CITN Tax Audit
Past Questions
24+ verified Tax Audit past questions for CITN. Step-by-step worked answers in 5 Nigerian languages.
Tax Audit topics (2)
Sample Tax Audit past questions
1. Tax audit is a:
- A. Marketing review
- B. Examination of taxpayer records
- C. Salary review
- D. Stock count
Answer: B
AI Explanation
**The reasoning** A **tax audit** is an official examination conducted by tax authorities (like FIRS in Nigeria) to verify that a taxpayer's financial records, tax returns, and declarations are accurate and comply with tax laws. Think of it as a "financial check-up" where auditors review your books, receipts, invoices, and accounts to ensure you've reported your income correctly and paid the right amount of tax. The key principle here: **Audit = systematic examination of records for accuracy and compliance.** **Why the wrong options tempt you** - **A (Marketing review)** – This examines sales strategies and customer reach, not tax matters - **C (Salary review)** – This deals with employee compensation adjustments, unrelated to tax verification - **D (Stock count)** – This is an inventory check for goods in a business, not financial/tax records These options use business terms to confuse you, but they don't involve examining tax compliance. **Quick takeaway** Remember: "Audit" always means **examining records to verify accuracy** – when it's a *tax* audit, you're checking tax records specifically, just like JAMB audits answer sheets to verify exam integrity!
2. Self-assessment requires the taxpayer to:
- A. File and compute their own tax
- B. Wait for FIRS
- C. Pay no tax
- D. Use a lawyer
Answer: A
AI Explanation
**The reasoning** Self-assessment is a tax system where **you take responsibility for your own tax affairs** — not the government. Under this system, taxpayers must: 1. Calculate how much tax they owe 2. File their tax returns themselves 3. Pay the correct amount to FIRS (Federal Inland Revenue Service) Think of it like grading your own test paper and submitting it. FIRS doesn't send you a bill first; **you tell them** what you owe. This is the principle behind modern taxation in Nigeria and most countries — the taxpayer assesses themselves, hence "self-assessment." **Why the wrong options tempt you** **B)** sounds safe — "just wait for the tax people" — but that's the *old system* (official assessment), not self-assessment. **C)** is wishful thinking! Self-assessment doesn't mean tax-free; it means you calculate it yourself. **D)** You *can* use professionals to help, but it's not required. The key word is **self** — you're responsible, whether you hire help or not. **Quick takeaway** Self-assessment = **You calculate, you file, you pay** — not waiting for government to do it for you.
3. Tax investigation is more serious than tax:
- A. Audit
- B. Filing
- C. Refund
- D. Holiday
Answer: A
AI Explanation
**The reasoning** Tax investigation and tax audit are both examination processes, but they differ in **severity and scope**. A tax audit is a routine, systematic review of financial records to verify accuracy — think of it as a standard check-up. Tax investigation, however, is a deeper, more serious probe triggered when authorities suspect fraud, evasion, or significant irregularities. It's like the difference between a routine medical check and a forensic examination when something suspicious is found. The principle: **Investigation > Audit in seriousness**. Investigations involve potential legal consequences, while audits are often preventive or compliance-focused. **Why the wrong options tempt you** - **Filing** is just submitting returns — a basic requirement, not an examination process - **Refund** is getting money back when you've overpaid — completely unrelated to scrutiny - **Holiday** is a tax break/exemption period — sounds official but has nothing to do with examination intensity **Quick takeaway** Remember: Audit checks if you're correct; investigation suspects you're wrong. Investigation is always the more serious process because it assumes something is already amiss.
4. A tax audit primarily checks:
- A. Marketing plans
- B. Accuracy of tax returns
- C. Staff salaries
- D. Office rent
Answer: B
5. A best-of-judgment assessment is used when records are:
- A. Complete
- B. Inadequate
- C. Audited
- D. Filed
Answer: B
6. Tax audit differs from investigation in that audit is:
- A. Criminal
- B. Routine compliance check
- C. Secret
- D. Optional
Answer: B
7. Tax audit primarily aims to:
- A. Increase tax rates
- B. Verify the correctness of taxpayer's returns and computations
- C. Sell services
- D. Replace the auditor
Answer: B
AI Explanation
Tax audit verifies that returns and self-assessments truthfully reflect the taxpayer's affairs.
8. Best of Judgment (BOJ) assessment is issued when:
- A. Taxpayer files perfectly
- B. Taxpayer fails to file or files questionable returns
- C. A refund is due
- D. An audit concludes successfully
Answer: B
AI Explanation
Where a taxpayer fails to file or submits questionable returns, the tax authority can raise a BOJ assessment.
9. A 'desk audit' is one performed:
- A. At the taxpayer's premises
- B. Largely from documents reviewed at the tax authority's office
- C. By the police
- D. By external consultants only
Answer: B
AI Explanation
Desk audits review filed returns and supporting documents at the revenue office — less invasive than field audits.
