The role of auditing in detecting tax evasion

Abstract

Forthcoming paper opens questions about new area of audit operations and a new practical challenge for audit profession - detecting tax frauds. A growing problem of tax evasion, expressed as an act of illegal reduction of tax liabilities, points out to the inability of state authorities to reduce or neutralize tax evasion volume. Created as a consequence of previous fact, forthcoming paper has an objective to examine whether, and in which way, auditing financial statements could contribute to initial signalizing of tax evasion through expressing opinion about veracity and objectivity of accounting statements. Special focus is put on related-party transactions with entities registered in offshore zones. As they progress more and more, these transaction become materially significant, thus becoming a subject of audit examination