Often, an audit of tax reporting is remembered before an on-site tax audit in order to clarify weak points and have time to work to correct the problems found. But today there is another approach that is gaining popularity. Tax audits are carried out in advance to prevent the threat of unnecessary attention from the tax authorities.
A tax audit performed in consultation with an experienced firm that provides auditing and taxation services in India helps in checking the correctness of the calculation and payment of taxes (tax accounting), monitoring the execution of declarations, and calculations.
The task of a tax audit is to prevent monetary losses of the organization, founders and, top managers. If the tax audit reveals violations, then the unpaid amount will be charged additionally, and the company will have to pay the fine.
Tax audits are useful both for confirming the professional competence of accountants and for identifying company resources.
Methods and methodology for conducting a tax audit
In practice, a tax audit is an individual procedure. Its course in each company is laid during the initial acquaintance with the activities of the company and “polished” with a deeper study of the procedure, methods of tax accounting, the formation of a taxable base in the company being audited.
But during the tax audit, certain actions can be distinguished that are typical for any company. So, what are these actions?
Analysis of accounting policy provisions for tax accounting purposes;
- Checking the tax accounting procedure for compliance with the requirements of the legislation; is the most massive stage of work in terms of volume. Also at this stage, such an important component as documentary evidence and justification of expenses (for example, for income tax) is checked.
- Verification of the correct application of the tax rate;
- Checking the correctness or possibility of applying for tax benefits;
- Formation of the final amount of tax payable;
- Filling out tax returns.
Of course, these are enlarged stages of the tax audit. At each of them, the experts who offer auditing and taxation services in India meet with a lot of nuances that are considered in more depth where full immersion is required.
Who cares about a tax audit?
Directors of the company. They bear personal responsibility, up to criminal liability, if there has been a violation. It is also important for them to know about the correct calculation of taxes because the money spent in vain can be redirected to business development.
Chief accountant and financial director. An audit of tax accounting is a way to insure yourself and accounting staff because an audit report can protect against claims from tax authorities since it can be referred to as evidence of innocence. It is also a test of your competitors because it is better to know about your mistakes than vice versa. Finally, tax audits sometimes make it much easier to tell management about potential threats to the organization.
To prevent your company from facing fines or just to know whether your company is paying tax correctly, choose auditing and taxation services in India.
This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.
Posted by:
CA Aman Aggarwal
AKGVG & Associates