REVENUE MEMORANDUM ORDER NO. 18-2007 issued on July 30, 2007 allows
the conduct of short-period or issue-based audit in the current year as a result of findings
obtained from surveillance/stocktaking activities provided that the same is covered by a
validly issued Letter of Authority (LA).
The resulting factual findings obtained during the surveillance/stocktaking
activities shall be analyzed, reconciled with the current books of accounts/accounting
records of the concerned taxpayer by the assigned revenue officers and compared with
the latest final returns (whether income and/or VAT) filed by such taxpayer to determine
the existence of discrepancies. If there are deficiencies established, short-period audit or
issue-based audit shall be conducted to corroborate, validate and supplement the resulting
discrepancies initially determined as a result of the surveillance or stocktaking activities.
Deficiency assessments may then be issued for those discrepancies that have remained
unsubstantiated or undisputed by the taxpayer