Many findings in zakat or tax audits are accounting issues at heart, not tax issues: an imprecise classification, an unreconciled balance, a missing disclosure. Reviewing these items before year-end close is far easier than explaining them after the return is filed.
1. Classification of investments
Is the investment held for trading or long-term? Is the investee a subsidiary or an associate? The accounting classification feeds directly into how the investment is treated in the zakat base.
2. Loans, shareholder and related-party balances
Separate long-term from short-term loans with documented maturity dates, and reconcile shareholder and sister-company balances with the counterparty. These balances are among the most frequently adjusted items in assessments.
3. Fixed asset register
Additions, disposals and capital work in progress need a clear schedule that agrees to the ledger — it underpins both the zakat base deduction and tax depreciation.
4. Provisions
For each provision: opening balance, charge, utilisation and closing balance. Charges and utilisations are treated differently in the return, and an incomplete schedule invites adjustment.
5. Revenue and the VAT reconciliation
Reconcile revenue in the statements to the year’s VAT returns and explain the differences (exempt revenue, exports, timing). An unexplained difference is a certain audit question.
6. Disclosures
Notes on equity, related parties, investments and contingencies are what an auditor reads first. A clear note saves many questions.
Reference: laws and regulations published by ZATCA: zatca.gov.sa