TaxTMI 
TaxTMI 
Verification of Records/Registers During the Course of Audit Verification (Procedure / Formats Separate for Goods and Services)
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..... Income Return 10. Fixed Assets Register 11. Monthly Stock Statement to Bank I. Records to be verified in the marketing and outward supplies departments - Sr. No. Name of the Record/Document Nature of the documents and check to be done 1. Purchaser order Nature of Document: This document denotes the price and other conditions laid for purchase of goods/outward sale of goods. Nature of Verification: Purchase order placed by Customers: (a) To verify the terms and conditions especially with respect to price revision, supply of any material/component by the customer, erection and commissioning charges. The total price charged in the Purchase Order may be compared with the Taxable value invoice to ensure that no extra flow back is received outside the invoice through commercial invoice/debit note. (b) To verify whether GST invoice is raised for full amount as per the Purchase Order. (c) Taxability of outward supply of samples may be verified. 2. Price Circular Nature of Document:- Most companies issues price circular periodically explaining various conditions of sales/ outward supplies like various types of discounts, conditions for providing the....
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....for outward supply of goods. (c) Whether Debit Notes/Journal Vouchers are also entered in the outward supplies register. If yes, whether taxable value duty is payable on additional considerations received through such Debit Notes/JVs. (d) Outward supply register normally shows taxable value and duty separately. Verify the cases where taxable value and duty has not been shown and find out the reasons thereof. II. Records to be verified in the stores department (where applicable) - Sr. No. Name of the Record/Document Nature of the documents and check to be done 1. Stores Ledger Nature of Document :- It contains the details about receipt of various input or consumable, its issue for production and closing balance. It also contains details like results of physical verification, obsolete items, slow moving items and it write off etc. Nowadays most of the companies maintains stock records on computer. Types of Verification:- i) Verify coding system for receipt, issue, stock verification, valuation, input cleared as such, obsolete item and other found in store records. ii) Compare the purchase as per ITC documents with a receipt in the store records. iii) Verify....
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....sfer, warranty period supply, MIN may be prepared showing different codes. All such clearances may be examined to verify payment of taxable value GST. 5. Waste Register Where the raw material or components are not in useful condition, they are transferred to Bad Bins. The Auditor should verify the concerned records seeking reversal of credit on such unusable inputs. These goods are also known as obsolete items. 6. Physical Stock Verification Statement Nature of document: The companies undertake periodic stock verification where book stock is compared with physical stock. The statement showing book stock, physical stock and variation is prepared on each such stock verification. Most of the companies undertake quarterly, half-yearly and annual stock verification. Nature of verification: (i) Stock verification statement should be examined to find out the cases of shortages or excesses. In case discrepancies are not explained, action may be taken either for demanding reversal of ITC or demanding GST. This statement may also be available in the Cost Audit Report. (ii) On the basis of such statement, stock adjustments are made in the financial records by pas....
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.... purchase material or for short receipt of purchase material. Types of verification: (i) If the customer's account shows details of debit note or JV, the reasons thereof may be inquired into and whether ITC has been reversed or not may be verified. 3. General Ledger: This Ledger contains all accounts of assets, liabilities, incomes and expenses. Scrutiny of this ledger is very important to a Tax Auditor as the income and expenditure accounts have direct impact on availment of credit, valuation of finished goods and payment of GST on the taxable value. The General Ledger may contain 100-500 accounts depending upon the size of the company. Therefore, selection of account for scrutiny is an important task for an auditor. For this purpose, accounts should be selected from the Trial Balance which gives names of all the accounts maintained by a unit. Some of the general rules which may be kept in mind while selecting the accounts for scrutiny are given below : (i) Credit entries in raw material purchase account (ii) Credit entries in expenses account. (iii) Income accounts. (iv) Unusual account. Types of verification: (i) All the important input purchase accounts may be ver....
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.... etc. from a customer. The job worker may raise a Debit Note for value of own material used by him. The principal may issue a Debit Note to a job worker for the value of scrap generated during job work process and retained by a job worker. Types of Verification: (i) Since the number of Debit Notes issued by a unit are generally not very large, therefore all the Debit Notes must be studied by a Tax Auditor. (ii) The Debit Note itself shows the reason for its issue and most of the time the supporting documents are enclosed with the Debit Note. Therefore, such documents should be studied in detail. (iii) Cases of additional recoveries from the customer or rejection and short receipt of inputs are generally noticed in the Debit Note. 3. Credit Note Credit Note is a statement informing the other person that his account has been credited for the reasons mentioned in the Credit Note. The financial impact of issue of a Credit Note is that the addressee is eligible to receive the amount of credit note. Credit Note may be issued for the reason like return of goods by the customer (outward supply's return) etc. 4. Journal Voucher (JV) Nature of Document:- JVs are....
