. For example, if branch transfer has taken place on 30.4. 2017, excise
duty will be levied. If services have been provided during the service tax regime, Service Tax will be levied.
Date of issue of invoice is not relevant}

Comparative view of Form GSTR-9 and GSTR 9C

Return in GSTR 9 Return in GSTR 9C

It is the report of a formal or official character giving Means formal statement to be made under provisions of Act
information the veracity of which needs an enquiry as to its correctness

Prescribed under a Statute Prescribed under a Statute

To be filed by all registered persons To be filed only if the aggregate turnover in a financial year
exceeds 2 Crores.
Not required to be filed by a Casual Taxable Person, Not required to be filed by a Casual Taxable Person, Non-
Non- Resident Taxable Person, Input Service Resident Taxable Person, Input Service Distributor, UIN
Distributor, Unique Identification Number Holders, Holders, Online Information and Database Access
Online Information and Database Access Retrieval Retrieval Service, Composition Dealers, persons required
Service, Composition Dealers, persons required to deduct to deduct taxes under Section 51 and persons required to
taxes under Section 51 and persons required to collect collect taxes under Section 52.
taxes under Section 52.
No need to annex financials Financials to be annexed
A plain reading of relevant provisions indicate that said Annual Return in GSTR 9 & Reconciliation Statement in
GSTR 9C must be filed together. If one were to peruse GSTR 9C there are certain tables which state that “turnover as
declared in annual return” indicating thereby that GSTR 9C is dependent on GSTR 9. This anomaly can be addressed
only on basis of finalized annual return initialled and presented to GST auditor by Registered person.

By CA SANIDHYA SARAF 6|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

B= AUDIT UNDER DIRECT TAX LAWS

• Profession gross receipts > Rs.50 Lac in any previous year {Clause (b) of 44 AB) OR
• Business Turnover/ Total Sales/ Gross receipts > Rs.1 Cr in any previous yr {Clause (a) of 44 AB) OR
• Person carrying business referred u/s 44AE/44BB (Exploration of mineral oil)/ 44BBB (Foreign co engaged
in Civil Construction) & declaring lower income than prescribed under those sections in PY
{Clause (c) of 44 AB). OR
• Person carrying business u/s 44 AD & declaring lower income than 44 AD & his income > max exempted limits
Applicability of Tax Audit u/s 44 AB

{Clause (d) of 44 AB}

Note: -
* Where all assessee is proprietor of more than one concern, aggregate of all the businesses to be taken into
consideration for the purposes of compliance with the provisions of Sec.44AB
* Under Section 44 AD, income would be presumed to be 8 % of the total turnover of the assessee, only if the total
turnover of the assessee is less than 2 crore. In case, the total turnover , of the assessee is more than Rs 2 crore,
income would be computed as per the normal provisions of the Income Tax Act. If payments are received
digitally, 8% shall be taken at 6 %.It implies that even if the turnover of the assessee exceeds 1 crore , tax audit
will not be applicable if the assessee opts for Section 44 AD .However, this scheme is not available for
professionals, commission agents and company assesses.
* Clause (c ) of Section 44 AB provides that if the assessee carries on presumptive business, tax audit is required if
he claims his income to be lower than presumptive income deemed under those sections.
* Requirements of Section 44 AB is a general requirement covering the overall position of accounts of assessee.
This applies to the consolidated accounts of the assessee for the relevant previous year covering the results of all
units owned by the assessee.

ILLUSTRATIONS ON APPLICABILITY OF TAX AUDIT PROVISIONS

DB Pvt. Ltd. has total turnover of 125 lacs for the FY 2017-18 = Section 44AD is not applicable to company
assessee, hence Limit of 2 crore is not applicable to DB Pvt. Ltd and it has to conduct the Audit of Books of
Accounts under section 44AB of the Act for the FY 2017-18 as turnover exceeds 1crore.

ABC & Co. (partnership firm) engaged in trading Electronic goods having a turnover of 165 lacs for FY
2017-18 = Section 44AD is applicable to Partnership Firm. Thus, ABC & Co. can declare the minimum profit @
8% of the turnover as its turnover during the PY 2017-18 does not exceed `2 crores. If the firm do not opt for
presumptive income scheme under section 44AD, it has togetbooksofaccountsauditedu/s44ABoftheAct.

Mr. A, Commission Agent has commission receipts of 137 lacs during FY 2017-18 = Though Section 44AD is
applicable to an Individual, it is not applicable to Commission income. In the given case, since, Mr. Anand earns
the commission income, he cannot take benefit of section 44AD. His total turnover during FY 2017-18 in respect of
commission income exceeds ` 1 crore, he has to get his books of accounts audited u/s 44AB of the Act.

Mr. Vishal Raka, owning an Agency of Samsung Mobile for the city of Pune and makes the turnover of ` 87
lacs during the FY2017-18 = Though Section 44AD is applicable to an Individual, it is not applicable to
Commission income. In the given case, since, Mr. Vishal earns the commission income, he cannot take
benefitofsection44AD.HistotalturnoverduringtheFY2017-18inrespectof commission income does not exceeds `1
crore, therefore, he need not to get his books of accounts audited u/s 44AB of the Act.

