Extension of Due Dates Due to Covid-19 Lockdown

INCOME TAX

Nature of Compliance Relevant Period Original Due Date Extended Due Date

Income Tax Return for [Belated return & Revised return]

FY 2018-19 (AY 2019-20) 31st March 2020 30th June 2020

TDS Returns in Form 24Q/26Q

 

4th quarter ending 31 March 2020

31st May 2020 30th June 2020

TDS Returns in Form 26QB/QC/QD

 

February 2020 30th March 2020 30th June 2020
March 2020 30th April 2020 30th June 2020
April 2020 30th May 2020 30th June 2020

Issue of Form 16/Form 16A

4th quarter ending 31 March 2020

15th June 2020 30th June 2020

Issue of Form 16B/Form 16C/Form 16D

For tax deducted in the month of March 2020

15th May 2020 30th June 2020

For tax deducted in the month of April 2020

14th June 2020 30th June 2020

Furnishing of Statement of Financial Transactions (SFT)

FY 2019-20

31st May 2020 30th June 2020

Making various investments/ tax saving investments or payments for the FY 2019-20 (section 80C to 80GGC & section 54 to 54GB)

FY 2019-20 31st March 2020 30th June 2020

GOODS & SERVICES TAX

Nature of Compliance Relevant Period Original Due Date Extended Due Date

GSTR- 3B (Taxpayers with Aggregate Turnover up to Rs. 1.5 crores in the preceding FY)

 

February 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

30th June 2020

 

[No Late fees & Interest up to the specified due dates]

March 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

3rd July 2020

 

[No Late fees & Interest up to the specified due dates]

April 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

6th July 2020

 

[No Late fees & Interest up to the specified due dates]

GSTR-3B (Taxpayers with Aggregate Turnover more than Rs. 1.5 crores but up to Rs. 5 crores in the preceding FY)

February 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

29th June 2020

 

[No Late fees & Interest up to the specified due dates]

March 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

29th June 2020

 

[No Late fees & Interest up to the specified due dates]

April 2020 22nd /24th Apr 2020

(Refer * & ** in note below)

30th June 2020

 

[No Late fees & Interest up to the specified due dates]

GSTR-3B (Taxpayers with Aggregate Turnover more than Rs. 5 crores in the preceding FY)

February 2020 20th Mar 2020 24th June 2020

 

[NIL Interest for first 15 days from the original due date, and reduced rate of 9% p.a. thereafter up to the specified due dates and No Late Fees]

March 2020 20th Apr 2020
April 2020 20th May 2020

GSTR-3B (Taxpayers with Aggregate Turnover more than 5 crores)

May 2020 20th June 2020 27th June 2020

GSTR-3B (Taxpayers with Aggregate Turnover up to 5 crores whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep)

22nd June 2020 12th July 2020

GSTR-3B (Taxpayers with Aggregate Turnover up to  5 crores whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi)

24th June 2020 14th July 2020
GSTR-1 (Normal Taxable Person)           Monthly Filing March 2020 11th Apr 2020 30th June 2020

[No Late fees up to the specified due dates]

April 2020 11th May 2020
May 2020 11th Jun 2020
GSTR-1 (Normal Taxable Person) Quarterly Filing

 

Qtr. ending March 2020 30th Apr 2020 30th June 2020

[No Late fees up to the specified due dates]

 

GSTR-6 (ISD Return) Mar’2020 13th Apr’2020 30th June’2020
Apr’2020 13th May’2020
GSTR-1 (Normal Taxable Person) Quarterly Filing May’2020 13th June’2020 30th June 2020

[No Late fees up to the specified due dates]

GSTR-7 (Taxpayers required to deduct TDS) Mar’2020 10th Apr’2020 30th June’2020
Apr’2020 10th May’2020
May’2020 10th June’2020
GSTR-8 (Taxpayers required to collect TCS) Mar’2020 10th Apr’2020 30th June’2020
Apr’2020 10th May’2020
May’2020 10th June’2020

Input GST credit – restriction rule of 110% with reference to GSTR2A

 

 

 

 

 

Feb, Mar, Apr, May, Jun, Jul, Aug month returns

 

The said restriction of input tax credit upto 110% of credit available under GSTR-2A as per Sub rule (4) of Rule 36 shall not apply to input tax credit availed by the registered persons in the returns in FORM GSTR-3B to be filed for the months from Feb-Aug2020. However, FORM GSTR-3B for the tax period of September, 2020 shall be furnished with the cumulative adjustment of input tax credit for the said months i.e., ITC of September 2020 along with ITC availed for the period Feb-Aug2020 shall not exceed 110%  of the cumulative eligible credit available in respect of invoices or debit notes for period Feb-Sep2020, the details of which have been uploaded by the suppliers during said months.

