The Audit Process Essay


The Audit Process is of extreme importance since this is the phase at which it is traveling to be determined how different revenue enhancement instances are traveling to be treated ; in our instance, whether additions received from immovable belongings are traveling to be treated as trading grosss or as capital additions.

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A revenue enhancement audit is an scrutiny of a taxpayer’s concern records and fiscal personal businesss in order to determine the right sum of revenue enhancements that should be reported and paid. A revenue enhancement audit is an indispensable characteristic in a self-assessment revenue enhancement government, as it ensures full conformity with revenue enhancement Torahs, deters any behaviour that can take to loss of gross to the State. A taxpayer can be selected for audit at any clip. However, it does non needfully intend that a taxpayer who is selected has committed an offense. The Audit map is carried in conformity with Standard Operating Procedures ( SOPs ) of relevant sections as set out below so as to guarantee uniformity.

  • Choice of instances

Cases, in order to be selected must be:

  1. run intoing certain standards,
  2. a instance where import/purchase inside informations are available
  3. one already assessed for income revenue enhancement but where no corresponding appraisals have been made for VAT and frailty versa,
  4. one where there are material differences between supplies declared in VAT returns and turnover declared in income revenue enhancement returns and frailty versa
  5. one which has been audited and assessed in old old ages demoing a diminution in income/turnover/profit border and other evident anomalousnesss
  6. one which has non been audited during the last 5 income old ages
  7. topic to random choice with the aid of the IS Department.
  • Allotment of instances

After undergoing a choice procedure, the files are so to be allocated to officers by the squad leader.

  • Preliminary Examination/ File Review

During the preliminary scrutiny phase, the following demands to be satisfied.

  • Ensure that all relevant records and paperss are available in file, every bit shortly as a file is received.
  • Make a note of any returns and histories non submitted.
  • Analyze the relevant returns and histories.
  • Make a sum-up of all returns ( VAT, Corporate Tax, PAYE ) under scrutiny.
  • Gather all information from Information Module and Taxpayer’s web site in instance such information is non already available in file. Here, we can through the Casier Hypothequaire ( CH ) obtain the figure of minutess carried out by a taxpayer, find the period of ownership of the immovable belongings and therefore ascertain whether there has been trade or non. It is of import to observe that even if many similar minutess set up that there has been trade, one individual stray dealing may still be considered as trade.
  • Carry out preliminary scrutiny through an analysis of returns submitted every bit good as all information available in file. It is necessary to happen out the nature of the taxpayer’s concern in instance this is non known already. Furthermore, the CH may, for case, be compared with the returns made in order to follow mismatches, if any, therefore giving rise to further asking processs.
  • Compare figures as declared in returns with those gathered through 3rd party information. For illustration, through the CH and web site of belongings traders, we may come to happen out the undertakings which have been completed already and see if these really reflect on their several histories. As such, strategies which have been entered into such as gross revenues done through the puting up of Societes, the different people involved on it, may be traced.
  • Review studies of old audits if any, or if available, audit findings for similar concern. Furthermore, the type of returns antecedently filed may be compared with the current return to analyze the type of gross declared.
  • Fix a brief history of the taxpayer based on information available. This will include non fiscal information such as type of concern taxpayer operates in, the length of clip he has been in concern, the size of the concern, among others.
  • Look for any leery points and note particular points which should be addressed.
  • Determine the countries on which the audit will concentrate.
  • If preliminary scrutiny reveals that the instance is non worthwhile, specific points which are to be noted before file is closed and returned.
  • If preliminary scrutiny reveals that the instance is worthwhile, find the countries on which the audit will concentrate, together with a sum-up of disagreements or incompatibilities noted and a list of questions to be made and paperss to be produced.
  • Proceed with Desk Audit.
  • Desk Audit

A desk audit is held at the MRA’s office. Desk audits are usually concerned with consecutive forward issues or revenue enhancement accommodations which are normally dealt with via correspondence. A taxpayer may be called for interview at MRA’s office if farther information is required. The undermentioned stairss are to be followed.

  • Request for information and other specifics such as bank statements or bills by agencies of written missive.
  • Grant taxpayer a hold to supply information and other specifics since even if they normally do non fix histories, they will be required to subject these.
  • Fix a list of paperss submitted and information acquired from them such as dislocation of disbursals.
  • Make transcripts of relevant paperss so as to confirm the appraisal at objection/appeal phase, documental grounds set uping the presence of trading such as the badges of trade where the purpose of taxpayer, the figure of minutess done, among others, are shown are really of import.
  • Keep meeting with taxpayer and/or representative.
  • Analyse the information/ account provided.
  • Fix the audit study
  • Vet study and give recommendations
  • Establish if field visit is required or non
  • Field Audit

A field audit is one that takes topographic point at a taxpayer’s concern premises. It involves the scrutiny of the taxpayer’s concern records. In the instance of a sole-proprietorship or partnership, if the taxpayer’s concern records are uncomplete it may affect the scrutiny of non-business records such as personal bank statements. A taxpayer will be given notice prior to a field audit. A field audit is carried out as follows:

  • Reach the taxpayer and advise the latter that his instance has been selected for a Field Audit after finishing the preliminary scrutiny and inform him in progress of periods and records that will be audited.
  • Make agreements for an initial meeting with the taxpayer at his/her concern premises and fix the list of points to be raised at the Field Audit and confirm when and where the audit of the books and records will take topographic point.
  • Carry out a hazard appraisal in order to concentrate on those points that have a high degree of hazard. Use analytical processs and intelligence plants in order to assist in the apprehension of the entity and to place countries of possible hazards.
  • Measure the dependability and truth of the taxpayer’s books and records. The more dependable the taxpayer’s records the more they can be used to find the right sum of revenue enhancement that is required to be paid. Verify at the same clip that the taxpayer is following with the relevant commissariats of the gross Acts refering the maintaining of records.
  • Determine if the taxpayer has implemented any internal controls and whether these internal controls are strong or weak.
  • Trace the information from the beginning paperss through the accounting systems. Information such as Land Registration fees, infrastructural costs, a lists of belongings acquirers, the cost apportionment footing, among other of import information may be obtained herewith. For case, we may corroborate minutess show on the Casier Hypothequaire.
  • Confirm the cogency of the informations in the taxpayer’s accounting systems and the rightness of the sums reported on his/her revenue enhancement returns.
  • In instance of an single taxpayer, carry out extra trials to compare life style of taxpayer with reported income.
  • Notify taxpayer of the proposed revenue enhancement accommodations and the principle for doing such accommodations
  • Give the taxpayer the chance to province his positions and give accounts and the proposed revenue enhancement accommodations
  • If taxpayer is agreeable, the amended proposal is maintained, but in instance he is non, he shall be issued with an appraisal.

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