10 Top-Notch Tax Audit Services in Singapore for Reviewing Company Expenditure and Securing Full Tax Compliance

How to Choose Tax Audit Services That Provide Actionable Suggestions for Business Improvements

The tax audit, otherwise known as the taxpayer examination, is the review process wherein errors in an organisation or individual's tax return are corrected. A tax audit aims to ensure that all reported data is accurate and that any omitted revenue reports are found.

The commission will verify your numbers' accuracy to ensure there are no errors on your return. The Inland Revenue Authority of Singapore (IRAS) audits thousands of individuals and organisations for several reasons, although the chances of being singled out for additional scrutiny are low. The commission audits some taxpayer information using a statistical formula and others based on questionable activities, so there's nothing to worry about if you're telling the truth.

The taxpayers file their tax returns electronically or by hand, and then the commission manually enters all this information into a computerised accounting system. Afterwards, the IRAS assigns numerical scores to determine who has a tax liability.

Benefits of Tax Audit

An audit is generally performed to understand a taxpayer’s own tax liability clearly. The issues commonly inspected in an audit, such as unreported income or overstated deductions, could usually be discovered by looking at the taxpayer’s return.

Businesses are often required to meet certain accounting and bookkeeping standards because of public law and business audits. These audits could also include actual enquiries, such as an assessment of inventory and premises. There are several benefits to tax auditing, including:

• Promote intentional compliance

The primary goal of the audit program is to encourage businesses to follow tax laws. Tax audits do this by reminding taxpayers of the consequences of disobeying the law and imposing penalties on those who are not compliant.

• Validity

An audit is an autonomous check to ensure that the financial statements accurately portray the company's current situation. This gives significant certainty and validity to your organisation's clients, partners, investors, and lenders. It confirms that everything is as it appears financially.

• Identify and prevent fraud

Unfortunately, fraudulent activity could go undetected in the workplace for long periods, and it is so significant that some organisations cannot recover monetarily or fix their reputation. An audit is a powerful tool for detecting fraud and the potential for fraud. Good auditors are adept at identifying flaws in an organisation's systems and controls and recommending measures to avoid fraud.

• Identify tax laws that need to be explained

Audits have the potential to uncover problem areas in the tax law that are creating turmoil for a large number of taxpayers. As a result, professionals need to be prepared to explain the requirements of the law if an audit is conducted.

Different Types of Tax Audits

Taxes are always a little unnerving, especially when the IRAS sends you something in the mail. However, many tax audits are nothing to worry about and could be resolved with minimal effort. The more involved audits could take much time if you're not prepared. To save yourself some hassle down the road, here's what you need to know about the different types of tax audits:

• Correspondence Audits

A correspondence audit is the most common type of IRAS audit, whereby the IRAS requests additional information about some aspect of your tax return. For example, they could ask for evidence of deductible expenses.

Audits from the IRAS are not unusual and typically happen when they want to verify information on your tax return. For example, if a math error or something else appears odd, you'll receive a letter asking for additional evidence or info.

The best way to approach a correspondence audit is by being prepared. Keep all relevant documentation and receipts tidy and in one place. All that's left to do is check that the information you submitted was accurate and make any needed corrections for any errors.

• Office Audits

The IRAS could request an office audit if an issue is more complex than a written explanation could handle. You will then meet with an auditor at an IRAS office. Additional visits are rare and only happen if the auditor feels they need more information from you.

An office audit is often conducted when there are concerns about itemised deductions, corporate earnings, or income. Large or unexpected amounts in these areas could be sufficient to warrant an audit.

In an office audit, you must be careful how you respond to the auditor's questions because a single blunder could expand the audit. As a result, it would be advantageous to have a tax attorney present during questioning and have all required documentation available.

• Field Audits

A field audit is the most comprehensive type of audit, where an auditor comes to your business to examine your records and interview you. They could also interview your staff, investigate your accounting procedures, and tour your facilities if they are auditing your business. These audits could be time-consuming and are by far the most intrusive.

