We have been dealing with a lot of aggressive auditors lately — not just aggressive from the standpoint of inflexibility on audit assessments, but aggressive in seeking to dictate the terms of how the audit is going to be managed from their point of view only (or for their convenience). Taxand USA focuses on ways a company can manage audit execution without allowing the auditor to manage the company.

 

Once the company has received a notice of an audit review (or perhaps before a notice is received), a company representative should consider performing an analysis to determine the company’s level of compliance related to the particular tax type and jurisdiction scheduled for audit. This could provide the company representative with a better understanding of potential underpayments and overpayments of tax, as well as provide the company with the ability to make more informed decisions related to the audit.

 

Given that several states now offer a managed audit programme, this is an option that should be considered.

 

In preparation for the audit, the company representative should begin gathering anticipated supporting documentation such as resale/exemption certificates, tax returns and return workpapers, electronic data, etc. If the supporting documentation is maintained in hard copy, verifying the location of the records and requesting records stored offsite can expedite the audit process. For electronic data, it is important to identify company personnel who can help extract the data. In addition, preparing an electronic download for a test month can be used as a “proof of concept” prior to extracting data for the entire audit period.

 

Discover more: Manage the auditors – don’t let them manage you

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Taxand's Take

As state and local governments continue to seek ways to increase revenue, companies should be prepared when encountering an auditor who uses aggressive audit techniques. Consider using the techniques outlined above to best manage the audit process from start to finish and ultimately minimise the costs associated with the audit. Don’t let the auditor manage your time, your resources or your office space.

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International Tax | USA

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