Auditing Services in India

Auditing Internal Controls

In response to the large corporate financial scandals like energy firm Enron Corp, telecommunications giant WorldCom and Tyco International, Sarbanes-Oxley Act (SOX) was introduced, in the USA, in year 2002.

Purpose of the Act was to improve accuracy of financial reporting by establishing formalized system of checks and balances and protect shareholders/ general public from fraudulent practices in the companies.

The SOX is mandatory and applies to all US-based public companies. These companies are required to maintain both good financial practices and data security standards. The Section 404 of the Act mandates rules on “management’s report on internal control over financial reporting”. The section requires all financial reports to include an Internal Control Report. The report provides assurance that the company’s financial data is accurate and adequate controls are in place to safeguard financial data.

To align with the requirements of the SOX, the PCAOB (U.S. Public Company Accounting Oversight Board) provided an updated standard AS 5, in May 2007.The Standard was about “Audit of Internal Controls over Financial Reporting integrated with Audit of Financial Statements”.

The SOX measures seek to govern financial operations and disclosures of the corporate entities. A major part of the SOX regulations is related to the information technology systems. SOX reporting involves IT departments as those departments are responsible for creating corporate records and maintaining archives.

To align with SOX regulations, companies are required to develop and implement comprehensive data security strategy. The strategy should be able to protect financial data prepared, used and stored during normal operations. IT departments must become familiar with the security, access, privilege and log management standards applicable to them.

The security teams use data classification to enforce and monitor corporate policies for data handling. Depending upon sensitivity and applicable regulations data may be encrypted, compressed or saved in a different file format. With the proper policies in place corporations can prevent unauthorized users from viewing regulated data. The security solutions have the ability to safeguard shared data.

Section 302 and 404 of the SOX prevent fraudulent agents (whether internal or external) from tampering with sensitive financial information.

Section 302: Corporate Responsibility for Financial Reports
Section 302 states that the CEO and CFO are directly responsible for documentation, accuracy and submission of all financial reports as well as the internal control structure,

to the SEC (Security Exchange Commission of U.S.A.).

The Commission requires, for each company filing periodic reports under section 13(a) or 15(d) of the Securities Exchange Act of 1934, that the principal executive officer or officers and the principal financial officer or officers, or persons performing similar functions, certify in each annual or quarterly report filed under either such section of such Act that—

1. the signing officer has reviewed the report;

2. based on the officer’s knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading;

3. based on such officer’s knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition and results of operations of the issuer as of, and for, the periods presented in the report;

4. the signing officers–

a. are responsible for establishing and maintaining internal controls;

b. have designed such internal controls to ensure that material information relating to the issuer and its consolidated subsidiaries is made known to such officers by others within those entities, particularly during the period in which the periodic reports are being prepared;

c. have evaluated the effectiveness of the issuer’s internal controls as of a date within 90 days prior to the report; and

d. have presented in the report their conclusions about the effectiveness of their internal controls based on their evaluation as of that date;

5. the signing officers have disclosed to the issuer’s auditors and the audit committee of the board of directors or persons fulfilling the equivalent function–

a. all significant deficiencies in the design or operation of internal controls which could adversely affect the issuer’s ability to record, process, summarize, and report financial data and have identified for the issuer’s auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal controls; and

6. the signing officers have indicated in the report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Section 404: Internal Control Report
The section 404 requires all annual financial reports to include an Internal Control Report. The report states that management is responsible for an adequate internal control structure and includes an assessment by the management of the effectiveness of the control structure. Any shortcomings in these controls must be reported. In addition, registered external auditors must attest to the accuracy of the management assertion that internal accounting controls are in place, operational and effective.

(a) Rule: The rules prescribed by the Commission, require each annual report submittedunder section 13(a) or 15(d) of the Securities Exchange Act of 1934, to contain an internal control report, which shall—

i. state responsibility of the management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and

ii. contain an assessment, as of the end of the most recent fiscal year of the issuer, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.

(b) Internal Control Evaluation and Reporting: With respect to the internal control assessment required under subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer.

An attestation under this subsection shall be made in accordance with the standards for attestation engagements issued or adopted by the Board.

SOX Documentation
While adopting rules to implement Section 404, the SEC expressly declined to prescribe scope of assessment or extent of testing and documentation required by the management. The scope and process of the assessment should be reasonable and assessment including testing should be supported by a reasonable level of evidences. Each company should use informed judgment in documenting and testing its controls to fit its operations, risks and procedures. Management should use their own experience and informed judgment in designing an assessment process that fits needs of that company. Management should not allow the goal and purpose of the internal control over financial reporting provisions which is “production of reliable financial statements”, to be overshadowed by the process.

The key business processes, material transactions and related controls are to be documented. Management should maintain sufficient documentation so that a person with reasonable knowledge can understand the process, how key controls are operating, who is performing controls, time and frequency of operating controls, evidence that the controls were performed and the reports used while applying those controls.

It’s important to establish a change management process which will ensure that the documentation is kept up-to-date as processes and controls change in a business.

The external auditor should agree on the documentation of controls.

SOX Audits
The SOX mandates companies to complete yearly audits and make the results available to stakeholders. Companies hire independent auditors to conduct SOX audit, which must be separate from any other audit, to prevent a conflict of interest.

For audit under section 404, a company must meet the following requirements:

Management accepts responsibility for effectiveness of the controls
Controls are suitably designed and implemented to achieve control objective i.e. reliability of financial reporting, using established criteria
Control objectives and related controls are documented
Management assesses effectiveness of internal control over financial reporting and reports on design & operating effectiveness of the control.

Auditors compare past financial statements with the current year and may interview personnel to verify if compliance controls are effective. The auditors check with the staff whether their duties match their job descriptions and that they have adequate training to access financial information in a secured manner.

SOX audit process involves the following steps:

1. Define Scope of audit using a Risk Assessment Approach
For performing risk assessment, a top-down approach is recommended. The auditor focuses on entity-level controls and works down to significant accounts, their disclosures and relevant assertions.

The purpose is to help auditor identify potential risks and sources, their impact on the business and whether internal controls will provide reasonable assurance that a material fraud/error will be prevented or detected.

