IT, GST, FED cases: FBR finalising names of third-party auditors for TY19

ISLAMABAD: The Federal Board of Revenue (FBR) is in the process of finalising third-party auditors for audit of income tax, sales tax, and federal excise duty cases of companies, Association of Persons (AoPs), and individuals for the Tax Year 2019.

Sources told Business Recorder, Monday that the FBR will select cases for audit through random balloting. The cases would be selected for audit through the Risk-Based Audit Management System (RAMS).

However, the auditors firm selection process is underway, sources said. So far, the FBR has decided to select over 50,000 income tax cases for third-party audit of companies, AOPs, and individuals for the tax year 2019.

Board-in-Council of the FBR had proposed selection of total 22,458 income tax audit cases for third-party audit. However, Finance Minister Shaukat Tarin had directed the FBR that in order to create national impact and to curb tax evasion, it is imperative that 50,249 audit cases of income tax for companies, AOPs, and individuals be selected for third-party audit.

Third-party tax audit procedure nearly finalized

According to the sources, it has also been decided that the process of the third-party auditors would be carried out under the Income Tax Ordinance 2001 as per the PPRA Rules.

Therefore, it was agreed that the procurement of services of third-party auditors would be done as per Public Procurement Rules, 2004.

Under the Income Tax Ordinance 2001, the board may appoint a firm of chartered accountants as defined under the Chartered Accountants Ordinance, 1961or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 or a firm of Cost and Management Accountants as defined under the Cost and Management Accountants Act, 1966 to conduct an audit of the income tax affairs of any person or classes of persons, and the scope of such audit shall be as determined by the board or the commissioner on a case to case basis.

It has also been decided that the third-party auditors would be bound to abide by the confidentiality provision to ensure confidentiality of the data of the taxpayer selected for audit.

The confidentiality under Section 216(7) of the Income Tax Ordinance 2001 would be ensured by the chartered accountant firms on the stamp papers as defined under the Chartered Accountant Ordinance 1961 or a firm of cost and management accountants as defined under the Cost and Management Accountants Act, 1966.

In order to ensure quality of audits, the third-party auditors would be divided into three different categories as per taxpayers declared turnover in their financial statements.

Copyright Business Recorder, 2021