accounting and tax audit

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2011 a general question always pops up in my mind is what if as an auditor may be for his ignorance or his client ignorance does not enter a complete bank entries out the one or more bank accounts maintained by the client who falls under tax audit and has for the f.y. 2009-2010 has already filed his tax return and audit report and later comes to know and want to rectity the error happed by ignorance my question here what is the procedure that the auditor has to follows so far accounting of the non accounted entries in the books, filing of revised return, payment of taxes and penaltys in all catagories of sales tax, service tax and income tax, and other repurcussion at later dated in assessment etc and other knowledge if any body can share from their personal experiences so far any profession can view from my question can please reply urgently. thanks and regards

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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13 February 2011 First of all; there is no DEATH SENTENCE for economic offences in India.

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That is why most of our leaders and businessmen do it well.

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Many times I have written that the Accounting is one of the most hated profession in the world and that is why businessmen don't want to maintain it in a proper manner. Since they don't want to maintain it in proper manner hence they are also not ready to pay for it happily.

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Small and medium businessmen want to write books of account at last moment and poor accountant never questions this activity.

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Every businessman talks - There are only few entries per day hence no need to pay that much to the accountant.

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They also argue that ultimately we have to settle with the authorities even if we maintain it regularly.

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So in my opinion; whatever you have asked is covered under above circumstances.

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Your client is more EXPERIENCED than you and that is why he does not care and even not worried at all.

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There are so many fools in

Accounting World who sign

the last hour balance sheets

thinking if penalties are lodged;

heavy loss would be there to the

businessmen.

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Whereas businessmen don't care at all but pretending to do so in thelast moments before the auditors.

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If you have maintained all the audit working papers; then you need not worry.

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Now it is the turn of worrying for the assessee.

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Just make a call to him telling all the consequences and earn handsome fee if you have that guts.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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13 February 2011 CA can not be made responsible for the things which have not been brought to his notice at the time of audit. As rightly pointed out Mr. Rakhecha, if you are having Audit Working Papers, you may be in a safe
position.

I may presume that the client must be close relative of yours or the person handling the accounting work is closely related with you.

An auditor must keep his eye open at the time of verifying the accounts. Most of the missing links can be joined at that time only if proper care is exercised.

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Querist : Anonymous

Querist : Anonymous (Querist)

15 February 2011 Dear Mr. Rakhecha and Mr. Bafna,
Thank you very much for the reply and so far earning of the handsome fees in concern sure to keep your advice in mind. As You rightly said sir clients takes very little interest in maintaining accounts, every burden is put on the CA and accountants. And I tell you sirs; my clients are in that matter can have rewards for not maintainig any thing on their side. So far my queries which is still unsolve can i file a revised return after taking into consideration all the entries left out and making all payments of service tax, etc and filing revised itr and tax audit report?. No Mr. Bafna the cleint is not related to me in any way but then I have to safe guard him since he is my client. please correct me if i am wrong. thank you once again Mr. Rakhecha and Mr. Bafna. Looking forward to have further brief answer on my query. Regards Asgarali

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 February 2011 The onus of maintaining books of account should always be kept shifted upon the client.

However, It is better to file revised return by considering the overall effect of the entries which were left.
You have e-filed the return this year, so No Audit Report has been attached with the Return.

For change in data, as we are having proper explanation, there will be no major difficulties or complications looking towards the facts of the case.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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15 February 2011 Dear One,
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A revised return can be filed. But it requires expertise and in depth knowledge about accounting and taxation. You have to justify under what circumstances the entries were left and these circumstances were beyond under control.

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In initial years of learing accounting; we knew about MATERIALITY CONCEPT.

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If looking to the amount involved; you think that it is amust to revise the return; then surely you can do.

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But also make alert to the client about maintaining books of account and say him the consequences if he does not maintain.

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Still if he does not listen to you; give him back his file.

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Such clients will never develop in future and never reward you. Right now you might think that he is a growing client but ultimately he will fail in the business. You will surely see it after 10 years.

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Everytime they will harass you and won't pay also for that.

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If you pay additional taxes which are due on the transactions left; then it will save your client from penalty proceedings which might be leviable if the entries are such which can be detected later on.

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Refer V G Mehta's Ready Reckoner for an instant look on penalty provisions.

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After filing revised return; you should develop liaison with the respective authorities under whom the case falls at the time of penalty proceedings.

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If the amount involved is too much and you can't deal it right now; refer the case to one senior CA but see carefully what actions he takes.

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You being a young fellow in the profession; I would suggest you to charge fee immediately otherwise the client will not pay for this additional work. Charge in advance or at the time of signing the return.

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P.S.

If the entries are such which do not affect the Total Income; then you can file the revised return without thinking much.
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Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2011 Thankyou Mr. Rakhecha and Mr. Bhafna once again for writing and giving your utmost time in replying to my query which seem to have been solved with your suggestion and I am going to follows in the way and manner as what you both goods self have said. Thankyou Asgarali. So kind of you sirs.