To

Name of Client.
Address,
Ahmedabad –

Sub: Letter of Engagement as Tax Auditors for the Assessment Year2020-21

Respected Sir,

We refer to the letter dated _________ informing us about our (re) appointment/ratification as the Tax

Auditors of the Company / Firm u/s 44AB r.w.s 44AD / ADA of The Income Tax Act, 1961. You have

requested that we audit the financial statements of the Company / firm as per the requirements of

Section 44 AB r.w.s 44AD / ADA of the Income Tax Act, 1961, for the financial year(s) beginning April 1,

2020 and ending March 31,2021. We are pleased to confirm our acceptance and our understanding of

this audit engagement by means of this letter.

Scope of Work of Tax Auditors

1. We as tax auditors shall be responsible to express an opinion on these financial statements

based on our audit conducted in accordance with the Standards on Auditing issued by the

Institute of Chartered Accountants of India by complying with ethical requirements and planning

and performing the audit to obtain reasonable assurance about whether the financial

statements are free from material misstatement.

2. We as tax auditors shall be responsible for verifying the statement of particulars required to be

furnished under section 44AB r.w.s 44AD / ADA of the Income-tax Act, 1961 to be annexed in

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Form No. 3CD read with Rule 6G(1)(b) of the Income-tax Rules, 1962. We will be conducting our

verification of the statement in accordance with Guidance Note on Tax Audit under section

44AB of the Income-tax Act, 1961, issued by the Institute of Chartered Accountants of India.

3. On the basis of your examination, we expect to report:

a) Whether the balance sheet and profit and loss account are in agreement with the books of

account of the firm;

b) Whether, in our opinion and to the best of our information and according to the explanations

given to us, the financial statements are a true and fair view) in the case of balance sheet, of the

state of affairs of the entity as at the last day of the accounting year; and ii) in the case of profit

and loss account, of the profit or loss for the accounting year.

4. In forming our opinion on the financial statements, we will perform sufficient tests to obtain

reasonable assurance as to whether the information contained in the accounting records and

other source date is reliable and sufficient as the basis for preparation of the financial

statements. We will also examine whether the information is properly presented in the financial

statements.

5. In forming our opinion, we shall carry out procedures designed to obtain evidence that will

provide reasonable assurance that the financial information is properly stated in all material

aspects. We have, therefore, a reasonable expectation of detecting material misstatements in

the financial information resulting from fraud or error. However, since the audit evidence

sought by us is persuasive rather than conclusive in nature, there is a possibility that some

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material misstatements of the financial information resulting from fraud and, to a lesser, extent,

error, if either exist, may not be detected.

6. Our fees will be billed as follows. The total audit fee of Rs. _______/- (excluding GST, other

applicable taxes and out of pocket expense) (Rupees ___________________ only) will be billed

on submission of the audit report. In case the audit team has to depute the additional resources

and has to work for extra ours for completion of audit due the reasons beyond the control of tax

auditors, the client will be responsible for the additional fees as per our Cost Over Run Policy.

7. We wish to emphasis that our audit report will be exclusively for income-tax purposes. We shall

not be liable for any way to any third party to whom you may make the audit report available.

8. We also wish to invite your attention to the fact that our audit process is subject to ‘peer

review’ under the Chartered Accountants Act, 1949. The reviewer may examine our working

papers during the course of the peer review.

9. We look forward to full co-operation from your staff and we trust that they will make available

to us the records, documentation and other information and explanations required in

connection with out audit.

10. Management’s Responsibility

a. We wish to clarify that the responsibility for the preparation of the financial statements

including adequate disclosure is that of the management of the firm. As part of our audit

process, we will expect to receive from management written confirmation of representation

made to us in connection with audit.

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b. Management is responsible for the preparation of the financial statements that give a true and

fair view of the financial position and financial performance (if applicable) in accordance with

the applicable Accounting Standards issued by the Institute of Chartered Accountants of

India.This responsibility includes the design, implementation and maintenance of internal

control relevant to the preparation and presentation of the financial statements that give a true

and fair view and are free from material misstatement, whether due to fraud or error,

maintenance of adequate accounting records,the selection and application of accounting

policies, and the safeguarding of the assets of the entity.

c. The Management is also responsible for the preparation of the statement of particulars required

to be furnished under section 44AB (in case of the assessee being a company, the reference

would be to the Accounting Standards referred to in section 133 of the Companies Act, 2013) of

the Income-tax Act, 1961 to be annexed in Form No. 3CD read with Rule 6G(1)(b) of Income-tax

Rules, 1962 that give true and correct particulars as per the provisions of the Income-tax Act,

1961 read with Rules, Notifications , circulars etc. that are to be included in the statement.

d. Management of entity understands that an audit involves performing procedures to obtain

audit evidence about the amounts and disclosures in the financial statements. The procedures

selected depend on the auditor's judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the preparation and fair

presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances but not for the purposes of expressing an opinion on the

effectiveness of the entity's internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of the accounting estimates

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made by management, as well as evaluating the overall presentation of the financial

statements.

e. Management agree and acknowledges that the audit will consume at least

working days after all the particulars as required by the auditors are submitted to them.

