TABLE OF CONTENTS
Table of contents
- Historical background of the study
- statement of the problem
- objective of the study
- Significant/importance of the study
- Scope of study
- limitation of the study
- Definition of the terms.
- Literature Review
- Computer and human development
- Short history of board of internal revenue
- Administrative set-up of Imo state of internal revenue department
- Manual operation of personnel income tax auditing unit.
2.4.1 Procedure chart of auditing activities
- What is auditing
- What is personnel income tax auditing
- The principle income of taxation
- Reasons for imposition of taxes
- Research methodologies, system investigation and
- system evaluation and analysis of present system
- system investigation
- Method of data collection
- System analysis
- Input of the new system
- Output of the new system
- Implementation and evaluation
- Implement of the system
- Location and installation
- Change over procedure
- Staff development and needs
- Hardware and software requirement
- Performance criteria
- Programming language used
- Recommendation and conclusion
Regrettably, it is worthy to note that several years after independence, that the statutory allocation is in the doldrums, people expectation on the government continues to rise. Every responsible government is always anxious to provide at least the very basic amenities for the people in addition to the payments of salaries and allowance of its employees. This is a difficult task to meet up today because of the problems inherent in a manual personnel income tax auditing that aids revenue generation in the states.
The manual process can only produce report after a long period of time that may not be less than two weeks. Also it could lead to a situation where fatigue could discourage a thorough job by the auditors.
It was based on the above mentioned points and others not mentioned here, that an analysis and feasibility study was taken of the old system (manual) with its attendant problems and limitations revealed to determine the need for a new system which can overcome the entire setback associated with the manual process. The use of computer in personnel income tax auditing can reduce human errors and hence is a necessity for enhanced revenue. The programming language used to develop this software is visual basic 6.0. it is an event driven programming language which is well suited for windows application.
Modern societies are technology driven thus changing their characteristics at an accelerating rate. One of the current developments in the information sector that will greatly affect business (improve business and society) is greatly increased computer literacy of leaders and general population which will make computerization transition seamless. That is, the use of computer in any process has been applied in virtually all spheres of human Endeavour. It has equally found wide application in both the private and the public sectors of the economy.
In Nigeria, today there is no gain saying revenue for government, we hear and see computerization project in NITEL, NEPA, and so on; the government has so decided on these project because of their long run advantages over current manual techniques.
In fact, no meaningful society today can exist and function efficiently without an element of computerization in the processing system. It was based on the above point and advantages inherent in computerization that the researcher decides to embark on the study.
In order to improve this revenue so as to provide essential services, the government should be encouraged to computerize its personnel income tax collection medium as well as embark on computerized audit procedures to determine or ensure actual compliance to revenue provision and standards. To achieve this task, in Abia state, the state board of internal revenue, the sole agent for revenue generation should properly equipped with modern computers and computer literate personnel needed to carry out the doctrines of assessment as well as auditing. The manual auditing procedure and techniques currently being employed in the auditing of personnel income taxes has negative effect on clients (agents) as well as employees, more especially under critical situation such as limited tune frame to computer audit exercise. The manual process can only produce reports after a long period of time that may not be less than two weeks; these delays will mean delayed revenue to the state. Also it could lead to a situation where fatigue could discourage a thorough job by the auditors. We have to note that computer is a system which is not subjects to fatigue as a human being and can perform several jobs the same dexterity as the first job executed.
The manual system of auditing also creates an opportunity for some corrupt tax officials to manipulate and falsify in order to see undue advantage. All this problem with others mentioned above generate the need for the automation of the audit procedure involved in personnel income tax system in Abia state.
Basically, the computerization components should provide technical assistance in the design, programming, listing and the complementation of a comprehensive computerized auditing system of personnel income tax administration.
1.2. HISTORICAL BACKGROUND OF THE STUDY.
This study was conceptualized on the premise that the statutory allocation formula which has remained at 24% to the state has continued to dawdle in relation terms thereby leaving the state to look inwards for internally generated revenue. That being the case efforts should be made towards changing the present manual system of tax audit so as to maximize the revenue yield available to the government. Lance the issue of misplacement of records, alteration of facts and figure and usher in improved services by tax officials. The implementation of a computerize approach could also lead to efficiency in the use of government resources as well as reducing tax evasion.
1.3. STATEMENT OF THE PROBLEM.
Auditing of personnel income system in Abia state board of internal revenue is done manually at present and stored in audit working. Sheets kept in files. The monitoring unit of the board usually stores it. The accumulation of this document in files creates low of storage problem as in lack of space, cost of fumigation to prevent attack from insect, cost of cleaning and shelving.
Equally some of the problems posed by the manual system are: – Time consumed in retrieving clients (agents) record in subsequent years (that is searching for records).
The methods of updating files making the whole exercise cumbersome and boring. There could be mistake in calculating taxpayers’ income as well as taxes due from them. In order words, there could be a problem of wrong assessment; there could be delays per say in publishing audit reports due to so many processes and complicity of procedure involved (there is easy sensibility of the records of taxation other than the personnel that prepared it. There is lack of efficiently in the utilization of resource in the course of audit exercise.
1.4. OBJECTIVES OF THE STUDY
The objectives of the study are to create a new computer base system to solve problems associated with manual system. These objectives are
- To provide an efficient computer base system for easier documentation updating and retrieval of data about taxable of data about taxable employer of about in Abia state.
