TIPS FOR DEALING WITH SALES OR PAYROLL TAX AUDITS

When business owners hear the word audit, it seems to stir up a variety of unpleasant emotions. These include fear, dread, annoyance, sometimes even anger.

While it’s true we must comply with audit requests, there are times when the auditor may ask for inappropriate documents. There have also been cases when an auditor presents him or herself in an unprofessional manner. The head of the accounting department must determine if the auditor is a competent professional and can be trusted with sensitive company documents.

Recently, I was involved in a payroll audit. It started out normally enough, with the auditor sending a request list to the client.

The client contacted me concerned about some of the items requested. The client did not want to send electronic copies to the auditor using email, as it didn’t seem secure.

Normally, auditors have a secure portal where documents can be uploaded. This is a common practice, however in this case it wasn’t clear this was an option.  In the end, the client requested that the auditor come to the business and perform the audit. That way, the records could remain on site.

That was when things went bad. The auditor showed up and was unrecognizable as a professional person due to his unkempt dress. Although he provided identification, the first impression was very bad.

The audit proceeded relatively normally, until he asked if he could make copies of the payroll records to take with him and review later. In addition, he seemed unfamiliar with payroll and the various reconciling items on the payroll register.

The accounting manager was very concerned.  However, she was afraid that if she denied these requests or made any trouble, the company might be punished by the entity conducting the audit. I advised her that the actions of the auditor were completely inappropriate and she should ask him to leave the premises immediately.

After the auditor had gone, I advised the accounting manager to contact his supervisor and explain the situation. I stressed that doing so immediately was very important, to show that the company was willing to cooperate, but they had concerns with the process.

The situation was resolved without further incident. A new auditor was assigned, and another date set to complete the audit.

Below is a list of tips that will help you experience a smooth audit:

  1. Always speak to the auditor on the phone regarding the requests. This will help you get to know the person you will be working with, and any concerns you have with their demeanor can be dealt with prior to the start of the audit;
  2. If the auditor is requesting electronic documents, find out if they have a secure portal where the documents can be uploaded. If not, an audit on site is preferred;
  3. If the auditor is requesting sensitive documents (like payroll records) be sure they cite the code which gives them the authority to do so. If security is breached, then they are responsible for any negative outcomes;
  4. When the auditor comes to your business, make sure they have proper identification. If they provide something that doesn’t satisfy you, you are well within your rights to call the main office and express your concerns;
  5. If the auditor requests something that makes you uncomfortable, go with that feeling. For example, if they want to copy records to take with them, that is a huge security risk. Any requests you feel are unusual should be questioned;
  6. Finally, if the auditor is acting inappropriately in any way, ask them to leave the premises. Immediately communicate with the main auditing office and explain your actions.

Generally, auditors are very understanding and sensitive to the time involved in conducting the audit. They want to make it as easy on the business as possible.

Your first responsibility is to the company you work for, and the employees of that company. The auditor needs to show respect for the business, and your time. If you don’t think that is the case, you must speak up with confidence and authority.

 

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