Nov 202018
 

Who is auditor under GST?

Requirements as to audit under GST:

By provisions of Section 35(5) read with Section 44(2) and other related provision, it indicates that appointments of auditors are subject to conditions and limitations that are specified / prescribed. On an understanding and analysis of these provisions the following facts emerge:

  • Every registered person whose turnover during a financial year exceeds the prescribed limit shall get his accounts audited:
    • by a Chartered Accountant; or
    • by a Cost Accountant.
  • The registered person is required to submit electronically a copy of the:
    • Audited annual accounts;
    • Annual return in the prescribed GSTR 9 (refer Appendix 2 for GSTR 9);
    • Reconciliation statement, duly certified, reconciling the value of supplies declared in the return furnished for the financial year along with the audited financial statement in GSTR 9C (refer Appendix 3 for GSTR 9C); and
    • Such other particulars as prescribed; on or before the 31st day of December following the end of the financial year.
  • Such documents are to be submitted electronically through the common portal either directly or through a Facilitation Centre notified by the Commissioner

Restrictions on appointment of auditor:

Relative or employee of the registered person:

The GST Laws do not prohibit a relative or an employee of the registered person being appointed as an auditor under Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

It may, however, be noted that as per Code of Conduct under clause (4) of Part I of Second Schedule, a chartered accountant who is in the employment of a concern or in any other concern under the same management cannot be appointed as auditor of that concern.

Further, as per the decision of the Council, a member who is not in full time practice cannot carry out attest function on and after the 1st of April 2005.

Therefore, an employee of the registered person or an employee of a concern under the same management cannot audit the accounts of the registered person under Section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

Disclosure of interest of CAs with entity:

It may also be noted that under the Second Schedule to the Chartered Accountants Act, if a member furnishes / gives an audit report in the case of a concern in which he and / or his relatives have substantial interest, it will be necessary for him to disclose his interest in the audit report. This is equally applicable to audit under section 35(5) read with Section 44(2) of the CGST Act and the corresponding Rule 80(3) of the CGST Rules.

Internal auditor can not be a GST auditor:

An announcement is made on 28th September 2018 clarifying that the council of the Institute of Chartered Accountants of India, in its 378th meeting clarified that “an Internal Auditor of an entity cannot undertake GST Audit of the same entity.

Audit fees:

The turnover (aggregate turnover) of a registered person, quantum of tax paid, refunds envisaged etc., cannot be a basis for fee to be charged. Fees cannot be fixed, based on the percentage of trading profits or any such method.