General Guidelines:
While conducting audit, the auditor is required to carry out his duties with utmost sincerity, integrity and diligence. The auditor has immense responsibility in detection of non-compliance, procedural irregularities and leakage of revenue due to deliberate action or ignorance on the part of the Taxable Person. At the same time, the auditor should keep in view, the prevalent trade practices, the economic realities as also the industry and business environment in which the Taxable Person operates. Therefore, the auditor should take a balanced and rational approach while conducting the audit. Besides, the auditor is expected to play a key role in promoting voluntary compliance by the Taxable Person. During the course of the audit, if certain technical infractions, without any revenue implications, arising due to bona fide oversight or ignorance of the Taxable Person, are noticed, the Taxable Person should be guided for immediate correction. Such cases should also be mentioned in working papers.
An auditor is responsible for conduct of audit and should endeavor to take a final view on all issues raised by him during that audit. The working papers for each of the step of audit should be filled in as soon as that step is completed. They should be ‘speaking documents’ that clearly explain why a particular area was included in the audit plan as well as the basis for arriving at every objection that goes into the draft audit report after audit verification. The documentary evidence which has been relied upon in arriving at certain conclusion should invariably be cited and included.
Verification of records mandated by the statute is necessary to check the correctness of assessment and payment of tax by the Taxable Person in the present era of selfassessment.
In keeping with the principles of audit outlined above, audit has to be conducted in a transparent and systematic manner with focus on business records of the Taxable Person and according to the audit plan for each Taxable Person.