Tax Audit Checklist

Additional Checklists
1. Corporate Governance
2. Peer Review
3. Return of Deposits Checklist
4. Tax Audit Checklist

CHAPTER IX
I. CORPORATE GOVERNANCE
1. Whether the criteria for applicability have been verified? The criteria being:
• Applicable to all the listed companies with paid-up capital of Rs.3 crores and
above or net worth of Rs.25 crores or more at any time in the history of the
company.
• Not applicable to the mutual fund scheme.
2. Whether the company has submitted a quarterly compliance report to the stock
exchanges within 15 days from the end of the quarter?
3. Whether the compliance in relation to the Board of Directors has been verified that:
• Board of directors of the company should comprise not less than fifty per cent of
non-executive directors
• The number of independent directors depends on whether the Chairman is
executive or non-executive Chairman.
• At least one-third of board should comprise of independent directors in case of
non-executive Chairman.
• At least half of the board should comprise of independent directors in case of
executive Chairman.
• In case of non-executive directors’ compensation whether the auditor has verified
that all compensation paid to non-executive directors has been fixed by the Board
of Directors and approved by shareholders in general meeting
4. Have you verified that the Board meetings were held at least four times a year and
that the time gap should not be more than four months between two meetings?
5. Have you verified that any particular director has not acted as Chairman of more than
five committees in which he is a director?
6. Have you verified that any particular director is not a member in more than 10
committees in which he is a director, three committees to be considered for this
purpose being Audit Committee, Shareholders Grievance Committee and the
Remuneration Committee?
7. Have you verified that the Board of Directors has prepared the Code of Conduct for all
board members and senior management of the company and also whether the same
has been posted on the website?
8. Have you verified that all board members and senior management on an annual basis
have given compliance to the Code of Conduct?
9. Whether all members of Audit Committee are financially literate and at least one of
them has accounting or related financial management expertise (both terms have been
explained in Clause 49) Two third of members should be Independent Directors.
10. Have you verified whether all committees – Remuneration, Audit and Grievance
Committees – have been constituted as per the requirements of the Clause 49?
11. Whether the Quarterly Results, Presentation made by companies to analysts have
been put on company’s website?
12. Have you verified whether the following matters are included in the Directors Report on
Corporate Governance?
(a) A brief statement on company’s philosophy on code of governance.
(b) Board of Directors
— Composition and category of directors for example promoter, executive,
non-executive, independent non-executive, nominee director, which
institution represented as Lender or as equity investor
— Attendance of each director at the BoD meetings and the last AGM
— Number of other BoDs or Board Committees he/she is a member or
Chairperson of
— Number of BoD meetings held, dates on which held
(c) Audit Committee
— Brief description of terms of reference
— Composition, name of members and Chairperson
— Meetings and attendance during the year
(d) Remuneration Committee
— Brief description of terms of reference
— Composition, name of members and Chairperson
— Attendance during the year
— Remuneration policy
— Details of remuneration to all the directors, as per format in main report.
(e) Shareholders Committee
— Name of non-executive director heading the committee
— Name and designation of compliance officer
— Number of shareholders complaints received so far
— Number not solved to the satisfaction of shareholders
— Number of pending share transfers
(f) General Body meetings
— Location and time, where last three AGMs held
— Whether special resolutions passed in the previous 3 AGMs
204 Audit Checklist – For Companies

— Whether any special resolution passed last year through postal ballot –
details of voting pattern
— Person who conducted the postal ballot exercise
— Whether any special resolution is proposed to be conducted through postal
ballot
— Procedure for postal ballot
(g) Disclosures
— Disclosures on materially significant related party transactions; i.e.,
transactions of the company of material nature, with its promoters, the
directors or the management, their subsidiaries or relatives etc. that may
have potential conflict with the interests of company at large.
— Details of non-compliance by the company, penalties, strictures imposed on
the company by Stock Exchange or SEBI or any statutory authority, on any
matter related to capital markets, during the last three years.
— Disclosure of accounting treatment, if different, from that prescribed in ASs
with explanation.
— Whistle Blower policy and affirmation that no personnel has been denied
access to the audit committee
(h) Means of communication
— Half-yearly report sent to each household of shareholders
— Quarterly results
— Which newspapers normally published in
— Any website, where displayed
— Whether it also displays official news releases
— The presentations made to institutional investors or to the analysts.
— Whether Management Discussion and Analysis is a part of annual report or
not.
(i) General Shareholder information
— AGM : Date, time and venue
— Financial Calendar
— Date of Book closure
— Dividend Payment Date
— Listing on Stock Exchanges
— Stock Code
— Market Price Data : High, Low during each month in last financial year
Audit Checklist – For Companies

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— Performance in comparison to broad-based indices such as BSE Sensex,

CRISIL index etc.
— Registrar and Transfer Agents
— Share Transfer System
— Distribution of shareholding
— Dematerialization of shares and liquidity
— Outstanding GDRs/ADRs/Warrants or any Convertible instruments,
conversion date and likely impact on equity
— Plant Locations
— Address for correspondence
Annexure I A
Format of Quarterly Compliance Report on Corporate Governance
Name of the Company:
Quarter ending on:
Particulars Clause of Compliance Remarks

Listing Status
Agreement Yes/No
1 2 3 4
I. Board of Directors 49 I
(A) Composition of Board 49 (IA)
(B) Non-executive Directors’
compensation & disclosures 49 (IB)
(C) Other provisions as to
Board & Committees 49 (IC)
(D) Code of Conduct 49 (ID)
II. Audit Committee 49 (II)
(A) Qualified & Independent Audit Committee 49 (IIA)
(B) Meeting of Audit Committee
(C) Powers of Audit Committee 49(IIC) 49 (IIB)
(D) Role of Audit Committee 49 (IID)
(E) Review of Information by Audit Committee 49 (IIE)
III. Subsidiary Companies 49 (III)

1 2 3 4
IV. Disclosures 49 (IV)
(A) Basis of related party transactions 49 (IVA)
(B) Disclosure of Accounting Treatment 49 (IVB)
(C) Board Disclosures 49 (IVC)
(D) Proceeds from Initial Public issues, rights
issues, preferential issues etc 49 (IVD)
(E) Remuneration of Directors 49 (IVE)
(F) Management 49 (IVF)
(G) Shareholders 49 (IVG)
V. CEO/CFO Certification
VI. Report on Corporate Governance 49 (V)
VII. Compliance 49 (VII)
Note:
1) The details under each head shall be provided to incorporate all the information required as
per the provisions of the clause 49 of the Listing Agreement.
2) In the column No. 3, compliance or non-compliance may be indicated by Yes/No/N.A.. For
example, if the Board has been composed in accordance with the clause 49 I of the Listing
Agreement, “Yes” may be indicated. Similarly, in case the company has not come out with
an IPO, the words “N.A.” may be indicated against 49 (VIIC).
3) In the remarks column, reasons for non-compliance may be indicated, for example, in case
of requirement related to circulation of information to the shareholders, which would be done
only in the AGM/EGM, it might be indicated in the “Remarks” column as – “will be complied
with at the AGM”. Similarly, in respect of matters which can be complied with only where the
situation arises, for example, “Report on Corporate Governance” is to be a part of Annual
Report only, the words “will be complied in the next Annual Report” may be indicated.
Non-Mandatory Requirements
1. Chairman of the Board
A non-executive Chairman should be entitled to maintain a Chairman’s office at the
company’s expense and also allowed reimbursement of expenses incurred in performance
of his duties.
2. Remuneration Committee
(i) The board should set up a Remuneration Committee to determine on their behalf and
on behalf of the shareholders with agreed terms of reference, the company’s policy on
specific remuneration packages for executive directors including pension rights and any
compensation payment.

