Introduction

Tax system in Pakistan is operating on self assessment basis. There is no physical control on the persons (including industrial concerns) registered under different taxes, except under special circumstances. The system promotes voluntary-compliance, self-documentation, self-assessment, and self-policing. Audit is the only instrument of control with the FBR through which compliance level of registered persons is monitored i.e. whereby the government checks whether a registered person/ taxpayer has correctly determined his tax liability, deposited due tax to the government and is making adjustments of input tax etc to which he is legally entitled. In order to safeguard the government’s interests, it is necessary that a central risk based “Audit Management System/ Centralized Automated Audit Monitoring System” be established and be constantly reviewed and streamlined/improved from time to time for achieving the desired results, and coordinate the audit activities of different taxes. Accordingly, as per FBR's reforms program, a Member (Audit) is now recruited from the private sector since April, 2002 and an Audit Wing has been established under him with effect from 1st January, 2003.

Audit Wing Goals

• Drafting National Audit Manual.
• Preparing National Audit Plan.
• Training the FBR workforce in modern auditing techniques.

All the above tasks have been completed. The National Audit Plan and the National Audit Manual have been prepared according to International Best Practices, with expert guidance solicited from an international audit expert.

Current Targets

• Taxpayers Audit- Based on transparent and automated selection criteria, 350 corporate taxpayers have been selected at 6 pilot sites for audit. The pace of audit is slow but, the results are encouraging.

• External Audit- Liquidate audit paras of past 16 years outstanding Audit Reports.
• Internal Audit- Liquidate internal audit paras for past 16 years and synchronize the functioning of Directorate General of Internal Audit for Direct and Indirect Taxes.
• Training of Auditors- 120 staff members were trained in 2007. The Programme is being continued with newly devised syllabi, based on need assessment.
• Computerization- Automate External, Internal and Taxpayers Audit as well as monitor Auditors transactions/ activities during all audits.

FBR to Ensure the Audit process is Effective, Fair and Conducted with Integrity

1. Selection Criteria

Taxpayers are selected for audits on the basis of transparent, discretion free and automated selection criteria. The selection is done by computer, using almost 20 different information items and without resorting to any identity details of the taxpayers.

2.Ensuring Integrity

An overall Integrity Program has been implemented within the organization. Auditors and Managers will be held to the highest ethical standards and disciplinary actions will be imposed against those who choose to conduct themselves in an unethical manner.

3. Courtesy and Professionalism

• Auditing Techniques

• Auditing Computerized Books and Records

• Fraud Awareness and Indicators of Fraud

4. Ensuring quality of Audits

• Ensure that prescribed standards and procedures are followed

• Ensure uniformity in the application of guidelines

5.Taxpayers Feedback

• Gauge perception of the Audit Process

• Help improve the overall audit process.

• Evaluate the behavior, professionalism and competence of Audit staff.

Role of the Taxpayers Audit Program

• Encouraging voluntary compliance

• Identifying areas for law clarification

• Addressing failure to meet Direct and Indirect Tax liabilities.

• Examining books, records and the financial affairs of the Taxpayers to verify that returns submitted are in compliance with the tax laws.

• Detecting errors that might have been made in the past, so that  Taxpayers can be advised to ensure better compliance in future.

Reminder

The majority of tax returns are accepted as filed. If we inquire about your return or select it for audit, it does not suggest you have done something wrong.  Our aim is to create an environment that ensures  voluntary compliance, success and growth of business, and collection of Government Revenues without losses.
 

You are encouraged to make a difference in your community by reporting those willfully evading their responsibility as tax paying citizens of Pakistan.