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Statutory audit of an Indian auto-component Tier 1 has 47 reconciliation checklist items distributed across five high-risk areas — revenue (variable-consideration constraint, GRN cut-off, RMPV index formula, FOMP provision reasonableness), inventory (fixed-overhead absorption against normal capacity, abnormal-waste exclusion, free-issue steel ITC-04 four-way reconciliation, slow-moving and obsolete provision matrix), receivables (OEM debit-note exposure, short-pay decomposition by reason, ageing buckets), tax (Section 393/394 codes 1002/1071 reconciliation, GSTR-9 tie-up, Form 26AS three-way match), and capital goods (tooling Schedule II policy, Rule 43 proportional ITC reversal). A generic CARO 2020 checklist will miss all five.
Risk-rate each of the 47 checklist items under SA 315 inherent risk plus control risk. Apply SA 330 substantive procedures proportionate to risk. Use SA 505 external confirmations for OEM debit-note exposure and bank balances. Use SA 540 procedures for variable-consideration estimates and slow-moving provisions. Test reconciliation evidence per item — scheduling agreement to call-off to GRN to invoice to payment for revenue; ITC-04 challan-out to challan-in to processing yield for free-issue steel; tooling-amortisation ledger to Rule 43 reversal for capital goods. Document the materiality and exception flagging per item.
47-item checklist with risk rating per item, SA-reference per item (SA 315 / 330 / 500 / 505 / 540), audit procedure description per item, sample-size rule per risk band, exception threshold per item against performance materiality, OEM-master mapped to portal-data-source for substantive testing, ITC-04 quarterly filings register, Rule 43 reversal worksheet, RMPV claim register with constraint-policy tier.
An audit-ready 47-item checklist completed per engagement with evidence per item, risk-rated exception list with materiality flagging, working-paper file linking each tested item to its supporting reconciliation evidence and SA reference, a CARO 2020 paragraph 3 reporting matrix, and a management letter draft addressing identified internal-control weaknesses in the auto-component-specific risk areas.
A statutory auditor walks into a ₹350 crore body-pressing Tier 1 in Pune on 15 April with the engagement letter signed and the year-end fieldwork starting next week. The previous year’s audit closed with a clean opinion but two management-letter points — RMPV variable-consideration documentation and free-issue steel ageing. The risk-rated checklist for this engagement has 47 items, distributed across five auto-component-specific areas, each requiring a substantive procedure aligned to SA 330 and a documented evidence base aligned to SA 230 working-paper standards.
This guide is the statutory audit checklist auto component manufacturer India that finance teams can pre-run before the audit arrives and that CAs can use as the engagement-planning baseline.
Quick reference
| Item | Standard | Regulator | Code / Threshold |
|---|---|---|---|
| Auditing standards | SA 230, 315, 330, 500, 505, 540 | ICAI | All applicable |
| Reporting framework | Ind AS (most large Tier 1s) | MCA | Companies Rules 2015 |
| CARO 2020 | All applicable paragraphs | MCA | Schedule III Division II |
| Materiality | 5% of PBT or 0.5% of revenue, whichever lower | ICAI SA 320 | Performance 50-75% |
| Revenue standard | Ind AS 115 | ICAI | Five-step model |
| Inventory standard | Ind AS 2 | ICAI | Lower of cost or NRV |
| Tax overlay TDS | Section 393(1)(a) code 1002 | CBDT | 1% / 2% |
| Tax overlay TCS | Section 394 code 1071 | CBDT | 1% from 1 April 2026 |
Area 1 — Revenue (12 items)
| # | Checklist item | Audit procedure | Key risk |
|---|---|---|---|
| 1 | Scheduling agreement coverage list | Tally agreements to active SAP / Oracle customer master | Unrecorded SA producing off-book revenue |
| 2 | Five-step model documentation per SA | Review accounting policy memo per OEM | Inconsistent application across customers |
| 3 | GRN-driven point-in-time recognition | Sample 30 GRN dates and verify revenue date match | Cut-off error around year-end |
| 4 | RMPV claim register completeness | Tally claim register to OEM portal claim history | Unrecorded RMPV claims understating revenue |
| 5 | RMPV variable consideration constraint | Test constraint per claim against documented policy | Over-inclusion at year-end |
| 6 | FOMP back-charge provision reasonableness | Compare provision to three-year actual run-rate | Under-provision smoothing earnings |
| 7 | OEM debit-note ageing | Age open debit notes by reason and OEM | Stale dispute risk |
| 8 | Discrete PO completeness | Verify PO log to revenue ledger | Unrecorded PO revenue at year-end |
| 9 | Tooling revenue bundled-vs-distinct | Review tooling agreements for transfer-of-ownership clauses | Wrong timing of tooling revenue |
