Audit and Assurance in Malta

Definition:
A tax auditing is the inspection of the taxpayer’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct, as the fact that a taxpayer declared tax returns to the tax department in time does not mean that a taxpayer has completed the tax obligation.

The purpose of conducting a tax audit:
Maintain and ensure the accuracy of books of accounts; and
taxpayer’s compliance with the tax law.

Tax audit process in Malta:
The Maltese Commissioner for Revenue is entitled to raise an investigation and notify the taxpayer in writing that the department is initiating a tax enquiry. In such investigations, the taxpayer will typically be required to provide information and supporting documentation in respect of queries raised by the Revenue.

Types of tax audits:

• mail tax audit:
  this is the simple tax audit that the tax officer notified and request the taxpayer to provide additional documents or clarification on the certain tax return declaration and deductions.
• office tax audit:
  this is the additional procedure to the mail audit where a client needs to visit the tax department to bring documents and be ready for tax officers’ questions.
• field tax audit:
  this is a depth audit from tax departments if they have some special suspicion on client’s declaration, in this case a tax officer examines documents and questions a client onsite.
• desk tax audit:
  this is sometimes similar to a mail tax audit, in this kind of audit, the tax officer reviews the document that taxpayers submit to them monthly or annually as per tax law requirements.
• limited tax audit:
  this is an in-depth over-desk audit which is normally performed at the site or office of taxpayers to examine and inquire additional information from taxpayers for specific areas.
• comprehensive tax audit:
  this is the same as a field audit, a taxpayer must be informed tax officers about their visit and the types of documents that they will review and they want taxpayers to be ready for their review.

Statute of limitations in Malta:

• for income tax:
  income tax assessment may be issued not later than five years from the end of the year in which the tax return or further return for that year is filed. This period will not apply where a taxpayer would have made incomplete disclosure of material facts or wilful disclosure of incorrect or misleading information in the income tax return/s.
• for VAT:
  with respect to VAT assessments, the prescription period is limited to six years from the end of the relevant tax period or the filing date of the said tax return.

Possible implications of a tax audit for a taxpayer:

• interest and administrative penalties; and
• a criminal investigation.

How long does a tax investigation take?
A tax investigation may be completed within months or a number of years – the duration thereof would highly depend on the complexity of the case in question.

You are next on the Revenue’s hit list – how to reduce this possibility:

• file your taxes on or before the due date, and
• stay abreast of tax changes.

How can we help?
Griffiths + Associates can help on a wide range of tax investigation matters including corporate tax, personal tax, VAT and FSS audits.

Definition of internal audit:
Internal auditing is an independent, objective assurance and consulting activity designed to provide assurance that a company’s risk management, governance and internal control processes are operating effectively.

Value to the company:
Internal auditors deal with issues that are fundamentally important to the survival and prosperity of any company: unlike external auditors, they look beyond financial risks and statements to consider wider issues such as the company’s reputation, growth, etc.

The difference between external and internal audit:

External and internal audits have very different objectives.

• External audit: it is intended for shareholders or members who are outside the company’s governance structure; the objective is to add credibility and reliability to financial reports from the company to its stakeholders by giving opinion on the report; the coverage is financial statements, financial reporting risks; the responsibility for improvement is none, however there is a duty to report problems.
•  Internal audit: it is intended for the Board of Directors and senior management who are within the company’s governance structure; the objective is to evaluate and improve the effectiveness of governance, risk management and control processes; the coverage is all categories of risk reports and their management; the responsibility for improvement is fundamental, it should be done by advising, coaching and facilitating in order to not undermine the responsibility of management.

Internal audit Malta:
Griffiths + Associates acts as a consultant providing advice and acting as a catalyst for improvement in a company’s practices. Clarifying this, our internal audit activity is fundamentally concerned with evaluating a company’s management of risk as that’s what a key to a company’s success.
To evaluate how well risks are being managed, we assess the quality of risk management processes, systems of internal control and corporate governance processes, across all parts of a company and report this directly and independently to the executive management and boards.

We highlight where improvements are necessary and thereby help executive management to understand how much effectively they are on behalf of their stakeholders.

We have a professional duty to provide an unbiased and objective view. To be effective, our audit department has qualified, skilled and experienced professionals (CPAs who are part of the core team not individuals brought in as required) who work in accordance with the Code of Ethics and the International Standards.

Speaking of “Auditing Malta”, we should remember that to date statutory audits of financial statements in Malta are obligatory for all companies irrespective of the size and activity of the entities: the annual audited financial statements must be prepared in accordance with IFRS or GAPSME and submitted at the MBR annually. Despite being a statutory requirement, the overall purpose of a financial audit is to enhance the degree of confidence of intended users in the Company’s financial statements.

For the highest quality auditing Malta, turn to Griffiths + Associates. Our audit team focuses on highlighting weaknesses and making recommendations for improvement while ensuring complete integrity and impartiality.

We can provide you with assurance services covering the following:

• Statutory audit;
• Liquidation audit;
• Voluntary audit;
• Due diligence reviews; and
• Ad-hoc investigations.

This wording implies auditing. Auditing is a part of the accounting world. Some interesting fact, auditing originates from the Latin term “Audire”, which means “to hear.”

By definition, auditing is an examination of accounting and financial records that is undertaken independently. This is done to determine if the company or the business undertaking has conformed its operations to the laws and the generally accepted accounting principles.

Auditing has 2 main categories – internal and external audit.
You can read more in our expert publication above.