2. Determine Risks related to Material Accounts & Processes
The auditor will:

Identify material items in the financial statements.
Determine locations having material account balances.
Review financial statements of those locations.
Verify details of the transactions in material account balances. Check how transactions occurred and how they were recorded. Auditor may also meet with the concerned persons such as process owners, financial controller etc.
Identify financial reporting risks for material accounts and the possible impact they may have on the account balances.

3. Identify SOX Controls
During materiality analysis auditor should identify & document SOX controls which can detect or prevent transactions from incorrect recording. Those are the key controls. The auditor should differentiate key controls from non-key controls and also identify manual and automated controls.

4. Test Key Controls
Testing key controls validates design and operating effectiveness of the controls in place. Controls testing involve inspection of documentation, evaluation, observation, inquiries with process owners, walkthrough the transaction and re-performance of the process etc.

5. Perform Fraud Risk Assessment
An effective system of internal controls is in place where internal controls reduce the opportunity to commit a fraud and also help with the assessment of possible frauds. Examples of effective internal controls are segregation of duties, reconciliation of bank accounts at regular intervals, investigation of employees’ expenses reimbursements etc.

6. Manage Documentation of Processes and Controls
Key operating processes and controls should be properly documented.

7. Assessing Deficiencies
During testing auditor may come across deficiency or gap in the sample selected. The deficiency/gap should be identified & corrected. The auditor should also review whether the deficiency/gap was due to design failure or operational failure of the control.

8. Deliver Management’s Report on Controls
A large amount of data and information is collected during testing of SOX controls.

The information gathered is useful for the management’s report on internal controls.

Auditing IT Systems
During SOX audit, review of internal controls related to IT assets such as computers, network, hardware and other electronic equipment that the financial data passes through, form a major part of the audit.

While auditing IT systems auditors review following internal controls:

i. Access: Access includes both physical controls such as doors, badges, locks on file cabinets and electronic controls like login policies, least privilege access and permission audits. Least privilege access model is an excellent example of access control which means each user only has the access necessary to do his/her job. The function of the user and not his/her identity, controls assignment of access rights.

Another good control is Permission audit. Permission audits are about review of permissions e.g. who has permissions to what, basis of getting that permission and whether the person is acting in a responsible manner. Auditors examine if current permissions are recorded & any changes to the permissions are verified and recorded.

ii. Security: Security controls ensure that the company has protection against data breaches.

iii. Data Backup: Maintaining off-site backups of all financial records is a SOX compliance requirement.

iv. Change Management: is having defined processes to add and maintain users, install new software and make any changes to database or applications which manage company’s financial information.

SOX compliance checklist
SOX compliance checklist is a tool for evaluation of compliance with SOX, reinforcing information technology & security controls and to uphold legal financial practices. A SOX compliance checklist includes the following steps:1. To prevent data tamperinga system is in place which tracks user logins and detects suspicious login attempts into the systems used for financial data.

2. To record timelines for key activities company has systems which can apply timestamps to all financial & other related data. The data is encrypted if required and stored at a remote, secure location.

3. Establish verifiable controls to track data access i.e. a system that can receive data messages from virtually unlimited number of sources including files, FTP transfers and databases and tracks who accessed or modified the data.

4. To ensure that safeguards are operational systems are implemented which can issue & distribute daily reports to selected officials in the organization, confirming that the SOX control measures are working properly.

5. Report periodically on effectiveness of safeguards implement system which generates reports periodically, on data, including report of all messages, critical messages, alerts and uses a ticketing system that archives security incidents occurred and how they were addressed.

6. To detect Security Breaches security system is in use which can analyze data in real-time, identify signs of a security breach and generate meaningful alerts, automatically updating incident management system.

7. To disclose security breaches company has a system which is capable of detecting and logging security breaches and allow security staff to record their resolution of each incident.

8. To disclose security safeguards to the auditor systems should be in place which can provide role-based access to the auditor, allowing him/her to view data and reports without making any changes.

9. A system to disclose failure of security controls to the SOX auditor. The system should enable auditor to view reports having details of the security control failure incidents, the incidents resolved successfully and the ones which could not be resolved.

Protecting the whistleblower
SOX encourages disclosure of corporate frauds by protecting employees who report fraud and testify in court against their employers. Companies are not allowed to change the terms and conditions of their employment. They can’t reprimand, fire, or blacklist the employee. Whistleblowers can report any corporate retaliation against them. SOX makes it a crime for a person to knowingly retaliate against a whistleblower for disclosing truthful information to a law enforcement officer. It authorizes the Department of Justice to criminally charge those responsible for the retaliation.

Firms conducting SOX Audits
The SOX also regulates accounting firms which conduct SOX audits. The PCAOB has set standards for the audit reports. It requires all auditors of public companies to register with them. The PCAOB inspects, investigates, and enforces compliance of these firms. It prohibits accounting firms from doing business consulting with the companies they are auditing. They can still act as tax consultants but the lead audit partners must rotate off the account after five years.

Source: Auditing Internal Controls

Need of Internal Audit

The purpose of auditing internally is to supply insight into an organization’s culture, policies, procedures, and aids board and management oversight by verifying internal controls like operating effectiveness, risk mitigation controls, and compliances with relevant laws or regulations.

Reasons why there’s an importance of Auditing Internally
Internal auditing programs are critical for monitoring and assuring that each one of the business assets are properly secured and safeguarded from threats. it’s also important for verifying that business processes reflect documented policies and procedures.

Let’s take a glance at five reasons why internal auditing is critical and their purpose keep your organization compliant with the common frameworks and regulations.

1. Provides Objective Insight
You can’t audit your own work without having a selected conflict of interest.
Your auditor, or internal audit team, cannot have any operational responsibility to know this objective insight. In situations where smaller companies don’t have extra resources to devote to this , it’s acceptable to cross-train employees in several departments to be able to audit another department. By providing an independent and unbiased view, the inside audit function adds value to your organization.

2. Improves Efficiency of Operations
By objectively reviewing your organization’s policies and procedures, you’ll receive assurance that you simply simply do what your policies and procedures say you’re doing, which these processes are adequate in mitigating your unique risks.

By continuously monitoring and reviewing your processes, you’ll identify control recommendations to reinforce the efficiency and effectiveness of these processes. In turn, allowing your organization to be enthusiastic to processes, rather than people.

3. Evaluates Risks and Protects Assets
An internal audit program assists management and stakeholders by identifying and prioritizing risks through a scientific risk assessment. A risk assessment can help to identify any gaps within the environment and permit for a remediation plan to happen.

