Rules Related to Selection for Tax Audit Purposes

Selection is based on some steps, explained below.

Brief review of audits conducted during the same period of previous year

Based on the experience from the previous but also on the analysis of trends and risk analysis through software’s in IT, the head of section proposes priority sectors for audit to the Head of tax office. These sectors will then be reflected in the audit plans. Establishing priority sectors for audit is not a spontaneous action but the outcome of analyses of objectives and their fulfillment and impact on the accomplishment of programs.

Identification of economic activities for audit priority using management reports

The heads of audit offices in cooperation with the head of section should have good knowledge of the economic activities which are continuously monitored by the assessment and collection inspectors. After making a preliminary analytic assessment, they should also use management reports in order to take into consideration the economic sectors and activities which require greater attention. In order to make this decision they should use multiple sources of information, other tax office sectors’ knowledge of businesses and most problematic activities in terms of hiding obligations. Finally, they should focus on the activities which demonstrate deviations from the average of the sectors in which they operate or repeated cases of non-declaration of their activities and tax obligations thereof.

Identification of high risk taxpayers using results from selection program based on IT system

Identification of high risk taxpayers and presentation of a monthly plan constitutes one of the most important steps in the analysis to assess hiding and avoidance by taxpayers. In fact, the entire audit process is a risk-based assessment process. However, identification of high risk areas in the audit plan has to do with general risk trends and audit potentials, in order to orient work in those areas where risk potentials are more probable and higher. In this identification process, the purpose of audit would not be oriented towards all risks, but, instead, it would focus on those risks and taxpayers which can have a decisive impact on the accomplishment of the objectives. auditing app

Risk assessment and period from last audit

Risk assessment implies the identification and analysis of risks threatening the accomplishment of audit objectives by establishing types and methods of audit, so that such risks can be avoided or minimized. Awareness of the fact that economic, industrial, technological, regulatory and operational conditions continuously change would help to continuously and accordingly adapt the methods used for risk identification.

Based on risk assessment and priorities established above, the heads of audit offices in cooperation with the head of section will choose the audit scheme to be adopted (complete audits, topic audits, etc.). When choosing the audit scheme, the head of section should identify the time since last audit and be oriented by it. The longer this period of time is the more imperative the need for audit will be. On the other hand, in the monthly plan the head of section should present the audit scheme to the Head of tax office. Such scheme should be supported with arguments and reasons for the causes of lack of audits in some taxpayers.

The time and efforts spent for an audit should be in proportion with the risk that taxpayers represent in terms of revenues. In order to make the best use of time, the majority of audits will be fiscal visits conducted in short time periods to check the accuracy of declarations and payments. Audit is conducted for a selected tax period and can only be limited to one selected type of tax.

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