What Businesses Should Have on Hand for Audits
Audits are an important element in keeping financial transparency, obeying regulations and maintaining your business’ credibility. Whether you are subjected to a statutory audit, internal audit, tax audit or GST audit, presence of proper documents at your end can ensure smooth execution of the process without much difficulty. Prepared organizations save time and money and minimize exposure to penalties, observations, and compliance issues. At GSCCA, we recommend that businesses view audit readiness as a continuous process not something done last minute.
Businesses Importance of Being Audit Ready
Readiness for an audit is indicative of the financial discipline and governance that a business has in place. Efficient audits occur when records are well-kept and documents can be located easily. Bad documents meanwhile more often than not result in audit qualifications, scrutiny and management trust\credibility loss.
Beyond readiness for an audit, companies must also ensure that they achieve and maintain compliance while integrating and standardizing internal controls into their business process to ensure the organization as a whole is functioning as optimally as possible. Maintain an organised file documentation system to maintain accuracy in financial reporting and build trust with investors, banks and regulatory bodies.
Basic Company and Legal Documents
In general, auditors will start by looking at the legal and constitutional documents of a company in order to obtain an understanding of its form and powers. These papers form the business’s legal identity, showing who owns and operates it.
Company incorporation certificates, partnership deeds, memo & articles of association, PAN, GST certificate and other statutory registrations. The board resolutions, minutes of meetings and authorization letters are crucial for ascertaining due process. 1 The GSCCA makes it policy to record and update its records in a way that will preclude any audit discrepancies.
Books of Accounts, and Other Books, Papers and Documents with Financial Effect
Proper books of accounts are the base for any audit 1. Auditors examine the accounting records of a company to establish whether transactions have been correctly recorded in compliance with the relevant account-keeping norms.
Primary financial transactions as documents are ledger, cash book, bank bok a/c wise books, journal entries with trial Balance reports and templates of balance sheets, profit & loss accounts or even cash flow statements. (Supporting schedules and reconciliations have to agree with the main records. Keeping accounts relatively current and in an easily reviewable order helps minimize questions during the audit and adjustements.
Bank and Cash-Related Documents
Bank and cash balances are heavily scrutinized in audit because of the inherent risk associated with their overstatement, or inappropriate use. Auditors independently verify bank balances, cash flows and reconciliations.
For such businesses that have to pay as per the provisions of section 43B, bank statements and bank reconciliation statement for the last three preceding years available with it, alongwith cheque counterfoils, deposit slips and bank statements showing entries in respect of loan amount should be kept ready. Cash Vouchers, Petty Cash Registers, and Cash Flow Summaries are all just as important. GSCCA stresses reconciliation on a regular basis to avoid disparities and maintain openness.
Taxation and Compliance Records
Tax compliance is a priority aspect in almost every audit. Auditors make sure taxes are being correctly calculated, paid on time and reported properly to the tax authorities.
Companies need to keep the transactional income tax returns, tax audit reports, advance tax challans, TDS return, TDS certificates and assessment orders. GST return, GST reconciliation statement and Input tax records for e-profile, eway bills, etc. are required for the audit of GST. Being up-to-date on these records will prevent penalties and interest imposed for non-reporting.
Sales, Purchase, and Expense Documentation
Sales and purchases are not only a significant component of business, but they are also often scrutinized in examination work. Accurate records should be kept in order to verify and complete these transactions.
4.2 All invoices, delivery challans, purchase orders, vendor agreements and credit or debit notes shall be kept in a manner whereby it can be readily discovered by a producer who may wish to pursue such information further. Receipts, invoices, and authorizations should reasonably explain business expenses. GSCCA recommends companies keep adequate documentation for all their monetary transactions.
Payroll and Employee-Related Records
Employee records are critical in confirming a company’s salary expenditure, statutory deductions and compliance with labor laws. Auditors review the payroll records for accuracy and authorization.
Salary sheets, payslips, attendance reports and service agreements along with statutory contribution records like PF & ESI should be present. The first words out of their mouth was that this is what happens when you don’t have good documentation in payroll.
Fixed Asset and Inventory Records
Tangible assets and stock are major investments for any company, it is important to keep this investment in order. Auditors confirm assets ownership, assessment and how they are being depreciated.
Firms should retain FA registers, purchase invoices, depreciation schedules and asset disposal records. Inventory records, stock ledgers, price lists and physical verification reports are also important. True and fair records of assets and inventory reduce the possibility of overvaluation or undervaluation of balance sheet items.
The Function of GSCCA on Audit Preparedness
Readiness isn’t just about being ready to collect needed documents; It’s about having your financial house in order throughout the year.” GSCCA helps companies with supporting documentation, process controls and legal requirements.
The preparation of audit documentation in advance allows businesses to reduce the risk they are facing during their audits, and invest in growth instead of compliance issues. GSCCCA’s professional audit services provide transparency, efficiency and assurance to its clients during the audit process.
Conclusion
Having appropriate documents in place at the time of audit is crucial for hassle free compliance and financial credibility. Documenting well mitigates audit pressure, penalty risks and are evidence of good governance. Companies with good, organized records are prepared for audits and can efficiently prove sound financials.
When GSCCA is your trusted CA firm, you will see that audit can be a strategic rather than compliance burden for you. Adopting this practice will benefit the business to be ready, at any point in time if and when audits come around.
