ASSESSMENT OF TAX AUDIT PRACTICE: THE CASE OF ETHIOPIAN REVENUE & CUSTOM AUTHORITY ADDIS ABABA MEDIUM TAXPAYERS NUMBER ONE BRANCH OFFICE

Abstract

This study examines tax audit practice in the case of Ethiopian Revenue & Custom Authority Addis Ababa Medium Taxpayers Number One Branch Office. The study stands to answer the following research question “How audit cases are select, what types of tax audit are performed, what are the existing performances of tax audit and what are the main problems of the tax audit program performed in AAMTNO1BO?” In light of this research question the study adopts Descriptive analysis is a form of data analysis used for the study. The research instruments were survey with Audit team leaders, tax auditors and investigators, in-depth interviews with Audit team leaders and compliance & risk management team officials and documentary review on the last 4 years performance of the audit process are applicable constructs. The selected target participants of the study were all Tax Auditors of AAMTNO1BO, there are 60 Tax Auditors and 16 investigators were available in Addis Ababa medium tax payer’s Number one branch office. The research questioner was distributed to those 76 respondents (Audit team leaders, Tax Auditors and investigators) only 70 of them are returned and The interviews was designed and administered to 15 tax officials (10 tax audit team leaders, 2 investigation audit team leaders, & 3 compliance & risk management team officials). Consequently, survey data was analyzed on descriptive statistics. Qualitatively interview and documentary evidences summarized and presented. The result of the study revealed that AAMTNO1BO exhaustively conduct comprehensive types of audit. Due to this consume audit resources improperly and the audit coverage of the revenue authority was too low, cases were selected based on ERCA risk selection criteria but the selection process is done manually and it is not automated selections, The Authority was not perform the audit work in predetermine time and the allocation of equal period for both complex & simple cases in addition absence of proficient and experienced tax auditors might result operational inefficiency. In the end, the study forwards the possible measures to be taken by AAMTNO1BO to mitigate problems in tax audit operation.