Understanding the BIR Letter of Authority and the Audit Process (2026 Update)

As a business owner, one of your primary responsibilities is to understand the Bureau of Internal Revenue (BIR) processes and respond to communications promptly, especially when you receive a Letter of Authority (LOA).

However, this process can feel intimidating and confusing, especially when your focus is on growing your business and driving profits. This guide offers a clear overview of LOAs and the BIR audit process to help you navigate it with confidence.

What is a Letter of Authority?

A Letter of Authority (LOA), now issued electronically as an eLA, is the BIR’s written authority for named revenue officers to examine a taxpayer’s books and records for a specific taxable year.

Under RMO 22-2026, the Commissioner of Internal Revenue approves eLAs for risk-selected (Priority) cases. The Regional Director or the Assistant Commissioner of the Large Taxpayers Service approves eLAs for Mandatory cases, such as tax clearance and one-time transaction cases.

BIR revenue officers use the LOA to examine your financial statement audit reports, books of accounts, and other accounting records to determine your tax liabilities for a specific year.

Which BIR documents authorize an audit?

• eLA: full audits
• Tax Verification Notice (TVN): verification of refund and tax credit claims
• Mission Order: surveillance

An audit or verification without one of these is unauthorized under RMO 22-2026. The BIR can only audit the tax types and taxable periods written on the document, and widening the scope needs a new authority.

Check these details on every eLA you receive:

• Your registered name and TIN
• The taxable period
• The covered tax types
• The assigned revenue officers

When the BIR serves, replaces, or consolidates an eLA

The BIR must serve the LOA within 30 days from its issuance date. If it is not served within this period, the LOA becomes null and void, and you may refuse to accept it unless a new LOA is issued.

If the BIR replaces your eLA, for example because the assigned officer can no longer continue the audit, it must send you a letter notice with the replacement. The notice must show:

• The old eLA’s serial number and date
• A statement that the old eLA is cancelled and the audit continues

A replacement cannot widen the original scope. If you have several eLAs for the same taxable year, the BIR can consolidate them into one eLA covering all tax types for that year.

The BIR Audit Process

Receiving an LOA can be concerning, but understanding the process helps you manage it effectively.

Step 1: Prepare your documents

The BIR serves the eLA together with a Standard Checklist of Requirements and a Taxpayer Consent on Audit Venue form. You have 10 calendar days to submit the documents on the checklist. These documents include the following:

• Ledgers
• Journals
• Sales and purchase books and schedules
• Official receipts
• Sales invoices
• List of payables and receivables
• Other relevant documents

If you miss the 10-day deadline, the BIR escalates in this order:

1. First Notice for Presentation/Submission of Documents. You have 10 calendar days from receiving it.
2. Second and Final Notice, if you still do not comply.
3. Subpoena Duces Tecum, which the BIR can request if you still do not comply. Ignoring a subpoena can lead to criminal proceedings for failure to obey summons under Section 266 of the Tax Code.

You also choose where the BIR examines your records, using the consent form:

• Submit the records to the BIR office
• Have them examined at your principal place of business, after coordinating with the revenue officer

The BIR accepts photocopies certified as true copies. It can ask for originals only to verify matters within the audit scope. Once a Subpoena Duces Tecum is issued, this choice no longer applies.

Step 2: Respond to the BIR

Responding to the BIR entails submitting all the required documents for the revenue officers to examine and assess. Should there be any discrepancies or clarifications from their assessment, expect them to send you the following notices:

