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The Auditor's Mantra: The More You Help Me,The More I Help You

author photo of Lloyd Geggatt

The auditor’s mantra: The more you can help me, the more I  can help you. Hard to believe? Well, most auditors really do care about the quality of business processes and would prefer businesses are able to pay the tax on time, with no penalty. As a result, they are more than willing to  provide process improvement suggestions during their visit. Their suggestions help your business before, during and after an audit.

Business process improvements that an auditor might identify can include methods of keeping track of tax, managing your income and outflow, software you might be using, or not using, to manage your records and even ways to present your information so that it makes following the audit trail easier. Helping you helps the auditor to more quickly assess and determine if there is going to be an impact from this audit. If there is little, or no impact, they prefer to handle the audit quickly in order to move on to bigger fish.

Auditors have quotas to meet in finding revenue for the state. As such, they prefer to be able to spend the least amount of time on small findings and focus on the audits that bring in greater revenues.

For example: Does it make sense for you to spend $100/hour  to have someone with a Master’s Degree in Accounting run your cash register to make sure there are no mistakes? Or does it make more sense to keep a staff member on the cash register and have the Accountant focus on ensuring your accounting methods and information are correct?

In like manner, the time spent on an audit by an auditor must be relevant to the value they bring to the state from the audit. Spending 40 hours on an audit that nets $500 and could have been avoided if the customer had kept his records in a more timely fashion using a financial software application, versus spending 40 hours on an audit that nets $500,000 is a no-brainer. So, of course the auditor will provide suggestions to help  prevent the lengthy time for an audit just because the data flow is unclear, records are spread all over the place in several locations or because your process is very manual and time-consuming.

An auditor’s time is valuable to the state, so the better  you keep your records, the more clear the audit trail, the happier they are.  And keeping your auditor happy, and interested in helping your business succeed,  can mean fewer and smoother audits down the road.

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Comments

3 Responses to The Auditor's Mantra: The More You Help Me,The More I Help You

  • Posted by Bob on March 21, 2013 9:03am:

    Lloyd,
    I respectfully disagree with your statement that "auditors have quotas to meet..." I was a sales/use tax auditor for 2 years & at no time was I EVER advised of a quota, amount/hour, or anything of that kind. And neirther were any of my colleagues. I do believe that quotas exist, however, I believe that it varies on a state-by-state basis.
    And on the other side of the fence, I have never had an auditor offer any advise on my companies' business processes. As a rule we were timely filers. Our issues were usually self-assessment deficiencies.
    The sales tax side was usually insufficient exemption documentation or perhaps incorrect taxability of a product/service. Although we did provide information on questionaires & discussed our processes, at no time did I ever see any auditors express interest or enter into any discussion about improviing our business process.
    Speaking as an ex-auditor, my state did not provide any training in this area whatsoever.

    • Posted by Author photo of Lloyd GeggattLloyd Geggatt on March 21, 2013 11:21am:

      Hi Bob,
      In hindsight, it may have been better to say auditors are expected to be "productive" and that production is measured by comparing the tax they bring to the time it takes to get it. Not exactly a "quota" system but my point was that auditors cannot afford to look for every dime in every audit.
      I'm somewhat surprised to hear about your experiences on both sides of the fence in regards to taxpayer assistance. Obviously different states have different approaches as do individual auditors within those state but to have no discussions in this area is, as I said, surprising. I know from personal experience as both a student and an instructor that this is part of the auditor training program and part of the overall auditing philosophy. Of course the degree to which any given auditor becomes involved depends upon the audiot involved.
      Thanks for the input and for keeping me honest,
      Lloyd

  • Posted by Kathy on January 6, 2012 1:17am:

    Lloyd,
    I agree completely. I've been on both sides of the fence, so I venture that I'm not overly prejudiced in so doing. It goes back to what I say and write often: auditors are people, too. While some are nasty individuals, most are not and they do care that business avoid the pain of audits assessments. There is a better use for business dollars that penalty and interest! Also true is that auditors would rather spend valuable time conquering the bigger problems. So, yes, please do heed the advice of auditors inasmuch as your resources permit it.

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