As an entrepreneur in Nigeria, few things are more stressful than receiving an audit notice from FIRS or LIRS. Poor record-keeping and non-compliance can lead to heavy penalties, frozen accounts, or even business closure.
At Faturoti Taiwo and Co., we’ve helped hundreds of Lagos businesses sail through audits unscathed. Here’s your ultimate guide to audit-proofing your business the right way.
Why Nigerian Businesses Get Audited
FIRS and LIRS typically audit businesses for these reasons:
Discrepancies in Tax Returns (Underreported income) High Expense Claims (Unsupported deductions) Late/Missing Filings (PAYE, VAT, WHT defaults) Industry Targeting (Oil & gas, imports, fintech) Random Selection (Yes, audits can be random!)
*”80% of audits we handle stem from simple record-keeping errors—all preventable.”*
— Faturoti Taiwo, Lead Consultant
5 FIRS Audit Triggers Nigerian Businesses Miss
1. Mixing Personal & Business Finances
Red Flag: Personal groceries on a business account
Fix: Open a dedicated corporate bank account
2. Incomplete Expense Documentation
Red Flag: Missing receipts for fuel or “miscellaneous” costs Fix: Use digital tools like QuickBooks or Wave to track expenses
3. PAYE Non-Compliance
Red Flag: Paying staff cash-in-hand without remitting taxes Fix: Automate payroll with Paystack or BambooHR
4. Suspicious VAT Filings
Red Flag: Claiming more input VAT than output VAT Fix: Reconcile monthly VAT reports before filing
5. Inconsistent Financial Statements
Red Flag: Bank records don’t match tax returns Fix: Hire a certified ICAN accountant for reconciliations
Audit-Proof Checklist for Nigerian SMEs
Keep Records for 6 Years (FIRS requirement) Separate Business/Personal Accounts File All Returns Before Deadlines Reconcile Books Monthly Use Approved Accounting Software
Pro Tip: FIRS accepts electronic records—scan receipts via SmartReceipt or Dext.
How to Prepare for an Ongoing Audit
Don’t Panic – Audits are routine (if you’re compliant)
Gather Requested Documents (Invoices, bank statements, payroll records)
Consult an Accountant Immediately
Never Alter Records (It’s a criminal offense)
Penalties to Avoid:
- 10-20% of tax due for underpayment
- ₦50,000+ for late document submission
Why Nigerian Startups Fail Audits
Case Study: A Lagos e-commerce startup paid ₦2.8m in penalties because:
- Used WhatsApp invoices (not FIRS-compliant)
- Couldn’t prove 60% of expenses
- Missed 8 VAT filings
Our Solution:
- Digitized their records
- Negotiated penalty reduction
- Implemented Zoho Books for compliance
Audit-Proof Accounting Software We Recommend
| Software | Best For | Cost (Monthly) |
|---|---|---|
| QuickBooks | Small retailers | ₦15,000 |
| Zoho Books | Service businesses | ₦12,500 |
| Sage | Manufacturing | ₦25,000 |
FAQs on Nigerian Tax Audits
Q: How far back can FIRS audit?
A: 6 years for companies, 4 years for individuals.
Q: Can LIRS audit my startup?
A: Yes—for PAYE, land use charge, or withholding tax.
Q: What’s the #1 audit defense tool?
A: Properly kept books (we offer free template).
Let Faturoti Taiwo & Co. Audit-Proof Your Business
Our Audit Protection Package includes: Financial Record Review Compliance Gap Analysis Audit Representation Custom Accounting Software Setup
+2347012725021
thomas@faturotitaiwoandco.com
“After failing 2 audits, Faturoti Taiwo’s team got us 100% compliant. Zero issues in 3 years!”
— *Manufacturing Client, Apapa