Taxation and Auditing

CHAPTER-1
INTRODUCTION

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Taxation and Auditing

INTRODUCTION
In the dynamic landscape of business and finance, adherence to taxation
regulations and robust auditing practices stand as pillars supporting economic
stability and growth. The "Enhancing Compliance through Effective Taxation
and Auditing Practices" project is an in-depth exploration of the symbiotic
relationship between taxation policies and auditing mechanisms, aiming to
shed light on their pivotal role in ensuring financial integrity, transparency,
and sustainability Auditing, on the other hand, is portrayed as a critical
accountability measure, serving to validate and verify the accuracy and
reliability of financial information. In essence, auditing acts as a safeguard
against misinformation, providing stakeholders, investors, and the public at
large with a level of assurance regarding the veracity of financial reporting.
This dual emphasis on taxation and auditing as indispensable components of
the economic apparatus forms the foundation upon which the entire project is
built

SWOC ANALYSIS:
A SWOC analysis, combining the elements of Strengths, Weaknesses,
Opportunities, and Challenges, provides a comprehensive overview of the
Taxation and Auditing landscape, examining both internal and external factors
influencing these critical components of financial governance.

Strengths:
The strengths of taxation and auditing lie in their foundational roles within the
economic system. Taxation, as a revenue-generating mechanism for
governments, provides the essential funds for public services, infrastructure,
and social programs. The consistent inflow of funds contributes to economic
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Taxation and Auditing
stability. Auditing, on the other hand, acts as a safeguard against financial
mismanagement and fraud, instilling confidence in stakeholders and investors.
Advances in technology have enhanced the efficiency of auditing processes,
allowing for real-time monitoring and analysis.

Weaknesses:
One of the weaknesses in taxation is the complexity of existing frameworks,
often leading to confusion and non-compliance. Frequent changes in tax laws
and regulations can pose challenges for businesses in adapting to new
requirements. Auditing, despite technological advancements, may face
limitations in addressing sophisticated financial instruments and evolving
business models. Additionally, a shortage of skilled auditors can strain the
effectiveness of the auditing process.

Opportunities:
The digital era presents opportunities for both taxation and auditing.
Advanced data analytics and artificial intelligence can streamline auditing
procedures, allowing for more in-depth analysis and early detection of
irregularities.
Technology also facilitates efficient tax collection and management. The
global push for environmental sustainability provides an opportunity to
incorporate green taxation policies, encouraging eco-friendly practices.
Collaboration between tax authorities and businesses can lead to more
transparent and cooperative tax compliance.

Challenges:
A significant challenge in taxation is the rise of international business models,
creating complexities in determining tax jurisdictions and enforcing
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Taxation and Auditing
compliance. Tax evasion and avoidance, facilitated by loopholes in existing
systems, pose ongoing challenges. In auditing, the challenge lies in keeping
pace with rapidly evolving financial instruments and business structures,
requiring continuous adaptation of audit methodologies. The potential for
cybersecurity threats and data breaches poses a risk to the integrity and
confidentiality of financial information.
In conclusion, the SWOC analysis reveals the intricate landscape of taxation
and auditing. Their strengths form the backbone of economic stability, while
weaknesses highlight areas for improvement, particularly in simplifying tax
structures and addressing skills shortages in auditing. Opportunities arise from
technological advancements and the global push for sustainability, but
challenges persist in the face of international business complexities and the
ever-changing financial landscape. By leveraging strengths, addressing
weaknesses, seizing opportunities, and proactively mitigating challenges, the
taxation and auditing sectors can evolve to meet the demands of a dynamic
and interconnected global economy.

NATURE OF BUSINESS:
The nature of business in the realms of taxation and auditing is intricately
woven into the fabric of economic governance, financial transparency, and
organizational accountability. Both taxation and auditing play pivotal roles in
shaping the landscape of businesses, influencing their operations, compliance
frameworks, and overall financial health.

Taxation:
At its core, taxation is the financial backbone of government operations,
facilitating the provision of public services, infrastructure development, and
social welfare programs. The nature of business, when viewed through the
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Taxation and Auditing
lens of taxation, is deeply entwined with regulatory compliance and fiscal
responsibility. Businesses operate within a framework of tax laws and policies
that dictate their financial obligations to the government.
The nature of taxation in business involves the assessment, collection, and
management of taxes imposed by governmental entities. This encompasses a
range of taxes, including income tax, corporate tax, value-added tax (VAT),
and various other levies. The strategic management of tax liabilities becomes
a critical aspect of business operations, influencing financial planning,
investment decisions, and overall profitability. Businesses often engage in tax
planning and optimization strategies to ensure compliance while minimizing
their tax burden within the bounds of the law.
Moreover, the evolving nature of international business introduces
complexities in taxation, as businesses operate across multiple jurisdictions.
Transfer pricing, cross-border transactions, and the harmonization of global
tax standards become integral considerations for multinational corporations.

Auditing:
Auditing, on the other hand, serves as a key element in maintaining the
integrity and reliability of financial information. The nature of business in the
context of auditing is characterized by the need for accountability,
transparency, and adherence to financial reporting standards. Auditors,
whether internal or external, play a crucial role in independently reviewing
and verifying financial statements to ensure accuracy and compliance with
established accounting principles.
Businesses undergo audits to provide assurance to stakeholders, including
investors, creditors, and regulatory bodies, about the accuracy of their
financial records. The nature of auditing in business involves a systematic
examination of financial statements, internal controls, and operational
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Taxation and Auditing
processes. Auditors assess the effectiveness of internal controls to mitigate
risks, detect fraud, and enhance the overall governance structure of the
organization.
In recent years, the nature of business in auditing has evolved with
advancements in technology. The use of data analytics, artificial intelligence,
and machine learning has transformed the audit process, enabling auditors to
analyze vast datasets for anomalies and patterns. This technological
integration enhances the efficiency and effectiveness of audits, providing
deeper insights
into financial performance and potential areas of concern.
In conclusion, the nature of business in taxation and auditing is marked by a
symbiotic relationship with regulatory frameworks, financial transparency,
and accountability. Businesses navigate the complexities of tax laws, engage
in strategic tax planning, and fulfill their fiscal responsibilities to support
societal development. Concurrently, the nature of auditing in business ensures
the reliability of financial information, instills confidence among stakeholders.

ORGANIZATIONAL STRUCTURE:
The organizational structure within the auditing domain is similarly
hierarchical, with a Chief Audit Executive or Head of Internal Audit
overseeing the entire auditing function. Reporting to this executive, Audit
Managers lead teams responsible for conducting internal audits, reviewing
financial statements, and assessing compliance with established accounting
standards.
Within the teams, Internal Auditors carry out detailed examinations of
financial records, operational processes, and internal controls. The structure
may also include specialists in areas such as IT auditing, fraud detection, and
risk management. The Chief Audit Executive often interacts closely with the
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Taxation and Auditing
organization's board of directors and may have a direct reporting line to the
audit committee to ensure independence and objectivity.
In addition to internal auditing, external audit firms play a crucial role in the
organizational structure. External auditors, often from a public accounting
firm, provide an independent evaluation of an organization's financial
statements. This external perspective enhances transparency and reassures
stakeholders about the accuracy and reliability of financial information.

Integration and Collaboration:

Despite operating within distinct spheres, the taxation and auditing
organizational structures share a common thread – the need for seamless
integration and collaboration. Tax professionals must work closely with
financial teams to ensure accurate reporting, while auditors collaborate with
various departments to validate compliance and risk mitigation efforts. The
synergy between these structures is pivotal for organizations to not only meet
their tax obligations but also fortify their financial governance and risk
management practices.
In conclusion, the organizational structures within taxation and auditing are
designed to navigate the complexities inherent in these critical functions. The
hierarchies, roles, and collaborative frameworks are tailored to address the
intricacies of ever-evolving tax laws, financial reporting standards, and the
dynamic nature of business operations. Together, these structures form the
backbone of responsible financial management, ensuring that businesses can
fulfill their fiscal responsibilities and maintain the highest standards of
financial integrity.

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Taxation and Auditing

FUNCTIONAL AREAS:
Functional Areas in Taxation:

Tax Planning and Strategy:

● Develop strategies to minimize tax liabilities legally.
● Analyze the impact of tax law changes on business operations.
● Implement tax-efficient structures for transactions and business
activities.

Tax Compliance:
● Ensure accurate and timely filing of tax returns.
● Monitor changes in tax regulations and adjust compliance strategies
accordingly.
● Respond to tax inquiries and audits from regulatory authorities.

