If a tax authority conducts an audit of a taxpayer's records, its main purpose is to:
Correct answer: C. Verify the accuracy of reported income and deductions
- A. Convert an indirect tax into a direct tax
- B. Replace every taxpayer's return with a fixed estimate
- C. Verify the accuracy of reported income and deductions
- D. Grant an automatic exemption from future tax
Explanation
A tax audit examines books, documents and other evidence to check whether income, deductions and tax calculations are properly reported. An audit may lead to an adjustment, but it is not itself an automatic exemption or a universal replacement of returns.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Taxation
Taxation covers the principles used to assess and collect taxes from individuals, businesses and transactions, with emphasis on income tax and sales tax concepts in Pakistan. Questions involve taxable income, exemptions, deductions, tax liability, withholding, returns, assessment, tax avoidance versus evasion, and the distinction between direct and indirect taxes.
Practise Taxation
50 free Taxation MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Taxation questions
Which income category generally arises from disposing of a capital asset for more than its relevant cost?
What does depreciation generally represent when computing business income?
When an employer deducts income tax from an employee's salary before paying it, the employer is acting primarily as what?
Which situation normally creates a tax liability for a business that sells taxable goods or services?
What is the main purpose of a tax deduction for an allowable expense?
A taxpayer who disagrees with a formal tax assessment would ordinarily seek relief through which process?