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(ii) To avoid conflicts of interest, the Remuneration Committee, which would determine the
remuneration packages of the executive directors should comprise of at least three
directors, all of whom should be non-executive directors, the chairman of committee
being an independent director.
(iii) All the members of the Remuneration Committee should be present at the meeting.
(iv) The Chairman of the Remuneration Committee should be present at the Annual
General Meeting, to answer the shareholder queries. However, it would be up to the
Chairman to decide who should answer the queries.
3. Shareholder rights
The half-yearly declaration of financial performance including summary of the significant
events in last six months, should be sent to each household of shareholders.
4. Postal Ballot
Currently, though there is requirement for holding the general meeting of shareholders, in
actual practice only a small fraction of the shareholders of that company do or can really
participate therein. This virtually makes the concept of corporate democracy illusory. It is
imperative that this situation which has lasted too long needs an early correction. In this
context, for shareholders who are unable to attend the meetings, there should be a
requirement which will enable them to vote by postal ballot for key decisions. Some of the
critical matters which should be decided by postal ballot are given below:
(i) Matters relating to alteration in the memorandum of association of the company like
changes in name, objects, address of registered office etc;
(ii) Sale of whole or substantially the whole of the undertaking;
a. Sale of investments in the companies, where the shareholding or the voting rights
of the company exceeds 25%;
b. Making a further issue of shares through preferential allotment or private
placement basis;
c. Corporate restructuring;
d. Entering a new business area not germane to the existing business of the
company;
e. Variation in rights attached to class of securities;
f. Matters relating to change in management.
5. Audit qualifications
Company may move towards a regime of unqualified financial statements.
6. Training of Board Members
Company shall train its Board members in the business model of the company as well as
the risk profile of the business parameters of the company, their responsibilities as directors,
and the best ways to discharge them.
7. Mechanism for evaluating non-executive Board Members
The performance evaluation of non-executive directors should be done by a peer group
comprising the entire Board of Directors, excluding the director being evaluated; and Peer
Group evaluation should be the mechanism to determine whether to extend/continue the
terms of appointment of non-executive directors.


II. PEER REVIEW CHECKLIST FOR THE AUDITOR

(REFERRED TO AS PRACTICE UNIT)
1. The peer review excludes:
i. Management consulting engagements;
ii. Representing a client before the authorities;
iii. Engagement to prepare tax returns or advising clients in taxation matters;
iv. Engagement for the compilation of financial statements;
v. Engagement solely to assist the client in preparing, compiling or collating information
other than financial statements;
vi. Testifying as expert witness; and
vii. Providing expert opinion on points of principle such as accounting standards or the
applicability of certain laws, on the basis of facts provided by the client.
Y/N/NA / Remarks
2. Whether the practice unit has ensured:
i. that while performing attestation services due compliance has
been made with the technical standards laid down by the
Institute?
ii. place proper system for maintaining the quality of attestation
services performed by him?
3. Whether the practice unit has adhered to various statutory and other
regulatory requirements?
4. Whether there has been enhancement on the reliance placed by the
users of financial statements for economic decision making?
5. Whether the general controls have been executed like independence,
maintenance of professional skills & standards, outside consultations,
staff supervision and development and office administration?
6. Whether the member has followed independent policies and
procedures as also communicated and monitored the same and
periodically reviewed the practice unit’s association with clients?
7. Whether the member has established plans for personnel needs -
based on current and anticipated clients?
8. Whether the member has established recruitment policy, personnel
policy and same have been communicated to new personnel?
9. Whether the member has any policy for outside consultation?
10. Whether the member has documented resolution of differences of
opinion?
11. Whether the member has written guidelines on responsibility,
expected performance and qualifications for advancement of the staff?

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Y/N/NA / Remarks
12. Whether there is a system of evaluating performance, system of
scheduling and staffing as also standardised forms, checklists,
questionnaires?
13. Whether the member has established procedures for retention of
records such as clients’ name, nature of engagement,
commencement of audit, date of audit report, billing etc.?
14. Whether the member has maintained staff register and proper library
containing relevant books and publications of the Institute?
15. Whether the member has organised and delegated field work to
competent personnel?
16. Whether the member has given directions, supervision and review of
work so as to be appropriate to the staff’s professional competence?
17. Whether the assistants have been informed about their
responsibilities, and objectives of what they are doing and the use of
audit programmes?
18. Whether the partners and managers closely control time spent by
audit team?
19. Whether the professional competence is commensurate with
responsibility allotted to the staff?
20. Whether there is new appointee orientation as also periodic
performance appraisals?
21. Whether the member has a system of continuous professional
development of its staff by access to libraries, internet, other sources
of updated technical knowledge as well as designation of experts as
available for consultation in area of expertise?
22. Whether the following Technical Standards have been complied with:
i. ASs issued by the ICAI;
ii. Statement on SAP and AAS issued by the ICAI;
iii. Framework for the preparation and presentation of financial
statements and statements on Standard Auditing Practices and
Guidance Notes on Related Services issued by the ICAI;
iv. Statements issued by the Institute of Chartered Accountants of
India;
v. Compliance of the Guidance notes issued by the Institute of
Chartered Accountants of India;
vi. Notifications/Directions issued by the Institute of Chartered
Accountants of India including those of a self regulatory nature
vii. Compliance with the provisions of the various relevant statutes
and/ or regulations which are applicable in the context of the
specific engagements being reviewed.

Y/N/NA / Remarks
23. Verify whether the permanent and current audit include following:
i. Appointment and the relevant resolution about appointment
ii. Terms of engagement
iii. Manner of determining audit fees
iv. System of book keeping
v. List of books of account maintained by the entity
vi. Particulars of the promoters, directors and their powers.
vii. Name of the persons writing books of account and other
authorized officers
viii. Deed governing constitution such as Memorandum and
Articles of Association, Partnership Deed
ix. Profit and loss account and balance sheet
x. Reports of branch auditor, summary of points of internal
auditor and director
xi. Note on client’s business and its accounting system
xii. Analytical review procedures in order to:
(a) identify important areas of accounts according to their
size
(b) highlight unusual or unexpected figures or relationships
in accounts
(c) design audit tests which concentrates on important and
unusual items
(d) obtain sufficient audit assurance to allow the reduction or
even elimination of detailed testing in some areas
xiii. Assessment of audit risk by using the professional judgment
and audit procedures to ensure that it is reduced to low level
xiv. Preliminary estimates of materiality for the audit
xv. Class of relevant accounting transactions, sample selection
and extent of checking
xvi. Compliance test to evaluate the reliability of key controls
xvii. Material weaknesses in the operation of key controls
communicated to the management
xviii. Performance of analytical review procedures, substantive test
to obtain sufficient appropriate audit evidence
xix. Letter of representation from the management on fundamental
accounting assumption and disclosure in changes in
accounting policies having material effect;

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Y/N/NA / Remarks
xx. Reservations made by branch auditor in the audit report have

been dealt within the finalisation of accounts
xxi. Working papers contain adequate evidence to support the
audit opinion. Working papers include:
(a) Copies of the audit programme
(b) Particulars of audit test carried out
(c) Copies of the principle working papers
(d) Letter of representation from the management on
fundamental accounting assumption and disclosure in
changes in accounting policies having material effect
(e) A letter of representation or copy, if addressed to the
other auditors
xxii. Summary of work done, problems, important decisions and
audit conclusions
xxiii. Review by senior in charge of work of all assistants, audit
programme followed and work performed as per time schedule
xxiv. Review of unadjusted errors to determine whether individual
and aggregate effect is not material
xxv. Post balance sheet events
xxvi. Formulation of draft audit opinion
xxvii. Comparison of budgeted time to actual and reasons for major
variations
xxviii. Complete staff evaluation forms
24. Whether the practice unit on being selected has made arrangements
to fulfil the following obligations:
i. To provide access or make available records or documents
considered relevant within reasonable time at one place;
ii. To provide explanation or further particulars;
iii. To provide all assistance and information in legible form;
iv. Has maintained certain records that represents the adequacy of
quality control policies and procedures followed by the practice
unit these records being recommendatory records like
(a) Profile of the practice unit
(b) Lists of clients
(c) Staff files
(d) Manual of policies and procedures or mandatory records
like working papers?

