Online Payroll Processing and Human Resource Management System Specialists > www.GBCPayroll.com
Atlanta Georgia Income Tax Preparation, Accounting and IRS Representation > www.GBCTax.com
Professional Auditing Services for Small Businesses > www.GBCAuditServices.com
Showing posts with label atlanta tax auditing services. Show all posts
Showing posts with label atlanta tax auditing services. Show all posts

Wednesday, August 24, 2016

IRS and Small Business Owners IRS Alert

If you run a small to moderate sized company,
outsourcing options as a means to protect your
investments on the in case of IRS prompted audit.

Many small businesses suffer from the misconception that only big corporations have to worry about exhaustive IRS audits. 

Nothing can be further from the truth.


Why?
The Internal Revenue Service utilizes a different set of criteria for evaluating moderate and small businesses, so there are numerous things that can red flag your company for potential governmental scrutiny that are unique to typical mom and pop ventures.

The most common issue  that creates unwarranted suspicion is the filing of numerous tax deductions and exemptions.  Even if such deductions are legitimate, far  too many of them may  give the IRS the impression, mistaken or other wise, that you are playing fast and loose with tax loopholes, shelters and write offs.  To reduce potential risk of an IRS audit in this regard,  you may wish to mitigate the numbers of deductions you indulge, taking due care to keep all receipts  and documents on hand.  This measure may not only keep you from getting audited, but may very well assist in keeping the business in the black should you wind up  being the unwitting participant of  an IRS evaluation.

Another potential problem that may be more specific to smaller and mid sized business is the correspondence audit. 

Moderate sized companies are in greater danger.

Especially this type of review due to the fact that this type of IRS evaluations focus primarily on  red flags that are specific to more diminutive enterprises. In many cases,  this style of audit may not require a face to face meeting and can be disputed in an informal setting.

Another way to keep the tax man at bay is to outsource your major accounting work. Even if you have an in house bookkeeper or a reliable on staff finance team, it is always a good idea to have another pair of eyes evaluating your books. Not only does it guarantee your financial records will be maintained, it allows for pristine record keeping that reduces IRS related inquiry.

Outsourcing may be especially needful if you undergo a correspondence audit and decide to dispute the outcome. 

Even though these kinds of IRS audits are largely handled via snail mail, they can still be costly and problematic to a small company's bottom line when contested.   Companies that routinely outsource with reputable accounting firms will be able to utilize reliable CPA's to represent them in Tax Court. Additionally, the company will be familiar with your company's in house finance paradigm and can utilize this knowledge to assist you in the pursuit of your goals.

-------------------------------------------------
READ MORE


-------------------------------------------------
Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------











Wednesday, August 10, 2016

What You Should Know About IRS Correspondence Audits


Many of these  types of audits occur when
mistakes in accounting happen.
Much ado has been made about the fact that IRS audits are on the  decline, however, this  does not mean the IRS can't, or won't, come knocking on your door.  This is especially true if you own a small to mid sized company, as these types of  audits are actually on the rise. 

Correspondence Audits and What They Mean for Your Business

When it comes to IRS related tax audits, large and small business can face two kinds. One is the face-to-face audit.  This particular process is largely handled in person, with the agent and business owner pouring over relevant documentation to assess how much money, if any, a business may owe in  taxes.

The type of audit small to moderate sized companies most often face however, is the called a correspondence audit. As the name implies, this type of  IRS review is generally handled via  snail mail, and can be disputed in lower tax courts. Even so, if handled incorrectly,  a correspondence audit can lead to a  closer examination  of your company's financial  records, which could lead to significant payouts.

This is something a struggling small enterprise can ill afford.

Dealing with a Correspondence  Audit

Correspondence audits usually occur after an IRS agent is alerted to potential issues on the company's tax return.  It could be something as simple as a clerical  error or  missing finance  documentation.  In such instances, an agent will send out an official letter to the business owner requesting further information for clarification.

Now, a correspondence  audit may appear innocuous enough but don't be fooled.   These types of government examinations can be a drain on time and financial resources as you try to get he matter sorted.  Making matters worse, there is usually very little recourse for businesses who receive these types of  notices in the mail, as contact information is seldom supplied.  In other words, you  receive  the notice with on o way to call  or ask questions regarding the  issue.  The only other option  a company will have at this juncture is to request an in office meeting with your local  IRS representative, but this request may or may not be honored--and that's perfectly legal.

How to Avoid a Correspondence Audit

When you receive one of these little bomb shells in the mail, you will have to respond to it by law or face heavy fines or penalties.  Many individuals try to gather the requested info and send it off hoping that will end the matter.  This may not always be the case.

As the old saying goes, an ounce of prevention is worth a pound of cure. Many of these  types of audits occur when mistakes in accounting happen.  Or worst yet, the company's finance department has lost or failed to keep up with pertinent records.