10. A 'field audit' involves:
- A. Soccer-stadium counting
- B. On-site visit to the taxpayer's business to inspect books and records
- C. Phone calls only
- D. Online forum review
Answer: B
AI Explanation
Field audits involve revenue officers visiting the taxpayer's premises to inspect books, stock and operations.
11. FIRS may invoke 'powers of substitution' under CITA when:
- A. Taxpayer is compliant
- B. Tax due is unpaid — by appointing a third party (e.g. bank) to pay over funds belonging to taxpayer
- C. A refund is processed
- D. Election year
Answer: B
AI Explanation
Substitution powers allow FIRS to appoint a third party holding funds for the taxpayer to remit the tax due directly.
12. The audit working file primarily serves as:
- A. Marketing material
- B. Evidence of audit work performed and conclusions reached
- C. A budget
- D. A staff handbook
Answer: B
AI Explanation
Audit working papers document procedures, evidence, conclusions — protect both auditor and authority.
13. A taxpayer aggrieved by an additional assessment must object within:
- A. 7 days
- B. 30 days
- C. 60 days
- D. 1 year
Answer: B
AI Explanation
Tax statutes (CITA, PITA, VAT Act) generally require objections within 30 days of service.
14. If a taxpayer–authority dispute is not resolved at objection stage, the next forum is typically:
- A. Supreme Court
- B. Tax Appeal Tribunal (TAT)
- C. National Assembly
- D. CIBN
Answer: B
AI Explanation
TAT (under FIRS Act 2007) is the first-instance tribunal for unresolved tax disputes.
15. Statute-barred period for raising additional assessment (general rule) is:
- A. 1 year from year of assessment
- B. 6 years (or unlimited where fraud/wilful default)
- C. Indefinite always
- D. 30 days
Answer: B
AI Explanation
Most Nigerian tax statutes provide a 6-year limitation, lifted to indefinite where there is fraud or wilful default.
16. Penalty for late filing of CIT returns is typically:
- A. Zero
- B. ₦25,000 in first month + ₦5,000 each subsequent month
- C. ₦1 million flat
- D. 5% of revenue
Answer: B
AI Explanation
CITA penalty: ₦25,000 in the first month of default plus ₦5,000 for each subsequent month.
17. Interest on unpaid tax under CITA is computed at:
- A. MPR only
- B. Prevailing CBN minimum rediscount rate plus a spread (commonly MRR + 5%)
- C. Always 1%
- D. 30% per annum
Answer: B
AI Explanation
Interest under CITA is generally based on the CBN minimum rediscount rate plus a statutory spread.
18. The 'three-line approach' to tax audit objection–appeal is:
- A. Object → Refer to TAT → Appeal to Federal High Court
- B. Object → Mediate → Negotiate
- C. Pay → Object → Withdraw
- D. Litigate immediately
Answer: A
AI Explanation
Typical sequence: file objection → refer dispute to TAT → appeal to Federal High Court on points of law.
19. A tax investigation (vs an audit) typically arises from:
- A. Routine cycle review
- B. Suspected fraud/wilful default
- C. VAT registration
- D. Filing on time
Answer: B
AI Explanation
Investigations are triggered by indicators of fraud or wilful evasion — broader and deeper than routine audits.
20. Tax authorities are empowered to compel production of books from taxpayers under:
- A. Statutory information-gathering powers in tax laws
- B. Verbal request only
- C. Newspaper notices
- D. Court summons only
Answer: A
AI Explanation
FIRS, SIRS etc. have statutory powers (e.g. FIRS Act, CITA, PITA) to issue notices compelling production of books and records.
21. An audit 'reconciliation meeting' is held to:
- A. Replace the audit
- B. Discuss findings with taxpayer and resolve disagreements before final assessment
- C. Set new tax rates
- D. Replace TAT
Answer: B
AI Explanation
Reconciliation meetings narrow areas of disagreement so final assessments are issued with fewer disputes.
22. VAT input/output reconciliation is a common focus of:
- A. Personal income tax audit
- B. VAT audits
- C. Property audits
- D. Customs only
Answer: B
AI Explanation
VAT audits routinely reconcile input VAT (purchases) and output VAT (sales) to verify net VAT payable/recoverable.
23. Withholding tax credit notes are typically reviewed in:
- A. Tax audits to validate WHT credits claimed
- B. Bank reconciliations only
- C. Inventory counts
- D. Marketing reviews
Answer: A
AI Explanation
Auditors verify that WHT credits claimed by taxpayers are supported by valid WHT credit notes from tax authorities.
24. Maintaining records for tax purposes is generally required for a minimum of:
- A. 1 year
- B. 3 years
- C. 6 years
- D. Indefinitely
Answer: C
AI Explanation
Most Nigerian tax statutes require taxpayers to retain records for at least 6 years.
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