This presentation takes you through the impact of Technology on Audit Environment. There are lot of slides from Tally which is an eye opener in the sense, that how a cheap software like Tally can be effectively used for Audit purposes like planning, documentation, query management. There is also some sharing on what is seen in SAP Environment.
2. Impact of IT
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3. IT has significantly impacted the audit
profession in the past two decades
• Electronic work papers to facilitate the documentation.
• Large firms are developing computerized decision aids to assist them in
going concern decisions, client acceptance issues, analytical procedures,
etc.
• IT impacts the behavior and attitudes of individuals working in the firm,
and the structure and processes of the firm.
• Enhancement in productivity through audit automation, eliminating
certain audit procedures, and enhancing information and knowledge
sharing capabilities.
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4. Some Applications in use
• Analytical procedures
• Internal control evaluation
• Sampling tasks
• Fraud review
• Testing on-line transactions
• Administrative/practice management tasks
• Knowledge management
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5. Migration in Expectations
• Moon vs Mars
• Bigger the organisation – Micro Level Audit
• Expressed and Unexpressed Requirements
• Are we really required ?
• Where lies the future ? – Total no. of CA’s in
India is ___________
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6. Male vs Female
• Male group argued that computer is female because:
1. No one but their creator understands their internal logic
2. The language they use to communicate with other computers
can-not be understood by everyone else
3. Even the smallest actions are stored in long term memory for a
long time and
4. As soon as you make a commitment to one, you find yourself
spending a lot on accessories.
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7. • The women's group, however, concluded that computers should be
male, because:
1. In order to do anything with them, you have to turn them on.
2. They have a lot of data but still can't think for themselves.
3. They are supposed to help you solve problems, but half the time
they ARE the problem; and
4. as soon as you commit to one, you realize that if you had waited
a little longer, you could have bought an improved version.
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8. Impact of IT on Audit
• Organisational Walkthrough
• Tally • SAP
– Audit Planning – Understanding TB
– Tax Audit – Auto Entries
– Multilocational Client – Role of CAAT Tools
• ERP • Excel / Access
– Basics – Financial Statements
– Audit Methodology – Analysis
– Customised vs Ready Made ERP
at client
– Exceptional Reporting
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9. Walkthrough
• MSO Cable Operator
Software in Use Functionality
TALLY ERP 9 Accounting
LOG2 SPACE Bandwidth Management
MQ SUBSCRIBE 5.72 Subscriber Management
ORACLE 10G DATABASE Subscriber Database
MOBILE PAYMENT SOLUTION Subscriber Collection
DCR FORM ENTRY SYSTEM Ad Revenue Booking
PAYROLL Payroll Management
CRM Material Management
ARS WINNET Attendance Management
ZIMBRA Email Server
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12. The New Statutory Audit
Feature in Tally.ERP 9 -
Auditors’ Edition
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13. Statutory Audit – Scope
Covered
Data Analysis
Auditing
Financial Statements As Per
Schedule VI
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14. Data Analysis – Tools available
Verification of Chart of Accounts
Verification of Balances
Verification of Stock items
Analytical Procedures
Pending Documents Mark the Status as Verification
Statutory Payments Complete after Analysing the data
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15. Verification of Chart of Accounts
Exception Types with Ledger Details
All the Ledgers are Listed Under the
Different Exception Types
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16. Verification of Stock Items
Verification of Stock Items Report
Similar to Chart of Accounts
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19. Auditing/Vouching
Verification of Vouchers
Related Party Transactions
Forex Transactions
The Auditing procedure is similar to the Tax Audit
Outstanding of MSMEs with respective Audit Status will
and the Vouchers
be displayed in the respective columns
Salary/Wages Payments (including ‘Head Count’)
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20. Auditing – Related Party Transactions
Once the Related Parties are identified, all the
Related Party transactions will be available for Scrutiny
Auditor can identify the Related
Parties with the help of Client
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21. Auditing – Forex Transactions
All the transactions involving Forex will be listed for scrutiny. The auditor
can drill down to check the Rate of Exchange used by the Client for each
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22. Financial Reports – Provided
Balance Sheet as per Schedule VI
Profit & Loss A/c as per Schedule VI
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23. Schedule VI Balance Sheet – Features
Can be generated with just a single click
Tally Default Groups (Business Groups) are mapped to Schedule VI groupings by default too.