By CA SANIDHYA SARAF 7|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

Clause Particulars required to be furnished u/s 44AB of Income-tax Act, 1961

1 Name Clause: - Person whose accounts are being audited u/s 44AB to be given.
2 Address Clause: - Address same as communicated by Person to Income-tax Dept. for assessment purposes
as on date of signing of audit report.
3 PAN allotted to Person indicated. (in E-filing = PAN is mandatory)
Details of IDT Registration (Person liable to pay IDT like Excise, Service Tax, GST, VAT, Custom
4 (If yes, please furnish Registration no. or any other identification number allotted for same)
The tax auditor is required to report the GST Registration no of the assessee. If the auditor
is prima facie of the opinion that the assessee is required to get himself under indirect tax
law but he is not registered under the said law, he is required to report same appropriately
5 Status of Person mentioned (Individual, HUF, Co, Firm, AOP etc)
6 Previous Year (Period of previous year to be stated)
7 AY relevant to previous yr for which accounts being audited = mentioned.
8 Under which Clause of Sec 44AB audit conducted = mentioned by auditor.
(a) If firm or AOP, indicate names of partners/members & PSR.
9 (b) If change in partners/ members/ PSR since last date of preceding year = particulars of change.
(a) Nature of business or profession
10 (If > 1 business or profession carried in previous year = Nature of every business or profession)
(b) If change in nature of business or profession = particulars of such change.
(a) Whether BOA prescribed u/s 44AA (If yes = List of books so prescribed)
(Example: - Mentioning Stock book and register not maintained).
(b) List of BOA maintained & address at which BOA are kept.
11 (In case BOA maintained in a computer system, mention BOA generated by such computer system. If
BOA are not kept at 1 location, please furnish Addresses of locations along with details of BOA
maintained at each location)
(c) List of BOA & nature of relevant documents examined.
Whether P/L includes any profits & gains assessable on presumptive basis.
12 {If yes indicate amt & section (44AD, 44AE, 44AF, 44B, 44BB, 44BBA, 44BBB, etc)}
(a) Method of accounting employed in previous yr
(b) Whether change in method of accounting employed in comparison to method in previous yr
13 (c) If answer to (b) above is in affirmative = give details of such change & effect thereof on P/L.
(d) Details of deviation in method of accounting employed in previous yr from AS prescribed u/S 145
& effect on P/L.
(a) Method of valuation of closing stock employed in previous yr.
14 (Link with AS-2 i.e. FIFO to LIFO but if change is LIFO to FIFO = reporting required but we will
mention that this is a bona fide change and meets requirement of AS-2.)
(b) If deviation from method of valuation prescribed u/s 145A & effect on P/L
Amounts not credited to P/L being: -
(a) Items falling in Scope of section 28.
(b) Performa credits, drawbacks, refund of duty of customs or excise or service tax or sales tax or VAT
(c) Escalation claims accepted during the previous yr.
(d) Any other item of income.
16 (e) Capital receipt (i.e. Capital receipts Taxable u/h PGBP & not Capital Gain) {CG goes CP}
• C = Capital subsidy in nature of promoters contribution. • G = Govt. Grants for Fixed Assets.
• C = Compensation for surrender of Certain Rights. • P = Profit on Sale of Fixed Assets.
Where any land or building or both is transferred during the previous year for a consideration less than
17 value adopted or assessed or assessable by any authority of SG referred to in section 43CA or 50C, please
furnish: - Details of property ,Consideration received or accrued, Value adopted or assessed or assessable.
18 Particulars of depreciation allowable in Income-tax Act, 1961 of each asset or block of assets.
19 Capital exp on scientific research assets & entire Sec 35 series of PGBP & 32 AC, AB, ABA.
In the list of weighted deductions Section 32 AD has been added i.e. where Companies get the
deduction for investment allowance.

By CA SANIDHYA SARAF 8|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

(a) Furnish details of amt debited to P/L, being in nature of capital, personal, advertisement exp etc.
(i.e. Any expenditure not disallowed u/s 37 or personal expense not debited in P & L.
(Ex: - Expenditure incurred on club, If same is incurred by co to meet personal exp of Director report.)
(b) Amounts inadmissible u/s 40(a) (i.e. when TDS not deducted or not deducted in due date = give details
21 of amt ,date of payment, Name & Address of payee)
(c) Amt debited to P/L = interest, salary, bonus, commission or remuneration inadmissible u/s 40(b)/ 40(ba)
(d) Disallowed income/ expenses i.e. Disallowance/deemed income under section 40A (3).
(i.e. Cash payment> Rs.10000.However exceptions given in Rule 6DD must be kept in mind).
22 Amt inadmissible u/s 23 of Micro, Small & Medium Enterprises Development Act, 2006.
Particulars of payments made to persons specified under section 40A (2) (b) (Related party).
23 Example: - Rent paid to brother-Report in form 3CD.
Also check if payment is excessive (> FMV or legitimate needs of business).
24 Amounts deemed to be Profits& Gains u/s 32AC, 33AB or 33ABA or 33AC
25 Amt of profit chargeable to tax u/s 41 & computation thereof.
In previous yr person Received Property/ Received shares (share of co not being co in which public are
28 substantially interested) without consideration or for inadequate consideration u/s 56(2) (vii a) & If yes =
furnish details
29 In previous yr Person got consideration for Issue of shares which exceeds the FMV of a company in
which public is not substantially interested- 56(2)(vii b) & If yes = Furnish details of it
Particulars of each loan or deposit in amt > limit us/ 269SS (taken or accepted >20000) or 269 T
31 (repayment > 20000) in cash. (Furnish details such as PAN, Amount, Name, Address & Payment Mode. )
Details of brought forward loss or depreciation allowance, incurred any speculation loss, incurred any loss
32 referred to in Sec 73A on any specified business in previous yr, change in shareholding due to which losses
can’t be allowed to be carried forward u/s 79.
33, 34 If Person is required to deduct or collect tax, furnished statement of tax deducted or tax collected in
prescribed time, liable to pay interest u/s 201(1A) or section 206C(7).
* If Trading concern = give quantitative details of principal items of goods traded
35 * If a manufacturing = give quantitative details of principal items of RM, FG & by-products (Opening
Stock, Purchases & Sales)
36 If domestic company = Details of Tax on Distributed Profits.
Whether Cost audit (37)/ Audit under Central Excise Act (38)/ Special Audit u/s 72A of Finance Act was
37, 38, carried out (39). If yes = give details of disqualification or disagreement on any matter/ item/ value/
39 quantity as may be reported/ identified by Auditor.
40 Details on Turnover, Gross profit, etc. for previous year & preceding previous year (A/c Ratios)
S.N. Particulars Previous Yr Preceding PY
1 Total Turnover XX XXX
2 Gross Profit/ Turnover XX X
..... ......................... ........ ............
41 Furnish details of demand raised or refund issued in previous yr under any tax laws other than Income-tax
Act, 1961 and Wealth tax Act, 1957 with details of relevant proceedings.

• A CA can accept maximum 60 tax audit assignments.

Guidance Note on Tax

• Clarification issued by Institute on Tax Audit Assignments = Tax audit reports may be signed by partners in
Audit by ICAI

any manner whosoever in accordance with specified audit limits.

• 1 partner can individually sign all tax audit reports subject to specified tax audit assignment limits on behalf
of all partners in firm of CAs in practice or all partners of the firm can collectively sign tax audit reports.
• Ex: - 6 partners = 360 tax audit assignments be accepted & even 1 partner can sign all 360 Tax audit report

The tax auditor should therefore obtain a certificate from the assessee regarding all such advances
received towards transfer of capital assets which have forfeited during the year.

