Items to include – year end financial statement audit – tax figures:

The audit of income taxes is primarily substantively tested meaning that low (or no) audit reliance is placed on internal controls.  The audit will focus on the financial statement balances which your stakeholders see (including the MD&A).

Your audit ready documentation should include support for the financial statement amounts and any material estimates used in calculating those figures. Generally, this will include provision working papers and source of inputs used, working papers or memos for material estimates used in said calculations, and the reconciliation of statutory tax rate to effective tax rate.

In addition you should prepare a tax benefit memo to support recognition of tax losses as deferred tax assets (or any other potentially contentious deferred tax assets).

Your goal is to make sufficient information available so the auditors can agree the inputs from the tax provision to the trial balance or other reports directly sourced, confirm payments made to the taxing authorities and make an assessment that the estimates used are reasonable and consistent with the company’s general risk appetite and growth strategy.  This include the tax rates and provincial allocation used.

ico Did you know?
Julius Caesar imposed a 1 percent general sales tax (centesima rerum venalium)

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