Tax audits are integral to ensuring tax compliance and integrity within the financial system. This study provides an overview of how tax audits impact taxpayer behavior and overall compliance with tax laws. Tax audits involve a detailed examination of an individual’s or organization’s financial records by tax authorities to verify the accuracy and completeness of tax returns. One of the primary impacts of tax audits is the enhancement of accuracy and transparency in financial reporting. Knowing that their financial statements are subject to audit encourages taxpayers to maintain meticulous records and adhere strictly to tax laws. Audits also serve as a significant deterrent to tax fraud and evasion. The possibility of detection through an audit discourages individuals and businesses from engaging in dishonest practices, thereby promoting a culture of compliance. Moreover, audits help identify gaps in compliance, leading to corrective actions and improvements in tax practices. This not only ensures adherence to current regulations but also aids in the refinement of tax policies. The administrative burden and cost associated with audits are notable, as preparing for and undergoing an audit can be time-consuming and expensive. These factors underscore the importance of effective record-keeping and proactive tax planning to minimize disruptions. Finally, tax audits often lead to behavioral changes in taxpayers. The experience of an audit can prompt individuals and businesses to adopt more rigorous compliance practices and enhance their financial management. The study concludes that tax audits play a crucial role in promoting transparency, deterring fraud, identifying compliance gaps, and encouraging better tax practices, thereby contributing to the fairness and effectiveness of the tax system.