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TMI BlogAUDIT PROCESSX X X X Extracts X X X X X X X X Extracts X X X X ..... n as per the Audit Plan including mandatory checks to be carried out. (viii) Conveying the preliminary findings of the audit to the taxpayer and recording his response. (ix) Preparing the draft audit report (DAR) for the Monitoring Committee Meeting (MCM) held by the Commissioner. (x) Examining the audit paras in MCM. (xi) Preparing the final audit report (FAR), within thirty days of the Meeting. (xii) Communicating the final audit report to the taxpayer (ADT-02). 6.1 Methodology for selection of taxpayers A scientific and well deliberated Risk Assessment programme, developed in coordination with the DGARM, is used to identify risky taxpayers. 6.1.1 Risk parameters for selection of taxpayers The list of risky taxpayers, which are selected based on risk parameters is shared with the Audit Commissionerates for audit. These risk parameters are subject to change depending upon audit feedback leading to their recalibration and identification of new risk parameters. 6.1.2 The CGST Audit Commissionerates are categorized based on number of large, medium and small categories of taxpayers (the criteria of which is annual turnover of the taxpayers) within their jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Audit and DGARM on a reference to be made by the Audit Commissioner, so that in future the said person may be identified for audit on priority. Also, the GST compliance rating of said person may also be modulated to reflect non-compliance with the mandate of audit. 6.3 Audit preparation - desk review Detailed methodology for desk review has been described in Chapter 5.5 of the GSTAM, 2019. The salient elements of Desk Review are: (i) The desk review lays emphasis on gathering data about the taxpayers, his operations, business practices, accounting system, studying flow of materials, cash and documentation. (ii) The information available with the Department is reconciled with the collected information. Results of Financial Ratios, Revenue Risk Analysis and Trend Analysis is documented. (iii) Examination of financial statements, cost & tax audit reports and records is carried out and all receipts of taxpayer as mentioned in financial records are examined for Tax liability and to verify eligibility for any exemption. 6.4 Audit Plan Based on the result of the preliminary Desk Review carried out by the auditor as per steps / procedure laid down in the Audit Manual, a draft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e implication. (iv) Documents submitted to various Government departments/ Regulatory Authorities such as Customs, Income Tax, Banks, etc. by the registered person should be used in cross verification of the information filed by the registered person for the assessment of GST. Information available with open sources such as electronic and print media, internet etc. should also be used for verification of information filed by the registered person. (v) The audit verification gives maximum opportunity to the auditor to go through the registered person's records. As a result of which, an auditor may come across a new set of information or documents, not earlier known, during any of the earlier stages. Further, while examining an issue, the auditor may come across a fresh issue also requiring detailed examination. In such a situation, the auditor should, after obtaining the approval of higher authority, go beyond the scrutiny envisaged under the Audit Plan and record the reasons for doing so. At the end of each entry in working papers, the auditor must indicate the findings. If any of the planned verifications is not conducted, the reasons for the same must also be recorded. While th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on conducted as per the audit plan. Any additional issue (not mentioned in the original plan) verified / point noticed is also mentioned. The initial views of the taxpayers are recorded in the verification document. Details of spot recoveries and willingness of the registered person to pay short levy are also recorded. (ii) The narrative of the objections in the audit report should be concise, to the point and self-contained and should convey the gist of the objection raised. Telegraphic narration should be avoided. Where the objections are based on any circulars or clarifications issued by the Board, they should be quoted. Cases, in which certain specified conditions are not fulfilled, giving rise to objections are backed by interpretations as decided by the court judgments, decisions of Appellate authorities or supported by technical literature, those should be cited. (iii) The DAR should be prepared within the shortest time span possible, i.e., within 10 -15 days of the commencement of the audit in the registered person's place and placed before the Monitoring Committee for decision. 6.8 Monitoring Committee Meeting (MCM) Monitoring Committee Meeting (MCM) should be convene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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