Your internal audit program will assist you to trace and document any changes that are made to your environment and confirm the mitigation of any found risks.

4. Assesses Controls
Internal auditing is beneficial because it improves the control environment of the organization by assessing efficiency and operating effectiveness. Are your controls fulfilling their purpose? Are they adequate in mitigating risk?

5. Internal Audits Ensure Compliance with Laws and Regulations
By regularly performing an indoor audit, you’ll ensure compliance with any and every one relevant laws and regulations. It also helps provide you with peace of mind that you simply are prepared for you next external audit. Gaining client trust and avoiding costly fines related to non-compliance makes internal auditing a crucial and worthwhile activity for your organization.

Need of Internal Audit

Inventory Audit in India

Inventory audit or stock audit refers to physical verification of a corporation or institution’s inventory assets. There are several sorts of stock audits depending upon the aim and each stock audit would require a special approach. Every business institution a minimum of must perform a stock audit once during a year to update and assure that the physical stock and therefore the computed stock is correctly matched. A stock audit helps to correct discrepancies between the physical stock and therefore the book stock. The stock audit helps to trace the quantity of physical assets remaining and make necessary arrangements to order new stock. If the corporate is handling different suppliers and vendors, a stock audit will make the inventory management process easier.

Why Stock Audit?

Records accurate level of inventory and help to avoid shortage or overstocking of materials.
It helps to detect inventory losses caused thanks to wastage, damage or theft.
It disclose obsolete raw materials and incorrect orders supplied to customers.
Analyze the particular quantity of stock against that noted on the accounting records.
Avoid unnecessary investment on raw materials and may help to save lots of money.
Enable the business owners to know truth financial status of the company.
Helps to seek out out discrepancies within the packaging and warehouse procedures.

It is very essential to conduct inventory audits to take care of inventory accuracy, spot causes of shrinkage, and make sure that one always have the proper quantity of stock at the proper time. an honest understanding of stock flow also will help make sure the business runs smoothly.

Inventory audit checklist
The inventory audits have three phases: planning, execution, and analysis. Inventory is one among the important areas for any business where chances of fraud are more as it’s a department where thefts and damages occur. Having effective controls, appropriate processes, proper checklist and regular stock audit is important for this function. Following is that the checklist for Inventory audit:

Evaluate which items to audit: Higher-risk inventory items should be assessed more frequently. it’s also referred to as ABC Analysis. High-value items are given the grouping of products A, mid-tier are B, and low values are C. ABC analysis also can help to manage a stockroom better and save time. you’ll sort inventory out by SKU (Stock keeping units) or Universal Product Code , then prioritize. Check Stock valuation process, components of cost of inventory, method of valuation.
Create an audit schedule: map an auditing schedule. Unfortunately, conducting a listing audit can disturb the regular business flow. we would like to settle on times that are least effective for the business, but also happen at an honest frequency to make sure those high-value items are going to be accounted for. The policies and procedures of shopping for and shipping items also can affect the schedule of your audit.
Physical verification of Inventory: It is that the process of counting each item of inventory. Firstly, we schedule this before time because it’ll likely be an inconvenience to normal business flow. Also, think about using technology, sort of a Universal Product Code scanner, to assist physically count each item and reconcile the counted inventory with ledger .
Collect the required documentation: Get out any important documents before time and confirm they’re easily accessible, but secure. Categorized inventory in High, Medium and Low value stock.
Conduct the inventory audit: There are different numbers of audit which will be essential, counting on the character of your business. Check Inventory lying with third parties, i.e. for paperwork , in third party warehouse.
Record the findings: Stock related MIS format and contents. the most purpose of an audit is to get gaps in compliance and appearance at opportunities to repair the deficit and improve operational processes.
Reconciling items investigation:If there are inconsistency between inventory counts as per company’s records and therefore the actual amounts on the warehouse shelves then find out why there are differences between these two amounts and make adjustments to the records to reflect this analysis. Inventory reconciliation is extremely important a part of cycle counting.

Inventory stop Process
Cut off process is an important process in Inventory valuation. When inventory is physically counted and inwards (receipts) and outwards (issues) movement of inventory isn’t stopped, it’s going to cause many difficulties within the counts. this is often why near of the date of inventory counting day, stop the movement of stock. If during this era stock is moved for any reason, it’s likely to affect the inventory count. Auditor requires studying the stop process of management and ensuring it’s adequate.

Source: Inventory Audit in India

Internal controls and Audit of Fixed Assets

Fixed assets, in an organization represent the long-term tangible assets which are used,

-to produce and deliver its products or services, and

-to manage its operations.

They are assets held for the purpose of providing or producing goods or services and are not meant for sale in the normal course of business. Therefore, an asset can be classified as a fixed asset or otherwise, depending upon the use to which it is put or intended to be put.

In many capital-intensive industries such as manufacturing, power generation and healthcare, fixed assets represent the largest item on the balance sheet. Historically, fixed assets have received little audit scrutiny and, as a result, some major financial frauds have been perpetrated through significant misstatements of fixed asset balances in the financial statements of public companies.

When asked if fixed assets are represented accurately in year-end financial statements, most organizations will answer with “yes.” However, audits may yield a different answer. Although many organizations do not perform an inventory of current fixed assets and a corresponding reconciliation, these steps provide an essential internal control for the financial reporting of fixed assets.

Moreover, fixed assets need attention to ensure the organization’s records are accurate and its controls provide effective oversight of this area. As with other asset classes, best practices enhance proper accounting, valuations and financial reporting.

Internal Controls over Fixed Assets
Fixed-asset transactions typically represent the acquisition and disposal of assets and the allocation of related costs to reporting periods through depreciation expense. The internal controls over the acquisition of fixed assets include the following:

Issuance and approval of a purchase order
Receipt of assets and preparation of a receiving report
Receipt of an invoice from a vendor
Reconciliation of the vendor invoice to the related receiving report and purchase order
Authorization of the payment of the vendor invoice
Issuance of a check for payment of the vendor invoice
Posting of the entry in the equipment sub-ledger
Posting of the equipment sub-ledger activity to the related general ledger control accounts
Reconciliation of the general ledger control accounts

Audit of Fixed Assets
External Auditors of most manufacturing organizations usually scope in Property, Plant & Equipment (PPE) as a risk area during their annual audit due to its materiality. A combination of controls testing and substantive testing is usually adopted when obtaining audit assurance on PPE.

