GST Audit Documentation: Requirements and Procedure

Deepti Shikha

18 Feb, 2021

Audit documentation is a written record, including electronic documents that are prepared during the course of the audit. The audit documentation forms the foundation for auditors to preserve the various scrutiny identified during the audit. These act as proof of performance of the audit and also safeguard the auditor at the time of the dispute. Besides, any type of document is vital to determine the path of any transaction; it plays an essential role in all the audits under the GST law and also in general. Furthermore, the audit documentation and its working papers are the vital records of the work done, conclusions made, and the opinion drawn. As per GST’s perspective, audit documentation or working papers are documents received as evidence during the conduct of the GST compliance audit.

Numbers cannot speak, but documents prepared properly can speak the numbers. This is how the properly documented working papers can show the numbers, which is how an auditor proves to others, including a court of law, that the audit was conducted effectively and methodically.

Read our article:Power of Tax Authorities to conduct Special Audit under GST Act

What is the Meaning of GST Audit?

Audit according to GST involves an examination of records or data, returns and other documents maintained by a GST registered person. It ensures the accuracy of the declared turnover, paid taxes, refund claimed, input tax credit availed and assess other compliances under the GST Act to be checked by an authorised expert.

GST is a taxation regime based on trust, wherein the taxpayer is required to self-assess his tax liability, pay the taxes and then file returns. Hence, to ensure whether the taxpayer has properly self -assessed his tax liability there must be a strong audit mechanism. Several measures are taken by the Government for implementing GST and audit is one amongst them.

What are the Objectives and Purpose of GST Audit Documentation?

The auditor must prepare GST audit documentation that is adequate to permit a skilled auditor, having no previous connection with the audit to be aware:

1. The nature, timing and the number of audit procedures performed to comply with the legal requirements.

2. The results of the audit process carried out and the audit evidence attained

3. Relevant matters arising during the audit and the conclusion reached thereon, and also significant professional judgments made on reaching these conclusions.

What are the Aspects and Purposes of GST Audit Documentation?

The following are the basic aspects and purposes of GST Audit Documentation:

• Evidence for the auditors to establish that the overall objectives are met by the auditors.
• GST Audit documentation is evidence to prove that the audit was planned and performed as per the Auditing standards prescribed.
• Help the appointed team of auditors to plan and perform the GST audit effectively.
• Also to enable the appointed team to take responsibility and accountability of their work.
• Enable the reporting partner to ensure that the work planned has been completed effectively.
• Assist in planning and control of all the audits to be conducted in the future.
• To encourage a proper methodical approach.
• For preserving the records of matters which are important for continuing the future audits.
• To enable the conduct of external inspections or peer reviews in accordance with pertinent legal, regulatory, or any other requirements.

What is covered under GST Audit Documentation?

The necessary documents for the GST audit documentation are enumerated below:

• An Offer letter including the scope and objectives of the auditor and its management.
• The Engagement Letter and also appointment letter.
• Details of the Audit plan and also the Audit program.
• A complete checklist for GST audit or GSTR-9C.
• A sample Copy of invoices or agreements, etc.
• A written copy of the representation letters received from the management.
• A GST returns a copy, the details of tax paid and also credit availed or sales made, etc.
• The important matters identified during the audit and deficiencies in internal controls which have been communicated to management.
• The risk assessment process applied for areas of high risk, and also areas of low risk must be noted.
• Sufficient and suitable audit evidence received during the audit.
• All working papers must be in electronic form such as Excel, CSV, PDF, JPEG, JSON, etc.

 The list given above is not inclusive, and any other document or letters which are compulsory or seems to be necessary can also be documented.

What are the Contents for GST Audit Documentation Working Papers?

The team performing audit must be aware of the significance and contents of GST audit documentation working papers. Having an essential source of information is the key for successful completion of an audit. Any observation made without documentary support can decrease the importance of it. The Important contents of GST audit documentation working papers are as follows:

• Name of the client, the time period covered by in audit, the methodology and tools used in the audit, and all the sources from where the data is received.
• Specified observations with all the crucial aspects such as date, amount, document references, and remarks.
• Signatures of all the members of staff who are involved in preparing the working paper and its preparation date.
• Signatures of the partner, reviewer and the date on which the signature was received.

What are the Common errors done by auditors in the  GST audit documentation Process?

Some various misunderstandings or myths prevent the auditors from adequately documenting the GST audit working papers and documents:

• The auditor avoided preparing a document of what he did, considering everyone is aware of it.
• The general assumption of the auditor that his work is completed after signing the papers.
• The auditor’s belief that if he is unable to find some errors in the documentation, the reviewer will take care of it.
• The auditor does not want to give time on documentation because he is busy helping in preparing the budget.
• An auditor must not make the above errors as the GST audit documentation, and working papers are the principal record of the work performed by him, as the conclusions reached and also expressing the opinion is enumerated in detail.

What are the Types of Audit files that must be Maintained in GST Audit Documentation?

