Internal Audit/Supervision - Why is it so Important?

Background

Let's talk about a very general reality between a Client and their Statutory Auditors

1. Statutory Auditor would meet you personally Once in a year and have a look at your Accounts Quarterly if you are interested in paying Advance Tax
2. The Client would be sending the data for GST return filing on a Monthly basis, but that’s really Mechanical after a few initial months and done by the Junior Staff without any Holistic look at the Transactions and Exception reports.
3. The Statutory Auditor will point out Non-compliances and Defaults for August 2019 in August 2020 (the client would hardly recall anything of the sort )
4. There is a general one-time evaluation of your Personal Accounts at the fag end of the Financial Year when it’s the last opportunity to pay the Advance Tax.

Clients Needs in Changing Times

1. Clients want a Quarterly Report of their Profit / Loss so they could know the standing of the business
2. Non-Compliances and Exceptions be brought to their notice by the next month end or maximum 3 months (High possibility to recall things and even resolve)
3. Save Interest Cost for Delayed Tax Payments – Most Important – why unnecessarily pay to the Government instead You can hire an Internal Auditor
4. Personal Accounts be updated Periodically generally on a Quarterly basis for more appropriate tax planning and payments.
5. Minimize the delay and defaults pertaining to TDS, GST, Profession Tax, Equalisation Levy, International tax, Corporate Law, FEMA, RBI matters.
6. Most Importantly, clients realize that Income Tax Returns and Taxes cannot be given Ignored for 11 months of the year as every penny saved is a penny earned.
7. A Cost Benefit Analysis – Remunerate the Internal Auditor for his timely work as he/she would have already saved great amount of Interest Costs with timely inputs.

Benefits of Hiring an Internal Auditor/Supervisor

1. Monthly Visits for Analysis of Data
2. Guidance to Accounts Team and Informal Training
3. Preparation of Tax Calendars customized to your Organisation
4. Guidance on Storing and Retrieval of Files and Folders
5. Report Exceptions and Non-compliances to Management in a monthly 1 Pager Report
6. List down To-Do List and push for execution with the Accounts Team
7. MIS Reporting to Management
8. Guidance regarding updated laws and clarificatory circulars specific to your organization
9. Improved Processes and Productivity among various teams viz sales, purchase, logistics.
10. Reporting to the Management for any inconsistencies requiring the attention and immediate interference.
11. Guidance on Tax Planning for Personal Accounts ( which is generally a March to March Phenomena )

The Author is a CA in Practice and Proprietor at R C D & Co., Chartered Accountants, Mumbai. He can also be reached at  raj@rcdco.in