| 10 | Engineering services revenue | Review separate billing for PPAP / validation | Bundling test failure |
| 11 | PLI Auto claim accounting | Review eligible-sales calculation against value-add audit | Premature recognition |
| 12 | Export revenue with foreign exchange | Verify forex rate applied at GRN date per Ind AS 21 | Forex restatement error |
Area 2 — Inventory (12 items)
| # | Checklist item | Audit procedure | Key risk |
|---|---|---|---|
| 13 | Cost-layer tagging per SKU | Sample 30 SKUs and verify direct material / labour / overhead split | Cost mis-classification |
| 14 | Fixed-overhead absorption | Verify normal-capacity baseline and per-unit allocation | Inflated WIP from low-utilisation absorption |
| 15 | Abnormal-waste exclusion | Test yield variance against engineered standard | Abnormal waste capitalised |
| 16 | Free-issue steel ITC-04 reconciliation | Four-way recon of challan-out / challan-in / processing / challan-back | Deemed supply at one-year window |
| 17 | Free-issue steel ageing | Age stock at supplier premises against one-year return | Section 143 deemed supply liability |
| 18 | Slow-moving provision matrix application | Test matrix against documented policy | Under-provision on aged stock |
| 19 | Obsolete provision build | Cross-check OEM programme phase-out announcements | Obsolete stock carried at cost |
| 20 | NRV testing for high-value SKUs | Compare carrying value to estimated selling price minus costs | Carrying value above NRV |
| 21 | Physical count reconciliation | Tally month-end physical to book inventory per cost centre | Count-to-book variance |
| 22 | WIP at job-worker premises | Verify job-worker stock confirmations | WIP omitted from inventory |
| 23 | Capital tooling held in production | Distinguish tooling capitalised vs inventory | Mis-classification |
| 24 | GST-inclusive vs GST-exclusive layering | Verify ITC-recoverable layer net of GST | Cost-layer inflation |
Area 3 — Receivables (8 items)
| # | Checklist item | Audit procedure | Key risk |
|---|---|---|---|
| 25 | OEM ageing schedule by customer | Tally to general ledger per OEM | Unreconciled OEM balance |
| 26 | Short-pay decomposition by reason | Verify reason-coding completeness | Stale unresolved short-pays |
| 27 | OEM debit-note exposure | Sum open debit notes per OEM and age | Provisioning gap |
| 28 | OEM short-pay ECL provision | Test expected credit loss model per Ind AS 109 | Under-provision on aged debits |
| 29 | OEM bank-confirmation receipt | SA 505 external confirmation per OEM | Unconfirmed balance |
| 30 | Tier 1 to Tier 2 back-charge recovery | Verify Tier 1 recovery from Tier 2 sub-suppliers | Lost recovery |
| 31 | Foreign-OEM forex exposure | Verify forex translation at balance sheet date | Forex restatement error |
| 32 | Related-party OEM receivables | Verify related-party disclosure per Ind AS 24 | Disclosure omission |
Area 4 — Tax (10 items)
| # | Checklist item | Audit procedure | Key risk |
|---|---|---|---|
| 33 | Section 393(1)(a) code 1002 deductions | Sample 30 job-work invoices and verify TDS at 1% / 2% | Wrong rate or missed deduction |
| 34 | Section 394 code 1071 collections | Sample scrap sales from 1 April 2026 and verify TCS at 1% | Missed TCS collection |
| 35 | Form 26AS three-way match for TDS receivable | Tally Form 26AS to books to TDS certificates | Unclaimed TDS or write-back risk |
| 36 | GSTR-9 to books tie-up | Reconcile annual GSTR-9 to revenue and tax ledger | Tax filing variance |
| 37 | GSTR-2B to ITC claimed | Tie ITC per GSTR-2B to books per month | ITC over-claim |
| 38 | Rule 42 proportional ITC reversal | Verify reversal on common credits | Reversal under-statement |
| 39 | Rule 43 proportional ITC on capital goods | Verify reversal on capitalised tooling | Reversal omission |
| 40 | Section 17(5) blocked credit | Review blocked-credit entries for compliance | ITC claim on blocked items |
| 41 | E-invoice and e-way bill compliance | Sample 30 dispatches and verify documents | Compliance failure |
| 42 | Advance tax and TDS / TCS deposit timeliness | Verify monthly deposit and quarterly Form 27EQ filing | Section 466 interest exposure |
Area 5 — Capital goods and tooling (5 items)
| # | Checklist item | Audit procedure | Key risk |
|---|---|---|---|
| 43 | Tooling capitalisation policy | Review accounting policy memo per OEM | Inconsistent treatment |
| 44 | Tooling depreciation method | Verify units-of-production or straight-line application | Depreciation mismatch |
| 45 | Tooling carrying value vs remaining volume | Test carrying value against forecast volume | Impairment trigger |
| 46 | Rule 43 reversal on capital tooling | Verify monthly Rule 43 worksheet | Reversal computation error |
| 47 | OEM-owned vs supplier-owned tooling | Review tooling agreements for ownership clauses | Wrong asset recognition |
How are the 47 items risk-rated under SA 315?
