Statutory Compliance required to be checked during an audit

Introduction:


Apart from regular Vouching and Verification, during an audit it is necessary to check the statutory compliance of the statutory body. So, rather than only Service Tax Applications, WCT calculations, and Sales Tax, an auditor needs to verify and check other Labour Laws and the compliance during an audit. So, some of the Labour Laws and the acts which are applicable on a Real-State Business and other sectors.

Some of those laws whose compliance are required to be checked are as follows:

  1. The Contract Labour (Regulation & Abolition) Act, 1970
  • Whether Registration Certificate (Before Appointing Contractor) – Form-1 has been obtained or not?
  • Whether Register Of Contractor – Form-XII has been obtained or not?
  • Whether Register Of Employees Employed By Contractor – Form-XIII has been obtained or not?
  • Is Muster Roll, Wage Register, Over Time Register, Fine Register Deduction Register, Advance Register              (Contractor) is maintained or not?
  • Notice Regarding Rates Of Wages is maintained or not.
  • Half Yearly Return By Contractor – Form – XXIV has been filed or not?
  • Annual Return By Principle Employer – Form – XXV (Before 15th Feb) has been filed or not?

 

2.  Employee State Insurance Corporation Act, 1948

Whether below books/ledgers are maintained or not?

  • Muster Roll
  • Wage Register
  • Inspection Book
  • Accident Register
  • Cash Books, Vouchers & Ledgers
  • Paid Challans, RDF And Declarations
  • Register Of Employees – Form – 7
  • Half Yearly Return – Form – 6 (April – September & October – March) 42 Days After Closing Continued Period has been filed or not?

3. Employees Provident Fund Act, 1952. 

Whether below mentioned books are maintained or not?

  • Muster Roll
  • Wage Register/Pay Roll register
  • Form- 3A, 5, 10 & 12A
  • Inspection Book
  • Cash Book, Voucher & Ledger
  • PF Work Sheet
  • Monthly Return – Form – 5, 10, 12A along with paid challans (before 25th of every month) has been filed or not?
  • Annual Return – Form – 3A & 6A (before 30th April Every Year) has been filed or not?

4.  Prevention of Money-Laundering Act, 2002

  • Whether the above referred policy is approved by Board of Directors?
  • Whether regular monitoring of transactions is done for ensuring effectiveness of the Anti Money Laundering procedures?
  • Whether special attention has been given to all complex, unusually large transactions/patterns which appear to have no economic purpose?
  • Whether the client identification programme is implemented?
  • Whether the compliance cell or department has randomly examined a selection of transaction undertaken by clients to comment on their nature i.e. whether they are in the suspicious transactions or not?

5.   Payment Of Bonus Act, 1965

  • Whether the company is eligible to pay bonus or not.
  • Whether Register Of Bonus – Form – C is maintained or not.
  • Whether the company maintains the calculations sheet of Bonus or not.
  • Whether minimum bonus is paid or not, in case of loss.
  • Whether provision for Bonus is made or not.
  • Whether Annual Returns – Form-D (Before December Every Year) is filed or not.

6.   Payment Of Gratuity Act

  • Whether the company is eligible to pay Gratuity or not.
  • If yes, then Notice Of Opening – Form – A ( To: Labour Department) has been filed or not.
  • Whether Register Of Gratuity is maintained or not.
  • Whether the company maintains the calculations sheet of Gratuity or not.
  • Whether provision for Gratuity is made on the basis of Actuarial or not?
  • Whether Declaration in “Form F” has been given or not.
  •  Payment Of Gratuity Act, Abstract

Hence, those above are the things that are required to be checked for an Labour Laws, during an audit. If the entity has not followed/maintained the above compliance then they are results to various interest and penalty provisions in their respective acts.

 

Thanking you

Happy Reading!!!

Published by

Shushant ( ICAI Final )

Shushant is a Chartered Accountant student at Institute of Chartered Accountants of India. He is also a Student of Company Secretary at Institute Of Company Secretaries of India. He is a administrator of this site . In his spare time he hang out with his friends and discuss about the current issues in market. You can find his latest blog posts at www.enrollmyexperience.com and at his facebook profile.

Leave a Reply