Avoiding this scenario may be as simple as hiring an outside accounting firm to handle your financial record keeping and tax filing. GBC of Atlanta is familiar with ins and out of Correspondence Auditing and related disputes and can act on your company’s behalf. Contact us today to learn more about how to protect your financial investments and remain in good standing with the IRS.

--------------------------------------------------
Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE















Wednesday, July 27, 2016

Tax Season is Every Season : How To Avoid An IRS Audit

What Does The IRS Take Into Consideration
When Performing An Audit?
Did you know that you are more likely to face an audit when Tax Season is in full swing.  In either case, it pays to be ready, no matter what.

Although Tax Season for all officially ends and begins on a given calender day, one mustn’t make the mistake that so many businesses do, by thinking  you are safe from scrutiny  once the season comes to a close.

Remain on Guard

The Internal Revenue Service has a list of things it looks for when considering a business for potential audit. These red flags can pop up for any  reason, at any  time. As this is the case, it remains imperative to  be on the look out for potential  accounting issues, and, when and wherever possible, to outsource with a reputable accounting firm.

Indeed, the IRS can  perform an audit for any reason any day of the week, 365 days a year.


Why?

Having a second pair of professional eyes lowers your risk of IRS investigation, which  all too often approaches a corporate audit with a “guilty  until proven innocent” mindset.

What to Look Out For 

The IRS looks for a wide variety of things that  could potentially clue them in  the idea that you may not be on the up and up, at least in their eyes. When it comes  to intensive government investigations, an uncrossed “t” and undotted “i” simply means payments weren't given to Uncle Sam  in due time, and that can spell trouble for you and your business.  Even so, agents will and often do consider human errors during an audit, but they will often need detailed documentation  to make such determinations—this  is when accurate record keeping becomes crucial.

So, what are some of the things the IRS will take into consideration when performing an audit?  There are quite a few, with the most common being:

Ready and Petty Cash – Businesses that run primarily on cash transactions or  have a lot of petty cash on hand for odds and ends, may garner significant  attention. This is because cash is hard to trace and can easily be hidden or  passed under tables.  In such cases, the IRS may also evaluate your --

Lifestyle and Charity Contributions –   When cash flow is difficult to determine, the Internal Revenue Service will often assess  an individual's social status as it relates to what neighborhood they live in, car they drive, how expensive their clothing  is and even the size of charitable contributions. They weigh these things against the person's assets, inheritances and  the money reportedly take in.  Of course, someone with a sizable income will be able to amass a wealth of creature comforts. If you are pulling in less than 110k a year however, living in Beverly  Hills and buying a Bentley every year should be well out of your price range.

While the IRS uses this assessment as tool in business that deals largely in cash, they can and often employ this methodology in affirming potential tax evasive or mismanagement  for other types of payment based goods and services.

Business Expenses and Reports  – It is not unheard of for  an employee or businessman  to  expense corporate travels, and while even entertainment and meals can be  legally deducted, you have to be able to prove their relation to  company related activity. This is why it is prudent to keep all receipts and documents  on file on the in case they are needed to justify an company expenditure during an audit.

Work Form Home Write Offs  – working from home is becoming more and more common. For business owners who spend a good portion of their time at their residence, they may and can often write off things like their utilities and  internet service.  Individuals  who are tempted to do so however, may  pile on unnecessary deductions in order to receive a hefty  tax return.  Eagle eyed IRS agents  will spot such discrepancies however, and in due time, you may find yourself undergoing an intensive tax audit.

As the above list indicates it is prudent to retain receipts and  relevant forms on the in case  the IRS pays you a visit. The best course of action is to avoid an audit altogether.  One way to do this it  to   stay on top of your accounts, which  is why outsourcing to a reputable finance firm is in you and your companies best interest, all year round.

--------------------------------------------------
Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, July 6, 2016

IRS Determination : You Have The Right To Contest

Appealing an IRS Determination
Appealing an IRS Determination – Is It Possible?

You've just undergone an exhaustive IRS audit and your worst fears were realized. You owe money. A lot of it. Money you don't even have.  You are now left with plenty of questions  yet not a ton of options.  At this juncture, you may feel inclined to toss your hands in the air, curl into the fetal position and drown out the world, but don't give up just yet.

Businesses, no matter how large or small, have the right to contest IRS determination in tax court.  What does this mean? It means that the IRS decision isn't necessarily final. If you are able to prove your case in court, you could manage to reduce the fees or eradicate them altogether.

Great!  How Do We Start?

