Applicability of Audit

Mandatory Audit

All the major audits are discussed below in this article. It will be helpful to the readers to establish which all type of audit is mandatorily applicable to him. I have tried to make this article very easy to understand.

1. Tax Audit

Tax Audit is mandatory under section 44AB of Income Tax Act, 1961 to following “Person”

Person Carrying Business: Total Sales, Turnover or Gross Receipt exceeds Rs. 1 Crores (*However from FY 2016-17 person can opt for presumptive income of 8% or Higher percentage if his total sales or turnover is not more than Rs. 2 Crores, in that case Tax Audit will not be applicable. Further if person conducting business, receives payment digitally then for such transactions, profit can be presumed as 6%. Applicable from FY 2016-17 onwards)

Person Carrying Profession: Gross Receipts Exceed Rs. 25 Lakhs. (*However from FY 2016-17 person can opt for presumptive income of 50% of higher if his gross receipts is not more than 50 Lakhs. If any person opts for Presumptive Income then he is not liable for tax audit)

If a person carrying Business and profession shows profit less than the rate of presumptive percentage then too he is liable to get his books audited.

*Please note: Presumptive Income under Section 44AD and Section 44ADA is applicable only to Resident individual, HUF and Partnership firm (Excluding LLP).

Due Date of Filing Tax Audit Report is 30th September Every year.

2. Statutory Audit

Individual/HUF/Partnership Firm: No Statutory Audit Applicable.

LLP: Statutory Audit is Applicable only if turnover in any financial year exceeds Rs. 40 Lakhs or its contribution exceeds Rs. 25 Lakhs.

Private Limited Company/Public Limited Company: Mandatory irrespective of Turnover, Profit, etc. Even in company is incurring loss; statutory audit is required to be conducted.

3. Internal Audit

Listed Company: Mandatory (whether private or Public)

Public Unlisted Company: Internal Audit is mandatory if Turnover is Rs. 200 crore or more, Borrowings is equal to Rs.100 crore or more, paid up share Capital is Rs.50 crore or more, Deposits Rs. 25 crore or more.

Private Unlisted Company: Internal audit is mandatory if Turnover is Rs. 200 crore or more and/or Borrowings is Rs.100 crore or more.

Not mandatory to others except mentioned above.

4. Concurrent Audit

The following branches of Banks, business activities/verticals of a bank may be subject to concurrent audit:

  • Branches rated as high risk or above in the last Risk Based Internal Audit (RBIA) or serious deficiencies found in Internal Audit.
  • All specialized branches like Large Corporate, Mid Corporate, exceptionally large/very large branches (ELBs/VLBs), SME.
  • All Centralized Processing Units like Loan Processing Units (LPUs), service branches, centralized account opening divisions, etc.
  • Any specialized activities such as wealth management, portfolio management services, Card Products Division, etc.
  • Data Centers.
  • Treasury/branches handling foreign exchange business, investment banking, etc. and bigger overseas branches.
  • Critical Head Office Departments.
  • Any other branches or departments where, in the opinion of the bank, concurrent audit is desirable.

Source: RBI website.

5. Stock Audit

Stock Audit is initiated by bank in 1992 to verify the security offered to the banks against various facilities by an independent authority w.r.t to its adequacy to cover the limits on a particular date. Limit of Stock Audit is fixed by the bank itself. Stock Audit is conducted yearly or Six monthly according to the guidelines of the Bank.

6. VAT Audit

VAT audit is compulsory if the turnover exceeds the amount specified as per the state. Like in Maharashtra VAT Audit is compulsory if turnover exceeds Rs.1 crore. It is applicable to business who are dealing in taxable Vatable (Including goods on which sales tax is levied) goods

The author can also be reached at taxdsj@gmail.com

Mandatory Audit

All the major audits are discussed below in this article. It will be helpful to the readers to establish which all type of audit is mandatorily applicable to him. I have tried to make this article very easy to understand.

1. Tax Audit

Tax Audit is mandatory under section 44AB of Income Tax Act, 1961 to following “Person”

Person Carrying Business: Total Sales, Turnover or Gross Receipt exceeds Rs. 1 Crores (*However from FY 2016-17 person can opt for presumptive income of 8% or Higher percentage if his total sales or turnover is not more than Rs. 2 Crores, in that case Tax Audit will not be applicable. Further if person conducting business, receives payment digitally then for such transactions, profit can be presumed as 6%. Applicable from FY 2016-17 onwards)

Person Carrying Profession: Gross Receipts Exceed Rs. 25 Lakhs. (*However from FY 2016-17 person can opt for presumptive income of 50% of higher if his gross receipts is not more than 50 Lakhs. If any person opts for Presumptive Income then he is not liable for tax audit)

If a person carrying Business and profession shows profit less than the rate of presumptive percentage then too he is liable to get his books audited.

*Please note: Presumptive Income under Section 44AD and Section 44ADA is applicable only to Resident individual, HUF and Partnership firm (Excluding LLP).

Due Date of Filing Tax Audit Report is 30th September Every year.

2. Statutory Audit

Individual/HUF/Partnership Firm: No Statutory Audit Applicable.

LLP: Statutory Audit is Applicable only if turnover in any financial year exceeds Rs. 40 Lakhs or its contribution exceeds Rs. 25 Lakhs.

Private Limited Company/Public Limited Company: Mandatory irrespective of Turnover, Profit, etc. Even in company is incurring loss; statutory audit is required to be conducted.

3. Internal Audit

Listed Company: Mandatory (whether private or Public)

Public Unlisted Company: Internal Audit is mandatory if Turnover is Rs. 200 crore or more, Borrowings is equal to Rs.100 crore or more, paid up share Capital is Rs.50 crore or more, Deposits Rs. 25 crore or more.

Private Unlisted Company: Internal audit is mandatory if Turnover is Rs. 200 crore or more and/or Borrowings is Rs.100 crore or more.

Not mandatory to others except mentioned above.

4. Concurrent Audit

The following branches of Banks, business activities/verticals of a bank may be subject to concurrent audit:

  • Branches rated as high risk or above in the last Risk Based Internal Audit (RBIA) or serious deficiencies found in Internal Audit.
  • All specialized branches like Large Corporate, Mid Corporate, exceptionally large/very large branches (ELBs/VLBs), SME.
  • All Centralized Processing Units like Loan Processing Units (LPUs), service branches, centralized account opening divisions, etc.
  • Any specialized activities such as wealth management, portfolio management services, Card Products Division, etc.
  • Data Centers.
  • Treasury/branches handling foreign exchange business, investment banking, etc. and bigger overseas branches.
  • Critical Head Office Departments.
  • Any other branches or departments where, in the opinion of the bank, concurrent audit is desirable.

Source: RBI website.

5. Stock Audit

Stock Audit is initiated by bank in 1992 to verify the security offered to the banks against various facilities by an independent authority w.r.t to its adequacy to cover the limits on a particular date. Limit of Stock Audit is fixed by the bank itself. Stock Audit is conducted yearly or Six monthly according to the guidelines of the Bank.

6. VAT Audit

VAT audit is compulsory if the turnover of exceeds the amount specified as per the state. Like in Maharashtra VAT Audit is compulsory if turnover exceeds Rs.1 crore. It is applicable to business who are dealing in taxable Vatable (Including goods on which sales tax is levied) goods

The author can also be reached at taxdsj@gmail.com

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Danish Jain 
on 17 February 2017
Published in Audit
Views : 5262
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