Can be further regrouped as required (User defined)
Flexible Schedule numbering
Generation of Schedules
Export to Excel for further formatting if required.
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24. Schedule VI Balance Sheet
The selected Group is moved along with the
Balance without affecting the actual data
The Group/Subgroup/Ledger Balances can be Moved
From one Schedule VI titles to another as required or
within default Tally Groups. To undo all changes click on
button or press F10
Select the Group which needs to be
Movement is possible using Ctrl+X Move button or
moved
Ctrl+Enter Configuration screenMove the cursor to the
required line
To undo last change click on
Click on this button or
the Click this press Ctrl+U
button or button or press
press Ctrl+X to CUT/Move
Ctrl+V to PASTE
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25. Schedule VI Balance Sheet
Final Schedule VI Balance Sheet
With Schedules nos.
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26. Schedule VI Profit & Loss A/c –
Features
Sales & Income Groups are mapped to INCOME by default
Expenses & Purchase Groups are mapped to EXPENDITURE
Option to rename INCOME & EXPENDITURE is provided to support all industries
Flexibility to regroup within INCOME & EXPENDITURE
Flexible Schedule numbering
Generation of Schedules
Export to Excel for further formatting if required.
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28. Preparation of Sch VI in Excel
• Giving Suffix to Ledgers in Tally
• Lets see a demo
• Other Advantages of using the suffix
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32. Tax Audit Menu
Tally Main -> Gateway of Tally->Audit & Compliance
The Audit &
Compliance Menu
with the available
features.
The menus under
Tax Audit are:
• 44AB Audit
• Form 3CD
• Form 3CA
• Form 3CB
33. Tax Audit Dashboard
Gateway of Tally > Audit & □ Clause No. in Form 3CD
Compliance > Tax Audit □ Description of the clause
under audit
□ No. of unaudited
Vouchers
□ No. of audited
Vouchers
□ No. of Vouchers under
observation
□ No. of Vouchers requiring
clarifications from client
□ No. of clarified Vouchers
for re-audit
□ No. of altered Vouchers
for re-audit
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34. Cl. 16- Payment of Statutory Dues
Verify employee contributions towards statutory funds
(PF,ESI,etc), employee bonus and commission payments.
To perform the audit ,
Use the Bonus, PF
under this clause, the
ESI Recoveries
Payroll option in
feature
F11:Features
to verify remittance
in Tally.ERP 9 has to
of statutory dues in
be enabled and the
time
payroll transactions
to Government
have to be accounted
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35. Cl. 17h- Amounts inadmissible u/s
40A(3)
Verify and disallow payments aggregating and above
prescribed cash limits Click F11:Features
in Cash Payments
screen.
The Company
Operations
Alteration screen is
displayed.
Audit rule under
Inadmissible Cash
Payments
U/s 40A (3) is
defined.
Define new value if
required.
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36. Cl. 17h- Amounts inadmissible u/s
40A(3)
Exclude ledger account(s) for which cash payments
aggregating to Rs.20000 in a day are allowed.
Click Ctrl+F9:Master
button in Cash
Payments screen.
Select the ledger
account in Select
Ledger screen.
Exclude the ledger
account in Ledger
Alteration screen from
the scope of audit
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under Rule 6DD of IT.
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37. Cl. 17h- Amounts inadmissible u/s
40A(3)
Define amount range for selecting transactions for audit of
cash payments in a day.
Define new
Click F10: Range
F6: Amount
amount display
wise to range as
define
per values for
newrequirements.
the Lowest andthe
Lowest ranges and
Highest and
Highest range of
the numbers of
cash payment
payments.
vouchers.