Transfer Pricing:
● Establish and monitor pricing policies for transactions between related
entities.
● Ensure compliance with international transfer pricing regulations.
● Mitigate the risk of transfer pricing adjustments and disputes.

International Taxation:
● Navigate tax implications for multinational operations.
● Optimize cross-border transactions to minimize overall tax exposure.
● Address tax treaty implications and manage foreign tax credits.

Tax Accounting:
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● Record and report income tax provisions in financial statements.
● Ensure compliance with accounting standards related to income taxes.
● Manage deferred tax assets and liabilities.

Tax Risk Management:

● Identify and assess potential tax risks.
● Develop strategies to mitigate tax-related risks.
● Implement internal controls to ensure tax compliance.

Tax Technology and Data Analytics:

● Leverage technology for efficient tax data management.
● Implement data analytics for tax planning and compliance.
● Utilize software for tax return preparation and filing.

Functional Areas in Auditing:

Internal Audit:
● Evaluate the effectiveness of internal controls.
● Conduct risk assessments to identify areas of potential concern.
● Ensure compliance with policies and procedures.

External Audit:
● Independently review and verify financial statements.
● Express an opinion on the fairness of financial statements.
● Provide assurance to stakeholders, including investors and creditors.

IT Audit:
● Assess the effectiveness of information systems controls.
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● Evaluate cybersecurity measures and data protection.
● Ensure the integrity and reliability of electronic financial data.

Operational Audit:
● Review efficiency and effectiveness of operational processes.
● Identify areas for improvement in business operations.
● Assess compliance with organizational policies.

Compliance Audit:
● Ensure adherence to legal and regulatory requirements.
● Review compliance with industry standards and codes of conduct.
● Investigate potential instances of non-compliance.

Forensic Audit:
● Investigate financial fraud and irregularities.
● Gather evidence for legal proceedings.
● Assess the adequacy of fraud prevention measures.

Environmental, Social, and Governance (ESG) Audit:

● Evaluate an organization's adherence to ESG criteria.
● Assess the impact of business activities on the environment and society.
● Provide assurance on sustainability and ethical practices.

Risk Management Audit:

● Identify and assess organizational risks.
● Evaluate the effectiveness of risk management processes.

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Taxation and Auditing

CHAPTER-2
DESIGN OF THE STUDY

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Taxation and Auditing
DESIGN OF THE STUDY
OBJECTIVE OF STUDY:
The objective of this study is to conduct a comprehensive exploration of the
intricate dynamics surrounding taxation and auditing within the context of the
modern business landscape. The multifaceted nature of taxation policies and
auditing mechanisms necessitates an in-depth analysis to unravel their
interconnected roles, impacts, and evolving challenges. The study aims to
Understand the Contemporary Taxation Landscape:
● Investigate and analyze the current local and international taxation
frameworks.
● Explore the components, structures, and intricacies of taxation policies.
● Examine the impact of recent legislative changes on businesses and the
economy.

Evaluate Auditing Standards and Methodologies:

● Assess the existing auditing standards and methodologies employed by
organizations.
● Examine the adaptability of auditing practices to evolving business
models.
● Explore the role of technology in enhancing auditing efficiency and
effectiveness.

Examine the Symbiotic Relationship Between Taxation and Auditing:

● Investigate how taxation policies influence auditing requirements and
vice versa.
● Explore how effective taxation can contribute to reliable financial
reporting.
● Analyze the role of auditing in ensuring compliance with taxation
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Taxation and Auditing
regulations.

Assess the Impact on Business Compliance:

● Evaluate the influence of taxation policies and auditing practices on
organizational behavior.
● Examine the role of incentives and penalties in shaping business
compliance.
● Investigate the integration of technological solutions to enhance
compliance measures.

Provide Real-world Case Studies:

● Present and analyze real-world case studies that illustrate instances
where taxation and auditing have positively influenced financial
stability, ethical business conduct, and economic growth.
● Extract valuable insights and lessons from these cases to inform best
practices.

Explore Opportunities for Improvement:

● Identify opportunities for refining existing taxation frameworks to
promote fairness and efficiency.
● Suggest improvements in auditing methodologies to enhance accuracy
and reliability.
● Explore avenues for collaboration between tax authorities, businesses,
and auditors to improve overall compliance.

Contribute Insights for Policy Formulation:

● Provide stakeholders, policymakers, and regulatory bodies with insights
to inform the formulation of taxation policies.
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Taxation and Auditing
● Offer recommendations for enhancing auditing standards to align with
the evolving business environment.
● Contribute to the development of a regulatory framework that fosters
transparency, trust, and sustainable economic practices.

Facilitate a Holistic Understanding of the Subject Matter:

● Conduct an extensive review of literature, incorporating diverse
perspectives from academic research, industry publications, and
regulatory guidelines.
● Conduct interviews with industry experts to gain practical insights and
perspectives.
● Develop a comprehensive understanding of the subject matter to serve
as a valuable resource for academics, practitioners, and policymakers.

METHODOLOGY:
The methodology adopted for the study on taxation and auditing is designed to
provide a comprehensive understanding of the intricate dynamics within these
realms. The research approach encompasses both qualitative and quantitative
methods, utilizing diverse sources of data and analytical techniques to achieve
a nuanced exploration of the subject.

Research Design:
The study employs a mixed-methods research design, combining qualitative
and quantitative approaches. This design is chosen to capitalize on the
strengths of both methods, allowing for a more comprehensive investigation
into the complex interplay between taxation policies and auditing
mechanisms.

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Taxation and Auditing

Qualitative Research:

Literature Review:
The study initiates with a thorough literature review, examining academic
articles, industry reports, and regulatory documents. This review lays the
foundation by providing theoretical insights, historical perspectives, and an
overview of current trends and debates in taxation and auditing.

Semi-Structured Interviews:
Qualitative data will be gathered through semi-structured interviews with
industry experts, including tax professionals, auditors, and regulatory
authorities. These interviews will offer firsthand perspectives on the practical
challenges, emerging trends, and the symbiotic relationship between taxation
and auditing in diverse business contexts.

Case Studies:
Real-world case studies from various industries and geographical regions will
be analyzed. These cases serve as valuable illustrations of how taxation and
auditing practices impact financial stability, ethical conduct, and overall
economic growth. The qualitative analysis of case studies enhances the study's
relevance and applicability.

Quantitative Research:
Surveys:
Quantitative data will be collected through structured surveys distributed to
businesses, tax professionals, and auditors. The surveys will include a mix of
closed-ended and Likert scale questions, focusing on topics such as
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compliance challenges, the effectiveness of tax policies, and the impact of
auditing practices. This quantitative data will provide numerical insights and
trends.

Document Analysis:
Financial statements, annual reports, and regulatory filings of select
organizations will undergo quantitative analysis. Key financial metrics,
compliance indicators, and the integration of taxation and auditing practices
will be quantitatively assessed, offering empirical evidence.

Analytical Techniques:

Content Analysis:
Content analysis will be applied to the literature review and document
analysis. This technique involves systematically categorizing and interpreting
textual data to extract key themes, patterns, and trends. It aids in identifying
prevailing theories, gaps in research, and practical applications.

Thematic Analysis:
Thematic analysis will be employed for coding qualitative data obtained from
interviews and case studies. This technique involves identifying, analyzing,
and reporting patterns within the data, allowing for the extraction of
meaningful themes and insights.

Statistical Analysis:
Quantitative data from surveys will undergo statistical analysis using software
such as SPSS. Descriptive statistics, correlation analysis, and regression
analysis will be applied to derive quantitative insights into relationships
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between variables, compliance trends, and the impact of taxation and auditing.

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Taxation and Auditing
Triangulation:
Triangulation, the combination of multiple research methods, will be utilized
to enhance the reliability and validity of findings. Consistency and
convergence of results from different sources contribute to a more robust and
holistic understanding of the subject matter.

Ethical Considerations:

Informed Consent:
Participants in interviews and surveys will be provided with clear information
about the study's purpose, potential outcomes, and their rights. Informed
consent will be obtained, ensuring voluntary and informed participation.

Anonymity and Confidentiality:

Confidentiality of participants will be strictly maintained. Identifying
information will be anonymized in reports and publications to protect the
privacy and integrity of individuals and organizations.

LIMITATION:
While the study on taxation and auditing aims to provide a comprehensive
understanding of their dynamics, it is essential to acknowledge certain
limitations inherent in the research process. Recognizing these limitations is
crucial for interpreting the findings accurately and understanding the scope of
the study.

