QUESTIONNARE FOR REVIEW OF INTERNAL CONTROL SYSTEM AND WALK THROUGH.
PURCHASES – INWARD SUPPLIES
1. Whether all purchases are centralised or de-centralised. If all purchases are authorised by few key persons like owner or Managing Director etc, it may require in-depth study of purchases.
2. Whether all the purchases are made only by issue of purchase order and whether different series of purchase order are issued. Also, the issuance of series of purchase order is centralised in the purchase section. Are there any cases where purchases have been made without issue of purchase order?
3. Whether there is a system of authorised Vendor List. If not, what is the system of approving particular vendor? Are there instances where substantial purchases have been made through unauthorised vendors?
4. Whether rejected inward supplies are stored separately. What is the system of accounting for the rejected inward supplies/short quantity?
5. Whether for purchase returns, debit notes are issued?
6. Whether for rejected inward supplies any set procedure is followed.
7. At what stage ITC is availed, i.e. either before testing for rejection or after testing for rejection?
8. On the inward supplies rejected or short quantity received, whether the ITC reversal is done on each invoice basis or on monthly basis.
9. Whether any item supplied free of cost by the customer.
1. What is marketing pattern – is it through depot, stockist, C&F agent related person or directly by the registered person?
2. How many series of outward supply /GST invoices are generated? For example, there can be different series for outward supplies, export supplies, scrap, other items and job work.
3. Whether all different series of invoices of out ward supplies are entered in one outward supply account or in different outward supply account.
4. Who authorises for despatch of outward supplies?
5. Whether any charges for erection/commissioning collected?
6. Whether Tax invoices are issued for composite supply of both goods and erection & Commissioning (which involves applicability of rate of tax of principal supply, viz., goods)?
7. Whether any materials supplied to the recipients at free of cost?
8. Any amount for marketing expenses, Advertisement, Royalty, Handling Charges, Packing Charges, Warranty, after sales service and Insurance received from recipient in any manner?
9. Whether commercial invoices and outward supply invoices (Tax Invoices under GST) are same or different?
10. Who is authorised to fix the price of outward supplies and whether any printed price circulars are issued?
11. Who is authorised to make supplementary outward supply invoices or debit note for price variation/additional recoveries (advertisement, after sales service, additional packing, insurance, freight, depot charges)?
12. Whether outward supply figures mentioned in GSTR1 are tallying with the records maintained by the registered person?
13. Whether any goods were received for repair etc. on return by the recipients?
14. Types of discounts given and how are they accounted for in relevant records.
15. Whether recipients’ accounts are debited with the net amount of invoice or gross amount?
1. Whether receipt in the stores record are shown only after inspection of inward supplies or before inspection.
2. What is the frequency of stock taking of all the items? How difference is accounted for and what reports are prepared.
3. What is the frequency of physical inventory for high value items (A category in ABC analysis) whether a report is prepared for stock verification and put-up to management and what is the frequency of reporting?
4. For inward supplies covered by insurance claim what is the procedure for filing the claim. Whether such inward supplies are entered in the store register or these are shown in separate account. Whether any register or report is prepared for all such claims.
5. What are the records maintained for inward supplies sent out for Job Work? Whether scrap is received back or job work price is adjusted.
6. How the defective/ damaged inward supplies are reflected in the books of accounts?
1. Whether GST paid on inward supplies are shown separately in purchase account?
2. Whether all inward supply invoices are entered for full value and thereafter for rejected/stock quantity, credit note or sales return invoice is prepared.
3. Whether GST payable on outward supplies made and shown separately in outward supply account?
4. In case of capital goods whether full value including GST is debited in the books or net value is shown in the capital goods account.
5. In case of capital goods fully written off whether GST deducted from such expenditure account or not?
6. What is the system to check GST liability (payment through Electronic Cash ledger / Electronic Credit Ledger) as shown in the financial records with the GST records? Whether any reconciliation is made for the differences?
1. Whether any input/output ratio has been determined for sending the input for job work.
2. What are the records maintained for sending inputs for job work (either directly from the supplier of inputs/ from the place of business of the registered person) and whether the records show quantity of inputs sent, quantity of final product to be received, actually received and variation?