Particularly odd amounts affecting complex aspects of your tax return could trigger a field audit. These audits help IRAS understand more about areas people commonly don't follow the rules and collect data for their tax analysis software.

The best way to prepare for a field audit is to keep all relevant tax records on file. Hiring a tax attorney could also help prevent the audit from being expanded further.

Qualifications of Tax Auditor

Tax auditors ensure that entities comply with laws and regulations surrounding taxes. To do so, they examine an organisation's tax documents, financial records, and receipts. Often, corporate employers hire tax auditors to perform these tasks. Tax auditors are usually required to have the following qualifications:

• Education

Tax auditors need, at the very least, a bachelor's degree. Many employers would rather have candidates with a master's degree in accounting or any related field because it is relevant coursework that includes business law, taxation, and finance

• Training and Experience

Tax auditors undergo on-the-job training to master their employer's procedures and processes. This training could entail shadowing an experienced tax auditor or conducting activities under the supervision of a more senior employee.

• Certifications and Licenses 

Certifications let professionals show current and future employers how qualified they are. People in tax auditing, such as Certified Internal Auditor or Tax Certification, could use these certifications to advance their careers and learn more about their duty practically.

Tax Audit Process

An audit could be done with just letters, emails or phone interviews. However, IRAS could also choose to visit your business site or meet with some of your key personnel and employees. If they want to do either of those things, you will be notified in advance by email, letter, or telephone call.

IRAS will inform you about the audit's timing and what documents they will be inspecting. IRAS also typically audits businesses for a few years of assessment in one go. A team of tax officers will arrive at your working space on the date of the field visit, usually commencing with an introductory interview to acquire the following background information:

• Your business's size and nature;
• Your business's operations;
• Organisation structure, comprising key management personnel responsibilities; and
• Accounting and bookkeeping processes, as well as internal control procedures, for your business.

Subsequently, they will ask you to provide specific documents to review. Among these are:

• Receipts, invoices, vouchers, and other documents received from or issued to suppliers that support all transactions in your business.
• Accounting records and schedules include electronic or manual documentation of a company's assets, revenue, liabilities, losses, gains, and expenses. If the accounting information is stored electronically, you should have access to it on the date of the visit.
• Bank statements for personal and business bank accounts, as needed;
• Sales and purchases listings to ensure the accuracy of the data shown in your Good and Services Tax (GST) returns;
• Checklists for self-review completed include a self-review form for pre-registration input tax claims and bad debt relief.

IRAS could collect information from other sources, such as asking your customers, suppliers, or banks to confirm the validity of the transactions you reported in your GST returns. Depending on how wide-ranging the audit is (and how well-kept your records are), a site visit could take more than one day, and tax officers could have to come back another time.

The Role of the Tax Auditor

Keeping your business' financial records current and accurate is key for several reasons: avoiding penalties or getting audited and because shareholders have the right to hire external tax auditors. The latter is important because often, shareholders only know a company's public financial statements - which could not accurately portray the organisation's actual finances.

External tax auditors provide an unbiased opinion on a company's finances, which they then relay to shareholders. A tax audit entails running a series of tests on the figures generated by the company. Tax auditors could verify the figures by performing calculations based on the documentation and comparing them to those recorded. They also examine internal accounting controls to ensure they are adequate.

Internal tax auditors are distinct from external tax auditors in that they are hired by the company's board of directors rather than the shareholders. Conducting an internal tax audit verifies that all financial accounts are up to date, minimising the amount of work required by external tax auditors. Internal tax auditors pay special attention to probable situations of fraud.

Frequently Asked Questions

If you have never had the experience of being audited by the IRAS, you could be wondering what all the fuss is about. To better understand what a tax audit entails, we have provided answers to some frequently asked questions below.

• How are businesses chosen for an audit?

The Inland Revenue Authority of Singapore uses comprehensive and cutting-edge data technology to identify which taxpayers could be at risk for not declaring and paying the right amount of sales, use, corporate, or withholding taxes.