1. Complexity of Taxation Laws:

Taxation laws vary significantly across jurisdictions, and their complexity
poses a challenge in achieving a universal understanding. The study may
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focus on general principles, but the nuanced differences in tax regulations at
regional and national levels may not be fully captured.

2. Evolving Regulatory Environment:

Taxation policies are subject to frequent changes, influenced by political,
economic, and social factors. The study's findings may be time-sensitive and
might not encompass the most recent legislative developments, potentially
limiting the relevance of the conclusions in a rapidly evolving regulatory
environment.

3. Heterogeneity of Business Practices:

Businesses operate in diverse sectors with varying business models, and their
taxation and auditing practices can differ significantly. Generalizations may
overlook sector-specific intricacies, and the study's applicability may be
constrained by the heterogeneity of business practices.

4. Limited Generalizability of Case Studies:

While case studies offer valuable insights, their generalizability is often
limited. The specific context, industry, and organizational characteristics in
each case may not represent the broader spectrum of businesses. Extrapolating
findings to different contexts should be done cautiously.

5. Availability and Quality of Data:

The reliability and availability of data, especially in the case of quantitative
analysis, may pose limitations. Some organizations may not disclose
comprehensive financial information, and data quality issues could impact the
accuracy of quantitative findings.

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Taxation and Auditing

6. Subjectivity in Qualitative Research:

Qualitative methods, such as interviews, involve subjective interpretations.
The perspectives of industry experts may be influenced by personal
experiences,
biases, or individual organizational contexts, introducing an element of
subjectivity to the study.

7. Self-Reporting Bias in Surveys:

Surveys rely on self-reported data from participants, which may introduce
response bias. Respondents might provide socially desirable answers or may
not accurately recall specific details, impacting the reliability of survey
results.

8. Rapid Technological Changes:

The study may face challenges in keeping pace with rapid technological
advancements, particularly in the auditing domain. Innovations in data
analytics, artificial intelligence, and blockchain may outpace the study's
capacity to incorporate the latest technologies and their impact on auditing
practices.

9. External Factors Impacting Business Practices:

The study may not fully account for external factors, such as economic
downturns, geopolitical events, or global health crises, that can significantly
influence business practices, taxation policies, and auditing priorities. These
external dynamics may introduce unanticipated variables not explicitly
considered in the study.
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10. General Economic Context:

Economic conditions at the time of the study may influence the behavior of
businesses, tax authorities, and auditors. Economic fluctuations and
disruptions could impact the study's findings, limiting the generalizability of
conclusions to different economic contexts.

Mitigation Strategies:
Transparent Reporting:
Clearly communicating the scope and limitations of the study in the research
documentation ensures a transparent presentation of findings, helping readers
contextualize the results.

Sensitivity Analysis:
Where applicable, sensitivity analyses can be conducted to assess how
variations in key assumptions or factors might impact the study's conclusions,
providing a more nuanced understanding.

Continuous Literature Review:

Regularly updating the literature review throughout the research process
allows for the incorporation of the latest developments, mitigating the impact
of evolving regulatory environments.

Diversified Data Sources:

Relying on a diverse range of data sources, including interviews, surveys, case
studies, and financial documents, helps triangulate findings and provides a
more comprehensive view of the subject.

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Contextualized Recommendations:
Recognizing the limitations of generalizability, the study can provide context-
specific recommendations, acknowledging the diverse nature of business
practices and taxation regulations.

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Taxation and Auditing

CHAPTER-3
DISCUSSION

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Taxation and Auditing

DISCUSSION
The study on taxation and auditing delves into the symbiotic relationship
between these two critical components of financial governance. The
discussion encapsulates key findings, implications, and considerations arising
from the research, shedding light on the intricate dynamics that businesses
navigate within the realms of taxation and auditing.

1. Symbiotic Nature:
The research underscores the inherent symbiosis between taxation and
auditing. Taxation policies shape the financial landscape, influencing business
decisions and revenue streams. Auditing, in turn, acts as a guardian of
financial integrity, ensuring compliance with tax regulations and providing
stakeholders with assurance regarding the accuracy of financial information.

2. Evolving Regulatory Landscape:

The discussion highlights the challenges posed by the evolving regulatory
landscape. The complexity of taxation laws, coupled with frequent legislative
changes, creates a dynamic environment for businesses. Adapting to these
changes requires not only compliance but also strategic tax planning to
optimize financial outcomes.

3. Technological Advancements in Auditing:

The study underscores the transformative impact of technology on auditing
practices. The integration of data analytics, artificial intelligence, and machine
learning enhances the efficiency and effectiveness of audits. Auditors now
have the capability to analyze vast datasets, detect anomalies, and provide
more insightful recommendations for risk mitigation.

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4. Challenges in Compliance:
Compliance with taxation regulations emerges as a multifaceted challenge.
Businesses face hurdles in navigating the intricacies of tax laws, especially in
the context of international operations. The study highlights the need for
clarity in tax frameworks and emphasizes the role of technology in facilitating
transparent and efficient compliance processes.

5. Role of Auditors in Risk Management:

Auditors are positioned as key contributors to risk management. Beyond their
traditional role of financial statement verification, auditors play a vital role in
identifying and mitigating risks. The study suggests that the integration of
auditing practices into broader risk management strategies enhances
organizational resilience.

6. Heterogeneity in Business Practices:

The discussion acknowledges the heterogeneity in business practices across
industries. Different sectors may face unique challenges in taxation and
auditing, requiring tailored approaches. Generalizations should be made
cautiously, and industry-specific nuances must be considered in developing
best practices.

7. Opportunities for Collaboration:

The study identifies opportunities for collaboration between tax authorities,
businesses, and auditors. Collaborative approaches can lead to more
transparent compliance processes, streamlined reporting, and a proactive
response to emerging challenges. Such collaboration fosters an environment of
mutual understanding and shared responsibility.
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8. Continuous Learning and Adaptation:

The research emphasizes the need for continuous learning and adaptation in
both taxation and auditing. As technological advancements and global
economic shifts reshape the business landscape, professionals in these
domains must stay abreast of changes, embracing innovation and refining
strategies to remain effective.

9. Ethical Considerations in Auditing:

Ethical considerations in auditing emerge as a crucial aspect of the discussion.
The study underscores the importance of maintaining integrity, objectivity,
and independence in auditing practices. Ethical lapses can undermine the
credibility of audits and erode trust in financial reporting.

10. Implications for Policy and Practice:

The findings of the study have implications for policymakers, practitioners,
and academics. Policymakers can draw on the insights to refine taxation
frameworks, considering the need for clarity, simplicity, and adaptability.
Practitioners can incorporate best practices in taxation planning and auditing
methodologies, leveraging technology for efficiency. Academics can use the
study as a foundation for further research, exploring emerging trends and
refining theoretical frameworks.

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CONCLUSION:
In conclusion, the discussion encapsulates a nuanced understanding of the
intricate dynamics of taxation and auditing. The symbiotic relationship,
challenges in compliance, technological advancements, and ethical
considerations collectively underscore the need for a holistic and adaptive
approach in navigating the complex terrain of financial governance. The study
contributes to the ongoing discourse, providing valuable insights that can
inform policy formulation, guide industry practices, and stimulate further
research in the ever-evolving landscape of taxation and auditing.

SUGGESTIONS:
As the study on taxation and auditing unfolds, several suggestions emerge for
policymakers, businesses, and auditing professionals to enhance the
effectiveness, transparency, and ethical standards within the realms of taxation
and auditing. These recommendations address the evolving challenges and
opportunities presented by the dynamic business environment.

1. Simplicity and Clarity in Taxation Policies:

Policymakers should prioritize simplicity and clarity in taxation policies. Clear
and straightforward regulations contribute to better compliance by businesses,
reducing the likelihood of misinterpretation and non-compliance. Simplified
tax codes also facilitate easier adaptation to changing economic conditions and
evolving business models.

2. Regular Review and Revision of Tax Laws:

Tax authorities should undertake regular reviews of tax laws to ensure their
relevance and effectiveness. The dynamic nature of business requires tax laws
to adapt to emerging trends, technological advancements, and global economic
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shifts. Regular revisions help maintain the responsiveness of tax frameworks.

3. Facilitation of International Tax Cooperation:
Given the increasing globalization of businesses, policymakers should focus
on fostering international tax cooperation. Collaborative efforts between
nations can help harmonize tax standards, reduce cross-border tax
complexities, and mitigate the challenges associated with transfer pricing and
double taxation.

4. Technology Integration in Tax Administration:

Tax authorities should embrace technology to enhance tax administration.
Automation, data analytics, and digital platforms can streamline tax filing
processes, reduce administrative burdens on businesses, and improve the
accuracy of tax assessments. This technological integration can lead to more
efficient and transparent tax compliance.