Where any expenditure in respect of which payment is made in excess of 10,000 at a time otherwise than by
40 A(3)
Account-payee cheque or draft, 100% of such payment shall be disallowed.

By CA SANIDHYA SARAF 9|Page “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

CLAUSE 29 in FORM 3CD

Clause 29A =
The auditor is required to report whether any amount Is taxable under the head IFOS u/s 56(2)(ix). If yes,
the auditor is required to furnish the following: -
* Nature of Income
* Amount thereof
Income from other sources u/s 56(2)(ix)- Advance received for capital asset and sale didn’t took place and advance
received is forfeited. This amount forfeited is to be shown as income from other sources u/s 56(2)(ix){ie Forfeiture
of Advance received towards the transfer of a capital asset will be taxable under the head IFOS.

Clause 29B =
The tax auditor is required to report whether any amount is taxable under the head IFOS u/s 56 (2) (x).
If yes, the auditor is required to furnish the following: -
* Nature of Income
* Amount thereof
Income from other sources u/s 56(2)(x)- ie Any sum received without consideration in excess of Rs 50000 or
Stamp duty value which exceeds 50000 or more or In sale of any immovable property where where consideration
exceeds 105 % of stamp value is to shown as IFOS u/s 56(2)(x).

INSERTION OF CLAUSE 30A & 30B in FORM 3CD

Clause 30A =
30 A- Primary Adjustment
The Tax auditor is required to report: -
(a) whether any primary adjustment is needed u/s 92 CE .
(b) Whether the excess money available with the associate enterprise has been repatriated in India and
(c) if yes whether repatriated to India within the prescribed time limit and
(d) if not repatriated what is the imputed interest income on excess money not been received in prescribed time.
No secondary adjustment is required if the amount of primary adjustment made in any previous year does not exceed 1 crore.
Eg 1. 50 lakh worth goods purchased from associate enterprise outside India and paid 60 lakh. Ie. primary adjustment is
only rs 10 lakh. So reporting under clause not needed.
Eg 2- Say goods are purchased from associated enterprise o/s India. FMV- Rs 90 crore. Purchased at Rs 105 crore. 15
crore is excess payment o/s India. So it is the primary adjustment needed.

Clause 30B = Limitation on Interest Deduction: -

30B (a) = Whether assessee incurred exp in PY by interest or similar nature > 1 Crore in 94B?(Yes/No)
30B (b) = If yes, please furnishthe following details:- * Expenditure by way of interest or of similar nature incurred
* Earnings before interest, tax, depreciation and amortization (EBITDA) during the previous year
* Expenditure by way of interest or of similar nature as per (i) above which exceeds 30% of EBITDA
* Details of interest expenditure brought forward as per subsection (4) of section 94B: A.Y. Amount
* Details of interest expenditure carriedforwardas per subsection(4) of section 94B

Eg -interest expense of co for CY- Rs 200 crore & EBIDTA-500 crore = Here, interest deduction can be claimed upto
30 % of EBIDTA ie 30 percent of 500 crore ie 150 crore. 50 crore of interest expenditure will be carried forward. The tax
auditor is required to report about the same.

30 C - Impermissible Avoidance agreement. However, the applicability of this clause is deferred till 1/4/2019

By CA SANIDHYA SARAF 10 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

Amendment in CLAUSE 31 OF FORM 3CD

Clause 31 (a) = Particulars of each loan or deposit > limit specified in Sec 269SS taken or accepted in previous year: -
* Name, address & PAN (if available with assesses) of lender or depositor
* Amount of loan or deposit taken or accepted
* Whether loan or deposit was squared up in previous yr
* Max amt outstanding in a/c at any time in previous yr
* Whether loan or deposit taken or accepted by CHEQUE/ DD/ ECS through bank account
* If loan or deposit was taken or accepted by CHEQUE/ DD, whether same was a/c payee cheque
(These particulars not be given if Govt. co, bank or corporation established by CG, SG or Provincial Act)

31 (b) - Accepting a specified sum

31 (c) - Whether Repayment of loan is done in Py, mode etc
31 (d) - Details of repayment of those loans originally accepted in cash

Clause 31 (e) = Particulars of repayment of loan or deposit or specified advance > limit specified in Sec 269T received
by CHEQUE/ DD which is not account payee during previous year: -
* Name, address & PAN (if available with assesses) of lender or depositor
* Amt of loan or deposit or specified advance received by CHEQUE/ DD which isn’t a/c payee cheque in previous yr
* Whether loan or deposit was squared up during previous year

Clause 31(ba): - Particulars of Reciepts in an amount exceeding the limits specified in Sec 269 ST in aggregate from a
person in a day or in respect of a single transaction relating to one event or occasion from a person during the Py, where
such receipt is otherwise than by cheque or bank draft or use of electronic clearing system through a bank account( ie cash
received of more than Rs 2 lakh in a single day or for a single event)
(i) Name, address and PAN (ii) Nature of transaction (iii) Amt of receipt (iv) Date of reciept
{ie in excess of Rs 2 lakhs from a single person in a single day in respect of a single transaction or multiple transactions
relating to one event or occasion. Eg-I received more than 2 lakh from my client in cash-I will have to report name, address ,
pan, Nature of receipt, amount date.

