CHARTERED INSTITUTE OF TAXATION (GHANA)
PROFESSIONAL EXAMINATIONS
AUGUST, 2019 EXAMINATION
FINAL EXAMINATION QUESTIONS.
FINAL 1: PAPER 7 – TAX AUDIT & INVESTIGATIONS
Question 1a.
A tax audit can only be successful when there is an adequate legal framework. This
is because a tax audit is a sensitive contract between the tax payer and Ghana
Revenue Authority. It involves an intrusion of the tax payer’s privacy, exploration of
private and business issues as well as the disruption of the tax payer’s day-to-day’s
workflow.
Required:
Briefly explain FIVE (5) key elements of a tax legal framework as enshrined in the
tax laws that relate to the function of a tax audit and investigation. (10
marks)
Question 1b.
The Ghana Revenue Authority (GRA) carries out tax audits and investigations into
tax affairs of persons and business enterprises from time to time. This involves an
examination of a tax return and its supporting books of accounts and any other
related information. In the course of discharging such duty, a tax auditor may have
access to confidential information. The Ghana Revenue Authority code of conduct
requires confidentiality in dealing with our taxpayers. Confidentiality is not only a
matter of disclosure of information. It also requires that a tax auditor acquiring
information in the course of performing professional services does neither use nor
appear to use that information for personal advantage or for the advantage of a
third party.
Required:
Explain four situations that a tax auditor may be required to disclose confidential
information. (4 marks)
Question 1c.
When the tax auditor has determined that, confidential information can be
disclosed, he must consider certain factors before such disclosure can be
considered
Required:
Explain briefly,THREE (3) factors that the tax auditor must consider before a
disclosure can be made when required to do so. (6marks).
Question 2a.
Audits are performed to ascertain the validity and reliability of information. The tax
auditor’s twofold objective is to achieve the necessary level of assurance to ensure
that, the amount of tax reported and paid are in accordance with tax laws and
regulations and also to promote voluntary tax compliance. To achieve these two
objectives, the tax auditor must obtain sufficient and appropriate evidence to
support his findings.
Required.
Discuss the quality of the following types of audit evidence giving TWO examples
of each form of evidence when conducting a tax audit exercise.
a) Evidence originated by the tax auditors
b) Evidence created by third parties
c) Evidence created by the management of the taxpayers
(12marks)
Question 2b.
Describe the general considerations which a tax auditor must bear in mind when
evaluating audit evidence. (8 marks)
Question 3a
Tax Auditors should be alert to indicators of potential related party issues that may
require special attention when performing the tax audit. Although certain
relationships may be clearly evident, such as parent-subsidiary, others may not be
so apparent.
Required
Mention and explain FIVE (5) potential related party indicators that may determine
the existence of related party transactions.(10 marks)
Question 3b.
Once related parties are identified, the auditor should place emphasis on testing
material transactions with parties known to be related or associated to the reporting
entity. The auditor should apply the audit procedures he or she considers
appropriate to determine the purpose, nature, and extent of the related party
transaction and the effect on tax returns submitted to the Ghana Revenue
Authority. In obtaining sufficient competent evidential matter, the auditor should
extend the procedures beyond just inquiry of management.
Required
Outline the substantive audit procedure you would follow to determine any tax
liability that may accrue to the state from the related party’stransactions.
(10 marks)
Question 4a.
One key issue that has been a concern to the Ghana Revenue Authority is the
increasing spate of objection to audit assessment. This situation has deprived the
government the timely manner of collecting taxes to finance the country’s budget.
At a conference of tax expert which you have been appointed as a main speaker
and the topic for discussion has been on how to minimize tax audit objections and
litigation.
Required.
Explain four methods that may be used by Ghana Revenue Authority to reduce
exposure to objections and tax litigation. (6marks)
Question 4b.
You are the Audit Manager on the audit of Al-Salam Limited (ASL) for the year
ended June 30, 2019. ASL is engaged in the manufacture of a wide range of plastic
products. While reviewing the initial self-estimate assessment submitted by the
taxpayer for 2019 year of assessment, the following matters have come to your
notice:
Total Chargeable Income 2,500,000
Tax Charged 625,000
The company has its accounting date of 1 July to 30 th June each year
Required
a. Determine how much tax would be paid in each quarter and when would the
payment be made. (2marks)
In November, 2018, the company submitted a revised assessment showing the
following
Revised chargeable income 4,350,000
Revised Tax charged 1,087,500
Show how these revised estimate would impact on the company’s tax payments for
the year. (4marks).
The company has submitted the following results for last four years ending 30June
as follows.
GHC GHCGHCGHC
Trading Profit/Loss before tax 5,246,500 (3,785,000) 6,750,000 8,450,000
Interest Income 650,000 742,000 0 564,000
Capital Gains 2,540,000 1,200,000 0 0
Capital Allowance 2,938,250 2,546,870 3,102,350 2,736,620.
The company had an unutilized capital allowance of GHC1,524,000 brought forward
from 2015 year of assessment.
Required.
In finalizing the returns under desk review, determine the chargeable income and
any additional tax payment or refund assuming that, loss relief is claimed as early
as possible. 8 marks
Question 5a.
Ghana Revenue Authority have the right to enquire into the completeness and
accuracy of any self-assessment tax returns and issue any observation made or
amended assessment under their compliance check powers.
Required
Mention and explain any four situations that Ghana Revenue Authority may enquire
about returns submitted by taxpayer to its office. (6 marks)
Question 5b
The tax auditor at the end of the field work but before issuing the report must
review key audit working papers including the tax returns submitted by the
taxpayer.
Mention SIX (6) key items that may be of concern to you when reviewing the tax
returns for audit purpose.(6 marks)
Question 5c.
The tax audit at the end of the field work and before issue the final report may issue
significant audit matters to the audit manager. These are those matters the auditor
views as most significant reported to those Charge with Governance. The auditor
must provide an explanation of how the significant audit matters were addressed in
the audit.
Required.
Mention and explain the term key significant audit matters and discuss its purpose
in the conduct of the audit. (8marks)