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38. Cl. 17h- Amounts inadmissible u/s
40A(3)
Verify if the Client has issued Bearer Cheques to suppliers.
Click Alt + B: Bank
Summary to display
ledger payments
through the bank
account.
Specify payments
made by bearer in
consultation with
client.
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39. Cl. 17h- Amounts inadmissible u/s
40A(3)
Configure the display of details in the feature.
Configure the following
display details:
• High/Low value
vouchers
• Limit for displaying
cash payments
• Display of low
valued payments
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40. Cl. 17h- Amounts inadmissible u/s
40A(3)
Select the required Ledger Account’s cash payment for audit.
Values available for
Click F9:Audit to audit
Audit Status
Transactions. are:
• the Audit
In Unknown Details
• Allowed
screen:
• Disallowed
• SelectClarification
Need required
• status Observation
Under under Audit
Status
• Enter the appropriate
value under Amount
• Enter remarks under
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41. Printed Annexures to Form
3CD
Clause 17(h):
Click Alt+P in
Amounts
Inadmissible
under u/s 40A(3):
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42. Cl. 18- Payments to Specified Persons
Verify and disallow expenses/payments made to specified
persons if found to be excessive/unreasonable
You can Payments
The Payments to
Use the alternatively
Configure the ledgerto
display
configure the ledger
through F12:
details under Other
accounts inPersons
Specified Related
accounts as Specified
Configure.
details to audit
featuredisplay after
Information in
Party Configuration
Ledger party
screen as per (b)
Persons Alteration
-Sec 40A (2)
related through
excessive and ledger
screen. underpayments
creation
configuration.
unreasonable Masters
discussions with the
menu.
-Sec
made40A (2) (b)
Client.to specified
Click F12: Configure.
persons.
Select Yes against
Click F9:Update toUse
Other Information
configure.
Click Ctrl+F9: Master
for Ledger Accounts.
and select the
appropriate ledger
accounts in consultation
with the Client from the
Select Item screen.
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43. Cl. 18- Payments to Specified Persons
Auditing Payments to Specified Persons.
Values are available for
Select required ledger
Audit Status.
vouchers for audit.
• Unknown
Click F9 Clarification
• Need : Audit to
audit. to be Reported
• Not
• To be Reported
• Under Observation
Select required status
under Audit Status.
Enter values under
Amount, Nature of
Payment.
Record appropriate
remarks under Audit
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Note.
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44. Printed Annexures to Form 3CD
Clause 18 :
Click Alt+P in
Payments to
Specified
Persons u/s
40A(2)(b)
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45. Cl. 24(b)- Loans / Deposits Repaid-Sec
269T
Verify repayments of Loans and Deposits aggregating to and
exceeding prescribed cash limits
Clickthe 24(b) – to
Use F4:Group
Select any Group for
select a/Group.
Loans Deposits
inclusion by pressing
Repaid feature to
Spacebar.
find payments (loans
& deposits) made by
Click Ctrl +
cash aggregating to
A:Change to include
and exceeding
the selected Group.
prescribed limits.
Press Ctrl+Q : Quit
Click F9:Master to
to return to Loans
configure the
and Deposits
inclusion of a ledger
Repaid screen.
account under the
clause.
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46. Cl. 24(b)- Loans / Deposits Repaid-Sec
269T
Configure the display of details in the report.
Click F12:Configure
to define the display
of details the Loans
and Deposits
Repaid screen.
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47. Cl. 24(b)- Loans / Deposits Repaid-Sec
269T
Audit transactions of Loans / Deposits Repaid – Sec 269T.
Select status under
required ledger
vouchers for audit.
Audit Status.
Enter value under
Amount. Audit to
Click F9 :
audit.
Record appropriate
remarks under Audit
Note. are large
If there
number of transactions,
Audit Status Values
available are: F12:
use the Alt +
Range to filter the
• Unknown
• Needof ledger
display Clarification
amounts greater than
• Not a Loan
Rs.20000.
