Sales Tax Instructions

Sales Tax Instructions, 2009
submitted returns to be reconciled to the books of account, going back to
the last audit conducted by the STW.
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Taking account of the returns a representative period of the taxpayers
trading should now be examined in some detail. This need be no more than
say three consecutive periods (three months) but may well cover to such
three month periods.
Purchases should be examined to ensure invoices are genuine, as far as
possible, and are ‗tax‘ invoices purchases must also be for the purposes of
the business and have been properly entered into the accounts. Selection
based on experience, size of claim etc. should be employed. A random
element should also be sampled.
Sales should be examined to determine sequential completeness and
accuracy in terms of the tax liabilities etc., and additionally, that the time of
supply rules are complied with.
Both sales and purchases should be checked for arithmetical accuracy,
sufficient to give satisfaction to the Auditor that they are accurately
maintained.
Some sort of audit trail should new be established. For example in the case
of sales it should be possible to check some transit notes/gate passes to the
sales invoices and vice versa. In the case of purchases a check could be
made to the stock records and from the stock records to the purchases.
Orders for stock purchases could be examined and reconciled to purchases
etc. These are simply examples of what can be done and are not exhaustive.
Wherever, possible a relationship exercise should be conducted, e.g.
motorcycle engines purchased, delivery according to stock stored, the
number of motorcycles sold. This forms a very important part of an audit in
that it is a good indicator of the veracity of the accounts being examined.
Where possible conduct a Bank reconciliation, although within a limited
time frame this may not always be possible. Close questioning at the outset
regarding the treatment of payments cash and other and the procedures
followed may be more fruitful.
Taking into account the type of business to establish the value
addition/mark-up. Do not forget that expenses are not confined to those
purchases with sales tax, e.g. salaries, rent etc. Consider whether this is
reasonable.
If the financial accounts were not available prior to the visits obtain a copy
and conduct basic checks-reconciliation of returns to revenue etc. not
forgetting the ‗other income‘ heading check also that where assets have
been sold off tax has been accounted for.
3. Report writing is as an important a feature of an audit as the audit itself.