PROBLEMS OF THE TAX AUDIT IN COLOMBIA

The tax audit has been disfigured. Most of the societies in Colombia are closed,

that is, they are not publicly traded and have few partners or shareholders, and generally a

partner or shareholder has the status of controlling entity, therefore, he is the direct or

indirect administrator of the company.

That implies, in practice, that the fiscal reviewer becomes a subordinate

employee of the administrator, who, as the head of the assembly, may appoint him and

withdraw him at will. So it is worth analyzing this figure and its shortcomings.

What is the tax audit?

It is the social body that must ensure the proper functioning of the company:

operations, compliance with the law and statutes and accounting and financial management,

verification of the conduct of administrators and employees, the interest of the owners, of

the community in general and of the State, through the governmental control entities of

business activity. All functions of the fiscal reviewer are described in the Commercial

Code.

What societies have to have fiscal review?

In principle, all public limited societies and any other type of societies whose assets

are equal to or greater than 5,000 current monthly legal minimum wages (CMLMW) or

gross income equal to or greater than 3,000 CMLMW in the immediately preceding year.
What are the main problems or challenges facing the tax audit in Colombia?

As mentioned above, the autonomy of the fiscal reviewer with respect to the

administrator disappears and he ends up in an obvious conflict of interest that prevents him

from fulfilling his duties with respect to the other partners or shareholders who do not

participate in the administration, failing to fulfill his main function.

The fiscal reviewer ceased to be that permanent internal auditor who is accountable

to the shareholders meeting or board of shareholders and became an advisor to the

administrator who decides matters of the company's operation regarding contracts,

accounting and taxes, among other matters. This completely blurs its raison to be, because

as being the one who advised the decisions of the administration, it will have little incentive

to fully inform and with the necessary objectivity the maximum social body, the

community and the State regarding the company's actions, so no watch over the interests

that were legally entrusted to you.

What measures could be taken to recover the fiscal audit as an active and suitable

body in commercial companies?

Some structural reforms are needed. The first is related to his appointment. Just as

the partners or shareholders who have the status of administrators cannot vote to approve

the financial statements of their management, they should not be able to vote to appoint the

fiscal reviewer due to conflict of interest.

It is also pertinent to recognize in which cases the tax audit lacks any object. The

simplest example is in those societies with a single shareholder or where a single

shareholder has more than 90% participation. Even if the amount of assets or income is
met, there should be no fiscal review because it is a very high transaction cost considering

that in effect the effect will be useless.

OBJECTIVES AND IMPORTANCE OF THE TAX REVIEW

OBJECTIVES

Permanent control and analysis so that the assets of the company are adequately

protected, conserved and used, and so that the operations are executed with the maximum

possible efficiency; equally permanent surveillance so that the administrative acts, at the

time of their celebration and execution, conform to the corporate purpose of the company

and the current legal and statutory and regulatory norms, so that irregularities are not

consumed to the detriment of the shareholders, third parties and the institution itself;

constant inspection of the handling of accounting books, record books, accounting

documents and archives in general, to ensure that the records made in the books are correct

and meet all the requirements established by law, so that they can be true that the

supporting documents of the economic facts, of the rights and obligations of the company

are properly conserved, as a basis for their accounting information; issuance of

certifications and reports on the financial statements, if the balance sheet reliably presents

the financial situation and the profit and loss statement the result of the operations in

accordance with generally accepted accounting standards; collaboration with government

regulatory and control entities.

IMPORTANCE

The Political Constitution, article 334, assigns the State the general direction of the

economy, and grants it the power to intervene by mandate of the law in the different stages

of the economic process, from the production to the consumption of the goods and services.

Many are the laws, decrees and regulations that have been issued under certain

constitutional norms, regulating several and numerous aspects of the economy in all its

sectors.

The tax audit plays a particularly important role in the life of the country, to the

point that effective, independent and objective work is an incentive for investment, savings,

and credit and in general facilitates dynamism and economic development. As an

inspection body, the auditor's office is structured with the aim of giving security to the

owners of the entities on the submission of the administration to the legal and statutory

norms, as well as on the security and conservation of the social assets, in addition to the

conduct to be observed in order to ensure the fidelity of the financial statements.

The functions of the fiscal reviewer duly exercised, for the rest, protect the third

parties who find in the patrimony of the moral entity the general pledge of their credits, so

that they must give confidence about the management of the resources of private savings,

of the investment and in general the fair and equitable management of the productive

apparatus of the country.

The institution of the fiscal review is one of the instruments through which

inspection and surveillance of control entities is carried out; has received the delegation of

functions of the State, which are to ensure compliance with laws and agreements between

individuals (bylaws and decisions of the administrative bodies), and give public faith,

which means among others, that its attestation or signature will legally presume, unless
proven otherwise, that the respective act conforms to the legal requirements, as well as the

bylaws, in the case of legal persons. In the case of balances, it will also be presumed that

the balances have been faithfully taken from the books, that these conform to the legal

norms and that the figures recorded in them faithfully reflect the corresponding financial

situation on the balance sheet data (Article 10 of Law 43 of 1990).