If a tax authority conducts an audit of a taxpayer's records, its main purpose is to:
Correct answer: A. Verify the accuracy of reported income and deductions
- A. Verify the accuracy of reported income and deductions
- B. Replace every taxpayer's return with a fixed estimate
- C. Convert an indirect tax into a direct tax
- 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.
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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.
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