An auditor should review the system of internal controls relating to fixed assets, particularly the following:

Verification under audit
Verification of fixed assets consists of examination of related records and physical verification. The auditor should normally verify the records with reference to the documentary evidence and by evaluation of internal controls. Physical verification of fixed assets is primarily the responsibility of the management.

Verification of Records

The opening balances of the existing fixed assets should be verified from records such as the schedule of fixed assets, ledger or register balances.
Acquisition of new fixed assets and improvements in the existing ones should be verified with reference to supporting documents such as orders, invoices, receiving reports and title deeds.
Self-constructed fixed assets, improvements and capital work-in-progress should be verified with reference to the supporting documents such as contractors’ bills, work-order records and independent confirmation of the work performed.
The auditor should scrutinize expense accounts (e.g. Repairs and Renewals) to ascertain that new capital assets and improvements have not been included therein.
Where fixed assets have been written-off or fully depreciated in the year of acquisition/ construction, the auditor should examine whether these were recorded in the fixed assets register before being written-off or depreciated.
In respect of fixed assets retired, i.e., destroyed, scrapped or sold, the auditor should examine

(a) whether the retirements have been properly authorized and appropriate procedures for invitation of quotations have been followed wherever applicable;

(b) whether the assets and depreciation accounts have been properly adjusted;

(d) whether the resulting gains or losses, if material, have been properly adjusted and disclosed in the Profit and Loss Account.

It is possible that certain assets which were destroyed, scrapped or sold during the year have not been recorded. The auditor may use the following procedures to ascertain such omissions:

Review work orders/physical verification reports to trace any indicated retirements.
Examine major additions to ascertain whether they represent additional facilities or replacement of old assets, which may have been retired.
Make enquiries of key management and supervisory personnel.
Obtain a certificate from a senior official and/or departmental managers that all assets scrapped, destroyed or sold have been recorded in the books.
The ownership of assets, like land and buildings should be verified by examining title deeds. In case, the title deeds are held by other persons, such as solicitors or bankers, confirmation should be obtained directly by the auditors through a request signed by the client.

Concluding Remarks
In order to help the auditors undertake quality audits and adhere to the audit compliance standards, ICAI has released guidelines advising auditors with regards to conditions that may arise due to COVID-19 pandemic, how they can carefully examine specific circumstances while undertaking audit and assess the risk accordingly. For auditors, it is majorly “remote” auditing, going through virtual data, but continuing to comply with the requirements of standards on auditing.

The COVID-19 outbreak may affect the useful life and residual life of fixed assets which requires management review. In case the expectations differ from previous estimates, then change in estimate should be accounted for in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

It is imperative to ensure that appropriate level of disclosures are done in the financial statements (which in most cases is a judgment call, depending on the facts and circumstances of each case) for the users of the financial statements to understand the impact of pandemic on the company as assessed by the management, Board of Directors and Audit committees.

Source: Internal controls and Audit of Fixed Assets

Complete Guide on Internal Audit in India

Internal Audit in India is one of the major areas which aid the organization in enhancing business performance by identifying the growth areas with greater scope for improvement. The process of Internal audit helps in reviewing the existing systems and their effectiveness by benchmark the audit processes and procedures against the best industry practices to meet the global standards.

Internal audit evaluates and improves effectiveness of an organizations risk management, control, governance and accounting processes. Internal audit is performed to identify potential risk (such as misappropriation of assets, misuse of funds, frauds, manipulation of records) an organization may be prone to, managing those risk and reporting on such risk and their management as per statutory requirements.

Internal Audit Objectives:
Internal audit is performed to give assurance to top level management that the risk associated to business are identified and managed properly. It is conducted to provide assurance that management of an organization has an ability to manage risk effectively. It also ensures that governance and internal control processes are operating effectively.

5 Reasons Why Internal Audits are Important
Internal auditing programs are critical for monitoring and assuring that all of your business assets have been properly secured and safeguarded from threats. It is also important for verifying that your business processes reflect your documented policies and procedures.

Let’s take a look at five reasons why internal auditing is important and their purpose in keeping your organization compliant with the common frameworks and regulations.

Provides objective insight
Improves efficiency of operations
Evaluates risks and protects assets
Assesses organizational controls
Ensures legal compliance

Basic Principals of an Internal Audit
For an internal audit function to be considered effective, the basic Principles should be achieved. Failure to achieve any of the Principles would imply that an internal audit activity was not as effective. The basic principles governing internal Audit are

Demonstrate uncompromised integrity and independence;
Display due professional care while performing Audit;
Demonstrate commitment to competence;
Maintain Confidentiality;
Assessment of Risk element and having adequate resources to address it;
Focusing on Systems and process i.e., Root Cause Analysis;
Participating in decision making, other than those subject to subsequent audit;
Adopting procedures to continuously improve the quality of internal audit process and audit reports;
Align strategically with the aims and goals of the enterprise;
Achieve efficiency and effectiveness in delivery;
Communicate effectively;
Provide reliable assurance to Those Charged with Governance (TCWG);
Be insightful, proactive, and future-focused.

What is an internal audit report?
An internal audit report is a document with the formal results of an audit. It is used by the internal auditor to show what was examined, highlighting positives, negatives and conclusions, so that the company’s management knows what is going well and what needs to be improved.

The report should be carefully prepared. Yet it is at this point that many internal auditors fail.

The text needs to be clear, objective and impartial in order to ensure that the audit’s results are useful and the organization can use them as a guide to set the direction of actions.

PK Chopra is one of the leading management consultants who have been assisting clients across industries with flexible and result oriented solutions that enhance the organization’s performance by improving efficiency in the business processes.

PK Chopra offers the internal audit services / process audit services in India to the companies. If you wish to know more in this regard, kindly contact us.

TCS Under Income Tax - Provisions Applicable from 01.10.2020

Tax Collected at Source Under Income Tax — New Provisions Applicable from 01 October 2020

Introduction
Finance Act, 2020 introduced 3 new provision under Tax Collected at Source (“TCS”):

TCS on foreign remittance through LRS;

TCS on selling overseas tour packages; and

TCS on sales of any goods

TCS unlike TDS is required to be collected additionally along with consideration for certain transaction;

That is TCS is required to be collected by the payee;

Whereas, TDS is required to be deducted on certain payments made by the payer for certain transactions.

