Methodology of Indirect Tax Audit

The indirect tax audit would involve the following steps:

• Evaluation of internal controls as to the proper quantification and discharge of the indirect taxes;
• Collection of information about the company and the industry with particular information on amount of imports, percentage of customs, amount of removals, quantum of CENVAT, proportion of credit, etc.;
• Design the audit programme depending on the evaluation of internal controls. This would include the records to be verified, areas to be verified and the specific aspects to be checked;
• The staff conducting the audit should be properly trained and should be conversant of the applicable laws and procedures. The audit should be consultative in nature without compromising the independence which is required to give opinion;
• The report on indirect tax audit should also provide specific comments on the statutory information, material matters reported by way of an executive summary and the assertion or qualification.