HALF YEARLY INTERNAL AUDIT MANDATORY
Half yearly internal audit has been made compulsory for stock brokers by SEBI. SEBI a premier body which regulates the securities related issues. The internal audit should be done only by an independent qualified Chartered Accountant, company secretaries, or cost and management accountants who do not have any conflict of intrest. For more log on to SEBI Website
DUE DATE OF FILLING INCOME TAX RETURN
Due date of filling income tax return for the assessment year 2008-09 is 30th Sept. 2008. This date is applicable to all i.e. partnership firms, proprietors, companies, HUF except the salaried persons. Similarly all the business or professions which have to get their A/c audited u/s. 44AB of the IT Act or under any statutaory act should also get A/c audited and file the return on or before 30th Sept.2008. For more log on to Income Tax Website.
FINANCIAL AUDIT –A TOOL TO AVOID FINANCIAL FRAUDS -III
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Vat Audit
Vat Audit is a popular concept in foreign countries. Countries like France & Korea have made VAT audit compulsory to keep a check on tax evasion. The concept of VAT audit is new for India. But most of the states have incorporated the audit provisions since inception. Especially some states like Maharashtra, Karnataka & Kerala have made detailed audit report compulsory if the gross turnover exceeds the specified limit mentioned in Act.
In Maharashtra Tax Audit has been introduced in VAT. There are two sections in the MVAT Act, 2002 which deals with audit i.e. sec. 22 & sec. 61.If one of the following conditions are fulfilled, the dealer is liable to get his books audited by a Chartered Accountant or Cost Accountant. (1) If the Turnover of sales or purchases exceeds Rs.40 Lacs during the financial year, and (2) A dealer or person who holds license in (i) Form P.L.L under the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 or (ii) Form B- RL under the Maharashtra Manufacture of Beer & Wine Rules, 1966 or (iii) Form E under Special Permits & License Rules, 1952, or (iv) Forms FL –I, FL – II, FL- III, FL – IV under Bombay Foreign Liquor Rules, 1953, or (v) Forms CL- I, CL- II, CL- III, CL/FL/TOD – III under the Maharashtra Country Liquor Rules, 1973, such dealers are required to get their returns and accountants audited by CA or CWA. They have to submit the report of the same in Form No. 704 to the department within 10 months from the end of the year to which the report relates i.e. on or before 31st January each year.
Sec 29 of the MVAT Act deals with penalties. If the dealer fails to comply with the notice given U/s. 22, for any purposes, a penalty of Rs.1000/- may be levied. Whereas U/s. 61 if the dealer fails to furnish audited report in Form No. 704, a penalty equal to (1/10) th % of total sales or total purchases whichever exceeds Rs.40 Lacs in turnover or where both exceed, lower of them as the case may be or Rs.1 Lac, whichever is less is charged.
Advantages
(1) The financial audit safeguards financial interest of persons who are not directly associated in day to day matters of management. (Sleeping partners, non executive directors etc.) (2) Bankers and other financial institutions require the audited financial reports for loans and other borrowings, monetary assistance for determining creditworthiness of the borrower. With the help of these audited reports the banks conducts the financial feasibility before approving the loan proposal. (3) Audited A/c helps in settlements of accounts of the retiring & deceased partners/ directors. (4) For receiving grants from central, state governments and foreign countries. (5) It helps in maintaining the records up to date while it also acts as moral check on employees. (6) Audited A/c helps in early detection of frauds and errors. The risks of frauds and errors get minimized as the audit is conducted by an independent auditor. (7) Auditing helps in determination of value of business at the time mergers, acquisitions and amalgamations.
Conclusion
As the India is one of the top emerging booming economies with a steady GDP growth of about 8.5%. With the huge money inflows the risk of fraud gets increased. Recently the most accounting firm KPMG (Klynveld Peat Marwick Goerdeler) surveyed Indian Corporates and came to the conclusion that over next two years i.e. by 2010, ‘India will be a fraud Haven’. They also surveyed that 75% of frauds remains undetected.
So it becomes necessary to keep a check on financial frauds. One of the measures to keep a check on these is to get the books of accounts audited by professional auditors
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Applicability of Audit
The entities which come under statutory audit are: (1) The audit of specified entities governed by sec. 44 AB of the Income Tax Act 1961. (2) Banking Companies which comes under the Banking Regulation Act 1949. (3) Co- operative Societies governed by Co- operatives Act 1912. (4) Electricity Companies under Electricity Act 1948. (5) Public and Charitable Trust registered under various religious and endowment Acts. (6) Statutory Corporations like LIC, Air India etc. (7) Pvt. Ltd. & Ltd. companies established under The Companies Act 1956.
Special Audit
Sec. 233A of the Companies Act 1956 gives power to central government to direct special audit in certain cases which are given below.
If the government is of opinion that 
a) That the affairs of the company is not being managed ethically. It means that the company does not follow sound business principles nor the prudent commercial practices. (b) Any company is being managed in a manner which can cause serious injury or damage to the interest of stakeholders, creditors, industry or the business of which it pertains. For e.g. In the Enron case the profits of the company were overstated while the fact was that it had huge losses. (c) The financial position of the company might endanger its solvency. It indicates that the liabilities are more than that of assets.
Cost audit
According to sec 233 B of the Companies Act 1956 the cost audit is defined as the audit process for verifying the cost of manufacture or production process of an article on the basis of accounts as regards utilization of material or labour or the other items of cost maintained by the company. The Cost and Works Accountant Act, 1959 empowers the cost accountants to conduct the cost audit and give its report based on the cost audits.
The audit of Cost accounts is necessary in certain cases where the company is engaged in production, processing, manufacturing or mining activities, such as particulars relating to utilization of material or labour or to other items of cost as may be prescribed as per sub sec. (1) of sec. 209. Industries covered under this act includes aluminum, bearings, bulk drugs, batteries other than dry cells, cement, nylons, papers , sugars, textiles, electronics products, telecommunications etc. The central government may direct the company to circulate the audited cost accounts along with the notice of the annual general meeting to its members.
If the default is made in complying with the sec. 233B the officer shall be punished for a term or which can be extended up to 3years or the company will have to pay fine of Rs. 50,000/- or both.
Tax audit
According to sec. 44AB, tax audit is compulsory for a person carrying on business or profession if, (a) in the case of a business, it’s total sales, turnover or gross receipts in the previous year exceeds Rs. 40 Lacs or (b) in case of profession, his gross receipts in profession in the previous year exceeds Rs. 10 Lacs or (c) where profit and gains from the business are deemed to be the profit and gains of the assessee has claimed his income to be lower than the profit or gains so deemed to be the profits and gains of his business, he must not only maintain books of A/c. but also get audited.
The assessee should get his A/c’s audited before the specified date i.e. 30th Sept. for Assessment year 2008-9. in case of not getting audited books of A/c the assessee will have to pay penalty.
The entities which comes under voluntary audit are (1) Proprietary Concern (2) Partnership Firms (3) HUF (Hindu undivided family) (4) Private Trust.
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