III. RETURN OF DEPOSITS CHECKLIST

Client ___________________________________ Year ended 31st March, 200___
A. GENERAL
(1) The return is to be made under Rule 10 of the Companies (Acceptance of Deposits)
Rules, 1975. Hence, knowledge of these rules and section 58-A of the Companies Act,
1956 is necessary.
(2) The return is to be filed with the Registrar of Companies by a company to which the
Rules apply, viz. a non-banking non- financial company.
(3) The return is to be filed before 30 June of each year, giving particulars prescribed as
of 31st March.
(4) The purpose of this checklist is to enable the auditor to certify the correctness
of the particulars required to be furnished in the Return and not on compliance
with section 58-A of the Companies Act, 1956 and the Rules.
B. VERIFICATION OF RETURN
PART 1 REMARKS
(1) This part deals with deposits referred to in Rule 3(2)(i); i.e., loans
from shareholders, deposits guaranteed by director(s) of the
Company and deposit against unsecured debentures, and deposits
from the public, Rule 3(2)(ii).
(2) Ensure that deposits outstanding at the end of the year (items 105
and 155) include unclaimed deposits.
(3) Confirm that particulars of deposits outstanding at the end of the

year (items 105 and 155) agree with the Registrar of Deposits and
the balance in the General Ledger account.
(4) If the accounts of the Company have been audited before the date
of certification of the Return, verify particulars given in items 141,
142, 191 and 192 with particulars of unclaimed deposits required to
be furnished in the Directors’ Report.
(5) If the accounts of the Company have not been audited before the
date of certification of the Return and if items 141, 142, 191 and
192 are stated as “nil” obtain Management’s representation to that
effect.
(6) Debentures which are not secured by mortgage of moveable

property or which are not convertible are not exempt and should be
treated as “unsecured” debentures (even though they may be
secured by a floating charge) and shown against item 111.

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REMARKS
PART 2
(1) This part deals with particulars of “liquid assets” and advertisement
inviting deposits or statement in lieu of advertisement. (Rule 4/4A).
(2) Confirm that the figure stated against item 210 includes “unclaimed”
deposits (items 141, 142, 191 and 192).
(3) Physically verify securities held as liquid assets, and obtain

confirmation from the Management that these are free of any
charge or lien.
(4) If securities held as liquid assets have been deposited with bank,
obtain particulars thereof from the bank along with a declaration to
the effect that securities are held free of any charge or lien.
(5) Verify the advertisement given by the Company published in an

English newspaper and a vernacular newspaper and indicate the
date(s) of publication thereof.
(6) Indicate the period of validity of the previous advertisement (i.e.,

the one prior to the advertisement referred to in Item 5 above).
The advertisement is valid up to the earliest of the following:
(a) 6 months from the date of closure of the financial year in

which it was issued, (State Date) or
(b) until the date on which the Balance Sheet is laid before the
shareholders in general meeting, (State Date) or
(c) where the AGM for any one year has not been held the latest
day on which the meeting should have been held.
[The advertisement is valid from the date of its publication to

the earliest of (a), (b) and (c)].
PART 3
(1) This part deals with “exempt” deposits.
(2) Details furnished should be verified from the ledger or Cash Book.
(3) Where the financial year of the Company ends on 31st March,
ensure that a reconciliation of the Secured and Unsecured
Loans shown in its Balance Sheet and the totals of items 110,
160 and 320 is furnished.

REMARKS
MANAGER’S CERTIFICATE
(1) Verify particulars of paid-up capital and free reserves from the
latest accounts laid before the shareholders.
(2) Ensure that deferred revenue expenditure, intangible assets,

miscellaneous expenditure not written off and accumulated
unprovided depreciation (refer to Notes to accounts and Auditors’
Report) are deducted.
(3) If free reserves include any capital reserve, ensure that it

represents realised capital profit.
(4) Ensure that the Return is duly signed by an authorised official of
the Company and dated.
AUDITORS’ CERTIFICATE
(1) Prepare draft of the auditors’ certificate.
(2) Ensure that it is signed by a partner in his personal name on
behalf of the firm.
(3) Where the financial year of the Company ends on 31st March
and the auditors’ report for the year under audit has not
been signed as at the date of certification of the Return
ensure that the fact that particulars furnished in Part 1 and 3
are subject to audit is stated in the auditors’ certificate.
(1) Attach working papers, referenced and cross - referenced to the
draft of the Return and / or the above.
(2) Give details of the total time taken in certifying the Return. HOURS
Completed by : Reviewed by:

Date : Date :

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IV. TAX AUDIT CHECKLIST (FORM 3CD)
Part A
1. Name of the Assessee
2. Address
3. Permanent Account No.
4. Status
5. Previous Year Ended
6. Assessment Year
Part B
Clause Particulars of the Clause as per Form 3CD
7 (a) If firm or Association of Persons, indicate names of partners/members and their
profit sharing ratios.
(b) If there is any change in the partners/members or their profit sharing ratios since
the last date of preceding year, the particulars of such change
Verification Outline CWP Ref. Comments,
if any
i. Verify Deed of Partnership for the names of the
partners and their profit sharing ratios.
ii. Verify the Partnership ratios from the Deed that was
filed with returns of the year prior to PY under audit.
Also verify the Form 3CD of that year.
iii. Correlate those ratios with that of the year under
report by checking the Deed relevant to the year
under audit.
iv. Note and disclose change, if any.
Notes
Only share in profit to be disclosed; i.e., remuneration, if
any should not be disclosed in this clause.


if any
Every change in the ratio should be disclosed.
Ratio for sharing losses, if different from the profit sharing
ratio, should also be disclosed.
Disclose both year’s ratios along with names in a tabular
form.
Conclusion:

8 (a) Nature of business or profession. (if more than one business or profession is carried
on during the previous year, nature of every business or profession)
(b) If there is any change in the nature of business or profession the particulars of such
change.

if any
i. Obtain list of activities/principal lines of business from
client and changes from previous year (if any) (i.e.,
both new and discontinued businesses)
ii. Verify above with the financial statements of the
current year, board and general meeting minutes, and
previous years Return of Income.
iii. Identify and disclose new activities in pre-operative
stage, even if no revenues are generated from the
same. For this purpose scrutinise accounts such as
capital w.i.p., pre-operative expenditure, interest costs,
etc.
iv. Check if the client carries out more than one business
or profession during the previous year, even if
discontinued within the year.
v. Disclosure :
(a) Under broad heads viz., manufacturing, trading
services and financial services,
(b) Nature of each business/profession should be
disclosed,
(c) Nature of product/services under each broad
head.
Conclusion:

217

9 a. Whether books of account are prescribed under Section 44AA? If yes, list of books
so prescribed.
b. Books of account maintained.
(In case books of account are maintained in a computer system, mention the books
of account generated by such computer system)
c. List of books of account examined

if any
i. For persons carrying on legal, medical, engineering or
architectural professions or the profession of
accountancy or technical consultancy or interior
decoration or authorised representative or film artist
the following books are prescribed u/s 44AA:
a. cash book;
b. journal, if the accounts are maintained according
to the mercantile system of accounting;
c. Ledger;
d. Carbon copies of bills; and
e. Original bills wherever issued to the person and
receipts in respect of expenditure incurred by the
person.
ii. Obtain list of books of account maintained by the
assessee. If books of account maintained on
computer then obtain certificate from software
developer/vendor for books of account generated by
the computer.
iii. Compare list of books maintained with previous year’s
schedule.
Notes
Disclose only those books that are verified for the
purpose of expressing true and fair view on financial
statements.
MIS and other reports generated by the computer system
should not be included.
Marks of identification should be affixed on each and
every book and document examined.
Lists of books maintained and examined will be common
unless not produced for audit thereby placing limitation on
the scope of our audit. Reason/note should be given for
such difference.
Conclusion:


10 Whether the profit and loss account includes any profits and gains assessable on
presumptive basis, if yes, indicate the amount and the relevant section (44AD, 44AE,
44AF, 44B, 44BB, 44BBA, 44BBB or any other relevant section)
if any
Profit and gains assessable on presumptive basis would
be of the following businesses:
• Civil Construction
• Plying, hiring or leasing of goods carriages
• Retail business
• Shipping business in case of non-residents
• Business of exploration, etc. of mineral oils
• Operation of aircraft in case of non-residents
• Foreign companies engaged in the business
of civil construction, etc., in certain turnkey projects.
Scrutinise the income accounts for the nature of income
to ascertain whether the same would fall in any of the
above categories and the conditions/requirements
prescribed under the Income-tax Act, 1961 are satisfied/
complied.
Conclusion:

11 (a) Method of accounting employed in the previous year.
(b) Whether there has been any change in the method of accounting employed vis-a-vis
the method employed in the immediately preceding previous year.
(c) If answer to (b) above is in the affirmative, give details of such change, and the
effect thereof on the profit or loss.
(d) Details of deviation, if any, in the method of accounting employed in the previous
year from accounting standards prescribed u/s 145 and the effect thereof on the
profit or loss.

