Ensuring Compliance and Book Accuracy

Introduction: The consistent decline in annual government revenue has prompted a strategic shift towards diversifying revenue sources beyond crude oil. To achieve this, comprehensive measures are being implemented to identify and rectify revenue leakages. This includes tightening fiscal policies and scrutinizing non-compliant taxpayers through tax audits. State Tax Audit Exercise: Empowered by Sections 47(4) and 48(4) of the Personal Income Tax Act (PITA), the Lagos Internal Revenue Service (LIRS) regularly conducts tax audit exercises. These audits involve the examination of individual incomes and organizational accounts, aiming to ensure compliance and identify any irregularities. Failure to provide requested information within the specified time may result in sanctions. Various factors, such as unreported income, excessive charitable donations, losses, and deductible expenses, can trigger an audit. The LIRS initiates the process by sending an Audit Notification Letter to the organization, outlining the audit scope (covering Personal Income Tax, Withholding Tax, Levies, or fees) and listing required documents. Commonly requested documents include Audited Financial Statements, Management Accounts, Bank Statements, Payroll records, and evidence of statutory contributions. The audit primarily serves as an information-gathering exercise, with potential tax assessments based on the gathered information. Any raised assessments can be contested and appealed according to the provisions of the PITA. Concealing information or attempting bribery during an audit is considered a criminal offense, punishable by law. An Additional Assessment may be issued if the initial assessment was based on incomplete or falsified information. Conclusion: To mitigate the risk of interest, penalties, and additional taxes resulting from a surprise audit, organizations are encouraged to engage external auditors to ensure the accuracy and completeness of their books and accounts. Proactive measures will not only enhance compliance but also contribute to a smoother audit process, ultimately avoiding unnecessary financial implications. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.