Revenue audit and revenue assurance for businesses in India

Where revenue leaks

• Unbilled work: services delivered, hours worked or goods shipped that were never invoiced
• Pricing errors: old price lists, contract escalation clauses not applied, wrong currency rates
• Discounts and credit notes: discounts beyond approved limits, duplicate credit notes, rebates paid on ineligible sales
• Usage and subscriptions: usage above plan limits not charged, renewals at old prices, trial periods extended without approval
• Returns and refunds: refunds processed without returned goods, or returns accepted outside the policy
• Collections: customer receipts not matched, write-offs without approval, unapplied credits
• Partners: under-reporting by distributors, franchisees or licensees who pay on reported sales

Revenue controls that prevent leakage

• Price lists and customer contract terms maintained in the billing system, with changes approved and logged
• Automatic billing triggered by delivery, usage or milestones, with exception reports for unbilled items
• Discounts, credit notes and write-offs approved within set limits under the delegation of authority
• Monthly reconciliation of deliveries or usage with invoices
• Revenue cut-off review at every month end
• Customer master data changes reviewed by someone outside sales
• Collections matched to invoices daily, with unapplied receipts followed up

These controls belong in your risk control matrix and SOPs, so they keep working after the audit is over.

Revenue audit by sector

Revenue recognition rules: Ind AS 115 and ASC 606

Recording revenue correctly is as important as billing it. Ind AS 115 in India and ASC 606 in the US follow the same five-step model:

1. Identify the contract with the customer
2. Identify the performance obligations in the contract
3. Determine the transaction price, including variable consideration such as discounts and rebates
4. Allocate the price to the performance obligations
5. Recognise revenue when, or as, each obligation is satisfied

Companies still on the older Indian Accounting Standards follow AS 9, which is less detailed, so the Indian statutory revenue and the US GAAP package can differ. We reconcile the two and document the differences for the statutory audit and the group auditors. If you are moving to Ind AS, see our Ind AS implementation guide.

Reconciling revenue with GST

In India, revenue is reported to the tax authorities every month through GST returns and e-invoices, so differences are visible quickly. A revenue audit reconciles:

• Revenue in the books with outward supplies in GSTR-1 and tax paid in GSTR-3B
• E-invoices generated with invoices recorded in the books
• E-way bills with dispatches and sales invoices
• Credit notes issued with those reported in GST returns
• Export revenue with shipping documents and foreign currency receipts

Unexplained differences often lead to GST notices. Our GST audit team can help resolve them before the annual return is filed.

Revenue of Indian subsidiaries billing a US parent

Many Indian subsidiaries earn all or most of their revenue from the US parent, usually on a cost-plus basis. Revenue errors here affect three things at once: Indian profit, the US group's cost and the transfer pricing position. A revenue review checks:

• Monthly invoices to the parent match the cost base and mark-up in the intercompany agreement
• Year-end true-ups are calculated and invoiced on time
• Foreign currency invoices are recorded at the correct exchange rates
• Export of services conditions are met for GST, and receipts arrive within the time FEMA allows
• Revenue recorded in India matches the expense recorded by the US parent

Differences should be fixed before the transfer pricing study and the statutory audit, not after.

Royalty and franchise audits for US licensors

Many US brands, software companies and franchisors earn royalties from Indian partners based on sales the partner reports. Licence and franchise agreements usually give the licensor a right to audit those reports.

Royalty payments from India to a US licensor are usually subject to Indian withholding tax. The India–US tax treaty rate can apply if the licensor provides a tax residency certificate and the required forms. Our double taxation team can advise on the India-side withholding and documentation.

Revenue audits for SaaS and subscription businesses

Subscription businesses have revenue spread across many small transactions and several systems: a CRM for contracts, a billing platform, a payment gateway and the general ledger. We reconcile them and test:

1. Active customers in the CRM against those billed
2. Plan, seat or usage levels against the amounts invoiced
3. Renewal pricing against contract escalation terms
4. Deferred revenue balances against unexpired subscription periods
5. Payment gateway settlements, refunds and chargebacks against the ledger
6. Recurring revenue metrics reported to the US parent or investors against the billing data

How we carry out a revenue audit

1. Map revenue streams

We list every revenue stream, the contracts and price lists behind it, the systems that record it and the people who approve changes.

2. Contract-to-cash walkthrough

We follow transactions from contract or order to delivery, invoice, collection and accounting, and identify the controls at each step.

3. Data analytics

We analyse full populations: invoices against price lists, deliveries against invoices, credit notes, discounts, write-offs and timing of revenue.

4. Recalculate and reconcile

We recompute samples of invoices, and reconcile billing systems with the books, GST returns and bank receipts.

5. Quantify and fix

We quantify leakage where possible, separate recoverable amounts from control gaps, and recommend changes to processes and controls.