OPTIMAL MEASURES FOR MINIMIZING THE TAX AUDIT EXPECTATION GAP IN KENYA
Keywords:
Tax Audit Expectation Gap, Tax Authority, Corporate Tax PayersAbstract
Purpose: The purpose of this study was to find out whether a tax audit expectation gap exists between the tax authority and corporate tax payers.
Methodology: The study adopted a descriptive research design.
Findings: The study findings confirmed that, indeed, a tax audit expectation gap existed between corporate tax payers and the tax authority. In addition, better tax compliance standards, forensic accounting, I-tax implementation and user education were found to be important measures in narrowing this tax audit expectation gap.
Unique contribution to theory, practice and policy: The study will be of significance to the following stakeholders: users of financial information including the corporate tax payers, the creditors, customers and suppliers. The study will provide information as to what is termed reasonable and unreasonable expectations. The tax authority in Kenya and those in other countries will find this study useful as it will highlight the tax audit expectation gap and how it can be reduced by several measures notably better tax compliance standards, forensic accounting, I-tax implementation, educating members and enhanced compliance with International Accounting Standards (IAS) and International Standards of Auditing (ISA). The findings of this study will also inform policy making with regard to corporate tax payers as pertains to duties and roles of auditors, the educative role of management, the introduction of stringent reporting and the government’s role in supervising the affairs of corporate tax payers. This study will be an invaluable addition to literature pertaining to corporate tax payers, and measures for reducing the tax audit expectation gap. Scholars who wish to further their education on the area of the expectation gap may use the findings of this study to do so.
Downloads
References
Adrian, K., Lawrence, A. & Cristal., S.(2009). Forensic Accounting: Public Acceptance towards Occurrence of Fraud Detection. International Journal of business management. 4 (11)
Ali, A., Heang, L., Mohamad, R. & Ojo, M. (2008).Internship and Audit Expectation gap Among Undergraduate Students in University Utara, Malaysia. Journal of Financial Reporting and Accounting, 6(1): 55-74.
American Institute of Certified Public Accountants (AICPA) (1992).Statement of position regarding mandatory rotation audit firms of publicly held companies. SEC Practice Section, Division for CPA Firms.
Appah, E. (2010). An Evaluation of Audit Expectation Gap: Issues and Challenges, International Journal of Economics Development Research and Investment, 1(2and3): 123-128.
Atu, O. K. & Atu, E. R. (2010). Auditing: The Journey so far and its expectation gap.The Nigerian Accountant., 43(2): 46-52.
Bologna, G.J. & Lindquist R.J. (2007). Fraud Auditing and Forensic Accounting: New Tools and Techniques, Hoboken, New Jersey: Wiley Publication.
Boyle, C. (2004).The structural origins of conflicts of interest in the accounting profession. Business Ethics Quarterly, 14(3): 377-398.
Christensen, A. (2009). Evaluation of Tax Services: A Client and Preparer Perspective. Journal of the American Taxation Association, 14 (2):60-87.
Chukwunedu, O. & Okoye, E. (2011).Forensic Accounting and Audit Expectation Gap - The Perception of Accounting Academics (September 1, 2011). Available at SSRN: http://ssrn.com/abstract=1920865
Cohen Commission: Commission on Auditors’ Responsibilities (1978). Report, Conclusions and Recommendations, New York, AICPA.
Collins, H., Milliron, C. & Toy, R. (2010). Determinants of Tax Compliance: A Contingency Approach. Journal of the American Accounting Association, 14 (2):1-29.
Conway, A. & Rouse, W. (2002). This is a Job for Superman: Calling in a Forensic Accountant. The Journal of Corporate Accounting and Finance, May/June 2002, p 23.
Damanpour, F. & Gopalakrishnan, S. (2011).The dynamics of the adoption of product and process innovations in organizations. Journal of Management Studies, 38 (1), 45-65.
Dixon, R., Woodhead, A. D. and Sohliman, M. (2006).An Investigation of The Audit Expectation Gap in Egypt. Managerial Auditing Journal, 21: 293-30.
Fadzly M. & Ahmad, Z. (2004).The Audit Expectation Gap: The Case of Malaysia. Managerial Auditing Journal, 19(7): 897-915.
Fowzia, R. (2008). An Empirical Study on Audit Expectation Gap: Role of Auditing Education in Bangladesh. Department of Business Administration. Stamford University, Bangladesh.
Hamisi S. (2012). The Factors Affecting the Implementation of International Public Sector Accounting Standards in Kenya, Unpublished Master’s Thesis.
Hite, A. & Hasseldine, J. (2010).Tax Practitioner Credentials and the Incidence of Internal Revenue Service (IRS) Audit Adjustment. Accounting Horizons 17 (1):1-14.
