CHAPTER : 3

RESEARCH
METHODOLOGY
PURPOSE OF THE STUDY:

The purpose is to study about the taxation and auditing services provided by the CA
firms. While assisting the CA / auditor doing the tax audit for the various clients’
companies, I also, examined the effectiveness and benefit of the services provided by the
CA firms to their respective clients and observing the level of satisfaction of the clients.

RESEARCH OBJECTIVES OF THE STUDY:

To examine the necessity of conducting the audits for the clients, why it is a requisite for
the firms to get the Audits done of their financial accounts and the timely filing of the
taxes levied on them.
For examining whether the services provided by the CA firms are satisfactory and the
activities are conducted while maintaining the authenticity and confidentiality for the
client companies or not.
To learn about what is taxation and auditing, how they are made mandatory and why it is
necessary for companies, individuals to pay taxes

RESEARCH METHODOLOGY ADOPTED :

The study is based on analytical method. The primary data is collected by personal
collection of the book of accounts of the mentioned clients and thereby conducting the
tax audit, along with interviewing the staff for knowing the views, comments and
confidence regarding the performance of audit, taxation and consultancy services given
by the CA firms.
The primary data is collected by interviewing the internal staff of the client companies.
The secondary data is collected from the books and websites.

RESEARCH DESIGN:

The research design is of Descriptive type since it involved in studying the in-depth
analysis of the data of the clients and only after analyzing the task of performing the
tax audit on the financial statements provided by the clients would be performed.

SAMPLING PLAN:

The sample that was taken was the number of the clients for whom I had personally
assisted the CA while conducting the tax audit function.

SAMPLE SIZE :

The sample that was taken was the number of the clients for whom I had personally
assisted the CA while conducting the tax audit function. Hence, The study was
performed on the 6 major clients.

SAMPLE POPULATION:

The sample area consists of the number of the clients for whom I had personally
assisted the CA while conducting the tax audit function. Hence, The study was
performed on the 6 major clients.
 CHAPTER : 4
DATA COLLECTION
METHOD OF DATA COLLECTION:

DATA SOURCE:

The data required for conducting of the study was collected from the primary sources
of data, namely, from the accounts office of the clients for whom I had personally
assisted the CA while conducting the tax audit function. Also, for performing the
tallying function of the Sales tax figures, for the matching of the figures, the data was
also gathered from the Income tax department websites, the website of Sales tax,
VAT/DVAT/CST etc.

Primary Sources: Client’s Companies Accounts Office

Secondary data: Registrar of Companies, Income Tax Department, Sales tax,

VAT/DVAT/CST websites etc.

ANALYSIS TECHNIQUE:

The data collected from the offices was analyzed using accounting methods and
techniques. For the diagrammatic representation, Pie charts, Bar diagrams are used to
reach at the conclusions. Findings are made on the basis of analysis of the data
gathered from the primary and secondary sources. Recommendations are made on the
basis of findings drawn from various data collected and also based on the observations
for the areas where corrections can be made.
LIMITATIONS:

The study was limited to few departments in the organizations.

Unavailability of executives in their cabins as they were engaged in field work at that
time.
Since, the study is based on personal learning experience, possibility of errors cannot
be ruled out.
Since the report is based on the primary data and personal interview, there is a
possibility of occurrence of false judgment and biased opinion of the auditor.
 CHAPTER 5:
DATA ANALYSIS
 COMPANY 1:

M/s S.A.RUBBER (INDIA)

