CHAPTER 1

INTRODUCTION

MEANING OF AUDITING

Auditing means examination of correctness of books of accounts with any

documentary evidence.

An audit is an IRS examination of an individual or corporation's tax return, to

verify its accuracy. There are three types of audits: correspondence audits (the IRS mails
a request for additional information), office audits (an interview is conducted at a local
IRS office), and field audits (an interview is conducted at a taxpayer's place of business,
for a corporate tax return). Since there is always the chance of an audit, experts
recommend keeping good records to support all the information in a return. The reason
detailed and accurate bookkeeping is so important is that the burden of proof is on the
filer, not the IRS.

MEANING OF AUDITOR

An accountant who conducts an audit to verify the accuracy of the financial

records and accounting practices of a business or government. A proper audit will point
out deficiencies in accounting and other financial operations. Many counties have an
appointed or elected Auditor to make independent audits of all governmental agencies in
the county government. The term "auditor" is often misused as meaning any accountant.
 OFFICE PROFILE

Name of the CA firm : KPS Elango & Associates

Address : 52, Sathymoorthy Road,

Ram Nagar,

Coimbatore – 641009.

Date of incorporation : 09.04.1996

Registration number of firm

With ICAI : 0073335

RBI Unique code : 312116

Partners’ Name : D.Ramasundharam,

N.Asokan,

R.Anbazhagan,

C.Sivasubramanian,

T.Sumathi.

Auditor’s Name : KPS Elango

 CHAPTER 2

TRAINING

AUDIT PROCESS AND TECHNIQUES

1. Posting checking

2. Testing the existence and effectiveness of management controls that

prevent financial statement misstatement

3. Casting checking

4. Physical examination and count

5. Confirmation

6. Inquiry

7. Observation

8. inspection

9. Year-end scrutiny

10. Re-computation

11. Tracing in subsequent period

12. Bank reconciliation

13. Vouching
 14. Verification of existence, ownership, title and value of assets and

determination of the extent and nature of liabilities

TALLY

Tally is a financial accounting software package designed by Tally Solutions

mainly for small businesses and shops. They claim on their website that Tally is used by
over 2 million users, in over 90 countries. Tally 9.0 is the latest version to date. Tally is a
complete business accounting and inventory management software that provides various
facilities like Govt. supported formats, multilingual operations, online functions and
processing for small and medium businesses. Tally Accounting Software is unique
accounting software that maintains a wide range of accounting books and vouchers. This
software is designed to keep businesses growing by focusing on the needs of customers.

The Late Shri S. S. Goenka, founder of the company Peutronics Pvt. Ltd. set up
Tally's software business in 1986.

Tally is an accounts and inventory management software which is having

many other features too. With the latest version of this software Tally9 you can

1. Do all basic accounting functions,

2. Manage your store and items,
3. Do the job costing,
4. Manage payroll,
5. Get many mis reports which are useful for day today functions,
6. File your tax returns like prepare balance sheet, profit and loss statement, VAT
forms, TDS, returns, Service tax returns, e-TDS filing, Excise forms, FBT reports
and forms,
7. Maintain budgets, scenarios,
 8. Calculate interest on pending amount
9. Manage data over different locations and synchronize it and many more other
features…

SALES TAX
Tax which is levied or imposed on the sale of goods is called sales tax. It is
one of the types of indirect taxes.

Under the constitution of Indian government both central and state

government are empowered to levy such tax and collect it on sale of goods, subject to
certain conditions.

Tamil Nadu was the first state in India to introduce the sales tax among the
states. It was enacted in “1st October 1939” under the act of “madras act of 1939”.
The main aim of the was to earn more revenue to make up the loss in revenue.

VAT

MEANING OF VAT

The term VAT refers to an increase in the value of goods at every stage of
production or transfer. The VAT is imposed on the value addition made by a seller on his
purchase when he makes the sale.

HISTORY OF VAT

THE CENTRAL SALES TAX ACT, 1956

(ACT ON LXXIV OF 1956)

 The central sales tax shall come into force on such date as the central
government may be notification in the official gazette, appoint and different dates may be
appointed for the different provisions of the act.

