Relationship between Income Size, Inspection and VAT Compliance: Evidence from Private Firms in Kenya

Many developing nations in around the globe, Kenya included are struggling with the problem of tax non-compliance by the taxpayers. In Kenya, the problem of tax non compliance among business firms constrains the realization of revenue collection targets by Kenya Revenue Authority (KRA). This study aimed at investigating the relationship between the size of taxpayer’s income, inspection by the tax authorities, use of tax registers and VAT compliance. A sample of 233 registered firms was selected and data collected using self administered questionnaires to personnel in finance department of the selected firms. The data was analysed both descriptive and correlation analysis. The study revealed that VAT non compliance is high among the middle-income business firms and that Inspection of business firms by tax authorities had a slight positive relationship with VAT compliance (r =0.15, p<0.05) The study revealed that effective and regular use of Tax Registers had a significant positive relationship with VAT compliance (r = 0.622, p<0.05). The study recommends that stringent compliance measures and close monitoring should be observed among the mid-sized private firms. Tax authorities should also encourage effective use of tax registers through regular but impromptu inspections.Key words; Tax compliance, Value Added Tax, Keny

Application of Business Risk Auditing among Audit Firms in Western Region, Kenya

Auditing remains an important tool of management oversight. Auditing theory indicates that the discipline draws its legitimacy on its ability to enhance confidence on the financial statements by its users. However, there has been increasing criticisms addressed to the audit profession in the recent past especially after the failure of several international and local firms which led to need to revisit the oversight role of audit. To remain relevant, auditors have been compelled to reengineer their audit approaches to be more responsive to business risks. In spite numerous calls of the departure from traditional audits, little is known as to how auditors in developing economies such as Kenya has responded to increasing business risks in their engagements. The purpose of this study was to evaluate the extent of application of Business Risk among audit firms in Western Region, Kenya. Cross-sectional survey research design was used. The target population of the study is 48 Audit firms in which saturated sampling technique was used. Respondents comprised of Audit Senior and Audit manager selected purposively from each firm. Primary data was collected using self administered questionnaires which was pretested and supplemented by secondary data from published accounts of client firms. The study established that BRA approach is practiced only to a moderate extent in the study area (mean 3.367, SDEV 0.086 in a scale of 5). The study provides rationale for BRA and its findings provides direction for response to business risks among audit practitioners besides enriching the literature of audit risk and fee models with expanded variables and evidences from emerging economies.Key words: Business Risk Auditing, Audit firms, Keny