TRADING AND PROFIT &LOSS ACCCOUNT FOR THE YEAR ENDED

31.03.2017
PARTICULARS AMOUNT PARTICULARS AMOUNT
To Opening Stock 3647222.00 By Sales 8192388.06
By Closing Stock
To Purchases 5078269.49 (BO) 3708000.00
To Bonus Exp 82630.00
To Electricity Exp 273288.00
To E.S.I Exp 76625.00
To Wages 677465.00
To Carriage Inward 4249.00
To Gross Profit 2060639.57
11900388.06 11900388.06
To Accounting Charges 48000.00 By Gross Profit 2060639.57
To Courirer& Postage 344.00 By Interest 1492.00
By Sale of empty
To Electricity (office) Exp. 13870.00 drums 34000.00
To Freight & Forwarding By Sale of scraps
Charges 1050.00 &rakhs 9423.50
To House Tax 11848.00 By Dividend 1500.00
To Insurance Exp 2046.00
To Bank Interest 34987.08
To Interest on TDS 639.00
To ISO Exp 7866.00
To Legal Exp 3000.00
To Licence Fees 5900.00
To Manufacturing Exp 13692.00
To MiscExp 5334.00
To Car hiring charges 120000.00
To Salary 658950.00
To Telephone Exp 1200.00
To Bank Charges 17954.24
To DeprectionExp 220478.40
To Interest on Loan 378845.10
To Licence Fees (I.S.I ) 35057.00
To Petrol & Diesel 10500.00
To Printig& Stationery 8385.00
To Rent 65510.00
To Short & Excess 1063.23
To Cess to Rubber Board fee 4681.00
To Net Profit 435855.02
2107055.07 2107055.07

BALANCE SHEET AS ON 31.03.2017

LIABILITIES AMOUNT ASSETS AMOUNT
CAPITAL
ACCOUNT FIXED ASSETS
Opening
Balance 2863157.58 Branch Office 2938421.70
Add Addition 1050000.00 Head Office 657213.00 3595634.70
Add profit &
Loss 435855.02
CURRENT
4349012.60 ASSETS
Less Home
Loan 250440.00 Closing Stock 3708000.00
Less Drawing 470000.00 3628572.60 UP Vat (C/F) 5578.39
Prepaid
Insurance 22510.00 3736088.39
LOAN AND
ADVANCES 4580843.30
As per
Schedule Sundary
attached Debtors
As per
Schedule
attached 395639.59
BANK Advance to
OVERDRAFT Suppliers 770686.00 1166325.59
Canara Bank 683188.25
A/C
No.026726172
086
Security
Deposit
Sundry
Creditors (as
per schedule
attached) 387628.00 Sh. A.K. Jain 35927.00
Electricity
Security 23992.00
Telephone
Provisions Security 2010.00 61929.00
ESI 7295.00
CASH AND
TDS 37885.00 BANK
Salary Payable 42261.00 Cash in Hand 909083.97
Canara Bank
Wages Payable 67852.00 SB A/c 3518.64
The Vaish
Coop, Bank
CST 65154.14 (H.O) 33099.00 945701.61
Rent 5000.00 225447.14

9505679.29 9505679.29

STATEMEN
T OF
ASSESSABL AMOUNT
E INCOME (Rs)

INCOME
FROM
BUSINESS
OR
PROFESSIO
N
As per Profit
& Loss A/c 435855.02

INCOME
FROM
House
Property
Interest paid (3480-
on self 1160-
occupied 696-
house 119954
property ) -118330.00

INCOME
FROM
CAPITAL
GAIN
Sale
Consideration 14980000
Less Transfer
cost 749000
Net
Consideration 14231000
Inexed Cost
of Purchase
and
Improvement
s
1983-84 82819 731092
1984-85 80912 662831
1985-86 106750 821895
1986-87 50000 365714
1987-88 35000 238933
355481 2820465
11410535
Less invested
in capital gain
scheme 7945200 3465334.68

INCOME
FROMOTH
ER
SOURCES
Bank interest 66452
FDR Interest 209070 275522.00

GROSS
Income 4058381.70
Less:Under
chapter VI-A
U/s 80C 30000.0
 PPF 0
u/s 80C
Principal but
amount of 130486. restrict
House Loan 00 ed 150000
U/s 80TTA
Bank Intt 10000 160000.00
Total Income 3898381.70