It was levied for determining when a sales or purchase of goods takes place
in the course of the inter-state trade or commerce or outside from India

GENERAL SALES TAX ACT, 1959

Before 2006, in Tamil Nadu, the sales tax was in the name of general sales
tax act, 1959. The meaning of this sales tax is, “tax levied on the sale of goods within
the state of Tamil Nadu”. But after 2006, it modified as value added tax (VAT).

TAMILNADU VALUE ADDED TAX ACT, 2006

[TAMILNADU ACT NO: 32 OF 2006]

DEFINITION

“An act to consolidate and amend the law relating to the levy of tax on the sale or
purchase of goods in the state of Tamil Nadu”.

It was amended on 1st Jan, 2007 and it enacted by the legislative assembly of the
state of Tamil Nadu in the 57th year of the republic of India. India introduces VAT in
1955 in the name of CENVAT [central value added tax]. VAT 1 st Introduced in France in
the year of 1954. Initially it did not cover services.

European Union. U.K, China, Sri Lanka, Brazil and Canada are some of the
countries who have introduced VAT. VAT as taxation system of commodity taxation
exists in and above 130 countries. VAT is levied at state level in India as a substitute to
existing sales tax system. In India, Haryana was the first introduced VAT in 2003.
ADVANTAGES OF VAT

VAT as a model is expected to improve the state finances and bringing down
the prices of goods. VAT is a multi-point tax. So, it prevents repeated taxation of the
same product. There by removing the duplication effect.

VAT provides uniform tax rates will prevail for almost all the commodities
throughout India. VAT abolishes taxes like additional sales tax, surcharge, etc. VAT as
the flexibility to generate large revenue, as it levy tax on value additions. VAT system
promotes the self- regulated mechanism in the preparation of tax.

SOME TERMS OF VAT

COMMERCIAL TAX OFFICER [CTO]

Any person appointed to be a commercial tax officer U/S 48

DEALER

Any person who carries on the business of buying, selling, supplying, or distributing

goods for some consideration.

GOODS
 All kinds of movable property (other than newspaper, actionable claims, stocks and

shares& securities) and includes all materials, commodities and articles.

DECLARED GOODS

Goods declared by section 14 of the central sales act, 1956.

BRANDED GOODS

As per sec 2(9) any goods – any goods sold under a name or a trade mark registered.

TAXABLE GOODS

Goods other than exempted goods specified in the 4th schedule of this act.

EXEMPTED GOOD

The goods falling under the 4th schedule and exempted by the government.

E.g. agricultural equipments likes crow-bar, hammer, seeds and so on.

INPUT TAX

The tax paid or payable under this act by a registered dealer on the purchase of

goods including capital goods.

OUTPUT

Tax paid or payable under this act by a registered dealer in respect of sale of goods.

REVERSAL OF TAX CREDIT

Reversal of input tax credit already claimed and availed under this act
TAX INVOICE

An invoice showing the tax charged separately.

ZERO RATE SALE

Sale of any goods on which no tax is payable but credit for the input tax related to

that sale is admissible.

TIN-TAX PAYER IDENTIFICATION NUMBER

Eleven digit registration number assigned under VAT to the dealers.

E.g.: 33891234567

The sales tax department gives tin for each registered traders and commodity code

for products.
VAT CALCULATION

VAT=OUTPUT TAX- INPUT TAX

VAT at different stages

Name: product-1 Rs

Manufacturing cost - 30

Add: rate of tax @ 5% - 2

Add: profit @ 10% on cost - 2

Product transferred to wholesaler from wholesaler - 35

Add: Rate of tax @ 5% - 1.75

Add: profit @ 10% on purchase value - 3.25

Product transferred to retailer from wholesaler - 40

Add: Rate of tax @ 5% - 2

Add: profit @10% on cost - 3

Product sold to consumer at a final rate of - 45

TAX DEDUCTION AT SOURCE

 OVERVIEW OF TDS

TDS is one of the modes of collection of taxes, by which a certain percentage of

amounts are deducted by a person at the time of making/crediting certain specific nature
of payment to the other person and deducted amount is remitted to the Government
account. It is similar to "pay as you earn" scheme also known as Withholding Tax in
many other countries, one of the countries is USA. The concept of TDS envisages the
principle of "pay as you earn". It facilitates sharing of responsibility of tax collection
between the deductor and the tax administration. It ensures regular inflow of cash
resources to the Government. It acts as a powerful instrument to prevent tax evasion as
well as expands the tax net.

