BASICS of GST Audit

BASICS of GST Audit

5          Special points to be noted in case auditor is a chartered accountant (other than covered above).

(a)          Opinion on financial statements when there is substantial interest

Clause 4 of the Council Guidelines No.1-CA(7)/02/2008, dated 8th August, 2008

“A member of the Institute shall not express his opinion on financial statements of any business or enterprise in which one or more persons who are his “relatives” within the meaning of Section 6 of the Companies Act, 1956 have, either by themselves or in conjunction with such member, a substantial interest in the said business or enterprise.

Explanation: For this purpose and for the purpose of compliance of Clause (4) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, the expression “substantial interest” shall have the same meaning as is assigned thereto under Appendix (9) to the Chartered Accountants Regulations, 1988.”

This implies in case of GST Audit Chartered Accountant shall not express his opinion on financial statements of any business or enterprise in which one or more persons who are his “relatives” within the meaning of Section 6 of the Companies Act, 1956 have, either by themselves or in conjunction with such member, a substantial interest in the said business or enterprise.

(b)          Appointment of an auditor when he is indebted to a concern

Clause 10 of the Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008

“A member of the Institute in practice or a partner of a firm in practice or a firm shall not accept appointment as auditor of a concern while indebted to the concern or given any guarantee or provided any security in connection with the indebtedness of any third person to the concern, for limits fixed in the statute and in other cases for amount exceeding Rs. 10,000/-“

(c)           Members in Part-time practice

“The Council at its 241st meeting decided that effective from 1.04.2005, any member in part-time practice (namely, holding certificate of practice and is also engaging himself in any other business and/or occupation) is not entitled to perform attest function, and that the resolution passed under Regulation 190A, which is currently in force and appears as Appendix 10 to the Chartered Accountants Regulations 1988 (Appendix No. 9 in 2002 Edition), be reviewed by the Executive Committee, in the light of the above decision

The Council at its 242nd meeting noted the recommendations made to it by the Executive Committee in this regard and accordingly passed the following resolution as a part of and in continuation of the existing resolution under Regulation 190A which appears as Appendix no. 9 to the C.A. Regulations, 1988 (2002 edition)

IT IS FURTHER RESOLVED that the general and specific permission granted by the Council is subject to the condition that -

1. i) any member engaged in any other business or occupation, in terms of general or specific permission granted shall not be entitled to perform any attest function except in the following cases.

• Authorship of books and articles
• Holding of Life Assurance Agency License for the limited purpose of getting renewal commission.
• Attending classes and appearing for any examination.
• Holding of public elective offices such as M.P., MLA&MLC.
• Honorary office-bearership of charitable, educational or other non-commercial organizations.
• Acting as Notary Public, Justice of the Peace, Special Executive Magistrate and the like.
• Part-time tutorship under the Coaching Organisation of the Institute.
• Valuation of papers, acting as paper-setter, head-examiner or a moderator for an examination.
• Editorship of professional journals - (not in employment)
• Acting as surveyor and Loss Assessor under the Insurance Act, 1938 (not in employment).
• Acting as Recovery consultant in the Banking Sector (not in employment)
• Any coaching assignment organized by the Institute, its Regional Councils and Branches of Regional Councils.
• Engagement as Lecturer in a University, affiliated college, educational institution, coaching organization, priGSTe tutorship, provided the direct teaching hours devoted to such activities taken together do not exceed 25 hours a week.
• Engagement in any other business or occupation permitted by the Executive Committee form time to time.

(ii) A member who is not entitled to perform attest function shall not be entitled to train articled/audit assistants

(iii) The decision (of the Council) taken at its 223rd meeting held in February,2002 prescribing the criteria for individual cases of articleship shall continue to be in operation, mutatis mutandis.

The Council in this connection also clarified that the Attest function for the purpose of this Resolution would cover services pertaining to audit, review, certification, agreed upon procedures, and compilation, as defined in the Framework of Statements on Standard Auditing Practices and Guidance Notes on Related Services published in the July, 2001 issue of the Institute's Journal.”

There by a Chartered Accountant in part-time practice shall not sign a GST Audit Report.

(d)          Appointment of an Auditor in case of non-payment of undisputed fees

Clause 7 of the Council Guidelines No.1-CA(7)/02/2008, dated 8th August,2008

“A member of the Institute in practice shall not accept the appointment as auditor of an entity in case the undisputed audit fee of another Chartered Accountant for carrying out the statutory audit under the Companies Act, 1956 or various other statutes has not been paid:

Provided that in the case of sick unit, the above prohibition of acceptance shall not apply.

7.1 Explanation 1:

For this purpose, the provision for audit fee in accounts signed by both - the auditee and the auditor shall be considered as “undisputed” audit fee.

7.2 Explanation 2:

For this purpose, “sick unit” shall mean where the net worth is negative.”

This provision is very basic provision for the benefit of CA community as a whole. We shall not accept any audit if there is audit fee is outstanding books of accounts (Audit fee can be payable only for a 1 year. If fee is pending for 2 or more years this shall bring in suspicion). We must take a NOC from auditors of the firm before accepting the audit assignment

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