Statutory Audit & Compliance Analysis
Comprehensive analysis of Indian accounting standards (Ind AS/GAAP) and tax law compliance (TDS, GST, Income Tax)
What’s hard about this today?
Software companies in India face complex compliance requirements across multiple accounting standards and tax regulations. Without systematic analysis, businesses risk non-compliance with Ind AS/Indian GAAP, GST law, TDS provisions, and income tax regulations. Common issues include improper export GST treatment, missing reverse charge mechanism (RCM), blocked ITC claims, and inadequate related party disclosures - leading to penalties, disallowed expenses, and audit objections.
How RyzUp fixes this
Comprehensive statutory audit analysis examining compliance with Indian Accounting Standards (Ind AS/Indian GAAP) and Indian Tax Laws including TDS, GST, Income Tax, and GST credit provisions. This analysis reviews general ledger entries to identify compliance gaps, tax risks, and provides actionable remediation steps.
Compliance Overview
Export GST Issues
Non-Compliant
RCM on Legal Fees
Not Booked
Motor Vehicle ITC
Blocked
TDS on Professional Fees
At Risk
A. Indian Accounting Standards (Ind AS/GAAP) Compliance
✅ Revenue Recognition (Ind AS 115): Sales properly categorized as Domestic, Export, SEZ with detailed narratives supporting transfer of risks and rewards
⚠️ Export Sales: Recorded correctly but flagged as "wrongly taxed" indicating GST process/compliance issues requiring correction
✅ Expense Classification (Ind AS 1 & 2): Proper segregation between Goods, Services, Legal & Professional, Director Remuneration, Contractor Charges
⚠️ Some legal fees incorrectly classified - "RCM not booked" affecting both GST accounting and expense recognition
✅ Related Party Transactions (Ind AS 24): Director Remuneration and fees separately accounted, but verification needed for counterparty relationships
✅ Accrual Basis (Ind AS 1): Ledger maintained on accrual basis with transactions independent of cash movements
B. GST Compliance Analysis
✅ Outward GST: Domestic sales have proper GSTIN documentation supporting GST compliance
❌ Export Sales Non-Compliance: Multiple entries (VCH20250027, VCH20250133, VCH20250183, VCH20250152) wrongly taxed - GST charged erroneously or improper LUT treatment
❌ Reverse Charge Missing: Legal fees to unregistered suppliers (VCH20250037, VCH20250194, VCH20250687) - RCM GST not booked violating Sec 9(3)/(4)
✅ Inward GST: Purchases show GSTIN/PAN supporting Input Tax Credit (ITC) eligibility
❌ Blocked ITC Claimed: Motor car purchase (VCH20250096) - ITC claimed but typically blocked under Sec 17(5) except for specific business types
⚠️ Impact: Export refund blockage, ITC reversal required, additional tax liability on RCM non-compliance
C. TDS (Tax Deducted at Source) Compliance
✅ Contractor TDS: Multiple entries show "TDS deducted at 0.5%" (VCH20250031, VCH20250042, VCH20250059, VCH20250135) indicating proper Sec 194C compliance
⚠️ TDS Remittance: Credit entries or remittance tracking not visible in ledger - requires verification of actual payment and TDS returns filing
⚠️ Director Remuneration: TDS under Sec 194J/192 needs verification especially if directors are non-employees
❌ Legal & Professional Fees: Payments (VCH20250037, VCH20250194, VCH20250087) lack TDS indication - potential Sec 194J non-compliance
🚨 Risk: Missing TDS leads to disallowance under Sec 40(a)(ia) and interest/penalty exposure
📋 Action Required: Verify TDS deduction, remittance, and Form 26AS/Form 16A issuance for all applicable payments
Compliance Summary Matrix
Area | Compliance Status | Key Issues | Legal Reference | Risk Level |
|---|---|---|---|---|
| Revenue Recognition | ✅ Compliant | Properly categorized with narratives | Ind AS 115 | Low |
| Expense Classification | ✅ Compliant | Appropriate segregation | Ind AS 1 & 2 | Low |
| Accrual Basis | ✅ Compliant | Maintained correctly | Ind AS 1 | Low |
| GST - Outward (Domestic) | ✅ Compliant | Proper GSTIN documentation | CGST Act | Low |
| GST - Export Sales | ❌ Non-Compliant | Wrongly taxed on multiple entries | Sec 16 IGST Act | High |
| GST - Reverse Charge | ❌ Non-Compliant | RCM not booked on legal fees | Sec 9(3)/(4) CGST | High |
| GST - ITC on Motor Car | ❌ Non-Compliant | Blocked ITC claimed | Sec 17(5) CGST | Medium |
| TDS - Contractors | ✅ Compliant | 0.5% deducted as required | Sec 194C ITA | Low |
| TDS - Professional Fees | ⚠️ At Risk | TDS not evident on legal fees | Sec 194J ITA | High |
| Related Party Disclosure | ⚠️ Requires Analysis | Counterparty verification needed | Ind AS 24 / Sec 40A(2) | Medium |
Tax Impact Assessment
GST Exposure
Export & RCM non-compliance
TDS Risk
Professional fees compliance
Financial Impact
Potential liability & disallowance
D. Actionable Remediation Steps
🔧 Export GST Correction: File amended GSTR-1/GSTR-3B returns, verify LUT documentation, claim eligible IGST refunds
📝 Book RCM Entries: Account for reverse charge GST on all legal/professional fees from unregistered suppliers, remit tax with interest
💰 Reverse Motor Vehicle ITC: Credit back ineligible ITC claimed on motor car, pay amount with interest unless business use qualifies
🎯 TDS Compliance: Deduct and remit TDS on all professional/contractor/director payments, file Form 26Q, issue Form 16A to deductees
🔍 Related Party Review: Identify and verify all counterparty relationships, ensure Ind AS 24 disclosures, check transfer pricing applicability
📊 Reconciliation: Match accounting records with statutory filings (GST, TDS, Income Tax) for completeness and accuracy
📋 Documentation: Maintain supporting documents for all transactions - invoices, contracts, LUT, TDS certificates, GST returns
⚖️ Disclosure: Note all disputed/non-compliant items in financial statement notes per Ind AS 1 and tax law requirements
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