Checklist and Guideline for Excise Audit.
Excise Audit is very important in organisations where excise is applicable.
Excise auditor need to check various factors while auditing such as examine the controls and procedures for accounting and claim in respect of Cenvat on eligible inputs – particularly examine the cases where Cenvat could not be claimed due to various reasons i.e. non-eligible items, loss of documents etc.
Excise Audit is very important in organisations where excise is applicable.
Excise auditor need to check various factors while auditing such as examine the controls and procedures for accounting and claim in respect of Cenvat on eligible inputs – particularly examine the cases where Cenvat could not be claimed due to various reasons i.e. non-eligible items, loss of documents etc.
| Checklist | How to check |
|---|---|
| Identify all the account balances appearing in the Trial Balance / Financial Statements relating to Excise / Cenvat | Checked from the excise Reconciliation Statement |
| Verify the returns / relevant records to ensure that the balances in books reconcile with the returns – in case the balances do not reconcile, ask the client for an appropriate reconciliation which should be examined in detail | ER-1 return is to be compared with the account balances ER-5 Annual return of information relating to principal inputs ER-6 Monthly return of information relating to principal inputs ER-7 Annual installed capacity statement |
| Examine the controls and procedures for accounting and claim in respect of Cenvat on eligible inputs – particularly examine the cases where Cenvat could not be claimed due to various reasons i.e. non-eligible items, loss of documents etc. | In certain clients, data in respect of Cenvat not claimed on inputs may not be readily available, which may be a management letter issue for strengthening the overall control over accounting in respect of Cenvat |
| Examine the credit for Cenvat in respect of Capital Goods – the same is to be taken @50% in the first year and the balance amount in the next year. Also ensure that cost of the asset is capitalised in the books net of such Cenvat and depreciation is claimed on the net amount only. | In cases where Cenvat on capital goods is claimed by the client, but the same is under dispute with excise authorities, it is suggested that a disclosure for contingent liability may be considered for the amount claimed |
| Review whether duties payable on clearance of finished goods has been paid within the stipulated time period i.e. 5th of the next month respectively. | If there are any delays in payment / adjustment of excise duty dues, interest would be payable by the client @ 24% |
| In respect of materials sent outside the factory premises for further processing / repairs etc. examine the records maintained and obtain a list of such cases as on the cut-off date i.e 180 days. Reconcile the same with the duty paid on removal thereof, amount of reversal, and final benefit availed when the goods after processing received into factory. | Records maintained by company in respect of material removed from the premises without paying duty on the condition of material would be come with in 180 days after the removal from the premises |
| Test-check a few cases of material receipts to ensure that the material receipt register (at the gate / stores) contains record reference of Cenvat documents. Also examine the normal time lag between receipt of material and availing of Cenvat credit. | Abnormal delays in availing Cenvat credit may be a management letter issue and may offer opportunities for advising the client for streamlining the processes. |
| Review the daily factory production, despatch and stock records and reconcile the figures with those reflected in the excise returns as well as the financial statements.(Review Of DSA) | |
| Obtain a list of all pending disputes / claims with the excise authorities and status thereof, with the amount involved. Reconcile the payments made under protest with the book balances. |