TIP 1: Conduct an Organizational Self-Evaluation
Prior to the start of the audit, an organizational self-evaluation should be conducted. An organization can lose credibility with an auditor if it is discovered that the business does not operate as described. Business process documentation should be reviewed to ensure that it accurately reflects current operations. Update the documentation if it is inaccurate. In addition, the organization’s transactions and supporting documentation should be analyzed to determine if purchases and sales are supportable and ensure that any sales tax implications have been addressed.
TIP 2: Review Previous Audit Assessments
It is extremely important to review any prior audit assessments issued by the tax authority to ensure that previously assessed items have been addressed and corrected. It is a given that the auditor will spend at least a portion of the audit focusing on these items. Significant penalties can be imposed where a taxpayer has been assessed for the same issue on consecutive audits.
TIP 3: Make Documents and Data Available on Audit Start Date
Assemble any documents that the auditor has requested in advance, including computer data files. Having these items available at the beginning of the audit will set things off on the right foot and avoid unnecessary delays or rescheduling.
TIP 4: Assign an Audit Liaison
Assigning a liaison to coordinate with the auditor is critical to the success of an audit. This individual must have a good understanding of the business operations to support the auditor. It is also helpful to have at least one person in the company who knows how the audit is progressing and all issues that the auditor might be targeting.
TIP 5: Set a Positive Audit Tone
The first meeting with an auditor can make or break your relationship with the audit team. It is important to set a positive, business-like tone. Let the auditor know that you will make every effort to help the audit proceed smoothly.
TIP 6: Commit to Audit Request Responses
It is imperative that the organization makes a firm commitment to provide a response to each request. Ensuring that the information is provided within the committed timeframes, where possible, is equally important. This will help the organization establish credibility with the auditor and develop a more professional relationship.
TIP 7: Meet Regularly with the Auditor
Regular meetings should be scheduled with the auditor to assess audit progress and stay informed about emerging issues. Having frequent meetings should alleviate potential roadblocks by creating an open forum to discuss issues and explain processes before they become a stumbling point.
TIP 8: Resolve Issues Before the Assessment Is Finalized
Auditors have considerable discretionary judgement while conducting their work, and an organization should avail itself of this opportunity to resolve identified issues before the audit is finalized. It is much more difficult, and potentially very costly, to have an item reversed or adjusted after the assessment has been issued.
TIP 9: Review Assessments in Detail
The Notice of Assessment should be reviewed thoroughly, with a view to ensuring that there are no surprises or obvious errors. Assessment amounts related to issues that were not discussed during the audit should be questioned. Make sure that all assessment items fall within the statutory audit period.
TIP 10: Take Corrective Action
Identified audit issues should be reviewed internally. Where necessary, changes should be made to business processes to correct the issues and prevent future occurrences. Significant penalties could apply to assessed items that are not addressed by the start of the next audit. Any process changes should be fully documented and reviewed periodically to verify that they are working as intended.
This list is intended to help your business stay on top of potential audit issues and improve tax compliance. For clarity around an active audit or a specific scenario, please reach out to Ryan’s tax professionals for more information using the form below:
This article is presented by Ryan, LLC for general informational purposes only and does not constitute legal, accounting, or other professional advice.