Treatment of bribe paid by client

The client has paid a bribe & accounted it as legal expenses. Since it was a bribe no TDS has been deducted u/s 194 J. What should we do as a statutory auditor?

Replies (6)

It depends upon the amount to book in Business Promotion/Sales Promotion normally done by most of the companies.

It is never advisable to shaw bribe as such in the books of accounts as there is no documenetary or other proof to show the nature of expenses , moreover it would only open room for further litigation for the payer and payee. So it is advisable to show such expenses as some valid busines expense and also deduct tds therein.

Dear Ruchi, thanks for the reply.The client has shown it as a legal expense. But since in reality its a bribe, they can't deduct tds on it.so how should the auditor show it?

If your client is showing it as legal expense then tds has to be deducted on it. As an auditor u should treat it as any other expense on which tds liability has not been complied with.

you can show this local conveyance expenses paid in cash, make cash payment vouchers upto rs, 19000. or you can show them as staff welfare expenses like refreshment to staff paid in cash.

Disgusting...... How can one suggest to MANIPULATE the accounts? The sanctity of accounts itself will be in jeopardy.

As an auditor, if someone starts telling you that it is BRIBE and all that...simply ask for the signed DECLARATION from the concerned person. Mind you, you are auditor and NOT solution provider.  If a company is in the practice of giving bribe, it is a serious offense and it can lead even upto DISCLAIMER report by the auditor.

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