Audit means an examination of books of accounts, statutory records, documents and vouchers conducted with the purpose of establishing the fact that the accounting records presents a true and fair view of the Organization. It is conducted by a party which is independent of that organization.
There are various kinds of audit being conducted under different laws such as statutory audit, internal audit, cost audit, stock audit etc.
Two of the important kinds of Audit which often create confusion among Business owners are Statutory Audit and Tax Audit.
A statutory audit is an audit, which is made mandatory under The Companies Act 2013. The purpose is to check the truthfulness and fairness of accounting records.
On the Contrary, Tax Audit is defined as an audit of the accounts of the taxpayer for the requirement of Section 44AB of The Income Tax Act, 1961 for assessing the correct income of the Assesee.
Following is a brief comparison between the two kinds of Audit:
|Point of difference||Statutory audit||Tax Audit|
|Governing Act||Section 143 of the Companies Act 2013||Section 44AB The Income Tax Act 1961|
|Applicability||Statutory Audit is applicable to all the Companies registered under Companies Act 2013 and erstwhile Companies Acts.||Tax Audit is applicable on all Companies, LLP’s, Partnership Firms as well as Individuals or Professionals whose turnover or Gross Receipts crosses the threshold limit.|
|Threshold Limit||There is no threshold limit of Turnover or Gross Receipt for Statutory Audit. It is compulsory for every company even if the Company has no turnover or had not commenced any business at all.||Tax Audit is mandatory for Business Organizations whose Total sales, turnover or Gross receipt for the year crosses Rs. 1 Crore
Tax Audit is mandatory for Professionals whose Gross Receipts for the year crosses Rs. 50 lakhs
|Purpose||The purpose of the statutory audit is to ensure reliability, transparency, truthfulness and fairness of the financial statements of the Company.||The purpose of Tax audit Is to ensure proper maintenance of books of accounts to truly reflect the taxable income of the assesse and preparation and submission of Tax Audit Report and Income Tax Return.|
|Due Date||Statutory Audit should be completed within 6 months from the close of the Financial Year but before conducting the Annual General Meeting to present the Audited Accounts to the Shareholders.||The due date for completing Tax Audit and filing of Tax Audit report with the Income Tax Department for a Financial Year is 30th September of the next year (Assessment Year).|
|Consequence of Non-compliance||Penalty for non-compliance:
For The company:
Ranges from Rs. 25,000- Rs. 5,00,000/-
For every officer in default:
Imprisonment of upto 1 year
Fine of Rs.10,000 to Rs. 1,00,000
|Failure of conducting of Audit of Accounts by a Tax payer will attract a penalty of the lower of the two amounts:
· 0.5% of total sales, turnover or gross receipt
· Rs. 1,50,000
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