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Chapter 2

METHODOLOGY OF RESEARCH

This chapter contains a detailed discussion on the research method,

setting of the study, sources of data, procedure of the study and statistical

treatment used in the study.

Research Method

This study used descriptive method of research. It is the process of finding

information and eventually giving explanations. It involves gathering information,

recording, describing, analysis, evaluation and interpretation.

According to Glass and Hopkins (1984), descriptive research involves

gathering data that describe events and then organizes, tabulates, depicts, and

describes the data collection. In other words, descriptive research may be

defined as a process of gathering, analyzing, classifying, and tabulating data

about prevailing conditions, practices, beliefs, processes, trends, and cause

effect relationships and then making adequate and accurate interpretation about

such data with or without the aid of statistical methods.

Through this method of research, the researchers were able to find out if

forensic accounting plays a significant role as an investigation method on tax

fraud. The researchers believed that using descriptive research method is the
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most appropriate and suitable because it defines the nature of the situation as it

exists at the study and explores the cause of particular phenomena.

In survey method research, participants answer questions administered

through interviews or questionnaires. After participants answer the questions,

researchers describe the responses given. In order for the survey to be both

reliable and valid it is important that the questions are constructed properly.

Questions should be written so they are clear and easy to comprehend.

This type of method was used to acquire information within the Bureau of

Internal Revenue Revenue Region 7 in selected divisions such as investigation

division, legal division, and assessment division. The tool used was in the form of

questionnaires that were personally sent to the respondents. Other process for

data gathering that was used by the researchers were through interview.

Setting of the Study

The study was conducted in Delta Quezon, City where the Revenue

Region 7 Bureau of Internal Revenue is located.

Quezon City is the largest city of Metropolitan Manila, which is an urban

agglomeration of 16 cities and 1 one municipality. This region is the political,

economic, social, cultural, and educational center of the Philippines. As

proclaimed by Presidential Decree No. 940, Metro Manila as a whole is the

Philippines' seat of government.

With a land area of 161.126 sq. km. or 16,112.8 hectares,). Quezon City

is more than four times the size of Manila, nearly six times the expanse of
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Makati, and more than 14 times bigger than Mandaluyong. It is almost one-fourth

the expanse of Metro Manila. Of the Metro Manila local governments, Quezon

City has the biggest population, constituting 24% of the regional population. With

a population of nearly three million, Quezon City is one of the largest sources of

manpower in the Philippines, with its employable human resource assets of

1.672 million. More than 20,000 college graduates contribute to its productive

pool every year. Its big consumer market is dominated by the youth, with more

than 40% of the population younger than 20 years.

Quezon City may be called one of the largest service economies in the

Philippines, if the indicator is the number of service-oriented establishments here.

In 2010, Quezon City had 58,133 registered businesses, with a combined,

declared capital of Php 1.380 trillion. Of this number, 18.5% are conglomerates.

In terms of number of establishments, 30% of the businesses are engaged in

retail, 25% are contractors, 11% are in wholesale trade, 6% are restaurants /

eating establishments, 2.7% are in manufacturing/production, almost 2% are

financial institutions, with the rest engaged in a wide array of other enterprise

activities. About 30 to 40 new businesses are registered every month. This city

has one of the largest consumer populations in the Philippines, with its 2,960,627

population. With 40% of the population less than 20 years old, it is a prime

market for youth marketing strategies that commonly include television

advertising, magazine advertising and online marketing. Conveniently, the city is

the site of the main broadcast stations of the Philippines' biggest networks, and is

a well-known media center.

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When Quezon City became the national capital in 1949, many national

government departments began to set up office in the new city. To date, there

are about 125 national government offices and 25 government-owned and

controlled corporations located in Quezon City.

Many of these agencies are located in Diliman, the center of southern

Quezon City, including the City Hall which is one of the highest and most

expansive city halls in the country. One of the national government agencies with

head offices in Diliman include the Bureau of Internal Revenue (BIR) wherein

Cesar Dulay is the current Commissioner.

