What are Guidance Notes on Tax Audits? (Important Guidance Notes)

Guidance notes on tax audits are auditing instructions and guidelines furnished by the Institute of Chartered Accountants of India (ICAI). It is the role of ICAI to provide guidance and ensure uniformity to the auditing process in India. In an auditing journey, an auditor may have the question “What are the most important and recent guidance notes on tax audits?”

Let us answer this question at depth and give you a list of the most important guidance notes on tax audits in India.

• Revised Guidance Note on Tax Audit (2022)
• Guidance Note on the Companies – Auditor’s Report (2022)
• Guidance Note on Audit of Consolidated Financial Statements (Revised 2016)
• Guidance Note on Reports in Company Prospectuses (Revised 2019)
• Guidance Note on Audit of Property, Plant and Equipment
• Guidance Note on Audit of Cash and Bank Balances
• Guidance Note on Audit of Debtors, Loans and Advances
• Guidance Note on Audit of Expenses
• Guidance Note on Audit of Revenue
• Guidance Note on Audit of Banks (2022 Edition)
• Guidance Note on Audit of Accounts of Members of Stock Exchanges (Revised)
• Guidance Note on Audit of Companies Carrying on General Insurance Business
• Guidance Note on Audit of Companies Carrying on Life Insurance Business
• Guidance Note on Certification of XBRL Financial Statements

There are certain other guidance notes issued by the ICAI apart from the above mentioned guidance notes, a comprehensive list of all furnished guidance notes can be found here. 

Revised Guidance Note on Tax Audit (2022)

The first Guidance Note on Tax Audit was printed in 1985, followed by revised guidance notes in 1985, 1989, 1998, 1999, 2005, 2012, 2013, 2014, and latest in 2022. The Revised Guidance Note on Tax Audit (2022) is issued by The Publication Department of the Institute of Chartered Accountants of India (ICAI), and gives out instructions and recommendations for the auditing of income tax reports in India. It talks about the following aspects of I.T in India:

• Accounting standards
• Audit procedures
• Types of financial statements
• Auditors reports
• Methods of accounting
• Valuation of closing stock
• Goods and Services Tax (GST) compliance
• Useful websites

Check out the Guidance Note

Guidance Note on the Companies – Auditor’s Report (2020)

Guidance Note on the Companies – Auditor’s Report (2022) is issued by the Ministry of Corporate Affairs (MCA) that elucidate guidelines and instructions on the Auditing and Reporting functions of corporate entities in India. It talks extensively on instructions regarding auditing of Companies, One Person Companies, Private Limited Companies, and Public Companies. The topics covered are:

• Standard Operating Procedure (SOP)
• Relevant Provisions
• Audit Procedures and Reporting
• Benami Property Transactions
• Relevant Acts
• Accounting standard for property, plant and equipment
• Books of accounts
• Assets and liabilities
• Valuation of inventories
• Deposits and investments

Check out the Guidance Note

Guidance Note on Audit of Consolidated Financial Statements (Revised 2016)

The Auditing and Assurance Standards Board of the ICAI has issued Guidance Notes on Audit of Consolidated Financial Statements (Revised in 2016). This guidance note highlights and states instructions relating to the audit of consolidated financial statements of companies in India. Key aspects highlighted within this guidance note talk about the following:

• Responsibility of the Auditor
• Audit Considerations
• Management Representations
• Reporting

Check out the Guidance Note

Guidance Note on Reports in Company Prospectuses (Revised 2019)

This guidance note gives out instructions as to how company prospectuses need to be drafted in accordance to certain standards and expectations. The guidance note talks about the following:

• Eligibility to Make the prospectus reports
• Legal Aspects
• Reporting fees
• Government rights and powers
• Accounting and auditing aspects
• Reporting standards

Check out the Guidance Note

Guidance Note on Audit of Property, Plant and Equipment

Guidance Note on Audit of Property, Plant and Equipment talks about auditing and reporting pertaining to property, plant, and equipment of companies. Subjects covered include:

• Inherent risks
• Opening balances
• Record verification
• How to calculate valuation of PPE
• Ownership of PPE
• Calculation of depreciation
• PPE Revaluation

