SUB GST p2.8

The approach of audit under GST

22 May 2020

Audit means the examination of records, returns and other documents maintained or furnished by a registered person under Goods and Services Tax Act are the rules made thereunder any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claim and input tax credit availed, and to assess his compliance with the provision of Goods and Services Tax Act and the Rules made thereunder.

Audit approach under GST audit 

No prescribed approach is required for conducting a GST audit. The audit may be conducted on the basis of the approach followed in the tax audit of the Income Tax Act and Audit under Companies Act.

The GST auditor is not required to express his opinion on the true and fair view of the financials when it is audited by others. In any case, he is required to certify the correctness and completeness of the certain reconciled data.

A various method that can be followed are listed below: 

• Obtaining prior knowledge of the business and comparing it with a similar business. 

• Preparing a master file of clients(permanent master file).

• Discussing with the audit team on the methodology to proceed with the audit. 

• Studying and evaluating system (including business system) and internal control of the business entity. 

• Assessing audit risk and deploying suitable personnel. 

• Assessing the risk appetite of the business entity. 

• Preparing an audit plan/audit program and conducting the audit accordingly. 

• Review meeting with the audit team. 

• Concluding based on the audit evidence obtained in the course of conducting the audit and a discussion with the client on the observations and findings. 

• Discussing with the registered person and obtaining various management certificates. 

• Reporting the observations in the prescribed statutory format, if any, or evolving a suitable format of reporting. 

• Maintaining audit working papers file(filing of documents either in the permanent file or working paper file). 

• Concluding the audit and intimating the management.

GST audit in a computerized environment 

• Compliances under the GST law are dependent on technology because of a large number of transactions. In the GST regime, information system has become an integral part of business entity day-to-day operations, such as return filing, the rectification of return filed, cancellation of multiple returns GSTR 1, GSTR 2A, GSTR 3B, e-Way Bill, GSTR 9, etc.

• The primary responsibility of the GST auditor is to assess the entire EIS environment and get a macro perspective of data availability and system reliability. 

• GST audit processes for big size entities is carried out by using computer systems and technology. For example,

• Verification for the matching of input tax credit availed with the outward supply declared by the supplier being large numbers, cannot be done manually. Hence different computerized tools and methods have to be used for the purpose. 

• So, it may be concluded that computerized tools and methods have to be used for conducting the GST audit. At the same time, the GST auditor must be aware of the EIS of the environment, and the audit risk involved therein.