Preparing for Audit in India – New Issue of India Briefing Magazine Out Now

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Preparing for Audit in India, the latest publication from Dezan Shira & Associates is out now and available for free download through the Asia Briefing Publication Store.

audit in India 2023 magazine

In this issue

  • An Introduction to Auditing in India
  • Preparing for the GST Audit
  • Technology-Enabled Changes in the Audit Compliance Landscape

Understanding the significance of the various types of audits a company must undertake is crucial for maintaining the financial position and credibility of its business. Whether conducted internally or by a third party, per compliance and statutory requirements, audits allow senior management and shareholders to evaluate a company’s performance, establish risk exposure and mitigate vulnerabilities, identify errors, and ensure compliance with government tax, industry, and regulatory norms.

In India, businesses are required to comply with different types of audits governed under various laws. The most common audits include statutory audits, internal audits, cost audits under the Companies Act, 2013, and tax audits under Section 44AB of the Income-Tax Act, 1961. Additionally, since the implementation of the Goods and Services Tax (GST) law in 2017, businesses and entrepreneurs in India must conduct GST audits annually.

In this issue of India Briefing Magazine, we provide readers with an overview of India’s audit types and processes, outlining general requirements and materials to be prepared. We highlight the role of the auditor and explain the significance of the different types of audit reports and how they identify company irregularities and errors related to tax compliance and operational scrutiny.

We also cover recent developments highlighting how tax and regulatory authorities are streamlining audit requirements on one hand, while tightening scrutiny of audit and accounting professionals, on the other. Lastly, we introduce technology-enabled changes in audit compliance and the recent requirement to enable the audit trail function in business software.

At Dezan Shira & Associates, we have a dedicated team of accounting and legal professionals in India with extensive experience in helping foreign enterprises ensure compliance. If you have any questions or require assistance with Annual Statutory Audit, GST Audit, Bookkeeping, Financial Reporting, or other compliance matters, please contact our offices in India or email us at india@dezshira.com. We are here to support your business needs.

What to expect from this magazine

Chapter 1

Audits are vital for ensuring transparent, accountable, and reliable financial information within organizations. Indian regulations mandate different types of audits and government scrutiny over financial reporting continues to be dialed up. Businesses are advised to align their reporting obligations with auditor demands to meet regulatory standards.

The chapter breaks down the statutory audit, internal audit, secretarial audit, cost audit, and tax audit process, including mandatory compliance thresholds, financial reporting requirements by entity type, and who conducts the different types of audit. It also briefly explains the auditor’s report. Different types of audit opinions carry varying levels of assurance and convey distinct messages to users—unqualified, qualified, adverse, or disclaimer of opinion.

Finally, the chapter discusses the expanded scope of India’s anti-money laundering legislation and applicability for audit professionals.

Chapter 2

The GST audit ensures businesses are in full compliance with GST regulations—their GST payments are timely and accurate, and their transaction records are precise. Additionally, the GST audit highlights areas where operational improvements can be made, ultimately helping businesses enhance their profitability and efficiency.

This chapter discusses changes to GST audit requirements in India, types of GST audit, compliance thresholds like annual company turnover, and tips for preparedness for the GST audit and annual return filing.

Chapter 3

Traditionally, audits have relied on manual assessments, consuming time and resources. Emerging technologies promise to revolutionize audits by overcoming limitations and enhancing efficiency. Indian audit regulations have also been amended to require audit trails to be enabled in business management software.

In this chapter, we introduce the concept of the audit trail, which serves as a date and time-stamped record documenting the history and details of various events, transactions, and activities in the business software used by an organization. From a compliance perspective, audit trails are a requirement for many organizations. Whether for financial, IT, HR, or operational audits, an audit log provides crucial evidence for inspection and validation of management’s assertions. Audit trails are also employed to monitor access to sensitive data, investigate IT incidents, understand API transactions, track data deletions, and combat cybersecurity threats. Starting April 1, 2023, it is now mandatory for all companies in India, regardless of their size, including not-for-profit companies licensed under Section 8 of the Companies Act 2023 (or Section 25 of the Indian Companies Act 1956), to incorporate a built-in mechanism in their software that records an audit trail for every transaction.

Lastly, this chapter looks at some of the frontier technology applications in the audit landscape—AI, blockchain, automation, and drone use.

About Us

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.