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

September 23, 1985 REVENUE MEMORANDUM ORDER NO. 26-85 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 sections, group supervisors and other revenue officers designated to supervise the investigation of internal revenue tax cases, and to motivate revenue examiners 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 2. Composition of the Audit Report Evaluation Committee 2.1 The Committee shall be composed of the following: 2.1/1 Deputy Commissioners 2.1/2 The Revenue Service Chief, Sector Operation Office 2.1/3 The Revenue Service Chief, Legal Office 2.1/4 The Revenue Service Chief, Assessment Office 2.1/5 The Revenue Service Chief, Collection Office 2.2 Deliberations during meetings of the Committee should always be participated in and attended by the abovementioned officials. However, only in extreme situations where it is not physically feasible for any one of them to be present shall they be represented by their respective assistants whom they will designate before a scheduled meeting or deliberation. 2.3 The Committee shall be presided over by the Deputy Commissioner, who has jurisdiction of the examiner whose report is under evaluation. 2.4 The Revenue Computer Center (RCC) shall be responsible for the selection of reports for evaluation, on a random basis, based on the Letters of Authority issued. 2.5 The Committee is hereby authorized to create a Secretariat who shall hold office at Room 309 National Office Building, BIR, Diliman, Quezon City, and whose main function shall be the processing of reports selected for evaluation and the preparation of report after 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 reports of investigation which are already approved by the Regional Director or by the Service Chief, the Commissioner of Internal Revenue or his Deputies as the case may be. 3.2 To determine whether the revenue examiner has diligently conducted his audit functions and has applied all the audit procedures and techniques which in the judgment of the Committee are deemed 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 examiner has strictly observed the procedures and requirements prescribed in existing revenue memorandum orders and other directives relevant to the audit and investigation 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 promotion, demotion, transfer or assignment of the revenue examiner or his supervisor, or recommend administrative/disciplinary action to be taken against a revenue examiner or his supervisor which is commensurate with the degree of inefficiency or incompetence which is determined and indicated from the evaluation of the audit or investigation report. 4. Methods/Procedures for the Evaluation 4.1 All Chiefs of Audit Division of the National Office, Revenue District Offices and heads of other authorized investigating units in the Revenue Regional Districts shall submit a complete list of Letters of Authority issued, in chronological order, with the corresponding addresses of the taxpayers for taxable years 1982 and 1983. For taxable year 1984 and henceforth, the list of L/As covering a six-month period shall be periodically submitted. 4.2 The said list shall then be forwarded to the RCC. 4.3 The RCC shall select at random from the list submitted the names of the taxpayer whose tax liabilities shall be the subject of evaluation. The RCC shall then forward the list of selected reports to the Secretariat. 4.4 The Secretariat in turn shall prepare a request addressed to the proper revenue officers, either in the National Office or in the Regional Office, who are in charge of the file or have custody of the report of investigation selected for evaluation, to forward immediately the selected audit report to the Secretariat of the Committee. 4.5 The Secretariat shall schedule periodic meetings of the Committee during which the latter shall deliberate on the findings and report of the investigating examiner and the supervisor. 4.6 The revenue examiner whose report is selected for evaluation and his immediate supervisor, and in some cases, the RDO, shall be requested to come to the National Office to be interviewed by the members of the Committee during the deliberation which has been scheduled previously by the Secretariat. During the deliberation, the members of the Committee shall request the interviewees to justify any omission of procedures which are deemed in the judgment of the Committee necessary to have been undertaken by them. The Committee shall prepare an evaluation report commenting on the adequacy (or inadequacy) of the audit procedures and techniques employed by the examiner and his compliance or non-compliance with existing revenue memorandum orders or directives regarding the audit and investigation 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 not be assessed without the approval of the Commissioner or unless the Commissioner directs the assessment thereof. The Committee shall, in all cases, advise the Commissioner of its findings and shall make recommendations as to what action should be taken. aisa dc 5. Meetings and Deliberations of the Committee The Audit Report Evaluation Committee shall meet at least once a week to interview revenue examiners, as well as their immediate superiors, whose reports are selected for evaluation. 6. Applicability This Revenue Memorandum Order shall be applicable to reports of investigation of internal revenue tax liabilities for taxable year beginning on or after January 1, 1982, and shall take effect immediately. (SGD.) RUBEN B. ANCHETA Acting Commissioner