• Repaid by Cash
• Repaid by
Cheque/DD
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• Under Observation
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48. Printed Annexures to Form 3CD
Clause 24(b): Click
Alt+P in Loans &
Deposits Repaid -
u/s 269T
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49. Cl. 27- Tax Deducted at Source
Verify remittance of taxes deducted at source have been made within
time to the Government
Use thethe Tax
To use Tax
Click Alt+F4:Party to
display Party
Deducted at
Summary details.
Source feature to
feature,
find whether tax
enable the TDS
Click Alt+F5:NOP to
deducted Statutory
option in at source
display the Nature of
has been Summary
Payment remitted
& Taxation under
within time to the
attracting TDS. in
F11:Features
Govt.
Tally.ERP 9 and
account the TDS
Note:
Verify detailsof
NOP-Nature under:
related transactions.
Payments.
Examine any particular
• Deduction Details
detail (e.g. Deducted
• Payment Details
on Time) in the TDS
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50. Cl. 27- Tax Deducted at Source
Display the TDS expenses closing balance with the closing balances
of other expenses (non-TDS).
expenses. Compare TDS
Verify non-TDS
expenses with non
to see if
TDShas to be in the
tax expenses
TDS Summary
deducted at source
screen.
for them.
Click F5: Expenses
Analysis to
generate the
analysis report.
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51. Cl. 27- Tax Deducted at Source
Audit transactions of Tax Deducted at Source.
Values required ledger
Select for Audit
vouchers for audit.
Status available are:
Click F9 : Audit to
• Unknown
audit.
• Audited
• Need Clarification
Select required status
• Under Observation
under Audit Status.
Record appropriate
remarks under Audit
Note.
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52. Printed Annexures to Form 3CD
Clause 27:
Click Alt+P in
TDS Summary
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54. Forms 3CA & 3CB
Form 3CA-This report
is prepared when
the accounts of the
business/profession
have been audited
under any other law.
Refer clause (a) of
Rule 6G
Form 3CB-This report
is prepared in the
case of a person who
carries on business or
profession, but not
being a person
referred to in clause
(a) of Rule 6G.
56. ERP – Can we say everything is proper by default
Implementation
• Customised vs Ready
• Bunch of tables
• Mapping of Auto GL
• Mapping of Auto Entries
• Variance Management
Audit Methodology
• Sample verification for System Assurance
• Check the first transactions in the sequence
• T Format vs Open Entries
• Control by Reports – System and Customised
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57. Part – I TB in SAP
Involvement of Non Accounting Personnel
Most entries passed by Department other than Accounts
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58. • Lets see a Trial Balance from SAP
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59. SAP V/S Non SAP
- Non SAP : Purchase GL’s available
- SAP System:
Consumption GL’s
Variance GL’s
Revaluation GL’s
- Purchase is a derived figure
Purchase = Closing Inv +Consumption – Opening Inv
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60. Material Movements
• 311 – Transfer from Stores location to PP location.
• 261 – Consumption by PP.
• 101 – Receipt
• 321 – Quality Check
• 601 – For Sale
• 531 - Scrap
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61. CO module / Valuation of Inventory
The Raw material is booked at actual cost and valued at FIFO method or
weighted average method. SFG & FG are valued at Standard Cost basis.
Determination of Standard Cost
Standard Cost of SFG & FG is determined by system itself.
Periodic standard cost run has to be made in the system. The system
calculates std cost on the basis of BOM & moving average price of RM.
Bill of Material
Stages: Preparation of BOM is dependent on stages to be kept in system.
You can have stock of SFG stage wise.
Material Code: Material need to be created in Material Master.
All material whether RM, Consumable, SFG, FG are given separate ID
number.
Series need to kept for proper understanding.
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62. Period End Activities
- Knocking up of Customer. (F-32).
- Knocking up of Vendors. (F-44).
- In case you have more than 1 plant, you can have TB plant wise. You can
see/verify all the above entries Plant wise.
Certain related activities that must be done before period end so as to
have proper FS
- WIP Run KKAO
- Variance Run KKS1
- Settlement of Variance CO88
- Closing of Production Orders COHV
- Std Cost CK40N
- Knocking up of Customer.