Clause 31(bb): - Particulars of Reciepts in an amount exceeding the limits specified in Sec 269 ST in aggregate from a
person in a day or in respect of a single transaction relating to one event or occasion from a person during the Py, recieved
by cheque or bank draft (not being an account payee cheque or demand draft (i) Name, address and PAN
(ii) Amount of receipt {Eg 2- I received more than 2 lakh from my client from cheque/draft which is not an
account payee cheque or draft, then report Name, address and Pan and Amount.}

Clause 31(bc): - Particulars of each payment made in an amount exceeding the limits specified in Sec 269 ST in aggregate
from a person in a day or in respect of a single transaction relating to one event or occasion from a person during the Py,
where such payment is otherwise than by cheque or bank draft or use of electronic clearing system through a bank account(
ie cash paid more than Rs 2 lakh in a single day or for a single event): - (i) Name, address and PAN
(ii) Nature of transaction (iii) Amount of receipt (iv) Date of reciept

Clause 31 (bd): - Particulars of payments in an amount exceeding the limits specified in Sec 269 ST in aggregate from a
person in a day or in respect of a single transaction relating to one event or occasion from a person during the Py, paid by
cheque or bank draft (not being an account payee cheque or demand draft): - (i) Name, address and PAN (ii) Amt of receipt

NOTE: - * Sec 269 SS of Income Tax Act = Loan/ deposit > Rs 20,000 to be only by CHEQUE/ DD/ ECS
* Sec 269 T of Income Tax Act = Loan/ deposit > Rs 20,000 to be only by CHEQUE/ DD/ ECS
* Sec 44AB apply when turnover exceeds Rs 1 Cr but benefit 44AD is available (i.e. option of 8% presumptive
income or 6 % if digital payment is made) if turnover is up to Rs 2 cr.
* Sec 44AD tax audit N/A to commission income.

By CA SANIDHYA SARAF 11 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

Clause 31 ba
Tax auditor is required to
report the following if
amount of more than 2
lakh Rs is received in
cash in a single day or for
a single event in the
previous year- Name,
address and PAN, Nature
of transaction, Amount of
receipt, Date of receipt.
COMPARATIVE ANALYSIS
Clause 31 bb Clause 31 bc Clause 31 bd
Tax auditor is required Tax auditor is Tax auditor is required to
to report the following if required to report the report the following if
amount of more than 2 following if amount of amount of more than 2
lakh Rs is received in more than 2 lakh Rs lakh Rs is paid in cheque
cheque or demand is paid in cash in a or demand draft(other
draft(other than account single day or for a than account payee cheque
payee cheque or demand single event in the or demand draft) in a
draft) in a single day or previous year- Name, single day or for a single
for a single event in the address and PAN, event in the previous year-
previous year-Name, Nature of transaction, Name, address and
address and Amount of payment, PAN&Amount of payment
PAN&Amount of Date of payment. .
receipt.

The amount of Rs 2 lakh has been specified in Section 269 ST of the Income Tax Act, 1961.

INSERTION OF CLAUSE 36A in FORM 3CD

Clause 36A =
(a) = Whether the assessee received amount in the nature of dividend in clause (22) of Section 2.
(b) = If yes, please furnish the following details:-
* Tax auditor obtain from the taxpayer a certificate containing a list of closely held co in which he is beneficial owner
* Obtain certificate from taxpayer giving particulars of loans or advances received by concern of his substantial interest
* Include appropriate remarks of his inability to independently verify the info & reliance on certificates obtained Above
* Verify Form 26AS if taxpayer to know if the closely held company has deducted tax at source
* Whether Amount is chargeable to tax as dividend 2(22)(e) been a subject matter of litigation = needs to consider

INSERTION OF CLAUSE 42 in FORM 3CD

Tax auditor to review Due diligence procedures carried out by taxpayer in accordance with Rule 114H & results of such
procedures. Tax auditor should review list of Reportable Accounts identified by due diligence process and the information to
be maintained and reported by Taxpayer. In case any reportable accounthas been omitted, or there is any error or omission in
Form 61B, the same may be reported under the Form No. 3CD. The auditor should verify if the taxpayer has filed Form No.
61B for correcting errors or omissions in the form filed originally.

(a) Whether assessee is required to furnish statement in Form No.61 or Form No. 61A or Form No. 61B? (Yes/No)
(b) If yes, please furnish: -
* I have entered in transaction > 2 lakh with a person who has not quoted the pan. Hence he has furnished form 60.
* I am required to file form 60. Ie receiver of form 60 has to file form 61.
* Form 61- Reciever of Form 60
* Form 61 A- Specified financial transactions- Eg Cash deposits > 10 lakh, BB of share of amount exceeding Rs 10 lakh etc.
* Form 61- FATCA- Foreign Account Tax compliance Act

42 Income Tax Dept Type Due date Date of Whether form contains info If not please furnish list of the
(a) Reporting entity ID of for furnish on transa ctions required to be details/tran sactions which are
No. Form furnish reported not reported

By CA SANIDHYA SARAF 12 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT
AUDIT – AMENDMENTS from RTP May 1
199 + RTP Nov 18 + RTP May 18
18)

INSERTION OF CLAUSE 43 in FORM 3CD

Clause 43 = CBCR
(a) Whether the assessee or its parent eentity
ntity or alternate reporting entity is liable to furnish the report as referred to
in subsection (2) of section 286 (Yes/No)
(b) If yes, please furnish the following details: -
* Whether report been furnished by assessee or its parent or alternate reportin
reportingg entity
* Name of parent entity
* Name of alternate reporting entity (if applicable)
* Date of furnishing of report

Clause 43 has been newly introduced in Form No. 3CD. The Finance Act, 2016 by introducing Section 286 in the Act, has
introduced provisions relating to the Country by Country Report (CbCR) and Master File pursuant to the adoption of OECD's
Base Erosion and Profit Shifting (BEPS), Action Plan 13 in India. Under Section 286, an intern international
ational group has to furnish
CbCR containing information about the whole group comprising of various constituent entities.
Such a report is to be filed in India if the parent entity is resident of India or the international group has appointed a
constituent
constituent entity which is resident in India to file CbCR on behalf of the whole group
The report under Section 286(2) is filed by the parent entity which is resident in India or the alternate reporting entit entity
which is resident in India. For tax audit ffor
or the assessment year 2018
2018-19,
19, the tax auditor should comment upon report Section
286(2) that was required to be filed on or before 31 March 2018. The tax auditor should verify if the taxpayer is required to
file the Form 3CEAC based on the satisfacti
satisfaction
on of the conditions prescribed. The tax auditor should also verify if the
taxpayer whose parent is a non
non-resident
resident has filed Form No. 3CEAC.