Rounded off 3898380.00

TAX
COMPUTA
TION:

special
Tax on above rate 3465330 @0.20 693066
normal
rate 433050 @0.10 13305 706371(*1)
Add:
Education
Cess @ 3% 21191

Total Tax
Due 727562
Add: Interest 10416

Total Tax &

Interest 737978(*2)

Tax Paid TDS 177739

Advance
Tax 401000
Self
Assess
ment Tax 159239 737978

(*1)-(NORMAL RATE -300000) X 0.1

(*2) -(TOTAL TAX DUE + INTEREST)

FINANCIAL RATIOS:

GROSS PROFIT RATIO = Gross Profit x 100

 Sales

= (2060640/ 8192388 ) x 100 = 25.15%

NET PROFIT RATIO: = Net Profit x 100

Sales

= 435855 x 100

8192388

= 5.3%

STOCK IN TRADE

TURNOVER RATIO: = Closing Stock x 100

Sales
= 3708000 x 100

8192388

= 45.26%

FINANCIAL RATIOS

NPR, 17.95383924
GPR, 44.36948371

ANALYSIS:

The financial ratios pie chart shows that STR is at 60% while the GPR & NPR are at
33% & 7% respectively stating that while the firm is making profit it is maintaing a
higher stock in trade turnover ratio which suggests that the businesses need to hold
stock for a longer period.

TAX COMPUTATION
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000 Series1
500000
0

GROSSTotal Income Tax on aboveTotal Tax &

IncomeInterest Paid

Analysis:

The tax computation chart shows the total taxes payable for the firm after sucessful
deductions from the gross total income. It shows that since, the total income to be
taxable was at Rs.38,98,380, hence, after the deduction of tax slabs it falls under and
calculating by special and normal rates, the tax payable amount is derived at and which
is higher in this case at Rs.737978
Company 2:

M/s BANSAL STATIONERS

TRADING AND PROFIT &LOSS ACCCOUNT

FOR THE YEAR ENDED 31.03.2017
PARTICULARS AMOUNT PARTICULARS AMOUNT
To Opening Stock 7211500.00 By Sales 9791716.00
To Purchases 3683378.00 By Discount on purchase 826657.00
By Closing Stock (BO) 691500.00
To Gross Profit 414995.00
11309873.00 11309873.00
To Audit &DSC Fee 7500.00 By Gross Profit 414995.00
To Bank Charges 810.00 By Interest on Security 45000.00
To Car
Running&maint 28450.00 By Rebate & Discount 3.00
To car insurance 5252.00
To Conveyance Exp. 14215.00
To Depreciation 25259.00
To Miscellaneous
Expenses 921.00
To Sales Promotion 16045.00
361546
To Net Profit
459998.00 459998.00

BALANCE SHEET
For the year ending 31.03.2017

LIABILITIES AMOUNT ASSETS AMOUNT

CAPITAL FIXED ASSETS 143132.00
ACCOUNT
Opening Balance 1892117
230252.
Add Addition 00
361546.
Add profit 00
2483915
.00 CURRENT ASSETS
Sundary Debtors 920762.00
111550.
Less Drawing 00 2372365.00
Advance to
Suppliers 1689406.00
UNSECURED
LOANS 571000.00 DVAT 9321.00
Closing Stock 691500.00

CURRENT LIABILITIES

Sundry Creditors 687285.00 CASH AND BANK

Cash in Hand 13473.00
PAYABLES & PROVISIONS Canara Bank A/c 165246.40
DVAT 2190.00

3632840.00 3632840.00

Statement Of Assessable Income

Source Of Income Amount(Rs)

Income From Business

Net Profit from Business 361546.00

Income From Other Sources

Bank Interest 4000.00

Gross Total Income 365546.00

Less:Deduction Under Chapter

VIA
Deduction Under Section 80C -
LIC Premium 31305.00
 Deduction Under Section
80TTA - Bank Intt 4000.00 35305.00

Total Income 330241.00

Rounded Off 330240.00

Tax
Computation
Tax On Above 8024
Less: Rebate u/s 87A 2000
6024
Add:EducationCess @ 3% 181
Total Tax Payable 6205
Tax Paid 6205