5. Incentivizing Ethical Business Conduct:

Policymakers should explore mechanisms to incentivize ethical business
conduct. Offering tax incentives for companies that demonstrate high ethical
standards and sustainability practices can encourage responsible behavior.
Such initiatives align taxation policies with broader societal goals, promoting
corporate social responsibility.

6. Strengthening Collaboration Between Tax Authorities and Businesses:

Encouraging open communication and collaboration between tax authorities
and businesses is essential. Regular dialogues, consultations, and feedback
mechanisms can enhance mutual understanding. This collaborative approach
can lead to more informed tax policies that consider the practical implications
for businesses.
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7. Continuous Professional Development for Auditors:

Professional bodies and organizations responsible for auditor certification
should prioritize continuous professional development. Auditors need to stay
abreast of technological advancements, changes in accounting standards, and
emerging risks. Training programs and certifications should emphasize ethical
considerations and the evolving role of auditors in risk management.

8. Integration of Environmental, Social, and Governance (ESG) Auditing:

Auditing practices should evolve to incorporate ESG considerations. Given the
increasing emphasis on sustainability and ethical business practices, auditors
should assess and report on an organization's adherence to ESG criteria. This
integration provides stakeholders with a comprehensive view of an
organization's impact on the environment, society, and governance.

9. Strengthening Whistleblower Protection:

Governments and organizations should strengthen whistleblower protection
mechanisms. Whistleblowers play a crucial role in exposing financial
misconduct and unethical practices. Robust protection frameworks encourage
individuals to come forward with information, contributing to improved
transparency and accountability.

10. Embracing Technological Innovations in Auditing:

Auditing professionals should embrace technological innovations to enhance
audit processes. Leveraging data analytics, artificial intelligence, and
blockchain can improve audit efficiency, accuracy, and the detection of
irregularities. Continuous investment in technology ensures auditors remain at
the forefront of industry advancements.
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11. Promoting a Risk-Based Audit Approach:

Auditors should adopt a risk-based audit approach. Rather than relying solely
on traditional audit procedures, a risk-based approach focuses efforts on areas
of higher risk. This proactive strategy enhances the effectiveness of audits,
identifies potential issues early, and contributes to better risk management
within organizations.

12. Transparency in Reporting:

Businesses should prioritize transparency in their financial reporting. Clear
and comprehensive disclosure of financial information enhances trust among
stakeholders, including investors, creditors, and regulatory bodies. Transparent
reporting is integral to the credibility of financial statements and reinforces the
role of auditing in ensuring accuracy.

13. Provisions of Tax Audit for A.Y. 2018-19

● Tax Audit requirements/thresholds as per Section 44AB of Income
Tax Act, 1961
● In case of Business –Turnover Exceeds Rs. 1 Crore (Assesseeopting
for Presumptive Taxation Scheme u/s. 44AD of the Act, the Turnover
limit is exceeding Rs2 Crore)
● In case of Profession-Receipts Exceeds Rs.50 Lakhs.
● Business u/s 44AE /44BB /44BBB; income is less than deemed
profits;
● Profession u/s 44ADA-Deemed profit is less than 50% & Total
Income exceeds Amount Not Chargeable to Tax.
● Form3CA-Report in case of a Person who is required to get his
accounts audited under any law.
● Form3CB-Report in any other case.
● Form 3CD-Particulars as required under Form 3CA or Form 3CB.

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Taxation and Auditing

● PENALTY PROVISION: ½ % OF TURNOVER SUBJECT TO

MAXIMUM RS. 1.50 LAKHS
● CBDT has revised Tax Audit Form 3CD Revised vide Notification
33/2018 dated 20.07.2018 (effective from 20.08.2018) by which it has
made 6 Amendments and 9 Insertions in Tax Audit Report Form3CD
The six changes in the tax audit form in Form 3CD
Budget for 2021: The ‘Tax Audit’ ceiling under Section 44AB has been
enhanced from Rs.10 crores to Rs.5 crores in cases where % of business
transactions are done digitally.
The reporting under clauses 30C and 44 of the Tax audit report (form 3CD) has
been suspended until March 31, 2021.

The Department of Revenue established 2 types of tax audit forms:

● The audit report would be in either Form 3CA or Form 3CB format.
● Form 3CA is for people whose accounts have been audited under
legislation other than the Internal Revenue Code. Form 3CB is for people
who haven’t had their accounts audited under any other law. As a result,
we can claim that this is for those who are being audited under the
Income Tax Act.
Tax audit Report has to be filed in either of the below forms:
● Form 3CA – For a taxpayer who is already required to have his accounts
audited under another law and is carrying on a business or profession (i.e.
law other than income tax law). The Companies Act of 2013 makes it
mandatory for a firm to have its accounts audited. As a result, it will
provide Form 3CA.
● Form 3CB — For a taxpayer who owns a business or practices a
profession but is not obligated by law to have his accounts audited. A
proprietorship entity or partnership firm with a revenue of less than one
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Taxation and Auditing

crore and no preference for the presumptive income scheme is not

required to have its books audited under any other law than income tax.
As a result, it will submit Form 3CB.
● 3CD Form – Form 3CD would be used for the statement of particulars.
This form contains a number of provisions that require the auditor to
report on a variety of topics. These clauses are split into two sections –
Part A offers basic factual information on the assessee, whereas Part B
comprises information about different income tax compliances that must
be provided.

Major Changes to Form 3CD, Tax Audit Report:

● Necessary amendments are made to Form No. 3CD, and a new serial 8a.
is introduced to indicate whether the assessee has elected taxes under
Sections 115BA/115BAA/115BAB.
● For the adjustment made to the written down value under section
115BAA (for the assessment year 2020-21 only) and the Adjusted written
down value, more information is necessary. Serial 18(ca) and 18(CB) are
included in Part-B of Form No. 3CD for this purpose.
● In serial no. 32(a) of Part-B of Form No. 3CD, the details of bringing
forward loss or depreciation allowance are updated to include the
adjustments for losses and allowances under section 115BAA.

Necessary amendments in ITR-6

(i) amendments in Schedule-DPM of Income-tax return -ITR-6 have been
made to make the adjustments of depreciation amount under section
115BAA.

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Taxation and Auditing

(ii)amendments in Schedule-CFL of Income-tax return -ITR-6 have been

made to made adjustments for losses and allowances under section
115BAA.
(iii) amendments in Schedule-UD of Income-tax return -ITR-6 have been
made to made adjustments for depreciation allowances for opting
section 115BAA.

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Taxation and Auditing

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Taxation and Auditing

Assistance on The Amendment of the Tax Audit

Guidance Note of Tax Audit u/s 44AB of Income Tax Act-1961 tells that
towards the specific cases members are urged to report for the accounts
reopened and amended through the board of directors. The accounts of the firm
once chosen during its AGM must not be opened again and amended. Towards
the concern of the amendment, the audit report must be provided through the
recommended method through the institute. “(Published in the Chartered
Accountant, pp.655, February 1985. Also refer to Revision/Rectification of
Financial Statements, published in Compendium of Guidance Notes – Volume
I)”. The council of the company affairs indeed mentioned that the accounts can
be amended to 44AB must not get amended in a regular way. But often a time
the member might be needed to amend his tax audit report upon the basis like:
● The amendment of the company accounts post its adoption in the AGM.
● The amendment of the law is like the retrospective amendment.
● Revision in interpretation, like. CBDT’s circular, judgments, and others
● Any additional cause such as the system or software issues needed the
amendment in the report which was uploaded formerly.
Moreover, post to uploading the tax report if it is found by the auditor that his
customer is involved in some other business indeed this has not been revealed to
him during the original tax audit time. Towards the same cases, the tax auditor
is ruling all the rights to amend the original tax audit report during its 1st
reporting and can see for any action through the tax council. It is good to
calculate the amended total taxable income of the customer and the amended tax
liability. There are various people who said that the auditor might be at risk
because of its 1st audit report, The auditor is subjected to amend that in their
own rights.

Amended Audit Report Could be Changed Again

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Taxation and Auditing

There is no restriction to amend the tax audit reports. The recommendation from
the assistance notice and the council is that this must be in the method
recommended in SA-560. When the Guidance Note of Tax Audit u/s 44AB of
Income Tax Act-1961 provides transparency that the tax audit report must not
get amended in a normal way. But no limit is there in changing through the rider
which can be changed to match some of the technical needs. This must be sure
that the latest amended report must pose the reference of the older reports and
must be signed on the present date.