11. Please sign and return the attached copy of this letter to indicate that it is in accordance with

your understanding of the arrangement for our audit of the financial statements.

Thanking you,

For and on behalf of

ABC
Chartered Accountants
FRN

CA
Partner
M No
Place Ahmedabad
Date

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Draft Notes to Tax Audit Report

Form 3CA / 3CB and Requirements of SA 700

The ICAI had pursuant to the issuance of the Revised SA 700, Forming an Opinion and
Reporting on Financial Statements, prescribed a revised format of the auditor's report on
financial statements. This revised format is effective in respect of audits of financial
statements for periods beginning on or after 1st April, 2018.
Form No. 3CA and Form No. 3CB are required to be filed online in a preset form. The same are
not in line with the requirements of revised SA 700 as there is no specifically allocated field for
providing information relating to the respective responsibilities of the assessee and the tax
auditor as required by revised SA 700.
Para 11.9 of the 2014 Guidance Note recommends that, having regard to the importance of
these respective responsibility paragraphs from the perspective of the readers of the tax audit
report, these respective responsibility paragraphs can be provided in the space provided for
giving observations, etc., under clause (3) of Form No. 3CA or clause (5) of Form No. 3CB as
the case may be. Para 11.10 of the 2014 Guidance Note recommends that the illustrative
assessee's responsibility paragraph and Tax Auditor's responsibility paragraphs in respect of
Form No. 3CB may be given as

"Assessee's Responsibility for the Financial Statements and the Statement of Particulars in
Form 3CD :
1. The assessee is responsible for the preparation of the aforesaid financial statements that
give a true and fair view of the financial position and financial performance (if applicable)
in accordance with the applicable Accounting Standards issued by the Institute of
Chartered Accountants of India. This responsibility includes the design, implementation
and maintenance of internal control relevant to the preparation and presentation of the
financial statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
2. The assessee is also responsible for the preparation of the statement of particulars
required to be furnished under section 44AB (in case of the assessee being a company, the
reference would be to the Accounting Standards referred to in sub-section (3C) of section
211 of the Companies Act, 1956/section 133 of the Companies Act, 2013) of the Income-
tax Act, 1961 annexed herewith in Form No. 3CD read with Rule 6G(1)(b) of Income-tax
Rules, 1962 that give true and correct particulars as per the provisions of the Income-tax
Act, 1961 read with Rules, Notifications , circulars etc. that are to be included in the
statement.
Tax Auditor's Responsibility

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3. My/Our responsibility is to express an opinion on these financial statements based on
my/our audit. I/We have conducted this audit in accordance with the Standards on
Auditing issued by the Institute of Chartered Accountants of India. Those Standards require
that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material
misstatement.
4. An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The procedures selected depend on the
auditor's judgment, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances but not for the purposes of expressing an opinion on the effectiveness of
the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
5. I/We believe that the audit evidence I/we have obtained is sufficient and appropriate to
provide a basis for my/our audit opinion.
6. I/We are also responsible for verifying the statement of particulars required to be
furnished under section 44AB of the Income-tax Act, 1961 annexed herewith in Form No.
3CD read with Rule 6G(1)(b) of the Income-tax Rules, 1962. I/We have conducted my/our
verification of the statement in accordance with Guidance Note on Tax Audit under section
44AB of the Income-tax Act, 1961, issued by the Institute of Chartered Accountants of
India."

Form 3CA / 3CB and Branch Audits

A person whose accounts have been audited under any other law may have branches at various
places. The branch accounts might have been audited by branch auditors under the said law. If
the audit under section 44AB is also carried out by the same branch auditors or other chartered
accountants, they should submit the report in Form No. 3CA to the management or the
principal tax auditor appointed for the head office under section 44AB.
The duties of the principal tax auditor and the tax auditors of the branches are governed by SA
600 "Using the Work of Another Auditor". The principal tax auditor should submit his
consolidated report on the registered office/head office and branch accounts and report in his
tax audit report in Form No. 3CA as under :
"I/We have taken into consideration the audit report and the audited statements of
accounts, and the statement of particulars in Form No. 3CD received from the auditors,
duly appointed under the relevant law, of the branches not audited by me/us".

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If the tax auditor is unable to obtain the required information in respect of branches situated in
India or outside India then the fact should be suitably disclosed along with its impact on the
Auditor's opinion on the particulars furnished in Form No.3CD, as an observation in clause (3) of
Form No. 3CA. The tax auditor should comply with SA 705, Modifications to the opinion in the
Independent Auditor's report.

Tax auditor called upon to report on one or more businesses of assessee

It may so happen that the tax auditor is called upon to give his report only in respect of one or
more businesses carried on by the assessee and the books of account of the other businesses
are not produced as the same are not required to be audited under the Act.
In such a case, the tax auditor should mention the fact that audit has not been conducted of
those businesses whose books of account had not been produced. However, if the financial
statements include, inter alia, the results of such business for which books of account have
not been produced, the auditor should qualify his report in Form No. 3CB.
Audit Meant exclusively for the Income Tax Purpose

We wish to emphasis that our audit report will be exclusively for income-tax purposes. We shall
not be liable for any way to any third party to whom you may make the audit report available

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