Audit

An independent examination of financial information, various books of accounts of any entity followed by physical checking, whether profit oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to express an opinion thereon is known as Audit. It is conducted to verify that one has created accurate and reliable financial reports and that no fraudulent activities are happening within the business.

  • Statutory Audit
  • Internal Audit
  • Management Audit
  • Transfer Pricing Audit
  • Stock Audit
  • Tax audit

Statutory Audit

A statutory audit is an independent assessment of the financial accounts of a company or institution wherein the auditor has report on whether the financial statements issued by an organization are 'true and fair', and meet all relevant guidelines or legal requirements. This audit helps and allows companies to guard against risk and plan for the future. Statutory audit is mandated by statute or law that governs an organization’s principles and ethics.

Different types of Statutory Audits are :

  • Finance Audit under Companies Act, 2013
  • Cost Audit under Companies Act, 2013
  • Tax Audit under Income Tax Act, 1961
  • GST Audit under GST Act, 2017
  • Internal and Concurrent Audit under NSDL
  • Concurrent audit, branch audit, stock audit, etc. under the Banking Act

Stock Audit

Stock audit refers to the physical verification of stock based on the maintained records. Thus, the audit used for a company's stock involves verifying and detecting discrepancies (if any), finding deviations, and reporting accordingly. Stock audit and stock verification are two terms that convey the same meanings.

Management Audit

A management audit is an analysis and assessment of the competencies and capabilities of a company's management in carrying out corporate objectives. The purpose of this audit is not to appraise individual executive performance but to evaluate the management team in its effectiveness to work in the interests of shareholders, maintain good relations with employees, and uphold reputational standards.

Internal Audit

Internal audits evaluate a company’s internal controls, including its corporate governance and accounting processes. Internal auditors are the ones hired by companies who work on behalf of their management teams. These audits also provide management with the tools necessary to attain operational efficiency by identifying problems and correcting lapses before they are discovered in an external audit.

Different types of Internal Audits are :

  • Compliance Audit
  • Internal Financial Audit
  • Environmental Audit
  • Technology/IT Audit
  • Performance Audit and / or Operational Audit

Transfer Pricing Audit

Transfer pricing (TP) is a term used to describe inter-company pricing arrangements relating to transactions between related entities. These can include transfers of intellectual property, tangible goods, services, and loans or other financing transactions. The Audit of such transactions is known as Transfer Pricing Audit, this generally done to avoid tax evasions.

Tax Audit

A tax audit is the process of verification and inspection of the accounts of a taxpayer to confirm their adherence to the provisions of the Income Tax law. Tax Audit is carried out under Section 44AB of the Income Tax Act, 1961. Tax audits are required if a taxpayer's sales, turnover, or gross earnings are more than Rs. 1 Crore in case of business and Rs. 50 Lakh for professionals in a given financial year. As per Financial Act, 2020, from AY 2020-21, the limit of Rs. 1 crore is proposed to be increased to Rs. 5 Crore if :

  • the taxpayer’s cash receipts are limited to 5% of the gross earnings or turnover and
  • the taxpayer’s cash payments are limited to 5% of the aggregate payments