Vat is the value added tax. We pay only the difference in our total VAT output and VAT input. Audit of VAT is supportive for checking the correctness of VAT and following all the latest provisions and amendments of law. From few years, it has become compulsory for many organizations. For example, in Maharashtra state, If turnover is more than Rs. 60, it is compulsory to audit of vat. Following are the 3 main steps of audit of vat in India.
1. Tin basis Sales and Purchase Matching
It is the duty of auditor to match Sale and purchase on tin basis. Now, when dealer provided his whole sale, purchase, Tin, invoices and his paid VAT information to auditor. On this information CA can get the information whether his showing turnover as per tin is equal to the other buyers’ buying under tin. If there is any difference it may be the chance of cheating of one side. If there is any error it should be rectified.
2. Check the Accounting System
Almost all the computer accounting system calculates the VAT input and VAT output and balance payable automatically. Auditor should check the mathematical correctness of accounting system by taking small sample and try to calculate the VAT manually and verify whether it is equal to the calculation by accounting system. On this basis, system error can be found. There are some accounting system like tally in-which you can use re-audit. It has simplified the process of tax audit.
3. Check Whether Accounting System Following Laws all Provisions
Time to time, state govt. may give the notification for new amendments in VAT. Auditor should check that dealer has followed all these new rules and regulations for paying the VAT. For example, Govt. may increase the rate, system should adjust the VAT on this basis.