Determinants of Tax Audit Effectiveness in Ethiopia Ministry of

School: Royal Melbourne Institute of Technology - Course: MANAGEMENT 103 - Subject: Accounting

College of public Finance, Management and Accounting Department of Accounting & finance Determinants of tax audit effectiveness, In the case of Ethiopia ministry of revenue west Addis Ababa small tax payer's branch office A Proposal Submitted to the Accounting & finance, College of Finance, Management and Accounting, Ethiopian Civil Service University, in partial Fulfillment of the Requirement for the Degree of Master of Science in Accounting & finance. By Melese Tegegne ID. NO. ECSU1801684 Advisor: RAHEL JIGI (PHD) FEB, 2021 Addis Ababa, Ethiopia

Table of Contents CHAPTER ONE..............................................................................................................................6 1. INTRODUCTION.......................................................................................................................6 1.1. Background of the study.......................................................................................................6 1.2 Statement of the problem.......................................................................................................8 1.3. Objective of the Study..........................................................................................................9 1.3.1. The General Objective of the Study...........................................................................9 1.3.2. Specific Objectives of the Study.................................................................................9 1.4. Research Questions.............................................................................................................10 1.5 Hypotheses of the study.......................................................................................................10 1.6. Scope and Limitation of the Study.....................................................................................11 1.6.1. Scope of the Study......................................................................................................11 1.6.2. Limitation of the Study..............................................................................................11 1.7. Significance of the Study....................................................................................................11 1.8. Definition of Keywords or key...........................................................................................11 1.9. Ethical Consideration..........................................................................................................12 1.9.1. Organizational of the thesis proposal...........................................................................12 CHAPTER TWO...........................................................................................................................13 LITERATURE REVIEW...............................................................................................................13 2. 0 Theoretical literature...........................................................................................................13 2.1. Definition of Tax Audit.......................................................................................................13 2.2. Theory of Audit...................................................................................................................13 2.2.1. The Lending Credibility Theory...............................................................................13 2.2.2. The theory of Inspired Confidence...........................................................................14 2.2.3. Deterrence theory......................................................................................................14 2.2.4. Contingency theory....................................................................................................14 2.3. Types of tax Audits.............................................................................................................15 2.3.1. Desk Audit or Verification.........................................................................................15 2.3.2. Field Audit..................................................................................................................15 2.3.3. Registration Check....................................................................................................16 2.3.4. Advisory Audits..........................................................................................................16

2.3.5. Record keeping audit.................................................................................................16 2.3.6. Refund Audit..............................................................................................................16 2.3.7. Comprehensive or Full Audit....................................................................................17 2.3.8. Fraud investigation....................................................................................................17 2.4. Determinants of Tax Audit effectiveness............................................................................17 2.4.1. Audit Quality..............................................................................................................17 2.4.2. Management support.................................................................................................18 2.4.3. Staff Expertise............................................................................................................18 2.4.4. Planning......................................................................................................................18 2.4.5. Audit Attributes.........................................................................................................19 2.4.5. Organizational independence...................................................................................19 2.4.6. Organizational Setting...............................................................................................20 2.6. Tax Audit Performance Measurement................................................................................22 2.5. Conceptual Framework of tax audit effectiveness..............................................................22 2.6. Empirical Literature............................................................................................................23 CHAPTER