Sections
Section 13 is the legal authority for the deduction of expenses. What subsections address NIS Paid and Superannuation contribution?
Superannuation contribution - Section 13(1)(i)
NIS Paid - Section 13(1)(p)
A pre-contact analysis contains researches relating to the taxpayer. Name two other things that should/could form part of a pre-contact analysis.
Analysis of data collated
Notations regarding areas of risk / areas to be probed
Legal references for statute to be utilized
The following items are adjusted for an IT05: Superannuation Contribution, Emoluments, Education Tax, NIS Contribution. In what order should the records appear in the RAiS WP?
Emoluments, NIS Contribution, Superannuation Contribution , Education Tax
What is expected in the "Summarized Findings" section of an audit report
Brief summary of item examined.
What was verified; how it was verified; findings; decision; legal reference and cross reference to worksheet
In the correct order as per the Department's standard, state the components of a worksheet heading
Name, TRN, Tax Type, Y/A or Period of Assessment, Item, Source(s)
What is the legal authority for adjusting an Income Tax return?
Income Tax Act section 72
Name six sources of research information for a pre-contact analysis
RAiS, AMVS, PTS, Internet, Site visit, Third Party, Previous Audit/Objection/Appeal
The following items are adjusted for a retailer: Cost of Sales, Rent, Income and Education Tax. In what order should the tabs appear in the worksheet?
Income, Cost of Sales, Rent, Education Tax
Name the components/ sections expected in an Audit Report
Background, Extent and scope, Audit Approach, Summarized Findings, Recommendation, Conclusion
Apart from the correct heading, what are the other standards expected for a worksheet
Signed (Prepared by:) and dated at bottom right hand. Footer feature should not be used.
Only one font type and one font size is to be used throughout (Times New Roman, Arial or Calibri.)
Legal size paper should be used throughout.
Each document attached should have a description
Separate Excel workbook for each Y/A
The tabs (worksheet) arranged in the order they appear on the return
Each working paper must be formatted for printing
What are the specific legal authorities for (1) serving an IIT assessment and (2) objecting to an IIT assessment?
serving assessment - Income Tax Act Section 75(1)
objecting - Income Tax Act Section 75(4)
You are assigned a refund case. State basic preliminary checks to be executed before proceeding to process the case / prepare working papers.
Verify the source of the refund
Verify the accuracy of the return
Verify required documents are submitted
Verify congruence of documents submitted and internal data (e.g. P24/S02; WHT Certs/RAiS Certificates Data)
What are the components expected to be captured in the body of a worksheet for the examination of an item?
What was verified, How it was verified, Findings, Decision, Legal Authority
Audit quality is compromised if cross referencing was not done. Explain cross referencing (in detail).
Tab to related tab(s)
Attachments to worksheet/audit report (stating exact filename)
Worksheet to Audit report and vice versa (stating exact filename/tabs)
In the correct order, name the RAiS STAGES for an audit
Classified
Pre-Contact Analysis
Examination of Records
Prepare Working Papers
Proposal Closing
Additional Adjustment (if necessary)
Final Report
Section 12 is the legal authority for income exempted from Income Tax. What subsections address Age Exemption and Pension Exemption?
Age Exemption - Section 12(1)(ab)
Pension Exemption- Section 12(1)(z)
Pre-contact research indicates that the taxpayer is not a Jamaican. What is your intended course of action?
During the pre-contact stage of an audit, you were told that the taxpayer is overseas and will return after 8 months. How will this information be utilized during the audit?
A. Residency; entitlement to threshold
B. Entitlement to threshold, other income from sources overseas, double taxation implications
Education Tax returned $10,000
Education Tax deducted by employer $5,000
Education Tax calculated $17,000
Amount claimed as Education Tax deducted by employer $7,000
Calculate Education Tax assessment and explain the RAiS posting.
Ed. Tax calculated $17,000 Less Ed. Tax returned $10,000 = Ed Tax Assessment $7,000
Amount claimed as Ed. Tax deducted by employer $7,000 less Education Tax verified as deducted by employer $5,000 = overstated amount disallowed $2,000
Net adjustment = 7,000 + 2,000 = $9,000
Posting: Returned $8,000 ($10,000-2000); Adj. $9,000; Corrected $17,000
The taxpayer is a shopkeeper who operates from a room at her home. One JPS meter is used.
You are preparing a working paper, the item reads: Verification of Electricity Expense
In addition to records used, amount verified/allowed, legal reference, what else must be stated in the worksheet?
Nature of the taxpayer's trade; Nature of the expense; Fact that meter is shared; Basis for determining amount attributed to the shop; Total electricity expense; pemises
In the correct order, state the file coding (lettering) for attachments to audits/refunds
A - Pre-Contact Analysis
B - Interview Notes
C - Audit Plan
D - Internal Correspondences (including Contact Sheet)
E - External Correspondences
F - Appendices
G - Auditor's Worksheet
H - Audit Report (including manual explanation of adjustments)
I - Closing Conference Memo
What specific sections of the Income Tax Act address: ETC, Contactor's levy tax credit and Tax credit for Income Tax withheld on specified services?
ETC - Section 32A
Contactor's levy tax credit - Section 32 (body corporate) and Section 25E (Individual)
WHT on Specified Services - Section 31C
Apart from name, contact details, account balances, employment history, financial certificates / payment, GCT Summary, Return details
What other Pre-Contact Analysis information can be garnered from RAiS?
Stamp Duty transactions including property, Customer affiliation, Pre-Contact Analysis, Third Party Data, ASYCUDA, previous audits/refunds, Web messages, Notes, related party research, accountant, attachments
As per RAiS, a taxpayer earned gross income of $5,000,000 from specified services. $150,000 Income Tax was withheld at source. It was verified that payments for specified services were made directly to the bank account. The bank deposit method is used to verify income. State all implications for the audit.
$150,000 should be allowed as a tax credit
$150,000 should be added to the bank deposits verified. Rationale: The amounts deposited were net (not gross) income.
CIT audit. Item being examined: Income
Facts: Single director who is solely responsible for the collection of all payments to the entity. He prepares weekly sales reports and lodgements then makes deposits to bank accounts. At year end, an external accountant prepares the IT02 using sales reports provided. Identify audit risk(s) and propose approach(es) to address same.
Income may be manipulated / understated
Weak system controls / no segregation of duties
Were receipts/invoices issued? Are they issued to all customers? Are they manual/electronic? What is the process for sales/service transactions? What are the methods of payment by customers? How many customers? Is there an independent means of verifying income e.g. via third parties?
In your own words define a quality audit
Factual; Properly documented/easily understood (Necessary facts & findings/decisions/legal reference/cross reference); Conform to the Department's standards; Allows for a third party to come to the same conclusion as the Preparer.