When we refer to a tax area, we refer to that pertaining to the public treasury. Nor to the different public organisms whose purpose is to collect taxes and tributes. Thus, when talking about tax audit, we refer to the control and inspection of the tax situation. Either of a natural or legal person. Through these types of audits, it is verified if the taxpayer complies or not with his tax obligations.
What is a Tax Audit?
The tax audit is a technique through which the facts related to acts of a tax nature are verified and analyzed. It is a method used to inspect both companies and individuals. That is, all those subjects who are taxpayers and have tax obligations for the Public Administration or the State.
Through the fiscal audit, the accounting records, monetary movements, as well as all the documentation. Actually that contains information related to the operations carried out by the subject. That during a determined period of time are analyzed and analyzed (the periods in fiscal terms go from year to year).
The tax audit is a method through which it is analyzed if the taxpayer, whether company or person, fulfills its tax obligations.
The function of the fiscal auditor goes through the verification of the declarations made by the taxpayer. Since before the Public Treasury and the tax payments and determining. Whether or not everything is in order and according to reality.
Once the auditor has obtained and analyzed sufficient information (whether from a corporate entity or from an individual). He will make an opinion, called an audit report . Where, on the one hand, he will detail all the information gathered. On the other hand, there will be a section of comments and opinion of the auditor.
Objectives of Tax Audit of a Company
Next, we highlight the main objectives of the tax audit, focusing especially on the scope of a corporate entity.
- That the balances of the liabilities of the balance correspond to outstanding debts. To the Public Treasury at the closing date of the fiscal year
- So that the debit balances to the Public Treasury have been valued. As according to the Accounting Principles and the pertinent fiscal regulations.
- Evaluate that the accounts are correctly classified in the balance sheet, between assets and liabilities.
- Check that, if there are claims raised by the Public Administration. Then that are not resolved at the closing date, they are correctly accounted for.
- Evaluate that the procedures have been carried out in accordance with good faith. Also ensuring that the established legal regulations have been complied with.
There are two types of tax audit procedure:
- Verification at our offices, which is done remotely
- Verification at your establishment, which is done in person
Each auditor must follow a procedure in the case of an audit at your institution. It is a process that takes place in several stages. Auditors are persons authorized by the Minister to exercise the powers and functions of audit. Actually review under the Tax Administration Act. They are also authorized by the Minister to exercise the audit, review. As well as inspection powers under the Excise Tax Act and the Tax Administration Act.
Upon request, an auditor so authorized must appear and show the document. That is signed by the Minister, attesting his status as auditor.
Before the Audit
- An auditor communicates with you or meets you in person and is clear.
- It tells you the years or periods covered by the audit.
- He asks for the relevant information and computer files. As well as the documents he needs to do his job. (on this subject, please consult the guide Preparation of electronic records registers [ IN-425 ]). To find out more about particularities related to each accounting software.
- He plans a meeting with you and confirms it in writing. In the written confirmation, he specifies his coordinates and those of his manager.
During the Audit
- It informs you of your rights and obligations and gives you the brochure. That is entitled Your Rights and Obligations with respect to a Tax Audit (COM-366).
- It gives you an estimate of the duration of the audit.
- Therefore it draws up a preliminary list of things. To check and makes sure you understand their scope and extent.
- He keeps you informed of the progress of the audit. Also if an extension proves necessary, he informs you.
- He carries out his mandate as soon as possible.
Note: When you are subject to a tax audit. It is in your best interest to clarify with the auditor any points of contention or outstanding issues. The duration of the verification could be shorter.
After the Verification
- Depending on the case, it gives you a draft contribution and additional documents for discussion. He explains the proposed changes and answers your questions.
- A period of 21 days is generally granted for you to send to the auditor. Any new information likely to modify the draft assessment. Thereafter, he will review the information you have provided. Then will make the necessary adjustments, including any repayments, if any.
- He advises you to close the file. If it has detected nonconforming elements, it recommends changes to be made in the future.
- It tells you how to exercise your remedies, if any.
- It remains available to provide you with any additional explanation. By following the issuance of the notice (s) of assessment resulting from the proposed assessment.
Note: The verification process may be different depending on your situation.
More From Business Study Notes:- Audit Of Company
Tax audit vs. Financial Audit
- The differences between the fiscal and the financial audit can lead to confusion, we detail them.
- So the tax audit is an independent process. While the financial audit is driven by the company itself.
- The tax audit is an objective examination of compliance with tax obligations. Where the financial audit focuses more on the compliance of the accounts.
- The fiscal audit focuses on the accounting results. Also the financial audit in the patrimony and finances of the company.
- The tax audit examines the tax situation of the company. Where the financial audit, the status of the accounting books.
- Therefore the fiscal audit is carried out by a State official. So the financial audit an auditor of the private sector.
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