tax audit fees-provision

[Gaurav Gawri]

Hi All,

Please help me to sort out why provision for tax audit is not done in the books

[Ganeshan Kalyani]

Accounting is done on accrual basis. Expenses incurred but invoice not received, for the same provision is made in books. Audit is done only when accounting year is closed. So audit is expense of subsequent year. And therefore provison is not made in books. This is my views. Thanks.

AI Summary

Accrual accounting: audit fees recognised when incurred; tax audit fees typically expensed in the subsequent year, not provisioned. Under accrual accounting, expenses are recognised when incurred even without an invoice, allowing provisions if an obligation exists at year-end. However, because statutory tax audits occur after the accounting year closes, the audit fee is treated as a subsequent-period expense; consequently, no provision is typically recorded in the closed-year books.