The impact on individuals or businesses of misreporting financial statements for tax avoidance from an accounting perspective / Aina Syazwani Mohd Isa and Saflina Azis

Financial statements serve as essential tools for individuals and businesses to understand their financial standing, encompassing income, expenses, assets, and liabilities. Once prepared, these statements undergo scrutiny by auditors. Subsequently, individuals and companies determine their tax obligations for the assessment year, with higher income or profits resulting in increased taxable income. Taxation plays a pivotal role in a country's revenue generation, financing expenses, and national development, while also fostering income distribution equilibrium. However, certain entities attempt to evade taxes, leading to tax noncompliance, an ongoing challenge faced by tax administration bodies like the Inland Revenue Board of Malaysia (IRB). Many individuals and businesses resort to manipulating financial statements to minimize tax liabilities, commonly through practices like overstating expenses and understating income, known as "creative accounting." Tax noncompliance occurs when entities fail to fulfill tax obligations, such as registering, submitting tax forms, reporting accurate income, and paying taxes within specified periods. Studies indicate widespread involvement in tax non-compliance, with sole proprietorship businesses identified as significant ctax evasion contributors.