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May-18 Nov-18 May-19 Nov-19 May-20 Nov-20 May-21 -
Series1 5 5 4 4
*From May 2019, Marks are given only for descriptive questions.
Q.1 Draft an Audit programme for conducting the audit of a Public Trust
[May 09 (8 Marks)]
scope of audit.
Q.2 A Co-operative Society having receipts above Rs. 100 lakhs get its
Societies Act, 1912, who is not a C.A. State with reasons whether such
audit report can be furnished as tax audit report u/s 44AB of the
Or
• Proviso to Sec. 44AB of Income Tax Act, 1961 lays down that
Q.3 Mr. X deals in a commodity and purchase and sales of that commodity
is ultimately settled otherwise than by the actual delivery. During the
financial year 2018-19 he purchased the commodity worth Rs. 95 Lacs
and sold the same commodity for Rs. 104 Lacs and the contract was
settled otherwise than by the actual delivery. X seeks your advice
whether he is liable for tax audit u/s 44AB of the Income Tax Act.
delivery.
In the given case the difference of Rs. 104 lacs and Rs. 95 lakhs
• In such transactions though the contract notes are issued for full
Conclusion: Mr. X is not liable for Tax audit u/s 44AB of the
The company recorded the turnover of Rs. 1.13 crore during the
Cash discount (other than allowed in Cash memo/ sales invoice) Rs. 9,20,000
for the prescribed limit of tax audit and guide the company whether
As per section 44AB of the Income Tax Act, 1961, audit is required
computing turnover:
turnover even if the returns are from the sales made in the
earlier year/s.
as under:
than Rs. 1 Crore, the provisions related to tax audit are applicable
to the company.
information to you for the FY 18-19. Turnover made during the year
Rs. 124 lacs. Goods returned in respect of sales made during FY 17-18
is Rs. 20 lacs not included in the above. Cash discount allowed to his
customer in the nature of trade discount Rs. 5 lacs. Kindly advise him
whether he has to get his accounts audited u/s 44AB of the Income Tax
As per section 44AB of the Income Tax Act, 1961, audit is required
computing turnover:
even if the returns are from the sales made in the earlier
year/s.
Crore, the provisions related to tax audit are not applicable to Mr.
A.
financing charge.
from turnover.
(iv) Sale proceeds of fixed assets: Will not form part of turnover
audit:
prescribed;
Q.8 M/s. SB & Co. has been appointed as tax auditor under section 44 AB of
Co. are the statutory auditors of the firm but they are un able to give
their report on the financial statements of the firm. M/s. SB & Co., have,
however, completed their tax audit and want to issue their reports.
• Proviso to Sec. 44AB of Income Tax Act, 1961 lays down that
specified date and furnishes by that date, the report of the audit
of Form 3CD are true and correct. The audit report is in the
of firm.
reasons, it will be possible for the tax auditor to give his report in
No.3CD.
Q.9 Mr. PK is conducting the Tax audit u/s 44 AB of the Income Tax Act,
1961 of MG Ltd. for the year ended 31 st March, 2019. There is a
difference of opinion between Mr. PK and the Management in respect
of certain information to be furnished in Form No. 3CD. As a tax
auditor, Mr. PK has to report whether the statement of particulars in
Form 3CD are true and correct and the same is to be annexed to the
report in Form No. 3CA. Advise on the matters to be considered by Mr.
PK while furnishing the particulars in Form No. 3CD.
Form No. 3CD, the tax auditor should state both the view
the form of audit report may not have been amended to bring
not give the information against all or any of the clauses, the
examination.
Q.10 As the tax auditor of a non-corporate entity u/s 44AB of the Income
Tax Act, 1961, how would you ensure compliance of section 145 of the
• Sec. 145(2) provides that the C.G. may notify in the Official
Gazette from time to time Income Computation and Disclosure
Standards to be followed by any class of assessee or in respect
• Sec. 145(3) provides that where the A.O. is not satisfied about
the correctness or completeness of the accounts of the
assessee, or where method of accounting provided u/s 145(1)
have not been regularly followed by the assessee or income
form 3CD.
I Accounting Policies
II Valuation of Inventories
IV Revenue Recognition
VIII Securities
IX Borrowing Costs
GST of Rs. 25 lakhs but utilized it for his personal use. The
appeared before the department and stated his inability to pay the
Mr. A instructed his tax auditor not to disclose his GST registration
believing that the income tax department might trace his scrutiny
Or
complied with.
• Further, as per Clause (12) of Form 3CD, if the profit and loss
3CD:
examined.
