Introduction

The tax audit and statutory audit sound alike but are not. There are some basic differences between them. In this blog, we’ll talk you through all points to help you distinguish between them. Before starting, we would like to ask you if you’re looking for a tax consultant kolkata. If yes, then India Vakil is the best platform for you. 

We’re the best income tax consultants in Kolkata who help our clients to know more about tax-related topics. Visit the official website of our tax firm in kolkata to avail fruitful services. You can even check our social media pages to know more about the client testimonials.

What do you mean by tax audit and statutory audit?

The statutory audit has been referred to by the Indian Judiciary as mandatory for the corporate sector. The purpose of conducting this audit is to maintain the legal accounts of the company. The Act associated with this audit is Section 143 of the Companies Act 2013.

The tax audit serves the purpose of finding the audit of the taxpayer’s account. The audit is also done by a Chartered Accountant. The Act associated with this audit is Section 44AB. The auditor here has to express his opinions regarding the audit report.

The key difference between tax audit and statutory audit

1. Application

The statutory audit is performed by the auditor as per the law’s guidance. That audit will apply to the organisation. However, there’s a condition while performing the tax audit. The Income Tax determines this assessment. It mainly carries the vocation or profession which aims to make a profit from his job. An account record of his start-up would also have to be maintained by him.

2. Threshold limit requirement 

Now, this is something that will give you a clear idea of what is tax audit and statutory audit. The gross receipt threshold limit or turnover is not a must in performing a statutory audit. This audit is a must for every company even if it has no turnover. On the contrary, the tax audit process requires the company to have at least 1 crore of turnover and the gross receipt should be more than 25 lakhs. 

3. How many times should these be conducted?

An organisation has to perform a statutory audit within 6 months from the financial year-end. But, the company has to hold a general meeting with the officials and shareholders before starting the audit. 

The tax audit in auditing has to be performed by a company or an individual on the 30th of September of a financial year. It’s the same date to file the tax audit report with the income tax auditing services department. 

4. Penalty criteria 

This is the main point of difference between tax audit vs statutory audit. An organisation may be fined something between 25, 000 to 5, 00, 000. Whereas, the officers will have to pay a penalty of 10, 000 to 1, 00, 000. In the case of the tax audit process, the fine is charged maybe 0.5% of the total sales, turnover, or gross receipts. If paid in money, it would be a minimum of 1, 50, 000.

5. Purpose 

The purpose of the statutory audit is to ensure there’s reliability, transparency, truthfulness, and fairness in the Company’s financial statements. It makes sure that there is a fair representation of the transactions they claim to pay the company tax on.

The motto of the tax audit for companies is to ensure that there’s proper maintenance of account books. The income tax auditing services ensure that the taxable income of the assessee and the preparation and submission of tax audit report are truly reflected by the books of account. 

6. Areas covered in the tax audit process

It is compulsory for tax companies to carry out this audit process. However, the Income Tax Act requires an organisation to perform this auditing only if it has a net turnover of at least 1 crore. Also, the receipts should be 25 lakhs or more.

Frequently Asked Questions 

1. Does statutory audit include tax audit?

Statutory audits are mainly divided into two categories. These are company audits and tax audits. According to the Companies Act 2013, every organisation must have its books of accounts audited every financial year, irrespective of the nature of business capital or sales turnover.2.

2. Can a statutory auditor become a tax auditor?

Yes, a statutory auditor can also audit your taxes. Please note that the number of tax audit reports that CAs can file is limited. 

3. Can a statutory auditor do GST filing?

Only a Chartered Accountant or a Cost Accountant can perform a GST audit. Note that this power doesn’t lie in the hands of a statutory auditor. 

4. What are the types of the statutory audit?

There are 4 types of statutory audits as per the Companies Act 2013. They are Cost Audit, Secretarial Audit, Tax Audit, and the GST Audit. 

5. Who appoints the statutory auditor?

A statutory auditor is appointed by the board of directors within 30 days of the organisation’s  incorporation. These rules confine to Section 139 of the Companies Act 2013.

6. What is the statutory audit limit for proprietorship?

In the case of a proprietor running a business, a tax audit is compulsory. It has to be done if the sales turnover is more than Rupees 1 crore. In the case of an individual, who has gross receipts of more than 50 lakhs, the tax audit is mandatory if he has a profession.

Conclusion 

So these were the main points of difference between tax audit and statutory audit. A statutory audit is wider in purpose than a tax audit in auditing. One can learn more about income tax auditing services after going through these in detail. 
Remember that a statutory audit is compulsory for every organisation. But, a tax audit only applies to companies under the Income Tax Act. You can visit India Vakil to read similar articles like this or avail any help regarding income tax returns. We’re the best income tax consultants in Kolkata with years of experience.