FBR to hire a third party to conduct audit of the tax year 2019

Jan 26, 2022: The Federal Board of Revenue (FBR) has reportedly hired a third party to conduct an audit of the tax year 2019.

According to reports, the Federal Board of Revenue (FBR) has audited companies, associations of persons (AoPs) and individuals for the tax year 2019. FBR has decided to hand over the case of income tax, sales tax and federal excise duty to a third party. According to sources, the FBR needs funding approval for third party auditors to audit the cases of companies, AOPs and individuals for the tax year 2019.

The FBR will select cases for audit by random ballot. Cases will be selected for audit through Risk Based Audit Management System (RAMS). Once funding is approved, the FBR will then select third party auditors. The FBR tax can cover more than 50,000 income tax cases for third party audits of companies, AOPs and individuals for the year 2019.

Under the Income Tax Ordinance, 2001, the Board may appoint a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1961 or a firm of Cost and Management Accountants such as the Cost and Management Accountants Act, 1966.

It is stated that income tax matters of any person or class of persons, and the scope of such audit shall be decided by the Board or the Commissioner on a case by case basis.

It has also been decided that third party auditors will be required to adhere to the privacy rules to ensure the confidentiality of the data of the taxpayers selected for the audit. Under Section 216 (7) of the Income Tax Ordinance, 2001, confidentiality will be ensured on stamp papers by chartered accountant firms as stated under the Chartered Accountants Ordinance, 1961.

To ensure better, standardized and timely audit quality, third party auditors will be divided into three different categories according to the turnover declared in the taxpayers’ financial statements.

FBR field formations including inland revenue audit officers and other categories of officers will not be assigned audit cases this year. They will also not be allowed to issue notices to cases selected through random voting.

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