Q.15 Write a short note on: Method of Accounting in Form No. 3CD of Tax
Audit.
profit or loss.
In such a situation, discuss the relevant clause of Form No. 3CD under
Or
u/s 133 of the Companies Act, 2013. During your tax audit u/s 44AB
of the Income tax act, 1961, the board of directors informed you that
it have been followed consistently and as such, there need not be any
• Clause 13(d) of Form No. 3CD of the tax audit report requires
follows:
ICDS I Accounting
Policies
ICDS II Valuation of
Inventories
Contracts
ICDS IV Revenue
Recognition
Assets
ICDS VI Changes in
Foreign Exchange
Rates
Grants
ICDS X Provisions,
Contingent
Liabilities &
Contingent Assets
Total
1961.
previous year.
profit or loss.
required to adjust the valuation for any tax, duty, cess or fee
Q.18 T Ltd’s previous year ended on 31 st March 2019. During that period, it
made a claim for refund of customs duty which was admitted as due
the claim in the profit and loss account nor reported the same in
clause 16(b) of Form 3CD for the reason that this has been admitted
as due by the authorities only in the next financial year. Further T Ltd
basis, but that was also not reflected in clause 13(b) of Form 3CD
order.
Q.19 While conducting the tax audit of A & Co. you observed that it made
an escalation claim to one of its customers but which was not
accounted as income. What is your reporting responsibility?
[May 11 (4 Marks)]
taken.
Q.20 While writing the audit program for tax audit in respect of A Ltd you
wish to include possible instances of capital receipt if not credited to
Profit & Loss Account which needs to be reported under clause 16(e)
of Form 3CD. Please elucidate possible instance. [May 13 (4 Marks)]
or
Or
In the course of your tax audit assignment u/s 44AB of the Income
Tax Act, 1961 of Dream Bank Ltd. You have instructed your assistant
to find out receipt of capital nature which might not have been
Audit procedures:
purchased the house property in the year 2014 for Rs. 30 lakh. The
lakh for the house property. How would you deal this matter in tax
audit report?
Accrued assessable
price lower than value adopted for stamp duty purpose, tax
Form 3CD.
Q.22 A is proprietor of a firm M/s ABC & Co. The firm has a turnover of
₹500 lakhs during the financial year ended 31.03.2019. The firm sold
land and building during the year for a consideration of Rs. 15 lakhs,
whose value for stamp duty purposes was Rs. 16 lakhs. As the Tax
Auditor of the said firm, is the above to be reported? If yes, how will
Accrued assessable
Tax Act, 1961, how would you report on the following: Capital
[Nov. 12 (2 Marks)]
following:
Q.24 As a tax auditor how would you deal and report the following: An
Or
Tax Act, 1961, how would you report on the following: Expenditure
subscriptions; and
ascertained.
you as the tax auditor for the financial year 2018-19. How would you
10,000.
carriages).
35,000.
Q.26 Mr. R, the Tax Auditor finds that some payments inadmissible under
Section 40A (3) were made, and advised the client to report the same
in form 3CD. The client contends that cash payments were made since
the other parties insisted upon the same and did not have Bank
covered under section 40A(3) read with rule 6DD were made
abovementioned clause.
Q.27 XYZ Ltd. pays Rs. 90,000 for its 10 employees to a Hotel as boarding
Company pays the amount in cash to the Hotel. The Hotel gives 10
bills each amounting to Rs. 9,000. The Company contends that each
Income Tax Act, 1961. As the tax auditor, how would you deal with the
matter in your tax audit report for the Assessment Year 2019-20?
[Nov. 14 (4 Marks)]
• In the given case, the tax auditor found that a hotel issued 6
bills to XYZ Ltd. Each amounting to Rs. 9,000 for boarding &
considered.
Q.28 Answer the following: As the tax auditor of a Company, how would
earlier year.
computation.
Q.29 You are the Tax auditor of BL & Co., a partnership firm engaged in the
business of plying of Goods Carriages for the financial year 2018-19
having a turnover of Rs. 20 crores. How would you deal and report on
the following:
carriages).
of ₹50,000.
₹10,000.
diamonds. For the year ended 31 st March 2019, you as the tax auditor
find that the entire exports are to another firm in U.S.A. which is
• In the instant case, however, Mr. Sharma has not made any
payments to his brother. On the contrary, he must have
received payments from him against exports made and, thus,
this clause would not be applicable to him.
Q.31 As a tax auditor how would you deal and report the following: An
assessee has paid rent to his brother Rs. 2,50,000 and paid interest to
Or
1961, how would you verify and report on the following: The assessee
[Nov. 17 (3 Marks)]
Ascendant or Descendant).
