Post on 22-May-2018
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 1
VAT from External Auditor’s PerspectiveNovember 2017
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 2
VAT Seminar…so farTopic
— VAT Regulations
— VAT from Finance Perspective
— VAT from External Auditor’s Perspective
Done
Done
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3
1. Introduction
2. VAT Accounts and FS Captions
3. Audit approach and procedures
Agenda
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4
4
Quiz - Audit
What does an auditor say when boarding a train?
Mind the GAAP…
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 5
5
Quiz - Audit
How many auditors does it take to change a light
bulb?
How many did it take last year?
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6
6
Quiz - Audit
What does an auditor's wife ask her husband when
she can't get to sleep?
"Tell me about your day, dear."
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8
VAT Accounts▪ Input VAT
▪ Output VAT
▪ Deferred Input VAT
▪ VAT Expense
Presented as net under 1 FS Caption
Capital asset scheme (Art. 57)
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 9
Financial statements captionsBalance sheet P&LAsset
Liability
= ‘Deferred Input VAT’
= ‘Net Output VAT’
Expense= ‘VAT Expense’
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 11
Auditing on a page…
TRIAL BALANCE
AUDIT OPINION
TODTOE
RoMM
MaterialitySAP
D&IRisk of
errorProcess
activities
Risk of
fraud
Audit
programEstimates
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 12
Audit Approach
COMPLIANCE WITH LAWS
Significant Account
Assess Risk of Error at Assertion
level Test
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 13
Financial statements captionsBalance sheet P&LAsset
Liability
= ‘Input VAT’
= ‘Net Output VAT’
Are these
Significant Accounts?
Expense= ‘VAT Expense’
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 14
What is a significant account?
In simple English: Every account that you want to perform audit work on
there is a reasonable possibility that the account could
contain a misstatement that,
individually or when aggregated with others, has a material effect on the financial statements, considering the risks of
both overstatement and understatement.
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 15
C E
A V
P
▪ Completeness
▪ Existence
▪ Accuracy
▪ Valuation
▪ Presentation
15
Assertions
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 16
AssertionsBalance sheetAsset
Liability
= ‘Input VAT’
= ‘Net Output VAT’
CEAV
CEAP
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 17
ProceduresProcedures Assertions
— Reconciliation of GL with VAT Returns
— Review of Aging of Input VAT/Deferred Input VAT
— VAT Logic Test (Recalculation)
— Review of Tax Correspondences
CEAP
V
CEA
C
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 18
18
Things to think about now…
System configuration for valid VAT Invoices
System configuration for VAT accounts
“Emirates-wise” supplies transactions schedule
VAT Group registration
Quarterly reconciliation of GL with VAT returns
Record keeping (5 years retention)
VAT Input for capital assets schedule
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 19
Record keepingB
oo
ks o
f ac
cou
nts • Annual accounts;
• General ledger
• Purchase day book;
• Invoices issued or received;
• Credit notes and debit notes.
Ad
dit
ion
al r
eco
rds
• Different taxes may require different records to be kept in order for taxpayers to be compliant, for example, a VAT account.
An
y o
the
r in
form
atio
n• Any other information as direct by the FTA that may be required in order to confirm, the person’s liability ottax, including any liability to register.
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 21
Next steps…
Read the new Federal Law No.8
of 2017
Think about your implementation
plan
Watch out for executive regulations and cabinet decision
© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE, member firms of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 22
“…Be prepared in season and out of season…with great
patience and careful instruction.” – 2 Timothy 4:2
22
Thoughts…
“Let us not become weary in doing good, for at the proper
time we will reap a harvest...” – Galatians 6:9
“Whatever you do, work at it with all your heart, as working for
the Lord, not for human masters” – Colossians 3:23
Thank you
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with
KPMG International. KPMG International provides no client services. No member
firm has any authority to obligate or bind KPMG International or any other
member firm vis-à-vis third parties, nor does KPMG International have any such
authority to obligate or bind any member firm. All rights reserved.