How, when and where you present your case is ascertained by the IRS ruling itself, but first and foremost:

Make Sure  Your Appeal is Valid – To  have your  case effectively heard, it must first fall under the rule of law, tax law in particular.  When it comes to  a tax appeal for example, you can't claim an conscientious objection or exemptions based on moral or religious grounds.   After determining  if your case falls within legal parameters, you can either file a claim using tax form 12203 (for cases where a determination of of $25, 000 or lower was made) and presenting it to the tax courts. If the determination was higher than $25,000 dollars, you will need to  file a formal protest, which is a bit more involved.  After all pertinent information if received, the courts will schedule a conference where they'll address your concerns  and assess them for validity.

Know What You Are in For – Disputing a tax assessment is not the same as appealing a civil or criminal case.  One major difference is that you won't see the individual who audited you at this point.  Rather,  an appeals officers will be assigned  to your case and the process will begin with them. Because the appeals officer is unfamiliar with your case and  may not have ties with the agent who audited you,  you could feel as if you'd have a better chance at getting heard and resolving the matter  to your satisfaction.

File Within the Allotted Time Limits – bear in mind that there is a  tiny window of time to appeal the decision, usually  30 days.  If you don't file your appeal  within the scheduled frame, you will lose the right to have your case heard.    The process is informal and can be done via letter correspondence or in face to face meetings. If you fear  you won't have time to address the case, you should consider having someone serve as  representative in your stead.

Hire a Knowledgeable  Representative – In cases where you wish to appeal an IRS ruling, it is best to hire a qualified CPA, Tax Attorney or  Agent  to go over your case and accompany you to hearings.  Someone ill equipped for the job  could end up costing you  your one chance to remove a heavy debt load from your shoulders.  If you decide to let someone speak on your behalf, be sure they have the expertise and know how to present your case well.

At the need of the day, most Americans are unaware that they can  even dispute an IRS audit ruling. If you have been audited recently, now would be to perfect time to claim your right to an appeal.  A step in the right direction would be to hire a expert CPA, such as the ones found at  GBC Income Tax Services of Atlanta.  Don't put your future as risk by doing nothing...start the appeals process and see what you can do to reverse  the decision and  get your business back on the fast track.

-------------------------------------------------
READ MORE

Wednesday, June 22, 2016

Facing the Dreaded Audit By The IRS

The Dreaded IRS Audit - What Actions You Should Take
The IRS has targeted you and your company for a comprehensive audit. 

You've done everything  humanly possible to avoid it, but  your worst fears have been realized. Before you  fling  yourself headlong into panic mode and start checking out real estate in Tahiti, relax. An audit  isn't necessarily the end of the world, especially if you know what to do  in preparation for one.

Great – I am Being Audited – Now What?

An audit can be particularly stressful for  both employer and employees alike.  While the business  owner worries about potentially  being fined, paying exorbitant fees or worse, going to jail, dependent  workers wonder if they could lose their primary source of income should the business go under.
With so much at stake, corporation undergoing a tax audit will need to ensure they have everything on hand to make the process go as smooth as possible.

Gather all pertinent file, records  and documents –this is  the most important aspect of preparedness that cannot be stressed enough. The inability to a locate or present documents  can provide IRS agents with enough fodder to fine   you or claim criminal intent on your part.   Indeed, companies that are able to provide relevant records and books are least likely to face serious consequence after an exhaustive audit.

Do Your Home work – A little research can go a long way in not only helping you feel more secure, but in educating you on what you will need throughout the IRS auditing process. One thing that may surprise you is that the IRS aren't the big evil boogeymen they are made out to be, in fact, they   will and often do consider the fact that employees are prone to human error.  At the end of the day, only a small handful of audits result in serious  citations, fines or arrests.    With that in mind, remember that  they will and often will pursue anything they think to be grossly out to of proportion with the facts presented.

Take a Deep Breathe and – Relax! – The last thing you want to do is raise suspicions that  you have something to hide by acting overly worried. That is not to say pretend everything is A-Okay—just don't get super worked up. Stressing over the matter won't help things anyway, as the best way to ensure you  are going to “beat the system”   is to  do everything in your power  to legally increase the odds of a positive outcome. Seeking the advice of  a well respected accounting firm like GBC Tax Services of Atlanta is one way to  do this.  By outsourcing, you can  go over what needs to be done prior to the IRS agency visit. You  will also be better equipped to ferret out potential problem and solutions before the big day arrives.  In any case, it is always wise to go with  proven experts in the field of accounting  so you know you  you'll be ready when the Tax man comes a-calling.

Once you’ve decided on an expert CPA,  you can have them represent you or be a  part of the process alongside you. In either case, it makes more sense to have a proven and trusted CPA at your side who will help you protect everything you're carefully built. They can also  help you  if you don't like the IRS determination, by taking your case to  tax court on appeal.

But no matter the outcome, it literally pays to do your homework.  Avoid  common business  pitfalls that  lead to  a  negative result after Internal Revenue evaluation by being  proactive on your own behalf. It is the only way to win at life as well as beat tax audits.