• How will I know if I've been chosen for an audit?

If IRAS believes you made a small error, they will notify you. The notice also called a correspondence audit, requests that you provide additional documentation to support any claims you could have made, such as charitable donation receipts or mileage logs for business trips.

Moreover, if you are chosen for a field audit, IRAS will give you a notice informing you that you have been picked for the examination. The notice will include which years the examination will cover and ask that you call an agent to schedule the audit time.

• How long will the auditors remain at my company? Is it necessary for the auditors to come to my location to do the audit?

Several factors affect how long an auditor spends at your business, such as the size of the company, what industry it's in, and how complex its accounting records are. On average, an auditor needs one week to review records for a sales or use tax audit of a medium-sized business. Once they're done examining everything, they'll give you some time to get more information if you need it. Finally, there will be follow-up meetings to discuss the audit's overall progress and early conclusions.

Most of the time, an auditor will only spend one day looking at records for a corporate tax audit. The audit time could be lengthened if they are auditing a large business or multiple businesses. IRAS audits are commonly conducted where your business is located, but other options could be available. An audit could be done remotely using your electronic data, or it could happen at the location of a third party, such as somewhere your tax professional works.

• Do the auditors use sampling?

Audit sampling saves both the taxpayer and the IRAS time by reducing audit fieldwork, and the time the taxpayer retrieves documents for audits. The sampling methodology could be greatly affected by factors such as the volume of invoices, company size, industry type, availability and access to records and any cyclical periods for purchases. Regular communication between the auditor and taxpayer is necessary to ensure that an accurate sample is selected.

• What if I don't submit the requested information?

If you don't give IRAS the requested information in writing, they could reassess your return and demand more taxes, plus an accuracy penalty. If you respond to a request for an audit or refuse to participate in one, IRAS could go to court to make you comply (but that's rare). It is more probable that they will increase your taxes and impose penalties.

How to Select the Best Tax Audit Firm

Imagine your auditing firm as a business partner you could rely on for years. This individual will play a major role in determining the success of your organisation, so it is important to take your time when making this decision. Use the following tips to find the right auditing firm for your needs:

• Do your research

Size is an important factor when researching which auditing firm to partner with. If you are a huge corporation, you would almost certainly require the services of one of the big firms. Midsize companies could go with regional firms. Small businesses could be able to get by with independent certified public accountants. There are many options available, so explore all your possibilities before deciding.

• Meet in person

If possible, try to go with a local firm so you can have an in-person meeting. Like a job interview, this will help ensure that the auditing team is competent and fits your workplace culture. If you get the sense that the team would be terrible with communication or buckle under pressure, then it's probably best to avoid them. You could learn more about a person in five minutes of face-to-face conversation than you ever could through emails or even phone calls. You'll want a team that works well with your existing workplace culture when things start getting tough.

• Seek industry expertise

When looking for an auditing firm, you should always inquire about their experience with companies similar to yours. Seasoned accountants with prior experience handling the finances of businesses in your industry will be best equipped to handle your audit and deal with anything that comes up unexpectedly. Always ask for proof of this experience and request specific examples of why they decided to specialise in your particular industry. The responses given by the firm should give you some insight into how well they understand your company's needs.

• Reputation and peer review

Since the auditing industry is smaller than most, every firm's reputation is common knowledge. As you narrow down your options, take this into consideration. You could also ask to see your prospective firm's latest peer review results. Other firms conduct these reviews to ensure that all legal standards and regulations are followed. Paying attention to how other firms in the industry view your preferred firm will give you insight into their abilities and effectiveness.

Tax audits could be a strenuous and anxiety-inducing process in general. However, planning ahead of time and understanding the process could help make it go more smoothly. If you are chosen for an audit, remember to be calm and cooperative, and have all of your documents ready. You could glide through your tax audit with good planning and a positive attitude.

View our tax audit firms in Singapore to learn more about how we can help ensure that your company's overall revenue and deduction claims are reported correctly and accurately.