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Auditing and Consulting Services

Audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, water management, and energy conservation.

Some Background

First, a little history lesson. In 1998, the IRS Reform and Restructuring Act was passed, ordering the IRS to focus more on taxpayer rights instead of collection activities. As a result, about one out every 79 tax returns were audited that year. This dramatic decrease continued, and by 2003, according to IRS data, only one of every 150 individual taxpayers were audited.

The IRS soon returned to their wicked ways and by 2005, the number of audits hit it’s highest since 1998. The 2006 tax year saw 1.28 million individuals audited.

Types of Audits and what kind of trouble:

– Correspondence Audit: The correspondence audit is the simplest type of IRS audit. During this audit, the IRS sends the taxpayer (via mail) a request for proof of a particular deduction or exemption taken by either completing a special form or sending photocopies of relevant financial records. On a positive note, the tax payer has the greatest chance of winning a correspondence audit.

– IRS Office Audit: An IRS office audit is done in an IRS office and is mostly about simple tax matters.

– Field Audit: Field audits are usually the most complete IRS audits and are performed by experienced IRS officers. I am afraid to say that a field audit usually results in additional tax bills for the tax payer.

– IRS Repetitive Audit: An IRS repetitive audit is an IRS audit conducted on the same tax payer over and over. If no additional tax bills results from an audit and the IRS wants to audit the same tax payer again, the tax payer can ask the IRS to discontinue the IRS audit on the ground of IRS repetitive audit.

In general, representing yourself in an audit is a risky undertaking, especially if it’s an IRS Office Audit or Field Audit. In these cases, it’s best to seek representation from skilled tax professionals that know your rights and the limits of the IRS.

Auditmetrics is committed to education by offering free education programs for accountants. The IRS has established directives on the statistical audit. Several states now follow the IRS guidelines especially for sales and use tax audits.The education program uses PowerPoint presentations. Included, and is available for purchase, is a Statistical Audit Manual. Our accountant students have consistently requested a text that they can use to aid in their learning, preferably one that is a practical how to type manual. Included with the manual is an Excel Workbook. Using only Excel worksheet commands, it runs through the process from beginning to end in setting up a statistical audit sample that meet IRS and AICPA standards.

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