-------------------------------------------------
READ MORE
-------------------------------------------------
READ MORE GBC Tax Services Website
For All Your Accounting Needs Call GBC 678-366-9232

Wednesday, June 15, 2016

What Home Businesses Need to Know About Auditing

Learn What You Can Do To Beat An IRS Audit


The factors that contribute to home business complications primarily concern keeping adequate, substantial records that indicate the influx of money alongside reasonable deductions that won't get you flagged for an audit.

Operating a  small business  can be  productive and exhilarating, but such proprietors  face a bevy of  issues that are unique to  “mom and pop” establishments. Add to this the fact that the company is operating from your home and things get even trickier. 

For instance, writing off  an off-site office as a business expense is a no brainer, as  one can establish the need to pay rent,  electricity, water and any other related  employee housing disbursement.  When it comes to  a home office however, you have to detail, with all due precision, the increments in which one uses things such as  supplies, water, lights,  and even the internet for business related purposes.  Some  may calculate erroneously and in  some cases fraudulently,  so more often than not, writing such things off can and/or  may  lead to an IRS audit.

How Would a Home Business Get Pinged for Audit?

The IRS considers and evaluates a home business  as it would any other,  while being aware of the limitations of such companies.  In other words, the criteria may remain the same but not the methodology  to factor in potential abuses or mistakes in reporting.

DIF Scoring  Rings Audit Bells   –  if there are enough red flags on your tax return, you could trigger what is known as a DIF  (Discriminatory Index Function) flag.  The DIF is a mathematical measurement that weighs  the possibility of audit based on certain income tax filing characteristics. In other words, if too much is out of whack on the form, it will trigger a high enough DIF to provoke an investigation.  This process is utilizes for all types of businesses, but can be problematic for home businesses, where certain nuances, like business expenses and home office space calculations, can be hard to assess properly.  With this being the case, even a mindful home business owner can  land themselves in IRS hot water.

Regular and Exclusive – Another issue, as discussed previously, is duly calculating the home office space, its requirements and  uses.  Getting this precisely right is important, as the IRS determines home office use in its tax audit assessments.  The evaluation  examines how  “regular” and “exclusive” office use is in relation to  home versus business life.  In order for a home office to  establish “office/ work viability” the IRS has to look at how regularly the room is used for business and how exclusively it is used for said business purposes.  For this reason, there are things one can indicate on  one's tax form that could give an agent the notion to investigate the in home set up. This would involve  making sure the small business owner  observed governmental and tax guidelines, like dedicating the space for work alone e.g. no watching Netflix and  having movie nights in the home office.

Examination of 1099 and W2's – a simple yet effective way that IRS agents can assess probable issues is by comparing  1099's or  w2's to the tax documents  themselves. This easy method of matching will tell an agent right away if there are any pertinent discrepancies in income reporting.

Beat the audit by looking for deductions – If you find yourself in the cross hairs of an IRS audit, it may very well pay to look for deductions wherever you can.  Many home business owners do  not now  for instance that they can write off things like utilities  and even business related phones calls.  If you have  relevant records on hand, they may be  able to be used to offset any taxes the IRS may calculate against you.

Locate  a Reputable  CPA – strong credentials  matter, so if your small home business is facing IRS scrutiny, contact a company like GBC Income Tax Service of Atlanta  and learn what you can do to beat the odds and increase your chances of a positive outcome.

-------------------------------------------------
READ MORE

Wednesday, February 24, 2016

Checklist to Prepare for an External Audit

An external audit will protect your
investment and keep your business.
Following is a step-by-step set of instructions intended to aid in the preparation for an external audit.

The guide can also be used for internal audits. Outlined are the planning stage, the entrance interview, fieldwork, the exit interview, and the final audit report phase.

Planning & Preparation:

  • Designate an audit liaison person within your organization who will act as the auditors’ main contact. This should be an experienced person with strong project management and communication skills.
  • Send a general communication to faculty and staff stating that if the auditors contact them directly, they should notify the liaison.
  • Have the liaison develop a list of contacts who must be kept informed of the audit progress.
  • Have the liaison develop a list of people who can provide support on technical issues and gathering documentation.
  • If necessary, schedule and conduct a general training session with individuals who may be asked to participate in the audit either to produce documents, be interviewed by the auditors or participate in findings discussions.
  • Contact auditors and set up entrance conference. Clarify the purpose of the audit and ask that audit requirements be in writing.
  • Alert the internal audit department of the upcoming audit.
  • Make necessary arrangements for the audit team – meeting rooms, preliminary interview schedule, entrance conference specifics including attendees.
Entrance Conference:

  • Develop a list of questions to discuss in the meeting including the purpose, objectives and scope of the audit; the awards to be included and sampling techniques; timelines including beginning and end of fieldwork and expected report date; and communication process.
  • Consider giving the auditor(s) a tour.
  • Determine staffing and space requirements, including whether the auditor will need internet access during fieldwork; arrange for auditor on site space; modify meeting room needs as necessary.
Fieldwork:
  • Obtain the list of requested records and develop an approach for pulling the information on a timely basis. Give a target date for providing records to the auditors.
  • Review the records prior to submission to the auditor. Consider if the records provide the necessary support. Anticipate what questions the records may provoke.
  • Maintain a list of all records provided to the auditor.
  • Meet with auditors at least weekly to learn of the status of the audit and potential issues that are identified.
  • Verify the facts on which issues are based; perform re-calculations and review source documents, if necessary.
  • Communicate at least weekly with those within the organization who need status updates.
  • Liaison should attend meetings between faculty/non-financial staff and external auditors unless the auditor or faculty insist otherwise.
  • Set up exit interview.
Exit Interview:
  • Ask for a copy of each finding or draft report prior to the interview.
  • Based on the nature of the issues, ask representatives from other groups to participate, e.g. general counsel, internal audit, office of sponsored programs, controllers office, etc.
  • Agree on valid findings; negotiate those findings where the facts are not representative of the control weakness.
  • Discuss with the auditor the disposition of the audit issue, i.e. verbal comment, report item, management letter.
  • Escalate any disputed issues to supervisors.
Audit Report:
  • Ask for the final draft report for review.
  • Draft management responses and circulate to management for approval.
  • Understand the follow-up process.
  • Perform a post-audit evaluation to determine weaknesses in the process and potential changes to approach in the future.
--------------------

Wednesday, February 17, 2016

On the Effectiveness of the External Audit Process

Make the most of your annual audit.
It is important that the audit committee has an independent point of view on audit quality; assessing the effectiveness is a natural extension of the audit committee's activities.

That said, what is an effective audit?

Whilst the auditor is in large part responsible for the effectiveness of the audit process, management and the audit committee have an important influence. Their contributions should also be considered in the overall assessment of effectiveness. An effective audit truly challenges and tests the contents of the financial statements in order to form an opinion on whether they present a true and fair view. An audit must, of course, comply with all relevant auditing and ethical standards. Fundamentally, an effective audit must deliver the right audit opinion, in which shareholders have confidence. Other characteristics of an effective audit include:

  • Communications and reports to those charged with governance that reflect the audit team’s thought processes and rationale for conclusions. These should discuss management’s approach, alternatives considered, relevant comparators and a clear articulation of the final conclusion. 
  • Effective interaction with management and the audit committee throughout its performance — everyone must understand what the ‘audit issues’ are, why they are ‘issues’ and how they will be resolved.
Assessing the effectiveness of the audit process is broader than assessing the auditor. Management have a role too and their contribution should also be included in the overall assessment. With this in mind, let us explore ways to assess the effectiveness of the external audit:

