The income Tax Department has sent Mr. X double refund of advance tax. The Government Auditor detected this while conducting
Options:
| a) audit of expenditure b) performance audit c) audit of stores and stock d) audit of receipts |
The Correct Answer Is:
d) audit of receipts
The Correct Answer Explanation: d) audit of receipts
The correct answer, “d) audit of receipts,” is apt in this scenario because it pertains directly to the source of the error. When the Income Tax Department erroneously sends Mr. X a double refund of advance tax, it signifies a flaw in the process of handling incoming payments and subsequent refunds.
An audit of receipts delves into this crucial area, scrutinizing the procedures and controls governing the inflow and outflow of funds within the department.
This type of audit ensures that all financial transactions, including tax refunds, are accurately processed, recorded, and monitored, thereby minimizing the likelihood of errors like the one experienced by Mr. X.
By conducting an audit of receipts, the Government Auditor can thoroughly examine the internal controls, systems, and personnel responsible for handling tax refunds. This helps identify any gaps or weaknesses in the process that may have led to the double refund issue.
Additionally, it allows for recommendations to be made in order to strengthen the overall efficiency and accuracy of the receipts department, ensuring that such errors are prevented in the future. Therefore, opting for an audit of receipts is the most pertinent course of action to rectify the specific error in this case.
Now, let’s discuss why the other options are not correct:
a) Audit of Expenditure:
An “audit of expenditure” primarily focuses on reviewing and validating the money spent by an organization. It aims to ensure that funds have been utilized for legitimate purposes and in compliance with budgetary allocations.
This type of audit scrutinizes the outflows of funds to ensure they align with approved budgets and have been expended in accordance with relevant laws and regulations.
In the scenario presented, where Mr. X received a double refund of advance tax, the issue does not revolve around the expenditure side of the equation. Rather, the error occurred during the process of refunding money to Mr. X.
It is a procedural error related to the refunding process, and not an issue with the utilization of funds. Therefore, an audit of expenditure would not be the appropriate type of audit to detect this particular error.
b) Performance Audit:
A “performance audit” is designed to assess whether government programs and activities are achieving their objectives in an effective and efficient manner. This type of audit aims to evaluate the performance and results of an organization’s operations.
It analyzes aspects such as program effectiveness, efficiency in resource utilization, and compliance with established policies and procedures.
In the case at hand, where Mr. X received a double refund of advance tax, the issue does not pertain to the performance of a specific program or activity. Instead, it involves an administrative error in processing tax refunds.
It is not a matter of program performance, but rather a procedural mistake in the processing of tax refunds. Therefore, a performance audit would not be the appropriate type of audit to detect this particular error.
c) Audit of Stores and Stock:
An “audit of stores and stock” is concerned with verifying the accuracy and reliability of an organization’s inventory management and control systems. This type of audit ensures that physical stock matches the recorded stock levels. It checks for discrepancies, potential losses, and the overall integrity of an organization’s inventory management practices.
In the situation described, where Mr. X received a double refund of advance tax, the error does not relate to inventory or stock levels. Instead, it involves a mistake in the processing of tax refunds.
The issue is not about discrepancies in physical assets, but rather an administrative error in handling financial transactions. Therefore, an audit of stores and stock would not be the appropriate type of audit to detect this particular error.
In summary, the correct option, “d) audit of receipts,” is the most relevant because the error in sending a double refund of advance tax pertains to the processing of tax payments and refunds, which falls under the domain of the receipts department.
The other options do not apply to this specific situation as they pertain to different aspects of financial management and control.
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