How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits – to check your compliance
* Desk audit – to verify accuracy of data
* Refund audit – that the refund is due
* Field audit – to closely monitor all tax processes.
* Integrated audit – to assess taxpayer compliance.
* Risk audit – to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Salaries & wages
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General – overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments – 5 yrs
* Invoices, sales & purchases – 5 yrs
* Bank statements – 5 yrs
* Year end working papers – 5 yrs
* VAT records – 5 yrs
* Other general documents – 5 yrs
* Salary & wage registers – 5 yrs
* Records of trust monies – indefinitely
* Staff records – 3 yrs
* Cheques & bills of exchange – 6 yrs
* Stock sheets – 6 yrs
* Record for CGT four years after date of tax return – 4 yrs
* Company statutory records – 15 yrs
* All close corporation statutory records – indefinitely
* All financial statements, fixed asset registers, accounting records, etc – 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
N E M E S I S A C C O U N T I N G
cell: 083 597 2772
fax : 086 512 0475