Audit procedures and applicability of accounting standards

[Tax Audit Report]

In the case of a person who carries on business and also renders professional services but who is not required by or under any other law to get his accounts audited,
report should be given in Form No. 3CB.
The statement of particulars should be given in Form No. 3CD.

Even where separate sets of accounts are maintained in respect of business and professional activities
Form No. 3CB and Form No. 3CD should be used.

[Tax Audit Report]

In the case of a person who carries on business or profession but who is not required by or under any other law to get his accounts audited, the expression "proper books of account" should mean,the books of original entry and other books of account required to be maintained to record all the transactions of the assessee in the same manner, as in the case of a person whose accounts of the business or profession have been audited under any other law.

Although, proper books of account have not been prescribed generally for a person who carries on business or profession but who is not required by or under any other law to get his accounts audited (except under Section 44AA for certain categories of persons), the tax auditor should ensure that such books are maintained as would give the information required to prepare balance sheet and profit and loss account in the formats recommended in Appendices X and XI of this Guidance Note.

Reference in this connection may also be made to the publication of the Institute entitled "Monograph on Compulsory Maintenance of Accounts", which provides the necessary guidance in the matter.

[Tax Audit Report]

In case

the accounts of a person who carries on business or profession but who is not required by or under any other law to get his accounts audited, are being audited for the first time

It is recommended that a disclosure be made to the effect that corresponding comparative figures of the previous year, if given, are not audited.

[Tax Audit Report]

In certain cases, members are called upon to report on the accounts reopened and revised by the board of directors.
The accounts of a company once adopted at its annual general meeting should not normally be re-opened and revised.
The Institute and the Department of Company Affairs have affirmed this position.

In case of revision, the audit report should be given in the manner suggested by the Institute. (Published in the Chartered Accountant, pp.655, February, 1985. Also refer to Revision/Rectification of Financial Statements, published in Compendium of Guidance Notes - Volume I).

The Department of Company Affairs had also clarified that accounts can be revised to comply with technical requirements.

It may be pointed out that report under section 44AB should not normally be revised. However, sometimes a member may be required to revise his tax audit report on grounds such as:

(i) revision of accounts of a company after its adoption in annual general meeting.

(ii) change of law e.g., retrospective amendment.

(iii) change in interpretation, e.g. CBDT Circular, judgements, etc.

In case where a member is called upon to report on the revised accounts, then he must mention in the revised report that the said report is a revised report and a reference should be made to the earlier report also.

In the revised report, reasons for revising the report should also be mentioned.

[Reference may also be made to the Guidance Note on auditor's Report on Revised Accounts of Companies Before Circulation to shareholders, published in Compendium of Guidance Notes, Volume- I] - vide Appendix XII.