Responsibilities of the management and GST auditor in GST audit

[Sandeep Rawat]

Appointment of the GST Auditors under section 35(5) and section 44(2) of the CGST Act  read with Rule 80(3) of the CGST Rules [read with the corresponding provisions of the State / Union Territory Goods and Services Tax Acts] is to certify the Reconciliation Statement in GSTR 9-C prepared for the financial year ended 31st March 2018.

In this context, clear responsibilities play a very important role to implement the bonafide purpose of the GST audit.

I have prepared the scope of the management as well as GST auditor responsibilities in GST audit under the GST laws.

Management Responsibilities

Compliance with GST laws and preparation of GSTR  9C in compliance of those laws

The Management is responsible for compliances with the GST laws, comprising the Union Territory Goods and Services Tax / Central Goods and Services Tax / State Goods and Services Tax Act, 2017* and Integrated Goods and Services Tax Act, 2017 and the respective rules framed thereunder, and for the preparation of the GSTR 9C in compliance of those laws.

Maintenance of adequate accounting records and internal controls for safeguarding of the assets and preventing and detecting fraud or other irregularities-written confirmation

The responsibility of the Management also includes the maintenance of adequate accounting records and internal controls for safeguarding of the assets of the Entity / Firm / Company* and for preventing and detecting fraud or other irregularities. As part of the audit process, GST auditor will request from the Management written confirmation concerning representations made to him in connection with the audit.

GST auditor Responsibilities

Audit the particulars included in the GSTR 9C- ensure that they are free of any material mis-statement

GST auditor’s responsibility is to audit the particulars included in the GSTR 9C to ensure that they are free of any material mis-statement.

Audit- auditing standards generally accepted in India and in line with the requirements under the GST laws and assessing the accounting principles used and significant estimates made by the Management in the presentation of financial statements

The audit will be conducted in accordance with the auditing standards generally accepted in India and in line with the requirements under the GST laws. Those standards require that GST auditor plan and perform the audit to obtain reasonable assurance as to whether the relevant GSTR 9C is free of material mis-statements. An audit includes examination on a test basis, using the concept of materiality, evidence supporting the amounts and disclosures in GSTR 9C. The audit may also include assessing the accounting principles used and significant estimates made by the Management in the presentation of financial statements.

Consider- internal control.

GST auditor will consider, solely for the purpose of planning of the audit and determining the nature, timing, and extent of the audit procedures, the enterprise’s internal control. This consideration will not be sufficient to enable him to provide assurance on internal control or to identify all reportable conditions.

Persuasive rather than conclusive nature of audit evidence

Having regard to the test nature of an audit, persuasive rather than conclusive nature of audit evidence, together with inherent limitations of any accounting and internal control system, there is an unavoidable risk that even some material misstatements, resulting from fraud, and to a lesser extent error, if either exists, may remain undetected. A practitioner is expected can’t reduce the engagement risk to zero.

Specific inquiries of Management- financial statements and other reports and effectiveness of internal control over financial reporting

As required by auditing standards generally accepted in India, GST auditor will make specific inquiries of Management about the representations contained in the financial statements and other reports as may be applicable and the effectiveness of internal control over financial reporting. Auditing standards generally accepted in India also require that, at the conclusion of the audit, GST auditor obtain representation letters from certain members of management about these matters. The responses to those inquiries, the written representations, and the results of the audit tests comprise the evidential matter GST auditor will rely upon in forming an opinion on the GSTR 9C or other reports. Owing to the importance of Management’s representations to an effective audit and review, the enterprise agrees liability and costs relating to the services under the letter attributable to any misrepresentations by Management. Management is responsible for providing him with all financial records and related information / documents on a timely basis, and its failure to do so may cause him to delay the report, modify the procedures, or even terminate the engagement.

Working papers prepared in conjunction with the audits - confidential

The working papers prepared in conjunction with the audits are the property of the Firm, constitute confidential information and will be retained by him in accordance with the Firm’s policies and procedures. However, GST auditor acknowledge that the details or data received from the management for preparation of these working papers are / is confidential information of the enterprise and will not be disclosed by him to any third party, except as set out in paragraph 9 below or when required by legislation, without the prior written consent from the Company.

Subject to a peer review

In accordance with the Statement on Peer Review issued by the Institute of Chartered Accountants of India, the attest services may be subject to a peer review to be conducted by an independent reviewer who can inspect, examine or take abstract of the work papers including those provided by the management.

(Mr. Sandeep Rawat has vast experience & knowledge in dealing with Direct and Indirect Taxation.  He can be reached at  sandeeprawatca@gmail.com)