Tax auditor may obtain a necessary certificate from the taxpayer in respect of constitution of the international
international.
(a) = Whether the assessee received amount in the nature of dividend in clause (22) of Section 2.
(b) = If yes, please furnish the following details:
details:--
* Tax auditor obtain from the taxpayer a certificate containing a list of closely held co in which he is beneficial owner
* Obtain certificate from taxpayer giving particulars of loans or advances received by concern of his substantial interest
* Include appropriate remarks of his inability to independently verify the info & reliance on certificates obtai
obtained
ned Above
* Verify Form 26AS if taxpayer to know if the closely held company has deducted tax at source
* Whether Amount is chargeable to tax as dividend 2(22)(e) been a subject matter of litigation = needs to consider

Clause 44: -
Break up of total expend
Break-up expenditure
iture of entities registered or not registered under the GST: -
Sl. Total Expenditure in respect of entities registered under GST Expenditure
No. amount of Relating to Relating to entities Relating to Total payment in respect of
Expenditure goods or services falling under other to registered entities
incurred in exempt composition registered entitites registered
year from GST scheme entities under GST
Expenditure
(1) (2) (3) (4) (5) (6) (7)

www. APNAMENTOR.com
 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

“ AUDITING STANDARDS ”
SA 720: - Auditor’s Responsibility in relation to Other Information
Meaning

Other information refers to Financial or non-financial information (other than F.S and the auditor’s report
thereon) included in the entity’s annual report.
Include

• Corporate Governance Report • Financial summaries • Financial ratios.

• Mgt Discussion & Analysis Report • Director’s Report • Chairman Speech • CSR Report
OTHER INFORMATION
SA Scope

• SA 720 deals with auditor’s responsibilities relating to other information relating to other info that is
included in entity’s annual report.
• These responsibilities do not require auditor to give assurance on other info.

Include separate section with heading “Other Info” when the auditor has obtained some or all of other info.
(It will be placed after heading Key Audit Matters).
Other information section shall include:
Reporting of Other Info

 Statement that Mgt is responsible for other info.

 Identification of other info obtained prior to the date of auditor’s report.
 For listed entity, identification of other info expected to be obtained after date of auditor’s report.
 Statement that auditor’s opinion on FS not covers other info & accordingly auditor does not
express any opinion or conclusion thereon.
 Description of auditor’s responsibilities relating to obtaining, reading, considering & reporting
other info as required by this SA.
 When other info obtained prior to date of audit report, a statement that auditor not identified
misstatement in other info & has nothing to report in this regard or a statement that describes
uncorrected misstatement of other info.

• Obtaining other info from Mgt by making appropriate arrangements to obtain such docs which
ROLE

consist of such info.

AUDITOR RESPONSIBILITY- SA 720 REQUIRE

• Auditor to Read Other Info to identify material inconsistency between other info & FS.

• If Material inconsistency identified in other info prior to audit report

Material • Ask Mgt to make correction.
misstatement/ • If mgt refuses to make correction, auditor to communicate matter with TCWG & request
Material that the correction be made.
inconsistency • If other info not corrected even after communicating to TCWG, then consider
exists in other implication for auditor’s report & communicate with TCWG about how auditor plans t
info address material misstatement in auditor’s report.
RESPONSE

• Possible implications may be reporting in the section “Other Information” Paragraph.

Material inconsistency • Material inconsistency identified in other information subsequent- to

/Material misstatement exists audit report = apply SA-560 if such misstatements effect FS.
subsequent to date of Audit • If not corrected by mgt, take appropriate action considering legal rights
Report & obligations.

Material misstatement exists Respond appropriately in accordance with other Standards. Example-SA
in FS 450, SA 315, 330, SA 705.

By CA SANIDHYA SARAF 14 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

SA 299: - Joint Audit of Financial Statements

(Applicable when more than 1 Auditor is appointed to conduct Audit of Large Entity)

Advantages of Joint Audit Disadvantages of Joint Audit

Pooling & sharing of resources.
Everyone has expertise in different area.
Advantage of mutual discussion.
Better quality & Low Costs of work performance
Improved services to Client Company.
Sharing of fees
Lack of clear definition in case of joint responsibility.
Co-ordination problems in conduct of work.
Areas of common concern being neglected.
Problems when firms of different standing are associated.

* Engagement partner & key members of engagement team from each of joint auditors to be
involved in planning audit.
Requirements
* Joint auditors to jointly establish overall audit strategy that sets Scope, Time & direction of audit.
of SA 299
* Development of Audit Plan {Principles of SA 300 will be applicable}.
* Identification of RMM (Risk of Material Misstatements) * Allocation of work.

• Where Joint Auditors appointed = By mutual discussion divide Audit work in themselves
• Division of work = on basis or in terms of Audit of Identifiable Units or Specified areas like
Division of
Components of FS i.e. Assets & Liabilities/ Income/ Expense or reference to Period of time.
Work
• Certain Important Areas which can’t be divided is covered by both.
• Division adequately documented & Communicated to entity.

Coordination Matters Requiring Disclosure or Discussion or Application of Judgment & deserves attention
to be communicated to all Auditors in writing by concerned Joint Auditor
RELATIONSHIP OF JOINT AUDITORS

(a) Joint Auditor Solely or Individually responsible or liable for: -

• Professional Judgment • Obtaining Info & explanation.
• Reviewing Internal Control & Audit Reports of work allocated to him
• Work Divided/ Allotted to each Joint Auditor in NTE of Audit Procedure whether or not
Separate Report is prepared by Joint Auditor
Responsibility
of Joint
Auditors
(b) Joint Auditors Wholly, Jointly & Severally responsible or liable for: -
• Work not divided & to be carried out together • Matter brought to notice of joint auditors
• Examine of FS as per Requirement of Statute • Matters on Agreement among Joint Auditors
• Statute requirement in relation to disclosure requirement of FS
• Ensure Audit Report comply to Laws, Regulations & Statutory requirements
• Decisions taken by All Auditor's with respect to NTE of Audit Procedures

To assume that other joint auditors have carried out work as per Generally Accepted Auditing
Rights of Joint
Procedures so not necessary for 1Joint Auditor to view work of Other Joint Auditor.
Auditor’s

* Normally Arrive at Single Agreed Report.

* If Disagreement on a matter in Joint Auditor = Each Joint Auditor to express his opinion by
Reporting Separate Report.
Responsibility * However efforts be made to arrive at agreed report so that users of FS not confused.
* If Joint Auditor Disagree to Majority Joint Auditors = then such Joint Auditor is not bound
by their views & so to issue a Separate Report.

By CA SANIDHYA SARAF 15 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

“AUDIT OF NON- BANKING FINANCE

COMPANIES (NBFC)”

MATTERS TO BE INCLUDED IN Apart from matters enumerated above where company has obtained a
AUDITORS REPORT IN CASE OF NBFC specific advice from Bank that it is not required to hold CoR from
not required to hold CoR wrt certain Bank = auditor shall include statement that Company is complying
conditions with conditions stipulated as advised by Bank.

