A tax audit engagement letter serves as a formal agreement outlining the auditor's role, the client's responsibilities, the duration of the audit, and other relevant details.

Draft Tax Audit Engagement Letter

A tax audit is the examination of accounts for income tax purposes to ensure their accuracy and adherence to applicable laws. It is conducted by a Chartered Accountant to verify income tax returns. The audit is mandated for businesses with turnover exceeding Rs.1 crore and professionals with receipts above Rs.50 lakhs.

The audit engagement letter sets out the scope of the auditor's work, the obligations of the client, the duration of the audit, and the fee, among other aspects. It represents a binding contract between the auditor and the client.

Below is a draft version of the engagement letter for your reference.

Draft Tax Audit Engagement Letter For The Assessment Year 2024-25

To,
The Board of Directors/Partners/Individual
[Address]
[Permanent Account Number (PAN)]

Dear Sir/Madam,

We refer to your letter dated ______ regarding our reappointment as the tax auditors of [Company/Partnership/LLP/Individual]. You have requested that our firm undertake the tax audit as per Section 44AB of the Income Tax Act, 1961, for the financial year ending on March 31, 2024. This engagement includes the issuance of a Tax Audit Report in Form Nos. 3CA/3CB, based on Form 3CD, which is to be duly filled by the management of the entity. The report will subsequently be filed with the Income Tax Department. We are pleased to confirm our acceptance and understanding of this engagement through this letter.

Our audit will be conducted to ascertain and report on the requirements of Form Nos. 3CA/3CB and 3CD, ensuring that the books of account and other records are accurately maintained and that Form 3CD is completed correctly by the management. The audit will assess whether the income, deductions, and relief claims are accurately reported and compliant with tax laws. In conducting this audit, we may rely on the work of statutory auditors, if applicable, to the extent necessary.

Our audit procedures will adhere to the provisions of the Income Tax Act, 1961, as well as the relevant rules and regulations. This audit will involve procedures to verify compliance with the requirements and disclosures in Form 3CA/3CB and Form 3CD, which is prepared by the management. The audit will also evaluate compliance with applicable income tax, TDS, and other laws. Management is responsible for ensuring that Form 3CD is correctly prepared and authenticated, while we will review and verify its contents, form our opinion, and issue the relevant reports.

This audit engagement is based on the understanding that the management and those charged with governance (e.g., the Audit Committee or Board) have the following responsibilities:

a) Ensuring the preparation of tax audit reports that provide the required assurance under the relevant provisions of the Income Tax Act, including compliance with Income Tax, TDS, and GST regulations and the proper maintenance of financial records.

b) Identifying and notifying us of any financial transactions or issues that may impact the company’s tax compliance.

c) Providing all necessary information in a complete and accurate manner.

d) Granting us access to:

(i) All relevant information, including books, records, vouchers, and documentation, whether maintained at the head office or elsewhere.
(ii) Internal reports on fraud or irregularities, if any, including reports submitted by cost accountants or company secretaries.
(iii) Any additional information we may require for the audit.
(iv) Unrestricted access to individuals within the company from whom we may seek audit evidence.
(v) All necessary assistance for the successful completion of our duties as tax auditors.

As part of our audit, we may request written confirmation from the management regarding representations made to us during the course of the audit.

Our audit report will be addressed to [Company/Partnership/LLP/Individual] and prepared in accordance with the relevant provisions of the Income Tax Act. The form and content of the report may be amended based on our audit findings.

Please note that our audit process may be subject to peer review or quality review under the Chartered Accountants Act, 1949. In such cases, reviewers may inspect our working papers and audit documentation.

We may involve specialists and personnel from our affiliated network firms to assist with specific procedures during the audit process.

We look forward to your full cooperation during the audit and request that you sign and return the attached copy of this letter to confirm your acknowledgment and agreement with the terms of our engagement.

Yours faithfully,
For [Firm Name]
Chartered Accountants [FRN]

[Partner/Proprietor]
Date: __________
Place: __________

Acknowledged and Agreed by [Entity Name]:
[Signature]
Date: __________

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This document is provided by Unpaper for educational and informational purposes only. It does not constitute legal, tax, or professional advice. While every effort has been made to ensure the accuracy and completeness of the information, Unpaper assumes no liability or responsibility for any errors or omissions. Users are advised to seek appropriate professional guidance before relying on the content. Unpaper is not liable for any actions taken or decisions made based on this document.