In the present case, an assessee has paid rent to his brother and
assessee; or
expenditure.
specified persons.
Q.32 You are doing Tax Audit of Private Limited Company for the financial
year ending 31st March, 2020. During audit, you notice that the
and out of which Rs. 100 Lakh was paid on 15/09/2019 and Rs.
16/09/2020.
(ii) GST payable of current financial year 2019-20 was ₹100 lakh and
out of this, 40 Lakh was paid on 25/05/2019 and balance of Rs.
60 Lakh remained unpaid till the due date of return.
The date of Tax Audit report and due date of return was 30th
September.
It has been assumed that 100 lakh was allowed in last year as it
report,
whichever is
earlier
GST
Q.33 How will you verify the Income & Expenditure of earlier years
3CD while carrying out Tax Audit u/s 44AB of the Income Tax Act,
(iii) Also see that all such items are properly disclosed.
Q.34 ABC Pvt. Ltd. was XYZ Pvt. Ltd. are the Companies in which public are
Pvt. Ltd. received some property being shares of XYZ Pvt. Ltd. The
As the tax auditor how would you deal with the situation?
same”
• This transaction now, falls under clause (x) of Sec. 56(2). For
Q.35 While doing Tax Audit, under section 44AB of the Income tax Act,
1961, of the accounts of Glue Private Limited for the Assessment Year
2019-20, it was found that during the Financial Year 2018-19, Glue
Private Limited had received 9,000 shares, the market value of which
was Rs. 90,000 on the date of transfer, at a price of Rs. 45,000 from
and there would be no cause for the Auditor to bring this matter in his
same”
• This transaction now, falls under clause (x) of Sec. 56(2). For
residents of India and provides you the following data related to such
issue:
how would you deal with the matter in your tax audit report?
[MTP-Oct.18]
Market Value:
which exceeds the fair market value of the shares as ref erred
exceeds the face value of Rs. 10 per share and fair market
value of the shares of Rs. 60 per share, and hence the case
Q.37 As a tax auditor how would you deal and report the following: An
Or
1961, how would you verify and report on the following: The assessee
has borrowed Rs. 50 lakhs from various persons partly in cash and
previous year;
provisions of section 269SS of the Income Tax Act and report the
Q.38 Discuss the reporting requirements in Form 3CD of the Tax Audit
Report u/s 44AB of the Income-tax Act, 1961 for the Brought forward
loss or depreciation allowance.
1 Serial Number
2 Assessment Year
3 Nature of loss /allowance (in rupees)
4 Amount as returned (in rupees)
5 Amounts as assessed (give reference to relevant
order)
6 Remarks
44AB of the Income Tax Act, 1961? [May 18 – Old Syllabus (4 Marks)]
speculation business.
Q.40 Discuss the reporting requirement in Form 3CD of Tax Audit Report
under Section 44AB of the Income-tax Act, 1961 for the Tax Deducted
at Source.
3CD:
XVII-BB:
2 Section
3 Nature of payment
Rs. 103 lacs for the year ended 31.03.2019. The Management
orders from customers. The raw materials required for every job are
Q.42 Discuss the reporting requirements in Form 3CD of the Tax Audit
Report U/S 44AB of the Income-tax Act, 1961 for the Tax on
distributed profits.
Q.43 ABC Ltd., having principal place of business in Delhi, is engaged in the
disagreed.
The management of ABC Ltd. instructed its tax auditor not to reveal
tax audit and cost audit as well. As a tax auditor, how would you deal
Report:
upon whether cost audit was carried out and if yes, details of
• For this purpose, tax auditor should obtain the copy of cost
auditor.
• In the present case, the cost auditor of ABC Ltd. has reported
Or
detail any one of the above ratios and how does it help the tax auditor
gross profit, etc., for the previous year and preceding previous
2. Gross profit/turnover
3. Net profit/turnover
4. Stock-in-trade/turnover
Material consumed/finished
5.
goods produced
decline in the same. The auditor may obtain data for about 4-5
manipulated.
Q.45 ABC Ltd. is engaged in providing certain services on which it did not
pay any service tax. As per company, said services were not liable to
against such order. ABC Ltd. has also requested the tax auditor not to
report as those services were not liable for service tax and it has also
under any tax laws other than Income Tax Act, 1961 and
proceedings.
