Internal Audit

Important Checklist for Internal Audit of Private Limited

Each private limited company get the accounts audited periodically. The process is done annually before the end of the financial year by the auditor or chartered accountants (CA). The auditor evaluates the company’s documents, produces a report, and gives it to the company. The audits are conducted with the management’s recommendations.
It is done to verify the company’s economic conditions and verify efficiency of the company. The Audit generates the management, including financial outputs, and it helps to make alterations in the upcoming projects and the company’s current projects.
Checklist of Internal Audit of private limited companies as follows: –

1. FORM ADT-1 Selection of Auditor.
2. FORM ADT-2 Eviction of Auditor.
3. FORM ADT-3 Registration of Auditor.
4. FORM AOC-4 Annual filing of financial statements
5. FORM MGT-7 Filing of annual return with debenture list and shareholder.
6. FORM MGT-14 filing of agreement to ROC^[1] resolution and agreement.
7. FORM CAR-1 maintenance cost and record.
8. FORM CAR-2 Assignment of cost auditor.
9. FORM CAR-3 Submission of the cost audit records to the board.
10. FORM CAR-4 Filing cost audit report, wherever applicable.
11. FORM ITR-6 Filing income tax return of the company.
12. GSTR-3B With GSTR-1 and GSTR. 2A for cross-verification.
13. FORM GSTR-9C Filing GST Audit Form.

STEPS

The following steps are involved in getting an audit done: –

• Scheduling the Audit
  Before planning an audit, a company ensures every team member has a clear intention for the company’s objectives. While performing an audit, when a company does not disclose sufficient information, the whole audit procedure is unworthy.
• Planning the Audit
  Firstly, the company ensures everything is scheduled accordingly to start the Audit. It comprises notifying the auditors to deduce the valuable time to do the review.
• Reports
  After completing the internal audit, the auditors came up with the results. The results show the fallacies found during the Audit and advice to use the schemes to enhance those weak areas. The outcomes of the Audit have enabled standards from before to after the Audit’s conduction to discover any significant differences in achievement based on the recommended changes.

Internal Audit as per Income Tax Act 1961

The following are the type of organizations to which the Income-tax act of 1961 is applicable:-

• Organizations with a turnover of more than Rs. 5 million
• Organization with a turn of more than Rs. 2 crores per annum is also included in section 44D  of the presumptive taxation scheme.
• Personal business with a turnover of Rs. 1 crore or more also comes under this act.

Who Signs the Private Limited Audit Report?

• Two company directors are required to sign the company’s financial statement.
• One of the directors is the Managing Director, and if there is no managing director, then the Director can sign the financial statement.
• After the directors sign the financial statement, the auditor attests to the report.
• The audit report is a duly certified copy.
• The qualifications, observations, or comments made on the financial statement have an adverse impact on the audit report and must be given for the open inspection.
• The auditor provides a report against any fraud in the company while conducting the Audit.

What is the penalty for non-compliance with an Audit?

Penalty for Form AOC-4

• A penalty of Rs. One hundred per day is charged for the delay in filing Form AOC-4.
• A Penalty of Rs. 1000 per day of default is charged to the company, which can go up to Rs. 100000.

Penalty for Form MGT-7

• A penalty of Rs. The companies will charge one hundred per day.
• Each member of the defaulter company shall be deemed to pay the penalty of Rs. 50,000 and a late fee of Rs. 100 per day till the default continues.
• The maximum penalty amount charged is Rs. 5 00,000/-.

Penalty for non-filing of ITR-6

• Late filing fees up to Rs. 10 000 are applicable for non-filing of the income tax return.
• According to section 273B, an approx. Fine of Rs. 1, 50,000 or 0.5% of the total sales, gross receipts or turnover for the current financial year.

Conclusion

Auditors play a crucial role in developing company accounts. The internal auditors create strategies from scratch. The auditors can conduct audits over specialized areas and routinely audit when they spend their maximum time and resources on their organization’s objectives.

Also Read:
Effective Steps of Performing an Internal Audit Successfully
The future of Internal Audit: Analysis, insights and prospectus
Account Standard 2605: Consideration of the Internal Audit Function