Taxation - Audit Process
Companies suffer corporation tax. The Companies Act use that corporation tax payable on the profits of any specific year should be matched against those profits in the loss and profit account and well known as a liability in the balance sheet at the finishing of the time to that the profits relate. It means for example, whether a company has a calendar trading year so the profits for the twelve months ended on date 31 December 2003 should be shown in the loss and profit account together along with the corporation tax payable on those profits in year 2003. The tax is payable is computed requiring income tax rules such are different from accounting rules. The auditor's processes include him in:
i. Obtaining the tax computation from his clients and ensuring such it is arithmetically accurate. The items disclosed as disallowable are supported through evidence and the items claimed as acceptable for example tear and wear allowances have been correctly computed in accordance along with the Income Tax Act.
ii. Review of correspondence along with the Income Tax Department, paying specific attention to queries raise and how that they have been resolved, determining outstanding matters and their current status.
iv. Obtaining a schedule summarising the tax liabilities such reflects the balance to be charged to the loss and profit account and the amount to be indicated as recent liability in the balance sheet.
v. Disclosure of the tax position should be in accordance along with legislation and KAS 10 which both needs that the tax charged are disclosed individually in the loss and profit account and the tax payable are shown in the balance sheet within current liabilities and a note to the accounts should amplify the basis of giving for taxation.