It has 2 Revenue District Offices; Revenue District Office No. 38 North,

Quezon City and the Revenue District Office No. 39 South, Quezon City. The

Revenue Region 7 is located inside the building of RDO No. 39 which is

composed of different divisions like regional investigation division, legal division,

assessment division, collection division, administration and human resource

management division, finance division, and tax payers assistance unit. Regional

Office of the BIR handling the Quezon City area. It also includes Novaliches,

Marikina, Antipolo, Montalban, Pasig, San Juan, Mandaluyong, South and North

QC. Within this building also resides the RDO No 40 -Cubao and RDO 39 -

South QC

The Bureau of Internal Revenue shall be under the supervision and

control of the Department of Finance and its powers and duties shall

comprehend the assessment and collection of all national internal revenue taxes,

fees, and charges, and the enforcement of all forfeitures, penalties, and fines
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connected therewith, including the execution of judgments in all cases decided in

its favor by the Court of Tax Appeals and the ordinary courts. The Bureau shall

give effect to and administer the supervisory and police powers conferred to it by

this Code or other laws. (Section 2 of the National Internal Revenue Code of

1997)

The vision of BIR tells that it is an institution of service excellence and

integrity.
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Figure 2

Bureau of Internal Revenue Revenue Region 7 Map

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Subject of the Study

This study used the total population sampling design which is a type of

purposive sampling technique where the researchers choose to examine

the entire population that have a particular set of characteristics. The

researchers prospect and qualified respondents came from the 27 employees of

the Assessment Division, 16 employees of the Investigation Division and 18

employees of the Legal Division, the employees are a combination of lawyers,

paralegals and certified public accountants. Hence, the researchers have all the

sixty one (61) respondents but only twenty three (23) or thirty seven point

seventy (37.70%) percent of them responded.

Sources of Data

This research used surveying through questionnaire checklist with a cover

letter specifically as the primary technique in gathering data. It was distributed to

the lawyers, paralegals, and certified public accountants of the assessment

division, the investigation division and the legal division in Bureau of Internal

Revenue. The questionnaires were given personally to observe their personal

idea about the issue.

The data from the related foreign and local literature and study served as

the secondary source of data that came from books, articles and existing studies

related to forensic accounting.

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Research Procedures

In relation to this study, the researchers followed procedural steps. First,

the researchers formulated three titles for the study to choose from. Among the

three titles, the Forensic Accounting as an Investigation Method on Tax Fraud

as Perceived by the Bureau of Internal Revenue, Delta Quezon City, Calendar

Year 2016 was approved to be the title of the study. The proponents started

formulating the Chapter 1 and Chapter 2 of the study, which are the Problem and

Its Background and Methodology of Research, respectively which were subjected

to a proposal defense.

After the proposal defense, the researchers began working on the

revisions of Chapter 1 and Chapter 2 and started on locating the respondents to

interview them. After the interviews, the researchers then analyzed and

interpreted the data that have been gathered and continued to proceed and work

on Chapter 3 and 4. After the adviser checked the researchers draft of Chapter 3

and 4, they worked on the revisions and passed the improved paper to the

research instructor. The researchers were subjected to a final defense where in

the panel gave corrections and suggestions in the formation of the study. Upon

final revision of the paper, the researchers submitted it to the CBA for hard

binding.

Statistical Treatment

The data collected in this study were subjected to certain statistical

treatments. The data were encoded, tallied and tabulated for better presentation
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and interpretation of the results. The statistical methods that were used are the

following:

1. Frequency and Percentage

The percentage and frequency distributions was used to classify the

respondents according to their age, sex, division, profession, and years of

employment. The frequency also presented the actual response of the

respondents to a specific question or item in the questionnaires.

The percentage of each item was computed by dividing it with the sample

total number of respondents who answered the survey. The formula used in the

application of this technique was:

% = (f/n) x 100

where:

% = percentage

f = frequency

n = number of cases or total sample

2. Weighted Mean

It is a kind of average where instead of each data point contributing

equally to the final mean, some data points contribute more weight than others.

Weighted means are very common in statistics, especially when studying

populations. The formula used in the application of this technique was:

Weighted Mean = wx/w

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where:

= the sum of

w = weights

v = value

In order to interpret the means, the Likert Scale below was used:

Scale Value Mean Value Verbal Interpretation

5 4.20 5.00 Strongly Agree

4 3.41 4.19 Agree

3 2.61 3.40 Somewhat Agree

2 1.81 2.60 Disagree

1 1.00 1.80 Strongly Disagree

3. Ranking

This is a descriptive method to describe numerical data in addition to

percentage. Ranking was used in the study to arrange the items analyzed in a

series of ascending or descending order of importance.

4. Analysis of Variance

To determine the significant difference between the respondents

perception on Forensic Accounting as an Investigation Method on Tax Fraud in

terms of age, sex, division, profession and years of employment, the researchers
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used One-way Analysis of Variance (ANOVA). It is a technique used to compare

means of three or more samples using the F-distribution.