• Notice of Discrepancy
  A Notice of Discrepancy (NOD) lets you know your tax deficiencies. Paying your liabilities settles your tax issue with the BIR. Otherwise, you have five (5) days after the notice receipt to present your side by providing supplementary documents. If you need more time, you can still submit supporting documents as long as you don’t exceed 30 days after the first day of notice. After the NOD, the BIR holds a meeting to discuss the discrepancy. The minutes are signed by you or your authorized representative and the assigned revenue officers. Any refusal to sign is noted in the minutes.
• Preliminary Assessment Notice
  Suppose the BIR claims you still have tax deficiencies but you don’t agree to the tax deficiency findings. In that case, the next course of action for the revenue office is to issue a Preliminary Assessment Notice (PAN). You must then reply and submit relevant documents within 15 days of receiving the PAN. The BIR issues the FLD/FAN only after you respond, or after 15 days from receiving the PAN if you do not respond, in which case you are considered in default. If you respond on time, the FLD/FAN, if warranted, follows within 15 days of your response. A late FLD/FAN does not void the assessment as long as it falls within the prescriptive period and due process was observed.
• Formal Letter of Demand or Final Assessment Notice
  In case of an unsettled dispute, the BIR will issue a Formal Letter of Demand (FLD) and Final Assessment Notice (FAN). If you disagree with BIR’s findings, you may file a protest letter within 30 days of receiving the FLD or FAN to request a reconsideration or reinvestigation. The process of the protest depends on the type of the request.
  • Request for Reconsideration: This is based on existing records. The taxpayer requests the BIR to reconsider its findings without introducing new evidence. It is typically based on a claim of misapplication of the law or computational errors.
  • Request for Reinvestigation: In this case, the taxpayer asks for a re-evaluation of the facts, providing additional evidence to support the protest. This requires a comprehensive re-audit, and the taxpayer must submit the new supporting documents within 60 days from the filing of the protest.
• Final Decision on the Dispute
  After evaluating your protest letter, the BIR will issue its Final Decision on Disputed Assessment (FDDA). At this point, your options include concluding the tax audit by paying, requesting the CIR to reconsider, or filing a petition with the Court of Tax Appeals (CTA) to review the CIR-signed FDDA within 30 days of its receipt.

How long should an audit take?

The BIR’s target for the revenue officer’s report of investigation, counted from the date of the eLA, is:

• Regional cases (including OAS cases): 180 days
• Large Taxpayers Service cases: 240 days

The clock pauses while the BIR requests a Subpoena Duces Tecum or an exchange of information. These periods bind the BIR internally, and a late report does not affect the validity of an assessment.

Step 3: Be proactive

Receiving an LOA is the start of the BIR’s auditing process, but it doesn’t have to end in a complex legal battle if you adopt a proactive approach. Review your tax records, organize your documents, and communicate with BIR officers to resolve discrepancies in your tax payments.

For a practical checklist, see our LOA and audit process best-practice guide.

Recent LOA Reforms You Should Know About

The LOA process has undergone significant changes following a controversy in late 2025. In November 2025, the BIR suspended all field audit operations under RMC No. 107-2025 to review and reform its audit processes amid concerns over the misuse of LOAs by certain BIR personnel.

The BIR officially lifted the suspension in February 2026 through RMC No. 8-2026, and alongside the resumption, introduced new audit rules under Revenue Memorandum Order No. 1-2026, as amended and supplemented by RMO No. 6-2026.

These changes directly affect how LOAs are issued and verified today. The new rules cover reforms such as system-generated LOAs and a single-instance audit framework to minimize the risk of abuse. Read our full explainer on the resumption of BIR audits and new audit rules.

On August 24, 2026, the BIR issued RMO 22-2026, which consolidates its audit rules into one audit program and took effect immediately. Its main points:

• One eLA per taxable year covering all applicable tax types, with exceptions
• A valid eLA, TVN, or Mission Order for every audit
• System-assisted, risk-based audit selection using data from filed returns and third-party information

Risk indicators include income tax due below 2% of gross sales and substantial sales with a reported net loss.

Get Ready for the BIR Audit with Expert Support

BIR audits require careful preparation and timely action, and this is exactly where expert accounting and tax service providers add value. By ensuring your documents are organized, responses to notices are handled promptly, and communication with BIR officers remains clear and professional, they help you navigate the audit process with greater confidence and efficiency.

If you want to ensure audit-readiness across your accounting and tax processes, get in touch with CloudCFO’s expert finance team to support your operations, so you stay fully compliant while focusing on growing your business.

Frequently Asked Questions

What gets a business selected for audit?
The BIR uses a risk-based system on your filed returns and third-party data. Triggers include income tax due below 2% of gross sales, substantial sales with a net loss, and more than five years in operation without an audit. These are selection criteria, not findings.

Does closing my business trigger an audit?
Often, yes. Tax clearance requests are Mandatory audit cases when gross sales for the preceding year exceed ₱3 million or gross assets upon retirement exceed ₱8 million. The BIR issues the clearance only after you settle any deficiency assessments in full.

Does having tax incentives mean I will be audited?
No. Taxpayers with exemptions or incentives are not automatically audited. They receive an eLA only when audit criteria, verifiable data, or signs of non-compliance support it.

How do I know an audit is over?
The BIR issues a Termination Letter for cases that are paid or have no findings, after the Regional Director or the Assistant Commissioner of the Large Taxpayers Service approves the audit report. Keep it as your proof that the case is closed.