3. Whether any monthly or periodic statements are prepared for each job work and at what level the statements are verified for taking corrective action?
4. What is the system of treatment of scrap generated at job worker? Whether it is brought back to the registered person’s premises or allowed to be disposed off by job worker?
5. Whether the finished goods after job-work are being supplied from job-worker’s premises.
6. When the finished goods are not received back from the job worker in time (180 days), what action is taken by the company and what accounting treatment is done for the same?
7. Whether the processed inward supplies after conversion into outward supplies are sold by the principal directly from the premises of Job-worker?
8. Whether outward supplies are made after transferring the same to any other place from the job-worker’s premises?
WALK THROUGH: Flow chart showing movement of transactions; same route can be followed for walk through process. (Consider only such part of flow chart as applicable in case the supplier being manufacturer or directly supplying goods procured as such)
Vendor Development / Supplier identification
Quantification of requirements – Technical literature
Hire purchase — Leasing agreements – Project reports
Purchase Order (Register of purchase Order)
Credit notes – Vouchers – Cheque book – Bills payable
Debit notes (for purchase return)
Purchase Return Book
II – INPUT TAX CREDIT
Material receipt — Loss in Transit /Rejects
Lab tests —- Rejects/ return / debit note
Return of reject / rejected inputs – Tax Invoice/ debit note
inward supplies Leased.
inward supplies written off –
Capital goods — fixed Asset register – Depreciation
↓ I.T. return
Annual report — Fixed Asset schedules / Depreciation schedules
Credit notes from suppliers
Tax Invoices for supply of inputs as Outward supplies (as such) / transfer ‘assets’.
cost audit report – cost register – Process chart
Balance sheet and P & L account / Annual report
IV Price determination (Transaction Value)
Other income in Annual Report
Debtors Ledger / Creditors Ledger
Cost Audit Report
Register for inter Corporate Loan
Register of advances
Dealer’s agreement / Consignment agents / C& F agents agreement
RBI approval for payment of Royalty
Bill of Entry Register
Bank reconciliation statement / Bank statement
Marketing files / Sales performance charts
Purchase order placed by buyers / sale contract
Fixed assets in custody of finance given by buyer
V. Classification (where applicable)
Research Development — Product Development – Product lab
Responsibility for verification of tax liability
Intimation —- Inter office Memo
Marketing documents including literature.
VI. Outward supply
Outward supplies/ sales order Book — Scrap Register
Dealers agreement — Distributor consignment Agents C & F Agents Agreements
Delivery note – Invoices
VII. outward supply return
outward supply return book Bank Reconciliation Statement
Non moving stock register
Credit notes — Job card / work order
IX Non Taxable items
Name of the Non-taxable item
Reversal of ITC
Part B- SUPPLY OF SERVICES
QUESTIONAIRE FOR REVIEW OF INTERNAL CONTROLS
(Information to be filled in by the Auditor before filling up the information in the working papers)
A. Flow Chart showing manner of verification of transactions and documents during Walk Through and Audit.
1. Verification of Supply of Services and Income:
> File of correspondences with the client/customer
> Quotation/Tender files
> Cost sheet to work out approximate cost of service (eg. cost of A.M.C., Advertisement cost)
> Price List (in cases where price of services are fixed as in case of Insurance Premiums, Cable Operators, Coaching Centres).
> Booking Register (eg. in case of Mandap keeper, Convention Centre, tour operators).
> Service Agreement/Contract like Agreement for Technical consultancy.
> Job cards/work statements (eg. in case of AMC or repair of vehicle, job card may show value of services and material used)
> Income Register/ Debit Notes
> Customer’s ledger Account (to verify total amount billed, by way of invoice, debit note, payment received, credit note issued)
> GST returns
2. Receipt of Inputs (including goods and services – Inward supplies) and availment of ITC thereon
> Vendor/Supplier list
> Correspondence with vendor/supplier
> Tender/Quotation documents
> Purchase Order
> Purchase invoices/bills
> Debit Notes (for return of input services)
> Purchase Register
> Ledger Accounts of inward suppliers (to verify the date of payments for inputs)
> Bank Account/Cash Account (to verify random cases for payments in respect of inward supplies)
> Verify use of inputs (eg. use of telephone for output services or for non-taxable work, insurance for property used for output services)
> Verify ITC register maintained if any
> Verify relevant GSTR 3Bs and GSTR9/ GSTR 9C
3. Financial Record Scrutiny
> Trial Balance
> Check all Income Accounts (showing credit balances) in Trial Balance.
