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Answer 10
Answer 10
The term ‘audit’ refers to a check, review, verification or inspection of a record, transaction, account etc.
A tax audit is the process of verification and inspection of the accounts of a taxpayer to confirm their
adherence to the provisions of the Income Tax law.
Section 44AB of the Income Tax Act, 1961 deals with the Audit of the Accounts of a certain category of
persons carrying on a business or engaged in a profession. The class of taxpayers listed under this
section compulsorily have to get their accounts audited by a Chartered Accountant. The CA will check
and verify that these accounts comply with the various provisions of the Income Tax law. Simply put, the
audit that is required as per Section 44AB of the Income Tax Act, 1961 is called a tax audit.
The outcome of the audit is an audit report. This report is drawn by the Chartered Accountant where he
or she gives his findings and observations about the compliance of the person under audit.
Objectives
(a) Maintain and ensure the accuracy of books of accounts, and have them certified by a tax auditor
(b) The purpose of reporting prescribed information is to ensure that you follow the various provisions
of income tax law.
c) Moreover, tax audits also ensure that the records reflect the actual income of the taxpayer and that
the claims for deductions made are accurate.
Tax audit under the Income Tax Act can be broadly summarized under the following three heads:
(B) Social audit-: A social audit is a way of measuring, understanding, reporting and ultimately improving
an organization’s social and ethical performance. A social audit helps to narrow gaps between
vision/goal and reality, between efficiency and effectiveness. It is a technique to understand, measure,
verify, report on and to improve the social performance of the organization.
Social auditing creates an impact upon governance. It values the voice of stakeholders, including
marginalized/poor groups whose voices are rarely heard. Social auditing is taken up for the purpose of
enhancing local governance, particularly for strengthening accountability and transparency in
Local bodies.
(a) Assessing the physical and financial gaps between needs and resources available for local
development.
(b) Creating awareness among beneficiaries and providers of local social and productive services.
(d) Scrutiny of various policy decisions, keeping in view stakeholder interests and priorities, particularly
of rural poor.
(e) Estimation of the opportunity cost for stakeholders of not getting timely access to public services.
The audit examines the potential hazards or risks posed by the company. Areas examined may include
company environmental policies and procedures, energy use practices, recycling, waste, conservation,
and pollution. Then, the company can use the results to determine what changes need to be made for
compliance.
(b) To see whether the social costs incurred due to manufacturing process of the firm is more than offset
by the social benefits rendered by it.
(c) To check that costs incurred for environmental protection are not mere wastage of money but are
helping to keep the environment clean and pollution free.
(d) To see that natural resources are not being extracted and consumed in the way detrimental to the
society.
(e) To control the costs incurred on procuring the natural resources and ensure that they have been
properly classified.
(g) To ensure that standard environmental practices are being followed by the firm.
Advantages of environment audit:
Following are the advantages that can be derived from the application of environment audit: