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Lifestyle Auditing

In: Business and Management

Submitted By nickgibiti
Words 1269
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Lifestyle auditing is the study of a person’s standards of living and uses this information to confirm whether it is consisted with their reported income.

This involves the tax authorities conducting independent investigations on business trusts, individual tax payers and company. This is done to ensure that monthly living the monthly living expenses of the tax payer are consistent with his assets and income statements that what was declared.

Lifestyle auditing is one of the critical tools used by the management in helping in the detection, prevention and correction of fraud and error on a timely basis. Life style auditing is a term that is used by forensic auditors to find out whether the lifestyle of an individual directly relates to their know income streams

Lifestyle auditing is simply the putting together of various databases which give the management and also investigators a quick view into certain aspects of the life of an employee. The use of a life style audit will legitimately lead to the prevention and detection of fraud.


In the recent past, there has been an increase in corruption cases such as taxpayers colluding with tax collecting officials hence posing a great challenge to public service as the government cannot collect enough money to finance setting up of schools, hospitals and other infrastructure for its citizens. public servants continue to waste the money collected through dubious payments to ghost companies, over-invoicing, and other diversionary actions, the cash crunch will only get worse.
Public servants continues to waste taxpayers money which are more so collected through dubious means such as over invoicing clients, payments to ghost companies and diversionary actions that only lead to the worsening of the cash crunch.
Yet in most cases evidence has it that most of the booming and flourishing real estates are owned by these public officers whose official assets and income statements remain modest.
And that is the reason for the extension of the life style auditing in order to ensure transparency in all public servants making very it difficult for the state and other public servants to conceal their proceeds of corruption.

Most companies, institutions and governments are embracing the use of life style auditing. For example in Kenya, the president recently ordered a lifestyle audit on its employees who are working on the governments revenue authorities, this clearly showed that endemic corruption was to be fought at all costs.

All the judicial officials who were found embezzling public funds were sent home and their duties relieved from them.
In South Africa for example, the South African Revenue Authority clamped down on wealthy taxpayers who were evading paying their fair share of tax. They were summoned and told to make their tax payments details public for that special circumstance.

The South African Revenue Authority did not believe that full discloser had been made pertaining to the filing of the tax returns and hence the need to introduce lifestyle auditing. This lead to the extension of a probe of all the business interests of the officials hence ordering a lifestyle audit of all the members of the cabinet
This was necessitated by the auditor general of a province who had done business with a company whose employees he had interest with.

Some of the current issues affecting this life style auditing is that there is no uniformity in the way its is carried as it lacks a proper common way of doing it leaving a lot of room for discussion as to the particular type of information to base on when carrying out the investigation.
Auditors carrying out this particular lifestyle audit shy away from it due to its nature of complexity in carrying out the audit. It is also a weak technique of implicating fraudsters. This makes it to demand for support from other techniques which are advocated for by the Association of Certified Fraud Examiners which poses that life style audit must be guided by integrity in order to eliminate bias.
Life style audit is still debatable as the IRS is not allowed to disclose personal records. Therefore, it is Association of Certified Fraud Examiners and the Internal Revenue Service with conjunction of tax authorities to come up with clear guidelines on the way to go

FUTURE It is high time that the culture of lifestyle audits was adopted in the civil Service as the norm since it would go a long way in ensuring that the corruption menace is defeated. Life style auditing is on the headway on the ultimate fight of corruption, it is therefore critical that all those who fail to account for their wealth be faced with the censure.
They must be publicly named, dismissed from their positions, sent to prison, and the assets they acquired from the proceeds of corruption seized and handed over to the government.
The officers found guilty of amassing wealth for themselves using public resources should be named in the public, their positions dismissed from them and sent to prison and the assets they acquired using the dubious means of corruption should be seized, confiscated from them and handed to the government.
This should not be a one day campaign but a day to day process. However this will require the intervention of political with the highest authority to ensure that the victims do not escape the censure due to political intervention.

In conclusion, the reason for conducting a lifestyle auditing is to determine the parties, affiliates or ownership interests of the people who are involved in irregularities of any nature: whether civil, criminal or which attracts a disciplinary action. This may involve the determination of interests of officials whether financial or not irrespective of whether they are disclosed or not.
Another may reason for lifestyle audit is to determine whether the employee appears to poses any risk to the employer. This assessment will be based on the conducting of initial personal probity checks
Life style audit are an excellent a barometer which measures the nature and extent of fraud risk in an organization. Companies are therefore advised to use this particular proactive anti fraud mechanism in order to protect themselves from falling victims of fraud and in most instances to help them identify fraud which could be happening right at the company’s very noses

The field of auditing is continuing to develop on daily basis as more factors are included. Lifestyle auditing is a new concept in auditing but it is an area that affects the lives of individuals and organizations too. The major problem that lifestyle audit tries to address is counterchecking individuals who could be performing some illegal acts. The approach will take opinions that have been raised in the recent days and in the past about the lifestyle audits

Ming, L. I. (2002). Life Style and Health Sport. Journal of Nanjing Institute of Physical Education (Social Science), 1, 001.

Benson, M. (2011). The British in rural France: Lifestyle migration and the ongoing quest for a better way of life. Oxford University Press.

Gallhofer, S., Paisey, C., Roberts, C., & Tarbert, H. (2011). Preferences, constraints and work-lifestyle choices: The case of female Scottish chartered accountants. Accounting, Auditing & Accountability Journal, 24(4), 440-470.

Hopwood, W.S., Leiner, J.J. & Young, G.R. 2012. Forensic accounting and fraud examination. 2nd edition. New York: McGraw-Hill.
Kass-Shraibman, F. & Sampath, V.S. 2011. Forensic accounting for dummies. Indianapolis, IN: Wiley.
Powell, S. 2011. Lifestyle audits are a critical management tool to identify fraud. The Mercury, Advertising Supplement, Business Update, 29 July

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