What is a Letter of Authority?
The Letter of Authority is an official document that empowers a Revenue Officer to examine and scrutinize a Taxpayer's books of accounts and other accounting records, in order to determine the Taxpayer's correct internal revenue tax liabilities.
Look for Unrecorded Liabilities
A look for unrecorded liabilites will be to verify for the completeness with the data disclosed by management / balances disclosed around the management account. On the other hand, the function is generally the trickiest and toughest. A substantial quantity of informations are expected to fulfill the audit's sufficient level.
How should we assure completeness of contingent liabilities?
- Inquire with management around the status with the on-going project, analyzed the situations and determine possible commitments and contingencies which could have already been created by managment, but not disclosed.
- Delivering bank confirmation to receive external proof on prospective bills payable, letter of credit, and so forth.
- Check out each of the agreements with the Corporation to determine prospective liabilities, for instance: corporate guarantee provided to bank for assure more than subsidiaries' loan.
- Examine minutes & resolutions to recognize on-going activities which could require commitments and contingencies
Bank Reconciliation
Is actually bank reconciliation prepared by an account executive viewed as a control within the financial preparation approach?
The response to this query is quite ambiguous. As you will discover threat that Account Executive set aside one particular balancing figure, so as to tally the complete reconciling items. Therefore, preparing of bank reconciliation itself will not type aspect with the control. On the other hand, if you will discover a superior assessment the bank reconciliation prepared, the above-mentioned threats is often mitigated.
Therefore, examining bank reconciliation is viewed as a control.
Tax Refund
What will be the accounting entries for tax refund?
Debitt Provision for Taxation
Credit Taxation Expense (P/L)
Getting recognition of tax refund in Profit & Loss statement (upon finalization of YA)
Debit Cash
Credit Provision for Taxation (B/S)
Getting recognition of tax refund receipt
As observed above, a tax refund is offset against the taxation recorded in P/L ( as evident from crediting taxation). Be observed that, a tax refund is prospective showing that the tax calculation is at its final stage ( more or less finalized). As a result, any excess provision based on the particular Year of Assessment should be re-assessed / reversed out appropriately.
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