Is the vat auditor duty bound to verify all vat tin nos ?

This query is : Resolved

Prashant (Querist)
Follow

02 November 2015 Query relating to VAT AUDIT:-
1) Is the VAT Auditor duty bound to verify all VAT TIN Numbers of suppliers providing goods to his client & check their validity before taking set off of Input Credit ?
2) The VAT Auditor puts the following remarks in his reports :-
(a) The Set-off is worked out only on the basis of Tax Invoices in respect of Purchases.
(b) The Audit includes examining on a Test Basis, evidence Supporting the amounts & disclosure in Financial Statements.
(c) The Tin Numbers of all customers / Suppliers could not be given. Please refer Dealer’s Certificate.

3) He also obtains a certificate from his client as worded below:-
“THIS IS TO CONFIRM that we have furnished TIN numbers of our customers & suppliers to the VAT Auditors of our Unit. However, we could not provide all details either because the dealers were not liable to obtain VAT Registration or did not respond to our request or were unregistered dealers/end users.

Can the Auditor be held responsible if the clients's supplier has failed to pay the vat to the Govt ?

Kindly advice on this issue.

Prashant

Prashant (Querist)
Follow

05 November 2015 Is the Vat Auditor duty bound to verify all Vat Tin Nos ?

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

01 August 2024 Here’s a detailed response to your queries regarding VAT audit and auditor responsibilities:

### 1. **Duty of the VAT Auditor to Verify VAT TIN Numbers**

**Is the VAT Auditor duty bound to verify all VAT TIN Numbers of suppliers providing goods to his client and check their validity before taking set-off of Input Credit?**

- **Verification Requirement**: The VAT auditor is not explicitly required to verify each VAT TIN number of suppliers for validity. However, it is generally a best practice to ensure that the VAT TIN numbers provided are valid to avoid potential issues with input tax credit claims. Verification of TIN numbers is part of due diligence to ensure that the VAT credit claimed by the client is legitimate.

- **Audit Standards**: The extent of verification can vary based on the audit standards and the specific VAT regulations of the jurisdiction. Some jurisdictions might have specific requirements for verifying the validity of TINs, while others may not.

- **Responsibility**: While it may not be a strict requirement, it is prudent for auditors to perform this check to ensure compliance with VAT laws and to safeguard against the risk of incorrect input credit claims.

### 2. **Remarks in the VAT Auditor’s Report**

**(a) The Set-off is worked out only on the basis of Tax Invoices in respect of Purchases.**

- This statement indicates that the VAT auditor has relied on tax invoices for calculating input tax credit. This is standard practice, as input tax credit can only be claimed on the basis of valid tax invoices.

**(b) The Audit includes examining on a Test Basis, evidence Supporting the amounts & disclosure in Financial Statements.**

- Audits typically involve examining a sample of transactions to verify the accuracy of the financial statements. This test-based approach helps in assessing the reliability of the information provided by the client.

**(c) The TIN Numbers of all customers / Suppliers could not be given. Please refer Dealer’s Certificate.**

- This remark indicates that not all TIN numbers were available during the audit. The auditor has noted this in the report and referred to a certificate from the dealer. It is standard for auditors to highlight any limitations in the documentation provided.

### 3. **Certificate from the Client**

**“THIS IS TO CONFIRM that we have furnished TIN numbers of our customers & suppliers to the VAT Auditors of our Unit. However, we could not provide all details either because the dealers were not liable to obtain VAT Registration or did not respond to our request or were unregistered dealers/end users.”**

- This certificate from the client indicates that while the client has provided TIN numbers to the auditor, there were issues in obtaining complete details, such as unregistered dealers or non-responsive suppliers. This is an important disclosure to document any limitations in the audit evidence.

### **Responsibility of the Auditor if Suppliers Fail to Pay VAT**

- **Auditor’s Responsibility**: The auditor’s primary responsibility is to verify the accuracy of the VAT credit claimed based on the documentation provided by the client. If the suppliers fail to pay VAT to the government, it is generally the supplier’s responsibility and not the auditor’s.

- **Client’s Responsibility**: The client is responsible for ensuring that their suppliers are compliant with VAT regulations. The auditor’s role is to review and verify the documentation provided by the client.

- **Liability for VAT Payment**: If the suppliers fail to pay VAT, it does not directly affect the auditor unless the auditor was negligent in their verification process. The auditor should document any limitations or concerns in their report and advise the client accordingly.

### Conclusion

The VAT auditor is not strictly bound to verify all VAT TIN numbers but should exercise due diligence to ensure that input tax credits claimed are valid. Remarks in the auditor’s report should clearly indicate any limitations in the documentation provided. The responsibility for paying VAT rests with the supplier, not the auditor, although the auditor should document any concerns or limitations in their audit report.

For specific guidance, especially in complex situations, consulting with a VAT expert or legal advisor familiar with the local VAT regulations is advisable.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now