AUDIT OF INCOME AND EXPENSE
This Chapter discusses the books of accounts, accounting records and documents used to record income and expense transactions. It enumerates the audit procedures and techniques for income and expenses.
The audit of income or revenues are applicable to resident and non- resident individuals engaged in business and the practice of profession, estates and trusts engaged in trade or business, general professional and business partnerships and corporations.
Expenses chargeable against income are allowable in their entirety only for business partnerships and corporations. Self-employed resident citizens and aliens engaged in business or the practice of profession, non-resident aliens engaged in business, estates and trusts engaged in trade or business and general professional partnerships as defined under Section 22 (B) of the Tax Code and their individual partners can claim expenses subject to the provisions of Section 34 of the Tax Code.
The subsequent discussions on the procedures and techniques in the investigation of income and expense accounts are general audit guides. The Revenue Officer should not be hindered in applying additional procedures and techniques, which he deems necessary, based on his initial findings, evaluation of internal control, reliability of accounting records, and analytical review of operations.
Reference: RAMO 1-2000