FINANCIAL RATIOS

NPR,
STR, 3.692366078 NPR
7.062092079 GPR
STR
GPR,
4.238225455

ANALYSIS:

The financial ratios pie chart shows that STR is at 47% while the GPR & NPR are at
28% & 25% stating that while the firm is making profit it is maintaing a higher stock
in trade turnover which suggests that the businesses need to hold stock for a longer
period
 TAX COMPUTATION
350000
300000
250000
200000
150000
100000
50000
0

Total Tax Payable Tax On Above Total Income

ANALYSIS:

The tax chart shows the total taxes payable for the firm after sucessful deductions from
the gross total income. It shows that the total income to be taxable was at Rs.365546 &
after the deduction of tax under the tax slabs, the tax payable amount is derived at Rs.
6205 and it is less in this case.

COMPANY 3:

M/S PUNEET & Company

Trading & Profit & Loss Account

(For The Year Ending 31st March,2017)
Particular Amount Particular Amount
To Opening Stock 532400.00 By Sales 13788116.00
To Purchases 11506985.00 By closing Stock 528700.00
To Cartages 15903.00
To Wages 432000.00
To Gross Profit 1829528.00
14316816.00 14316816.00
To Account Charges 40000.00 By Gross Profit 1829528.00
To Advertisement Exp. 138465.00 By Excess & Short 208.00
To Audit Fee 20000.00
To Bank Charges 10255.10
To Car Insurance 15272.00
To Car Maintenance 12500.00
To Commission 65000.00
To Conveyance Exp. 37750.00
To Depreciation 126364.00
To Intt. Paid on Car
Loan 31857.27
To Intt. Paid on Other
Loans 17974.78
To Job Labour Charges 312240.00
To Legal Expenses 26000.00
To Postage Exp. 17000.00
To Printing &
Stationery 1302.00
To Rent 168000.00
To Salary 186000.00
To Sales Promotion 24400.00
To Staff Welfare 19600.00
To Telephone Exp. 840.00
To Net Proffit 558915.85
1829736.00 1829736.00

BALANCE SHEET
(For the year ending of 31st March 2017)

LIABILITIES AMOUNT ASSETS AMOUNT

CAPITAL A/C FIXED ASSETS
Opening Balance 1320691.70 716064.00
Add:Profit 558915.85
1879607.55 CURRENT ASSETS
Less:Drawing 258789.00 1620818.55 Sundry Debtors
3269833.00
Advance to
SECURED LOANS Suppliers
HDFC Bank 296480.94 158492.00
HDB Finance 27625.02 324105.96
Closing Stock 528700.00
CURRENT LIABILITIES DVAT Refund 473144.00
Sundry Creditors VAT Input 73436.00
2946470.00
Advance From CASH & BANK
Customers
944000.00 Cash In Hand 465788.00
Yes Bank 430.30
PAYABLES &
PROVISIONS ICICI Bank 177064.71
Accounts Charges The Kangra Co-Op
Payable 10000.00 Bank Ltd. 2442.50
Audit Fee 20000.00 30000.00

5865394.51 5865394.51

STATEMENT OF
ASSESSABLE INCOME AMOUNT(Rs)

INCOME FROM
BUSINESS OR
PROFESSION
As per Profit & Loss A/c 558915.85

INCOME FROMOTHER
SOURCES
Bank interest 7500.00

GROSS TOTAL INCOME 566415.85

Less:Under chapter VI-A
u/s 80C LIC 66751.00
maximum
u/s 80D Mediclaim 22704 to 15000.00
u/s 80TTA 7500.00 89251.00
Total Income 477164.85
Rounded off 477160.00
TAX COMPUTATION

Tax on above 22716

Less: Rebate u/s 87A 2000
20716
Add: Education Cess @ 3% 621

Add: Interest u/s 234B &

234C 2067

Total tax payable 23404

Tax Paid 23404

 FINANCIAL RATIOS

STR,
3.834461503
GPR
NPR,GPR, NPR
4.05360565613.26887589 STR

ANALYSIS:

The financial ratios pie chart shows that STR is at 18% while the GPR & NPR are at
63% & 19% stating that while the firm is making higher gross profit, it is also
maintaing its stock in trade turnover which suggests that there is fast movement of
stock and hence, the businesses do not need to hold their inventory for longer time.