NBFCs to comply with Ind- AS as: -

Applicability of
* Accounting periods beginning 1 April 2018 = Listed and unlisted NBFCs having a net
Indian
worth of 500 crore or more and holding, subsidiary, joint venture or associate
Accounting
companies of such NBFCs
Standards (Ind-
* Accounting periods beginning 1 April 2019 = All other listed NBFCs, unlisted NBFCs
AS) on NBFCs
having a net worth of 250 crore or more but less than 500 crore and holding,
–
subsidiary, joint venture or associate companies of such NBFCs.

Difference in
* NBFCs allowed to present items of B/S in order of their liquidity which is not allowed to companies
Division II
required to follow Division II. Additionally, NBFCs required to classify itemsof the balance
(Ind- AS-
sheet in financial & non-financial whereas other companies to classify items in current/ non-current.
ther than
* NBFC to separately disclose by note any item of ‘other income’ or ‘other expenditure’ > 1 % of
NBFCs) &
Total income. Division II, on other hand, requires disclosure for anyitem of income or expenditure
Division III
which exceeds 1% of revenue from operationsor 10 lakhs, whichever is higher.
(Ind- AS-
* NBFCs to separately disclose under ‘receivables’, the debts due from any LLP in which its director
NBFCs) of
is a partner or member.
Sch III

MCA vide notification dated October 11, 2018 introduced Division III under Schedule
Format for preparation of
III of the Companies Act, 2013, wherein a format for preparation of financial
financial statements by
statements by NBFCs complying with Ind- AS has been prescribed = Every NBFC
NBFCs under Ind- AS
required to comply with Ind - AS shall prepare its financial statements as per it

“CODE OF ETHICS (PE)”

MANDATORY KYC NORMS for CA in PRACTICE where Client is: -

Individual/ Proprietor Corporate Entity Non Corporate Entity

General Info: -
* Name of Client * Business Description * Copy of Last Audited Financial Statements * PAN/ Aadhar Copy
Engagement Info: -
* Type of Engagement
Regulatory Info (If Client is Corporate Entity): - * Entity PAN No. * Director Name, Address & DIN * CIN

By CA SANIDHYA SARAF 16 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

* CA in Practice may be Equity Research Adviser (can’t publish report as its Other Business/ Occupation)
* CA being member of Trust can’t be Auditor of said trust.
* CA in Practice may engage himself as Registration Authority (RA) to obtain DSC for clients.
* CA can hold Credit Card of Bank when he is also Auditor of bank provided Outstanding Balance on
said Card does not > 10000 beyond prescribed credit period limit on credit card given to him.
* CA in Practice can act as Mediator in Court, since acting as “Mediator” = Deemed covered in meaning
of “Arbitrator’ which is permitted to Members in Practice as per Regulation 191.
RECENT DECISIONS OF ETHICAL STANDARDS BOARD

* CA in Practice not permitted to accept Audit Assignment of Bank he took loan on FD held by him there.
* Board in Meeting (Jan, 2017) = decided where law prohibits for instance in Income Tax Act & rules
framed there under, such prohibition on Statutory / Tax Auditor to be VALUER of Unquoted equity
shares of entity he is Auditor, will continue but where there is no specific restriction under any law. So,
permissible subject to compliance with provisions as in Code of Ethics relating to independence.
* Ethical Standards Board in 2011 decided = not permissible for Member who has been Director of
Company on resignation to be appointed as Auditor of said Company & Cooling period for same may
be 2 years. {Section 141(3) disqualification states that Officer of Company can’t be Auditor.
* CA in Practice can’t become Financial Advisors & Receive fees/ commission from Financial
Institutions such as Mutual Funds, Insurance Companies, NBFCs etc.
* CA can’t exercise lien over Client documents/ records for non - payment of his fees
* It is not permissible for CA Firm to print its Vision & Values behind Visiting cards as it would result in
solicitation & so it would be Violation of Provisions of Clause of Part-I of 1st Schedule to CA Act
* Not permissible for CAs in Practice to take Agencies of UTI, GIC or NSDL.
* Permissible for Member in Practice to be Settler of a Trust.
* Member in Practice can’t hold Customs Brokers License u/s 146 of Customs Act, 1962 read with
Customs Brokers Licensing Regulations, 2013 in terms of provisions of Code of Ethics.
* CA in service may appear as Tax Representative before Tax authorities on behalf of his Employer, but
not on behalf of other employees of Employer.
* CA who is Statutory Auditor of Bank cannot for same FY accept stock audit of same branch of bank or
any of branches of same bank or sister concern of bank, for same FY.
* CA Firm appointed as Internal Auditor of PF Trust by Govt. Co can’t be its Statutory Auditor.
* Concurrent Auditor of Bank ‘X’ can’t be Statutory Auditor of bank ‘Y’, which is sponsored by ‘X’.
* CA/ CA Firm can’t be Internal Auditor of Co. & Statutory auditor of its Employees PF Fund
* Ethical Standards Board while noting requirement for Director u/s 149(3) of Co Act to reside in India for
min182 days in previous calendar year, decided that such Director in scope of Director SIMPLICITOR
(permitted as per ICAI norms), if he is non-executive director required in Board Meetings only.
* Internal Auditor not to undertake GST Audit simultaneously.

“AUDIT OF PSUs”
Financial Audit Compliance Audit

Financial audit is primarily Compliance audit is Independent assessment of whether a given subject matter is
concerned to: - in compliance with applicable authorities identified in criteria.
• Express Audit opinion on FS
• Enhance Degree of confidence of Compliance audit is concerned with: -
intended users in FS. • Regularity = adherence to laws, regulations & agreements applicable to entity.
• Propriety = observations of General principles governing sound financial mgt
& ethical conduct of public officials.

C&AG to express opinion whether Perspective of compliance audit: -Compliance Auditing is conducted either: -
FS prepared , in all material • In relation with audit of financial statements OR
respects as per applicable FRF. • Separately as individual compliance audits OR
• In combination with performance auditing.