Check out the Guidance Note

Guidance Note on Audit of Cash and Bank Balances

A corporation or entity will most certainly have a lot of their assets in the form of cash and bank balances. The Guidance Note on Audit of Cash and Bank Balances lay down the rules and regulations on how to audit cash and bank balances. Topics covered include:

• Verification of Bank Balance
• Examination of Valuation
• Verification of Cash Balances

Check out the Guidance Note

Guidance Note on Audit of Debtors, Loans and Advances

This guidance note issued by the Auditing Practices Committee (APC) of the Council of the Institute of Chartered Accountants of India lay down the framework, regulations, and guidelines for the Audit of Debtors, Loans and Advances of an entity. Topics covered include:

• Examination of Records
• Direct Confirmation Procedure
• Verification and Internal Control Evaluation
• Documentation
• Management Representations

Check out the Guidance Note

Guidance Note on Audit of Expenses

Every business venture has certain expenses. It is the role of the APC to clearly outline the various guidelines and recommendations on how a business entity needs to calculate and format its audit of business expenses. Topics mentioned under this guideline include:

• Goods and Raw Materials Consumed
• Purchases and Purchase Returns
• Salaries and Wages
• Retirement Benefits
• General Administrative Expenses
• Interest expenses
• Repairs and Maintenance
• R&D Expenses
• Contingency expenses

Check out the Guidance Note

Guidance Note on Audit of Revenue

A corporate entity’s most important function is to make a profit while generating revenue. The calculation and formatting of revenue reports need to follow a certain standard format. This format and related guidelines are mentioned under the Guidance Note on Audit of Revenue, which talk about the following:

• Examination of Records
• DisclosuresProcedures of reporting
  Special Con
• siderations
• Documentation

Check out the Guidance Note

Guidance Note on Audit of Banks (2022 Edition)

Banks operating in India need to follow a specific auditing format and guidelines issued under the Guidance Note on Audit of Banks. Important aspects highlighted under this guidance note include:

• Balance sheet format and preparation
• Books and Records
• Borrowings and Deposits
• P&L Account
• Handling of Cash
• Personal Banking Department
• Retail Banking and Marketing Department
• International Banking Division
• Treasury Operations
• Loan Syndication
• Credit Recovery Department
• Law Department
• Business Department
• Consolidation of LFARs
• Overview of Standards on Auditing

Check out the Guidance Note

Guidance Note on Audit of Accounts of Members of Stock Exchanges (Revised)

Guidance Note on Audit of Accounts of Members of Stock Exchanges talks about the format and guidelines pertaining to the audit of accounts of members of stock exchanges. Topics covered are:

• Accounting for Stock Exchange Transactions
• Rolling Settlements
• Derivatives
• Accounting and Audit of Derivatives
• Apart from the above, the guidance note also talks about a variety of other topics.

Check out the Guidance Note

Guidance Note on Audit of Companies Carrying on General Insurance Business

This guidance note is specific to the general insurance sector of India. General insurance companies need to adhere to the guidelines mentioned within this guidance note while formulating their reports. Topics covered include:

• Principles of insurance
• Accounting system and framework
• Internal controls
• Audit at branches / divisional offices
• Audit at head office
• Investments
• Reinsurance guidelines

Check out the Guidance Note

Guidance Note on Audit of Companies Carrying on Life Insurance Business

This guidance note is specific to the life insurance sector of India. Life insurance companies need to adhere to the guidelines mentioned within this guidance note while formulating their reports.

• Principles of life insurance
• Accounting system and framework
• Audit at branches / divisional offices
• Audit at head office
• Handling investments
• Internal controls

Check out the Guidance Note

Guidance Note on Certification of XBRL Financial Statements

Guidance Note on Certification of XBRL Financial Statements is a 78 page document issued by the Auditing and Assurance Standards Board of the ICAI. This guidance note furnishes guidelines for the communication of financial information electronically through XBRL. Topics covered include:

• Requirements for XBRL statements in India
• Preparation of XBRL statements
• Format of XBRL Financial Statements
• Management Responsibility

Check out the Guidance Note

Apart from the above most important guidance notes on tax audits, there are also a few more guidance notes issued by the ICAI. You can check out all of the issued guidance notes for tax audits in India.