TAX COMPUTATION
350000

300000

250000

200000
Series1
150000
100000

50000

0
Total Income Tax on above Total Tax payable
ANALYSIS:

The tax computation chart shows the total taxes payable for the firm after sucessful
deductions from the total income. It shows that since, the total income to be taxable
was at Rs., 477164.85, hence, after the deduction of tax slabs it falls under, the tax
payable amount is derived at Rs.23404 and which is less in this case.

COMPANY 4:
M/s Akshh International
Prop: Vikas Gupta

Trading & Profit & Loss Account

(For The Year Ending 31st March,2017)
Particular Amount Particular Amount
To Opening Stock 4736812.00 By Sales 62966143.00
To Purchases 64053516.75 By closing Stock 8393297.00
To Gorss Profit 2569111.25
71359440.00 71359440.00
To Accounts Charges 28500.00 By Gross Profit 2569111.25
To Audit fee 10000.00 By Excess & Short 6336.70
To Bank Charges 1123.60
To Car Insurance 15562.00
To Car Maintenance 58636.00
To Conveyance 18000.00
To Depreciation 92636.00
To Intt. Paid on Loans 1087936.00
To Rent 30000.00
To Salary 360000.00
To Staff Welfare 19275.00
To Telephone Exp. 43955.00
To Trade Discount 444.00
To Travelling Exp. 144750.00
To Net Proffit 664630.35
2575447.95 2575447.95
BALANCE SHEET
(For the year ending of 31st March 2015

LIABILITIES AMOUNT ASSETS AMOUNT

CAPITAL A/C FIXED ASSETS
(As Per Annexures
Opening Balance 7493462.32 "A") 774936.00
Add:Addition 770000.00
Add:Profit 664630.35 CURRENT ASSETS
8928092.67 Sundry Debtors
(As Per Annexures
Less: Drawing 240000.00 8688092.67 'C') 10690482.00
Closing Stock 8393297.00
UNSECURED LOANS 9602629.00 Security 23500.00
Special Additional
CURRENT LIABILITIES Custom Duty 3483713.50
Sundry Creditors 2254791.85
Advance From
Customers
2730519.00 CASH & BANK
Cash In Hand 983.56
PAYABLES &
PROVISIONS Yes Bank Ltd 360065.46
Audit Fee Payable 10000.00
VAT Payable 275189.00
CST Payable 56962.00
TDS Payable 108794.00 450945.00

23726977.52 23726977.52

Statement Of Assessable Income

Source Of Income Amount(Rs)
Income From Business
Net Profit from Business 664630.35

Income From Other Sources

Bank Interest 1000.00

Gross Total Income 665630.35

 Less:Deduction Under Chapter VIA
Deduction Under Section 80C - LIC
Premium 21308.00
Deduction Under Section 80TTA - Bank
Intt 1000.00 22308.00

Total Income 643322.35

Rounded Off 643320.00
TAX COMPUTATION

Tax On Above *39332

Less: Rebate u/s 87A 2000
37332
Add:EducationCess @ 3% 1120
Total Tax Payable 38452
Tax Paid 38452

*(Taxable Income roundoff -250000) x 0.1

FINANCIAL RATIOS

NPR, 3.692366078
NPR
STR, 7.062092079 GPR
STR

GPR, 4.238225455

ANALYSIS:

The financial ratios pie chart shows that STR is at 47% while the GPR & NPR are at
28% & 25% stating that while the firm is making profit it is maintaing a higher stock
in trade turnover which suggests that the businesses need to hold stock for a longer
period
 TAX COMPUTATION
350000
300000
250000
200000
150000
100000
Ser
50000
0

Total IncomeTax on aboveTotal Tax payable

ANALYSIS:

The tax computation chart shows the total taxes payable for the firm after sucessful
deductions from the gross total income. It shows that since, the total income to be
taxable was at Rs.643322, hence, after the deduction of tax slabs it falls under, the tax
payable amount is derived at Rs. 38452 and which is less in this case.