CBDT or UDIN Furnishes Facility for Amendment

The member is called towards the amended accounts then he should write in the
changed report specifying that the report is the amended report and the
reference must be built to the previous report. In the amended report the cause
for amendment the report must be shown.
The e-filing portal permits to upload of these revised audit reports via CA
towards the similar PAN and the assessment year. Moreover, the CBDT
furnished the utility for furnishing or uploading the tax audit report moreover
added beneath the heading OTHERS in the uploading tab.
However, here one can write anything and upload it on the website of the
department. You should indeed do comments or observations for the particular
class of Form No. 3CD that are to be written in e-form in the space given in
same. In another way, they could be uploaded as PDF files inside the filed of
the upload other reports of the portal.
The UDIN was given the option to furnish the tax audit report for the prior
years. One can generate the latest Unique Document Identification Number
(UDIN) by opting for the related assessment year via drop our list mentioned in
the system. Moreover, no revision limit is there for it.

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Taxation and Auditing

FORM 3CD – Explanation & Applicability

For a taxpayer, the period between June to September is a particularly stressful
period since all the financial data for the last financial year needs to be
accumulated together and the final tax liability would be determined on the
basis of the same.
The ‘Tax Audit’ limit under Section 44AB is Rs 5 crore (the threshold limit is
Rs 10 crore where minimum 95% of business transactions are done in digital
mode). If the taxpayer is subject to audit, then this process is even more
elaborate as one not only has to submit a return but also a tax audit report to the
Income Tax authorities. In this context, we whould have heard or come across
the ‘Form 3CD’. We will cover the following aspects with regard to Form
3CD.

Latest Update
The reporting under clause 30C and clause 44 of the tax audit report (form
3CD) has been kept in abeyance till 31st March 2022.

Applicability of tax audit

To know more about the applicability of tax audit, please read here.
Tax audit forms
The Incomes prescribed two types of forms for tax audit:
Audit Report: The audit report would be either as per the Form 3CA or Form
3CB. Form 3CA is for those persons whose accounts have been audited under
any law other than the Income Tax laws. Form 3CB is for those persons whose

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Taxation and Auditing

accounts have not been audited under any other law. So we can say, this is for
the people who are audited under the income tax act
Statement of Particulars: The statement of particulars would be as per Form
3CD and is also the focus of our article. This Form has a total of 44 clauses
where the auditor has to report on the various matters contained therein. These
clauses have been divided into two parts – Part A covers the basic factual
details about the assessee and Part B contains the particulars of various
compliances under the income tax laws that need to be furnished
a. Part A covers the basic factual details about the assessee and
b. Part B contains the particulars of various compliances under the income tax
laws that need to be furnished.

Format of Form 3CD

Clause-wise summary of Form 3CD
Sl. No. Particulars Comments
1 Name of the assessee These are the basic details
2 Address included for identification of
3 Permanent Account Number (PAN) the assessee. It may be noted
branch should be mentioned along that if the audit is in respect of
with the name of the assessee. a branch, name and address of
such would need to be
mentioned.
4 Whether the assessee is liable to The registration numbers with
pay indirect tax like excise duty, the respective tax authorities
service tax, sales tax, goods and need to be entered in this
services tax, customs duty, etc. If clause
yes, please furnish the registration
number, GST number or any other
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Taxation and Auditing

identification number allotted for

the same
5 Status This refers to the different
classes of assesses included in
the Act – individual, Hindu
Undivided Family (HUF),
company, firm (includes
LLP), Association of Persons
(AOP), Body of Individuals
(BOI), local authority and
artificial juridical person
6 Previous year from ___ to ____ This relates to the financial
year pertaining to the audit.
This period is typically from
the 1st April to 31st March of
the next year but care has to
be taken in case of closure of
businesses, new businesses,
amalgamations, demergers,
etc.
7 Assessment Year This relates to the relevant
assessment year pertaining to
the audit
8 Indicate the relevant clause of The applicable clause [(a) to
section 44AB under which the audit (e)] of Section 44AB under
has been conducted which tax audit is being
conducted should be selected.
9 (a) If firm or association of persons, The name of the partners or

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Taxation and Auditing

indicate name of partners/members members of a firm or AOP

and their profit sharing ratios will be covered here. In case a
person is in a representative
capacity (e.g., A’s HUF is a
partner and A is in
representative capacity on
behalf of the HUF), then the
name of the beneficial
partner/member should be
mentioned (A’s HUF).
Further, profit sharing ratio
includes the ratio at which
losses would be shared.
(b) If there is any change in the All changes that occur during
partners or members or in their the year, no matter how often,
profit sharing ratio since the last must be mentioned.
date of the preceding year, the
particulars of such change
10 (a) Nature of business or profession (if The assesse will have to select
more than one business or the business code applicable
profession is carried on during the to him from the list provided.
previous year, nature of every If there are any changes in the
business or profession) nature of business or
(b) If there is any change in the nature profession to be carried out,
of business or profession, the the same needs to be
particulars of such change mentioned. Temporary
discontinuance of business
need not be mentioned.
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Taxation and Auditing

11 (a) Whether books of account are Every person, upon crossing a

prescribed under section 44AA, if specified limit of turnover,
yes, list of books so prescribed. needs to compulsorily
(b) Lists of books of account maintain certain books of
maintained and the address at accounts as prescribed like
which the books of account are cash book, journal, ledger, etc.
kept. Further, certain specified
(c) List of books of account and nature professionals have additional
of relevant documents examined records prescribed that they
must maintain. For example, a
doctor must maintain a daily
case register where certain
details of patient visits are
recorded. The tax auditor lists
the books and records that
were checked by him.
12 Whether the profit or loss account The amount of profit that
includes any profits and gains relates to a business subject to
assessable on presumptive basis, if the presumptive scheme of
yes, indicate the amount and the taxation must be reported
relevant section (44AD, 44AE, here. In case of multiple
44AF, 44B, 44BB, 44BBA, businesses, only the amount of
44BBB, Chapter XII-G, First profit that relates to the
Schedule or any other relevant businesses subject to the
section) presumptive scheme of
taxation will be reported
section-wise.
13 (a) Method of accounting employed in The method of accounting,
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Taxation and Auditing

the previous year whether cash or mercantile

(b) Whether there had been any change must be mentioned.
in the method of accounting Companies however are
employed vis-à-vis the method compulsorily required to
employed in the immediately maintain their accounts on
preceding previous year. accrual or mercantile basis
(c) If answer to (b) above is in under the Companies Act
affirmative, give details of such
change, and the effect thereof on
the profit or loss.
(d) Whether any adjustment is required The Income Tax Act has
to be made to the profits or loss for prescribed certain Income
complying with the provisions of Computation and Disclosure
income computation and disclosure Standards (ICDS) ranging
standards notified under section from ICDS I to ICDS X. The
145(2) effect of these ICDS must be
(e) If answer to (d) above is in the taken in the computation of
affirmative, give details of such tax to arrive at the net tax
adjustments liability – The increase in
profit, decrease in profit and
net effect is mentioned as per
each ICDS.
(f) Disclosure as per ICDS The ICDS also contain certain
disclosure requirements and
this is the clause under which
such disclosures are ultimately
made.
14 (a) Method of valuation of closing This method of valuation

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Taxation and Auditing

stock employed in the previous would be on the basis of the

year. method of accounting
(b) In case of deviation from the regularly employed by the
method of valuation prescribed assessee subject to certain
under section 145A, and the effect prescribed adjustment on
thereof on the profit and loss account of tax, duty, cess, etc.
(like excise duty, VAT)
incurred in procuring the
inventory.
15 Give the following particulars of Generally speaking, an asset
the capital asset converted into held as a capital asset would
stock-in-trade: attract income under the head
(a) Description of capital asset; capital gains at the time of its
(b) Date of acquisition; sale and an asset held as
(c) Cost of acquisition; stock-in-trade would attract
(d) Amount at which the asset is income under the head profits
converted into stock-in-trade. and gains of business. When it
is decided to treat a capital
asset as part of the stock of the
business, it is treated as a
‘transfer’ for income tax
purposes and will attract
capital gains subject to certain
conditions and exceptions.
16 Amounts not credited to the profit Section 28 is the charging
and loss account, being – section for the income under
(a) The items falling within the scope the head ‘profits and gains of
of section 28; business or profession’. This
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Taxation and Auditing

