• Tax auditor must state whether they have examined the balance sheet as on a particular relevant date
• Must confirm examination of profit and loss account (or income and expenditure account) for that period
• Balance sheet and profit & loss account must be attached with the audit report
• This is the opening paragraph establishing the scope of examination

• Tax auditor must certify that the balance sheet is in agreement with books of account
• Must certify that profit & loss account (or income & expenditure account) is in agreement with books
• Books maintained at head office AND all branches must be in agreement
• Total number of branches must be mentioned
• This ensures consistency between financial statements and accounting records

Clause (a): Observations, Comments, Discrepancies or Inconsistencies

• Report any observations, comments, discrepancies or inconsistencies found during audit
• Only qualificatory nature observations should be mentioned
• If no observations exist, report "NIL"
• Must comply with Standards on Auditing (SA) issued by ICAI
• Observations should relate to information/explanations, books of account, or true and fair view

Clause (b): Subject to Above Observations

Part (A): Information and Explanations

• Report whether all information and explanations were obtained
• Information should be necessary for audit purposes
• To the best of auditor's knowledge and belief

Part (B): Maintenance of Proper Books of Account

• Opinion on whether proper books of account have been kept
• Applies to head office and all branches
• Based on examination of the books
• Assessment of adequacy and appropriateness of records

Part (C): True and Fair View

• Opinion on whether accounts give a true and fair view
• Read with notes thereon, if any
• Based on information and explanations given
• (i) Balance Sheet: True and fair view of state of affairs as at 31st March
• (ii) P&L Account: True and fair view of profit/loss or surplus/deficit for the year

• States that the prescribed particulars are furnished in Form No. 3CD
• Form 3CD is annexed to this audit report
• Form 3CD contains detailed clause-wise information (44 clauses)
• This paragraph links Form 3CB with Form 3CD

• Auditor must report whether particulars given in Form 3CD are true and correct
• Based on auditor's opinion, information, and explanations given
• Subject to observations/qualifications, if any
• Tax auditor should report any differences of opinion with assessee regarding particulars
• Must give observations/comments/adverse remarks/disclaimers on any clause of Form 3CD
• Should refer to reporting requirements as per SA 700

When is Form 3CB Applicable?

• For persons carrying on business or profession
• Who are NOT required to get accounts audited under any other law
• Different from Form 3CA which is for those already audited under other laws

Branch Audits

• If person has branches with separate accounts maintained
• Assessee can request single tax auditor for head office and all branches
• OR assessee can appoint separate tax auditors for branches
• Branch tax auditor will give audit report in Form 3CB to management or head office auditor
• Head office auditor submits consolidated report for head office and branch accounts
• Head office auditor can rely on branch auditor's report with suitable checks

Special Situations

• Amalgamation/Merger/Demerger: Form 3CB should be issued when financial statements of merged/demerged entities are not required to be audited under Companies Act
• Partial Business Audit: If auditor is called to audit only some businesses and others not produced, should mention this fact and qualify report if consolidated statements include unaudited businesses
• UDIN Requirement: Auditor should mention Unique Document Identification Number (UDIN) for issuing the audit report

Standards to Follow

• Standards on Auditing (SA) issued by ICAI
• Specifically SA 700 for opinion on financial statements
• Accounting Standards (AS) or Ind AS as applicable
• Guidance Notes issued by ICAI

Important Qualifications and Observations

• Qualifications should be mentioned in Paragraph 3(a)
• Any difference of opinion with assessee should be reported in Paragraph 5
• Should state both viewpoints if there's disagreement
• Report "NIL" if no qualificatory observations
• If assessee doesn't provide information, qualify the report - don't withhold it

Relationship with Form 3CD

• Form 3CB is the audit report (narrative)
• Form 3CD is the annexure containing detailed particulars (44 clauses)
• Both forms together constitute complete tax audit documentation
• Form 3CD details must be verified and certified through Form 3CB

Issue 1: Incomplete Information from Assessee

• Problem: Assessee has not furnished complete particulars in Form 3CD
• Solution: Do not withhold the audit report
• Action: Qualify the report in Para 5 of Form 3CB
• Mention: Information not furnished or inadequate/insufficient

Issue 2: Books Not Maintained at Some Branches

• Problem: Books of account not produced for some branches
• Action: Mention the fact in the audit report
• If: Financial statements include results of such branches - qualify the report

Issue 3: Disagreement with Assessee's View

• Problem: Auditor's opinion differs from assessee regarding Form 3CD information
• Action: Report both viewpoints in Para 5
• Include: Relevant information to enable tax authority to decide

Issue 4: Law Changes After Form Revision

• Problem: Form 3CB not amended to reflect latest law changes
• Action: Compute allowances/disallowances based on current applicable law
• Note: Don't wait for form amendment - apply current law

Issue 5: Judicial Pronouncement Relied Upon

• When: Auditor relies on court judgments for any view taken
• Action: Mention this fact in observations
• Where: State in Para 5 of Form 3CB

Before Starting the Audit

• Verify the person is NOT required to audit accounts under any other law
• Confirm applicability of Section 44AB
• Obtain engagement letter from the assessee
• Understand the nature of business/profession
• Identify all branches and locations

During the Audit

• Examine balance sheet as on relevant date (typically 31st March)
• Examine profit & loss account for the year
• Verify agreement with books maintained at head office
• Verify agreement with books maintained at all branches
• Obtain all necessary information and explanations
• Assess whether proper books of account are maintained
• Review Form 3CD prepared by the assessee
• Verify each clause of Form 3CD
• Document any disagreements or qualifications

While Reporting

• Attach balance sheet with the report
• Attach profit & loss account with the report
• State total number of branches
• Report all observations/comments/discrepancies in Para 3(a)
• Give opinion on information and explanations in Para 3(b)(A)
• Give opinion on proper books of account in Para 3(b)(B)
• Give true and fair view opinion in Para 3(b)(C)
• Confirm Form 3CD is annexed in Para 4
• Report on correctness of Form 3CD in Para 5
• Include UDIN in the audit report
• Sign and date the report
• Ensure compliance with SA 700 and other relevant SAs

Quality Checks

• Cross-verify figures in Form 3CB and Form 3CD
• Ensure consistency in reporting
• Review all qualifications are properly worded
• Verify all required attachments are included
• Check mathematical accuracy of Form 3CD
• Ensure all clauses marked "Not Applicable" are actually not applicable