How should a foreign-invested entity prepare for annual audit in India?

There 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.