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How should a foreign-invested entity prepare for annual audit in India?
Q&AThere are a couple of steps that are recommendable for preparing annual audit in India. The foreign company should:
- Brief the auditors on the nature of your business, the background of it, the business activities you carry out and to what extent you are following the internal control procedures.
- Provide them with a list of raw materials that are consumed regularly.
- Identify with the auditors on how is the input raw material changed into final products.
- Provide them with the opening balance report from the management account of the foreign-invested entity.
- Provide them with an explanation to the purchasing procedures of the foreign-invested entity, as they will conduct price surveys to find out if there is any fault therein, committed perhaps by a dishonest employee.
- Provide them with documentations in relation to travel and related expenses, which might be questioned as to the necessity of such travels.
- Demonstrate your business maintained its RG 23 books and stock registers when manufacturing or processing materials.
- Maintain a Permanent Account Number of all persons who come under the applicability of tax deduction at source.
If a Permanent Account Number is not provided, then the company needs to deduct tax deduction at source at a rate of 20%, applicable for the time being as per the recent changes to the Finance Act.
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