Creation of Audit Report Evaluation Committee to Enhance Audit Efficiency and Supervisory Performance

January 11, 1989 REVENUE MEMORANDUM ORDER NO. 05-89 (amended by RMO 34-95, as amended by RMO 42-95) SUBJECT : Creation of Audit Report Evaluation Committee to Enhance Audit Efficiency and Supervisory Performance TO : All Internal Revenue Officers and Others Concerned 1. Purpose The objective of this Revenue Memorandum Order is to enhance the effectiveness of supervisory functions performed by chiefs of audit divisions, revenue district officers, chiefs of sections, group supervisors and other revenue officers designated to supervise the audit and investigation of internal revenue tax cases, and to motivate revenue enforcement officers to apply adequate audit procedures and examination techniques through the exercise of better judgment and prudence. To attain this objective, a Committee on Audit Report Evaluation (hereinafter referred to as the Committee) is hereby created and organized. cd i 2. Composition of the Audit Report Evaluation Committee 2.1 The Committee shall be composed of the following: 2.1/1 Deputy Commissioner Victor A. Deoferio, Jr., Chairman 2.1/2 Assistant Commissioner (Planning and Research), Member 2.1/3 Assistant Commissioner (Administrative), Member 2.1/4 Assistant Commissioner (Legal), Member 2.1/5 Assistant Commissioner (Collection), Member 2.1/6 Representative of the Commissioner, Member 2.1/7 Representatives of each of the Deputy Commissioners, Member 2.2 The members of the Committee may, as the exigencies of its functions may require, be divided into two groups, each group to deliberate separately on the audit reports selected for post audit evaluation. The Chairman shall assign cases selected for post-audit evaluation to each group. 2.3 Deliberations during meetings of the Committee should always be participated in and attended by the above-mentioned officials. However, only in extreme situations where it is not feasible for any one of them to be present should they be represented by a subordinate official whom they will designate before a scheduled meeting or deliberation. 2.4 The Committee meetings shall be presided over by the Chairman, or any of the members of the Committee who he may designate. 2.5 The Committee is hereby authorized to create a Secretariat from the supportive personnel assigned in their respective offices to process the selection of reports for evaluation. 3. Function and duty of the Committee It shall be the duty of the Committee - 3.1 To conduct selective audit review and evaluation of audit and investigation reports which are already approved by the Regional Director or by the Assistant Commissioner for Assessment, Assistant Commissioner for Special Operations Service, Deputy Commissioners or the Commissioner as the case may be. 3.2 To determine whether the revenue enforcement officer has diligently conducted his audit functions and has applied all the prescribed audit procedures and techniques, of which, in the judgment of the Committee, are deemed reasonably necessary in the light of the facts and circumstances of each case for the proper determination of the correct internal revenue tax liability of the taxpayer. 3.3 To determine whether the revenue enforcement officer has strictly observed the procedures and requirements prescribed in existing revenue memorandum orders and other directives relevant to the audit, investigation and reporting of internal revenue tax liabilities. 3.4 To determine whether the immediate supervisor has prudently and competently exercised his supervisory duties and functions. 3.5 To recommend, as the circumstances may warrant, the demotion, transfer or assignment of the revenue enforcement officer or his supervisor, or recommend administrative/disciplinary action to be taken against a revenue enforcement officer or his supervisor which is commensurate with the degree of inefficiency or incompetence which is determined and indicated as a result of the evaluation of the audit or investigation report. 4. Methods/Procedures for evaluation 4.1 The Chiefs of the Assessment Branches, the Assistant Commissioners for Assessment and Special Operations Service Intelligence and Investigation Office, Special Investigation Branches and the heads of special investigation teams or groups shall prepare a monthly list of approved reports of audit and investigation submitted or forwarded to and received by them beginning March 1, 1989, in a form prescribed therefor (Annex A). 4.2 The said list shall be forwarded to the "Secretariat, Audit Report Evaluation Committee," Room 503, National Office Building, Bureau of Internal Revenue, Diliman, Quezon City, within ten days after each month. 4.3 The Secretariat shall select at random from the said lists the names of the taxpayers whose internal revenue tax liabilities have been audited/investigated, the reports on which will be evaluated by the Committee. The Secretariat shall prepare requests addressed to the proper revenue officers of either the National Office or the Regional Office or other investigation units, who are in charge with the file or custody of the reports of investigation of the tax liabilities of the taxpayers selected for evaluation to forward immediately the selected audit reports to the Secretariat of the Committee. 4.4 The Secretariat shall send the audit reports to each member of the Evaluation Committee for their individual review and evaluation. Each member of the Committee shall have at least one day to go over the reports and to list down the deficiencies which will be discussed with the revenue enforcement officer and his supervisors during a deliberation meeting to be scheduled by the Secretariat. 4.5 The Secretariat shall schedule periodic meetings of the Committee during which they will deliberate on the findings and report of the investigating revenue enforcement officer and his supervisor(s). 4.6 The revenue enforcement officer whose report is selected for evaluation and his supervisor, and in some cases, the Revenue District Officers and Audit Division Chiefs, shall be requested to come to the National Office to be interviewed by the members of the Committee during the deliberation which has been previously scheduled by the Secretariat. During the deliberation, the members of the Committee shall request the revenue enforcement officer to justify any omission of procedures which in the opinion judgment of the Committee, are deemed necessary to have been undertaken by the revenue enforcement officer. The Committee shall prepare an evaluation report commenting on the adequacy (or inadequacy) of the audit procedures employed by the revenue enforcement officer and his compliance (or noncompliance) with existing revenue memorandum orders or directives regarding the audit, investigation and reporting of internal revenue tax cases. 4.7 If the evaluation of the report indicates that an additional deficiency internal revenue tax is still due from the taxpayer, such additional deficiency tax shall be assessed. The Committee shall, in all cases, advise the Commissioner of its findings and shall make recommendations as to what action should be taken. 5. Meetings and deliberations of the Committee The Committee shall meet regularly to interview revenue enforcement officers, as well as their supervisors, whose reports are selected for evaluation. 6. Applicability This Revenue Memorandum Order shall be applicable to reports of audit/investigation of internal revenue tax liabilities submitted beginning March 1, 1989. acd Revenue Memorandum Order No. 26-85 dated September 23, 1985, is hereby superseded. (SGD.) JOSE U. ONG Commissioner of Internal Revenue