TCS ON FOREIGN REMITTANCE THROUGH LRS

The new provisions of tax collected at source are applicable w.e.f 01 October 2020

TCS ON SELLING OVERSEAS TOUR PACKAGES

TCS ON SALE OF ANY GOODS (1/3)

TCS ON SALE OF ANY GOODS(2/3)

TCS ON SALE OF ANY GOODS(3/3)
We have tried to address few practical aspects in implementation of the said provision by way of FAQs:

How to Collect Tax from the buyer? The seller needs to raise the invoice inclusive of the amount of TCS. However, liability of remittance does not arise until the time when amount is to be collectedHow to determine the applicability of these provision?The law does not make mandatory to comply continuously once the seller is obliged to follow, which means the applicability needs to be determined on a year to year basisWhether TCS applicable on sale of property?Sale of property is covered distinctively under the provision of section 194IA for value exceeding INR 50 LakhsWhether TCS should be refunded in case of sales returns?No, only primary sales value should be refunded as the amount of TCS would have been credited as prepaid taxes and will appear in Form 26AS of the buyer. However, if the amount has not been settled or net settlement is being made post adjustment of return then on such net consideration TCS should be collectedWhether the consideration will include the amount collected towards GST?The word consideration is not defined. In terms of section 145A irrespective of the treatment in books of accounts, the value of sales will be inclusive of GST

TCS PAYMENT AND RETURN

TCS collected needs to be paid within 7 days of the nextmonth.
Every tax collector shall submit quarterly TCS return i.e., Form 27EQ in respect of the tax collected by him in a particular
The due date of quarterly return is asunder

WAY FORWARD AND SCOPE LIMITATION

WAY FORWARDSCOPE LIMITATIONWe shall assist in determining the applicability of the above provision, depending on the nature of business and each business transaction;andWe have not considered the current revised rates as proposed by the government in view of the global pandemic COVID — 19;andThe amount on which the tax should be collected and the amount of remittance for each of the transaction.However, for the sake of the completion, the rates w.r.t sale of goods have been reduced to 0.075% for buyer having PAN/Aadhar, for current financial year only

Disclaimer
Please note that the above note is subject to government clarification or changes in law, we have merely discussed the applicability in the current scenario

Source: https://pkchopra.com/blog/index.php/tcs-under-income-tax-provisions-applicable-from-01-10-2020/

Income Tax Audit in India

What is a Income Tax Audit in India?
Under Section 44 AB of the Income Tax Act, 1961, provision of Income Tax Audit is covered. Income Tax Audit is a way to examine an individual’s organization tax returns by any outside agency. Income Tax Audit done to verify all income, get the deduction information or about expenditures incurred. To do tax audit is mandated as per the provisions of the Income Tax Act. This act states that all the taxpayers are required to do an audit of all the accounts of their business or organization.

As per Section 44AB, the audit aim is to ascertain the factual veracity of the returns filed and the accomplishment of other requirements as per applicable rules.

The Chartered Accountant performing the tax audit is required to do the submission of all its findings and observations in the form of an audit report. The audit report is given as per format available in the form numbers 3CA/3CB and 3CD.

What is section 44AB?
Section 44AB contains the provisions related to class of taxpayers for whom getting their accounts audited by a chartered accountant is mandatory.

Tax audit objectives
Following are the objectives of tax audits:

1. A structured tax audit ensures all the organizations and businesses are mapped on similar grounds as far as financial transparency is concerned.
2. It ensures all businesses maintain account books and records relating to revenue and expenses
3. It ensures that total income and deductions are claimed accurately and to the best of everyone’s knowledge.
4. It nullifies the chances of any possible fraudulent practices.

Who all are covered under tax audit rule?
Following is the list of people or class of people who compulsorily need to get their accounts audited:
1. An individual engaged in any form of business with turnover more than Rs. 1 crore.
2. Any professional with annual income more than Rs. 50 lakhs
3. Any individual covered under section 44AD, presumptive taxation rule but later on claims and proves that the profits are lower than as calculated for the taxation purpose. Same is the case with an individual who’s on record income is more than the amount which is tax-free.
4. Anybody who earlier qualified under the presumptive taxation rule but later on opted out of it. He/she would lose the option to revert back to the rule for a straight 5 assessment years span.
5. Individual who qualifies for presumptive taxation scheme but later on claims the actual profits are lower than the calculated ones under the section 44AE.
6. Individual who qualifies for presumptive taxation schemes but later on claims that the actual profits are lower than the calculated ones under section 44BBB.

How to get/file Tax Audit Report
The tax audit report is to be electronically filed by the chartered accountant to the Income-tax Department.

After filing of report by the chartered accountant, the taxpayer has to approve the report from his e-fling account with Income-tax Department (i.e., at www.incometaxindiaefiling.gov.in).

Penalty for not getting Tax Audit
If any person who is required to comply with section 44AB and fails to get his accounts audited or fails to furnish tax audit report , the Assessing Officer may impose a penalty.

The penalty shall be lower of the following amounts:
(a) 0.5% of the total sales, turnover or gross receipts, as the case may be, in business, or of the gross receipts in profession.
(b) Rs. 1,50,000.

Hence, it is very important to conduct a tax audit in a timely manner to ensure the transparent and hassle-free running of the business. Any failure in doing so attracts heavy fines and penalty. Being vigilant regarding the financial declarations and filings is important for the smooth running of the business as well as business owner’s mental peace.

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Internal Auditing Services in India

The Process of Due Diligence Services in India

If you happen to be an entrepreneur or a sale one that has his/her sights on the acquisition of a business, it’s your right to examine the financial records, and research that’s company activity related. Due diligence services in India enters the image at now and ensures that related information is compiled. It also sees if there’s a minimum average which can influence your ultimate decision regarding the acquisition or purchase.

