Tax Audit is conducted in accordance with the provisions of Section 44AB of the Income-tax Act. It involves examination of the books of account of the assessee and reporting of prescribed particulars in Form 3CD along with the audit report in Form 3CA or 3CB.
Scope of Tax Audit
The audit encompasses:
Verification of books of account maintained by the assessee
Examination of deductions claimed under various sections
Review of quantitative details of principal items of goods
Reporting on payments attracting tax deduction provisions
Certification of particulars required in Form 3CD
Procedures
Standard audit procedures include:
Reconciliation of financial statements with tax computation
Verification of closing stock and work-in-progress
Examination of loans, deposits and related-party transactions
Assessment of compliance with specific reporting clauses
Reporting
The completed tax audit report is filed electronically and forms an integral part of the income tax return for the relevant assessment year.