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

YEARPARTICULARS
ENDED 31.03.2017 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 Manufacturing 13692.00
Exp
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 35057.00
(I.S.I )
To Petrol & Diesel 10500.00
To Printig& 8385.00
Stationery
To Rent 65510.00
To Short & Excess 1063.23
To Cess to Rubber 4681.00
Board fee
To Net Profit 435855.02
2107055.0 2107055
7 .07

BALANCE SHEET AS ON
31.03.2017
LIABILITIES AMOUNT ASSETS AMOUNT
CAPITAL
ACCOUNT FIXED
ASSETS
Opening
Balance 2863157 Branch 2938421
.58 Office .70
Add 1050000 Head 657213. 3595634.
Addition .00 Office 00 70
Add profit
& 435855.
Loss 02
CURRENT
4349012 ASSETS
.60
Less Home
Loan 250440. Closing 3708000
00 Stock .00
Less 470000. 3628572. UP Vat 5578.39
Drawing 00 60 (C/F)
Prepaid
Insurance
 22510.0 3736088.
0 39
LOAN AND
ADVANCES 4580843.
30
As per
Sched Sund
ule ary
attach Debt
ed ors
As per
Sched
ule 395639.
attach 59
ed
BANK Advance
OVERDRAF to 770686. 1166325.
T Suppliers 00 59
Canara 683188.2
Bank 5
A/C
No.02672
6172 086
Security
Deposit
Sundry
Creditor
s (as per
schedule 387628.0 Sh. A.K. 35927.0
attached) 0 Jain 0
Electricity
Security 23992.0
0
Telephone
Provisions Security 2010.00 61929.00
ESI 7295.00
CASH AND
TDS 37885.0 BANK
0
Salary 42261.0 Cash in 909083.
Payable 0 Hand 97
Canara
Wages 67852.0 Bank 3518.64
Payable 0 SB A/c
The Vaish
Coop,
CST 65154.1 Bank 33099.0 945701.6
4 (H.O) 0 1
Rent 5000.00 225447.1
4

9505679. 9505679.
29 29

STATEME
N T OF
ASSESSAB
LE AMOUN
INCOME T (Rs)

INCOME
FROM
BUSINESS
OR
PROFESSI
O
N
As per
Profit 435855.
& Loss A/c 02

INCOM
E
FROM
House
Proper
ty
Interest (3480-
paid on 1160-
self 696-
occupied 11995 -
4 118330.0
house 0
property )

INCOM
E FROM
CAPITA
L GAIN
Sale
Considera 1498000
tion 0
Less
Transfer 749000
cost
Net
Considera 1423100
tion 0
Inexed
Cost of
Purchase
and
Improve
ment
s
1983-84 82819 731092
1984-85 80912 662831
1985-86 106750 821895
1986-87 50000 365714
1987-88 35000 238933
355481 2820465
1141053
5
Less
invested 7945200
in capital 3465334.
68
gain
scheme

INCOME
FROMOT
H
ER
SOURCE
S
Bank 66452
interest
FDR 20907 275522.0
Interest 0 0

GROSS
Income 4058381.
70
Less:Under
chapter VI-
A
U/s 80C 30000.
0
PPF 0
u/s 80C
Princip but
13048
al restric 1500
6. 00
amoun 00 t ed
t of
House
Loan
U/s 80TTA
Bank Intt 100 160000.0
00 0
Total 3898381.
Income 70

Rounded 3898380.
off 00

TAX
COMPUT
A TION:

special
Tax on rate 3465330 @0.2 69306
above 0 6
nor
mal 433050 @0.1 13305 706371(*
rate 0 1)
Add:
Educati
on 21191
Cess @ 3%

Total Tax
Due 727562
Add: 10416
Interest

Total Tax &

Interest 737978(*
2)

Tax Paid TDS 1777

39
 Advanc
e 4010
Tax 00
Self
Asse
ss 1592 737978
ment 39
Tax

(*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 7211500. By Sales 9791716.00
Stock 00
To Purchases 3683378. By Discount on 826657.00
00 purchase
By Closing Stock 691500.00
(BO)
To Gross Profit 414995.0
0
11309873 11309873.00
.00
To Audit &DSC 7500.00 By Gross Profit 414995.00
Fee
To Bank 810.00 By Interest on 45000.00
Charges Security
To Car
Running&main 28450.00 By Rebate & 3.00
t Discount
To car 5252.00
insurance
To Conveyance 14215.00
Exp.
To 25259.00
Depreciation
To
Miscellaneous
Expenses 921.00
To Sales 16045.00
Promotion
361546
To Net Profit
459998.0 459998.00
0

