When people hear the word “audit”, it’s safe to say that the term doesn’t generally elicit very positive emotions. In fact, whether internal audits, IRS audits, or state tax audits, people just don’t like them, or on the far end of the spectrum, actually fear them. Call me crazy, but I’m one of the few people (besides auditors themselves) that don’t HATE them – partially because I feel that we can generally help clients who are being audited, and we can help bring them peace of mind.
Of course, the best option is to not get audited at all, but if you do find yourself in an audit situation, there are some things that you can do to mitigate the pain, and also to make it go smoothly. Here are some examples of things you can do when notified by a state that an audit is coming.
- Hire a third party to assist. Whether you are a small company or a large multi-national firm, it’s important to engage with someone that can work between company personnel and the auditor. There are many reasons for this, but I think the most important one is that as the taxpayer, you are simply too close to the detail (particularly as a smaller company). A CPA or other consultant will assist in fielding questions and getting resolution.
- When the auditor is on-site, give him or her a clean, well-lighted workspace, preferably in a closed door setting (a conference room). We’ve all heard stories of the client that wants to put the auditor in the boiler room and make them as uncomfortable as possible. I find that treating the auditor respectfully and making it easy for them to come in, see the overall taxpayer workplace and then getting their fieldwork done quickly is to everyone’s advantage. Making the auditor feel like a second-class citizen won’t benefit anyone.
- It bears repeating – the nice workspace should have a door. I recommend to clients that they plan to house the auditors in a conference room during their stay. Company staff should be aware that there are auditors in the office and be particularly careful with internal discussions. Auditors have a quizzical nature about them, and may overhear things that are not relevant to the audit, but may raise additional questions. Never seat auditors in the open staff area or break room, etc. If a conference room is not available, consider asking the auditor to conduct the audit at the third party CPA’s location.
- Try to provide all of the information requested by the auditor in a neat, organized, and timely fashion. Sometimes, not all information is available on the day the auditor begins fieldwork. If that is the case, communicate with the auditor as to when she can expect to receive it. Also, be sure to make copies of all information provided. You want to be sure you remember what you gave to the auditor.
- Adhere to deadlines and/or request reasonable extensions. Sometimes initial audit notices (or subsequent requests) come at an inconvenient time, or while key personnel are on leave, or (insert reason here). Most often auditors are willing to push the start date back, or provide an extension to provide information when requested. We recommend to always request extensions in writing, and to certainly get confirmations of them in writing as well.
Stay tuned to this blog for additional tips. You can also see a replay of my recent webinar about “How to Avoid or Navigate a Sales Tax Audit” through CPA Academy here.
Remember – an auditor wants to get to the right answer as quickly as possible. So does the company. Often, there is a difference in opinion as to what that right answer is, but generally, everyone would like to see the audit go smoothly, with the least amount of pain possible. Following some of the steps above can help make that a reality. And if you need some assistance, please don’t hesitate to contact us at Miles Consulting Group – we are happy to assist with your audit.