By CA SANIDHYA SARAF 17 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

Responsible Party &

3 parties = Auditor,
• Auditor = Role of auditor fulfilled by Supreme Audit Institution, India & its personnel delegated

Intended users
to conduct audits.
• Responsible party
- The relevant responsibilities are determined by constitutional or legislative arrangement.
- Auditable entities & TCWG of auditable entities be responsible parties.
- Responsible for subject matter info, to manage subject matter/ address recommendations.
ELEMENTS OF PSU AUDIT

• Intended users = Individuals, org or classes thereof for whom the auditor prepares audit report.

Subject • Subject Matter = Info, condition/ activity measured/ evaluated against certain criteria
PSU AUDIT

Matter,
• Criteria = Benchmarks used to evaluate the subject matter.
Criteria &
Subject • Subject Matter Info = Outcome of evaluating or measuring subject matter against criteria.
Matter Info

• Attestation Engagements = Responsible party measures subject matter against criteria & presents
subject matter info, on which auditor then gathers sufficient and appropriate audit evidence to
Engagement
Types of

provide reasonable basis for expressing conclusion.

• Direct Reporting Engagements = Auditor measures or evaluates the subject matter against criteria.
(Financial audit = always attestation engagements as based on financial info by responsible party)
(Performance audits and compliance audits are generally direct reporting engagements)
Mean

Public Sector auditing augments confidence of intended users by providing relevant info & independent &
objective assessments concerning deviations from accepted Standards or Principles of Good Governance.

Principles of PSU Audit = General Principles + Principles related to Audit Process

Principles Related to Audit Process

General Principles
Planning the Audit Conducting the Audit Reporting & Follow Up
• Ethics & Independence Establish terms of Audit

• Professional Judgement Perform the planned Prepare a Report based on

procedure to obtain audit the Conclusions Reached
• Quality Control Obtain Understanding of evidence.
the Entity
• Audit Team Mgt & Skill

• Audit Risk Conduct Risk

Assessment of Problem
• Materiality Analysis

• Audit Risk
Evaluate the audit evidence Follow-Up on Reported
• Materiality Identify Risks of Fraud and draw conclusions. Matters as relevant

• Documentation

• Communication Develop Audit Plan

By CA SANIDHYA SARAF 18 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

“LIABILITIES OF AUDITOR”
Over the Co & Officer in Company = Fine from Rs. 25,000 to Rs. 5 Lac
Sec. 147 – Punishment for Contravention

default – 147(1) Officer in Default = Imprisonment to 1 yr

{Violation of Sec. 139 - 146} or Fine 10,000 - 1 Lac or Both
Fine Rs. 25,000 to Rs. 5 Lakh OR 4 Times the Remuneration of Auditor
Over the Auditor – 147(2) (Whichever less)
{Violate Sec 139, 143, 144,
145} Willful default = Imprisonment up to 1 yr & Fine Rs. 50,000 - Rs. 25 Lac
OR 8 Times the Remuneration of Auditor (Whichever less)
If auditor convicted u/s 147(2) = Liable to Refund Remuneration received by him to company &
Pay for damages to company, statutory bodies or authorities or to members or creditors of Company for loss arising
out of incorrect or misleading statements of particulars made in his audit report.
Measures for prompt payment of Damages147(4): -
* CG by notification, specify any statutory body or authority or an officer for ensuring prompt payment of
damages to company. * Such body, authority or officer shall pay damages to such company or persons.
* File report with CG on making such damages in manner specified in notification.
147(5) = If criminal liability of audit firm, in respect of liability other than fine = concerned partner or partners,
who acted in a fraudulent manner or abetted or colluded in any fraud shall only be liable.

Sec 34 = Criminal Where prospectus circulated/ issued/ distributed (CID) including statement which is
Liability for untrue or misleading or inclusion or omission of any matter is likely to mislead
Misstatements in = Every person who authorize issue of such prospectus = Liable u/s 447 (Fraud)
CRIMINAL LIABILITIES IN CO ACT

Prospectus

Sec 448 = If in Return, Report, Certificate, F.S., Prospectus, Statement or Other doc under this law,
Criminal Liability any person makes statement: -
(a) Which is false in material particulars, knowing to be false. OR
for making False
(b) Which omits material fact, knowing it to be material.
Statement = Liable u/s 447 (Fraud)

Person guilty of Fraud = punishable: -

• Imprisonment = 6 months – 10 yrs &
• Fine not Less than amount involved in Fraud but may extend to 3 Times amt
Sec 447 = involved in fraud. (If fraud on Public interest = Imprisonment not < 3 yrs)
Punishment for
Fraud u/s 447 Where fraud involves amt < 10 lakh or 1% of Turnover of company (whichever
lower) & not involve public interest = Person guilty of such fraud punishable with
imprisonment upto 5 years OR Fine upto 50 lakh OR Both.

Sec 35: Civil liability for Misstatements in Prospectus

=> NO PERSON LIABLE ABOVE, if he prove: -
* Consented to be director = BUT withdrew consent before issue of prospectus & was issued
without his authority or consent OR
CIVIL LIABILITIES

* Prospectus issued without his knowledge or consent & on becoming aware of its issue, he gave
(Co. ACT, 13)

reasonable public notice that it was issued without his knowledge or consent.

Notwithstanding anything ABOVE, where it is proved that prospectus issued to defraud applicants, other person
or for any fraudulent purpose = Every person referred ABOVE: -
* Personally responsible without any limitation of liability, for all or any of the losses or damages incurr
by any person who subscribed to the securities on the basis of such prospectus.
* Expert in 2(38) of Co Act, 2013 includes Engineer,Valuer, CA, CS, Cost accountant & other person
who has power or authority to issue certificate in pursuance of any law for time being in force.
(The liability would arise if the written consent of the auditor to the issue of the prospectus, including the report
purporting to have been made by him as an “expert” has been obtained)

By CA SANIDHYA SARAF 19 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)

“COMPANY AUDIT”
Co. with: • Net worth 500 Cr or more OR • Turnover 1000 Cr or more OR • Net profit 5 Cr or more
= Constitute CSR Committee & spend least 2 % of Average NP (PBT) for Immediately preceding 3 YRs on CSR
Sec 135 - CSR
Applicability

Sec 135= N/A to Specified IFSC (International Finance Service Centre) from 5 yrs of commence of business

Co. ceases to fulfill Criteria for 3 Consecutive FYs = no CSR Committee & no Sec 135 till meets such criteria