For all the recurring audits, the working papers must be split by the GST auditor between:

Permanent Audit File

The permanent audit file is enumerated below:

• The letter of engagement of the auditor
• The organizational structure of the company to be audited.
• Important documents such as Memorandum of Association (MOA), Articles of Association (AOA), minutes of meeting etc.
• The audited financial statements and books of accounts of the previous year and form GSTR 9 and GSTR 9Cs.
• The MRL which is provided by the management and the ICQs.
• Trend analysis, ratio analysis etc.

Current Audit file

The current audit file contains the following elements:

• The offer letter and the acceptance letter of the auditors.
• A complete checklist of the audit program and the audit plan.
• The analytical review procedures which was performed during the audit process.
• The reconciliation statement between the books of accounts and the annual returns.
• The communication made with the other auditors, experts, and third parties during the auditing process.
• The review notes prepared by auditors along with representations etc.

Ownership of the GST Audit Documents

The GST audit documentation work is the asset of the auditor.

• The auditor makes it available to the organisation at the auditor’s discretion copies of the audit documentation, provided that such disclosure does not weaken the independence or the validity of the ongoing or the conducted audit process.

• The auditor must implement reasonable procedures to retain and access the audit documentation for a period of time made sufficient to meet the needs of his or her practice of auditing and also to satisfy any applicable legal or regulatory requirements for preserving the records both electronically and physically.
• Further, the auditor has ethical and legal obligations to maintain the confidentiality of the information provided by the client.

What are the Eligibility and Qualification of GST Auditor

The GST audit can be performed only by a Chartered Accountant (CA) or a Cost Accountant. They can perform GST Audit as per Section 35 of the CGST Act.

The following individuals are appointed as an auditor:

• A Person working as an internal auditor cannot be appointed as a GST Auditor simultaneously.
• The GST Act does not permit a GST practitioner to perform the audit. The power to conduct an audit is granted only to a Chartered Accountant or Cost Accountant who is in practice or is an employee of a firm of Chartered Accountants or Cost Accountants. Hence, a Chartered Accountant must not be a registered GST practitioner for the purpose of issuing the Audit Report.
• Where an organisation or an institution has multiple branches registered under GST in different states or Union Territories, the total aggregate turnover of all such branches is considered while calculating the threshold limit of Rs. 2 crores. In case, the cumulative turnover of all the branches exceeds the amount of Rs. 2 crores, then the GST audit applies to each of these branches, irrespective of whether the turnover of a particular branch is less than the threshold limit specified in the Act. In this type of case, a person can appoint either one dedicated auditor for all branches or a separate auditor for each of the branches. Where multiple departments have different auditors, the Standards on Auditing: SA 299 — Responsibility of the Joint Auditors may apply for the purpose of reporting GST Audit observations & Reporting.

Conducting GST Audit and Issue of GST Audit report

The conduct GST Audit and issue its report the following procedures must be applied:

Appointment of GST Auditor

A partner, proprietor or Board of Directors in case of a Company must appoint a GST Auditor at the start of the financial year.

Accounts to be reviewed by GST Auditor

The essential accounts or records for review are as follows:

• Sales Register of the business.
• Stock Register of the company.
• The Purchase Register and ledger specifying expenses.
• The Input tax credit availed and also utilized.
• The Output tax  which is payable and also paid
• E-way bills generated during the period of audit, if in compliance with rules.
• Any documents that record communications from the GST department relating to the year.

Submission of the GST Audit report and Annual return:

The final GSTR-9C can be certified by the same CA who had conducted the GST audit, or it can also be approved by any other CA who did not perform the GST Audit for that particular GSTIN.

The following points must be reported and  also certified by the GST Auditor or the certifier:

• If all the requisite accounts or records are maintained.
• The financial statements are prepared according to the books of accounts which are maintained at the principal place of business or an additional area of business of the taxpayer.
• Certify the accuracy of information provided in Form GSTR-9C.
• To list down all the observations and reservations/comments made in audit.

Documents to be furnished by the taxpayer

The documents to be furnished by the taxpayer are as follows:

• Audited financial statements or books of accounts.
• Annual return to be filed in Form GSTR-9 for every GSTIN.
• A Certified reconciliation statement made in Form GSTR-9C, reflecting the reconciled values of supplies and tax of the amounts declared in GSTR-9 compared to audited financials in Part-A, along with the Audit report in Part-B.

Contact Enterslice

We at Enterslice, with the help of our professionals, will help you sail through this GST Audit documentation work. You will find experienced Chartered Accountants who will help you throughout this process.

Conclusion

Though it is not mentioned in the GST laws^[1] that the GST audit documentation is mandatory for the GST audit, it is still suggested to adopt the audit documentation specified in the generally accepted auditing standards and the principals apply to any other statutory auditors. Further, the audit documentation and working papers are the essential record of the work done, conclusions made, and the opinions expressed. From the GST’s perspective, audit documentation or working papers are documents achieved as evidences during the conduct of the GST compliance audit.