Friday, September 12, 2014

AUDIT CHECK LIST AS PER NEW 3CD



1. Name of the Assessee :
2. PAN :
3. Status :
4. Registered Office :
  • Whether books of accounts are maintained at registered office? If not specify,
  • What all books of accounts are maintained?
  • Incase books are maintained in the computer, mention the books that can begenerated
  • Method of accounting followed
  • Verify if there is any change in method of Accounting, if yes specify
5. Assessment Year :
6. Previous Year :
7.Verify whether tax audit is applicable :
  • If yes, which clause of Sec. 44AB is applicable
8. Get copy of AOA & MOA/ Partnership Deed :
  • To know the nature of business and if there are any changes in the nature of business
  • To know if there are any changes in the Profit Sharing Ratio and change in partners
9. Get confirmation from assessee that no other bank account is opened :
10. Mention the registration numbers or other applicable numbers if, the assessee is liable to pay indirect taxes

Verification of Opening Balances:
i. Compare the audited balance sheet of last year with the opening trial balance of current year
ii. Whether the closing entries for last year have been passed correctly?
iii. Whether there are any changes in groupings or heads?



BALANCE SHEET





Share Capital
  • Verify the Annual Report submitted in ROC returns to know the share of the members
  • If there is any change in authorised share capital verify the AOA or the corresponding deed pertaining to such change
  • Verify if any new shares are issued and confirm that the amount received against the calls is correct or not?
  • In case the new shares are issued on the basis of prorata basis or such shares are issued against any debentures verify whether the treatment for the issue is correct or not?
Share application money
(especially in case of Private limited companies)
  • Verify whether any amount is received as share application money and also check the amount deposited is received in cash or cheques.
  • Verify whether they have opened a new bank account for depositing share application money
  • Verify whether there is any share application money pending for allotment
  • Verify whether the company is using the application money received for  business without allotment or not
  • Has it complied with the provisions of its Articles restricting share transfers?
  • Check if there is share application money which is to be refunded
Secured Loans
  • Verify the loans or bank OD's with the statements obtained from the banks/financial institutions and also the new loans obtained
  • Verify copies of sanction letters evidencing rate of interest being   charged and the rate of interest as per sanction letters.
  • Produce Interest workings regarding the loans
  • To confirm with the interest obtain a confirmation of interest certificate from the banks / financial institutions
  • In case any loans are cleared verify whether any  satification of charge been filed with   ROC
  • In case repayment structure of loans is  in instalments check the penalties charged in case of any default
Unsecured loans
  • List of loans taken or squared off during the financial year
  • Verify the loans taken and the repayment of loans are within the purview of Sections-269SS & 269T and gather the details regarding such receipts or payments
  • In case of any default in repayments, check the penalties charged
  • In case any loans received from members directors or other related parties in the previous year check whether the repayment is done to them or not
  • If no, verify whether such loans are treated as deposits or not and in case of default check the penalties imposed
  • Give Details of any amount borrowed on hundi or any amount due thereon (including interest on the amount borrowed) repaid, otherwise than through an account payee cheque.
Current Liabilities and Provisions:
  • Obtain the break up for creditors of services and creditors of Goods
  • In case there are any agreements with the creditors verify and get the quoted price for the goods purchased
  • Obtain the ledger copies of the parties
  • Check whether any interests are paid in case of late payment or default in paymentof amount to debtors and reconcile it with the agreements if any
  • Check the provisions made for the finanicl year regarding the salaries,taxes are correct or not
  • Verify whether there are any provisions outstanding for long period and the resons for non payments
  • Furnish details of any lliabiltywhuch is in  contingent nature
ASSETS

Fixed Assets :-
  • Verify whether  are there any additions, deletions to fixed assets, if so produce copies of invoices along with workings for capitalization of assets
  • Produces a detail note on the WDV at the end of the year, any Subsidy or grant or reimbursement received
  • Produce depreciation workings, both book purposes and I.T. purposes.
  • Produce the list of assets not accounted in books along with value and state location of such assets.
  • Where any land or building or both is transferred during the previous year for a consideration less than value adopted in section 50C, please furnish such details
  • Whether the certificate has been obtained from the vendor regarding life and warranty of assets.
  • Check whether there is any closing WIP
Current Assets:-

