WEALTH SINGH

21/04/2025

🛠️ An Audit That Went Beyond Numbers


During one of our audit assignments for a large Indian manufacturing company, we discovered something that looked perfectly fine on paper - but wasn’t in reality.

The company operated multiple manufacturing units across India and engaged contract workers through third-party labour contractors. As per Indian labour laws, eligible contract workers must be provided with earned leave - paid annual leave with wages. These are in addition to weekly rest days and are typically earned at the rate of one day for every 20 days of work.

📋 On the surface, the process looked structured:
✔️ Labour contractors filed statutory data with authorities
✔️ The company tracked labour compliance through a centralised internal portal
✔️ Manufacturing units regularly uploaded confirmations of full compliance
Everything appeared in order.
Until we verified the details.
As part of our audit, we compared:
🔹 Actual labour deployment records at the plant
🔹 Government filings submitted by the contractor
🔹 Compliance declarations uploaded internally
And that’s when we found a serious discrepancy.
⚠️ Earned leave benefits were not being provided to eligible contract workers at that unit - and this had gone unnoticed for years.

📌 Under Indian labour laws:
🔹 Unused earned leave can be carried forward, subject to a limit (typically 30 days)
🔹If a worker leaves or is terminated, payment must be made for unused earned leave
🔹The principal employer remains legally responsible even if the contractor fails to comply
🔹Filings and Declarations alone do not absolve accountability

📉 The internal portal showed “compliant”,
📉 The central team accepted it at face value, and
😔 The workers were quietly denied a basic legal right
This wasn’t just a documentation issue.
It was a long-standing social and legal gap - hidden in plain sight.

🔍 We highlighted the issue and sensitised leadership on the potential financial penalties, legal risks, and reputational damage if the issue wasn’t addressed.
✅ The company took prompt corrective action
✅ A compliance review was initiated across other units
✅ And most importantly, the affected workers were finally granted their rightful benefits

🎯 Key Takeaway:
Compliance isn’t about ticking boxes - it’s about being accountable to people.
Auditors don’t just find numbers - we uncover what numbers can sometimes hide.
When done right, an audit doesn’t just protect the organisation -
It also upholds the dignity of the people who help it run every day.

💬 Have you ever come across similar gaps during an audit or review? Would love to hear your thoughts in the comments.

26/07/2024

Reduction of the Long Term Capital Gain (LTCG) tax rate on non-financial assets like real estate from 20% to 12.5% and the removal of the indexation benefit seem simplified and appealing in absolute percentage terms. However, simple calculations under different practical CAGRs tell a different story, as the removal of the indexation benefit may actually increase the tax burden on taxpayers despite the reduction in the tax rate. This might encourage some to underreport or conceal their gains to avoid higher taxes, potentially leading to an increase in black money.

01/08/2023

ERM, or Enterprise Risk Management, is a systematic approach to identifying and addressing potential events that could pose a risk to an organization's strategic objectives or opportunities for competitive advantage. It is a multidimensional and ongoing process that is primarily managed by the compa...

01/01/2023

29/12/2022

Waheguru Ji Ka Khalsa Waheguru Ji Ki Fateh 🙏

28/12/2022

28/12/2022

Guru Gobind Singh Ji De Chote Sahibzade Baba Zoravar Singh Ji, Sahibzada Baba Fateh Singh Ji Te Mata Gujri Ji Di Laasani Shahadat Nu Kot Kot Naman.

Waheguru Ji Ka Khalsa Waheguru Ji Ki Fateh 🙏

26/05/2022

https://www.linkedin.com/posts/tarandeep-singh-bhatia_risk-riskmanagment-internalaudit-activity-6935575437032984576-2smg?utm_source=linkedin_share&utm_medium=android_app

...

27/03/2022

New tax rules on EPF Interest:

Effective April 1, 2022 the tax will be imposed on interest earned on the contribution to Employees Provident Fund (EPF) if the amount is in excess of the threshold limit of Rs. 2.5 lakh every year. This new rule is governed under section 9D of the Income-Tax Act. For the purpose of calculation, the contribution to the PF accounts up to Rs. 2.5 lakh is tax-free. But, if an employee contributes in excess of the above-mentioned limit, the tax will be imposed on the interest portion earned on the excess contribution. It is important to note that only the interest amount on the excess contribution will be considered for tax calculation, and not the contribution amount. This rule has been introduced targeting the high-class taxpayers, preventing them from taking advantage of the government-backed scheme. Because they would park their excess funds in EPF to earn tax-free interest. However, low and middle-class taxpayers will not be affected by this rule. For example, if an employee contributes Rs. 5 lakhs to EPF in a year, out of that Rs. 2.5 lakhs will be taxable and interest on that part shall be taxed in the hands of the employee year after year.