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Model guide prepared to improve auditing

ISLAMABAD (November 08 2003): To make sales tax auditing system more efficient, the Central Board of Revenue (CBR) has prepared a 'Model Audit Report'.

The audit report, which has been prepared under the supervision CBR Member Sales Tax Shahid Ahmed, was highly appreciated by the collectorates, chartered accountant firms and tax practitioners.

The model report would act as guideline for the auditors, improving their working.

Sources told Business Recorder here on Friday that audit reports submitted by Collectorates of Sales Tax showed that auditors face difficulties in preparing audit reports due to absence of proper procedure.

In this connection, the CBR has made an attempt to draft a report, examining all necessary documents of traders/importers and record required under the law. Some additional record may be required for conducting audit of a particular type of importer, but generally this model covers all aspects of audit.

The report asks the auditors to check any attempt made by the unit to claim bogus refund.

Model Audit Report showed that the auditors examined the following documents of a commercial importer: Sales tax returns, supply register, output sale tax invoices, purchase register, input sales tax invoices, inventory record, bills of entry, payment and receipt proof, inward and outward gate passes, debt/credit note and form of statement under section 143-B of the Income Tax Ordinance.

On the basis of sales tax returns, the profile of the registered person has been prepared. It encompasses data pertaining to local supply to registered units, local supply to un-registered persons, output tax, purchase value, input tax, bank paid, refund claimed and carry forward and refund sanctioned.

The profiles of ten major buyers of items from registered persons would be checked to substantiate as to whether the reported sales to them are genuine and the same is reported in sales tax profiles.

Moreover, the tax payable is reconciled. However, CBR opined that there are many situations where the tax payable may not be reconciled due to short-filing/non-filing. In this situation, the conclusions drawn would be recorded by the audit staff in the audit findings and reconciliation summary.

Model Audit Report has specified that the auditors have also verified the payments and receipts (proof required under section 73 of the Sales Tax Act, 1990).

The audit findings should point out discrepancies, if any, in the record of purchases/sales, the report added.

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