Due Diligence Steps

The Action Plan: all the parties who are concerned with the deal should agree on what information and issues got to be highlighted in order that due diligence is completed effectively. The ambit of the problems and knowledge may or might not include structures within the organization, annual legal reports, shareholding records, personal and company financial records.
Reviewing the finances: The Due diligence team makes it some extent to carefully undergo the balance sheets of the corporate additionally to annual reports and cash flows too. All the pertinent files are validated with the assistance of an accountant and therefore the tax office.
Asset inspection: If there’s a plant and machinery involved within the business, the due diligence team views them as assets, ensuring that each one of the above are in good working condition. A stock value is suggested before the day of settlement. Insurance plans and policies should even be checked beforehand.
Scale of prospects and therefore the supply chain: The Due Diligence Team requests the list of key clients to work out if they’re active buyers. Existing contracts should even be scanned to seek out out if future business is feasible . Suppliers also fall within the gaze of due diligence and that they are verified to ascertain if outstanding payments remain or if there are settlement invoices.
Level of the competition and reason for sale: As an investor, you’ll be benefited to understand the precise reasons behind the sale of the corporate . this may entail a touch of digging around and also observing the competition from other players in order that a benchmark are often determined. Industry trends should also not be neglected.

General Financial Rules (GFR Rules)

The General Financial Rules (GFRs) are the general rules of Government of India (GOI) which are applicable to all Government Ministries/Departments. Exceptions are provided in the Rules. These rules are applicable in matters relating to Public Finance, that is, Matters relating to Revenue and Expenditure of Government.

These rules were first introduced in 1947 and modified thereafter in 1963, 2005 and 2017. A task force was established for comprehensive discussion and review of the GFRs set up. GFR sincludes all effects of Reforms introduced by the Government, for example, Direct Benefit Schemes (DBS), merger of Railway Budget with the General Budget, Introduction of Government e-Marketing Portal, Non-Tax Revenue Portal, etc.

These Reforms were introduced due to the changing Business Environment to promote simplicity and transparency in the Government Financial System and procedures.

The various important Rules are further explained as under:

General Principles Relating to Expenditure and Payment of Money

In case any expenditure is incurred by any officer, then the following should be observed:
Vigilance:Every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public moneys as a person of ordinary prudence would exercise in respect of expenditure of his own money and expenditure should not be more than situation demands.

Public Interest:Any authority which is benefiting themselves directly or indirectly from the expenditure should not sanction the expenditure by itself, the expenditure shall not be made for particular person or community unless no special orders received in this regards and it should be in public interest.

The Duties and responsibilities of a Controlling officer is to ensure,
That the expenditure does not exceed Budget,
That incurred only for the funds provided,
That incurred in public interest,
That adequate controls are there in the department for prevention of wastage of public money and
Errors prevention and detection
In case of certain special matters like, relinquishment of revenue; rights of power, water; grant of land etc. unless the power to issue an order is delegated or approved by the President, a subordinate authority cannot issue an order without the previous order of the Finance Ministry.
A sanction for any fresh charge shall lapse if it is not renewed and if no payment has been made during a period of twelve months from the date of issue of sanction, provided that,
When the period of sanction is prescribed in the regulations, then on the expiry of such period
When the regulations say that the expenditure would be met from the Budget provisions, then at the end of the Financial Year

In case of purchase, the sanction won’t lapse if any tender has been accepted within the period of one year, even if no payment, in whole or in part has been made.

Notwithstanding anything contained above, any sanction related to addition to a permanent establishment, made from year to year under a general scheme by a competent authority, or an allowance sanctioned for class(s) of government servants, but not drawn by the officer(s) concerned, shall not lapse.
The Reserve Bank of India (RBI) shall be the Banker to the Government. It shall provide various banking services to the Ministries either through its branches or its agent banks. All payments and all receipts (including tax revenues) shall be made or collected by the RBI through its own offices or through the nominated branches of its agent banks.

Public Financial Management System (PFMS)

PFMS is an integrated Financial Management System of Controller General of Accounts.

Budget Formulation and Implementation

Control of Expenditure Against Budget

To maintain the control of expenditure over sanctioned grants, the CG should follow an effective control as follows:-

Bills with proper classification of account should be presented for withdrawal of money.
All the drawing officers shall maintain registers in Form GFR-5, physically or electronically, for allocation under each minor Head and submit it with the head of the department on the third day of following month. A register shall be submitted irrespective of nil statement or if there are any adjustments like, inward claims.
A broadsheet of all the receipts shall be maintained in Form GFR-6. The Controlling officer shall ensure that classifications are done properly, expenditure is less than the Grant amount, reason of the increased expenditure shall be properly noted and it is properly signed by the Disbursing officers
When all the verification is done, the Controlling Officer shall prepare a Statement in Form GFR-7, wherein the Totals from GFR-5, Statement Totals given by the Disbursing Officers and other Total of Adjustments which have not been taken before, should be incorporated. These new adjustments shall also be communicated to the Disbursing Officer.
The Head of Department shall prepare a consolidated Statement in GFR-8 in which the complete expenditure with its appropriation into various heads shall be mentioned.
The Head of Department and the Accounts officer shall reconcile the balances maintained by both of them.
The Disbursing Officer shall maintain a register in Form TR 28-A in which all the Bills presented to the Principal Accounts Officer shall be entered. The Bills should match with the cheques. All the retrenchments shall also be noted in the register.
The Accounts Officer shall furnish an extract of the expenditure registers to the Disbursing Officers, in which monthly expenditure apportioned into various heads shall be mentioned. The Disbursing Officer shall tally this expenditure with the expenditure in Form GFR-5 and investigate the differences, if any. The book adjustments from the monthly statements shall also furnished in Form GFR-5. After all this is done, the Disbursing officer shall give a confirmation of the figures.
The Principal Accounts Officer of each Department shall send a monthly statement showing the expenditure in various heads according to the Budget provisions to the Heads of Departments. They shall discuss over the differences between the Statement and GFR-8 and furnish a quarterly report on 15th of second following month after the end of quarters.
The Heads of Departments shall prepare a statement wherein all the revenue and capital expenditure figures are entered separately by 15th of the following month. The figures shall be taken from Form GFR-8 and these figures should also be posted in other expenditure registers. The Heads of Departments shall also furnish a progress report of all schemes for which they are responsible. The physical progress, Budget provisions as well the reasons for shortfall shall also be reported therein.
A broadsheet in Form GFR-9 shall also be maintained by the Heads of Departments wherein the prompt receipt of various returns and actions for any defaults should be mentioned.
The Controlling officer shall maintain liability registers in Form GFR-3 from the liability statements obtained from spending authorities in Form GFR-3A every month starting from October in each financial year.
The Department of Central Government shall provide the Finance Ministry a detail of savings noticed in the Grants by them. After the acceptance, these funds shall stand lapse at the end of the financial year. These funds shall be returned to the Government.
No expenditure on a New Service shall be made which is not provided in the Annual Budget, unless there is a supplementary Grant for it.
The Disbursing officer shall not approve an excess allotment of an expenditure unless he has taken approval from his superior authority. The authorities shall also maintain these excess allotments in the liability register in the Form GFR-3.
In case of re-appropriation of expenditure from one primary unit to another within a Grant amount, shall be furnished in Form GFR-1.Re- appropriation shall only be made when it is known or anticipated that units from which the funds are to be transferred are not to be utilised in full or savings can be affected in them. Also proper approval from competent authority should be taken.
In case any need for an unforeseen expenditure for a New Service not provided in the Budget arises and there is no time for voting of the Supplementary Demand, then an advance from the Contingency Fund, set up under Article 267(1) of the Constitution shall be obtained before incurring the expenditure. The procedure for obtaining an advance is laid in the Contingency Fund of India, 1952.
The Secretary of a Ministry/ Department, who is the Chief Accounting Authority shall be responsible for all the financial matters of his ministry (including control on expenditure, accounting and appropriation, receipts and collection of funds, appearance to parliamentary committee and to his ministry as required)