COMPANY 5:

M/s Delhi Acrylic Co.

Prop: DevenderSah

Trading & Profit & Loss Account

(For The Year Ending 31st March,2017)
Particular Amount Particular Amount
To Opening Stock 519500.00 By Sales 14663291.00
By closing
To Purchases 13239427.00 Stock 258600.00
To Cartage-Inward 63225.00
To Gorss Profit 1099739.00
14921891.00 14921891.00
By Gross
To Accounts Charges 12000.00 Profit 1099739.00
To Audit fee 7500.00
To Bank Charges 4701.55
To Bank Interest 937.00
To Conveyance 32400.00
To Electricity Exp 96200.00
To Fright & Forwarding 29000.00
To Professional Charges 8500.00
To Rent 120000.00
To Salary & Wages 432000.00
To Sales Promotion 20325.00
To Staff welfare 22175.00
To Net Proffit 314000.45
1099739.00 1099739.00

BALANCE SHEET
(For the year ending of 31st March 2017)

LIABILITIES AMOUNT ASSETS AMOUNT

CURRENT
CAPITAL A/C ASSETS
Opening Balance 285977.00 Sundry Debtors
Add: Addition 550000.00 5273719.00
Add: Profit 314000.45 Closing Stocks 258600.00
1149977.45
Personal
Less: Drawing 180000.00 969977.45 Investment 1268000.00
PNB FDR 1800000.00
UNSECURED LOANS
AshaYadav 1150000.00 CASH & BANK
NeealmYadav 1750000.00 2900000.00 Cash In Hand 37775.00
Yes Bank Ltd 117452.00
Punjab National
PNB OD A/c 1591050.00 Bank 1941243.45
CURRENT LIABILITIES
Sundry Creditors
4869791.00
Advance From
Customers
329429.00
EXPENSES PAYABLE
Accounting Charges 19200.00
Audit Fee 7500.00
CST 1342.00
Professional Charges 8500.00 36542.00

10696789.45 10696789.45
 Statement Of Assessable Income

SOURCES OF INCOME Amount(Rs)

Income From Business
Net Profit from Business 314000.45

Income From Other Sources

Bank Interest 1500.00

Gross Total Income 315500.45

Less:Deduction Under Chapter VIA
25308.
Deduction Under Section 80C - LIC Premium 00
1500.0
Deduction Under Section 80TTA - Bank Intt 0 26808.00

Total Income 288692.45

Rounded Off 288690.00
Tax Computation
Tax On Above 3869
Less: Rebate u/s 87A 2000
1869
Add:EducationCess @ 3% 56
Total Tax Payable 1925
Tax Paid 1925

FINANCIAL RATIOS

STR,
1.76
GPR
NPR, 2.14 NPR
STR
GPR, 7.50
ANALYSIS:

The financial ratios pie chart shows that STR is at 15% while the GPR & NPR are at
66% & 19% stating that while the firm is making higher gross profit it is maintaing its
stock in trade turnover which suggests that there is faster movement stock and hence,
the businesses do not need to hold higher inventory

TAX COMPUTATION
350000
300000
250000
200000
150000
100000 Series1
50000
0

Total IncomeTax on aboveTotal Tax payable

ANALYSIS:

The tax chart shows the total taxes payable for the firm after sucessful deductions from
the gross total income. It shows that the total income taxable was at Rs. 288692.45,
after the deduction of tax, the tax payable amount is derived at Rs. 1925 and it is less in
this.
COMPANY 6:
M/s Shiv Engineering
Prop: Ashok Shukla