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if any
i. Verify Notes to Account for disclosure of significant
accounting policies.
ii. Compare with previous year’s tax audit report for
basis adopted.
iii. Scrutinise Notes to Accounts, Auditors’ report and
CARO for change in method of accounting and the
quantification thereof.
Notes
Presently, the standards prescribed under Section 145 of
the Income-tax Act, 1961 are :
• Disclosure of accounting policies
• Prior period items
• Extraordinary items
• Changes in accounting policies
Differences if any, between above standards and those
carried by ICAI need to be identified and effect thereof
disclosed.
A change in an accounting policy will not amount to a
change in the method of accounting and hence such
change in the accounting policy need not be mentioned
under sub-clause (b).
Conclusion:

12 (a) Method of valuation of closing stock employed in the previous year.
(b) Details of deviation, if any, from the method of valuation prescribed u/s 145A and
the effect thereof on the profit or loss.

if any
i. Ensure disclosure is consistent with Significant
Accounting Policies under Notes to Accounts.
ii. Check that the following is included in the valuation of
stocks: tax, duty, cess or fee (by whatever name
called).


if any
iii. If the items mentioned in (ii) above are not included,
then quantify the effect thereof on opening and closing
stock valuation.
Note
The effect on the profit and loss account of deviation from
method of valuation prescribed under Section 145A
should be given individually on the opening and closing
stocks. Both the effects should be disclosed separately
and not netted off. In case of netting off, there should be
proper disclosure.
Conclusion:
Particulars of the Clause as per Form 3CD

12A Give the following particulars of the capital asset converted into stock-in trade:—
a) Description of capital asset;
b) Date of acquisition;
c) Cost of acquisition;
d) Amount at which the asset is converted into stock-in-trade;

if any
i. Verify whether the assessee has converted any capital
asset into stock in trade by scrutinising the Assets
accounts,
ii. Obtain the list of assets converted into stock-in-trade,
iii. Verify the date of acquisition and cost of acquisition
with the supporting documents
iv. Obtain the amount at which it is converted into stock
in-trade
v. Disclosure:
• List of assets converted in stock-in-trade including
description,
• Date of acquisition of each asset,
• Cost of acquisition for each,

221

if any
• Amount at which the capital asset is converted
into Stock-in-trade.
Conclusion:
Particulars of the Clause as per Form 3CD

13 Amounts not credited to the profit and loss account, being:
13(a) The items falling within the scope of Section 28

if any
i. Scrutinise liability and capital reserve accounts to
ascertain any amount in the nature of income.
ii. Scrutinise audit report and notes to accounts for
comments, if any, on deferment/non-accounting of
income.
iii. Identify whether the business of the assessee enjoys
the benefit of any import licence, cash assistance for
exports, claims for duty drawback, proforma credits,
refunds, etc.
Note :
Verify whether income when (i) to (iii) above is
accrued, in accounts, if due. If not accounted, quantify
separately.
iv. Review the items of financial statements, that
considering the propriety of transaction, would be
generating revenue but are provided free of cost or at
subsidised rates. Disclose such items separately and
quantify the effect wherever possible.
v. Discuss with the management by making prima facie
inquiry of any facilities or other benefits provided to
others out of gratis or otherwise.
Note:
Put appropriate disclaimer note on management
representation about facilities provided for use by the
company and not charged for or services subsidised.
Conclusion:


13(b) The proforma credits, drawbacks, refunds of duty of customs or excise, or refunds of
sales tax or value added tax, where such credits, drawback, refunds are admitted as
due by the authorities concerned

if any
i. Discuss with the management for any of the above
claims admitted as due by the authorities concerned
at the year end.
ii. Verify whether the above claims have been credited to
the profit and loss account and, if not, obtain reasons.
iii. Scrutinise subsequent receipts of customs or excise
refunds, drawbacks, refund of sales tax or VAT.
Ascertain when these claims were admitted as due by
the authorities concerned.
iv. Verify recent sales tax/VAT assessment orders to
determine whether any refund is due. Also consider
verifying the VAT audit report.
v. Cross check with notes to accounts and qualifications
in auditors, report for such credits.
Conclusion:

13(c) Escalation claims accepted during the previous year

if any
i. Check the accounting policy followed for accounting
for escalation claims as also any adverse comments
in auditors’ report/ notes for non-accounting of claims.
Conclusion:

223

13(d) Any other item of income

if any
i. Scrutinise the notes to account and auditors’ report for
any undisclosed/unaccounted revenue/income. (Refer
items listed in Section 2(24).
Conclusion:

13(e) Capital receipts, if any.

if any
i. Review items representing credits in the nature of
capital receipt particularly those credited to capital
reserve.
ii. Check whether any of these could be credited to
revenue under tax laws. If yes, ensure appropriate
disclosure.
Notes
All capital receipts which are not directly related to assets/
liabilities should be disclosed here.
Conclusion

14 Particulars of depreciation allowable as per the Income-tax Act, 1961 in respect of each
asset or block of assets, as the case may be, in the following form:
(a) Description of asset/block of assets.
(b) Rate of depreciation
(c) Actual cost or written down value as the case may be
(d) Additions/deductions during the year with dates; in case of addition of an asset, date
put to use; including adjustments on account of
(i) Modified Value Added Tax credit claimed and allowed under the Central Excise
Rules, 1944, in respect of assets acquired on or after March 1, 1994.


(ii) Change in rate of exchange of currency, and
(iii) Subsidy or grant or reimbursement, by whatever name called.
(e) Depreciation allowable.
(f) Written down value at the end of the year.

if any
i. Obtain a schedule in the form required under the
clause. Description of asset/block of asset should be
under the following heads:
• Building
• Plant and Machinery
• Furniture and Fixtures
• Vehicles/Cars (acquired after 1-4-1990)
• Other Specified Assets and
• Intangible Assets
• Computers
ii. Identify the opening block of WDV from previous
year’s return of income.
iii. Check/vouch adjustments to the block of fixed assets
during the year from statutory audit file or relevant
supports.
iv. Identify separately and vouch for adjustments on
account of the following:
• CENVAT, from RG 23A Part II and RG 23C Part
II registers
• Change in rate of exchange of currency, from the
financial statements/audit work papers
• Subsidy/grant/reimbursement, etc., verify the
scheme under which it is received and ensure
appropriate treatment in books.
v. Confirm whether rates and amount for claim of
depreciation are as per Section 32 and Rule 5 of the
Income-tax Act and Rules respectively.
Notes
Suitable note should be put for our reliance on last return
of income for opening WDV of the asset, since that may
be subject to change during assessment.
225
An assessee may not desire to claim depreciation in

respect of any block of asset in any year. In that case, a
specific mention about the assessees not to claim
depreciation should be stated. The relevant decision case
laws on which reliance is placed by the assessee for
exercising his option not to claim depreciation should also
be stated by way of a note.
It is possible that there may be certain disputes about the
rate of depreciation in respect of any block of assets or
with reference to the computation of WDV, etc. in the
earlier years. Therefore, the figures of WDV of block of
assets or the rates of depreciation may change. Suitable
note with regard to such items in respect of which
disputes of earlier years are not resolved up to the date
of giving the audit report and it should be clarified that the
figure of depreciation allowable may change as a result of
any decision which may be received after the audit report
is given.
Conclusion:

15. Amounts admissible under Sections (a) 33AB (b) 33ABA (c) 33AC(wherever applicable)
(d) 35 (e) 35ABB (f) 35AC (g) 35CCA (h) 35CCB (i) 35D (j) 35DD (k) 35DDA (l) 35E
Debited to the profit & loss account. (showing the amount debited and deduction
allowable under each section separately);
(a) Not debited to the profit and loss account.

