POINT

DESCRIPTION

1. Opening balance verification

1. Last year closing balances of assets and liabilities are incorporated as opening balance of this year.

2. Assure that there is no difference in closing and opening balance of any account.

3. Verify that opening balance is correctly entered. 

2. Personal expense checking

1. It is important to check whether expenses of partner, proprietor are treated as drawings and not as business expenses.

2. Ensure that proper accounting entry has been passed.

3. Taxation and accounting policies

1. If assessee has opted for presumptive taxation, special tax rates (Section 115BA/ BAA/ BAB), check whether it fulfils all required conditions.

2. Verify TDS liabilities and returns are as per tax rules.

3. Methods and policies are as per applicable AS and Ind AS.

4. Documents & records

1. Check which books are required to be maintained by assessee as per Section 44AA.

2. Reconcile the income recorded in P&L account with 26AS.

5. Allowances/ Disallowances

1. Details of expenses, provisions not allowed are treated as deemed income.

2. Statutory payment expenses are allowed only if paid.

6. Booking of deductions

1. Check which income tax deduction are claimed by entity with their proof document.

2. Also, verify that he claimed amount of deduction is within prescribed limit of act.

7. Other important details

1. Check loans and advances provisions as per section 269S/ SS/ ST requirements.

2. Details of brought forward depreciation/ losses is to be checked properly.

3. Also implication of Section 40a(2), 43(B) are to be checked

Sl No.

Particulars of Clause

Points to be considered

8

Details of partners/ members and their profit sharing ration etc.

1. Check partnership deed and cross check partner name and profit ratios.

2. If any changes in name, ratios compared to last year disclosure is required

9

Depreciation Particulars

1. Prepare schedule of assets and depreciation in required format

2. Asset should be grouped on basis of block of asset and rate of depreciation.

3. Verify whether opening WDV is correctly taken.

4. Check any adjustments to the block of fixed assets during year from available records.

5. Also adjustments related to gst, foreign exchange, grant etc. are to be checked separately.

6. Check whether rate applied is correctly as per Section 32.

10

Bonus, commission or other payments to employee

1. In this clause, any sum paid to employees as bonus, exgratia and commission are to be disclosed only if amounts are paid/ payable in lieu of profits/ dividends.

2. Disclose details of contributions received from employees for various funds like provident fund, superannuation fund, ESIC etc. Such contributions are allowed as deductions only if made within due date as per respective laws.

11

Details of amount debited to P&L account being capital/ personal expenditure etc.

1. Check whether P&L include any personal or capital nature expenses.

2. Generally following accounts are to be checked properly for this-

- Repairs & Maintenance

- Travelling expenses

- Salaries & Wages

- Depreciation

- Legal, Professional & Consultancy Fee

3. If any such expenses are found, then ensure correct adjustments is adopted to rectify such mistakes.

12

Amounts inadmissible under Section 40(a)

1. Prepare/ obtain statement showing payment made outside India along with details of TDS, royalty, fees for technical services etc. to NRI.

2. Calculated TDS amount and crosscheck. If any shortage is found report such shortage.

3. If TDS is deducted on such payment to NRI but not paid within due date, such payment will be disallowed for the year. Report this

4. In case of payments to residents and no TDS has been deducted or deducted but not paid within due date then such payment will be disallowed to the extent of prescribed limit.

13

Payment of interest, remuneration, commission etc. inadmissible u/s 40(b)/ 40(ba)

1. Check whether payment of interest, remuneration, commission etc. is as per partnership deed.

2. If any excess payment, or not allowable payment as per partnership deed, disclose details.

14

Disallowance/ deemed income under Section 40A(3)

1. Obtain list of payments, with amounts more that Rs. 10,000, made or otherwise than account payee cheque/ draft.

2. Verify cash book and bank book to ensure compliance.

3. In case of transport business limit will get enhanced to Rs. 35,000.

15

Provision for payment of gratuity not allowable under Section 40A(7)

1. Obtain schedule of gratuity calculations and check amount of gratuity calculated and payable to employees left.

2. Check actual payment date. It should not be after due date applicable.

3. Indicate details of Provision for gratuity, contribution, gratuity payable.

16

Any sum paid to employer not allowable under Section 40A(9)

1. Obtain list of payments made by an employer towards the setting up or contribution to any fund, trust, company etc. other than:

- Recognized Provident Fund

- Recognized gratuity Fund

- Recognized Superannuation Fund

2. If payment made to other than above fund, disclosure is required.

17

Liability of a contingent nature

Check if any contingent liability is there, if yes, disclose it

18

Amount of deduction inadmissible in terms of Section 14A

1. Check if assessee has earned any exempt income.

2. Trace that income related expenses incurred.

3. If such expenses are to be added back to taxable income.

19

Amount inadmissible under proviso to Section 36(1)

1. Check if assessee has any loan and paid/ accrues interest thereon.

2. If such borrowed loan is not put to use then such expenses are not allowed as expense.

20

Acceptance/ Repayment of loan/ Deposit/ Specified sum under Section 269SS/ 269ST and 269T

1. Prepare/ obtain statement giving details about loan taken/ repaid by the assessee during the year.

2. Check advances received/ repaid against property  has been recorded properly in fixed asset/ concerned property account correctly.

3. Section 269SS:- All loan taken/ accepted above Rs. 20000 otherwise than cheque, draft or ECS are to be reported with required information in given format.

4.Section 269 ST:- As per this section, no person is allowed to receive any sum of more than Rs. 2 lakhs otherwise than by cheque, draft or ECS form a person in a day or in relation to a single transaction.

5. Section 269T:- All loan repaid above Rs. 20000 otherwise than Cheque, draft or ECS are to be reported with required information in given format.

21

Compliance related to TDS payable on certain expenses

1. Check whether provisions of Chapter XVII-B or Chapter XVII-BB are applicable to assessee. If yes then details should be given.

2. Whether assessee has submitted statement of TDS/ TCS as required.

3. Check if any interest is payable by assessee on above payments.

22

Details regarding turnover, gross profits etc. for the previous year and preceding previous year

1. Calculate required ratios and cross check it with given information.

2. Give particulars of the components of the amounts considered in the ratios.

3. Calculation method of gross profit should be disclosed and to be followed continuously for all the years.

4. Following details are to be given:

- Total Turnover

- Gross Profit/ Turnover

- Net Profit/ Turnover

- Stock-in-trade/ Turnover

- Material Consumed/ Finished goods produced.