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Are your company's financial records audit proof?

by , 25 August 2014
When SARS decides to audit your company it'll go through everything. Every record and financial detail is up for scrutiny at this point.

That's why today, you should ask yourself: 'Are my financial records audit proof?'

If they're not, SARS may find an error that can lead to serious penalties, especially if it can prove tax evasion or avoidance.

But it's not just errors the SARS auditors will look for. It'll also look for, what the Practical Tax Loose Leaf Service calls, 'Sham Transactions'.

Here's what this is so you can ensure SARS won't find any in your records...


What is a sham transaction?

When SARS audits you and looks through your records, it'll look at any transactions your company has made and check them against the agreements that govern them. (For example, it'll check the IRP5 you gave an independent contractor versus the contract you signed with him.)
It'll also compare these transactions against the law to ensure you comply.
SARS may spot any transactions that appear to have a different intention from what the agreement suggests. This is a sham transaction.
A sham transaction covers up the original or true nature of the transaction. This is another form of tax avoidance and you could pay up to 200% penalties for this. 
So how do you avoid this?
*********** Reader's choice  ***************

How do you avoid SARS catching on to this?

It's simple, don't enter into them. You must be completely honest in all your transactions and agreements. 
Otherwise, SARS will catch you out. It may not be today or even this year, but it'll eventually decide to audit your business and then it'll spot your dirty dealings. 
So rather avoid 200% penalties simply by complying with the law.

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Are your company's financial records audit proof?
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