if any
i. Discuss whether any of the sections referred are
applicable to the assessee. The business activities/
expenditures covered are:
• Growing and manufacturing of tea (33AB)
• Prospecting/extraction/production of petroleum
and/or natural gas (33ABA)
• Operation of ships (33AC)
• Scientific research (35)
• Telecommunication services (35ABB)
• Eligible projects or schemes for promotion of
social and economic welfare (35AC and rules 11F
to 11-O)

if any
• Rural development programmes (35CCA)
• Conservation of natural resources (35CCB)
• Preliminary expenses (35D)
• Amortisation of expenditure in case of
amalgamation/demerger (35DD)
• Amortisation of expenditure incurred under
voluntary retirement scheme (35DDA)
• Prospecting/extraction/production of any minerals
(35E)
ii. Scrutinise general ledger for items of allowable
expenses, particularly those in the nature of capital
expenditure, which under tax laws are allowed as
deduction (e.g. licence fees, preliminary expenses as
defined under 35D)
iii. Check depreciation schedule for any capitalised asset,
is claimed as an allowance under tax laws and ensure
separate disclosure.
iv. Ensure appropriateness of deductions (particularly
weighted deductions) claimed under the relevant
sections.
For items in (i) above, verify and classify items which
have been charged to current statement of profit and loss,
and those that are not.
Conclusion:

16(a) Any sum paid to an employee as bonus or commission for services rendered, where
such sum was otherwise payable to him as profits or dividend [Section 36(1)(ii)]

if any
i. Obtain a schedule of bonus, ex gratia and commission
paid/payable to employees stating the name of the
employee, designation, amount of bonus/ex gratia/
commission paid/payable, etc.
Note
Disclose particulars of the above payments only if payable
in lieu of dividends or profits.
Conclusion:

227

16(b) Any sum received from employees towards contributions to any provident fund or
superannuation fund or any other fund mentioned in Section 2(24)(x); and due date for
payment and the actual date of payment to the concerned authorities [Section
36(1)(va)].

if any
i. Check payroll records for any deductions on account
of provident fund, superannuation fund, ESIC or
contribution towards any other fund for the welfare of
employees.
ii. Obtain and verify chart for employees contribution
towards the above funds with their respective due
dates and actual dates of payment.
Conclusion:

17 Amounts debited to the profit and loss account, being:
17(a) Expenditure of capital nature

if any
i. Scrutinise audited accounts and schedules for
expenditures:
a. Repair & Maintenance
b. Travelling expenses
c. Salaries & Wages
d. Stores & spare parts consumption
e. Depreciation
f. Legal, Professional & Consultancy charges
g. Filing Fees
h. Capital losses written off
i. Miscellaneous Expenditure written off (Balance
Sheet item)


if any
j. Miscellaneous/general expenses, for capital
expenditure written off.
k. Computer software expenses to ensure that it
does not include any system software.
Notes
Common examples of such write offs would be –
expenses on increasing authorised capital, share issue
expenses written off, obsolete assets written off, etc.
Legal opinions for specific accounting treatment to be
brought to Manager / Partner’s attention.
Conclusion:

17(b) Expenditure of personal nature

if any
i. Verify whether Directors’ remuneration and
perquisites covered by contractual obligations.
ii. Scrutinise report under CARO for any personal
expenses reported.
iii. Scrutinise earlier years assessment orders for any
expenses being disallowed as personal expenses by
the Income-Tax Department, whether disputed or not
by the assessee.
iv. Scrutinise schedules/vouchers for expenses like –
Staff Welfare, Entertainment, Rent, General Expenses,
Sales Promotion, Travelling, Hotel & Club bills, Guest
house expenses, Drivers Salary, Telephone expenses,
Electricity expenses and Motor Car expenses.
Conclusion:

229

17(c) Expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like,
published by a political party

if any
i. Refer to the Companies Act checklist in the file for
comments on contribution to political parties.
ii. Verify the supporting documents such as souvenirs or
pamplets issued by the political party.
Notes
Contribution to trade union affiliated to a political party
should also be reported. Disclosure is not required, if
trade union separately recognised
Conclusion:

17(d) Expenditure incurred at clubs –
(i) as entrance fees and subscriptions
(ii) as cost for club services and facilities used

if any
i. Check the payments to clubs for expenditure of
personal nature or entertainment. Disclose if the same
item is included in another clause of the Statement of
Particulars.
ii. Check the other revenue heads of account for
payments to clubs.
Notes
Payments to clubs would not include payments to service
organisations like Lions, Rotary, Giants, Diners, etc.
Conclusion:


17(e) (i) Expenditure by way of penalty or fine for violation of any law for the time being in
force.
(ii) Any other penalty or fine.
(iii) Expenditure incurred for any purpose which is an offence or which is prohibited by
law.

if any
i. Make prima facie inquiry about the applicable laws to
the organisation with the management and also
identify specific statutes based on review of clients
business.
ii. Verify from audit work papers for expenditure in the
nature of penalty, fine, illegal payments.
iii. Verify Income Tax, Sales Tax, Excise, P.F. and other
orders for penalty and other payments.
Conclusion:

17(f) Amounts inadmissible u/s 40(a).

if any
i. Obtain statement of payments made outside India,
(with corresponding TDS amount) on account of
interest, royalty, fees for technical services or
other sum paid outside India or in India to a non-
resident (other than a company/foreign company)
chargeable under the Act.
ii. Cross check with expenditure in foreign currency
disclosed in the notes to account.
iii. Verify whether adequate tax has been deducted and
paid on the above payments. If not, then give details
of non/short deductions.
iv. For the items of payments stated in (i) above where
the tax deducted in subsequent year or deducted but
paid after the time limit given in of section 200(1), the
deduction of the amount of royalty etc. should be
taken in the previous year of payment of tax. Report
the list of such inadmissible amounts.

231

if any
v. In case of payments to residents of interest,
commission or brokerage, fees for professional or
technical services, contractor/sub-contractor on
which tax was not deducted or deducted but not paid
before the prescribed time limit such payments will be
disallowed. Report the list of such inadmissible
amounts.
vi. FBT and STT are inadmissible for computing income.
Verify the amounts based on available information and
report them separately under this clause.
vii. Disclose the amount of income tax, FBT and wealth
tax charged to the statement of profit and loss.
viii.Obtain an employee wise statement of salaries paid
outside India with corresponding tax withheld and
verify the accuracy of the deduction.
ix. 40(a)(iv) Provident fund – TDS – Salaries – pending.
x. Write appropriate disclaimer where it was not possible
to verify or ascertain certain inadmissible amounts
pertaining to any of the above categories.
Note
Where taxes are paid abroad and are grouped under
rates and taxes/any other account head, the same should
be disclosed.
In cases where taxes are not deducted properly during
the year but on an overall basis the amount deducted for
the year is correct, then non-deduction/short deduction for
a particular month need not be reported.
Conclusion:


17(g) Interest, salary, bonus, commission or remuneration inadmissible under Section 40(b)/
40(ba) and computation thereof.

if any
i. Verify the details of payments to partners/members for
interest, salary, bonus, commission or remuneration
with reference to the deed of partnership/other
documents (in case of AOP or Body of Individuals)
and books of account.
ii. Work out payments in excess of limits prescribed
under Section 40(b)/40(ba) and report the same in the
Statement of Particulars.
Notes
Payments to the partner only in the capacity as partner
should be stated (i.e.; payments for specific professional
services, etc. should not be reported). However, obtain
particulars thereof for the purposed.
Conclusion:

17(h) a) Whether a certificate has been obtained from the assessee regarding payments
relating to any expenditure covered under section 40A(3) that the payments were
made by account payee cheques drawn on a bank or account payee bank draft, as
the case may be, [Yes/No]
b) amount inadmissible under section 40A(3), read with rule 6DD [with break-up of
inadmissible amounts];

if any
i. Obtain a certificate from the assessee for all payments
in excess of Rs. 20,000/- stating that they were made
by account payee cheque/bank draft.
ii. In case the assessee is unable to give a clean
certificate then the certificate should state payments
that were made otherwise than by a/c payee cheque/
draft then payments exceeding Rs. 20,000/- in cash or
by cheques/drafts which are not crossed should be
listed therein.

