Pre-Audit for payments is a brand-new sort of audit lots of big MNCs are choosing now days for their payments. Managing payments of vendors is not an easy task as they have to comply with policies of the business and Statutory compliances Like TDS, GTA, Reverse charge mechanism etc.
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What is Pre Audit for payments?
In pre-Audit a deal is audited initially, if it complies required compliances then such transaction is authorized. In basic words a payment to vendor can be done just after getting approval from Pre-Auditor.
Why is Pre Audit for payments is required?
Statutory functions:
While dong Tax Audit auditor prohibit numerous costs for violating arrangements like not subtracting TDS, for not making Reverse charge system for services received, for not making GTA. As all these expenses are prohibited and added back, the earnings of the company increases and tax liability likewise increases. State Tax auditors prohibited 1,00,00,000(1 Crore) rupees of costs tax liability of the company increases by 30,00,000(30 Lakhs) plus other taxes. By integrating Pre-Audit system all these disallowances can be avoided or pulled down saving company millions of rupees. It likewise gives a healthy tax audit report which positions an excellent impression in financiers and market.
Internal functions:
Organizations will have their own set of policies, Terms and conditions to launch payments. Say business has actually released a Purchase order to a vendor to acquire 100 units of product for 200 each. And its companies policy to deduct liquidated damages (In easy words charges) from the vendor if he stops working to provide the item on time.
How is Pre-Audit for payments is done?
- A file called PRA (Payment release guidance) is prepared by the person who initiates the payment, it consists of information like name of the vendor, amount to be paid, TDS deducted Purchase order number etc.
- Along with PRA associated files like billing provided by supplier, Purchase order, Lorry invoice, MDCC (Product dispatch clearance certificate) etc are attached for the reference of Pre-Auditor.
- After cross inspecting the entry passed and terms and conditions mentioned in purchase order pre auditor will authorize the payment.
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