- To modernize the auditing system so that efficiency can be realized.
- To give a more accuracy and timely information for government decision making.
- To provide facilities for quick access to stored data giving at random in other to assist in management functions.
- To store the confidence of employer of labor in the personnel income tax system of Abia state.
- To eliminate all forms of corruption in personnel income tax auditing.
- To enhance the efficiency of the tax auditors by reducing the volume of manual operations of their disposal.
- To reduce the role of tax evasion among employers of labor.
- To eliminate piles of dusty physical files in the offices thereby keeping the office neat and a very healthy environment to work.
- Enhance the processes of auditing personnel income taxpayers and hence provide immediate result on any operation required on a tax payer’s file.
- In case of replacement or stranger personnel, it provide modern sophisticated information system which supplies both environmental and internally generated information to new personnel.
1.5. IMPORTANCE OF THE STUDY
Since the concept of the world as a global village emerged in the 90’s there has been a rapid development of computer technology in virtually all fields of human Endeavour.
An analogy between manual systems and computer systems provides a starting point for management both in private and public sector understanding of computer systems. This development has laid to the advancement of information management and hence necessitated the need to computerize that tax auditing system to meet with the present day needs of the government.
This research will equally analyze the present manual system of tax auditing and design a new system to solve the inadequacy inherent accurate and efficient means of tax auditing in Abia state.
The new system to be installed will have all the advantage of the computerize system which includes time, flexibility, interactivity and creating a good database.
1.6. SCOPE OF THE STUDY
The scope of this project is personnel income tax auditing in Abia state board of internal revenue due to the level of information technology in Nigeria, especially Abia state. There will be some manual operation to complete the auditing process area such as notification of auditing exercise will still be performed manually. Due to the time constraint as this project is for academic purpose leading to the award of national diploma (ND) after two years of academic excellence. The auditing of pay_ as_ you earn tax payers will be covered in the new system (case study).
1.7. LIMITATION OF THE STUDY.
This project work was faced with a number of restricting factors, which made the work impossible to get beyond this scope. The most pressing factors were:-
- lack of finance
- epileptic power supply
- inadequate supply of data
- Inadequate time for the project work.
1.7. DEFINITION OF TERMS
AUDIT WORKING PAPERS:- these are columns sheet of paper on which records of incomes of employees of the audited companies organizations are made. They are source record documents at the top right corner of the working papers are provisions for the schedule number, name of person who prepared the working paper and the dates of the preparation. At the top left corner of the working paper is made up of serial number column 2 for names of employees, columns 3 for basic salary. Column 4-15 are for the months from January to December while column 16 is allowed two rows and handle uses of maximum of twenty (20) employees per sheet of 40 rows, the second row of the two rows per employee is used to record monthly tax deducted.
IT FORM-INCOME TAX FORM A:– according to A.C. Tabansi (2000) a. this is a form given to eligible tax payers to complete and return to the tax for their assessment on which the personnel income tax audit is based. It consists of six (6) parts named A to F. details range from personnel data of tax payers to source of income as well finally declaration and attestation to the truism of the declared income and information contained in the form.
PERSONNEL INCOME TAX:- A.C. TABANSI,(2000) explains it by saying that this represents taxes on the emoluments of employees of companies, organization and establishments. It includes the basic salary and other components such as tent, transport allowance, entertainment and other subject to a stipulated limit that is determined from government legislations. The government has been able to use tax to control; inflation and other economic problems.
SYSTEM:- this is an overused word that has several meaning to various groups of people G.D Clarke Defines a SYSTEM as an organized set of objects, elements or components that are interrelated and interdependent and have a common set of basic objective such as production and satisfaction. He opined that the elements of any system are:-
MONITORING UNIT:- as written in the hand book this is the unit in charge of personnel income tax audit in Abia state board of internal revenue. It is headed by a principle interceptor of taxes who works in liaison with chairman board of internal revenue through the director direct taxes. He is assisted by several tax inspectors with accounting and management bias, as well as electrical officers who carry out routine assignments needed in the day to day running of the unit.
IT FORM 45:- as contained in A.C. Tabansi (2000) this is an acknowledgement slip prepared by the sender of a letter and signed by both the recipient and sender in which the recipient acknowledge the receipt of a letter requesting him to supply facts necessary for tax audit report is to be submitted as well as correspondences established between the board and outside parties.
IT FORM F3 (TAX DEDUCTION CARD):- also in A.C Tabansi (2000), the IT form f3 is a card prepared and the payer assessment section of the tax office and gives the employers of labour a guide to normal income tax deductions. The taxes deductible is based on the income declaration form. The employees gross earning, gross relief, gross tax due and monthly tax deductions are stated on the card. The tax card is given to the employee who uses it to make deductions of taxes during the year. at the end of the year, these card are batched and returned to the various tax offices in company of form H1 that is the annual return.
AUDITING:- in defining auditing it will be good to see how Ngwakwe C.1998 defines auditing; audit is a Latin word meaning “He hears” conventionally of records and draft account produced by companies/organizations by tax auditors to enable the auditors form opinions as to the adequacy or inadequacies of the system. It also helps in ascertaining the extent of compliances to lay down rules and regulations. The end result as required by law is for the auditor to put himself in a position where he can express an opinion concerning.
- The profit and loss account of the company.
- The balance sheet gave a true fair view of the financial position at the year end.
- If the financial statement comply with the law.
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