Tax Audit

Introduction to Tax Audit

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Definition of Auditing
Auditing is the accumulation and evaluation
of evidence about information to determine
and report on the degree of
correspondence between the information
and established criteria.
(Arens, Elder & Beasley, 2012)

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Definition of Auditing
Auditing should be done by competent and
independent person.
(Arens, Elder & Beasley, 2012)

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Types of Auditing
1. Operational Audit
2. Compliance Audit
3. Financial Statement Audit
(Arens, Elder & Beasley, 2012)

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Tax Audit
One of the example of Compliance Audit is
the audit conducted by the tax officer for
determining whether an individual/ body
has fulfilled the tax requirements or not.
This audit is usually recognized as TAX
AUDIT.

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Definition of Tax Audit
According to General Provision and
Taxation Procedures:
Tax audit is a series of activities to collect
and process data, information and or
evidence conducted in an objective and
professional manner based on an auditing
standard in order to assess tax
compliance and other objectives for the
enforcement of provisions of the tax laws.
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Example: Audit of Tax Return

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The Concept of Tax Audit

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Tax Assessment System and
Tax Audit
There are four types of tax assessment
system:
Official Assessment System
which gives an authority to the tax
collector for determining the amount of
tax payable that a tax payer has to pay for.

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Tax Assessment System and
Tax Audit
Semi Self Assessment System
which gives authorities to the tax
collector and tax payer for determining
the amount of tax payable.

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Tax Assessment System and
Tax Audit
Withholding System
which gives an authority to the third
party (neither tax collector nor tax payer)
for determining the amount of tax payable.

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Tax Assessment System and
Tax Audit
Self Assessment System
which gives a full authority to the tax
payer to determine, calculate, and pay the
tax payable himself.

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Tax Assessment System and
Tax Audit
Centre for Tax Policy and Administration
Organization for Economic Cooperation
and Development (OECD) defines Self
Assessment System as below:

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Tax Assessment System and
Tax Audit
System under which the taxpayer is
required to declare the basis of his
assessment (e.g. taxable income), to
submit a calculation of the tax due and
usually, to accompany his calculation with
the payment of the amount he regards as
due.

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Tax Assessment System and
Tax Audit
The role of tax authorities is to check
(perhaps in random cases) that the
taxpayer has correctly disclosed his
income.

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Tax Assessment System and
Tax Audit
Therefore, it can be concluded that tax audit
is happened as the consequences of Self
Assessment System and Withholding
System.

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