BALANCE SHEET
For the year ending 31.03.2017

LIABILITIES AMOUNT ASSETS AMOUN

T
CAPITAL FIXED 143132
ASSETS .00
ACCOUNT
Opening 18921
Balance 17
23025
Add Addition 2.
00
36154
Add profit 6.
00
24839
15 CURRENT
.00 ASSETS
Sundary 920762.0
Debtors 0
11155
Less Drawing 0. 2372365.00
00
Advance to
Suppliers 1689406.
00
UNSECURED
LOANS 571000.00 DVAT 9321.00
Closing 691500.0
Stock 0

CURRENT
LIABILITIES

Sundry Creditors 687285.00 CASH AND

BANK
Cash in 13473.00
Hand
PAYABLES & Canara Bank 165246.4
PROVISIONS A/c 0
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 - 31305.
LIC Premium 00
Deduction Under
Section 4000. 35305.00
80TTA - Bank Intt 00

Total Income 330241.00

Rounded Off 330240.00

Tax
Computa
tion
Tax On Above 8024
Less: Rebate u/s 87A 2000
6024
Add:EducationCess @ 181
3%
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 532400.00 By Sales 13788116.
Stock 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 40000.00 By Gross Profit 1829528.0
Charges 0
To 138465.00 By Excess & 208.00
Advertisement Short
Exp.
To Audit Fee 20000.00
To Bank Charges 10255.10
To Car Insurance 15272.00
To Car 12500.00
Maintenance
To Commission 65000.00
To Conveyance 37750.00
Exp.
To Depreciation 126364.00
To Intt. Paid on
Car 31857.27
Loan
To Intt. Paid on
Other 17974.78
Loans
To Job Labour 312240.00
Charges
To Legal 26000.00
Expenses
To Postage Exp. 17000.00
To Printing &
Stationery 1302.00
To Rent 168000.00
To Salary 186000.00
To Sales 24400.00
Promotion
To Staff Welfare 19600.00
To Telephone 840.00
Exp.
To Net Proffit 558915.85
1829736.00 1829736
.00

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

LIABILITIES AMOUN ASSETS AMOUNT

T
CAPITAL A/C FIXED ASSETS
Opening 1320691. 716064.0
Balance 70 0
Add:Profit 558915.8
5
1879607. CURRENT
55 ASSETS
Less:Drawing 258789.0 1620818. Sundry
 0 55 Debtors
3269833.0
0
Advance to
SECURED Suppliers
LOANS
HDFC Bank 296480.9 158492.00
4
HDB Finance 27625.02 324105.9
6
Closing Stock 528700.00
CURRENT DVAT Refund 473144.00
LIABILITIES
Sundry VAT Input 73436.00
Creditors
2946470.
00
Advance From CASH &
BANK
Customers
944000.0 Cash In Hand 465788.00
0
Yes Bank 430.30
PAYABLES &
PROVISIONS ICICI Bank 177064.71
Accounts The Kangra
Charges 10000.00 Co-Op 2442.50
Payable Bank Ltd.
Audit Fee 20000.00 30000.00

5865394. 5865394.5
51 1

STATEMENT OF
ASSESSABLE INCOME AMOUNT(
Rs)

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

INCOME
FROMOTHER
SOURCES
Bank interest 7500.00

GROSS TOTAL 566415.85

INCOME
Less:Under chapter
VI-A
u/s 80C LIC 66751
.00
maxim
u/s 80D Mediclaim 2270 um to 15000
4 .00
u/s 80TTA 7500. 89251.00
00
Total Income 477164.85
Rounded off 477160.00
TAX COMPUTATION

Tax on above 22716

Less: Rebate u/s 2000
87A
20716
Add: Education 621
Cess @ 3%
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 4736812.0 By Sales 62966143.00
0
To Purchases 64053516. By closing 8393297.00
75 Stock
To Gorss Profit 2569111.2
5
71359440. 71359440.00
00
To Accounts 28500.00 By Gross Profit 2569111.25
Charges
To Audit fee 10000.00 By Excess & 6336.70
Short
To Bank Charges 1123.60
To Car Insurance 15562.00
To Car 58636.00
Maintenance
To Conveyance 18000.00
To Depreciation 92636.00
To Intt. Paid on 1087936.0
Loans 0
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
2575447.9 2575447.95
5
BALANCE SHEET
(For the year ending of 31st March 2015