(b) The proforma credits, drawbacks, clause intends to capture and

refund of duty of customs or excise report those incomes which
or service tax, or refund of sales tax ordinarily wouldn’t be a
or value added tax where such business income but is
credits, drawbacks or refunds are deemed to be business income
admitted as due by the authorities by virtue of the Income Tax
concerned; Act. For example,
(c) Escalation claims accepted during compensation received on
the previous year; account of termination of
(d) Any other item of income; employment, profit on sale of
(e) Capital receipt, if any. import license, remuneration
received by a partner from a
partnership firm, etc. Even
export benefits like pro forma
credits, duty drawbacks,
refund of customs, etc. would
be covered under this clause if
not credited to the profit and
loss account. Further, a capital
receipt would not normally
attract tax unless the
transaction is specifically
covered in the provisions.
Thus if such receipt is not
appearing in the profit and
loss account it will be covered
here.
17 Where any land or building or both If the sale consideration of an
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Taxation and Auditing

is transferred during the previous immovable property is less

year for a consideration less than than the stamp duty value of
value adopted or assessed or such property, the stamp duty
assessable by any authority of the value shall be deemed to be
State Government referred to in the sale consideration for the
section 43CA or 50C, please purpose of computing capital
furnish details of property, gains thereon where such
consideration received or accrued property is held as a capital
and value adopted or assessed or asset and where the property is
assessable held as stock-in-trade, the
stamp duty value shall be
taken as income/sale value to
be considered under the
business head of income. This
clause aims to check
compliance in this regard.
18 Particulars of depreciation The Income Tax Act
allowable as per the Income Tax prescribes depreciation to be
Act, 1961 in respect of each asset or charged as per the ‘block of
block of asset, as the case may be, assets system’ subject to
in the following form:- certain conditions. This clause
(a) Depreciation of asset/block of checks that the depreciation
assets has been arrived at correctly.
(b) Rate of depreciation
(c) Actual cost of written down value,
as the case may be
(d) Additions/deductions during the
year with dates; in the case of any

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Taxation and Auditing

addition of an asset, date put to use;

including adjustment on account of:
(i) Central Value Added Tax credits
claimed and allowed under the
Central Excise Rules, 1944, in
respect of assets acquired on or
after 1st March 1994, (ii) change in
rate of currency, and (iii) subsidy or
grant or reimbursement, by
whatever name called.
(e) Depreciation allowable
(f) Written down value at the end of
the year
19 Amounts admissible under sections: These sections allow for
32AC, 32AD, 33AB, 33ABA, 35(1) special deductions for
(i), 35(1)(ii), 35(1)(iia), 35(1)(iii), prescribed businesses. The tax
35(1)(iv), 35(2AA), 35(2AB), auditor checks whether the
35ABB, 35AC, 35AD, 35CCA, assessee has complied with all
35CCB, 35CCC, 35CCD, 35D, the necessary conditions to
35DD, 35DDA, 35E; claim a deduction under these
sections. Some of these
sections may require a
certificate by a Chartered
Accountant certifying the
eligibility.
20 (a) Any sum paid to an employee as The assessee would be
bonus or commission for services allowed a deduction in respect
rendered, where such sum was of a payment made to an
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Taxation and Auditing

otherwise payable to him as profits employee in the nature of a

or dividend bonus of commission only if
such bonus or commission
was available exclusively to
such employee in relation to
the services rendered by him.
(b) Details of contribution received These funds include
from employees for various funds superannuation funds created
as referred to in section 36(1)(va) for the benefit of the
employee. The contributions
made by the employer to such
funds shall be allowed as a
deduction only if they are
made within the due date as
specified in the applicable
law.
21 (a) Please furnish the details of The nature of these expenses
amounts debited to profit and loss are such that they may either
account, being in the nature of be fully disallowed or only
capital, personal, advertisement, allowed subject to certain
expenditure, etc. conditions. If they form a part
of the profit and loss account,
they have to be disclosed here.
(b) Amounts inadmissible under These sections broadly relate
section 40(a)(i), 40(a)(ia), 40(a)(ic), to disallowances made in
40(a)(iia), 40(a)(iib), 40(a)(iii), respect of an expenditure or a
40(a)(iv), 40(a)(v) part of an expenditure where
tax was required to be
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Taxation and Auditing

deducted at source but the

assessee failed to do so.
(c) Amounts debited to profit and loss This is applicable to firm,
account being, interest, salary, AOP or BOI assessees where
bonus, commission or remuneration payments are made to the
inadmissible under section partners/members in the
40(b)/40(ba) and computation nature of salary, remuneration,
thereof; interest, etc. The Act has
prescribed certain limits upto
which such expenditure can be
allowed in the hands of the
firm/AOP/BOI and if the
expenditure exceeds this limit,
the same is not allowed as a
deduction.
(d) Disallowance/deemed income This section places a
under section 40A(3) disallowance on any
expenditure incurred by any
mode other than an account
payee cheque/bank draft or
through a bank account using
ECS if they exceed Rs. 10,000
in a day subject to certain
exceptions.
(e) Provision for payment of gratuity The deduction under this
not allowable under section 40A(7); section is allowed in relation
to a provision created for
payment of contribution to an
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Taxation and Auditing

approved gratuity fund only if

such sum is actually payable
during the year.
(f) Any sum paid by the assessee as an Any payment incurred by an
employer not allowable under employer towards setting up
section 40A(9); of any fund, trust, Company,
AOP, BOI, Society, etc will
not be allowed as a deduction
subject to certain exceptions.
(g) Particulars of any liability of a Such a liability usually relates
contingent nature; to ongoing legal disputes
where it is not certain that
there will be a liability for the
as assessee.
(h) Amount of deduction inadmissible The section prescribes a
in terms of section 14A in respect method of calculation of an
of the expenditure incurred in amount of expenditure which
relation to income which does not will be disallowed as it is
form part of total income; deemed to be incurred towards
earning exempt income.
(i) Amount inadmissible under the Where the assessee borrows a
proviso to section 36(1)(iii) loan for business purposes, the
interest thereon would
normally be allowed as a
deduction. However, if such
loan was used to acquire an
asset, the interest shall not be
allowed for the period
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Taxation and Auditing

between the date of borrowing

of the loan to the date on
which the asset was put to use.
22 Amount of interest inadmissible The MSME act prescribes an
under section 23 of the Micro, amount of interest that would
Small and Medium Enterprises not be allowed as a deduction
Development Act, 2006. in the computation of taxable
income of the assessee.
23 Particulars of payments made to This section basically
persons specified under section disallows expenditure incurred
40A(2)(b) by way of payment to
specified persons (relatives) if
the assessing officer finds
them to be excessive in nature.
24 Amounts deemed to be profits and These sections allow for a
gains under section 32AC or 32AD special deduction to certain
or 33AB or 33ABA or 33AC. assessees subject to certain
conditions. In case of a breach
of these conditions, the whole
or a part of the deduction
allowed earlier would be
included as deemed income.
25 Any amount of profit chargeable to This section relates to deemed
tax under section 41 and profits arising out of:
computation thereof.
Where a deduction has been
allowed in an earlier year in
respect of an expenditure but
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Taxation and Auditing

the assessee has received

some benefit whether by cash
or by reduction in actual
liability in the current year,
such benefit will be
chargeable to tax under this
section.

Where an asset has been sold

by an assessee engaged in the
power generation and
distribution and such sale
consideration exceeds the
written down value.
Where an asset used in
scientific research has been
sold for a consideration
greater than its original cost

Where a bad debt that was

allowed earlier is subsequently
recovered.