Where co. not required to appoint Independent Director u/s 149(4) = To have CSR committee of > 2Directors

Auditor who Resigned = To file in 30 days from Date of Resign in ADT- 3 to Co. & ROC
140(2), (3)
Filing of File to CAG also in Govt. Co case indicating facts & reasons for Resign
Statement
of Resign If auditor not comply to Sec 140 = 50,000 to 5,00,000 OR Audit fees/ Renumeration
(whichever lower)

FS comply to AS Qualifications w.r.t. maintenance of A/c

Adequate, Operative effectiveness of Internal Financial Control with

Proper BOA maintained
143(3) Reporting to Shareholders

(Available to Pvt. Co
which = Not Defaulted in
Filing FS u/s 137 OR
Annual Return u/s 92
with Registrar)
reference to FS.
No Reporting needed for IFC effectiveness for: -
* OPC
* Small Co.
* Co with Aggregate Borrowings from Bank, PFI or Body corporate at any pt.
of time in FY < 25 Cr & with Turnover < 50 Cr as per latest Audited FS

B/S & P/L agree with BOA Br. Audit Report Received & manner of dealing with it

Ds disqualified u/s 164(2) Comments on Financial Transaction with Adverse Effect on Co.

Obtained Info for Audit Disclosure of Pending Litigations Impact on Financial Position

Other matters prescribed Any delay in Transferring amt to IEPF

in Rule 11 (Amended) Provisions for Material Foreseeable loss on LT Contracts made

Co. provided Disclosures in FS of Holding & Dealing in Specified Bank Notes (SBN) during 8-11-16 to 30-12-16 &
whether these are as per BOA maintained by Co.

At all Times to BOA & Vouchers at RO or Other Place (Br., ASSOCIATE &
Right to Access
Subsidiary too)
143(1) Rights of
Auditor

Right to Obtain
From Officers of Co. as necessary for performance of his Duties
Info

Right of Lien Right of Lien for Non Payment of Dues of Work Done
(Not specified in Auditor can exercise this on Clients Books & docs for Non- Payment of fee (But
Act 2013) impracticable under Legal & professional ethics)

143(14) Sec 143 apply mutatis mutandis apply to = COST ACCOUNTANT in Practice & CS in practice

By CA SANIDHYA SARAF 20 | P a g e “APNA MENTOR” 976-040-0350

 CA FINAL – AUDIT – AMENDMENTS from RTP May 19 + RTP Nov 18 + RTP May 18)
Notification Dt 23.2.18 = CG exempted companies in defence production to extent AS on segment reporting apply.
141(3) + Rule 10 of Co (Audit and Auditors) Rules, 2014 = Person who directly or indirectly renders any service
POINTS TO REMEMBER referred in 144 to company or its holding or its subsidiary = Not eligible for appointment as auditor of company.
(NEWLY INSERTED)

MCA Notification Dt Feb 5, 2018 = Provision of deferred tax asset as per Ind AS 12 or AS 22 = N/A to Govt
Company which is PFI, NBFC registered with RBI in RBI Act, & engaged in business of infra finance leasing with not
< 75% of its Total Revenue from such business with Govt companies or other entities owned or controlled by Govt
Ratification for appointment = Not required at every AGM when auditors been appointed for 5yrs
Where co. not required to appoint Independent Director u/s 149(4) = To have CSR committee of > 2Directors
Section 141 + Rule 10 of Companies (Audit & Auditors) Rules, 2014 = Person directly or indirectly renders service
in Sec 144 to Company or its Holding or its Subsidiary = Not Eligible for appointment as auditor of a company.
AS 17 shall not be applicable to companies engaged in defence production.
Rotation of Auditors: -
As per Section 139(2) of Companies Act 2013, Rotation of Auditors is applicable in case of Pvt Limited Companies if
the paid up share capital is ≥Rs 50 crores(Earlier it was 20 crores)

“OTHER AMENDMENTS”
Order for reopening of accounts not to be made beyond 8 financial years immediately preceding the
current financial year until and unless CG has until Section 128(5) issued a direction for keeping
Books of Accounts longer than 8 years, reopening of accounts shall be made for such longer period.
Tribunal upon receiving the application for reopening of account was required to give notice to CG, Income
130(3) Tax Authorities, SEBI or any other statutory regulatory body or authorities concerned. Now after
authorities concerned, the words any other persons concerned shall also be inserted.
AUTHOR’S NOTE = Provision has been inserted to provide opportunity of being heard to the
Auditors/Chartered Accountants.

CG may by notification, constitute NFRA to provide for matters wrt AS & SA.
Role/ Functions of NFRA: -
FUNCTION

* Make recommendations to CG on formulation & laying down of accounting & auditing policies &
standards for adoption by companies or class of companies or their auditors
Sec 132 - National Financial Reporting Authority (NFRA)

* Monitor and enforce compliance with ensuring compliance with AS & SA in manner prescribed
* Oversee quality of service of professions associated with ensuring compliance with such standards &
suggest measures for improvement in quality of service & other related matters as prescribed.
* Perform such other functions relating to above functions as may be prescribed.

* NFRA to consist of Chairman = person of eminence & Expertise in accountancy, auditing, finance or
CONSTITUTION

law to be appointed by CG & such other members not > 15 consisting of part-time & full time
members prescribed
* Chairperson and members shall make a declaration to the CG in the prescribed form regarding no
conflict of interest or lack of independence in respect of their appointment.
* Chairpersons & members in full-time employment with NFRA = shall not be associated with any
audit firm (including related consultancy firms) during their appointment & 2 after ceasing to hold
such appointment.

* Powers to investigate on own motion or on reference made to it by CG, matters of professional or

other misconduct committed by any member or firm of CA. * Powers of civil court.
* Power of NFRA to impose penalty on CA/CA firm for professional or other misconduct: -
POWERS

- Individuals - Min 1 Lac rupees &- Max 5 times of fees received

- Firms - Min 5 Lac rupees & Max 10 times of fees received (earlier it was 10 Lac)
- Debarring a member of the institute for a period of 6 months to 10 years.
NOTE: - Any person aggrieved by the order of NFRA may prefer an appeal before the Appellate
Tribunal in such manner and on payment of such fee as may be prescribed

By CA SANIDHYA SARAF 21 | P a g e “APNA MENTOR” 976-040-0350