DEDUCTOR’S FUNCTION

1. Obtain TAN

Every deductor is required to obtain a unique identification number called TAN (Tax
Deduction Account Number) which is a ten digit alpha numeric number
e.g.DELH90468K.

This number has to be quoted by the deductor in every correspondence related to Income
Tax matters concerning TDS.

2. He/She should obtain PAN of the deductee.

3. He/She should deduct the tax at correct rate.

4. The tax deducted has to be deposited in the designated banks within specified time.
(Govt. deductors shall transfer the tax deducted through book entry in Government
account).This is detailed below:

 By or on behalf of the Government  : on the same day,

 By or on behalf of any other person : before the 7th of the following month.

However, if the amount is credited in the books on 31 st March then the tax should be
remitted by 31st May.

Note: w.e.f., 01.04.2008 electronic payment of tax has to be done by all corporate
assesses and all persons whose cases are auditable under section 44B.

5. Use challan no. 281 for depositing TDS amount.

6. File statements of tax deduction in the prescribed time.

The due dates for filing of TDS/TCS statement are :

15th of July for Quarter 1,

15th of October for Quarter 2,

15th of January for Quarter 3 and

15th June for last Quarter however for TCS statements the due date is 30th April.

7. Use correct form to file TDS/TCS Returns. They are:

Form 24Q        for salaries

Form 26Q        for non-salaries

 Form 27EQ      for TCS

Form 27A/27B Control sheet for electronic TDS/TCS

It may be noted that the following persons have to compulsorily file e-TDS
statements

 All government offices/Departments

 All companies /corporations

 All persons whose cases are auditable

 All persons whose TDS statements contain more than 50 deductees.

The process of filing of e-TDS returns is available in detail at following websites

www.incometaxindia.gov.in or http://tin-nsdl.com.

8. Issue TDS certificates as per existing procedure and within the time prescribed as
stated below:

The certificate should be issued within one month from the end of the month in
which the income is credited however for credit entries made on 31 st March, due date is
7th June, except in the case of salary where the certificate has to be issued by 30 th of April
of the following financial year in which the income was credited.

  
TAN

Every deductor is required to obtain a unique identification number called TAN

(Tax Deduction Account Number) which is a ten digit alpha numeric number. This
number has to be quoted by the deductor in every correspondence related to TDS.

FORMAT OF TAN

PROCEDURE FOR GETTING TAN  

It can be obtained by filing an application in form no. 49B to any of the TIN
facilitation Centers (TIN-FC) namely NSDL. Addresses of the TIN-FC as well as the
forms can be downloaded from the website www.incometaxindia.gov.in or http://tin-
nsdl.com. The fee for processing TAN application is Rs.  60/-. This can be paid by:

a. Cash at TIN-FC counter

b. Demand draft or

c. Cheque or

d. Credit card
 The demand draft/ cheque shall be in favour of 'NSDL-TIN'. TAN number will be
communicated to the deductor by NSDL.

VARIOUS ONLINE SERVICES OF INCOME TAX DEPARTMENT

The Income Tax Department (ITD) as a part of its citizen centric activities is
providing a host of online services to the taxpayers services through various websites so
that a taxpayer can fulfill his routine tax obligations.

Following services are being provided:

(i)  Dissemination of tax related information through websites

(ii) Dissemination of taxpayer specific information

(iii) PAN and TAN related services

(iv) e-filing of returns of income

(v) e-payment of taxes

(vi) e-filing of TDS returns

ONLINE TAX ACCOUNTING SYSTEM
 

•Tax deposits take place at over 13,000 branches of 33 designated banks throughout
the country

• Banks imprint a unique Challan Identification Number (CIN) on each challan

• Facility provided for online payment, and viewing status of tax payment

• Handles over 2 crore tax payment transactions per year

e-PAYMENT OF TAXES

 Anytime anywhere payment of taxes

 Easy and fast.