Sundry Debtors:
  • Produce break-up of Debtors for more than six months
  • Produce copies of agreements with the parties.
  • Confirm is there any need to write-off any balances outstanding if so the reasons for such provision.
  • Check whether there are regular repayments from Debtors or not
  • Get external confirmation from Debtors to know that there are no dummy debtors
Cash and Bank Balance:-
  • Produce a list of payments made in cash for more than Rs. 20,000/-
  • Produce Bank statements and Bank Reconciliation Statements for the whole period.
  • Also produce bank statements and details of subsequent dates of clearance of cheques pending in BRS at the year end.
  • Produce copies of FDRs and statements of interest workings.
  • Also confirm that are there any new bank accounts opened during the period if so produce copies of Board Resolution authorizing the same.
  • If any Petty cash account is maintained than provide reconciliation statement for it, if there is any deviation than state the reason for same.
  • Have you Ensured that cash book has a positive balance on daily basis?
  • Whether the unsigned cheques books is crossed or kept in the lock by taking proper consent from management.
Investments:-
  • List of investments made during the year and amount invested.
  • Provide Nature of investments whether it is a long term or short term
  • List of investments sold during the year.
  • Whether provisions are made in relation to interest receivable or dividend income?
  • Provide the list in respect of date of investments made and date of maturity.
  • Verify Whether during the previous year the assessee has received any property, being share of a company, without consideration or for inadequate consideration as referred to in section 56(2)(viia)
Other Current Assets:
  • Verify whether there are any short term loans and advances due from Directors, other officers of the company
  • Check whether there are any prepaid expenses, advance duties and taxes paid etc.
PROFIT AND LOSS A/C

Sales & Other income
  • Produce break-up for Sales & Other income.
  • Produce relevant agreements with the parties
  • Whether the sales are made against Purchase Order and whether the same is verified?
  • Check whether any discount is allowed
  • Are there any discrepancies in issuing the invoice, state the reason for same?
  • Produce Sales Reconciliation with Sales Tax/VAT Returns.
  • Provide detail note on sales return, stating reasons, amount of sales return and reason for the same.
  • Please note the sales voucher number that are cancelled and the reason for the same.
  • Produce interest workings and copies of dividend warrants if any included in other income along with workings for Dividend received.
  • Produce break-up of miscellaneous income along with detailed workings if any.
  • Details of Other Income like the pro forma credits, drawbacks, refund of  customs duty  or excise or service tax, or refund of sales tax or VAT should be furnished in 3CD
  • Details of Escalation claims accepted during the previous years if any should be mentioned
Purchases :-
  • Produce break-up for Purchases
  • Provide the agreement entered with the parties , is there any change in terms of contract in previous year?
  • Check the correctness of date ,amount, name of party, qty, rate of goods etc in invoice
  • Whether the Purchase is made as per Purchase order and the same is verified?
  • Whether supporting Goods Receipt Note (GRN/GIN) and other necessary documentation obtained.
  • Whether there are any pending / missing  GRN to be entered in the system?
  • Check whether debit note are passed for rejections and whether proper reasons are mentioned?
  • Check whether goods received are transferred/accounted under proper stock item at proper cost.
  • Check whether there are any discount receiveed during the F.Y
  • Check whether any purchase returns are made during the year
Inventories:-
  • Check method of valuation
  • Produce closing stock valuation statements along with the details of cost and market value of inventories
  • Produces a detail note on the raw material purchased and used.
  • Produce Reconciliation statements with Excise Records and delivery challans
  • Whether the register is maintained at gate point for the proper control of inventory.
  • Whether the physical inventory was taken during the year, list out the discrepancies found, and what action was taken in this regard.
  • Verify whether stock reserve is maintained or not in case of branch transfers
  • Verify the records with the stock statements submitted to the bank
  • Reconcile the opening cost, purchases ,sales and closing cost (in case of manufacturing companies reconcile the rawmaerials ,finished goods,byproducts(if any)) and give the details in the report
  • Check whether any capital asset is converted into stock in trade
Administrative Expenses:-
  •  Provide the detail note on the Expenses incurred under the head “Administrative Expenses”.
  • Check whether all expenses have supporting documents
  • Reconcile the salaries paid to employees with the attendance register,payslips
  • Reconcile the OT paid to employees with the records
  • Verify the bonus/commission  payments made to employees are otherwise paid as dividends/profit and if any furnish such details
  • Furnish the details of expenses, being in the nature of capital, personal, advertisement expenditure etc
  • Check whether the payments made to the partners are as per Sec-40(b)
  • Check whether the payments made to the related parties
Finance Charges:-
  • Produce break-up of Finance Charges along with detailed workings for interest charged.
  • Whether there is any default in making the payment of interest or other dues?
  • Verify whether any interest is paid as per other acts which are inadmissble for calculating income
Statutory Payments, Dues & Returns
  • Check whether all the statutory payments are made within due date?
  • Check the payments made with the challans
  • Check the interest payments made in case of late payment of tax dues or late filing of returns
TDS & TCS
  • Verify whether TDS is deducted as per provisions of sec-40(a) of IT act
  • Verify 26 AS
  • Check whether Assessee  is liable to deduct or collect TDS or TCS as per Chapter XVII-B & Chapter XVII-BB
  • Check whether the assessee has furnished the statement of tax deducted or tax collected within the prescribed time. If not, please furnish the details:
  • Verify the advance tax challans for income tax
PF& ESI
  • Reconcile the payments made with returns
  • Check  whether employer and employee comtributions as per statute
Other Payments (VAT,CST,Excise,Customs,Service Tax,Professional Tax)
  • Amount of Central Value Added Tax credits availed of or utilised during the previous year and its treatment in the profit and loss account and treatment of outstanding Central Value Added Tax credits in the accounts.
  • Reconcile the payments made with Service tax, Excise, VAT,CST returns and others if any

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