Tax audit affects revenue collection in that it promotes voluntary compliance of taxpayers which increases revenue. It also determines the accuracy of returns so as to ensure the right taxes are submitted. With tax audit tax liability can be easily declared and matters that need adjustment are identified.
It will reveal undeclared taxable incomes
It will reveal non allowable expenses that were allowed by the tax payer
Improves compliance
prevents tax evasion and avoidance
All these will enable the government to maximize on its revenue collection for planning and budgeting purposes
In my opinion I think this question is more about the "reliability of Tax Audit in revenue collection" than just the process itself... In the Accountancy profession It is very important to understand the language... For the fact that the question is based on Tax Audit (not Tax review) the opinion that the Auditor will Express will give a "reasonable assurance" that the Income Tax as calculated by the client or taxpayer is free from all material misstatements either due to fraud or error... it is very important to note that this Assurance is "not Absolute"... Tax Audit does help the Commissioner of Inland Revenue to collect revenues from taxpayers and that is without a doubt.
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