 No lengthy queues

 No last minute rush

 Fewer mistakes

 Instant generation of CIN- eliminates possibilities of mis-match in CIN particulars

 Available at www.incometaxindia.gov.in and www.tin-nsdl.com .

e-FILING OF INCOME TAX RETURNS 

 Anytime Anywhere filing
 Easy, Fast and Free

 No lengthy queues

 No last minute rush

 Fewer mistakes

 Immediate e-filing acknowledgement

 No personal interface
  Select appropriate type of Return Form 

 Download Return Preparation Software for selected Return Form.   

 Fill return offline and generate a XML file. 

 Register and create a user id/password.   

 Login and click on relevant form on left panel and select "Submit Return".

 Browse to select XML file and click on "Upload" button.

 On successful upload acknowledgement details would be displayed. Click on

"Print" to generate printout of acknowledgement/ITR-V Form.

 Available at https://incometaxindiaefiling.gov.in.

TAN REGISTRATION

1. TAN Registration available at www.tin-nsdl.com.

2. Authenticated deductors-

i. View of the status of all statements filed;

ii. Download of consolidated quarterly e-TDS statement for preparation of

correction statement; and

iii. Special functionalities related to quarterly TDS statement.

 3. Registration is free.  

AUDITOR'S REPORT

UNQUALIFIED OPINION

An opinion is said to be unqualified when the Auditor concludes that the Financial
Statements give a true and fair view in accordance with the financial reporting framework
used for the preparation and presentation of the Financial Statements. An Auditor gives a
Clean opinion or Unqualified Opinion when he or she does not have any significant
reservation in respect of matters contained in the Financial Statements.

QUALIFIED OPINION REPORT

A Qualified Opinion report is issued when the auditor encountered one of two

types of situations which do not comply with generally accepted accounting principles,
however the rest of the financial statements are fairly presented. This type of opinion is
very similar to an unqualified or "clean opinion", but the report states that the financial
statements are fairly presented with a certain exception which is otherwise misstated.

ADVERSE OPINION REPORT

An Adverse Opinion is issued when the auditor determines that the financial
statements of an auditee are materially misstated and, when considered as a whole, do not
conform with GAAP. It is considered the opposite of an unqualified or clean opinion,
essentially stating that the information contained is materially incorrect, unreliable, and
inaccurate in order to assess the auditee's financial position and results of operations.

DISCLAIMER OF OPINION REPORT

 A Disclaimer of Opinion, commonly referred to simply as a Disclaimer, is issued
when the auditor could not form and consequently refuses to present an opinion on the
financial statements. This type of report is issued when the auditor tried to audit an entity
but could not complete the work due to various reasons and does not issue an opinion.

CONTENTS

CHAPTER I

INTRODUCTION

CHAPTER II

TRAINING

CHAPTER III

CONCLUSION
CHAPTER I

CHAPTER II
CHAPTER III
INTRODUCTION
TRAINING
CONCLUSION
ACKNOWLEDGEMENT
CERTIFICATE
 CONTENTS

ACKNOWLEDGEMENT

I express my sincere thanks to Dr.DURAISAMY, M.Com., M.Phil., MLIS.,

Ph.D., faculty advisor of our commerce department for their valuable guidance during
the period of my Institutional Training.

I wish to express my grateful thanks to Dr.E.K.Rayapan, M.com., M.Phil.,

Ph.D., head of commerce department for having given me this opportunity to pursue this
training.

I express my heartfelt thanks to our principal Dr.R.Sellapan, MBA., M.com.,

M.Phil., D.LL., Ph.D., and faculty members of commerce for having given me this
wonderful opportunity to undergo this Institutional Training.

I am very thankful to the Management of Gobi Arts & Science College,

Gobichettipalayam for having given me this opportunity to pursue this training.

Also, I extend my sincere thanks to M/s.KPS ELANGO&ASSOCIATES for

providing the opportunity and guidance to do this training in their firm.
 CHAPTER 3

CONCLUSION

Industrial training in M/s KPS ELANGO AND ASSOCIATES helped me to

know about the actual working of a firm. The same helped me to gain practical

knowledge within a short span of ten days.

It helps to gain the knowledge about the auditing and how the theoretical aspects
are applicable in the actual field.

On the whole, it was a useful period in my life where I have seen what I have
studied in my books.

This training has provided me broad knowledge about the auditing activities,

structure of organization, method of administration, how production activities are carried

on and procedures regarding export.

As a student, this training was very helpful for me to know the difference between

theoretical and practical knowledge.