Section 44AB deals with the audit of 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. A Chartered Accountants can conduct a certain number of tax audits as fixed by ICAI. Here are the details for the Tax Audit limit for CA as fixed by ICAI.
Tax Audit by Chartered Accountants
Tax audit is governed by income tax law, as the name suggests, a tax audit is an examination or review of accounts of any business or profession carried out by taxpayers from an income tax point of view. Section 44AB gives the provision relating to the class of taxpayers who are required to get their account audited from a chartered accountant. The Audit conducted by the Chartered Accountant of the accounts of taxpayer in pursuance of the requirement of section 44AB is called tax audit.
The outcome of the audit is an audit report. This report is drawn by a Chartered Accountant, where he or she gives his or her findings and observations about the person’s compliance under audit.
A Tax Audit can be conducted by a Chartered Accountant or a firm of chartered accountants. If it is performed by the latter, the name of the signatory who has signed the report on behalf of the firm must be stated in the audit report. The signatory must provide his/her membership number while registering in the e-file portal.
Tax Audit Limit For CA as per ICAI
It is important to note that, Chartered Accountants have a limit on the number of the tax audit report that can be filed. The maximum number of tax audits that can be undertaken by a Chartered Accountants is limited to 60. In the case of the firm, the restriction on the tax audit limit will be applicable for each partner.
Who can be Tax Auditor?
There are certain prohibitions on the appointment of tax auditors, which are enumerated below:-
|Any member in part-time practice is not eligible to perform a tax audit.|
|A chartered account cannot audit the accounts of a person to whom he is indebted for more than Rs.10,000.|
|A statutory auditor will be deemed to be guilty of professional misconduct if he/she accepts the appointment of Public Sector Undertaking/Government Company/Listed Company and other Public Company having turnover of Rs 50 crores or more in a year and accepts any other work, assignment or service in regard to the same undertaking/company on a remuneration which in total exceeds the fee payable for carrying out the statutory audit of the same undertaking/company.|
|The Chartered Accountant who is assigned with the task of writing and maintaining the books of account of the assessee should not audit such accounts.|
|An auditor cannot accept more than 60 tax audit assignments in a particular financial year.|
|An internal auditor of the assessee cannot be appointed as a tax auditor.|
|The audit of accounts of a professional firm of Chartered Accountants cannot be performed by any partner or employee belonging to such firm.|
Frequently Asked Questions- FAQs
How many audit reports a CA can sign?
Tax Audit Limit For CA as per ICAI- A Chartered Accountant or a firm of chartered accountants conduct the audit as per tax audit provisions. An individual can conduct only 60 audits in a financial year. In the case of a partnership firm, this limit applies to each member of the partnership firm being a chartered accountant.
What is the limit for tax audit?
A Taxpayer is required to have a tax audit carried out if the sales, turnover, or gross receipts of business exceed Rs. 1 crore in the financial year. The threshold limit of Rs. 1 Crore for a tax audit is proposed to be increased to Rs. 5 Crore from AY 2020-21 (FY 2019-20) if the following two conditions are satisfied-
(i) The aggregate of all amounts received including the amount received for sales, turnover, or gross receipts during the previous year, in cash, does not exceed five percent of the total turnover/gross receipts; and
(ii) The aggregate of all payments made including the amount incurred for expenditure, in cash, during the previous year does not exceed five percent of the total payment.
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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.
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Compiled by- CA Chirag Agarwal (Practicing Chartered Accountants)