Note for GST–

* – Taxpayers whose principal place of business is in the States of Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Karnataka, Goa, Kerala, Tamil Nadu, Telangana, Andhra Pradesh, the Union territories of Daman and Diu and Dadra and Nagar Haveli, Puducherry, Andaman and Nicobar Islands or Lakshadweep- Due date was 22nd of the following month

** – Taxpayers whose principal place of business is in the States of Himachal Pradesh, Punjab, Uttarakhand, Haryana, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand or Odisha, the Union territories of Jammu and Kashmir, Ladakh, Chandigarh or Delhi- Due date was 24th of the following month 

REGULATORY

Nature of Compliance Relevant Period Original Due Date Extended Due Date
LLP Settlement Scheme 2020

 

 

 

Preceding Financial Years and current financial year till 30th September, 2020

Documents due for filing by 31st Mar 2020 if not filed earlier as required and subsequent filing requirements till 30th September, 2020 under Limited Liability Partnership Act.

Scheme open for all filings made from 01st April 2020 to 30th September 2020.

 

Late Fees completely waived and immunity from Prosecution in respect of default related to filings.

Companies Fresh Start Scheme 2020

 

 

 

Preceding Financial Years and current financial till year 30th September, 2020

Documents due for filing by 31st March 2020 if not filed earlier as required and subsequent filing requirements till 30th September, 2020 under Companies Act.

 

Scheme open for all filings made from 01st April 2020 to 30th September 2020.

 

Late Fees completely waived and immunity from Prosecution in respect of default related to filings.

 DISCLAIMER

 This document has been prepared in summary form by Dewan P. N. Chopra & Co. from sources believed to be reliable and based on The Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, various notifications issued by CBIC and circulars issued by Ministry of Corporate Affairs. For further details, please refer the above Ordinance/Notifications/Circulars. The information contained herein is intended only for the person to whom it is sent. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. Recipients should conduct and rely upon their own examination, investigation and analysis and are advised to seek their own professional advice. The information and data contained herein is not a substitute for the recipient’s independent evaluation and analysis. This document is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies on it.

Posted in Direct Tax, GST, Regulatory, Taxation |

Risk Management for ‘Black Swan’ Events and Business Continuity Plan

Why the term Black Swan is used so often in risk management because the risk managers feel the need to separately call out extreme impact events, regardless of probability and they pose an existential threat to a firm.

Black Swan Definition 

The most common definition of a Black Swan is: an event in which the probability of occurrence is low, but the impact is high. A contemporary example is impact of coronavirus pandemic which the world is currently facing.  In these, and similar events, the impact is so extreme, risk managers have felt the need to classify these events separately to tell decision makers not to get into a false sense of security because the annualized risk is low.  This is where the office-talk term “Black Swan” was born. It is an attempt to assign a special classification to these types of unforeseen risks.

Black Swan is an outlier, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us create explanations for its occurrence after the fact, making it predictable.”

It’s become a generally accepted word to describe low probability, high impact events.

Tools to describe circumstances around low probability, high impact events.  

Risk managers use the term ‘Black Swan’ because they need to communicate they need a tool to draw attention to those extreme unforeseen risks that could outright end a company. There may be something that can be done to reduce the impact (e.g. diversification, Business continuity plan, preparation for pandemic, backups, etc.) or perhaps nothing can be done (e.g. market or economic conditions that cause company or sector failure). Nevertheless, risk managers would be remiss to not point this out.

Risk conditions go beyond simply calling out low probability, high impact events. They specifically deal with low probability, high impact events that do not have any or have weak mitigating controls. Categorizing it this way makes sense when communicating risk. Extreme unforeseen risks with no mitigating controls may get lost in annualized risk aggregation.

There are two types of risk conditions:

  1. Unstable Risk Condition: Describe a situation in which the probability of a loss event is low and there are no mitigating controls in place.
  2. Fragile Risk Condition: Very similar to an unstable risk condition, the distinction is that there is one control in place to reduce the threat event frequency.

Risk Managers need tools to help business leaders to conceptualize actual risk. Risk conditions describe these types of events and the unique risks they pose with greater clarity and without outdated, often misused metaphors.

Business Continuity Plan

A Business Continuity Plan (BCP) is a process that defines the potential impact of disaster situations, defines policies to respond to them and helps businesses to recover so that they can function as usual. A BCP is generally formulated in advance for the disaster and involves the company’s key managerial personnel. The main goal of a BCP is to protect personnel and assets, both during and after the disaster.

Business continuity plans are difficult and differ from organization to organization. Here are some examples of what a BCP may include:

  • Policy, purpose, and scope business continuity plan
  • Goals and objectives of the organization
  • Key roles and responsibilities of managerial personnel
  • Risk mitigation plans for risk identified
  • List of tasks required to keep operations flowing
  • Explanation of where to go during an emergency
  • Data backups protocols
  • Plan maintenance protocols
  • Coordination with local government bodies
  • Contact information of key management personnel

Business continuity plans are an important part of any business. Disasters can lead to a loss in revenue and higher costs, which in turn can affect profitability. Businesses can’t always rely on insurance alone, as insurance doesn’t always cover every cost associated with the incident.

A BCP can also benefit a business in these two ways:

  • The business will feel more prepared to handle the unforeseen.
  • The business will have a plan to continue providing critical service after unfolding of the disaster.

Disclaimer: The information contained herein is in summary form and is based on information available in public domain. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. This document is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain or for any loss, howsoever caused or sustained, by the person who relies on it.

Posted in Risk Advisory |

Taxability of E-commerce Transactions

With the expansion of information and communication technology, the supply and procurement of digital goods and services have undergone exponential expansion everywhere, including India. Today is the Era of E-commerce which is significantly growing faster than the global economy as a whole.

E-commerce (electronic commerce) is the activity of electronically buying or selling of goods or provision of products on online services or over the Internet through digital or electronic facility or platform. Some renowned e-commerce examples in India are Amazon, Flipkart, Myntra, Paytm, Zomato, Swiggy etc.

The E-commerce business models have created new tax challenges. The typical direct tax issues relating to e-commerce are the difficulties of characterizing the nature of payment and establishing a nexus or link between a taxable transaction, activity and a taxing jurisdiction, the difficulty of locating the transaction, activity and identifying the taxpayer for income tax purposes.

Considering the growing numbers of e-commerce transactions and entities, Government of India has recently brought in certain provisions in the Income tax Act, 1961 (‘Act’) to tax such E-commerce transactions. Such provisions which were introduced through Finance Act, 2016 (FA 2016) and Finance Act, 2020 (FA 2020) are explained in brief herein below:

PROVISIONS UNDER INCOME TAX ACT FOR E-COMMERCE TRANSCTION

A. Equalization Levy:

Levy on online Advertisement Services provided by Non Residents:

Equalization Levy was first introduced by Finance Act, 2016 and is governed by the provisions Chapter VIII to Finance Act – “Equalisation Levy” which provides for taxation the digital transactions. Equalisation levy is direct tax on the income of a Non Resident E-Commerce operator but it is a levy different from Income Tax. Any receipt which were subjected to equalisation levy were thus made exempt from income tax by inserting clause 50 under section 10 to the Act.

Initially vide Chapter VIII of Finance Act, 2016, equalization levy @6% was imposed on consideration received for the following specified services rendered by a non-resident service provider:

  • Online advertisement;
  • Any provision for digital advertising space or any facility or service for the purpose of online advertisement;
  • Any other service as maybe notified by Central Government.

