Assessment Of Tax Audit Practice And Its Challenges-A Case Study Of Ethiopian Revenue And Customs Authority Large Taxpayers Office

Tax audit is an activity or a set of activities performed by Tax auditors to determine taxpayer’s correct tax liabilities for a particular accounting or tax period. Many countries have adopted a self-assessment system (SAS) including Ethiopia; Tax audit is a key feature of the self-assessment system (SAS). Researches on this area will have invaluable contribution for the tax authority to achieve its objectives and to improve its tax administration. Descriptive method was used to analyze the collected data. To achieve these objectives, both quantitative and qualitative research approach were used and data were collected from primary and secondary sources. The analysis provided the tax audit had problems in the application of information technology /SIGTAS/ tax audit to its maximum capacities, incompetent auditors to tackle tax evasion and avoidance, weak taxpayers’ education program which cannot improve the compliance level of taxpayers. The study concluded that if tax audit were conducted by competent auditors, and supported by IT, it would have resulted in effective tax administration, improved compliance level and increased tax revenue. The study recommended that the tax authority /ERCA/ should improve the capabilities of tax auditors, and apply IT in its audit to its maximum.