Where an amount has been

withdrawn from a special
reserve created by a financial
company on which deduction
was earlier allowed
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Taxation and Auditing

Where such amounts/benefits

as above have been received
even after the closure of
business.
26 In respect of any sum referred to in This section allows certain
clauses (a), (b), (c), (d), (e), (f) or expenditure like cesses, taxes,
(g) of section 43B, the liability for duties, interest to bank, etc. to
which:- be claimed only on actual
(a) Pre-existed on the first day of the payment of the same if it is
previous year but was not allowed made before the due date of
in the assessment of any preceding filing the return for the
previous year and was (a) paid respective assessment year.
during the previous year; (b) not
paid during the previous year;
(b) Was incurred during the previous
year and was (a) paid on or before
the due date for furnishing the
return of income of the previous
year under section 139(1); (b) not
paid on or before the aforesaid date
(State whether sales tax, customs
duty, excise duty, or any other
indirect tax, levy, cess, impost, etc.,
is passed through the profit and loss
account.)
27 (a) Amount of Central Value Added The details of the CENVAT
Tax credits availed of or utilised credit carried forward from the
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during the previous year and its previous year, its utilization
treatment in the profit and loss and the balance left needs to
account and treatment of be provided along with the
outstanding Central Value Added treatment of the same in the
Tax credits in the accounts. accounts of the as assessee.
(b) Particulars of income or This clause would be relevant
expenditure of prior period credited only for the persons following
or debited to the profit and loss the mercantile system of
account. accounting.
28 Whether during the previous year Where the assessee receives
the assessee has received any certain shares of a private
property, being share of a company limited company where the
not being a company in which the Fair Market Value of such
public are substantially interested, shares minus the amount paid
without consideration or for to acquire such shares exceeds
inadequate consideration as referred Rs. 50,000, such excess shall
to in section 56(2)(viia), if yes, be chargeable to tax under the
please furnish details of the same. head ‘Income from other
29 Whether during the previous year sources’.
the assessee received any
consideration for issue of shares
which exceeds the fair market value
of the shares as referred to in
section 56(2)(viib), if yes, please
furnish details of the same.
29A (a) Whether any amount is to be Advances received in relation
including in income chargeable to the transfer of a capital
under the head ‘income from other asset are shown as income
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Taxation and Auditing

sources’ as referred to in clause (ix) from other sources where the

of sub-section (2) of section 56? advances are forfeited and the
(Yes/No) capital asset is not ultimately
(b) If yes, please furnish the following transferred.
details: (i) Nature of income (ii)
Amount thereof
30 Details of any amount borrowed on Hundis are financial
hundi or any amount due thereon instruments not recognised by
(including interest on the amount formal law.
borrowed) repaid, otherwise than
through an account payee cheque
[Section 69D]
30A (a) Whether primary adjustment to The transfer pricing provisions
transfer price, as referred to in sub- under the Income Tax Act in
section (1) of 92CE, has been made general aim to value
during the previous year? (Yes/No) transactions with associated
(b) If yes, please furnish the following enterprises at an arm’s length
details:- (i) Under which clause of price. This clause aims to
sub-section (1) of 92CE primary capture such relevant
adjustment is made? (ii) Amount information within the tax
(in Rs.) of primary adjustment (iii) audit report.
Whether the excess money
available with the associated
enterprise is to be repatriated to
India as per the provisions of sub-
section (2) of section 92CE?
(Yes/No) (iv) If yes, whether the
excess money has been repatriated
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Taxation and Auditing

within the prescribed time (Yes/No)

(v) If no, the amount (in Rs.) of
imputed interest income on such
excess money which has not been
repatriated within the prescribed
time.
30B (a) Whether the assessee has incurred Where an Indian Company
expenditure during the previous borrows a sum of money from
year by way of interest or of similar an associated enterprise, the
nature exceeding one crore rupees deduction in respect of interest
as referred to in sub-section (1) of payable on such borrowed
section 94B? (Yes/No) amount under the Income-tax
(b) If yes, please furnish the following Act shall be restricted to 30%
details:- (i) Amount (in Rs.) of of EBITDA (Earnings before
expenditure by way of interest or of interest, tax, depreciation and
similar nature incurred: (ii) amortisation). The interest in
Earnings before interest, tax, excess of 30% shall be
depreciation and amortization allowed to be set off in
(EBITDA) during the previous year subsequent years subject to
(in Rs.): (iii) Amount (in Rs.) of certain conditions. This clause
expenditure by way of interest or of places a check for compliance
similar nature as per (i) above in this regard.
which exceeds 30% of EBITDA as
per (ii) above: (iv) Details of
interest expenditure brought
forward as per sub-section (4) of
section 94B (v) Details of interest
expenditure carried forward as per
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Taxation and Auditing

sub-section (4) of section 94B

30C (a) Whether the assessee has entered An impermissible avoidance
into an impermissible avoidance arrangement would be an
arrangement, as referred to in arrangement where the main
section 96, during the previous purpose is to obtain a tax
year? (Yes/No) benefit and is not at arm’s
(b) If yes, please specify:- (i) Nature of length, results in tax evasion
the impermissible avoidance (directly or indirectly), lacks
arrangement: (ii) Amount (in Rs.) commercial substance or is
of tax benefit in the previous year carried out in a manner that
arising, in aggregate, to all the does not otherwise occur if the
parties to the arrangement”; arrangement was for bona fide
purposes.
31 (a) Particulars of each loan or deposit Taking a loan or any amount
in an amount exceeding the limit in relation to an immovable
specified in section 269SS taken or property (specified sums)
accepted during the previous year: exceeding Rs. 20,000
Name, address and PAN of the otherwise than by way of an
lender or depositor, Amount of loan account payee cheque or bank
or deposit taken or accepted, draft or use of a bank account
whether the same was squared up through ECS would attract a
during the year, maximum amount penalty equal to the amount
outstanding at any time during the borrowed. Details of all loans
previous year, whether the same or specified sums taken
was taken or accepted by cheque or exceeding Rs. 20,000 are
bank draft (specify if account provided herein.
payee) or use of ECS through a
bank account
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Taxation and Auditing

(b) Particulars of each specified sum in

an amount exceeding the limits
specified in section 269SS taken or
accepted during the previous year:
Name, address and PAN (if
available) of the person from whom
specified sum is received, amount
of specified sum taken or accepted,
whether the specified sum was
taken or accepted by cheque or
bank draft (specify if account
payee) or use of ECS through a
bank account
(ba) Particulars of each specified sum in Section 269ST says that a
an amount exceeding the limits person is not allowed to
specified in section 269ST taken or receive more than Rs. 2 lakh
accepted during the previous year: from either: (i) From a person
Name, address and PAN (if in a day (in total); (ii) In
available) of the person from whom respect of single transaction;
specified sum is received, amount or (iii) In respect of
of specified sum taken or accepted, transactions relating to a
whether the specified sum was single event/occasion; If such
taken or accepted by cheque or amount is paid through any
bank draft (specify if account mode other than an account
payee) or use of ECS through a payee cheque / bank draft or
bank account use of ECS through a bank
(bb Particulars of each receipt in an account. The reporting of non-
) amount exceeding the limit compliance with this section
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Taxation and Auditing

specified in section 269ST, in will be made in this clause.

aggregate from a person in a day or
in respect of a single transaction or
in respect of transactions relating to
one event or occasion from a
person, received by a cheque or
bank draft, not being an account
payee cheque or an account payee
bank draft, during the previous
year:- (i) Name, address and
Permanent Account Number (if
available) of the payer; (ii) Amount
of receipt (in Rs.)
(bc) Particulars of each payment made
in an amount exceeding the limit
specified in section 269ST, in
aggregate to a person in a day or in
respect of a single transaction or in
respect of transactions relating to
one event or occasion to a person,
otherwise than by a cheque or bank
draft or use of electronic clearing
system through a bank account
during the previous year:- (i) Name,
address and PAN (if available) of
the payee; (ii) Nature of transaction;
(iii) Amount of payment (in Rs.);
(iv) Date of payment;
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(bd Particulars of each payment in an

) amount exceeding the limit
specified in section 269ST, in
aggregate to a person in a day or in
respect of a single transaction or in
respect of transactions relating to
one event or occasion to a person,
made by a cheque or bank draft, not
being an account payee cheque or
an account payee bank draft, during
the previous year:- (i) Name,
address and PAN (if available) of
the payee; (ii) Amount of payment
(in Rs.)
(c) Particulars of each repayment of Repayment of a loan or any
loan or deposit or any specified amount in relation to purchase
advance in an amount exceeding the of an immovable property
limit specified in section 269T (specified sums) exceeding
made during the previous year: Rs. 20,000 otherwise than by
Name, address, PAN (if available) way of an account payee
of payee, amount of repayment, cheque or bank draft or use of
maximum amount outstanding at a bank account through ECS
any time during the previous year, would attract a penalty equal
whether the repayment was made to the amount borrowed.
by cheque or bank draft (specify if Details of all repayments of
account payee) or use of ECS loans or specified sums paid
through a bank account exceeding Rs. 20,000 during
(d) Particulars of repayment of loan or
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Taxation and Auditing

deposit or any specified advance in the year are provided herein.