233

if any
iii. Cross verify the list given by the assessee with the
bank statements.
iv. Scrutinise cash book to ensure completeness and
accuracy of list provided by the assessee.
v. Independently look for such payments in cash that
may not be included in the list / certificate provided by
the assessee.
vi. Ensure disclosure for obtaining certificate and
inadmissible amounts under S. 40(A)(3) read with
Rule 6DD. (See note below)
Notes
The details obtained from the assessee should also cover
the payments falling within the exceptions provided in
Rule 6DD(a) to (l), and payments not relating to
expenditure such as advances and loans to employees,
which are not to be reported in the Statement of
Particulars.
Ensure that the disclosure consist of inadmissible
amounts which is 20% of the amounts in excess of each
such expenditure as the limit is qua each expenditure.
Payments to employees in respect of salaries, wages,
leave travel assistance, etc., are also to be reported if
they are paid otherwise than by crossed cheque/draft.
Conclusion:

17(i) Provision for payment of gratuity not allowable under section 40A(7)

if any
i. Obtain schedule for provision for payment of gratuity.
ii. Cross tally schedule with the amount as per audited
accounts.
iii. Check the provision for gratuity which has become
payable to employees who have left the services.
iv. Check the actual date of payment in case of funds set
up by the company and the due date as per the trust
deed.

if any
v. Indicate the following separately
a. Provision towards approved gratuity fund
contribution
b. Provision for gratuity that is due and payable
during the year.
c. Other provisions.
Conclusion:

17(j) any sum paid by the assessee as an employer not allowable under section 40A(9)

if any
i. Obtain list of payments made by an employer towards
the setting up or formation or contribution to any fund,
trust, company, etc., other than:
a. Recognised provident fund.
b. Recognised gratuity fund.
c. Recognised superannuation fund.
d. As required by or under any other law.
ii. Indicate in the Statement of Particulars the payments
made by the employer other than those mentioned in
(i) above.
Conclusion:

17(k) Particulars of any liability of a contingent nature.

if any
i. Scrutinise liability accounts to identify any liability of
contingent nature debited to the profit and loss
account.

235

if any
Notes
State that this does not include provision for leave
encashment debited to the profit and loss account and
provided in accordance with Accounting Standard 15.
Conclusion:

17(l) Amount of deduction inadmissible in terms of section 14A in respect of the expenditure
incurred in relation to income which does not form part of the total income,

if any
i. Does the assessee have any exempt income;
ii. If ‘yes’ then verify whether the assessee has incurred
any expenditure to earn exempt income,
iii. Consider the account head that are likely to contain
expenditure relating to such income and scrutinise
them,
iv. If there is any expenditure relating to such exempt
income then such expenditure incurred should be
disclosed under this point and added back to the
taxable income.
v. In case of composite business the expenditure relating
to the exempt income should be determined as per
method to be specified by CBDT.
14A is amended from AY 2007-08.
Conclusion:


17(m) Amount inadmissible under the proviso to section 36(1)(iii).

if any
i. Has the assessee accrued/paid any interest on loan
borrowed,
ii. Ascertain the purpose of such loan,
iii. Where the amount is borrowed for capital asset which
is still not put to use ensure that such amounts are not
treated as expenses,
iv. This inadmissible amount should be shown in this
point
In case the asset for which any amount is borrowed and it
is put to use during the year under report then apportion
the amount of interest on time basis.
Conclusion:

18 Particulars of payments made to persons specified under section 40A(2)(b)

if any
i. Obtain duly certified list of persons specified under
Section 40A(2)(b) and cross tally with previous years
list. Also check whether the entities/parties listed in
the register maintained under Section 301 of the
Companies Act, 1956 or referred to in any Board
Minutes fall in category of specified persons.
ii. Obtain list of expenditures in respect of which
payment has been made or is to be made for goods,
services and facilities (including remuneration and
interest to partners) to the above-mentioned category
of persons and check with:
• Agreements/authorisation
• Vouchers/entries in the general ledger
• Personal accounts of the parties
Notes
Payment would include amounts paid/payable.

237

if any
Only amounts debited to profit and loss account should
be disclosed.
Conclusion:

19 Amounts deemed to be profits and gains under section 33AB or 33ABA or 33AC.

if any
i. Confirm the workings of profits and gains as per the
requirement of these sections.
ii. In respect of section 33ABA verify from the
accountants’ report required under sub-section (2) of
this section.
Conclusion:

20 Any amount of profit chargeable to tax under section 41 and computation thereof

if any
i. Obtain a statement of written back during the year.
Inquire whether allowance in tax returns was claimed
in earlier years.
ii. Scrutinise other income and reserves account and
report receipts, upon succession of business.
iii. For Power Companies only — In case of sale of
fixed assets, check whether the sale value exceeds
the WDV of that particular asset. If yes, report
difference under this clause. However, this should be
restricted to the difference between cost and WDV of
that particular asset.
iv. In case of sale of assets used for scientific
research, the excess of sale proceeds (together with
deduction under section 35(2)(i), 35(2)(ia), 35(2B)(c))
over capital expenditure; or the amount of deduction
above, whichever is lower should be reported.


if any
v. Obtain a statement of recovery of debts earlier written
off. Report to the extent amount allowed as deduction
in the past assessments.
vi. In case assessments are not complete for the years in
respect of which bad debts are recovered, ensure
appropriate disclosure by way of note.
vii. Obtain list of amounts withdrawn from special reserve
created under section 36(1)(viii) with corresponding
deduction allowed in earlier assessments. Report with
note as discussed under verification point (vi) above.
viii.In case business (in respect of which all the above
income is received) is discontinued, any unclaimed
loss (other than speculation loss) of the year in which
the business is discontinued for that particular
discontinued business can be set off against these
incomes. Consider the effect of the same in the
computation under this clause.
Conclusion:

21(i)* In respect of any sum referred to in clauses (a), (b), (c), (d), (e) or (f) of section 43B the
liability for which -
(A) pre-existed on the first day of the previous year but was not allowed in the
assessment of any preceding previous year and was
(a) paid during the previous year
(b) not paid during the previous year
(B) was incurred in the previous year and was
(a) paid on or before the due date for furnishing the return of income of the
previous year under section 139(1);
(b) not paid on or before the aforesaid date.

if any
i. Scrutinise previous years tax audit report, current
liabilities & secured/ unsecured loans (for interest
accrued and due) to identify any of the following
amounts pertaining to earlier years:

239

if any
• Tax, duty, cess or fee (by whatever name called)
levied under any law (e.g., excise duty provision,
customs duty, service tax, electricity duty, R&D
cess, textile cess, municipal taxes, profession tax,
octroi duty, etc);
• Any sum payable by employer by way of
contribution to provident fund or superannuation
fund or any fund for the welfare of employees;
• Bonus or commission payable to employees;
• Interest payable on any loans or borrowings from
public financial institution, state financial
corporation or industrial investment corporation,
and
• Interest payable on term loans availed from a
scheduled bank.
• Leave encashment
• Any sum payable by an employer in lieu of leave
at the credit of employee
ii. Verify payments relating to above (not allowed as a
deduction in the earlier assessment years) with
relevant supports viz., challans, receipts, bank advise,
etc. Also disclose amounts unpaid out of above.
iii. For expenditures mentioned in (i) above debited to
profit and loss account (including those not routed
through the profit and loss account) of the current
year, determine the amount remaining unpaid (i.e.,
shown as liabilities) as at 31st March. Also verify
amounts paid subsequently on or before the filing of
return of income, and balance outstanding.
iv. In respect of any tax, duty, cess or fee reported in
clause 21(i) it is necessary to state whether it is
routed through the profit and loss account. For this
refer to the accounting policy on sales to confirm if
sales include excise duty, sales tax, service tax, etc.
v. Verify report under CARO for any statutory dues
remaining unpaid.
(Note: The information given under 21(i)(B) is only up to
the date of signing this report. )
Conclusion:


22(a) Amount of Modified Value Added Tax credits availed of or utilised during the previous
year and its treatment in the profit and loss account and treatment of outstanding
Modified Value Added Tax credits in the accounts

if any
Purchase of goods and materials
i. Document the system of accounting excise at the time
of purchase of goods and materials, point of availment
or utilistion of CENVAT credit and entries passed at
the time of availment/utilisation of CENVAT credit.
ii. Quantify and verify from excise records the amount of
CENVAT credit available for the year, amount utilised
and the balance outstanding.
iii. Provide a summary of above account with description
and ensure disclosure of the same
Conclusion:

22(b) Particulars of income or expenditure of prior period credited or debited to the profit and
loss account

if any
i. Check the items under the head prior period
adjustments, or check the notes on accounts to
ensure whether any expenditure or income of prior
year is debited or credited to profit and loss account.
ii. Reference to be made to the method of accounting
followed by the organization and stated at clause 11
of Form 3CD.
Notes
In case of cash system of accounting, there will not be
any item appearing under this clause.
Conclusion:

241

23 Details of any amount borrowed on hundi or any amount due thereon (including interest
on the amount borrowed) repaid, otherwise than through an account payee cheque
[Section 69D]
if any
i. Obtain a statement of hundis borrowed and repaid
during the year with the mode and amount of each
individual payment.
ii. Also check the mode of payment of interest due on
hundi during the year.
iii. Obtain loan confirmations.
iv. Disclose all payments made for above otherwise than
by account payee cheque.
v. Ensure disclosure of standard note of the firm for our
inability to verify whether the payments are done
through account payee cheque or not.
Notes
It should be noted that hundi does not include bills of
exchange but bills of exchange includes hundi.
Where any amount is borrowed on hundi or repayment
thereof (including interest) is otherwise than through and
account payee cheque drawn on a bank, the amount so
borrowed or repaid shall be deemed to be the income of
the person borrowing or repaying for the previous year in
which the amount was borrowed or repaid.
Conclusion:

24(a) *Particulars of each loan or deposit in an amount exceeding the limit specified in Section
269SS taken or accepted during the previous year:—
(i) Name, address and permanent account number (if available with the assessee) of
the lender or depositor;
(ii) Amount of loan or deposit taken or accepted;
(iii) Whether the loan or deposit amount was squared during the previous year;
(iv) Maximum amount outstanding in the account at any time during the previous year;
(v) Whether the loan or deposit was taken or accepted otherwise than by an account
payee cheque or an account payee bank draft
* (These particulars need not be given in the case of a government company, a
banking company or a corporation established by a Central, State or Provincial Act.)


if any
i. Obtain statement in the required format and check
with relevant accounts in general ledger.
ii. Scrutinise loan accounts, current account and deposit
accounts for similar items.
iii. Scrutinise advances account to find out whether such
advances are in the nature of loans/deposits.
iv. Obtain loan confirmations
Notes
Particulars to be disclosed above would apply only in
cases where the loans/deposits taken exceeds Rs. 20,000
during the year.
Adjustments made in the ledger accounts of the parties
by journal entries would also amount to repayment or
acceptance of loan/deposit.
In case details are not given because they are
voluminous, ensure proper disclosure (like in respect of
bank overdraft/cash credit, fixed deposits, etc.)
Ensure standard note in respect of disclaimer on inability
to verify whether the loan/deposit was taken by an
account payee cheque/draft.
Conclusion:

24(b) Particulars of each repayment of loan or deposit in an amount exceeding the limit
specified in Section 269T made during the previous year:—
(i) name, address and permanent account number (if applicable with the assessee) of
the payee;
(ii) Amount of the repayment;
(iii) Maximum amount outstanding in the account at any time during the previous year;
(iv) Whether the repayment was made otherwise than by account payee cheque or
account payee bank draft.

243

if any
i. Particulars (i) to (iv) need not be given in the case of
a repayment of any loan or deposit taken or accepted
from Government, Government company, banking
company or a corporation established by a Central,
State or Provincial Act
ii. Obtain statement in the required format and check
with relevant accounts in general ledger.
iii. Scrutinise loan accounts, current account and deposit
accounts for similar items.
iv. Ensure that all the items, which are covered under 24
(a) above and in respect of which repayment is made
during the year, disclosure is made under this clause.
Notes
Particulars to be disclosed above would apply only in
cases where the loans/deposits taken exceeds
Rs. 20,000/- during the year.
Adjustments made in the ledger accounts of the parties
by journal entries would also amount to repayment or
acceptance of loan/deposit.
In case details are not given because they are
voluminous, ensure proper disclosure (like in respect of
bank overdraft/cash credit, fixed deposits, etc.)
Ensure standard note in respect of disclaimer on inability
to verify whether the loan/deposit was repaid by an
account payee cheque/draft.
Though section 269T deals with only deposit, reporting
will be for both loans and deposits since the form requires
comment on both. However, if the client takes the view
that section 269T does not cover repayment of loan then
appropriate disclosure should be made.
Conclusion:


24(c) Whether a certificate has been obtained from the assessee regarding taking or
accepting loan or deposit, or repayment of the same through an account payee cheque
or an account payee bank draft. [Yes/No]

if any
i. Obtain a certificate from the assessee that all the
loans or deposits or repayments of loans have been
made through an account payee cheque or an
account payee bank draft
ii. No certificate is required if repayment of any loan or
deposit taken or accepted from Government,
Government company, banking company or a
corporation established by a Central, State or
Provincial Act
Conclusion:

25(a) Details of brought forward loss and depreciation allowance in the following manner to
the extent available

if any
i. Verify the last return of income filed, and make a list
of all the carry forward losses.
ii. Verify the recent assessment orders and ensure that
the effect of such assessment, so far as applicable to
the carry forward losses and depreciation, has been
properly dealt in the annexure prepared.
iii. Ensure disclosure of amount of carry forward loss
being subject to change on account of open
assessments.
iv. Get the annexure so prepared verified by the audit
Group.
Notes
All types of carry forward of losses, depreciation etc.
should be included.
Remarks column should give the status under appeal, etc.
Disclosure:
Ensure that the disclosure is made in the below
mentioned Format
245
Serial Assessment Nature of Loss Amount as Amount Remarks

Number year /Allowance returned as assessed
(in rupees) (give reference
to order)
NIL
Conclusion:

25(b) Whether a change in shareholding of the company has taken place in the previous year
due to which the losses incurred prior to the previous year cannot be allowed to be
carried forward in terms of section 79.

if any
i. Is there any brought forward loss? If no b/f loss is
there then skip this point,
ii. Is the assessee other than company in which the
public is substantially interested?
iii. If ‘yes’, then is there any change in the share holding
pattern carrying voting rights compared to the year
whose loss is sought to be set off?
iv. Is the above change is 51% or more on the last day
of the year under report?
v. If yes then report the same under this clause.
Such b/f loss will not be admissible for setoff. It should be
noted in the Return of Income and suitably disclosed.
Conclusion:


26 Section-wise details of deductions, if any, admissible under Chapter VIA

if any
i. Verify the return of income of earlier years to ensure
that all the deductions claimed in the previous year,
and if applicable in the current year, have been
disclosed.
ii. Scrutinise the current year financial statements and
audit work papers for identifying any claims available
under the chapter.
iii. In respect of sections under which independent
certificates are required, ensure that a copy of the
same is put on the file.
iv. Ensure full particulars of deductions with quantification
thereof are verified and signed off by audit staff.
Notes
Though the tax audit report is in relation to business and
profession income, disclosure of information on deduction
available under other heads should be made.
The information required under this clause can be given
only when the return of income for the year has been
made up.
Conclusion:

27 a) Whether the assessee has complied with the provisions of Chapter XVII-B regarding
deduction of tax at source and regarding the payment thereof to the credit of the
Central Government. [Yes/No]
b) If the provisions of Chapter XVII-B have not been complied with, please give the
following details*, namely:—
Amount
i Tax deductible and not deducted at all
ii Shortfall on account of lesser deduction than required to be deducted
iii Tax deducted late
iv Tax deducted but not paid to the credit of the Central Government