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....onsideration ii) Verify whether any system changes have been advised and followed by the taxable person. Also examine the implications on the past period for any short payment or non-payment of tax. iii) Internal Auditor also reports about stock verification and in case of shortages the ITC availment needs to be examined. 6. Purchase Book Nature of Document: This shows credit purchase of raw materials and other inputs. Nature of Verification: (a) To find out major suppliers (b) It may also show taxable value and GST separately. In that case taxable value and GST recorded in the purchase register may be reconciled with credit availed as per ITC return. 7. Purchase Return Book Nature of Document: This book gives details of goods returned to suppliers. Nature of Verification: Verify whether ITC has been expunged / such goods cleared on payment of GST. 8. Tax Audit Report Nature of document: The Tax Audit Report is given by Chartered Accountant. The said report is given in the form 3 CD and it is required to be enclosed along with the Income tax return filed by the taxable person. Nature of verification: Depreciation statement as per....
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.... is hypothecated for loans. In such cases, verify the stock position as per statement given to the bank and the stock position as per company's private and financial records. PART- II - SUPPLY OF SERVICES A. RECORDS TO BE VERIFIED I Marketing and sales department - 1. Purchase Orders/Agreements/MOUs 2. Outward supply book II. Stores department - 1. Stores Ledger 2. Job work/Sub-contract Register III. Finance & Accounts related records - 1. Ledgers 2. Debit Note 3. Credit Note 4. Journal Voucher 5. Internal Audit Reports 6. Purchase Book 7. Purchase Return Book 8. Income Tax Audit Report 9. Income Return B. AREAS TO BE COVERED IN THE TAXPAYERS/UNITS AVAILING EXPORT PROMOTION SCHEMES: II. Records to be verified in the marketing and sales departments - Sr. No. Name of the Record/Document Nature of the documents and check to be done 1. Purchase order/Agreements/MOUs Nature of Document : This document denotes the price and other conditions laid for purchase and sale of goods and services. Nature of Verification: Purchase order placed by Customers, Agreement/MOU with the Customers: (a) To verify the terms and conditions specially wit....
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....tor discharges tax, then valuation of such goods/services should be examined for the inclusion of any freely supplied material in the value. III. Finance & Accounts related records - Sr. No. Name of the Record/Document Nature of the documents and check to be done 1. Ledger Nature of document: Ledger is a book where transactions of same nature are grouped together in the form of an account. For example, all transactions relating to GST payment may be entered in GST Payment Account. Ledgers are of three types: 1. Debtor's Ledger: This contains accounts of all debtors (customers). All transactions made with a customer are entered in the individual account of each customer. Details of sales invoices and debit note issued to a customer and payment received from a customer are entered in the customer's individual account. Types of verification: (i) Ledger account of the major customers should be scrutinized. In the Customer's account it should be verified as to what are the documents used for recording the sales of the goods/services. These documents may be sales invoices or debit notes or Journal Vouchers (JV). If debit note and JVs are also found entered in the cust....
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....uld be selected for scrutiny and the exact nature of such income's accounts should be found out from the study of the documents mentioned in the relevant ledger accounts. Some of these accounts might have direct impact on the valuation of finished goods or it may also affect the GST liability. (iv) Unusual accounts as noticed during the study of Trial Balance may also be scrutinized so as to find out the exact nature of such accounts. (v) The auditor may verify the Plant and Machinery Account to find out the additions made during the year and the disposal of plant and machinery made during the year. In the case of disposal, whether the appropriate amount of tax has been paid or not may be inquired into. (vi) As far as verification of claiming of depreciation on capital goods is concerned, the verification should be made from the Income tax return filed by the assessee or from the Income Tax Audit Report. 2. Debit Notes Nature of Documents: Debit Note is a statement informing the other party that his account has been debited for the reasons given in the Debit Note. The financial impact of a Debit Note is that the addressee is liable to pay the amount mentioned in t....
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....st centres may account for consumption of raw material for each centre on a monthly basis. In such cases, the raw material consumption by non-production department like construction department or maintenance department may be found out from the study of JVs which is passed at the end of each month. The said JVs may also be useful in quantifying the amount of wrong availment of ITC for entire year as only one JV is required to be examined for each month. (iv) Adjustment entries passed for transferring the balance of one account to another related account may also be found out from the study of JVs. For example, Recovery of Packing and Forwarding Charges Account may be transferred to Packing and Forwarding Expenses account and for this purpose a JV is passed. (v) Sometimes additional consideration may be collected from customer by issuing a simple letter to the customer (without issuing any debit note or sales invoice). In such cases these transactions are accounted for through JVs. (vi) Similarly, for quantities short received or rejected quantity also the supplier may be compensated by way of intimation and the transaction is recorded through a JV. 5. Internal Audit Report ....