The correct answers are: The income tax liability included in the financial statements is calculated by the company and is normally an estimate; The provision for income tax is adjusted each year in the light of what is agreed with the tax authorities.

The income tax liability included in the financial statements is not calculated by the tax authorities, it is calculated by the company. Auditors are permitted to assist their audit clients in the calculation of the provision for income tax and in their negotiations with the tax authorities, although they must not make decisions for their clients. Auditors are required to check the calculation of the provision for income tax as part of their normal audit procedures.