Every person, being a resident and carrying on business or profession or a non-resident having a permanent establishment in India is liable to deduct the equalisation levy from the amount paid or payable to a non-resident in respect of the specified service at the rate of 6%, if the aggregate amount of consideration for specified service in a previous year exceeds one lakh rupees

Extension of Scope of Equalisation Levy to Ecommerce transactions being sale of goods or provisions of services:

Vide Finance Act, 2020, the scope of equalisation levy is now extended by making suitable amendments and introducing new sections in Chapter VIII of Finance Act, 2016 to include consideration received or receivable by an e-commerce operator from e-commerce supply or services made or facilitated by it to:

  1. a person resident in India; or
  2. a person using IP address in India; or
  3. a non-resident in following specified circumstances:
  • sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement through IP located in India;
  • sale of data, collected from a person who is resident in India or from a person who uses IP address located in India;

The rate of such levy will be 2% and will be applicable on and from 1st April 2020. Consequential amendment is done in Sec. 10(50) to provide that income arising from e-commerce supply or services chargeable to Equalisation levy would be exempt from income tax.

Following are the important terms defined in Section 164 of Finance Act 2016 which needs to be understood:

  • E-commerce supply or services means:

(i) online sale of goods owned by the e-commerce operator; or

(ii) online provision of services provided by the e-commerce operator; or

(iii) online sale of goods or provision of services or both, facilitated by the e-commerce operator; or

(iv) any combination of activities listed in clause (i), (ii) or clause (iii);

  • E-commerce operator means a non-resident who owns, operates or manages digital or electronic facility or platform for online sale of goods or online provision of services or both;

The equalisation levy shall on e-commerce transaction shall not be charged in the following cases:

(i) where the e-commerce operator has a permanent establishment in India and e-commerce supply or services is effectively connected with such permanent establishment; or

(ii) where the equalisation levy is leviable under section 165 of the Finance Act 2016 being equalisation levy on online advertisement services; or

(iii) Sales, turnover or gross receipts of the e-commerce operator from the e-commerce supply or services made or provided or facilitated is less than Rs. 2 crore during the previous year.

Every e-commerce operator will be required to make Equalization levy payments quarterly as mentioned below:

Quarter Ending Due date
30th June 07th July
30th September 07th October
31st December 07th January
31st March 31st March

B. TDS on E Commerce Transaction under Section 194-O of the Act:

E-Commerce operators, at the time of credit of the amount of sale of goods, services or both to the account of an e-commerce participant or at the time of making payment to an e-Commerce participant by any other mode, whichever is earlier, deduct TDS @1% of gross amount of sale or services or both. The said provisions are effective from 01st October 2020.

Following are the important terms defined in Section 194-O of the Act which needs to be understood:

  • E-Commerce means the supply of goods or services or both, including digital products, over digital or electronic network;
  • E-commerce operator means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce;
  • E-commerce participant means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce;

Following important points needs to be kept in mind for the purposes of Section 194-O of the Act:

  • Any payment made by purchaser of goods or recipient of services directly to e-commerce participant for sale of goods or provisions of services or both facilitated by e-commerce operator shall be deemed to be paid by e-commerce operator and TDS shall be required to be deducted on the same;
  • No deduction to be made by e-commerce operator under Section 194-O of the Act, if the following conditions are satisfied:

E-commerce participant is an individual/ HUF; and

Gross amount of sale of goods or provisions of services or both during the year does not exceed Rs. 5 lakhs; and

E-commerce participant has furnished his PAN or Aadhar number to the E-commerce operator;

  • If TDS has been deducted in respect of a transaction under Section 194-O of the Act, then, TDS shall not be deducted under any Section of Chapter XVII-B of the Act on such transaction. However, TDS provisions shall continue to apply on amount received/ receivable by e-commerce operator for hosting advertisements or providing any other services not covered under this Section.
  • For the purpose of Section 194-O of the Act, e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant.

PROVISIONS UNDER GST FOR E-COMMERCE TRANSACTION 

Apart from the above provisions under Income Tax Act, E-commerce transaction are taxable under GST regime as under:

Registration Provisions for e-commerce operator

As per Section 24 of the CGST Act, E-commerce operators are required to get mandatorily registered under GST irrespective of the Turnover in the following Cases:

  • person who are required to pay tax under sub-section (5) of section 9 (Section 24(iv));
  • every electronic commerce operator who is required to collect tax at source under section 52 (Section 24(x);

Where an electronic commerce operator does not have a physical presence in the taxable territory, then any person representing him for any purpose in the taxable territory shall be liable to pay tax, and if he neither have a physical presence in the taxable territory nor have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.

