CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The Tax payer is a dodger when it comes to the issues of payment. He therefore needs to be
motivated or forced to pay what is expected of him. The taxpayer is always unwilling to pay his
Tax liability. The use of Tax Audit has however helped in the generation of revenue to the
government. Adediran, Alade & Oshode (2013), opined that, Tax Audit just like financial Audit
involves the gathering of information and processing it for determining the level of compliance
of an organization with tax laws of the territory. For a successful audit, it is necessary for the
auditor to organize his work in such a way that the assignment is accomplished efficiently &
effectively.

The Audit unit of the Federal Inland Revenue Service [FIRS] use audit tools to identify tax
evaders and to carry-out enforcement on any company. One of such audit tools is the risk engine
tool for identification of tax evaders or non-compliant taxpayers. Companies flagged by such
tools are either subject to tax audit or tax investigation. In line with its statutory mandate and the
provisions of sections 58 and 60 of the companies Income Tax Act[Cap.21 LFN 2004 ] and
sections 26 and 27 of the Federal Inland Revenue Service [Establishment ] Act 2007 [Iheany,
2014].

In an effort by the FIRS to increase government revenue through taxation, reforms have been put
in place through Process Operations Department [POD] and units.

These departments and units faced serious challenges in the light of the existence of fraud
syndicates and the absence of a secured electronic system. Also another department was
established. This was the Audit Department, because the new leadership realized that Tax Audit
and investigation were core operational priorities of a modern system of administration. The
existing units processes in the pre-reform era lacked the requisite funding, training, independence
and spread to function optimally. The Investigation and Intelligence Division was established on
February, 2006 to take over the operations of the Special Investigation Branch and the
Intelligence Branch. The mandate of the new unit includes; Investigation of civil and criminal

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cases and violations of Tax laws. Installation of an effective database and efficient intelligence
network. Prosecution of violators of the Tax laws to serve as deterrence.
Fostering closer
working relationships with other divisions established included the values and Doctrines
Division- which was built on the whistle blower unit. This unit had earlier been established in
August in 2005 in the office of the Executive Chairman of FIRS to serve as a window through
which stakeholders and the public at large could reach the Chairman with reports of corrupt
practices involving the FIRS and its staff (FIRS, 2012).

1.2 Statement of the Problem

Due to moral decadence and general fall in respect for hard work, the society, general public,
parents, friends and family care less how anyone makes money or acquire wealth. Because of
abuse of power and privileged positions, an average Nigerian has no faith in the government and
will not want to entrust their resources to the government as such payment of Taxes will be
ranked among the least obligation they owe to the government at all levels.

Over the years, revenue derived from taxes has been very low and no physical development
actually took place, hence the impact on the poor is not being felt. Inadequate tax personnel,
fraudulent activities of tax collectors and lack of understanding of the importance to pay Tax by
Tax payers are some of the problems of this study. The issues mentioned above will therefore
constitute the problem to be addressed by this research work.

1.3 Objectives of the Study

The main objective of this study is to examine the assess the impact of Tax Audit on revenue
generation in Federal Inland Revenue Service. The specific objectives are to;

(i) Determine the effects of Tax Audit on revenue generation in Federal Inland Revenue
Service.

(ii) Examine the relationship between the Tax Audit and revenue generation in Federal
Inland Revenue Service.

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 (iii) Analyze the effect of Computer Aided Audit Tools (CAAT) on Revenue Generation in
FIRS.

1.4 Research Questions

(i) What are the effects of tax Audit on Revenue generation in Federal Inland Revenue
Service?

(ii) What are the relationships between Tax Audit and revenue generation in Federal
Inland Revenue Service?

(iii) What is the effect of computer Aided Audit Tools (CAATs3) on Revenue Generation
in FIRS?

1.5 Research Hypotheses

In order to guide the study the following hypotheses were formulated:

1. Ho: Tax Audit does not have significant effect on revenue generation in Federal Inland
Revenue Service.

2. Ho: There is no significant relationship between Tax Audit and revenue generation in
Federal Inland Revenue Service.

3. Ho: Computer Aided Audit Tools (CAATs) do not have significant effect on revenue
generation in FIRS.

1.6 Significance of the Study

The study is expected to dwell into all forms of Tax administration, setup, synergy in order to
Assist policy makers to identify pit-falls in the administrative mechanism on Tax with a view to
correcting the pit-falls.

This study is beneficial to researchers, Financial economic analyst, for students for further
research, to stake holders and to the management of Federal Inland Revenue Service in order to

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See ways and means of improving collection of the Tax proceeds from Tax payers. Add
knowledge to student(s) and Nigeria at large who will lay their hands when conducting similar
research.

1.7 Scope of the Study

Tax as a veritable source of revenue to the government is not restricted to an area of Nigeria.
This research was restricted to the Federal Inland Revenue Service to examine the extent to
which the revenue is accrued to the government between 2000 and 2017. This period of study
was selected due to the economic melt down experience of inflation, unemployment and
recession

1.8 Limitation of the Study

During the course of carrying out this research, some difficulties were encountered such as:

There were difficulties in getting favorable data and some annual reports.

Inability for personals to disclose information for security purpose.

1.9 Operational Definition of Terms

Total Income: is the aggregate (summation) of assessable income from all sums for the year
after deduction loses and capital allowances.

Assessable Income: The amount of income after charging expenses and outing gross income,
from each source in the year immediately preceding the year of assessment.

Assessment year: This is a period of twelve months beginning from 1 st January to 31st December
of the year.

Value Added Tax: It is the Tax on consumption. It is borne by the final consumer of goods and
services because it is included in the final price paid. It is a multi-stage tax and a replacement of
sales Tax.

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Economy: is defined as the condition under which human and material resources of the
appropriate quantity and quality are exchanged at the lowest cost.

Efficiency: This means the extent to which productivity is enhanced with a given input at a
lower cost.

Effectiveness: This is defined as the extent to which objectiveness or goals are achieved.

CHAPTER TWO

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 LITERATURE REVIEW

2.0 Introduction

This chapter deal with the theoretical and empirical review on minimization of Tax Audit
problem and their significance performance of Federal Inland Revenue Service. This section also
discusses various challenges confronting Tax Audit in Federal Inland Revenue Service.

2.1 Theoretical Framework

Any strategy to prevent Tax evasion should begin with the theory of why people cheat on their
Taxes. Naturally, much of it is unconvincing and ambiguous. Nevertheless, to give an indication
of the full range of variables that social scientists have studied in an attempt to answer this
question. The Forum on Tax Administration (2004) “identified some of the basic theories of Tax
compliance” which include, among others: Economic theories, Psychological theories and
Sociological theories.