Defalcation and Losses

Any loss or shortage of public money, revenue, receipts, or other property held by or behalf of government, shall be immediately reported to the next higher authority, Statutory Audit Officer, and Principal Accounts Officer even if such loss has been made good by the party responsible. However, the following losses need not to be reported:
Losses due to mistakes in assessments which are discovered too late,
Assessments due to interpretation of law by the local authority overruled by the higher authority
Losses not exceeding Rupees ten thousand
Cases involving serious irregularities should be reported to Financial Adviser or Chief Accounting Officer of the Ministry or Department and the Controller General of Accounts of Ministry of Finance. A Report of loss should be maintained containing
An initial report, which should be made as soon as the suspicion arises
The final report, to be sent to higher authorities
All losses more than Rupees Fifty thousand due to suspected fire, fraud or theft of Government property, shall be reported to Police for investigation as early as possible, similarly all losses of immovable property of more than Rupees Fifty thousand, such as building, due to cyclone, earthquake, fire, flood etc. shall be reported at once by the subordinate authority.

Source: General Financial Rules (GFR Rules) | Auditing Services

New Valuation Regime under Companies Act, 2013

Till now, only an ad-hoc framework for valuation professionals was in place, which is basically governed by the Companies Act, and the government has designated the Insolvency and Bankruptcy Board of India (IBBI) as the authority to implement the new regime of registered valuers.

The move came at a time when stressed companies worth thousands of crores were up for sale under the Insolvency and Bankruptcy Code (IBC) and there was no standardized formula for valuing these assets nor is there a proper regulatory framework governing the valuation profession. Proper valuation of a company is also a crucial part of any merger and acquisition.

Accordingly, the Ministry of Corporate Affairs introduced the Companies (Registered Valuers and Valuation) Rules, 2017 (“Rules“). The Rules inter alia provided for the eligibility criteria which needs to be fulfilled for obtaining a certification for being a registered valuer and the manner in which the certification maybe obtained.

The Rules also provide that the Insolvency and Bankruptcy Board of India (“IBBI“) established under the Insolvency and Bankruptcy Code, 2016 be the “registering authority” which will hold examinations and grant certifications of the designation of a “registered valuer”.

The valuation by a registered valuer applies to valuation of assets, liabilities, shares, etc. required under the Companies Act, 2013 and the rules made thereunder. It does not apply to valuations required under other laws, unless the other laws mandate valuation by a registered valuer. However, certain SEBI Regulations also mandate valuation by RV.

Thus, from February 01, 2019, only a registered valuer is allowed to undertake valuation required under the Companies Act.
It is interesting to note that under Section 247(2) of the Companies Act, the registered valuer is required to:

Make an impartial, true and fair valuation of assets which maybe required to be valued;
Exercise due diligence while performing the functions of a valuer;
Make the valuation in accordance with such rules as maybe prescribed;and
Not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during or after the valuation of assets.

Who can be a Registered Valuer?
A person, who aspire to be a registered valuer, is required to possess certain qualifications and experience, obtain membership of a recognized organization of valuers and get itself registered as a valuer with IBBI. The RV Rules sets out in detail the eligibility criteria, educational qualifications (degree), experience, and procedure for registration of a valuer. However, such valuer will not undertake valuation of any assets in which he has a direct or indirect interest or becomes so interested at any time during a period of three years prior to his appointment as valuer or three years after the valuation of assets was conducted by him.

Different qualifications of registered valuers for different class of assets

For valuation of land & building, a registered valuer must be a graduate or post graduate in Civil engineering, architecture or town planning with minimum experience of 3 to 5 years
For valuation of plant & machinery, a registered valuer must be a graduate or post graduate in Electrical or Mechanic Engineering with minimum experience of 3 to 5 years
For valuation of securities or financial assets, a person must be a member of ICAI, ICSI or Institute of Cost Accountants of India or an MBA with specialization in Finance, with minimum experience of 3 years in the discipline after completing graduation

The registered valuer is responsible for any negligence or misconduct leading to disciplinary action by IBBI and regulatory penalties and fines.

Impact on valuation practice in India
For long, in the absence of a specialized cadre of valuers, valuation services have been usually provided by chartered accountants and merchant bankers, etc. They typically issue valuation certificates for the purpose of compliance under the Companies Act and other laws like SEBI Regulations and even I-T Act. However, the lack of a standardized formula has resulted in too much of subjectivity in the valuation of companies. Now with this rules and IBBI being appointed as responsible authority to administer and perform functions under the said rules, the valuation domain is being well regulated.

Presently more than 900 valuers are registered under IBBI and they are only authority to carry out valuations under different legal framework. Nevertheless the other laws are soon expected to be amended to include the Registered Valuers to carry out Valuations.

The MCA has constituted a committee to recommend the valuation standards and policies for compliance by companies and registered valuers. Given the need of the hour, the ICAI has already established a Valuation Standard Board and formulated ICAI Valuation Standards in June 2018. These ICAI Valuation Standards will remain effective till valuation standards are notified by the MCA.

Though the valuation of a listed company whose shares are actively traded on a nationwide stock exchange in India can be derived from its prevailing market price over a period of time, the valuation of an unlisted company and its shares is the real challenge.

