Audit Assurance Services

Helps clients by understanding the increasing complexity of the regulatory environment , the need for greater transparency in operations and disclosure norms.

We, at SGA provide the following Audit Assurance Services :

  • Statutory Audits under the Companies Act, 2013
  • Income Tax Audits under the Income Tax Act , 1961
  • GST (Goods & Service Tax) Audits
  • Transfer Pricing Audits (in select cases)

Auditing & Assurance Services are the core of any successful and visionary Organisation. Employing advanced techniques and creative approach in Auditing for better financial & administrative controls, we also suggest improvements for more efficient operation, stronger financial structure and improved system of accounting and administrative controls. Assurance services add efficiency and profitability to your organization by providing independent credibility to your financial statements, professional advices to management, and expedient solutions to improve the systems & performance.

The financial statement audit has never been more important. In today’s business environment there is more scrutiny and scepticism of a company’s financial statements than ever before. Investors expect more and greater reliability, more oversight and clear evidence of internal controls. Corporate management, boards and audit committees, internal and external auditors, analysts and other investment professionals all have important roles to play in rebuilding investors trust by executing their respective responsibilities, keeping in mind both legal obligations and the heightened expectations of investors. Meeting investor expectations begins with the completeness and accuracy of information contained in a company’s financial statements.

A well-conducted audit can provide business owners with valuable information and assurance that statements are truly and fairly presented. At SGA we view the audit process as an opportunity for our clients to learn more about their businesses so they are better equipped to communicate with banks, investors and partners. We provide our clients with an objective presentation of their financial information as well as qualified advice and observations.

  • Planning and preparation of ingenious audit approach and programs, as per the statutory requirements.
  • Evaluating the strengths and weaknesses of the audit areas, and reporting their efficiency, effectiveness, and the state-of-control by analysing scrupulously the audit evidence.
  • Presentation of the reports of findings, conclusion derived, and the suggested recommendations, to inform the management, about the adequacy of controls and effectiveness of operations.
  • Appraising the actions taken by the management regarding the follow-up and the reporting techniques.
  • Abiding to the norms of ethical and professional standards, to ensure the quality and consistency of the audit work.

We have more than 20 years of experience in the area of Audit & Assurance and we have helped many clients take advantage of changing industry trends and legislation to grow their businesses. Our audit philosophy is based on integrity, objectivity, independence and strict adherence to all professional standards, regulations and laws. The primary objective of every audit is to express an opinion on the true and fair presentation of the financial position and operational results of the client.
For organisations that require an audit for statutory or regulatory reasons associated with the filing of their annual and periodic financial information, SGA can provide high quality audit services.
SGA’s work takes into account all current and where appropriate, prospective auditing, accounting, and reporting regulations and guidance. Our audit clients include a few multinational corporations, as well as many small and medium-sized companies.

  • Compliance with regulations.
  • Advice on controls and processing system weaknesses.
  • Confirmation of accounting treatments with respect to complex transactions.
  • Increased monitoring of prospective accounting and regulatory changes.
  • Independent review of externally reported information.
  • Accountants’ report.

Every company registered in India is required to prepare financial statement for period ending 31st March every year. Such financial statements must give a true and fair view of the state of affairs of the company and comply with the accounting standards notified by the central government under the Companies Act. Such financial statement must be prepared in the form and format which is prescribed for a specific type of company in schedule VI.

The expression on financial statements includes the following items:

  • A balance sheet as at the end of the financial year.
  • A profit and loss account, or in the case of a company carrying on any activity not for profit, an income & expenditure account for the financial year.
  • Cash flow statement for the financial year.
  • A statement for changes in equity, if applicable.
  • A explanatory note on the accounting policy and assumptions adopted by the company.

A Tax Audit is an audit, made compulsory by the Income Tax Act, if the annual gross turnover/receipts of the assessee exceed the specified limit. Tax audit is conducted in Sec 44AB of the Income Tax Act by a Chartered Accountant.

Applicability of tax audit:

Business Sales / Turnover or Gross Receipt exceeds INR. 1 Crore (INR. 5 crore if the cash receipts and payments do not exceed 5% of the total receipts and payments respectively)
Profession
(For Ex. Architect, Advocate, Accountants, Doctors, etc.)
Gross Receipts Exceeds INR 50 Lacs
Business u/s 44AD If the Sales/Turnover or Gross Receipt is less than INR 2 Crore if such person is enrolled under the presumptive taxation scheme who claims that the profits of the business are lower than the profits calculated in accordance with the presumptive taxation scheme (presently this threshold limit is 8% profit on the sales / turnover or gross reciepts) would be required to obtain a tax audit report.
Profession u/s 44ADA Declaring the income at amount less than 50% of the gross receipts and whose income exceeds the basic exemption limit (which is Indian Rs 2.50 lacs at present) for relevant previous year but whose gross receipts are less than INR. 50 lacs.

If the assesses who is qualified under the presumptive taxation scheme but opts out of it after a specified period, he would lose the ability to revert back to the presumptive taxation scheme for a continuous term of 5 assessment years after the decision to opt out is taken.

Every registered person must get its accounts audited under the GST Act by a Chartered Accountant / Cost Accountant if the aggregate turnover during FY exceeds INR 2 Crores from sale of goods or services.

Calculation of turnover shall be PAN (Permanent Account Number ) based i.e. all sale of goods/ services shall be taken for computing the limit of INR 2 Crores.

For computing the aggregate turnover, following shall be included-

  • Value of all inter-state taxable supply
  • Value of all intra-state taxable supply
  • Value of all exempt supplies
  • Value of all export supplies
  • Job work supplies on principal to principal basis
  • Zero rated supplies
  • Any supply to agent/ job work on behalf of principal

For computing the aggregate turnover, following shall be excluded-

  • Taxable supply on which reverse charge is applicable
  • All taxes and cess paid under GST
  • Goods supplied and received back from job work.
  • While computing the limit of INR 2 Crores, turnover of all the branches of an organization should be considered and if the cumulative turnover exceeds the limit of INR 2 Crores then every branch will be liable for GST audit irrespective of the fact that their individual turnover does not exceed the specified limit.
  • Organization can appoint either the single auditor for all branches or separate auditor for each branch.

As per the GST Act, due date of audit and annual return is specified as 31st December of subsequent fiscal year and in case of failure in complying with the same then as per act no specific penalty is prescribed. So it will be covered under the head of general penalty of Rs. 25000.

Transfer Pricing Audits

In taxation and accounting, transfer pricing refers to the rules and methods for pricing transactions within and between enterprises under common ownership or control. Transfer pricing provisions are applicable on international transactions and specified domestic transactions between associated enterprises (AE).

International transactions refers to transactions between two or more AEs involving one of the following activities:

  • The sale, purchase, or lease of tangible or intangible property;
  • The provision of services or cost-sharing agreements;
  • The lending or borrowing of money;
  • A transaction of business restructuring or reorganization with an associated enterprise, irrespective of the fact that it has bearing on the profit, income, losses or assets and/or
  • Any other transaction with a bearing on the profits, income, losses, or assets of such enterprises.

Relationships falling under the AE category include direct or indirect participation in the management, control, or capital of an enterprise by another enterprise. hey also cover situations in which the same person participates in the management, control, or capital of both the enterprises.

Safe harbour rules:

Safe harbour in tax parlance refers to the circumstances under which income-tax authorities accept the transfer price declared by the company, at which it transacts with its subsidiaries or an associated company, without any question.

On June 7, 2017, the Central Board of Direct Taxes (CBDT) in India revamped safe harbour rules to align safe harbour margins with industry standards and enlarge the scope of international transactions under it.

Methods to determine the arm’s length price

For tax purposes, companies are required to record the exchange of goods using the arm’s-length principal.
India’s Income-tax Act, 1961 prescribes the following methods to determine the arm’s length price between two affiliated companies:

  • Comparable Uncontrolled Price (CUP) Method;
  • Resale Price Method (RPM);
  • Cost Plus Method (CPM);
  • Profit Split Method (PSM);
  • Transactional Net Margin Method (TNMM);
  • Such other methods as may be prescribed.

Domestic transfer pricing

Till March 2013, the transfer pricing provisions were limited to international transactions alone. From April 2013 Transfer Pricing provisions have been extended to SDTs (Specified Domestic Transactions) and are applicable from the assessment year 2013-14.

Transactions which are covered under the Specified Domestic Transactions include:

  • Expenditures in which payment has been made or would be made to:
  • A director
  • A relative of the director
  • An entity where a director or the company has the voting interest exceeding 20%
  • The above transactions would be treated as Specified Domestic Transactions only if the aggregate value of such transactions exceeds INR 5 crore. However this threshold has been increased to INR 20 crores from AY 2016-17.

Transfer pricing documentation:

Taxpayers are required to maintain information related to international transactions undertaken with AEs.

The rules prescribe detailed information and documentation that must be maintained by the taxpayer. Such requirements can broadly be divided into two parts.

The first part includes information on the ownership structure of the taxpayer, a group profile, and a business overview of the taxpayer and AEs, including prescribed details such as the nature, terms, quantity, and value of international transactions.

The rules also require the taxpayer to document a comprehensive transfer pricing study.

The second part of the rules requires that adequate documentation is maintained to substantiate the information, analysis, and studies documented under the first part of the rule.

It also contains a recommended list of such supporting documents, including government publications, reports, studies, technical publications, and market research studies undertaken by reputable institutions, price publications, relevant agreements, contracts, and correspondence.

Taxpayers having aggregate international transactions below the prescribed threshold of INR 1 Crore and Specified Domestic Transactions below the threshold of INR 20 Crores are relieved and exempted from maintaining the prescribed documentation.

However, it is essential that the documentation maintained should be adequate to substantiate the arm’s length price of the international transactions or specified domestic transactions.

Companies to which transfer pricing regulations are currently applicable are required to file their tax returns on or before September 30th, following the close of the relevant tax year.

Address

Sachin Gujar & Associates,
Chartered Accountants
47/22, Erandwana, Law College Road,
Ekta Apts, 3rd Floor, Above Nirmitee Furniture,
Pune - 411004

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