> Compare value of Income Accounts with value of taxable services shown in relevant GST returns.
> Verify invoices/bills/other documents of Income Accounts on which GST is not paid.
> Verify major expenses accounts to confirm whether any recoveries made from customer/client are adjusted in the expenditure account.
> Check Journal Vouchers/Debit Notes to verify recoveries from Customer/clients on which GST is not paid.
4. Use of Inputs/ Input Services in Exempted Services:
> Check details of Input Services on which ITC was availed
> Check, if any, record maintained for quantifying inward supplies used for exempted outward supply services or non-taxable activity.
> Verify use of inward supplies by verifying documents
> Check costing of outward supply (prepared for submitting quotation or prepared for calculation of cost of output services)
> Check job card/work statement to find out exact quantum of use of input services.
B. Questionnaire for gathering information:
|01.||Name & address of the registered person.|
|02.||Name and contact number of the ‘Authorised person’ for Audit.|
|04.||Whether the taxable person is also registered as an Input Service Distributor?|
|05.||Whether the taxable person is a Proprietary, Partnership firm, Limited liability Partnership firm (LLP), Pvt. Ltd Company, Public Limited Company?|
|06.||Details of transactions with Associated Enterprise.|
|07.||Details of Taxable Supplies made|
|08.||Details of Taxable inward supplies received for which tax has to be paid under reverse charge. (under Section 9(3)/ 9(4))|
|09.||Details of exempted Services supplied, if any, & Notification No.|
|10.||If both Taxable and Exempted Services are provided, whether ITC is being reversed as per the prescribed method|
|11.||Details of Exports|
|12.||Whether any periodical report/statement is furnished to any State / Central Government / Authority / Regulatory bodies? If yes, details thereof.|
|13.||Whether any offence case is booked in respect of GST, Income Tax, VAT/ Sales Tax. If so, details thereof.|
|14.||Whether any service is sub-contracted partially or wholly? If so, details thereof.|
|15.||Whether ITC on input services availed? If so, indicate details of major input services.|
|16.||Whether ITC on Capital Goods availed? If so, details of such Capital goods, along with their HSN|
|17.||Whether entire consideration payable to the supplier was paid to them within 180 days on inputs received? If not, whether reversal of ITC/ interest thereof was done?|
|18.||In case the registered person is an Input service distributor (ISD), whether he is having any unit supplying only exempted outward supplies? If yes, whether he is distributing the credit in respect of services related to that unit also?|
|19.||Whether any amount payable/ paid to the supplier has been adjusted against the receipt/ receivable and net income shown in the P&L Account.|
|20.||Whether any advance payment is received towards outward supplies? If yes, whether GST is paid on such receipts?|
|21.||Is there any expenditure to any entity abroad which has been made but on which taxable person is not required to pay GST under reverse charge mechanism? If yes, details thereof.|
|22.||Whether GST is paid on the gross value received including TDS amount deducted by the service recipients?|
|23.||Whether PF/ ESI or any other charges of the personnel of the service provider are being directly paid by the service recipients? If so whether GST is paid on such amount.|
|24.||Details of agreements entered into by the registered person for supplying / receiving services|
|25.||Details of expenditure in foreign currency on which GST has neither been charged by the registered person nor it is payable under reverse charge mechanism|
2. Invoicing pattern
|01.||Is invoice issued in respect of all transactions? If not, reasons for not issuing invoice.|
|02.||How many series of invoices are being used?|
|03.||If more than one series is used, give details of each such series.|
|04.||If there are more than one series of invoices, is GST paid on all the series of invoices?|
|05.||If not, then the reasons for not paying GST on such series of invoices (e.g. exempted / exports / non-taxable services). Give details.|
|06.||Whether the invoice contains the GSTIN?|
|07.||Is invoice issued on the date of supply of service or before or later?|
|08.||List the different heads under which amounts are billed in invoices and their corresponding heads in the Trial Balance.|