*On TEAM-STRUCTURE AND LEADERSHIP demonstrated by external auditor:
  • Does the partner demonstrate leadership of the team and provide effective ownership and oversight of the audit? 
  • Do the partner(s) and manager(s) commit an appropriate amount of time to undertake the audit, to supervise staff and to meet directly with management and the audit committee? 
  • Do you agree with the audit team’s assessment of significant risk areas? 
  • Are appropriate specialists (e.g., tax, pensions, valuations etc.) involved in the audit commensurate with the complexity of issues?
*Possible sources of evidence; Indicators:
  • Feedback from management on whether the partner and key team members are available and responsive, based on interactions throughout the audit. 
  • Feedback from members of executive management most involved in the audit process, on whether the lead audit partner is actively engaged in the audit process and audit decisions and is not over-reliant on his/her team. 
  • Evidence that changes are made to the audit team in response to changing business needs as well as performance issues e.g., team strengthened to deal with a major corporate transaction. 
  • Direct experience of the audit committee and the board based on interactions with the auditor. 
  • Information from the auditor on the proportion of senior to junior time and the absolute amount of hours budgeted to be spent on the audit by senior team members. 
  • Information from the auditor on the proportion of audit effort spent addressing risk areas. 
  • Feedback and insights received by the audit committee and executive management from the involvement of specialists.
*On HOW WELL THE EXTERNAL AUDIT IS TAILORED TO THE BUSINESS:
  • Is the audit team’s understanding of the business and its structure, the sector and the regulatory environment appropriately reflected in the audit approach? 
  • Is the audit approach responsive to changes in the business over time? 
  • Has the approach been challenged in the current year and if so, what has changed? 
  • Have business risks been properly considered when assessing audit risks?
*Possible sources of evidence; Indicators:
  • Evidence that senior audit team members demonstrate a good understanding of the group’s business and industry sector (e.g., from their discussions with executive and non-executive management). 
  • Communication of planning matters by the auditor to the audit committee shows scope changes that are responsive to changes in the size, risk and nature of the business. 
  • Communication of planning matters by the auditor to the audit committee shows clear understanding of the business and the risks that matter most. 
  • Audit committee’s consideration as to whether the external audit scope makes sense in the context of the areas of the business that it is concerned about. 
  • Audit approach is clearly modified year on year as appropriate. 
  • Commerciality, flexibility and innovation are apparent from the discussions with the audit team.
*On PROFESSIONAL SKEPTICISM in execution of external audit:
  • To what extent does the team demonstrate professional integrity and objectivity? Would the audit partner say ‘no’ when needed and stand by their view? 
  • Is there an appropriate degree of challenge throughout the audit? 
  • In areas of significant accounting and audit judgement, does the audit team demonstrate the robustness of their approach including the evidence considered and the rationale for the conclusions reached?
*Possible sources of evidence; Indicators:
  • Feedback from management and the audit committee on whether senior audit team members were robust when dealing with key judgments, errors, etc., whether they had conviction, were able to clearly articulate the rationale behind their position and did not unduly rely on management representations. 
  • The auditor’s communications about their independence clearly articulate the safeguards considered and applied to maintain independence and objectivity. 
  • Results of external quality reviews. 
  • Evidence from audit committee and other meetings that the audit partner challenges executive management’s view and does not just accept explanations received without corroboration. 
  • Quality and clarity of the articulation of the key audit and accounting issues. The basis for the auditor’s view is clearly explained and the audit committee understands the auditor’s thinking.
*On TECHNICAL EXCELLENCE in execution of external audit:
  • Is technical excellence visible within the team and is this appropriately demonstrated alongside commercial application? 
  • Are management and the audit committee provided with accounting, corporate governance and other technical and regulatory insights to allow them to operate effectively in a changing environment? 
  • Do the partner(s) take ownership of technical judgments and are they able to clearly articulate their point of view and reasoning behind them? 
  • To what extent are specialist technical resources used and effectively deployed in order to address difficult or unusual technical issues?
*Possible sources of evidence; Indicators:
  • Quality of analysis in communication and reports from the auditor. 
  • Feedback from members of executive management who are best placed to assess technical competence. 
  • Experience from audit committee briefings and formal meetings. 
  • Results of external quality reviews. 
  • No late surprises coming through communications. 
  • Feedback and insights received from the specialists where involved. 
  • Number of restatements and prior year adjustments.
*On COMMUNICATION AND REPORTING by the external auditor:
  • Are communications from the auditor clear and concise and does the auditor communicate a point of view where relevant? 
  • Are the communications and reports from the auditor timely so as to allow appropriate action to be taken to prevent as well as detect material misstatements in financial reporting? 
  • Are communications from the auditor specific and relevant to your company and its circumstances?
*Possible sources of evidence; Indicators:
  • Clarity and timing of reports to management and the audit committee and whether they provide insight into broader governance matters, the company’s financial reporting process and control environment rather than just accounting technical matters. 
  • Use of interim and ‘early warning’ reports in addition to communication of planning matters and findings from the audit. Feedback from management regarding communications throughout the year. 
  • No late surprises coming through communications.
*On THE ROLE OF MANAGEMENT in the external audit process:
  • Are key personnel available and accessible to the auditor when needed? 
  • Is information requested by the auditor prepared on a timely basis, complete and accurate? 
  • Are management’s papers to the auditor and audit committee on key judgments, estimates and uncertainties well researched and written i.e., articulate the issue, approach used by management and rationale, alternatives considered and a clear final conclusion and recommendation? 
  • Where possible, is management proactive in seeking early input from the auditor e.g., on complex, unusual or sensitive transactions? 
  • Does the audit timetable allow sufficient time for robust quality control and review processes to be applied by both management and the auditor? 
  • Do management act on feedback provided by the auditor on financial reporting processes, and controls?
*Possible sources of evidence; Indicators:
  • Delays in the audit process beyond the control of the auditor. 
  • Feedback from the auditor on availability and flexibility of key management personnel and timeliness and quality of information received. 
  • Feedback from the auditor and audit committee on quality of management’s papers on judgments, estimates and uncertainties and timeliness of involving the auditor. 
  • Number of audit adjustments as a result of errors in information provided. 
  • Auditor’s feedback on whether management implemented agreed upon actions from prior year management letters, assessments of the audit process or post audit debrief meetings.
---------------------------------
Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE





Wednesday, January 27, 2016

Help the Success of the External Audit by Educating Your Professional Team on the Characteristics of Skepticism.

Expect your external auditors to
embrace a professional level of
skepticism in order to succeed.
Skepticism is integral to the conduct of external auditors. But the exercise of skepticism should not be limited to external auditors. Even if not codified in law or regulation, deterrence and detection of financial reporting fraud requires all participants in the financial reporting supply chain to exercise skepticism.

