This lesson provides a detailed examination of desk audits, one of the two main types of tax audits. It covers the scope, procedures, and appropriate application of desk audits within the overall verification strategy.

• Definition: Desk audits are examinations conducted at the tax office without visiting the taxpayer’s premises. They can be completed quickly via letters, telephone conversations, facsimile, and emails .

• Scope: Desk audits are typically used when the auditor is confident that all necessary information can be ascertained through in-office examination. They are usually carried out annually and are primarily based on: a review of income tax and VAT returns, basic ratios comparing with previous periods or other taxpayers in similar industries, and cross-checking information included in taxpayer files .

• Issue-Oriented Audits: A common type of desk audit focused on specific problems identified through prima facie checks. For consumption taxes, these can cover a number of within-year tax returns. Results typically in a final assessment of tax due for the tax period, barring evidence of large-scale unpaid tax or fraud .

• Comprehensive Desk Audits: Cover several taxes and tax periods. High-risk taxpayers are asked to produce a wide array of books and records at the tax office. Relatively ineffective at detecting major tax non-compliance, while imposing high compliance costs on the taxpayer .

• Prima Facie Desk Verification: Used when returns are checked for internal arithmetic consistency, eligibility for deductions claimed, credibility using norms determined from data mining, and information provided across different taxes. Scope depends on number of cases assigned to an audit officer and extent of IT support. Errors should lead to communication to the taxpayer to make good the error .

• The Desk Audit Process: Often starts with a letter detailing the issue being reviewed and the records needed to resolve a potential discrepancy. Information exchange happens by mail or electronically. Factual issues should be resolved during the course of the audit .