Trading & Profit & Loss Account

(For The Year Ending 31st March,2017)
Particular Amount Particular Amount
To Opening Stock 532400.00 By Sales 1986820.00
To Purchases 150492.00 By closing Stock 538700.00
To Cartages 15904.00
To Wages 332000.00
To Gross Profit 1494724.00
2525520.00 2525520.00
To Account Charges 40000.00 By Gross Profit 1494724.00
To Advertisement Exp. 106665.00 By Excess & Short 508.00
To Audit Fee 25000.00
To Bank Charges 15255.10
To Car Insurance 15272.00
To Car Maintenance 12500.00
To Commission 65000.00
To Conveyance Exp. 37750.00
To Depreciation 156364.00
To Intt. Paid on Car Loan 31857.27
To Intt. Paid on Other Loans 17974.78
To Job Labour Charges 112240.00
To Legal Expenses 26000.00
To Postage Exp. 17000.00
To Printing & Stationery 1302.00
To Rent 198000.00
To Salary 176000.00
To Staff Welfare 19600.00
To Telephone Exp. 840.00
To Net Proffit 420611.85
1495232.00 1495232.00
 FINANCIAL RATIOS

STR,
27.11367915 GPR
GPR, NPR
75.23197874 STR
NPR, 21.17010348

ANALYSIS:

The financial ratios pie chart shows that STR is at 22% while the GPR & NPR are at
61% & 17% stating that while the firm is making higher gross profit it is maintaing its
stock in trade turnover which suggests that there is faster movement stock and hence,
the businesses do not need to hold higher inventory.

TAX COMPUTATION
350000
300000
250000
200000
150000
100000 Series1
50000
0

Total IncomeTax on aboveTotal Tax payable

ANALYSIS:

The tax computation chart shows the total taxes payable for the firm after sucessful
deductions from the gross total income. It shows that since, the total income to be
taxable was at Rs. 318860.85, hence, after the deduction of tax slabs it falls under, the
tax payable amount is derived at Rs. 7100 and which is less in this case.

ANALYSIS & INTERPRETATION OF THE DATA :

KEY POINTS TO CONSIDER (FOR TAX AUDIT) :

Cash Payments should not be more than 20,000/-

Depreciation on the Assets are ascertained on the basis of their date of purchase
100% depreciation for 1-6 months old used assets
More than 6 months – 50% of rate of depreciation is charged

Unsecured Loans for more than 20,000/- are not allowed to paid in Cash.

Ensuring that the proprietor has issued TDS certificates to the contractors, to the
salaried workers and professional heads etc. for the job rendered by them to the
company.

Timely deposit of the quarterly Income tax returns

TDS is deducted, deposited and filing of the TDS returns with the Income Tax
department.

Also, the Income tax returns are timely sent to the IT department.

Matching the challans of the payment of VAT, purchase bills.

Yearly analysis of the GPR, NPR, Stock-in-trade turnover ratios and ensuring there are
no abnormal losses incurred by the company.

Checking and tallying the bills of expenditures, rent , purchases etc.

Matching the Sales figures with the Sales tax returns and purchases figures from DVAT.

Examining whether the stock-in-trade ratio is higher or smaller

Analysis of the current debtors:

Ensuring they must be just 3 months old otherwise create provisions for bad debts for the
debtors who are more than 6 months old.
 CHAPTER 6 :
FINDINGS & SUGGESTIONS
FINDINGS:

The findings drawn are as follows;

Cash Payments are not more than 20,000/- and there is timely payment to the creditors

Depreciation on the Assets are ascertained on the basis of their date of purchase
100% depreciation for 1-6 months old used assets
More than 6 months – 50% of rate of depreciation is charged
Mostly, the rate of depreciation used is at 18%.

Unsecured Loans for more than 20,000/- are paid in Cash rather they are paid through
cheques and there is no bouncing of those cheques observed.