Economic Theories: Economists approaching the question of why people fail to comply with the
law began by constructing a theory based upon the assumption about human behavior that
underlies all economics; namely that individuals generally act rationally in evaluating the cost
and benefit of any chosen activity.

i. Psychological Theories: Many analysts have suggested that the economic model of
human behavior reflects a too simplistic view of human beings and, in the real world
of everyday life, is without any predictive value. Like economists, Psychologists also
tend to explain human behavior in terms of variables that relate to individuals.
However, they tend to model human behavior in much more complex terms than
economists.

ii. Sociological Theories: Sociologists tend to see the cause of variation in human
behavior in the structure of the social system. Thus they explain people’s actions by
examining the forces that impinge on the position that they occupy within the system.

2.2 Empirical Framework

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Adediran, Alade and Oshode (2013) examine the impact of Tax Audit and Investigation on
revenue generation in Nigeria and concluded that, Tax Audit and Investigations can increase the
revenue base of the government and can also stamp out the incidents of Tax evasion in the
country. He recommended that, Tax Audit and Investigations should be carried out more often
and as thorough as possible to accomplish its task of increasing the revenue base and stamping
out Tax evasion in the country.

Ibrahim, Yusuf and Bello (2014), examined the contribution of Tax Audit and investigation to the
sustainable development of the Nigerian economy and concluded that the practicing accountants
should uphold the fundamental principles of professionals ethics while rendering consultancy
services since they often act for Taxpayers in their dealing with the relevant Tax authority.
Afuberoh and Okoye (2014) examined impact of Taxation on revenue generation in Nigeria and
recommends among others that Well Equipped Data Base (WEDB) on all Tax payers should be
established by the Federal, State and Local Governments with the aim of identifying all possible
sources of income of Tax payers for Tax purpose however the Tax collection processes must be
free from corruption.

Frank (2010) concludes that Audit policy can have important effects on production decision by
firms. The nature of such effects depends on whether firms compete or collude. According, an
appropriate designed Audit policy may not only achieve greater compliance and higher net
revenue for given output and resources spend on Audit but may also have other effects that
would be normally considered desirable in a wider economic context. Yongzhi (2005) concluded
that this study does find a positive relationship between the Audit and the voluntary compliance.

The Nigerian Tax system has failed in the area of its administration in Nigeria today does not
measure to the appropriate standard. The self-employed persons earn more those in paid
employment. The self-employed earn four times higher than those in paid employment but the
bulk of personal income yield comes from those paid employment whereas those who are self-
employed earn most of the money. As a result of inadequacy in monitoring Taxes paid, lots of
those who are self-employed evade Tax. These thus call for the need for a good and standard Tax
Audit and Investigation. Tax Audit and Investigation in Nigeria are terms which embrace a
variety of sectors. It simply means the advanced part of Auditing practice that involves

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examination of books of account in order to check if the assessable profit showed by the Tax
payer is correct.

Furthermore, Adediran, Alade & Oshode (2013), Opioned that , Tax audit just like financial
audit involves the gathering of information and processing it for determining the level of
compliance of an organisation with Tax laws of the territory. For a successful audit, it is
necessary that the Auditor organizes his work in such a way that the assignment is accomplished
completely and efficiently. According to Horn by (200) Tax means “money you have to pay to
the government so that it can pay for public services”. He also defined Audit as “an official
examination of business and financial records to see that they are true and correct”. The
Association of Chartered and Certified Accountants (2009) defined an Audit as an exercise
which provides assurance to the shareholders and other stakeholders of a company on the
financial statements because it is independent and impartial.

2.3 Tax Audit

Tax Audit just like financial Audit involves the gathering of information and processing it for
determining the level of compliance of an organization with Tax laws of a territory. For a
successful Audit, it is necessary that the Auditor organizes his work in such a way that the
assignment is accomplished completely and efficiently. More importantly, a professional Tax
Auditor or investigator must possess sound accounting and taxation knowledge, he must be sharp
in interpreting the Tax laws, tactical and must display high intelligence in applying tax laws, and
he must have sound knowledge of investigation techniques. Apart from technical skills, he must
be alert and open minded with good communication skills. These are necessary personal
prerequisite for any Tax Auditor or investigator to be successful for Tax audit assignments. A tax
as we already know is a chage imposed by governmental authority upon property, individual or
organisation to raise money for public purpose. An audit on the other hand can be seen as the
examination of the records underlying a financial statement as will enable the Auditors to report
authoritatively, whether in his opinion, the statement gives a true and fair view. (Izedonmi2000,
Okoye,2006).

Adesina (2005) defined an Audit as the examination of accounting documents and of supporting
evidence for the purpose of reaching an opinion concerning their propriety. It is an examination

8
intended to serve as a basis for an expression of opinion regarding the fairness, consistency, and
conformity with accepted accounting principles of statement prepared by a corporation or other
interested parties. Tax Audit is therefore a means of ensuring compliance with the Tax laws. The
primary purpose of Tax Audit is to maintain the confidence in the integrity of the self-assessment
system. It helps to improve voluntary compliance by detecting and bring to book those who do
not pay the correct amount of Tax . One of the cardinal principles governing the Tax Audit
program is that each line of grade or business should receive at least a nominal amount of Audit
attention. The selection of times for Audit is management decision and criteria used vary from
time to time. (Ola: 1999)

The idea of Tax audit became known through Lagos state where monitoring agents were
appointed to carryout Tax audit on government behalf. These monitoring agents mostly
Chartered Accountants who are performing the function of carrying out Tax audit of PAYE. The
function of these monitoring agents however was taken over by Tax consultant in 1996 and their
mode of operations different from that of monitoring agents. It becomes fashionable for state
government to carry out Tax audit exercise in order to fulfill all righteousness that the actual Tax
due to the government have been deducted and remitted to the government account (Ojo, 1998).

This exercise has however received some credits which are;

i. Making the taxpayer conversant with the applicable Tax laws

ii. The rate at which the Taxpayers comply with Tax laws has been increased.

iii. It has added depth to the Nigerian Tax practice

iv. The revenue of the government was increased.

2.3.1 Types of Tax Audit

Adediran , Alade & Oshode (2013) classified the following as types of Tax Audit:

Desk (or office) Audit: This is one which the whole activity of the Audit takes place within the
confines of the office of the Tax officials. In this situation the Tax official may simply request the
Taxpayers to provide some additional documents to his office to enable him clear some issues in

9
the returns submitted. In this type of Audit, no official notice is given to the Taxpayer of the
impending desk Audit exercise. He only gets to know when letters are written to him requesting
for certain documents or explanations. The essence is to ensure some level of compliance with
Tax laws, rules and regulations as well as performing the administrative checks on returns
submitted.

