Sunday, 26 July 2015

How would Internal Audit for an IT Company be different from that of a Manufacturing Company?

Internal Audit is an audit of a company's financial records as per the scope defined by the Management, so primarily the area of checking will be defined by the Board of Directors or the Finance Managers. However, here's an attempt to give you a basic framework on how it would be different from the audit of a manufacturing company.

Applicable Tax Laws: Excise is a tax on manufacture of goods. As an IT company may not be producing tangible goods, Excise may not be applicable. However, Service Tax laws will be applicable as primary revenue for such concerns is through providing services and not goods. Sales Tax or VAT may be applicable in case they have some softwares which are sold off-the-shelf and are not customized as per clients need.

Other relevant aspects to check would include, but will not be limited to:
- Servicing Bills, Service Tax, CENVAT records, other incomes
- Salaries, PF, Attendance records, Staff Welfare, Directors' Remunerations, Payment to outsourced staff on retainership basis
- Foreign currency translation matters, foreign remittance compliances
- Withholding taxes, Service tax under reverse charge mechanism
- Royalty or patents, if any
- TDS compliance on salary, professional charges, commission, contractual payments, etc.
- Related party transactions from the point of view of transfer pricing as well as the Companies Act, 2013
- Sources of finance, their repayments, working capital requirements, long term borrowings
- Depreciation on assets, physical verification of fixed assets
- Dividend payments
- Corporate law compliance

No comments:

Post a Comment

We would love to know what you have to say about this information.