|09.||Name the heads in the invoice on which GST is not paid.|
|10||Are there any reimbursements billed in the invoice?|
|11.1||Are there any debit/ credit notes issued for claiming reimbursements?|
|12.||If yes, is GST paid on these reimbursements? If not, reasons thereof.|
|13.||Whether invoices are generated on Computer. If yes, then whether the Invoice Numbers are generated automatically or is fed manually. What safe guards are provided in the system for data security? Give the name and designation of the person having the authority to cancel an invoice.|
|14.||Whether any amount is recovered by issue of debit note and whether it is included in the gross value of services?|
|15.||Give a brief on sale pattern of services liable to GST.|
|16.||Are any goods or services supplied by the service receiver free of cost or at subsidized price?|
3. Accounts and records
|01.||Whether accounts are prepared on mercantile basis or cash basis?|
|02.||Whether the Accounts are maintained electronically? If yes, the name of accounting packages / computer software installed for maintaining accounts in the units like Tally, FAS etc:|
|03.||Whether accounting software was switched over to some other software during the audit coverage period.|
|04.||Whether any changes have been made in the accounting policies affecting GST liability relating to reimbursement of expenses, timing of payment of GST and treatment of payments in foreign currency?|
|05.||Whether accounts are audited by Statutory Auditor? If so, name and address of the auditor.|
|06.||Whether Cost Accounting records as prescribed under Section 148 of the Companies Act, 2013 are required to be maintained?|
|07.||Whether Cost Audit is conducted and if yes report thereof is prepared?|
|08||Whether there is any system of Internal Auditing?|
4. Making of GST return
|01.||List the ledger/ accounts from where the monthly gross amount received is taken for taxable service.|
|02.||List the ledger/accounts from where the amount received towards gross monthly amount of Exports is taken.|
|03.||List the ledger/accounts from where the amount received towards gross monthly amount of exempted service is taken.|
|04.||List the ledger/accounts from where the gross monthly amount of amount received as pure agent is taken.|
|05.||List the ledger/ accounts from where the gross monthly amount billed is taken.|
5. Place of supply
|01.||Whether place of supply is correctly determined in case of supplies so as to identify supplies as whether inter-state or intra state supplies|
|02.||ZERO RATED SUPPLIES – Value of services exported if any, on which no GST has been paid?|
|03.||If so whether all such supplies are eligible to be treated as such ZERO RATED SUPPLIES|
|04.||Is the payment for services exported received by the service provider in convertible foreign currency? It not, list those transactions where amounts are not received in foreign currency.|
|05.||Is the payment for services exported received by the service provider in convertible foreign currency within the time limit prescribed by RBI? If not, give details.|
|06.||Whether any services has been exported to “Associated Enterprises”. If yes, mention the value thereof.|
6. VALUATION OF SERVICES
|01.||Is there any outward supply of goods involved in the course of providing service or otherwise?|
|02.||Is the value of goods supplied as mentioned in Point (1) above included in the gross amount charged as declared in GST|
|03.||“Gross Amount Charged” includes reimbursements billed for the purpose of determining value of supplies and in turn the tax liability?|
|04.||Is there any, Value of reimbursements on which GST is not charged|
7. AMOUNTS TO BE INCLUDED IN TAXABLE VALUE
|01.||Whether any Goods / Services provided free of cost by the recipient|
|02.||Whether reimbursements received from recipient|
|03.||Whether any other expenditure borne by the recipient, which are otherwise to be borne by the supplier?|
|01.||What is the organization structure?|
|02.||Who is responsible for billing and outward supplies?|
|03.||What reports are given to his seniors on the daily, weekly, monthly sales? Give sample copies?|
Note: After obtaining the above information, the auditors may physically examine the concerned ledgers/ documents which may be relevant for verification of the issues mentioned in the audit plan as well as any new additional issues that may be identified during the time of gathering of the information