Service Tax along with interest thereon. ABC Ltd. has also filed
file an appeal against the same. ABC Ltd. also requested the
services were not liable for any service tax and they have also
decided to file an appeal to CESTAT against the order of
raised during the previous year under any tax law other than
that Tax Audit relates only to tax matters with which the Income tax
auditor only the requisite information and records for the purpose of
and fair view of the state of affairs in the case of the balance
sheet and in the case of the profit and loss account/income and
• While carrying out tax audit u/s 44AB, the tax auditor is
required to state whether in his opinion, the particulars as
stated in Form 3CD are true and correct. The audit report given
u/s 44AB assist the income-tax department in ensuring
compliance of provisions of Income Tax Act by the assessee. In
order that the tax auditor may be in a position to explain any
question which may arise later on, it is necessary that he
should keep necessary working papers about the evidence on
which he has relied upon while conducting the audit and also
maintain all his necessary working papers.
evidence.
Q.47 State with reasons whether an auditor conducting tax audit ‘certifies’
Act, 1961.
of particulars.
different opinion.
Q.48 State whether a Tax audit report can be revised and if so state those
Or
You are doing the tax audit of a Limited Company. After submission of
mistake of law and due to this mistake, revised the final accounts. As
a tax auditor, company seeks your opinion whether the tax audit can
circumstances, the tax Auditor may have to revise his Tax audit
report also.
AGM.
earlier report.
Q.49 Define the term Audit under CGST Act. Describe the statutory
Sec. 2(13) of CGST Act, 2017 defines the term Audit as”Audit
under this Act or the rules made there under or under any other
turnover declared, taxes paid, refund claimed and input tax credit
Statutory Requirements:
prescribed.
2Cr. shall get his accounts audited and he shall furnish a copy
year with the audited annual F.S., and such other particulars
as may be prescribed.
Q.50 XYZ Limited is looking for an auditor for getting it accounts audited as
per GST. Being an expert in the indirect taxes field XYZ Limited is
be prescribed.
exceeds Rs. 2Cr. shall get his accounts audited and he shall
office.
the case and the interest of revenue, is of the opinion that the
not within the normal limits, he may, with the prior approval
Commissioner.
or
Q.52 List the best practice that can be adopted for GST Audit.
adopted:
Report.
compliance.
(3) Generalised audit software may be used for GST audit which
audit.
(5) Trial balance should be reviewed for detecting any set off of
areas of noncompliance.
Accountant from XYZ & Associates, observes on 23 July 2020 that PQR
Ltd has not filed its GSTR 3B for the month of Feb. & its GSTR-1 return
is also not complied with. What should Mr Sandhu advise the client
• The auditor should advise the company to file all the returns,
the returns filed by the company, verify the ITC claimed, verify
company.
Q.54 In terms of Sl. No. 5G of Form GSTR 9C, the turnovers included in the
audited financial statement for the period April 2017 to June 2017
the turnover as per the GST Laws. Please specify which of the
form part of turnover for the period July 2017 to March 2018
(d) Services were provided during the period June 2017. The service
was completed on 20.6.2017, but invoice for the service was
raised only on 1.8.2017.
(a) Since the goods were not approved and returned after the
stipulated period of 6 months, the value of the said supplies
one may reflect such adjustment under Part II, Sl. No. 5 Clause
O – ‘Adjustments in turnover due to reasons not listed above’
as addition.
(b) The said goods are liable to excise duty since the goods have
the State Level VAT laws. Since audit is being conducted for
of the Finance Act, 1994. The date for payment of service tax
because the charge u/s 66B gets attracted for the period June
liable for service tax, then tax would not be payable under the
turnover under this Sl. No. for the period April 2017 to June
2017.
(d) Since the invoice was raised after a period of thirty days,
has reduced his input tax credit. Assuming the input tax
reduced from outward supply for the tax period March 2018.
Q.55 As the auditor appointed under the GST Act, 2017, how would you
financial year:
though the due date for issuing invoice as per the contract
year and was carried forward to the current financial year shall
here.
Q.56 While conducting GST audit of PQR Ltd. you have observed the
following:
fluctuations (+/-)
GSTR 9.
Q.57 PQR Limited has exported goods to a Company located in USA. The
currency at ₹66.
GSTR 9C.
fluctuations (+/-)
GSTR 9.
Q.58 Please state which of the following are liable to reverse charge
charges GST @ 12%. The consignor has booked the GTA. The
recipient has paid the freight to GTA on ‘to collect’ basis. Would
does not charge GST. The consignor has booked the GTA. The
recipient has paid the freight to GTA on ‘to collect’ basis. Would
(c) Advocate Mr. X has provided legal service and charged GST of ` 18
on his invoice of ` 100. The advocate’s client has paid 118 to the
7D.
(b) Since consignment note has not charged GST @ 12%, reverse
person liable to pay freight, that is, the recipient and not the
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