Skepticism is a questioning mindset, and it requires an understanding that even the best organizations can be susceptible to fraud. Management, audit committees, and internal auditors, at a minimum, should take a “trust but verify” approach with systems, methods, and communications rather than accept critical information at face value.

Skepticism is not an end in itself and is not meant to encourage a hostile atmosphere or micromanagement. The word skepticism, in fact, comes from the Greek word skeptikos, which means “inquiring” or “reflective.”

Is skepticism a set of personality traits, or is it a learned skill? The short answer is both. We will consider skepticism as an individual characteristic, albeit with multiple dimensions, listed as follows:

  • Questioning mind—A disposition to inquiry, with some sense of doubt
  • Suspension of judgment—Withholding judgment until appropriate evidence is obtained
  • Search for knowledge—A desire to investigate beyond the obvious, with a desire to corroborate
  • Interpersonal understanding— Recognition that people’s motivations and perceptions can lead them to provide biased or misleading information
  • Autonomy—The self-direction, moral independence, and conviction to decide for oneself, rather than accepting the claims of others
  • Self-esteem—The self-confidence to resist persuasion and to challenge assumptions or conclusions
-----------------------
READ MORE>> www.thecaq.org: The Fraud-Resistant Organization

-------------

Wednesday, January 20, 2016

Creating a Fraud-Resistant Culture in Your Business; the Importance of Skepticism

Skepticism is discouraged in some
cultures around the globe,
 particularly when it means
 challenging superiors within an
 organization. When dealing
internationally, training and
education can lessen the
gravity of this reluctance.
In an age of complex accounting in an increasingly global economy, the entire financial reporting supply chain must participate in deterring and detecting financial reporting fraud.

The effort begins with a tone at the top that promotes an ethical culture, a tone set by the CEO and management, reinforced by boards, audit committees, and internal auditors, and enhanced with the knowledge and presence of external auditors

The effort requires the exercise of healthy skepticism up and down the financial reporting supply chain. Ultimately, it is the responsibility of all the players in an organization to know their roles in delivering high-quality financial reporting, to be part of the financial reporting supply chain’s “deep defense” in deterring and detecting financial reporting fraud, and to perform those roles to the best of their abilities.

To effectively conduct an audit of an organization’s financial statements, an external auditor should have a thorough understanding of an organization and its industry to evaluate whether the results suggest that a fraud risk exists. The external auditor should know how to assess fraud risk, including the risk of management override of controls, and how to respond to identified risks. In accounts or assertions with lower risk of material misstatement, less evidence and documentation may be required, while accounts or assertions where higher risk factors are present demand more rigorous examination of evidence.

What is most helpful to aid the external audit is to train staff to use characteristics of skepticism. While some individuals are more naturally disposed toward skepticism, research shows that individuals can be trained to employ professional skepticism.

What is skepticism?

Throughout the audit process, auditing standards call for external auditors to exercise professional skepticism, defined by the auditing standards as “an attitude that includes a questioning mind and a critical assessment of audit evidence.” External auditors are required by professional standards to be alert for information that suggests material errors in the financial misstatements, and must exercise skepticism when considering the possibility that there may be a material misstatement of the financials due to fraud. External auditors must also apply professional skepticism when they consider the risk that management may override internal controls, and take that risk into account when formulating judgments about the nature and extent of audit testing.

PCAOB’s Practice Alert No. 10 Maintaining and Applying Professional Skepticism in Audits, reminds auditors of their obligation to exercise professional skepticism throughout the audit, and suggests skepticism is “particularly important” in the following circumstances:

  • Significant management judgments 
  • Transactions outside the normal course of business, such as nonrecurring reserves, financing transactions, and related-party transactions that might be motivated solely, or in large measure, by an expected or desired accounting outcome 
  • The auditor’s consideration of fraud 

To properly exercise skepticism, in addition to diligently pursuing sufficient appropriate audit evidence, an external auditor can employ effective interview and inquiry techniques, including how to evaluate nonverbal communications. 

External auditors also should be familiar with judgment biases and other threats to skepticism. 

Cognitive biases have their place. Without them, decisions can fall victim to the inefficiency of “analysis paralysis.” However, when not kept in check, judgment biases can lead to bad decisions and to overlooking possible indications of fraud. A delicate balance is required. The first step in striking that balance is awareness.


What are some common threats to skepticism?