Each item is rated on inherent risk and control risk. Items with high inherent risk and weak control receive larger sample sizes under SA 330 substantive procedures. The risk-rating template for a typical engagement:
| Risk band | Items | Sample size | Procedure |
|---|---|---|---|
| High inherent + weak control | 5, 6, 15, 16, 27, 33, 39 | 30 to 60 | Full substantive |
| High inherent + strong control | 3, 4, 14, 26, 34, 36 | 15 to 30 | Combined audit approach |
| Moderate | 7, 10, 18, 21, 28, 38, 41 | 10 to 15 | Substantive analytical |
| Low | Remaining | 5 to 10 | Sample-based check |
Three-Way Match Exception Cost Calculator
Quantify the reconciliation exception exposure that statutory auditors will surface as risk findings — sized to your Tier 1 dispatch and GRN volume.
Open the Three-Way Match Exception Cost Calculator →Worked example: ₹350 crore Tier 1 audit
A statutory auditor running a ₹350 crore body-pressing Tier 1 audit applies the 47-item checklist. The planning phase identifies five high-inherent-risk items: RMPV variable consideration (item 5), FOMP provision (item 6), abnormal waste (item 15), free-issue steel one-year ageing (item 17), and Section 394 code 1071 collection (item 34, first year of operation).
The substantive procedures yield three findings:
Finding 1 — RMPV constraint over-inclusion. Two productivity-claim RMPV entries totalling ₹62 lakh were booked at 100% inclusion. Per the company’s documented constraint policy these are discretionary claims requiring 25% inclusion. Audit recommends a ₹47 lakh revenue reversal and an adjustment to the FY-end estimate. Materiality threshold: ₹38 lakh (performance materiality 60% of ₹64 lakh). Adjusting entry passed.
Finding 2 — Free-issue steel ageing exposure. 14.2 tonnes of free-issue HSS steel held at supplier premises is past the one-year Section 143 return window — deemed supply liability of ₹2.4 lakh GST. Disclosure note in the financial statements; management letter point on internal control to flag pre-window stock for return.
Finding 3 — Section 394 code 1071 deposit delay. Scrap-sale TCS for April 2026 was deposited on 12 May instead of 7 May — interest at 1% per month under Section 466 = ₹4,200. Immaterial but flagged in management letter.
The engagement closes with an unmodified opinion plus three management-letter points. The 47-item checklist provides the evidence trail backing every conclusion.
Tax overlay specifics
The checklist’s tax items 33 to 42 are the audit’s tax-overlay anchor. The CBDT’s new framework with Section 393 (TDS), Section 394 (TCS), Section 413 (non-resident payments), and payment codes 1001 to 1092 governs every transaction from 1 April 2026 onwards. Cross-era transactions where deduction occurred under legacy Section 194C / 206C(1) but recovery happens in FY 2026-27 stay on the legacy lineage — the audit procedure verifies the cross-era handling is consistent with the documented policy.
The ICAI Standards on Auditing and CARO 2020 guidance are the authoritative framework. The MCA Companies Rules 2015 and the CBDT new-framework codes are the applicable regulatory references.