Audit means an examination of accounting books, conducted in order to establish the fact that the accounting records present a truthful and correct view. Many people get confused between statutory audit is fiscal check in this context. While the first an audit carried out under the Companies Act, the latter an audit conducted under the Income Tax Act.
The rules concerning the audit of an entity's financial statements are discussed in statutory audit . At the other extreme, the provisions relating to taxation are dealt with in the tax audit . Take a reading of this article to learn about the differences between statutory audit and fiscal control.
|Sense||Legal audit audit made mandatory by law.||The tax audit is an audit made mandatory by the Income Tax Law, if the gross receipts / revenues reach the specified limit.|
|Performed by||External auditor||Chartered accountant|
|Audit of||Complete accounting records.||Tax issues.|
|Purpose||Ensure the reliability and transparency of the financial statement.||Guarantee the correct conservation of the accounting books and reflect the assessor's taxable income.|
Definition of a statutory audit
A statutory audit is a verification, which is made mandatory by law. The purpose is to verify the truthfulness and fairness of the accounting records. The appointment of the auditors, their removal, the rights and duties, the remuneration, are established according to the provisions of the law, applicable to the organization.
In the case of companies, the auditor appointed by the shareholders at the annual general meeting (AGM), and the remuneration is also established by them. Companies registered under the Companies Act of 1956 must have their accounts checked by a qualified accountant only after the preparation of the financial statements. The statutory auditor presents his report, in which he expresses his opinion on the truthful and correct view of the final accounts. In addition to this, it ensures the compliance of the financial statements based on the provisions of the law.
Definition of tax audit
The tax audit is defined as an audit of the tax payer's accounts by a chartered accountant, pursuant to Section 44AB, where the auditor must express his or her views and observations through the audit report.
A control that is required, under the Income Tax Act, 1961 only if: the valuer is covered by the definition of a person under the Income Tax Act, which carries out an activity or profession with object of earning / earning, maintains accounting books, profits or gains are calculated according to chapter IV, where the taxable income is the permissible loss.
The client involved in the business, whose turnover exceeds Rs. 1 Crore and for the assignee engaged in a profession, in which their gross receipts in above Rs. 25 lakh. The evaluator must have his account verified, if the gross turnover / revenue exceeds the set limit, even his income is lower than the taxable income. Assists the official in charge of the assessment, in ascertaining the assessor's taxable income, according to the various provisions of the law.
Key differences between statutory audit and fiscal control
The differences between the statutory audit and the tax audit are clearly defined for the following reasons:
- An audit, required by the statute (law), known as a statutory audit. The tax audit is an audit made compulsory by the law on income tax if the turnover of the asserted reaches the specified limit.
- The statutory audit carried out by external auditors while the tax assessment conducted by a practicing chartered accountant.
- Legal audit audit of complete accounting records. Vice versa, Tax Audit verifies tax transactions.
- The purpose of the statutory audit is to ensure reliability, transparency, truthfulness and correctness of the financial statement. Unlike a tax audit, which guarantees the correct maintenance of the books and faithfully reflects the taxable income of the beneficiary and the required deductions are actually made by the assessor.
After discussing the above points, it can be said that the statutory audit and tax audit are completely different. The latter is often a type of the former. Therefore, the scope of the statutory audit is wider than the tax audit. The statutory audit is mandatory for all companies, while the fiscal audit is mandatory for those assizes that meet the conditions of the income tax law.