Role of the Head of Tax Audit Office

During the audit each head of audit office must first monitor the execution of the audit to make sure that:

- Legal orientation of the audit meets the required levels;

- Audit is being conducted according to the approved program;

- Audit resources are being used effectively and efficiently;

- Audit is being conducted in compliance with the established standards and methodology;

- Audit is being conducted impartially and based on the principles of equal treatment for taxpayers with similar activities and in similar economic situations.

During this supervision the head of office requires information from office inspectors about the progress of the audit process and discusses with them about the most effective forms and methods to conduct the current audit, giving recommendations and receiving feedback. For important issues the head considers as deviations from the program or failure to apply the established standards and methodology or in case of erroneous legal orientation on the part of inspectors, the head of office immediately informs the head of section and Head of tax office in order to determine the necessary measures for the correct application of the law and officially advise the auditors.

The head of office may ask to be informed in writing. Such notice is given via intermediate reports and mainly applies to taxpayers with considerable volume of work, requiring a longer time for audit.

The head of office administers the evidence gathered from conducted audits in terms of sale prices per unit of goods or services, determining the flow level of goods or services the taxpayer belongs to the number of employees identified according to their job positions, minimum, average and maximum salaries explained according to the functions they perform and identifies the list of clients and suppliers with a flow value threshold per invoice. He stores this statistical database in order to use all these data as information to refer to in other audits of similar activities in the future.

Preparation of audit program by head of audit office

The accurate definition of the audit methodology and technique to be used in every case is one of the elements used for the preparation of audit programs.

The audit program is a technical program which serves as an internal instruction. It contains the principal guidelines for conducting the audit to a given taxpayer. Such program must comply with the risks and problems the taxpayer's objectives involve, workload and type of audit to be conducted. The preparation of the audit program requires preparatory work by the head. This preparatory work has to do with the most recently updated information about:

- Suspension of VAT declarations;

- Declarations of insurance contributions with minimum values or zero;

- Requests for termination of activity or bankruptcy;

- Declarations of activity balance sheets with losses;

- Repeated cases of evasion;

- Newly registered taxpayers declaring a crediting VAT value for several successive months;

- Beneficiaries of tax or customs incentives for equipment or machinery with a low profit rate, etc.,

- Similar cases identified in the course of everyday audit practice.

Appointing auditors according to monthly plan

Appointing auditors for conducting an audit should not be a casual action. When appointing the auditors for a particular audit, the head of section should take into consideration a series of factors and circumstances which have to do with:

- Auditor's professional ability: This includes the auditor's professional and intellectual knowledge, skills, and capacity. The head should never place an audit in incompetent positions.

- Taxpayer's nature and complexity: This includes the amount and volume of work as well as the complexity of the taxpayer. The bigger the volume of work and the complexity of the taxpayer, the more care should be taken when selecting auditors with special knowledge and skills for the area to be audited.

- Interpersonal relations condition the auditors' team work. Auditing a large and complex taxpayer requires team work and good cooperation among inspectors in the course of the audit process. For various reasons it might very well occur that interpersonal relations between two or more auditors are not good. It is recommended that such inspectors should not be in the same team during an audit.

- The auditor's former relations with the taxpayer and his/her staff. If in the course of previous audits there have been conflicts between the auditor and the taxpayer and his/her staff, it is not recommended to appoint that particular auditor to audit that particular taxpayer.

- Conflict of interest, which represents a situation or relationship of wealth or moral interest between the auditor and taxpayer, which can affect the auditor's opinions. An audit conducted by an inspector involved in a conflict of interest should be cancelled. Such cancellation represents a financial as well as a moral loss for the audit sector. Therefore, this component should be given due and special attention.

Registration of audit time and result

It is indispensable to document the auditor's working time not only in terms of how much time is spent, but also in terms of its destination and effectiveness of use, or in other words, in terms of its "product".

The respective form reflecting the working time and the product is part of an auditor's papers and at the end of the work it is signed by the inspector involved and deposited in the audit file. The form is individual and it is completed by every inspector, in spite of their working team. The registration of working time and its use (see form in Appendix to Manual) is completed by all inspectors and it includes not only the time spent during the audit, but also during the preparation of audit reports and documents, discussions with taxpayer or heads of audit, trips to taxpayer, interruptions of work for various reasons, etc.

Suspension of an auditor from an audit that has already started should be justified in writing by the head of section and Head of tax office with reasons which are attached to the file and stored in the archive.

Review report and auditor's performance evaluation by the head

The following requirements help to review the quality of the audit report. Such requirements should serve as guidelines for the head of office and head of section:

1. Appearance

- Be appropriately addressed and signed;

- Correct use of headlines;

- A good introduction describing the object of the audit and its purpose;

- Audit findings listed by importance;

- References from relevant manuals and provisions;

- Detailed material attached;

- Numbers for paragraphs and pages for easier reference;

- Recommendations should correspond to the audit findings;

- No spelling or grammar mistakes;

- Express the auditor's opinion on the financial situation and all the findings.

2. be complete and accurate

3. Evidence (facts)

4. Appropriate conclusions

- Conclusions and recommendations should comply with audit findings.

5. Investigation and crosscheck with several other elements to help clarify suspicions

- The report should mention important areas which require crosscheck of documentation

- Crosscheck is made within the audit timeframe.

6. Professional standards

- Reports should be written appropriately and in a professional way.

