3. Galii Mirkaneessuu (Reveneu recognition)
Audit Objective:
To determine whether Taxable Revenue has been reported
accurately,
To determine the reported revenue has been properly classified
for Taxation,
To ensure Tax Evasion has not been committed.
4. Revenue Audit Procedure
Pre Examination Procedure
Review the listed sources of Revenue and evaluate
based on the type and nature of the business.
Review prior year assessment reports and you may
ask previous auditors about the business.
Obtain Knowledge of the Business & relate the
sources of revenue with the knowledge.
Consider Audit Risk.
6. Revenue Audit Procedure
Perform analytical procedures: both Vertical & Horizontal
analysis,
Determine extent of reliance on the company Internal Control
System,
Conduct a tour to the business and an interview,
Determine Sample Size
Examine VAT, TOT, refund claim and withholding document
with total revenue report separately with all months.
7. Legal Considerations Art 48 (2) C
A record of all Sales and Purchases of Goods and Services related
to the business entity showing;
Particular of Goods and Services,
Name of Buyers’ and Sellers’,
Using pre-numbered invoices
containing vendor’s TIN.
7
Revenue Audit Procedure
8. Audit Approach In Revenue Examination
The Audit Risk Is Here Understatement Of
Revenue
• A bottom up
i.e. From source document /Invoices,
Ledger/ to Income statement.
9. How to determine Revenue
Now the base of accounting which the taxpayers used that is
Accrual, cash base and percentage of completion
Example
Cash Base:- revenues and expenses are recorded in
accounting books by strictly following cash inflow and cash
outflow.
Regardless of the accounting period when a particular activity
is performed in an enterprise, revenue from such an activity
will not be recorded until collection of cash is made.
10. How to determine Revenue …
Similarly, expenses are recorded, irrespective of the
period of time to which they apply, only upon payment
of cash.
Cash basis accounting is common only in small
business enterprises of which most of transactions
are immediately followed by cash receipt and cash
payment.
Example advance collection, cash sales at the time,
credit collection
11. How to determine Revenue ...
In accrual accounting:-revenues and expenses are
recognized by taking into account the period of time
within which a transaction has been effected.
Accordingly, revenue is recorded in accounting books
in the period when the activity has been performed.
Example; Cash sales at the time, credit sales (accrued
revenue)
12. Questions
A. XYZ business company sales of 2012 presented below;
Trade account receivable 120,000
Cash sales during the year 280,000
Total credit sale made during the year 370,000
Total trade account receivable collected during the year 390,000
Total cash collected in advance from the customer 65,000
then recognize the revenue;
1).Based on cash base of accounting Method?
2).Based on accrual base of accounting Method ?
3)How we recognize VAT revenue ?
13. Answer
1. under cash base of accounting
Cash sales made during the year 280,000
Credit sales collection during the year 390,000
Advance collection from the customer 65,000
Total sales under cash base ====735,000
2. under accural base of accounting
Cash sales during the year 280,000
Credit sales during the year 370,000
Total sales under accrual base ==650,000
3. In both base VAT should be collected on
cash sales, credit sales and advance collection
14. Inventory
•Visit the business premises of the taxpayer before the
commencement of the audit.
•Observe the taxpayer’s practices with respect to inventory
management, invoicing,
•Identify source of invoice.
•Identify forgery receipt, inactive business organization .
• Compare the taxpayer’s inventory records (or year-end
inventory list) with the books of account, financial
statements and tax declaration note.
15. Cont…
• Confirm costing method and any provisions made for
obsolescence.
• Determine the extent of the verification performed by the independent
external auditor.
• For instance, a company that sales computers would not be
expected to keep car spare parts as stock. If this happens, then it
indicates that the taxpayer has not fully disclosed other business
dealings.
16. Cont…
• Determine the inventory valuation method used by the taxpayer
and its acceptability in relation to tax law. (Average ,FIFO not
LIFO
• Test the costs from the suppliers invoices, import entries etc.,
for the items that comprise the majority of the reported
inventory.
• Confirm costing method and any provisions made for
obsolescence.
• Test the costs from the suppliers invoices, import entries etc., for
the items that comprise the majority of the reported inventory.
17. Cont…
• Review any adjustments made by the taxpayer with respect
to shortages, values and the like
• Review of finished goods, particularly with respect to
goods stored at the premises of company officials.
• Camper the purchased amount with finished goods/sales
and working process.
• Cheek the raw material purchased is directly sold with out
adding value.(ex .Textile factory, soft drinks)
18. Gaaffii
Galmee herregaa yeroo hojjetamu meeshaan osoo hin
gurguramin hafu .
1. Raabsaa dhugaatii, hojii daldala bunaa, shaqaxaa fi mana huccuu,
mana mukaa fi sibiilaa akkamitti adda baastuu ?
2. Meeshaa man kuusaa keessa nanna’u dhuguma meeshaa sirriitti adda
bahee beekamuudha ?
3. Meeshaa man kuusaa keessa jiru akkamitti mirkaneessina?
4. Daldala hojii omisha (manafacturing ) irratti bobba’anii jiran akkamitti
adda baastu?
5. Meeshaalee hojii ijaarsaaf hojii irra osoo hin oolin hafan akkamitti
xiinxalamaa?
