Tax Audit

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CA Ysil Karunai (Querist)
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26 May 2010 Dear Sir,
In a tax audit report, if the Auditor is unable satisfy about the payment exceeding Rs.20000/- through A/c payee cheque/draft means he has to give Diclaimer of opinion.
Query:
How to ensure whether a payment through cheque is A/c payee or Bearer cheque in a audit process?

daya shankar singh

daya shankar singh (Expert)
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26 May 2010 You verify the payment made through cheque by the bank statement of relevant month in which payment is made

CA. NIRMAL SINGH

CA. NIRMAL SINGH (Expert)
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26 May 2010 In this case disclaimer is not required if it is ensured that payment is not through cash.

CA Ysil Karunai

CA Ysil Karunai (Querist)
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26 May 2010 How to identify in a bank statement whether a payment is made through A/c payee cheque or Bearer cheque.

CMA.Palani Arumugam

CMA.Palani Arumugam (Expert)
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26 May 2010 Actually it is very difficult to verify from the bank statement, because some banks shows as "clearing" and some banks shows the name of the party. For the bearer cheque also, the bank statement shows the name.

The better way to verify is to check the bank statement of the party to whom the cheque is issued. But practically it is not possible for all the party.

Hence auditor has to give the disclaimer of his opinion.

CMA RV Padmakumar.A

CMA RV Padmakumar.A (Expert)
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26 May 2010 No need to give disclaimer of opinion in report,,if the auditor is satisfied the said amount is routed through bank...

If not satisfied, then the said amount is added back while preparing computation statement for income tax return purpose...

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