- Knocking up of Vendors.
- Closing of PP module
FI should be closed when FS for a period is prepared.
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63. CAAT Tools
• Masters
– Vendor Masters
• Vendors with Same PAN No.s
• Vendors with same addresses
• Duplicate Names
• Transactions
– Purchases
• Rate Variance among various suppliers
• Time lag between Purchase order and GRN
• Number of suppliers for each item
• Comparison of Freight Cost from different suppliers
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64. • CA Subodh Kedia
• CA Vishal Langalia
• CA Inderpal Singh
• Dr Kalpesh Parikh
• Google.com
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Notes de l'éditeur
In this slide the points that will be discussed in the presentation are mentioned.
Note: This is the main menu of the AE tool consisting of Tax Audit, Statutory Audit and Compliance menus.The Tax Audit menus consists of:44AB AuditForm 3CDForm 3CAForm 3CB
Note:This is the dashboard of the clauses under the Sec 44AB Audit . It provides a snapshot of the clauses to be audited The current number of audited, unaudited vouchersThe number of vouchers: Under Observation Needing Clarification Clarified (but to be audited again) Altered by the Client after a preliminary audit (those again have to be audited) Whether clauses are audited.In addition we have the following buttons:F2: Period: Choose the period of transactions for auditAlt+F9: Save Audit- To save the audit of the clause.Alt+C: Clarification List: This is the list of clarifications that have been sought and the replies by the clientF11: Features: Displays the Audit Rules defined for the audit.F12: Configure: The details of audits conducted of the previous year under each clause.
Note:In the Annexures to Form 3CD screen, click the Bonus, PF, ESI Recoveries feature to display the Employee Deduction screenThe screen displays the amounts of statutory deductions, the payment status and the current audit statusSelect the desired statutory deduction and click to display the Payroll Monthly Summary screen for audit.Drill further to payment voucher level details and select the required voucher(s) for audit. ( Press the spacebar to select any voucher)Press F9 to perform the audit.
Under this clause the Auditor has to report on cash payments aggregating and exceeding Rs.20000 in a day ( increased to Rs30000 in the next FY).
The initial configuration before audit in F11: Features is defined in that screen.Some payments are exempt from cash payment rule, for example, payments of taxes to Govt or payments in rural/moffusil places where banking facilities are not available or if the recipient of cash has no bank account or the local traditions demand payments by cash only.For this purpose the Rule 6DD allows you to exclude such ledgers from the purview of the tax audit.
The Auditor can generate reports on the lowest and highest values of payments. Further the Auditor can provide any values of ranges to generate a report on cash payments.Notice the lowest and highest values of payments displayed for a ledger account.Select any ledger account and drill down to the payment level for audit.
If the Auditor is concerned about the issue of Bearer Cheques, the AE provides a list of bank payment transactions for analysis. The Auditor can select such transactions for audit and satisfy if they are paid through A/c payee cheque/DD or the client has issued bearer/self cheques. For this exercise, the Auditor has to check the bank statements and cheque counterfoils to satisfy that the payments were made as per law.
The display of details in the Cash Payments to aid the Auditor in the audit work. The F12: Configure button allows the auditor to define the limits for cash payments, display high and low payment values,etc.
The method of auditing is described here and the values for the Audit Status.Drill down to the voucher level, select the transaction and use F9: Audit to perform the audit.The status values for Audit Status are: Unknown: This status is chosen when the auditor has not decided about the outcome of the audit of the payment transaction or wants to change the decision taken earlier.Disallowed: The amounts paid late or unpaid are not allowed as deductions in computing the taxable income.Need Clarification: The Auditor wants more information from the Client before deciding on the audit decision.Under Observation: The Auditor is yet to form an opinion on the transaction under audit and wants to collect more information/consult supervisors before taking a decision.
