The investigation on books of accounts miscellaneous records other than accounting ledgers and journals. More often than not, scrutiny of these records may reveal items which the Revenue Officer should take into consideration as the examination progresses.

The records and information to be obtained are the following:

A. Minute Book

The review of the minute book should not be confined to the taxable year under audit but should cover at least some period immediately before or after. As the Revenue Officer scans the minute book, he should note appropriate transactions and items of significance, such as contracts entered into by the taxpayer, stock issuance, dividend declaration and compensation of officers.

B. Stock Transfer Book

This book contains the names of stockholders, past and present, with the number of shares cancelled and issued. This book is also vital in computing documentary stamp tax liabilities. When the stock and transfer book is not available, the record of dividend payment is an alternative source of similar information.

C. Partnership Agreement

A copy of the partnership agreement should be obtained and certain provisions affecting partner’s salaries, profit and loss sharing, interest on capital, other allowances and other matters which may have tax consequences should be noted.

D. Audit Report of Independent Auditors

The Revenue Officer should read the auditor’s report accompanying the financial statements. Sometimes, Revenue Officers fail to evaluate the auditor’s report. In cases where the auditor issues two reports, one for management and the other for attachment to the tax return, the former should be studied and compared with the latter.

E. Auditor’s Working Paper

Audits, particularly of large companies, may frequently be simplified and facilitated, if the examining Revenue Officers are given access to the auditors working papers. Where necessary, authorization from the taxpayer or requests for access to said working papers signed by duly authorized officials shall be secured to be able to scrutinize the working papers of auditors, particularly the year-end adjustments, intercompany transactions, nature of receivables and other peculiar accounts.

F. Statements and Schedules Filed with Government Regulatory Agencies

Certain taxpayers are required to file financial statements and other reports with government bodies such as the Securities and Exchange Commission for corporate taxpayers, the Garments and textile Export Board for garments exporters, the Board of Investments for exporters, and other similar government offices. The Revenue Officer should compare the statements filed with the Bureau of Internal Revenue against those filed with other government offices. Any discrepancy should be inquired into and material differences should undergo an in- depth investigation.

G. Appraisal Reports

Appraisal reports, particularly real estate appraisals, are important in many cases such as for estate tax valuation of properties, capital gains tax verification, and donor’s tax investigation.


Reference: RAMO 1-2000

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