The Effects of Tax Audit on Revenue Collection: Case of Kenya Revenue Authority

Abstract

The study was on the effects of tax audit on revenue collection a case of the Kenya Revenue authority. The study is limited to the Nairobi West region of the Kenya Revenue Authority. This study adopted a descriptive approach. Data sources that were used were secondary data from Kenya Revenue Authority reports. Data was analyzed using T-test analytical model. From the t-statistics results the parametric Pearson correlation or ‘r’ value is significant for tax paid before audit and tax paid after audit as it clearly indicates there is an increase in the tax paid after audit, this is clear for random tax audit, cut-off tax audit and conditional tax audit. Also from the analysis of the taxes collected from a certain firm two years prior to the audit and two years after the audit, there is an increase in tax collected after the audit. Thus it is right to say that tax audit is directly related to revenue collection. Therefore it is clear that the more tax audits conducted the more revenue collected in the audit and in the subsequent years as the companies are better informed. The study recommends that the tax audit reports be submitted to the public and a standard procedure to be found in choosing the companies that random audit is conducted. A study should be conducted on the procedures followed during audit to see if all the Kenya Revenue employees follow the same procedures or a standard procedure is in place and adhered to.