Ismail, N.A. & King, M. (2010). Firm Performance and Accounting Information Systems (AIS) alignment in Malaysian SMEs. International Journal of Accounting Information Systems, 6 (4): 241-259.
ITD, (2010).Revenue Administration in Sub-Saharan Africa: Comparative Information Series no.1 International Tax Dialogue: available at http://www.itdweb.org/documents/AfricaStudy.pdf accessed on 30thDecember 2014
Jackson, B., Milliron., C. & Toy., D. (2008). Tax Practitioners and the Government. Tax Notes: 333-341.
Kenya Revenue Authority, Operations Report. (2007/2008).www.kra.org. Accessed on 15 May, 2015.
Lee, T. H. & Azham, M .A. (2009). The Audit Expectation Gap: A Review of the Contributing Factors. Journal of Accounting and Auditing, 4(8): 30-37.
Lee, T., & Ali, A. (2008).The ‘knowledge gap’ and ‘deficient performance gap’ between auditors and corporate managers, an empirical study in Malaysia. GadjahMada International Journal of Business, 10(1):13–33.
Lee, T., & Azham, A. (2008).The audit expectation gap: A review of the contributing factors. Journal of Modern Accounting and Auditing, 4(8) (Serial No.39)
Lee., T.H., Gloeck, J.D. & Palaniappan., A.K. (2007). The audit expectation gap: An empirical study in Malaysia. The Southern African Journal of Accountability andAuditing Research,7(1): 1-15.
Liggio., C.D. (1974). The Expectation Gap: The Accountant's Waterloo. Journal of Contemporary Business, 3(3): 93-115.
Nicholas, N. B. & Price, J. E. (2004). Does Representation Matter in IRS Office Audits? Journal of the American Taxation Association 26 (1):21-42.
OECD. (2010). Tax Intermediaries Study. http://www.oecd.org/tax/administration/3 9003880.pdf.
Ojo, M. (2006). Eliminating the Audit Expectations Gap: Myth or Reality? Munich Personal RePeEc Archives. http://mrpa.ub.uni-muenchen.de/232/mrprapaper. Accessed on 2nd March 2013.
Owojori, A. A. & Asaolu, T. O. (2009). The Role of Forensic Accounting in Solving the Vexed Problem of Corporate World. European Journal of Scientific Research 29 (2): 183-187.
Porter, B. & Gowthorpe., C. (2004). Audit expectation-performance gap in the United Kingdom in 1999 and comparison with the Gap in New Zealand in 1989 and in 1999. The Institute of Chartered Accountants of Scotland, Edinburgh.
Porter, B. (1993). An Empirical Study of the Audit Expectation – Performance Gap. Accounting and Business Research. 24(93).
Porter, B. & Gowthorpe., C. (2004). Audit expectation-performance gap in the United Kingdom in 1999 and comparison with the Gap in New Zealand in 1989 and in 1999. The Institute of Chartered Accountants of Scotland, Edinburgh.
Porter, B., Simon, J. & Hatherly, D., (2005). Principles of External Auditing. John Wiley & Sons, Ltd.
Rien, A. F. (2014). Audit Expectation Gap and Its Implication on Credit Decision Making. International Journal of Scientific and Technology Research, 3(2): 250-257.
Salehi, K. and Rostami, L. (2009). Audit expectation gap: International evidences. International journal of academic research, 1(1).
Schisler., L. & Galbreath., G.(2011). Responsibility for Tax Return Outcomes: An Attribution Theory Approach. Advances in Taxation, 12:173-204.
Seelmann, J. et al., (2011). Benefits of a computerized integrated system for taxation: iTax case study”. A handbook for practitioners based on GIZ tax sector experience in Tanzania and the Philippineshttp://www.taxcompact.net/documents/ITC_iTax-case-study.pdf. Accessed 30th March, 2012
Suluo, A.J.S. (2013). The role of information and communication technologies in insurance industry: the case of Tanzania insurance organizations, MBA dissertation, Mzumbe University.
Victor-Nyambo, G.T. (2009). The role of information and communication technology (ICT) in Taxation: the case of Large Taxpayer Department Tanzania Revenue Authority, MBA dissertation, Mzumbe University.
Zeithaml, V.A., & Bitner M. J. (2000). Services Marketing (2nd ed.). New York : McGrawHill. Inc.
Zikmund, P. E. (2008). Reducing the expectation gap: Forensic audit procedures. The CPA Online Journal, available at http://www.nysscpa.org/cpajournal/2008/608/essential s/p20.htm, Accessed 22nd November, 2014.
Downloads
Published
How to Cite
Issue
Section
License
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work’s authorship and initial publication in this journal.