The proprietor has issued TDS certificates to their contractors, to the salaried workers
and professional heads etc. for the job rendered by them to the company and also, they
have been issued the TDS certificates from the financial institutions.

There has been timely deposit of the quarterly Income tax returns as well as of sales tax
returns which are tallied through the sales tax website.

TDS has been deducted, deposited and filing of the TDS returns with the Income Tax
department.

Also, the Income tax returns are timely sent to the IT department.

The challans of the payment of VAT, purchase bills provided by the clients are matching
and hence, entered in the tally erp software.

Yearly analysis of the GPR, NPR, Stock-in-trade turnover ratios and the business
ensured that there are no abnormal losses incurred by the company.

Also, where there is higher stock-in-turnover ratio the firms have been advised to hold
the stocks and for the smaller ratios, it suggested that the businesses are having good
and the faster flow of the stock movement.

The bills of expenditures, rent , purchases are checked and tallied etc.

The Sales figures are in accordance with the Sales tax returns and purchases figures from
DVAT.
Also, there has been no undue shortage or misappropriation of funds observed alongwith
the all the payments and incomes statements in accordance with the figures mentioned in
the financial statements.

Many clients business was observed that they set-off their liabilities early and there was
little delay in the payments to the creditors and there has been less delay.

Analysis of the current debtors: Ensuring they must be just 3 months old otherwise create
provisions for bad debts for the debtors who are more than 6 months old.

The Relevant Tax Authority (RTA) employed tax audit towards achieving target
revenue.

Tax audit reduces the problems of tax evasion, tax avoidance and other tax
irregularities.

Tax audit aimed at ensuring the submission of accurate and current returns for proper
computation.

Awareness on tax rules and regulation increase compliance and reduce non-compliance
tax payers.

That one of the reason behind the tax audit is the suspicion over the returns submitted
by the tax payers.

Tax payers do not usually co-operate with the tax audit personnel during the exercise.

Tax audit improves the level of tax compliance by the tax payers.

No effective sanctions over the non-compliance tax payers with the tax rules and
regulations.

The personnel conducting the tax audit are skilful in the area of tax audit.

The tax audit personnel are not adequate and equipped with necessary working
materials.
Suggestions:
After the completion of the study, according to my opinion, there still exists a
possibility that biased approach can be adopted by many CA ‘s performing the tax
audits for the companies. Though, ICAI has laid many stringent and strict rules and
regulations for maintaining the ethics always and there has been heavy emphasis by
them on the authorized audit performance to give their judgments based on the facts
which are there in front of them and to their best knowledge without having any undue
influence of the particular clients for whom they are performing the audit.

Also, the data provided to the CA’s are given by the companies is not ensured that
there is no falsification of the facts mentioned hence, they need to perform internal
audits and the various kinds of audits which are not statutory in nature along with those
which are such as company audit. So that, when the financial statements reaches the
CA is ensured to be true in all sense.
The Relevant tax authority at all levels should improve the standard of tax audit
employed for effectiveness and efficiency.
Tax audit should aim at reducing more problems of tax evasion, tax avoidance and
other tax irregularities for standardization.
The scope of tax audit should be wider in such a way that will ensure proper
submission of accurate and current returns for proper computation.
The RTA should provide a policy to the public on the awareness of the importance of
tax payment and the effect of non-tax payment, so that the level of compliance would
be high and non-compliance will be low or even none.
The tax payers should have God fearing and submit the accurate returns of their
operation.
RTA should also provide a policy that would allow the tax payers to co-operate during
the period of tax audit and at the same time the tax payers should do their best toward
cooperating with the tax audit personnel during the period of the exercise.
RTA should also improve the standard of tax audit personnel so that they can highly
improve the level of tax compliance by the tax payers.
There should be effective sanctions by RTA over the non-compliance tax payers with
the tax rules and regulation.
Hence, it is advisable that in spite of indulging in falsifications of the facts, companies
should ensure that they bring forth the right facts and not involved in tax evasion
activities also.