Section 9(5) of the CGST Act (corresponding Section 5(5) of the IGST ACT)

The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Specified Services under Section 9(5) of the CGST Act:

S.No. Description Supplier of Service Person Liable to pay GST Notification No. Effective  Date of Notification
1 Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab and motor cycle; Any person E-commerce Operator Notification No. 17/2017-Central Tax (Rate)

Dated 28th June’2017

1st July’2017
2 Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act i.e. whose turnover exceeds the Threshold limit. E-commerce Operator Notification No. 17/2017-Central Tax (Rate)

Dated 28th June’2017

1st July’2017
3 Services by way of house-keeping, such as plumbing, carpentering etc. Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act E-commerce operator Notification No. 23/2017-Central Tax(Rate) dated 22nd Aug, 2017 1st July’2017

TCS on E-commerce transaction under GST regime

As per Section 52 of CGST Act, 2017, every e-commerce operator, not being an agent, shall collect TCS at such rate not exceeding 1% (0.5% each under CGST & SGST and 1% in case of IGST) of the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the operator.

Every operator who collects the amount shall furnish a statement, electronically, in Form GSTR-8, containing the details of outward supplies of goods or services or both, effected through it, including the supplies of goods or services or both returned through it, and the amount collected under sub-section (1) during a month, in such form and manner as may be prescribed, within ten days after the end of such month.

Following are the important terms defined in CGST Act, 2017 related to e-commerce which needs to be understood:

  • E-commerce means the supply of goods or services or both, including digital products over digital or electronic network;
  • E-commerce operator means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;
  • Net value of taxable supplies shall mean the aggregate value of taxable supplies of goods or services or both, other than services notified under sub-section (5) of section 9, made during any month by all registered persons through the operator reduced by the aggregate value of taxable supplies returned to the suppliers during the said month 

DISCLAIMER

This document has been prepared in summary form by us from sources believed to be reliable based on Income Tax Act, 1961 (as amended by FA 2020), Finance Act, 2016 along with explanatory memorandum and CGST Act, 2017 and IGST Act, 2017. For further details, please refer the relevant acts and related rules. The information contained herein is intended only for the person to whom it is sent. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. Recipients should conduct and rely upon their own examination, investigation and analysis and are advised to seek their own professional advice. The information and data contained herein is not a substitute for the recipient’s independent evaluation and analysis. This document is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies on it.

 

Posted in Direct Tax, Taxation |

CBDT Grants Covid-19 Relief to Lower/Nil Deduction Certificates

CBDT grants Covid-19 relief to lower/nil deduction certificates, extends validity till June 30. For details, please refer attached note.

CBDT Order on TDS or TCS

Posted in Regulatory |

Artificial Intelligence

Artificial Intelligence: How technology transforming the audit

Technology is changing the way business is conducted and data is analyzed. Since the environment is constantly changing, the principles and methods of audit needs to be changed, so as to produce efficient results which can be relied upon by all. An organization looks for three skills in an auditor which are in area of technology, communication and critical thinking.

How Artificial Intelligence leads to Improved Results

Previously, the feasible method of auditing was to analyze large quantities of data by taking smaller random samples. This approach is being followed year after year. Clients and auditors have accepted the fact that anomalies outside the sample set are potentially missed. This is called sampling risk, the risk of reaching a different conclusion based on examining a small set of data as compared to entire data set. Due to the limitations of auditing, the auditor cannot provide absolute and guaranteed assurance on the audit findings. These limitation can be rectified through the use of audit data analytics.

The nature of Artificial Intelligence is to learn about and identify patterns in data. It helps in analyzing secondary data and cross correlate hundreds of variables to establish the correct transaction. It is used to analyze large no. of transactions and put them in buckets: high risk, medium risk, low risk. It helps to learn more about client’s transaction through analysis of full population of data and to identify the exceptions, making it possible for auditor to work effectively, efficiently and smartly. Thus, improving the quality of audit.