Below is the Ready Reckoner for the valuation transactions covered in case of Private, unlisted Public companies and listed companies under Companies Act 2013, SEBI and Income Tax Act 1961:

Nature of TransactionPrivate CompanyUnlisted Public CompanyListed Public CompanyFresh Issue/ preferential allotment(Rule 13 of SCD Rules, 2014)Yes- by RV(sec 42 and 62 of CA 2013)Yes- by RV(sec 42 and 62 of CA 2013)Not required, if frequently traded shares.If shares not traded frequently, then issue price can be valued by MB or CA

(Reg 76A of ICDR)

Rights IssueNot Required (sec 62 of CA 2013)Not required (sec 62 of CA 2013)Not required (ICDR)Employee Stock Option SchemeNot Required (sec 62 of CA 2013)Not Required (sec 62 of CA 2013)Not Required (SEBI Reg)Bonus IssueNot RequiredNot RequiredNot RequiredEmployees Stock Purchase Scheme(Rule 16 of SCD Rules)Yes- by RV (sec 67 of CA 2013)Yes- by RV (sec 67 of CA 2013)Not Required (sec 67 of CA 2013)Valuation of Assets Involved in Arrangement of Non cash transactions involving DirectorsIn case of sales or purchases of any asset between the company and directors of the company (or its subsidiary company, holding company or associate company) or a person connected with the director for consideration other than Cash, in this scenario value of transaction will be calculated by the RV. Section 192(2) of CA, 2013.In case of sales or purchases of any asset between the company and directors of the company (or its subsidiary company, holding company or associate company) or a person connected with the director for consideration other than Cash, in this scenario value of transaction will be calculated by the RV. Section 192(2) of CA, 2013.In case of sales or purchases of any asset between the company and directors of the company (or its subsidiary company, holding company or associate company) or a person connected with the director for consideration other than Cash, in this scenario value of transaction will be calculated by the RV. Section 192(2) of CA, 2013.Sweat Equity (rule 8 of SCD Rules)Yes- by RV (sec 54 of CA 2013)Yes- by RV (sec 54 of CA 2013)Yes- by MB (valuation of IP or value addition) or CA (certification that valuation is in accordance with AS)(Reg 8 of SEBI SE Regulations)Buyback of sharesNot required but valuation report can be obtained from MB, CA or RV for justifying the buyback price(rule 17 of SCD Rules, Sec 69 of CA 2013)Not required but valuation report can be obtained from MB, CA or RV for justifying the buyback price(rule 17 of SCD Rules, Sec 69 of CA 2013)Not required but valuation report can be obtained from MB, CA or RV for justifying the buyback price(rule 17 of SCD Rules, SEBI Buyback Reg)Purchase of Minority ShareholdingShares of Minority shareholding can be acquired at price calculated by RV. (Sec 236 of CA 2013)Shares of Minority shareholding can be acquired at price calculated by RV. (Sec 236 of CA 2013)MB as per SEBI CircularsMergers & AmalgamationsYes- by RV (sec 230 of CA 2013 Rule 6(3) of Merger Rules)Yes- by RV (sec 230 of CA 2013 Rule 6(3) of Merger Rules)Yes- by CA(SEBI Circulars)Reverse Merger- Exit price for shareholdersNot ApplicableNot ApplicableYes- by RV (Sec 230(3)(h) of CA 2013)Scheme of Corporate Debt RestructuringYes- by RVYes- by RVYes- by CA (cases not exempt from ICDR) or RV (for cases exempt from ICDR) (Reg 158(7) of ICDR)Conversion of Debt into equity sharesNot requiredNot requiredYes- by CA (cases not exempt from ICDR) or RV (for cases exempt from ICDR) (Reg 158(7) of ICDR)Report on effect of compromiseYes- by RV, MB CA or any other advisor (Sec 232(2)© of CA 2013)Yes- by RV, MB CA or any other advisor (Sec 232(2)© of CA 2013)Yes- by RV, MB CA or any other advisor (Sec 232(2)© of CA 2013)Fairness Opinion on Scheme of Mergers or AmalgamationNot RequiredNot requiredYes- by MB (SEBI circulars)Accounting StandardsIf valuation report is required to be obtained, then such valuation shall be done by RV (s 133 and s 247 of CA 2013)Delisting regulationsNot ApplicableNot ApplicableValuation can be done by RV, CA or MB (s 247 of CA 2013, Reg 23 of SAST)FDI Regulations- Issue of shares/ securities to NRYes- by MB, AC or Cost Acc (Reg 11 of FEMA 20(R))Yes- by MB, AC or Cost Acc (Reg 11 of FEMA 20(R))Yes- as per SEBI reg (Reg 11 of FEMA 20(R))SEBI (REIT) Regulations- valuation of assetsYes- by RV (Reg 2(zz)of SEBI (REIT) Reg)SEBI (INVIT) Regulations- valuation of assetsYes- by RV (Reg 2(zzf)of SEBI (INVIT) Reg)Valuation under IBCYes- by RV (IBBI Circular dated Oct 17, 2018)Under Income Tax Act 1961Fresh Issue and transfer at:

Face Value
Premium
Fair Market Value by DCF
FMV by NAV

(S 56(2) of IT Act, Rule 11UA)

Not Required Any Valuer (MB/ CA/ RV) MB only Any ValuerNot required Any (MB/ CA/ RV) MB only Any ValuerIt shall only take place in open market at FMV, thus no valuation prescribed for the same.Transfer of shares at less than FMV (u/s 50CA)Any ValuerAny ValuerNot applicablePreferential Allotment (S 56(2)(Rule 11UA)If shares issued at premium, then valuation by any valuer (MB, CA or RV)If shares issued at premium, then valuation by any valuer (MB, CA or RV)If shares issued at premium, then valuation by any valuer (MB, CA or RV)Rights Issue (S 56(2) (Rule 11UA)In case shares issued at premium, valuation may be required by any Valuer (MB, CA or RV).In case shares issued at premium, valuation may be required by any Valuer (MB, CA or RV).In case shares issued at premium, valuation may be required by any Valuer (MB, CA or RV)

However, one can opine that in cases where valuation report by Registered Valuer is mandatorily required under Companies Act, 2013, then it shall also be accepted under Income Tax Act, 1961 (except in cases where MB report is mandatory under DCF) as well as FEMA.

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