- Be presented in a professional way.

- Be constructive and provide opportunities to affect the correction and improvement of the situation.

Taking and handing over of duty by head of office

Performance evaluation for inspectors and directly that of the heads is one of the major duties of the Head of LTO. Performance evaluation should be based on the general goal, objectives and the inspector's job description. This process should evaluate such skills as:

1. Organizational and management skills of the heads of offices and sections. Such skills include the skill to affect subordinates to achieve their objectives.

2. Skills to analyze data and make the best decision, coming up with proposals providing solutions for the audit.

3. The skill of team work is the way for the head to contribute and help others fulfill their duties.

4. Administration of resources implies the capacity to use available resources effectively and efficiently in order to achieve objectives.

5. Self-promotion by means of which the head makes the best use of his/her skills through full participation in actions, demonstrating maximum commitment to achieve objectives.

6. Creative spirit implies the head's skill to generate new ideas, which bring effective solutions to problems and help to achieve objectives.

7. Self-organization implies time planning and setting priorities in performing the duties.

8. Written communication skills evaluate how the heads forward written information to their superiors and the skill to interpret such information or any other information presented in other materials.

9. Oral communication skill is the ability to verbally and appropriately forward accurate information to superiors and the ability to understand and interpret in a way that others understand their ideas.

10. Service quality is the personal awareness and that of other office or sector members as well, and capacity to take effective action to satisfactorily meet the taxpayer's needs and management duties, maintaining proper quality.

11. Technical expertise, which represents the ability to use and master the necessary technical knowledge and skills to be effective in their work.

12. Professional independence, which implies performing duties and providing opinions without being influenced by people with authority or various interests.

Performance evaluation for the entire audit personnel

Depending on the function level, from auditor to head of section, besides the above, there are other elements to be evaluated, such as the ability to delegate duties, negotiation skills, common sense, initiative, independence to execute, the ability to accept others' opinions, the willingness to assume responsibility, etc.

The Head of tax office always confidentially communicates the evaluation to the evaluated auditors and heads relying on the Human Resources Manual. It is recommendable to make the evaluation in the form of a grounded report, analyzing the general goal and the achievement of established objectives.

Personnel reward and promotion are based on this evaluation. Therefore, it should be well grounded, clear and consistent with its objectives. Inaccurate, unrealistic evaluations send a negative message to the entire personnel and have reverse impact in the promotion of personnel.

The above-mentioned skills mainly relate to the annual evaluation of auditors and significantly differ from the general characteristics of personnel. They are mostly based on the judgment of superiors for their subordinates according to hierarchy in tax office. However, it would more effective if this evaluation was made for shorter periods, monthly or quarterly, or in cases when the above positive or negative skills are very evident. A characteristic evaluation of an auditor's work implies a complete and effective evaluation of his/her performance. Such evaluation is not based on different periods of time, but on the results achieved. Thus, it is recommendable and very effective that there be a performance evaluation for every audit.

This evaluation mainly takes into account a) expertise and b) service quality, but other elements can also be included, such as: evaluation of team work, interpersonal relations, oral communication skills, etc. Such evaluation should be formalized in a chart attached to the performance report and other documents of the auditor as specified in the Human Resources Manual. The Head of tax office should organize the necessary cooperation between audit, investigation, registration, debt management, and assessment and collection sectors in order to increase detection capacities and avoid repetition of audits with no findings or attempts for corruption.

Measurement criteria for auditors and heads

In order to determine whether the basic audit objectives have been achieved it is necessary to adopt some measurement criteria for audit results. Such measurement criteria can be categorized as follows:

Quantity: The number of conducted audits is very important, first, because each inspector must conduct a certain minimum number of audits to guarantee a sufficient percentage of enforcement for taxpayers who do not abide by the law. This minimum quantity is calculated as a ratio of audits conducted by tax office with the number of taxpayers administered by this office during one fiscal year, in observance of objectives planned for audit. This criterion has to do with the impact of audit upon as many taxpayers possible. This means that the more fiscal audits are conducted, the more stimulation there will be for taxpayers to correct their self-declarations. On the other hand, it means that in certain economic sectors with fiscal evasion and tax avoidance problems, the continuous presence of audits ensures a more cooperative attitude among taxpayers exercising their activity in these sectors.

Value of detections: The sum of detected and settled obligations is important in correcting or penalizing taxpayers who have either hidden or deformed their self-declarations in considerable sums for the state budget. Since the number of audits in tax office is approximately 50%, selection of taxpayers for audit is therefore essential. By measuring the values detected by a particular auditor in a quarterly period it is possible to check the achievement of objectives regarding the detection of incomes calculated as losses from fiscal evasion or tax avoidance by taxpayers in tax office.

Quality: Generally, quality can be based on:

- The number and type of audit reports reviewed or returned by the Heads of offices and sectors or the Head of tax office;

- The number of appeals made by the taxpayer, and;

- The percentage of money collected because of the results of audit assessments.

Time spent for each tax audit: The administrative responsibility for failure to apply the Law on tax procedure rests with the heads of office, in case they are not able to officially justify to their direct superiors any unjustifiable delays in the audit process made by their subordinates as an administrative deficiency which runs against the status of public civil servant.

Adopting high quality standards, the audit section makes sure that the auditor's functions are appropriately oriented, used and serve to educate taxpayers, resulting in higher payment levels of revenue from audits.