Note:Printed report - Annexure for Clause 17h
Note: Certain payments to persons who are closely related to the client and may be Directors, Partners, Relatives, etc. have to be reported in the Tax Audit. The Auditor before starting the audit consults the Client and obtains the information on such payments. The other type of payments that the Auditor is interested if they are unusual and are excessive/unreasonable.Ledger accounts created for such persons can be configured using the Ctrl+F9:Master feature or the Ledger Master creation screen.The Auditor can also configure the display of information on the Payments to Specified Persons screen by using the F12: Configure button menu.
Note:Audit of payments to Specified persons can be performed at the voucher level by using the F9:Audit feature.The status values available for Audit Status are:Unknown: This status is chosen when the auditor has not decided about the outcome of the audit of the payment transaction or wants to change the decision taken earlier.Needs Clarification: The Auditor requires more information from the Client before concluding the audit.Not to be Reported: The Auditor decides after verification that the cash payment is allowable as per law in certain cases, like payments to Govt, payments to persons having no bank account, etc.To be Reported: The Auditor has found that the payment was made violating the clause 18 and hence had to be reported in Form 3CD report.Under Observation: The Auditor is still not completed the audit and wants to refer to other sources/Superior for confirmation.
Note:Printed report-Annexure for Clause 18.
Note:Under this clause any payment of loans/deposits as described under Sec269T are to be made through an account payee cheque/DD if the amount aggregates to and exceeds Rs.20000/- on a day.Click F9:Master to configure the inclusion of any ledger account under Loans and Deposits Repaid for audit.
Note:Under this clause any payment of loans/deposits as described under Sec269T are to be made through an account payee cheque/DD if the amount aggregates to and exceeds Rs.20000/- on a day.Click F9:Master to configure the inclusion of any ledger account under Loans and Deposits Repaid for audit.
Note:The Auditor can drill down to the voucher to perform the audit of the selected transaction. The audit is performed using the F9:Audit feature.The status values available for Audit Status are:Unknown: This status is chosen when the auditor has not decided about the outcome of the audit of the repayment transaction or wants to change the decision taken earlier.NeedClarification: The Auditor requires more information from the Client before concluding the audit.Not a Loan: The transaction is not a loan and hence will be disallowed as a deduction while computing the taxable income.Repaid by Cash: These are transactions that are repaid by cash and will be disallowed while computing the incomeRepaid by Cheque/DD: These transactions are repaid by a crossed account payee cheque/DD.UnderObservation: The Auditor is still not completed the audit and wants to refer to other sources for confirmation.
Note:Printed report -Annexure for Clause 24b.
Note:Under this clause the assessee has to report whether tax at source deducted has been paid to the account of the Govt as per Chapter XVII-B of the IT Act. The remittance of the tax deducted at source should be within the prescribed time as specified under the IT Act.To perform this audit, the TDS option in Tally.ERP 9 has to be enabled.The Auditor can view the party and payment details using the Alt+F4:Party and Alt+F5:NOP.The TDS Payment Summary with the details of Deductions and Payments are displayed and also the expense summary.
Note:The Auditor can use the F5: Expenses Analysis to compare the TDS and non-TDS expenses.
Note:Select the required tax payment by drilling down to the voucher level and audit it by using F9:Audit key.The three audit status values in this clause are:Audited: This refers to the situation where the tax payment has been verified to the fact it has been remitted within time or not.Needs Clarification: The Auditor requires more information from the Client before concluding the audit.UnderObservation: The Auditor is still not completed the audit and wants to refer to other sources for confirmation.
Note:Printed report -Annexures for Clause 27b.
Note:In the Form 3CD feature, click Alt+P to print the audit report. The Form 3CD is the audit report that is prepared by the Auditor for filing with the IT Dept.
Note:The Form 3CA and CB are assertions/opinions made by the Auditor in respect to the conduct of the audit under Sec 44AB and reported by Form 3CD. Form 3CA audit report is prepared for businesses audited under any other laws – partnership, proprietorship, Association of Persons,etc.Form 3CB is an audit report prepared for an assessee who carries on a business other than mentioned under Form 3CA.