247

if any
i. Obtain a statement of TDS deducted showing the
particulars of the head under which tax is deducted,
amount deducted, due date of payment, payment date
and amount and the delay in payment.
ii. Check the relevant vouchers, challans and e-TDS
returns submitted of the tax so deducted.
iii. Identify various heads of expenses where TDS there
is a likelyhood of TDS liability and scrutinise the those
accounts to ensure that wherever TDS was liable to
be deducted, is deducted and deducted correctly,
(Ensure you have the correct heads and rate chart
including changes if any during the year)
iv. Scrutinise relevant accounts for expense heads such
as salaries, interest, royalties, contractors/sub-
contractors, professional technical fees etc.
v. Scrutinise the ledger to obtain instances where tax is
deductible but it is not deducted or there is short
deduction,
vi. Report the instances where tax is deducted but paid
after due date,
vii. Report instances of late deduction of tax and non
payment to the Government account.
Notes
Instances of
— Tax deductible and not deducted;
— Tax deducted lower than what was required;
— Tax deducted late;
— Tax deducted and not paid or late paid;
The above reporting should be done within the
relevant heads for which the entire details are
submitted. In case it is not possible to go through the
entire account due to the quantum of entries then it
should be disclosed by a suitable note that it was
done on a test check basis.
Ensure appropriate disclosure.
Conclusion:


28(a) In the case of a trading concern, quantitative details of principal items of goods
traded —
(i) Opening Stock:
(ii) Purchases during the previous year:
(iii) Sales during the previous year:
(iv) Closing Stock:
(v) Shortage/excess, if any:

if any
i. Verify whether the quantitative information is given as
per stock records maintained by the assessee or
compiled from financial statements.
ii. Verify that at least the items, which constitute more
than 10% of the value of purchases or consumption or
turnover as the case may be are disclosed as a
separate item.
iii. The information about percentage of yield, shortage of
raw materials as well as shortage and percentage of
finished products to be given to the extent data is
available from the assessee’s records. Non-receipt of
particulars, if any, should be stated.
Conclusion:

28(b) In the case of a manufacturing concern, quantitative details of principal items of raw
materials, finished products and byproducts —
A Raw Materials -
(i) Opening Stock
(ii) Purchases during the previous year
(iii) Consumption during the previous year
(iv) Sales during the previous year
(v) Closing Stock
(vi)* Yield of finished products
(vii)* Percentage of yield
(viii)* Shortage/excess, if any

249
B Finished Products/Byproducts —
(i) Opening Stock
(ii) Purchases during the previous year
(iii) Quantity manufactured during the previous year
(iv) Sales during the previous year
(v) Closing Stock
(vi) Shortage/excess, if any
*Information may be given to the extent available.

if any
i. Verify quantitative details from the notes to account.
Conclusion:

29 In the case of a domestic company, details of tax on distributed profits under section
115-O in the following form:—
(a) Total amount of distributed profits;
(b) Total tax paid thereon;
(c) Dates of payment with amounts.

if any
i. Ensure that total amount of profits distributed and the
tax paid thereon is as per the audited profit and loss
account.
ii. Verify and obtain copy of challan for payment of tax
and date of payment.
Notes
Only the dates of payment in respect of tax on dividend is
to be given and not the date of payment of dividend.
Conclusion:


30 Whether any cost audit was carried out, if yes, enclose a copy of the report of such
audit [See section 139(9)]

if any
i. Verify the CARO for any cost audit conducted under
Section 233B of the Companies Act, 1956. Include
whether cost audit has been conducted or not in the
letter of representation.
ii. If yes, whether a copy of the same has been attached
to the Tax Audit Report.
Notes
No verification is required in case the audit has been so
conducted.
Also, if the audit was supposed to have been conducted
and the same has not been conducted, this fact is to be
disclosed in the report.
Conclusion:

31 Whether any audit was conducted under the Central Excise Act, 1944, if yes, enclose a
copy of the report of such audit.

if any
i. Inquire with the client, whether any audit conducted
under the Central Excise Act, 1944. Include whether
audit under Central Excise Act, 1944 has been
conducted or not in the letter of representation.
ii. If above audit has been conducted then attach copy of
the same to the Tax Audit Report.
Notes
No verification is required in case the audit has been so
conducted.
Conclusion:

251

32 Accounting ratios with calculations as follows
(a) Gross profit/Turnover
(b) Net profit/Turnover
(c) Stock-in-trade/Turnover
(d) Material consumed/Finished goods produced

if any
i. Verify figures required for the purpose of ratios from
the audited accounts and ensure that they are
consistently followed.
ii. Give particulars of the components of the amounts
considered in the ratios.
Notes
The manner in which the gross profit has been derived
should be disclosed and be followed consistently.
Net profit should be the profit before tax but after all the
other adjustments.
Stock-in-trade should be the average of opening and
closing stock of work-in-process and finished goods.
Finished goods produced would be derived by the
following formula :
Turnover xxx
Less: Gross Profit xxx
xxx
Add: Closing Stock of Finished of goods xxx
xxx
Less: Opening Stock of Finished goods xxx
Finished goods produced xxx
The stock figures should be taken as per books of
account and not the adjusted number as per section
145A.
Conclusion:

Prepared Date: Reviewed Date :

by : by :
Annexure A
Part A Repeat the details as reported in Part A of the Form 3CD.
Part B i. This part should contain the relevant code applicable to the business.
ii. Details of items stated in Serial numbers 1 to 9 and 14 to 16 should be same as in
the Annual Accounts.
iii. Remaining items from Serial numbers 10 to 13 should be verified against relevant
account head if given separately in the annual accounts or from the relevant
account balances as per general ledger verified by the auditor.
Annexure 1
Part A
1 Name of the assessee:
2 Address:
3 Permanent account number:
4 Status:
5 Previous year ended:
6 Assessment year:
Part B
1 Nature of Business or profession in respect Code
of every business carried on during the
Previous Year
Part C
Parameters Current year Preceding Year

Rs. Rs.
1 Paid-up share capital/capital of partner/proprietor
2 Share Application Money/Current
Account of Partner or Proprietor
3 Reserves and Surplus/Profit and Loss Account
4 Secured loans
5 Unsecured loans
6 Current liabilities and provisions
7 Total of Balance Sheet

253
Parameters Current year Preceding Year

Rs. Rs.
8 Gross turnover/gross receipts
9 Gross profit
10 Commission received
11 Commission paid
12 Interest received
13 Interest paid
14 Depreciation as per books of account
15 Net Profit (or loss) before tax as per
Profit and Loss Account
16 Taxes on income paid/provided for in the books

NOTES
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Tax Audit Checklist

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Tax Audit Checklist

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Additional Checklists

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— Performance in comparison to broad-based indices such as BSE Sensex,

Particulars Clause of Compliance Remarks

206 Audit Checklist – For Companies

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208 Audit Checklist – For Companies

II. PEER REVIEW CHECKLIST FOR THE AUDITOR

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210 Audit Checklist – For Companies

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xx. Reservations made by branch auditor in the audit report have

212 Audit Checklist – For Companies

III. RETURN OF DEPOSITS CHECKLIST

(3) Confirm that particulars of deposits outstanding at the end of the

(6) Debentures which are not secured by mortgage of moveable

Audit Checklist – For Companies

(3) Physically verify securities held as liquid assets, and obtain

(5) Verify the advertisement given by the Company published in an

(6) Indicate the period of validity of the previous advertisement (i.e.,

(a) 6 months from the date of closure of the financial year in

[The advertisement is valid from the date of its publication to

(1) This part deals with “exempt” deposits.

214 Audit Checklist – For Companies

(2) Ensure that deferred revenue expenditure, intangible assets,

(3) If free reserves include any capital reserve, ensure that it

Completed by : Reviewed by:

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IV. TAX AUDIT CHECKLIST (FORM 3CD)

1. Name of the Assessee

3. Permanent Account No.

5. Previous Year Ended

216 Audit Checklist – For Companies

Verification Outline CWP Ref. Comments,

Clause Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

Audit Checklist – For Companies

Clause Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

218 Audit Checklist – For Companies

Clause Particulars of the Clause as per Form 3CD

Clause Particulars of the Clause as per Form 3CD

Audit Checklist – For Companies

Verification Outline CWP Ref. Comments,

Clause Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

220 Audit Checklist – For Companies

Verification Outline CWP Ref. Comments,

Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

Audit Checklist – For Companies

Verification Outline CWP Ref. Comments,

Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

222 Audit Checklist – For Companies

Clause Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

Clause Particulars of the Clause as per Form 3CD

Verification Outline CWP Ref. Comments,

Audit Checklist – For Companies