54. V. Qabeenyaawwan taaksiin itti kaffalamu /Taxable Assets/
• Labsicha keewwata 55tiin qabeenyaawwan taaksiin itti kaffalamu
ramaddiiwwan lamatti qoodamanii jiru:
Ramaddii "A"
o Qabeenyaa hin sochoone.
o Qabeenyaan hin sochoone namaa darbuu isaan duratti yoo
xinnaate waggaa lamaatiif guutummaan guutuutti mana jireenyaaf
tajaajile hin dabalatu . %15
Ramaddii "B"
o Aksiyoonotaa fi Boondota
o Mirgaa fi filannaa aksiyonota fi bondota irratti kenname ni
dabalata %30
55. VI. Qabeenyaawwan Biroo /Other Assets/
• Qabeenyaawwan kunniin kan daldalaas, kan taaksiin itti
kaffalamus miti:
Qabeenyaawwan faayidaa dhuunfaaf oolan; (konkolaataa
Mana
Qabeenyaawwan galii gibira irraa bilisa taasifame argachuuf
faayidaa irra oolan.
Qabeenyaa hin sochoone mana jireenyaaf tajaajilu.
62. Qabeenyaa Dabarsuu fi Abbummaan Qabachuu
• Hir’ifama dullumaa fi kaayyoo gibira qabeenyaa
kaappitaalaa dabarsuun faayidaa argamu irratti kaffalamuuf
qabeenyaa galmeen itti raawwatamu gurgurtaan, kennaan
yookiin wal-jijjiirraan yoo darbu dabarsaan qabeenyaa
akka dabarsetti kan lakkaawamuu fi namni darbeef
qabeenyaa abbummaan akka qabateetti kan lakkaawamu
waliigalteen gurgurtaa, wal-jijjiirraa yookin kennaa guyyaa
qaama waliigaltee kennuuf aangoon kennameef biratti
galmaa’e irraa eegalee ta’ee, hir’ifama dullumaa
gaafachuun kan danda’amu qabeenyaan kan galmaa’ee
ta’u yoo mirkanaa’e dha.
63. 4.Mala hir’ifama fi % hirifama Dulluma sirnaan beekuu
Qabeenyaa gatiin
hir’atu
Taarifa mala
hir’ifama
dullumaa kallattii
Taarifa mala
hir’ifama
dullumaa gatiin hir’atu
Kompiyuutara, softi weerii fi
kuusuu odeeffannoo
%20 %25
Giriin haawusii (green house) %10 -
Giriin haawusii osoo hin
dabalatiin fooyya’insa
qabeenyaa hin sochoone irratti
taasifamu
%5 -
Qabeenyaa gatiin hir’atu biroo %15 %20
Qabeenyaa gatiin hir’atu
hojiilee misooma albuudaa fi
boba’aatiif faayidaa irra oolu
%25 %30
64. Gaafii shaakalaa 1ffaa
• Konkolaataa Gatiin isaa Mil. 2 ta’e bara 1/11/2011 bitamee
hojii keessa kan jiru hanga bara 2015 tti wagga waggaan
akkaataa mala hir’ifama dullumaa gatiin hir’atutin “accumulated
depreciation” hagam ta’aa ?
• Bara 2012
• 2013,
• 2014
• 2015
64
65. Deebii
Book Value rate dep.per year Ac.dep
2012 2,000,000.00 0.2 400,000 400,000
2013 1,600,000.00 0.2 320,000.00 720,000
2014 1,280,000.00 0.2 256,000.00 976,000
2015 1,024,000.00 0.2 204,800.00 1,180,800
65
66. Question
Assume that,Yominat Company will generating
revenue continuously for the coming five years
with the asset value of 1,200,000,use full life 5
years, depreciation rate 20%.
1.Calculate depreciation expense for each year based
Declining Balance Method.
2.Compare Deprecation expense for each year with
declared amount of Revenue ?
66
67. Answer
Year 1 Year 2 Year 3 Year 4 Year 5
Book
Value 1,200,000 960,000 768,000 614,400 491,520
Dep.Expen
se 240,000 192,000 153,600 122,880 98,304
Ending
Book
Value 960,000 768,000 614,400 491,520 393,216
Graph
Data
Start Year 1 Year 2 Year 3 Year 4 Year 5 End
1,200,000(240,000 ) (192,000 ) (153,600 ) (122,880) (98,304 )
393,216
(SV)
67
68. 5.Qabeenyichi Galii Maddisiisuu eegaluu Qabaa.
Qabeenyich kallatiinis ta’e al kallattiin galii osoo hin
maddisiisin baasii hir’ifama dullumaa dhiyaatu
mirkaneessuun hin danda’amu.
Fkn: Konkolaataa callisee ijaajjuu ykn Man kuusaa
osoo tajaajila hin kennin cufamee oolu odiiterri baasii
hir’ifami dullumaa mirkaneessuu hin qabu.
69. 6.Qabeenyichi Tajaajila hojii daldalaaf qofa ooluu
mirkaneessuu (building and truck)
Amala isaanii irraa kan ka’e qabeenyawwan daldalaa irra
gudda faayidaa dhuunfaaf kan oolan yoo ta’e bu’a
qabeessummaan galii kaffaluu gaaffii jela ni gala.
Qabeenyaawwan hojii daldalaa galii hojii daldalaa
argamsiisuuf waggaa guutuu hojii irra kan hin oolle yoo
ta’e hir’iffamni dullumaa kan shallagamu yeroon gar-
tokkee waggaa qabeenyaawwan hojii irra hin oollee haala
madaalawaa ta’een erga hir’ifamee booda ta’a.
