Internal auditing

As an auditor u have to report it ....

>> 1st Non compliance statutory dues

>> wrong accounting of Salary paid

>> Failure in Internal Control

>> This type of trasactions will incerase the chances of frauds

It will amount to wrong accounting and non compliance of statutory dues.

Suggestion:

The amount so paid should be debited to Salaries paid (Temporary Employees), know whether the salary drawn by such person is more than Rs 6500 p.m., if not no need to deduct pf as per PF Act 1952.

Dear Yamini....!!!

You should report to the management with considering the following points.

1.  The person who is treated as a contractor should treated as a creditor of the company. If the contractor are treated as an expense than it is against the coorect accounting practice.

2.  The person as mentioned in Income Tax Act, 1961, under section 2 (31) is liable to deduct tax at source under section 194C if the single payment made or credit given to a contractor is exceeds Rs. 20000/- and the aggregate sums credited or paid exceeds Rs. 50000/-  during the financial year.

Regarding avoidance of PF, i am agree with Nagajyothi.

Dear Yamini,

Before clearing your doub i would like to share a sentence. " Accounting is not about the arithmetical accuracy of the figures but the arrangement of the information to its right function"  Now moving towards your query- The person is being appointed on contract basis so question of giving him the sttutory benefit like PF, ESIC is not the prima facie. The contractual transaction do not entitle such benefit. Further debiting the professioonal fees/ Account Writing Fees to printing and stationery account is violaition to the accounting rules, the things should be debited to its actual expense only. The same should be reported to mangement. futher see that if the same is being debited to professional fees on your recomendation- TDS provisions are also attracted.

With Regards.

Bhavik