11 Nov Your Guide To A Successful Audit
You have just submitted your annual tax return and feel like you’ve conquered Mount Everest! You sit back beaming from ear to ear and start planning how you will be spending your SARS refund.
When all of a sudden… Wait! What?
Surprise… You have been selected for a verification audit!
As the killjoy it is, being selected for a SARS audit or verification audit is much more common than you think.
Before we get any further, let’s establish what an audit actually is.
An audit is a detailed examination of an organisation’s or individual’s financial records and relevant documents to see if they are an accurate and honest declaration of his/her tax position to SARS.
In the event where the taxpayer has not filed a tax return, it is an investigation to determine if the taxpayer’s actions comply with the tax rules and regulations.
So who can be selected for a SARS audit?
Any taxpaying individual can be selected for verification, depending on their risk profile. This is to ensure proper administration of tax in the country.
It is important to note that taxpayers may also be selected for audit on a random basis.
Here are some useful tips to help you survive and thrive an audit!
The best way to survive an audit, well, is to know what triggers an audit in the first place.
This is why it is so vital to have a good, trustworthy accountant.
Having pro-active financial management is always first prize. Knowing your labour, SARS and Statutory Compliance is in order from the start – makes things so much easier, and shows the relevant authority that your intention was always to comply.
There are two major “audit” areas to note:
- SARS – Income Tax, VAT, PAYE, Provisional Tax and Payroll
- Labour – UIF, WCC, Payroll, PAYE, Bargaining councils, employment regulations.
Remember paper is King! You must have your slips!
Without supporting documents SARS will disallow every expense claim you might have. This could result in you paying a hefty tax bill, and who wants that? So get disciplined with slip keeping, because the benefits are significant.
Don’t wait to perform reconciliations at year-end, perform them monthly or quarterly throughout the year. Doing this allows you to identify, investigate and resolve reconciling items in a timely manner. If you wait until the last minute you may not have enough time to resolve the issue prior to the audit.
Responsive time is very important – the quicker you respond, the more confidence it gives SARS that all is well and in order.
Take stock of previous year audits adjustments, internal control recommendations or challenges encountered during the past year. This can be a good starting point for self- review, help you remember important details and avoid making similar mistakes. During the planning meeting with your accountants, discuss what went well during the previous year, and where there may be areas for improvement, and more effective communication between your organisation and your auditors.
Keep your records organised, safe and dry! Familiarise yourself with the document retention requirements by SARS. Understand what the legal requirements of a valid tax invoice are, both when invoicing your customers, and when suppliers invoice you!