an amount exceeding the limit
specified in section 269T received
otherwise than by a cheque or bank
draft or use of ECS through a bank
account during the previous year:
Name, address, PAN (if available)
of the payer, amount of loan or
deposit or any specified advance
received otherwise than by a cheque
or bank draft or use of ECS through
a bank account during the previous
year.
(e) Particulars of repayment of loan or
deposit or any specified advance in
amount exceeding the limit
specified in section 269T received
by a cheque or bank draft which is
not an account payee cheque or
account payee bank draft during the
previous year: Name, address, PAN
(if available), of the payer, amount
of loan or deposit or any specified
advance received by a cheque or a
bank draft which is not an account
payee bank cheque or bank draft
during the previous year.
32 (a) Details of brought forward loss or Such amounts need to be
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Taxation and Auditing

depreciation allowance to the extent revised for any change arising

available out of a rectification order,
assessment order, etc.
(b) Whether a change in the This provision is applicable to
shareholding of the company has a private limited company
taken place during the previous year with the following exceptions:
due to which the losses incurred
prior to the previous year cannot be Less than 51% of the voting
allowed to be carried forward in power only has changed hands
terms of section 79.
Change in shareholding is due
to death of a shareholder

Change in shareholding is due

to shares gifted by a
shareholder to a relative

Where the holding Company

is a foreign company and the
change in shareholding is due
to amalgamation/demerger
where less than 51% of the
shareholding has changed
(c) Whether the assessee has incurred A speculation loss cannot be
any speculation loss referred to in set off against any income
section 73 during the previous year. other than a speculation gain.
If yes, please furnish details of the Further, a loss in speculation
same. business will be allowed to be
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Taxation and Auditing

(d) Whether the assessee has incurred carried forward for only 4
any loss referred to in section 73A years. This clause keeps the
in respect of any specified business above provisions in check.
during the previous year, if yes,
please furnish details of the same.
(e) In case of a company, please state
that whether the company is
deemed to be carrying on a
speculation business as referred in
explanation to section 73, if yes,
provide details of speculation loss if
any incurred during the previous
year.
33 Section-wise details of deductions, The tax auditor will have to
if any, admissible under Chapter verify whether the assessee
VIA or Chapter III (Section 10A, has fulfilled the conditions
10AA). necessary to claim the section-
wise deductions.
34 (a) Whether the assessee is required to These sections broadly relate
deduct or collect tax as per the to compliances in respect of
provisions of Chapter XVII-B or TDS payable on certain
Chapter XVII-BB, if yes, please expenses. The tax auditor
furnish details reports the expenditure on
(b) Whether the assessee is required to which tax was required to be
furnish the statement of tax deducted, whether such tax
deducted or tax collected. If yes, was actually deducted and
please furnish the details paid to the government on
(c) Whether the assessee is liable to time. In case of a failure to
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Taxation and Auditing

pay interest under section 201(1A) comply on time, the details of

or section 206C(7). If yes, please penalty in respect of such late
furnish details. payments will also be covered.
35 (a) In the case of a trading concern, The name of the stock item
give quantitative details of principal and its unit of measurement
items of goods traded: (i) Opening would need to be provided
Stock; (ii) purchases during the
previous year; (iii) sales during the
previous year; (iv) closing stock;
(v) shortage/excess, if any
(b) In the case of a manufacturing
concern, give quantitative details of
the principal items of raw materials,
finished products and by-products:
A. Raw Materials: (i) opening
stock; (ii) purchases during the
previous year; (iii) consumption
during the previous year; (iv) sales
during the previous year; (v)
closing stock; (vi) yield of finished
products; (vii) percentage of yield;
(viii) shortage/excess, if any. B.
Finished products/by-products: (i)
opening stock (ii) purchases during
the previous year; (iii) quantity
manufactured during the previous
year; (iv) sales during the previous
year; (v) closing stock; (vi)
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Taxation and Auditing

shortage/excess, if any.
36 In the case of a domestic company, Where a domestic company
details of tax on distributed profits has paid dividend to its
under section 115-O in the shareholders, it is liable to pay
following form:- (a) total amount of dividend distribution tax
distributed profits; (b) amount of thereon. This dividend also
reduction as referred to in section includes deemed dividend
115-O (1A)(i); (c) amount of subject to certain conditions.
reduction as referred to in section
115-O (1A)(ii); (d) total tax paid
thereon; (e) dates of payments with
amounts.
36A a) Whether the assessee has The provisions of deemed
received any amount in the nature dividend are attracted when a
of dividend as referred to in sub- private limited company
clause (e) of clause (22) of section advances an amount to a
2? (Yes/No) (b) If yes, please shareholder (or to a concern in
furnish the following details:- (i) which he has a substantial
Amount received (in Rs.): (ii) Date interest) having more than
of receipt 10% voting power in the
37 Whether any cost audit was carried company subject to certain
out, if yes, give the details, if any, conditions.
of disqualification or disagreement
on any matter/item/value/quantity
as may be reported/identified by the
cost auditor.
38 Whether any audit was conducted
under the Central Excise Act, 1944,
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Taxation and Auditing

if yes, give the details, if any, of

disqualification or disagreement on
any matter/item/value/quantity as
may be reported/identified by the
auditor.
39 Whether any audit was conducted
under section 72A of the Finance
Act, 1994 in relation to valuation of
taxable services, if yes, give the
details, if any, of disqualification or
disagreement on any
matter/item/value/quantity as may
be reported/identified by the
auditor.
40 Details regarding turnover, gross Calculation of such ratios
profit, etc. for the previous year and would not be applicable for
preceding previous year: 1. Total persons engaged in profession/
turnover 2. Gross profit/turnover 3. service industry.
Net profit/turnover 4. Stock-in-
trade/turnover 5. Material
consumed/finished goods produced
41 Please furnish details of demand There are various other
raised or refund issued during the legislations like indirect tax,
previous year under any tax laws profession tax, etc. that the
other than Income-tax Act, 1961 assessee may be subject to and
and Wealth Tax Act, 1957 such acts may have their own
alongwith details of relevant authorities to pass a demand
proceedings or refund order. The details of
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Taxation and Auditing

orders of such authorities need

to be provided in this clause.
42 (a) Whether the assessee is required to The forms mentioned in this
furnish statement in Form No. 61 or clause relate to Specified
Form No. 61A or Form No. 61B? Financial Transactions where
(Yes/No) reporting needs to be done in
(b) If yes, please furnish Income-tax respect of certain prescribed
Department Reporting Entity transactions when they are
Identification Number, Type of entered into by such assessees
form, Due date for furnishing, Date as are prescribed in Section
of furnishing (if furnished), 285BA.
Whether the form contains
information about all details/
transactions which are required to
be reported. If not, please furnish
list of the details/ transactions
which are not reported
43 (a) Whether the assessee or its parent The report mentioned in this
entity or alternate reporting entity is clause relates to providing
liable to furnish the report as information in respect of the
referred to in sub-section (2) of international group of entities
section 286 (Yes/No) of which the assessee is a part
(b) If yes, please furnish the following and where the parent entity of
details: (i) Whether report has been such international group is not
furnished by the assessee or its resident in India.
parent entity or an alternate
reporting entity (ii) Name of parent
entity (iii) Name of alternate
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Taxation and Auditing

reporting entity (if applicable) (iv)

Date of furnishing of report
44 Break-up of total expenditure of This clause attempts to
entities registered or not registered provide a break-up of the total
under the GST expenditure into various fields
that are relevant from the GST
point of view like expenditure
in relation to exempt goods /
services under GST, payments
to entities under the
Composition Scheme,
Payments to entities not
registered under GST etc. A
similar schedule is available
as a part of the Income Tax
return forms to be filled up by
those not liable for tax audit.

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Taxation and Auditing

CHAPTER-4
LEARNING EXPERIENCE

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Taxation and Auditing

LEARNING EXPERIENCE
TAXATION AND AUDIT:
The studying was very educative. I get all information from organization web
site and I got lot of information from the resource person in the organization.
The company website helped me a lot about seeking information about my
internship report. I came to know about the organization in depth their day to
day operation procedure and service. The information that I have learnt from
the organization is very useful to my academics and my career as well.

Internship are one of the best ways you can experience the work force
without all the extra responsibilities or commitments, it is a perfect way to get
a certain industry, it also equips you with the necessary skill needed in the
future. Internship are definitely the learning experience it increases the
knowledge about the particular industry or the company. From this I came to
know about taxation and audit, various product, background and financial
statement etc.

I learnt many things like nature of the business, quality policies, workflow
model. Ownership pattern. Future growth. Swot analysis and Analysis of
financial statement.

I have learned many things about the organization working environment and
relationship between managers and employees. This study helps me to know
more information about the skills and certifications which are needed by the
organization from an employee.

I have learnt how an employer and an employee relationship should be and

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Taxation and Auditing

how to interact with the superiors and subordinates. In this internship how the
Taxation and audit industry is needed for society and how they are providing
services and good products.

This study helps my curriculum as well as my career study and this helped me
to know more information about the organization.

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Taxation and Auditing

THANK YOU

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