Field Audit: By the nature and scope of their work, regular assessing officers can only carry out
limited desk Audit through examination of accounts and returns. It is in a bid to check this
handicap as well as to improve on Tax compliance that Tax authorities carry out field Audit
exercise on Taxpayers by physically conducting the exercise in the office of the Taxpayer. The
Taxpayers are however formally noticed of the arrival of the Auditor prior to the commencement
of the Audit and requirements of the Auditors in terms of documents to be Audited will also be
requested for in advance. Field audit involves physical verification of documentary evidence and
materials at the premises of a Taxpayer so as to confirm the facts and figures of the Tax returns
field by corporate Taxpayers. The scope or depth of verification depends on the outcome of the
desk Audit work carried out by the Tax auditor as well as the risk factors of the Audit exercise.
Special attention will normally carried out through the back duty Audit may be instituted when
the following occurs:

i. Failure to disclose or include in full any income or earning in the return made
available to the Tax office.

ii. Doubtful claim of capital allowance in respect of current or previous year.

iii. Reduction in the profit in the returns files in the Tax office.

iv. Where the Tax charged or assessed is less than what it ought to be.

The institution of back duty Audit on a Taxpayer can either be a routine or as a result of the
above reason. It is an exercise by the relevant Tax authority to ensure that the amount due to the
government is duly collected (Ariwodola,2000).

2.3.2 Features of the Nigerian Tax System

Somorin (2011) stated the features of the Nigerian Tax system as follows:
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 (i) Simplicity, Certainty and Clarity: Tax payers should understand and trust the tax
system and this can only be achieved if Nigerian Tax policy keeps all Taxes simple
creates certainty through considerable restrictions certainty through considerable
restrictions on the need for discretionary judgments and produces clarity by educating
the public on the application of relevant Tax laws. It is therefore imperative that the
Nigerian Tax system should be simple (easy to understand by all), certain (its laws
and administration must be consistent) and clear (stakeholders must understand the
basis of its imposition).

(ii) Low cost of Administration; A key feature of a good Tax system is that the cost of
Administration must be relatively low when compared to the benefits derived from its
imposition. There must therefore be a proper cost- benefits analysis the imposition of
any Taxes and the entire machinery of Tax Administration in Nigeria should be
efficient and cost effective.

(iv) Fairness: Nigeria’s Tax system should be fair and as such observe the objective of
horizontal and vertical equity. Horizontal equity ensures equal treatment of equal
individuals. The Nigeria tax system should therefore seek to avoid discrimination
against economically similar entities. Vertical equity on the other hand addresses the
issue of fairness among different income categories. In this regard, the Nigerian Tax
system shall recognize the pay to pay principle, in that individuals should be taxed
according to their to their ability to bear the Tax burden.

(v) Flexibility: Taxes in Nigeria should be flexible enough to respond to changing

circumstances should also be considered before the introduction of new Taxes or the
review of existing ones.

(vi) Economic Efficiency: The Nigerian tax system shall all times strive to minimize the
negative impact of taxes on economic efficiency by ensuring that the marginal tax
rates do not distort marginal prosperity to save and invest.

2.4 Tax Audit and Investigation

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Adediran and Oshode (2013) outlined a number of issues in Tax Audit and Investigation. A
modest effort will hereby be made to address some of these contemporary issues related to Tax
Audit and Investigation. Some of these are summarized below:

i. Responsibility for the result of Tax Audits: The result of a Tax Audit is enforced by
holding the employer responsible for any Tax liability arising from the Tax Audit of the
employees. In a situation where some affected staff (local and expatriates) might have left
the country by the time of the Audit there is always a debate as to who should be held
responsible. This debate is quite unnecessary as the law is clear on who should be held
responsible. Section 81 of the Personal Income Tax Acts (PITA) as amended to date
recommends that where an employer fails; “to make the deduction or properly account
therefore, the amount, together with a penalty of 10% per annum of the amount of
interest at the prevailing commercial rate shall be recoverable as a debt due by the
employer to the relevant Tax Authority”. Thus it is the duty of the appointed collection
agent or an employer to fully account for what it had deducted, or ought to have
deducted, on behalf of the relevant Tax Authority.

ii. Definition of Chargeable Income: Chargeable Income is defined in Section 3 (1) of the
PITA as the income of a person “from a source inside or outside Nigeria” and it includes
any gain, profit salary, wages, fee, compensation, bonus, premium and almost all
conceivable allowances but excluding some reimbursable expenses and compensation for
loss of office. In some cases, only basic salary is included by the employers while other
taxable allowances like bonus, appropriate portions of rent and transport allowances and
leave pay are wrongly excluded from taxable income. In the oil industry where the
compensation package is robust, exclusion of relevant income and allowance has the
tendency of gross understanding PAYE taxes and remittances to the respective state
government. The normal Audit approach is to re-compute the taxable income and tax
there from with a view to recovering possible underpayments, if the collection agents
have previously been computing the taxable income as stipulated by the Act, there would
have been no need for elaborate Tax Audit.

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iii. Focus on Revenue Generation: It is often said that the consumer is always right, this is
however not the case in the relationship between the tax authority and the taxpayer. This
is so because the major aim of Tax Audit and Investigation is not to manage the taxpayer
but a focus on gathering revenue (Ojo, 1996).

iv. Artificial Transactions, Global Income, Expatriates and Deemed Income:

Taxable incomes of expatriates in the oil industry are most often grossly understated. This
emanates form the fact that the revenue accruing to oil companies are partly received
offshore from which expatriates are also partly paid offshore. The part of an expatriate’s
income paid offshore is always hidden form the Tax authorities. This is an illegal practice
given that whwt is taxable in Nigeria as stipulated by section 3(1) of the PITA is the
income “from a source inside or outside Nigeria”. In other words, an expatriate is
expected to pay Tax on his global income here in Nigeria irrespective of how and where
the income is received provided the work is performed here in Nigeria. In other to ensure
that government is not under charged as a result this, the Tax auditor usually has no
choice than to invoke the provision of section 17(1) of the PITA which states that where a
Tax authority is of the opinion that any transaction which reduces or would reduce the
amount of any Tax payable is artificial or fictions, the Tax authority may disregard the
disposition or direct that such adjustments shall be made as respect as the income of an
individual so as to counteract the reduction of liability to Tax affected.” This is done by
substituting the declared taxable income of the expatriate with reasonable deemed income
which in most cases is computed by assigning the naira equivalent of the minimum wage
or the average unemployment benefit in the country of origin of the expatriate
concerned . This is based on the assumption that no rational expatriate (who might have
come from a country more developed than Nigeria) will accept a job that will fetch him
less than the minimum wage (or unemployment benefit) in his country in some cases,
where the Tax Auditor has reasons to believe that income of local staff in a company is
understated, the concept of deemed income may also be applied. In the oil industry for
example, there are many off-payroll benefits paid to local staff, such benefits include
furniture grants, dress allowances and housing grants that are not meant to be refunded.
All these are always not included in the taxable Income of the employees hence the

13
 justification for applying the concepts of deemed income in this instance. The application
of “deemed income is a recent development in Tax Audit which the private sector detests.

v. Recovery of debt due to the State Government: One of the recent developments is the
sealing-up of business premises so as to recover liabilities or debts due to the state
Government (e.g Edo State) arising form Tax Audits. The critics of this particular method
often claim that such a method is not in line with provisions of section 96 of the PITA. It
should be realized that the section provides that the Tax authority may, in the prescribed
form, for the purpose of enforcing payment of the Tax due detrain upon my land,
premises, or place in respect of which the Taxpayer is the owner. If the defaulter in
question is the taxpayer, the most practical way his immovable property can be detrained
is by sealing it up. In the case that the defaulter is not the tax payer but his employer who
failed to remit government what is deducted on behalf of the government, the issue is that
of debt. This is recoverable ”as a debt due by the employer to the relevant authority” as
per Section 81 of the PITA. As the Act is silent on how the government should go about
recovering such debts, sealing up the premises of recalcitrant debtor cannot be said to be
a contravention of the PITA provisions particularly if it is done after an order form a court
of competent jurisdiction.

2.5 Condition for a Good Tax Audit

For the Tax inspector to carry out a good audit exercise, the following conditions must be
fulfilled.

i. The Tax Auditor must be familiar with the environment in which he works. It is a
condition which is highly critical that the Tax Inspector must be properly schooled
in the political, economic, social, cultural and religious environment of the
Taxpayer. A good knowledge of his environment will affect the decision made by
him.

ii. The Tax officials should be motivated to carry out Tax Audit, he should be properly
trained and have experience in this area. The Tax inspector should not be carried
away by corrupt practices that render the aim of the Tax audit useless.

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 iii. The Tax Audit should be properly supervised by those who are professional and
when new Tax inspectors are sent to carry out the Audit, they should be monitored
by older ones so as to make sure the right thing is done.

iv. Specialization should be encouraged. The cases should be grouped. This will allow
the Tax Audit staff to become specialist in specific field.

v. The manner in which the Audit is being carried out should be changed. The use of
computer should replace the manual process as this will go a long way in
facilitating the job and helping to preserve information for a long time. This will
improve the efficiency of the exercise (Ogundele, 1999).

2.6 Need for enforcement of Tax and Proper Utilization

Farayola G.O.(2013). In his book titled," Guide to Nigeria Taxes”, “taxation is one
of the sources of income for Government and such income is used to finance public utilities
and to meet other social obligations”. In other words tax collection should be enforced and
government is advised to utilize the proceeds from them in meeting up the above social
obligations. According to Norman D. Nowak in his book, Tax administrant theory and
practice (New York Praeger Publisher), P.11”No real progress in the Tax administration
could be made unless there is a concerted effort by both agencies to assess the due properly
and enforce collection at a predictable speed in a scheduled time “. Norman D. Nowak
blamed inefficiency in Tax Administration on lack of incentives and motivations for Tax
officers. It is in recognition of this and other government laudable objectives that a
performance, bonus is being arranged for Tax officials. It is the view of the researcher that
unless the incentives and motivations are second to none, the present situation will always
persist (inefficiency). That is Tax officials or Tax Administrators will be bought over by
Tax revenue.

2.7 Implementation and Execution Mechanism

Ezejieve A.C writer on Taxation wrote in the Nigeria Accountants of Nigeria P.34 April/June
1981 edition 110/2/V RV 2 that “No matter how efficient the Tax laws and policies are, unless
implementation and execution machineries are equally efficient and effective the entire system

15
(i.e Tax system which involves, Taxpayers, Auditors/Tax representatives, Tax officials and
Government) may crumble. He blamed most of our Tax assessment and collection purely on
administration. For effective and efficient Tax collections he recommended the followings:

i. Right oriented staff, for which graduates of Accountancy and professionally qualified
accountants shall constitute the band for assessment Audit and Investigation of Taxes,
while qualified lawyers shall be responsible for collection. Inspector of Taxes both within
and abroad.

ii. Staff movement programme: This may reduce connivance tendencies between Tax
officials and Taxpayers. Right working environment for which full autonomy is proposed
for service (i.e Federal Inland Revenue Service (FIRS) to avoid excessive government
intervention.

iii. Need for information procurement and dissemination to enlighten Taxpayers e.g General
Workshop on Self-Assessment and Value Added.

iv. Enforcement of penalties and additional assessment.

v. Remedying imbalance in Tax assessment.

vi. Past disposition of Tax cases.

vii. Establishment of revitalization of statistics section of the revenue.

viii. Use of budgetary system of tax collection.

In other works of Rabiu S.A, Personal Income Tax in Nigeria, Procedure and Problem P.71.
(1st Edition), Management by objective (MBO) Approach to Tax collection, “to increase the
yield, the target for collection (based on the estimated Tax population) against which actual
performance can be measured should be set at the beginning of every financial year. This will
enable each Tax official to put in his/her best”. Furtherance to the above evaluation of the
target should be carried out and returns on collection made in that order.

2.8 Need to Control Tax Arrears

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Professor Whiteman in quarterly journal of administration, July 1979 gave ten prescriptions of
control of Tax Arrears which include:

i. Accurate budgeting for revenue: The revenue budget should not be determined
arbitrarily but must be subjected to statistical data and application of appropriate
techniques like fund balance recording techniques to each type of Taxes.

ii. Accurate estimating or assessment: In the case of Best Of Judgment (BOJ) assessment
should be based as far as possible upon adequate and realistic data so as to avoid
excessive determination of Tax due. Companies’ industrial average may also play
important role in this direction.

iii. Timely demand for revenue : Assessment should be raised immediately to avoid the
payment period being reduced and increase in arrears.

iv. Tax collection at source (or withholding tax or withholding VAT) i.e Tax paid on
behalf of Tax payers and the taxpayer is handed over the net balance.

2.9 Principles of Taxation

Adam (1910) maintained in his book “The wealth of Nations” gave the most important set of
principles, which are also known as the “cannon of Taxation” which are still accepted generally
by Tax administrators all over the world. The principles of taxation are outlined below:

i. Equity/Equality of Sacrifices:

Adam Smith maintained in these principles that each tax payer should contribute to
the support of government also referred to as “state” as nearly as possible in
proportion to his ability to pay. For example 10 to 20 percent of all income above a
certain figure , since there are some citizens whose incomes were so low that they
were obviously to pay any taxes. Musgrave and Peacock (1984).

Conceived the principles of equity as equal proportion of Taxation on every income

that is; in principle everyone should pay the same proportion of his income Tax. This
means proportional taxation or some percentage on all incomes and therefore rejected

17
 progressive taxation i.e (higher tax rates on higher incomes). It also means equal
taxation of earned and investment incomes, existing private wealth and capital are
exempted, taxation is limited to income only.

In the same view, Prest and Barr. (1985) said, equal amount per head should be
levied. It is obviously much easier to run a system under which everybody pays say
ten pounds per head than one which the amount due varies according to economic
circumstance.

ii. The Principle of Certainty:

This principle asserts that the taxpayer should know how much Tax he has to pay, and
when it is to be paid. Such information should be adequately accurate and clearly
stated by the tax regulations. Thus, neither the amount nor the time of payment should
be the subject of arbitrary decisions by the Tax officials.

iii. The principle of Convenience:

Taxes should be collected at a time convenient for the taxpayers. For example, the
Pay As You Earn income tax on salaries and wages deducted weekly or monthly as
the case may be as income is received, is a good example of the principle of
convenience. Convenience as a principle of taxation has to do with the enforcement
of Tax administration. Eckeston (1983) has said that a good tax should not impose
taxes that are impossible to enforce even when people comply to Tax laws voluntary,
the government should verify the tax payments, if not the tax becomes an invitation to
break the law.

Adam (1910) has pointed out that every tax ought to be levied at the time or in the
manner in which it is likely to be convenient for the contributor to pay it. Using this
principle as an example, one can argue that the convenient time for payment of Tax
for West African farmers is during the harvest time.

iv. The Principle of Economy:

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 The principle emphasizes that the cost of assessing and collecting a tax should be the
yardstick so that the cost of collecting Tax should be excessive. For example, if the
expense incurred in the course of collecting a Tax exceed even 50 percent of the
yield, then such Taxes do not conform to the principle of economy.

3.0 Problems of Tax Administration in Nigeria

According to Soyode and kajola (2006), the problems of tax administration in Nigeria are as
follows:

i. Tax Evasion: Tax evasion is a deliberate and willful practice of not disclosing full
taxable income so as to pay less Tax. In other words, it is a contravention of Tax laws
whereby a taxable person neglects to pay the tax due or reduces tax liability by
making fraudulent or untrue claims on the income tax form. Tax is evaded through
different methods some of which include the following:

 Refusing to register with the relevant Tax Authority.

 Failure to furnish a return, statement or information or keep records required.

 Making an incorrect return by omitting or understating an income, which will also

lead to payment of less tax than otherwise have been paid.

 A taxpayer hides away totally without making any tax return at all.

ii. Tax Avoidance: Tax avoidance has been defined as the arrangement of tax payers’
affairs using the Tax shelters in the Tax law, and avoiding Tax traps in the Tax laws,
so as to pay less Tax than he or she would otherwise pay. That is, a person pays less
Tax than he ought to pay by taking advantage of loopholes in a Tax levy. Tax can be
avoided in various ways:

 Incorporating the Tax payer’s sole proprietor or partnership into a limited liability
company.

19
 The ability to claim allowances and relief that are available in Tax laws in other to
reduce the amount of income or profit to be charged to Tax.

 Minimizing the incidence of high taxation by the acquisition of a business concern

which has sustained heavy loss so as to set off the loss against future profits.

 Minimizing Tax liability by investing in capital asset (for instance through the new
form of corporate financing by equipment leasing), and thus sheltering some of the
Tax payers income from taxation through capital allowance claims.

 Sheltering part of the company’s taxable income from income tax by capitalizing
profit through the issue of bonus shares to the existing members at the (deductible)
expenses to the company.

 Creation of a trust settlement for the benefit of children or other relation in order to to
manipulate the martinet tax rate such that a high income bracket tax payer reduces his
tax liability.

 Converting what would ordinarily accrue to the tax payer (employee) as income into
capital gain (i.e Compensation for loss of office) the advantage of the employer and
employee.

 Manipulation of charitable organizations whose affairs are controlled and dominated

by its founders thus taking advantage of income Tax exemption.

 Buying and article manufactured in Nigeria thereby avoiding import duty on import
on imported articles.

 Avoiding the consumption of the articles with indirect Taxes incorporated in their
prices e.g tobacco.

20
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

Presented in this chapter is the research methodology and procedure adopted in obtaining the
requirement of the study. Examined here in includes sources of data, sample size, sampling
technique and the method of data analysisis.

3.1 Research Design

Research design is a detailed plan on how a research study is to be completed so as to identify

the procedure required to undertake a study and ensure the validity and objective of the research
design method which can be classified into three different types; explorative, explanatory and
descriptive. This research is designed to study the effects of Tax Audit on revenue generation in
Federal Inland Revenue Service based on Nigeria experiences. The purpose is to assess the roles
of Tax Audit on revenue generation in Federal Inland Revenue Service. Therefore, this research
is based on descriptive research design.

3.2 Population of the Study

In Nigeria, the number of officers in the Federal Inland Revenue Service is 1200 (H.O.D human
resources). Therefore, to aid this research, the researcher included the staff on Grade level 04-16
while he excluded staff on level 01-03 from the population since by virtue of their position,
information from them may not be accurate, valid and reliable for the purpose of this study.

21
Hence, the purpose of research is to discover answer to questions through the application of
scientific procedures (Settez L:1979).

3.3 Sample of the Study

The simple random sampling is adopted in this siding in which every member of the population
has an equal chance of being selected. The Size of nine hundred (900) respondents used to
reduce sampling error and allow relatively wide representation because of the maximum
numbers of respondents used.

3.4 Sampling Technique

Probability sample would be used in this research work (simple random sampling technique). In
administering the questionnaire to the respondents, the researcher adopted random sampling
method which restricted my study to 900 staff since the study of the entire population of the staff
of the Audit Department is costly, time consuming and uncontrollable.

3.5 Method of Data Collection

A well-structured questionnaire was designed and analyzed by the researcher. These

questionnaires was made up of printed questions administered to the respondents and answered
in a manner that suggested their individual opinion. Then, the items of information that will be
collected emanated from primary (questionnaires) and secondary (textbooks, journals) sources
and was equipped with the correct data 900 which was analyzed and from which this reports
were compiled and also results were produced.

3.6 Description of the instrument of Data Collection

To achieve the objective of this research, the instrument to be used in collecting data for this
research work is questionnaire. Questionnaire was designed and was administered personally by
the researcher with possible answers from which the respondent will tick in the form of; Strongly
Agree, Agreed and or Disagreed. The questionnaire was designed in a way that it is quickly
understood by the respondents would react to the question without encountering bias.

22
3.7 Validity of the Instruments

To ensure the validity of this research work, the instruments was validated by experts from the
Consultancy Department Post Graduate Diploma in Account and Finance for the suitability and
appropriateness.

3.8 Methods of Data Analysis

To analyze and present data generated from the field, the researcher adopted the tabular method.
In the tabular method, the researcher systematically arranged the facts and figures in rows. Each
table uses carefully given appropriate title and captioned accordingly. At the base of each table,
source reference was presented. In effecting data analysis, the researcher used Descriptive
Statistics method to analyze the data. Inferential statistics employed to test the hypothesis was
the chi square distribution. The Chi-square is used to measure the discrepancy between observed
and expected frequencies. It is a statistical tool when two variables are drawn from independent
samples, each samples having been categorized in two ways such as Yes and No responses
(Onwumere J.U.J: 2009) including Data that are non-metric and are accordingly expressed in
frequencies. These tools are statistically chosen yardsticks for data analysis and hypothesis
testing.

3.9 Instrument for Data Analysis

The instrument used for data analysis of research question one, two, three and four is Chi-Square
(χ²) Statistical tool.

Model Specification

In this study, the use of percentage, simple average and chi-square will be used in taking the
hypothesis. Because of the manner in which data are been collected, the level of significance is
5% and the level of confidence interval is 95%. Chi-square formulae is given as:

23
χ²=Ʃ[(O-E)]² /E

Where

χ²=Chi-Square

Ʃ= Summation

O= No of observed frequency

E= No of expected frequency

Degree of freedom (df) = (r – 1) (c – 1)

Where;

R = Number of row

C = Number of column

Decision rule:

A set of decision rule is important as to the null or alternation hypothesis

The rule states that:

The null hypothesis (Ho) will be rejected if the calculated X² is greater than X² table value else
the alternative hypothesis (Hi) will be accepted.

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction

24
Data generated from field work were presented, analyzed and interpreted in this chapter. Effort
was made to relate data analysis to the objectives of the study and research questions posed in
chapter one. Also, the data collected from respondents based on questionnaires issued to them are
presented based and analyzed. The presentation are in tabular form showing the distributions of
responses.

4.2 Presentation and Analysis of Data

The questionnaires were distributed in the proportion shows in the table below; one hundred
questionnaires (100) were distributed to the staff of Federal Inland Revenue Service, Adamawa
State.

Questionnaire Distribution and Responses

Question 1: Do you agree that the use of taxes has assisted in the development of

TABLE 4.1.1 RESPONSES FROM QUESTION 1

Options No. of responses Percentages

Strongly Agree 40 63%

Agree 10 16%

Disagree 14 21%

Total 64 100%

Source: Field Survey, 2017

From the table 1 above, the respondents agreed that the use of taxes has assisted in the
development of the country. This is seen from the number of respondents that agreed which are
40(63%) for both tax authorities and tax payers.

Question 2: Do you agree that taxes are one of the major tools for revenue generation by the
Federal, State, and Local Governments?

Table 4.1.2: Responses from Question Two

25
Options No. of responses Percentages

Strongly 56 88%

Agree - -

Disagree 8 12%

Total 64 100%

Source: Field Survey,2017

From table 3 above, the respondents agreed that taxation has impacted on revenue generation in
Nigeria. This is seen from the number of respondents that agreed which are 34(53%) for both tax
authorities and tax payers.

Question 4; Has the publicity made in the print and electronic media on the importance of taxes
payment impacted positively on revenue generation in Nigeria?

Table 4.1.4: Responses from Question Four

Options No. of Responses Percentage

Strongly Agree 42 62%

Agree - -

Disagree 22 38%

Total 64

Source: Field Survey, 2017

26
When you look at this table, you can see that majority of them representing 61% of the
respondents disagree that there is no cooperation between the Audit Department and the
Financial Management Branch (FMB) of Treasury Division while 25 in number presenting 39%
believed that there is cooperation between the departments or division.

Question 7: Do you agree that if aggressive and innovative modes of collecting revenue from
existing Federal, State and Local Governments internal sources are put in place the revenue
generated by these governments would increase?

Table 4.1.7; Responses from Question seven

Options No. of Responses Percentage

Strongly Agree 25 39%

Agree - -

Disagree 39 61%

Total 64 100%

Sources: Field Survey, 2017

From table 7 above, both tax authorities and tax payers disagreed that if aggressive and
innovative modes of collecting revenue from existing Federal, State and Local Governments
internally sources are put in place, the revenue generated by these governments would not
increase. This is seen from the number of respondents that strongly disagreed which are 39(61%)
for both tax authorities and tax payers.

Question 8: Are the present Tax Audits in the Federal Inland Revenue Service skilled to cope
with the computerization of government accounts.

Table 4.1.8 Tax Audits are Skilled to cope with the Computerization of Government Accounts

Options No. of Responses Percentages

Strongly Agree 23 36%

Agree - -

27
Disagree 41 64%

Total 64 100%

Source; Field Survey, 2017

Table 4.1.8 shows that Tax Audits in the Federal Inland Revenue Service cannot cope with
computerization of government Accounts. This is evidenced by the fact those who disagree are
41 in number representing 64 percent and those who agreed are 23 in number representing 36
percent of the respondents.

Question 9: Do you consider these factors as problems that hinder Tax Audit efficiency?

Table 4.2.9 Responses from Question Nine

Options No. of Responses Percentages

Asset 2 3%
valuation/obsolescence

Management representation 8 13%

Ignorance of the objection 21 33%

of Audit

Desire to cover fraud or 33 51%

intentional errors

Total 64 100%

Source: Field Survey, 2017

28
This question was asked in order to find out if there are factors that constitute hindrances to Tax
Audit efficiency in the Federal Inland Revenue Service as evidenced by the following,
management representation which is the abuse of authority as well as the desire to cover fraud or
intentional errors which is represented by 51 percent of the respondents. These factors lead to
inefficiency of internal Audit.

Question 10: Are Auditors in the public sector competent in the course of their work.

Table 4.1.10 Competence of Tax Auditing in the course of their work.

No. of Responses Percentages

Options

Agree 33 52%

Slightly Agree - -

Disagree 31 48%

Total 64 100%

Source: Field Survey, 2017

The conclusion from Table 4.1.6 is that Tax Auditing in the Federal Inland Revenue Service are
competent in the course of their work from the fact that 33 out of 64 respondents representing 52
percent agreed while 31 out of the same number of 64 respondents representing 48 percent
disagreed with the fact that Auditors in the public sector are competent in the course of their
work.

29
4.3 Testing of Hypothesis

Test of hypothesis 1

Ho: Tax Audit does not have significant effect on revenue generation in Federal Inland Revenue
Service.

In order to test this Hypothesis, data from 4.1.1 (Question 1) will be used below:

Table 4.3.1

Options No. of Responses Percentage

Strongly Agree 35 54%

Agree 5 8%

Disagree 24 38%

Total 64 100%

Source: Field Survey, 2017

Contingency Table for the Calculation of Expected Frequency

Table 4.3.2

Options No. of Responses Appreciation No. Total

Strongly Agree 35 54 89

Agree 5 8 13

Disagree 24 38 62

Total 64 100 164

30
Source: Field Survey, 2017

Formulae for calculation of expected frequency is given as:

Ei = Row total * Column

Grand Total

The following are determination of expected frequency,

1.89 * 64/64 = 34.73

2.13 * 64 = 5.07

3. 62 * 64/64 = 24.19

4. 89 * 100/64 = 54.26

5. 13 * 100/64 = 7.93

6. 62 * 100/64 = 37.8

Table 4.3.3 Computation of Chi-Square χ²

S/N Oi Ei Oi-Ei (Oi-Ei)² (Oi – Ei)²/Ei

1 35 34.73 0.27 0.0729 2.0990

2 5 5.07 -0.07 4.9 0.9664

3 24 24.19 -0.19 0.0361 1.4923

4 54 54.26 -0.26 0.0676 1.12458

5 8 7.93 0.07 4.9 0.6179

6 38 37.80 0.2 0.04 1.0582

Total 164 163.98 - 10.0166 7.4796

Source: Field survey, 2017

31
 χ² or (Oi – Ei)²

Ei

χ² = 7.4796

Table Value of X² = 5.99

Remark:

Since the calculated value of χ² is greater than the value (7.4796>5.99), the null
hypothesis is therefore rejected, meaning that Tax Audit has significant effect on revenue
generation in Federal Inland Revenue Service.

Test of Hypothesis 2

Ho 2: Tax audit has no relationship with the revenue generation in Federal Inland Revenue
Service;

Table 4.3.4

Options No. of Responses Percentage

Strongly Agree 42 62%

Agree - -

Disagree 22 38%

Total 64 100%

Source: Field Survey, 2017

Table 4.3.5 Computation of Chi-square χ²

Options Oi Ei Oi – Ei (Oi – Ei)² (Oi – Ei)²/Ei

Agree 42 32 10 100 3.125

32
Slightly - - - - -
Agree

Disagree 22 38 10 100 3.125

Total 64 64 - 200 6.25

Source: Field Survey, 2017

Calculated value of χ² = 6.25

Table value of X² = 5.99

Ho is rejected while Hi is accepted. This means that the calculated Chi-square 6.25 is greater
than the table value of 5.99 which implies that Tax Audit has a relationship with the revenue
generation in Federal Inland Revenue Service.

Test of Hypothesis 3

Table 4.4.6 Data for test of hypothesis 3

Options No. of Responses Percentages

Strongly Agree 25 39%

Agree - -%

Disagree 39 61%

Total 64 100%

Source: Field Survey, 2017

Table 4.3.7 Calculation of Chi-square χ²

Options Oi Ei Oi – Ei (Oi – Ei)² (Oi – Ei)²/Ei

Strongly 25 32 7 49 1.53
Agree

Agree - - - - -

33
Disagree 39 32 7 49 1.53

Total 64 64 - 200 3.06

Source: Field Survey, 2017

Calculated value of χ² = 3.06

Table value of χ² = 5.99

Remark:

The null hypothesis should be accepted because the Table Value which is 5.99 is more than the
calculated value of Chi-square, 3.06. Therefore, we conclude that Computer Aided Audit Tools
(CAATs) have significant effects on revenue generation in Federal Inland Revenue Service.

3.2 Research Findings

This study revealed the followings:

(i) That from the Chi-Square analysis, Tax Audit has significant effect on revenue
generation in Federal Inland Revenue Service.

(ii) That from the Chi-Square analysis, CAAT does not have any significant effect on
revenue generation.

(iii) That taxation is the most important source of revenue to the governments in Nigeria
from the point of view of certainty and consistency of taxation.

(iv) That taxation is regarded as a tool of fiscal policy used by government all over the
world to influence positively or negatively particularly type of economic activities in
order to achieve desired government objectives such as to increase the rate of
economic growth and hence per capital income which leads to a higher standard of
living.

3.3 Discussion of findings

34
The study revealed that Tax Audit has significant effects on revenue generation in Federal
Inland Revenue Service. This implies that Tax Audit ensures arithemetic accuracy of all
figures in account and computation in taxpayers records; Tax Audit increases revenue
generation from taxes; an increase in Tax Audit increases Tax bases for the government
and an increase in Tax Audit reduce tax fraud in the Tax system. This is in part in
agreement with Yongzhi (2005) who concluded that, there is a positive relationship
between the Audit and the voluntary compliance.

35
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Introduction

This chapter focuses on the summary and findings of this research work. Recommendations were
also made to the research questions raised and conclusions of the study were also presented in
this chapter.

5.2 Summary

This study revealed the followings:

(i) That from the Chi-Square analysis, Tax Audit has significant effect on revenue
generation in Federal Inland Revenue Service.

(ii) That from the Chi-Square analysis, CAAT does not have any significant effect on
revenue generation.

(iii) That taxation is the most important source of government revenue in Nigeria from
the point of view of certainty and consistency of taxation.

(iv) That taxation is regarded as a tool of fiscal policy used by government all over the
world to influence positively or negatively particular type of economic activities
in order to achieve desired government objectives such as to increase the rate of
economic growth and hence per capital income which leads to a higher standard
of living.

(v) That taxation is being used to achieve many objectives such as raising of revenue
required to meet government expenditure, wealth redistribution, economic price
stability, and economic growth and development.

36
5.3 Conclusion

In this study, effort has been made to analyze taxation as a tool for revenue generation in
Nigeria in the three tiers of government namely; Federal, State and Local governments
for structural and economic developments. In this study , issues relating to taxation as a
tool for wealth creation and employments, the role of taxation in wealth creation and
employments, the role of taxation on economic and social development sustainability and
government revenue generation were considered.

Furthermore, the study considered other problems militating against effective Tax
administration in Nigeria such as identification of the person to be assessed, identifying
income for Tax purpose, personal problem and low image of Tax officials in the eyes of
the public, attitudinal problem and cumbersome process of payment.

Finally, the study conclude that Tax Audit has significantly impacted on revenue
generation in Federal Inland Revenue Service.

5.4 Recommendations

Based on the findings of this study, the following recommendations are offered;

(i) Tax Audit should be carried out on a routine basis to ensure that actual revenue
collected is what the relevant Tax authority remits to the government. Tax Audit
prevent Tax evasion by the Tax evaders and avoiders. Internal mechanism to
check and monitor the staff of the Tax Audit department should be put in place to
minimize the level of corruption and enhance effectiveness of the Tax Audit

(ii) Tax Audit department should be given autonomy to carry-out their responsibility
effectively as specified in Federal Inland Revenue Service Establishment Act
2007.

37
(iii) Relevant Tax authority, Tax Auditors and FIRS should have full knowledge of
modern Audit tools like Computer Aided Tools (CAATs) to enhance performance
and maximum Tax revenue generation.

The importance of Tax revenue to the government cannot be over emphasized

especially now that government over dependence on oil revenue is failing due to
global drop in crude oil price. All relevant authority should encourage Tax Audit
for increase in Tax revenue, in order for government to keep up with its obligation
to her citizen.

38
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Afuberoh, D. Okoye, E. (2014). “The impact of Taxation on Revenue Generation

in Nigeria “International Journal of Public Administration and Management
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Profit Tax”, Lagos, JAA Nigeria Ltd.

Asher, M.G. & Heij, G.(199). “South-East Asia’s Economic Crisis: Implications
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Barbone, l., Das-Gupta, A., De wulf, FL, & Hanson, A. (1999). Reforming Tax
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International Herald Tribune, April 21-22.

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problems” 1st Edition, p.7

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Frank A. (2010). “Nigeria Finance Review, Deductibility of Legal and

Accounting Expenses to Contest Tax Liability in Nigeria”,P. 25-34.

Hornby, A.S. (2000).”Oxford Advanced Learners Dictionary of Current

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Izedonmi, F.O.I. (2000).”Introduction to Auditing”, Benin city, Ambik Press.

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41
 APPENDIX 1

Dear Respondents,

I am a PGD student of Adamawa State Polytechnic, Yola from the Consultancy

Department Post Graduate Diploma in Account and Finance currently undergoing a research on
the topic: “Impact of Tax Audit on Revenue Generation in Federal Inland Revenue
Service”.

The questionnaire is mainly aimed at the researcher to fulfill an academic requirement; any
information provided shall be treated with utmost care.

Thank you

Yours faithfully,

Akilu Sadiq Umar.

42
AN ASSESSMENT OF TAX AUDIT ON REVENUE GENERATION IN
FEDERAL INLAND REVENUE SERVICE

SECTION A

DEMOGRAPHIC DATA

1. Sex: Male ( ) Female ( )

2. Age:

(a) Under 20 years ( )

(b) 21-30 years ( )

(c) 31-40 years ( )

(d) Above 40 years ( )

3. Educational background.

(a) WASC ‘o’ LEVEL ( )

(b) OND/NCE ( )

(c) B.Sc/HND ( )

(d) Others ( )

4. Grade held in your organisation

(a) Level 04-07 ( )

(b) Level 08-10 ( )

(c) Level 11-13 ( )

43
(d) Level 14-16 ( )

5. Periods of service in your present organization

(a) Below one ( )

(b) 1-5 ( )

(c) 6-10 ( )

(d) Above 10 ( )

SECTION B

6. Do you agree that the use of Taxes has assisted in the development of the country?

7. Do you agree that Taxes are one of the major tools for revenue generation by the Federal,
State and Local Governments?

(a) Strongly Agree ( )

(b) Agree ( )

(c) Disagree ( )

8. Has Taxation impacted on revenue generation in Nigeria?

(a) Strongly Agree ( )

(b) Agree ( )

(c) Disagree ( )

9. Has the publicity made in the print and electronic media on the importance of Taxes payment
impacted positively on revenue generation in Nigeria?

(a) Strongly Agree ( )

(b) Slightly Agree ( )

44
 (c) Disagree ( )

10. Is the Internal control system in the Federal Inland Revenue Service very effective.

(a) Strongly Agree ( )

(b) Agree ( )

(c) Disagree ( )

11. Is there a strong cooperation between the Audit Department and the Financial Management
Branch of the Treasury Division (FMB).

(a) Strongly Agree ( )

(b) Agree ( )

(d) Disagree ( )

12. Do you agree that if aggressive and innovative modes of collecting revenue from existing
Federal, State and Local Governments internal sources are put in place the revenue generated by
these governments would increase?

(a) Strongly Agree ( )

(b) Agree ( )

(c) Disagree ( )

13. Are the present Tax Audits in Federal Inland Revenue Service skilled to cope with the
computerization of government accounts?

(a) Strongly Agree ( )

(b) Agree ( )

(d) Disagree ( )

45
14. Do you consider these factors as problems that hinder Tax Audit efficiency?

(a) Agree ( )

(b) Slightly ( )

(c) Disagree ( )

15. Are auditors in the public sector competent in the course of their work?

(a) Agree ( )

(b) Slightly Agree ( )

(c) Disagree ( )

APPENDIX II

X² = E (Oi – Ei)²

Ei

Ei = Row total * Column

Grand Total

1. 89 * 64 = 34.73

64
2. 13 * 64 = 5.07
64
3. 62 * 64 = 24.19
64
4. 89 * 100 = 54.26

46
 64
5. 13 * 100 = 7.93
64
6. 62 * 100 = 37.8
64

APPENDIX III
Degree of X².05 X².025 X².01 X².005 D.F
Freedom
1 3.841 5.024 6.635 7.879 1
2 5.991 7.378 9.210 10.579 2
3 7.815 9.348 11.345 12.838 3
4 9.488 11.143 13.277 14.860 4
5 11..070 12.832 15.086 16.760 5
6 12.592 14.449 16.312 18.548 6
7 14.007 16.013 18.475 20.278 7
8 15.507 17.55 20.090 21.955 8
9 16.919 19.023 21.26 23.589 9
10 18.309 20.482 23.209 25.188 10

47