Audits are established as public trusts under trust laws or as files formed under the Societies Registration Act or as companies ed under of the Companies Act 1956.
All these Acts applicable to an entity based on its constitution. Further, the act itself requires the NGO receiving a foreign contribution to get books of account audited by chartered accountants. Under the Incorporation Law in India depending on its form or mode of registration has its accounts audited under the respective incorporation law or Act Audit under the Societies Act Trust Act or Companies 1956 it under Income Tax Act from the requirement of audit under the incorporation law Income Tax Act 1961 also provides for a compulsory audit under section 12A(b) Under the Income-tax law audit becomes necessary where the total income of an organization exceeds the maximum amount which is not chargeable to Income Tax in any previous year. The accounts of an organization have to be compulsorily audited as required under section 12A(b) of the Act.
The Auditor has to issue the Report in Form LOB.
In Form lOB, the chartered accountant has to set out different particulars relating to various aspects such as the application of income accumulation of income investment of income and the benefits to persons referred to in section 13(3) of the Income-tax Act 1961. Further in the case where the donor organizations (both international as well as local) make grants or provide funds they normally enter into an agreement with the recipient non-profit organization. In all such agreements, various important provisions are normally made regarding the purpose of the grant, manner in which it should be utilized and the time frame within which it should be utilized etc. In all such circumstances, the auditor is expected to report on the due compliance on the terms of the agreement. Further, most donors required a special audit report and an audited statement of accounts from the chartered accountants.
Rule 8(2) requires the certification of every such yearly account by a Chartered Accountant in Form FC-3.
rule 8(2) in form fC-3 in ngo
1.) Form FC-3 requires the disclosure of opening balances, receipts, utilization and closing balances of foreign contribution. Such disclosure is to be given in respect of each different purpose.
2.) Further, in Form FC-3, as many as 26 distinct purposes have been identified. If there is a purpose not covered in these 26 items, the same is to be shown as a residuary purpose with and in kind are to be shown separately.
3.) The receipts at first recipient are to be shown distinctly from those as the second/ subsequent recipient. In addition, the form also requires the classification of the year’s receipts into donor¬wise break-ups.
4.) Apart from all these information break-ups, the form also requires the auditor’s certificate. In his certificate, the auditor has to state the following:
(i) Whether he has audited the accounts for the year and has examined all relevant books and vouchers;
(ii) Whether the amount of foreign contribution at the beginning of the year, amount/worth of foreign contribution at the year-end have been correct.
(iii) Whether the accounts and records relating to foreign contribution have been maintained in the manner specified in section 13 and Rule 8 (i); and Whether the information furnished in the form (i.e. purpose¬wise, country-wise and donor-wise information referred to above) and in the Balance Sheet and Statement of Receipt and Payment is correct as checked by him.
