The Supreme Court released the justice that was on debate. The judgement is about the rule from ICAI. Clause six of Chapter VI from ICAI talks about the number of tax audits assigned to a chartered accountant. The matter was on the debate as it is related to the fundamental rights of a citizen. The clause talks about the reasonable restrictions on the job of a chartered accountant. The debate from the professionals emphasized the need for fundamental rights of the chartered accountants. The senior Advocate Paramjit Singh analyzed the case. He represented the petitioners. The judgement about the auditing profession was from the Justices BV Nagarathna and Augustine George Masih. The judgement says that it does not violate the freedom and fundamental rights of the chartered accountants. The clause is effective from 1st of April 2024. The Judgement says that ICAI has the right to adjust the ceiling of tax audits according to the current business trends. The blog shed light on the tax and statutory audits job of a chartered accountant.
The ICAI rule about tax audit:
According to the rule, chartered accountants are allowed to take tax audit assignments of 60 per financial year. The rule is effective in India from April 1, 2024. The chartered accountants breaching the aforesaid limits of ICAI are treated with disciplinary actions. The bench declared that the petitioners against the rule of ICAI are treated as legal uncertainty. The court also mentioned that the ICAI has the power to make adjustments to the tax audit numbers. The Supreme Court justice says that ICAI contributes to the national and international standards of the accounting profession. ICAI maintains credibility and dynamism in the examinations. The justice also says that the true test of maintaining high standards lies in ethical standards. The professional ethical standards followed locally help for achieving the international standards.
Tax Audit fee recommended by ICAI:
The committee for members in Practice had revised the fee for the professional assignments done by the practicing-chartered accountants. The fees for the professional services are divided based on the location. The fee also depends upon the position of the working professional in the CA firm. The principal fee for one day is as follows: 18,000 and above 12,000 and above or 8,000 and above. The qualified assistants receive a fee for one day of work as follows: 10,000 and above per day, 7,000 and above per day, and 5,000 and above per day. The semi-qualified assistants receive fees for one day of 5,000 and above, 4,000 and above, and 3,000 and above. The fee of other assistants for one day is as follows: 3000 and above, 2000 and above and 1000 and above. The following pointers explain the recent guidelines for practicing chartered accountants.
- The committee divided the location into class A, B, and C cities. Tax Audit fees for the three classes of cities are as follows: 40,000 and above, 30,000 and above and 22,000 and above.
- The company audit fee for a small PVT company is as follows: 50,000 and above, 35,000 and above, and 25,000 and above.
- The company audit fee of a large size company is according to the complexities of the job.
- The company audit fee of Medium Six companies is as follows: 80,000 and above, 55,000 and above and 35,000 and above.
- The fee for transfer pricing audit is according to the complexities of the work.
Difference between statutory and tax audit:
Professionals working in tax audit prepare the financial statements, and profits and calculate the tax to be paid. Professionals working in statutory audit prepare the financial and auditor reports after checking the compliances. The following pointers elucidate the differences between statutory and tax audits:
- Statutory audit is for accuracy, and tax audit is for productivity.
- Professionals working in tax audit work as employees. Professionals working in statutory audit work as practitioners or consultants.
- Statutory audit is evidence-based, and tax audit is a transaction-based one.
- Tax audit is for organizations with a turnover of one crore or more. The tax audit is mandatory for organizations with an annual receipt of more than 25 lakhs.
- Statutory audit understands the operating environment. Professionals working in statutory audits prepare the checklists, questionnaires, notifications, regulations, and surveys related to the industrial guidelines.
- The management team of the organization conducts the tax audit.
- Professionals working in tax audits check the payments, receipts, objections, and appeals of the taxpayer. Tax audit is from the government. It is on behalf of the state and central government.
- The shareholder of a company appoints the statutory auditor. Statutory auditors report the findings to the CA firm and shareholders.
- Tax audit checks the information and catches the mistakes in the books of accounts.
Does the demand for tax and statutory audit professionals exceed?
In a statutory audit, the nature of business and money makes no difference. In the case of tax audits, the nature of business and profits makes a difference. Tax audit helps maintain the internal system and books of accounts properly. Statutory audit builds trust with the investors. The demand for tax audits and statutory audits is growing day by day. The money and laws are bringing complexities to the audit process. Statutory auditors and tax auditors understand the value of money and tax laws. The auditors work to improve the internal and external systems of the companies.
Bottom Line:
Statutory and tax audits are essential to maintain the quality standards. Chartered accountants perform job roles according to their interests and capabilities. The contribution of chartered accountants helps the business and government.