BASICS of GST Audit

BASICS of GST Audit

3) How to conduct GST Audit? Important points to be kept in mind while auditing.

3.1.        Awareness regarding economy

An auditor must be aware regarding the knowledge of the economy as a whole.

The knowledge of the business must be used by the auditor in assessing the inherent control risks in determining the nature, timing and extent of audit procedures. An auditor must also be aware of the trade practices prevalent in industry.

3.2.        Maintaining Working papers file

There must be two types of file for keeping client’s documents, which are:

• Permanent file
• Working paper file

1. a) Documents maintained in Permanent file

• Name, address and contact number of the clients.
• Brief profile of the client.
• Address of his businesses and location of his branches along with the details of the concerned persons in charge.
• Copies of the registration certificates under other allied laws.
• A list of products in which dealer deals in, various notifications and clarifications applicable, copies of important jugdement, advance ruling copies and clarification with reference to the client in specific and products in general.
• Audit Report of previous year.
• Copies relating to constitution of the organization, like Memorandum and Article of Association, Partnership Deed, Addendum to the Deeds etc.
• Copies of the Application made for Composition Scheme, Special Accounting Scheme, Partial Rebating, etc.
• A list of visits by various department officials, notices received and replies thereof, pending litigations before various authorities and other important issues unresolved.

All other papers are also of great importance; these are maintained in working papers file.

Requirement of Working papers

1. They help in setting out the plan for the audit;
2. They help in the supervision and review of the audit work and to review the quality of work being performed, in accordance with AAS 17 “Quality Control for Audit Work”;
3. They document clearly and logically the schedule, results of test, etc.
4. Working papers tells that Internal control has been properly evaluated;
5. They also tell us that the proof and facts obtained and procedures performed afford a reasonable basis for an opinion.
6. Documentation also contributes to the quality of an audit.

Period of retention of working papers

Working papers shall be retained by the auditor till the time it is required by him for conducting audit and also for professional requirements of record retention.

Ownership and custody of working papers

Working papers are the property of the auditor. The auditor may, at his discretion, make portions of, or extracts from his working papers available to his client.

The auditor should adopt reasonable procedures for custody and confidentiality of his working papers.

Requests for access to Working papers

Auditor is not required to provide access to their working papers to the following, except to the extent stated in next para:-

• Client
• Other auditors of the enterprise
• Related enterprise such as parent or subsidiary company.

The main auditors of an enterprise do not have right of access to the audit working papers of the branch auditors. In the case of a company, the statutory auditor has to consider the report of the branch auditor and has a right to seek clarifications and to visit the branch if he deems it necessary to do so for the performance of the duties as auditor.

Client does not have a right to access the working papers of the auditor. But, the auditor may make extracts from his working papers and can make available those working papers to the client, at his discretion 

3.3.        Pre-audit meeting with the Audit Team

A meeting shall be conducted by GST auditor regarding the matters to be discussed with the audit team. In the meeting, the auditor should brief the team on matters such as:-

• Background of the dealer
• Nature of business
• History of the dealer
• Any industry specific points
• Key financial parameters and accounting policies
• Organisation of the business and accounts
• Key-products dealt by the dealer

 Scope of work, extent and manner of checking the various transactions should also be clearly mentioned in the audit plan. He should also brief the team in respect of basic audit plan, audit program and various audit checklists which are essential for carrying out the audit.

3.4.        Evaluation of internal control system of the entity

Detailed study of internal control system shall be done within the entity for assessing the risks of audit. Nowadays. after the invent of computers, mostly internal control systems are computer driven that is why risks of software and hardware should also be well taken care of.

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