Audit data analytics involves the analysis of complete sets of data to identify anomalies and trends for further investigation, as well as to provide audit evidence. This process usually involves an analysis of entire populations of data, rather than only examining a small sample of the data.

Key areas where Technology will bring major impact in Auditing:

  1. Enhancement of Audit Quality by using artificial intelligence

Artificial intelligence involves algorithms that enables software to absorb information and think like humans and mimic their actions. It can perform analysis on large set of data which is impossible by auditors today. It provides solutions and new strategies to correct the work for the problems that it come across.

2. The Power of Predictive Analytics

Predictive analysis uses advance techniques to make predictions about the future based on the probabilities. It may involve use of artificial intelligence and machine learning to rectify those predictions.  In the context of the high-quality audit, auditors can employ digital tools to extract information from an organization’s systems, and then use predictive analytics for the purpose of identifying patterns that either align or don’t align with anticipated outcomes and trends. This type of analysis is conducted for various reasons, but it is especially useful in gaining deeper insight into a client’s business and financial risks.

This technological transition won’t happen overnight rather it will take years to go from traditional approach to data analytics. It is the organizations who should incorporate these new techniques in an effective manner as well as according to their need in order to gain the competitive advantage over other competing firms.

Use of Data Analytics by Audit Firms

The audit firms whether large or small use data analytics in order to reduce risk and to provide quality services to the client. There are no universal audit data packages available but bigger firms use their own resources in order to create their own data analytics platforms while smaller firms on the other hand are dependent on the readymade packages.

These data analytics packages help the auditors to audit large amounts of data effectively through the use of IT systems thereby increasing the audit quality as well as add value to the client. Auditors can extract and manipulate client data and analyze it. By doing so they can improve understanding of client’s information and identify the risks in an effective manner. These data analytics techniques help in understanding large amounts of data in simplified and pre structured forms and help in developing audit programs according to client specific risks, helping auditors to arrive at the results more efficiently and accurately.

Benefits of Audit Data Analytics

Some of the key benefits auditors can expect to see after adopting data analytics are as follows:

  1. Enhanced audit quality – Data analytic techniques and methods enable audit teams to have:
    • More relevant audit
    • Identifying issues earlier
    • Larger populations tested
    • More relevant evidence gathered
    • Higher quality audit evidence
  2. Improved client service – Audit data analytics help auditors to gain a better understanding of their clients’ business and to provide further insight into risk and control assessments resulting in:
    • Greater insight
    • Raising issues earlier
    • Improved communication
    • Possibility to visualize results
  3. Increased effectiveness – Data Analytics can be used to:
    • Assess large volumes of data quickly
    • Make better informed risk assessments
    • Increased auditors’ focus
    • More frequent testing
    • More timely reporting

How Audit Data Analytics benefits the businesses organization 

Audit data analytics benefit the businesses by delivering higher quality, enhanced transparency and efficiently executed audit. It also leads to better communication between the auditors and management. The auditor gets more clear understanding about the client’s internal controls, control gaps and deficiency, causes of the exceptions etc. Thus, management might get to know about various frauds, misappropriation made by the employees / staff which the management is unaware of, for which appropriate actions can be taken at very early stages.

Conclusion

The future of audit is going to be different than what it is today. Better business understanding, enhanced quality services and improved business value are some examples of what the future will look like. Artificial Intelligence will however not displace the role of an auditor rather it will be a helping hand to automate large data analysis task. Auditors will no longer need to select a random sample from a data set rather the entire data set can be looked into thereby decreasing the sampling risk and providing absolute assurance instead of reasonable assurance. The use of Artificial Intelligence gives a competitive advantage over firms that use the traditional techniques.  

It is not enough to have latest technology – auditors must be able to mine data for information that is important to clients, such as that affecting relevant risks, internal controls and important processes, and be able to communicate it clearly and candidly.

Disclaimer:

The information contained herein is in summary form and is based on information available in public domain. While the information is believed to be accurate to the best of our knowledge, we do not make any representations or warranties, express or implied, as to the accuracy or completeness of such information. This document is not an offer, invitation, advice or solicitation of any kind. We accept no responsibility for any errors it may contain or for any loss, howsoever caused or sustained, by the person who relies on it.

 

 

Posted in Audit & Assurance |