LIABILITIES AMOUNT ASSETS AMOUNT

CAPITAL A/C FIXED ASSETS
(As Per
Opening 7493462 Annexures 774936.00
Balance .32 "A")
Add:Addition 770000.
00
Add:Profit 664630. CURRENT
35 ASSETS
8928092 Sundry
.67 Debtors
(As Per
Less: Drawing 240000. 8688092. Annexures
'C') 10690482.
00 67 00
Closing Stock 8393297.0
0
UNSECURED 9602629. Security 23500.00
LOANS 00
Special
CURRENT Additional
LIABILITIES Custom Duty 3483713.5
0
Sundry 2254791.
Creditors 85
Advance From
Customers
2730519. CASH & BANK
00
Cash In Hand 983.56
PAYABLES &
PROVISIONS Yes Bank Ltd 360065.46
Audit Fee 10000.0
Payable 0
VAT Payable 275189.
00
CST Payable 56962.0
0
TDS Payable 108794. 450945.0
00 0

23726977 23726977.
.52 52
 Statement Of Assessable
Income
Source Of Income Amount(R
s)
Income From Business
Net Profit from Business 664630.3
5

Income From Other Sources

Bank Interest 1000.00

Gross Total Income 665630.3

5
Less:Deduction Under Chapter
VIA
Deduction Under Section 80C -
LIC 21308.0
Premium 0
Deduction Under Section
80TTA - Bank 1000.00 22308.00
Intt

Total Income 643322.3

5
Rounded Off 643320.0
0
TAX COMPUTATI
ON

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- 63225.00
Inward
To Gorss Profit 1099739.00
14921891.00 14921891.00
By Gross
To Accounts 12000.00 Profit 1099739.00
Charges
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 & 29000.00
Forwarding
To Professional 8500.00
Charges
To Rent 120000.00
To Salary & 432000.00
Wages
To Sales 20325.00
Promotion
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 285977.0 Sundry
0 Debtors
Add: Addition 550000.0 5273719.
0 00
Add: Profit 314000.4 Closing 258600.0
5 Stocks 0
1149977.
45
Personal
Less: Drawing 180000.0 969977.4 Investment 1268000.
0 5 00
PNB FDR 1800000.
00
UNSECURED
LOANS
AshaYadav 1150000. CASH &
00 BANK
NeealmYadav 1750000. 2900000. Cash In 37775.00
00 00 Hand
Yes Bank 117452.0
Ltd 0
Punjab
PNB OD A/c 1591050. National 1941243.
00 Bank 45
CURRENT
LIABILITIES
Sundry Creditors
4869791.
00
Advance From
Customers
329429.0
0
EXPENSES
PAYABLE
Accounting 19200.00
Charges
Audit Fee 7500.00
CST 1342.00
Professional 8500.00 36542.00
Charges

10696789 10696789
.45 .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.
Deduction Under Section 80TTA - Bank 0 26808.00
Intt 0

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)
Partic Amount Particular Amount
ular
To Opening Stock 532400.00 By Sales 1986820.00
To Purchases 150492.00 By closing 538700.00
Stock
To Cartages 15904.00
To Wages 332000.00
To Gross Profit 1494724.0
0
2525520.0 2525520.00
0
To Account 40000.00 By Gross 1494724.00
Charges Profit
To Advertisement 106665.00 By Excess & 508.00
Exp. Short
To Audit Fee 25000.00
To Bank Charges 15255.10
To Car Insurance 15272.00
To Car 12500.00
Maintenance
To Commission 65000.00
To Conveyance 37750.00
Exp.
To Depreciation 156364.00
To Intt. Paid on Car 31857.27
Loan
To Intt. Paid on 17974.78
Other Loans
To Job Labour 112240.00
Charges
To Legal Expenses 26000.00
To Postage Exp. 17000.00
To Printing & 1302.00
Stationery
To Rent 198000.00
To Salary 176000.00
 To Staff Welfare 19600.00
To Telephone Exp. 840.00
To Net Proffit 420611.85
1495232.0 1495232.00
0
 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.