There is research that identifies threats to professional skepticism and ways in which such threats can be mitigated. One threat is a lack of vigilance about possible sources of bias in judgment. While everyone uses shortcuts to facilitate forming judgments or making decisions, it is important to be aware of the potential for cognitive shortcuts that can lead to poor decisions. When an individual fails to notice financial reporting irregularities, it could be because he or she fell into one of the several common judgment trapsFollowing is a list of 4 most common judgment tendencies with strategies suggested to help avoid these and mitigate bias:


  1. Confirmation: The tendency to put more weight on information that is consistent with initial beliefs or preferences.
    Solution: *Make the opposing case and consider alternative explanations. *Consider potentially disconfirming or conflicting information.
  2. Overconfidence: The tendency to overestimate one’s own ability to perform tasks or to make accurate assessments of risks or other judgments and decisions.
    Solution: *Challenge opinions and experts. *Challenge underlying assumptions.
  3. Anchoring: The tendency to make assessments by starting from an initial value and then adjusting insufficiently away from that initial value.
    Solution: *Solicit input from others. *Consider management bias, including the potential for fraud or material misstatements.
  4. Availability: The tendency to consider information that is easily retrievable or what’s easily accessible as being more likely or more relevant.
    Solution: *Consider why something comes to mind. *Obtain and consider objective data. *Consult with others and make the opposing case. 
Judgment biases are not the only threat to the exercise of skepticism. Threats exist at every level of the financial reporting supply chain. For example, the individual might face deadline pressure, pressure to please one’s boss or client, or lack of experience in significant accounting estimates. These threats can be mitigated, but the first step is clear-eyed acknowledgment that the threats exist. Understanding the importance of skepticism is a vital part of ensure the success of both the internal and external audits.

The role and responsibility of the external auditor defined:

The primary responsibility of the independent external auditor is to provide an opinion on an organization’s annual financial statements. The opinion is intended to provide reasonable assurance that the financial statements are presented fairly in all material respects. Most large companies (i.e., those with over $75 million in public float), are also required to have their external auditor report on the effectiveness of the company’s internal control over financial reporting. External auditors are engaged by, and report directly to, the audit committee, but they often have contact across many parts of an organization’s operations, and can garner valuable insights not only about controls, but also about an organization’s culture. In addition, their work across multiple companies endows external auditors with useful perspectives.

Professional standards require the external auditor in a financial statement audit to understand the company’s system of internal control as part of the audit planning process. This understanding includes consideration of the tone at the top and overall corporate culture, and incentives or pressures that may impel fraudulent financial reporting. The auditor considers factors such as management’s philosophy and operating style (including the integrity and ethical values practiced by management), the company’s commitment to competence, the effectiveness of the board and audit committee’s oversight, and the company’s human resource policies and practices (including compensation arrangements). All of these factors contribute to the auditor’s risk assessment of the company.

Communications

The more an external auditor engages, and engages effectively, with various members of management throughout an organization, the better the audit design and results. In obtaining information, face-to-face meetings encourage open discussion and the opportunity to assess nonverbal communications. Early in the engagement, auditing standards require the external auditor to brainstorm about possible fraud risks. Topics for brainstorming include:
  • How and where the engagement team believes a company’s financial statements could be susceptible to material misstatement due to fraud
  • How management could perpetrate and conceal fraudulent financial reporting
  • How assets of the company could be misappropriated
  • The importance of maintaining the proper state of mind throughout the audit regarding the potential for material misstatement due to fraud
Other factors that the external auditor may consider as part of its risk assessment include the following:
  • Communications and training programs, including the tools that help each level of management reinforce the desired messages with its direct reports
  • Incentives or pressures that may exist for management to engage in fraudulent financial reporting
  • Management’s fraud risk assessment and results of testing of internal controls
The board and audit committee can leverage the external auditor’s fraud risk assessment to ask questions of management.

Transparent, open, two-way communications between the external auditor and the audit committee are vital, and is it is necessary for all parties involved to employ an attitude of skepticism.

--------------------
READ MORE>> thecaq.org: The Fraud-Resistant Organization

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE











Wednesday, January 13, 2016

Who Gets Audited by the IRS?

Get an External Audit!
Believe it or not, it’s the big fish that get audited more often.

If a Schedule C shows more than $1 million in sales, the odds of being audited rise to 12.1%. If you are in this situation, I would suggest discussing incorporating your business with your attorney and tax professional. This move doesn’t just minimize your audit risk but it also allows you to take advantage of potentially lower tax rates and limits liability.

Here is some IRS data that show the frequency of audits performed in 2012 by return type:

First of all, in 2012 there were more than 143 million individual income tax returns filed, and 1% of these returns were audited that year.

  • When it comes to business returns however, the odds of being audited increase. Many of those 2012 individual returns contained a Schedule C, Income and Expenses for sole proprietors.  Audit risk also rises depending on how much income your business generates. For example, if your Schedule C lists gross receipts under $25,000, your odds of being audited are 1.2%, just a little bit higher than those for individual returns without business income. The odds double to 2.4% when gross receipts exceed $25,000 up to $100,000. Once small business owners bring in more than $100,000 and up to $1 million in gross revenue, their odds of landing in the hot seat increase by 3.6%.
  • When it comes to corporate returns, during 2012, 17.8% of large corporations with more than $10 million in assets were audited. And once assets exceed $20 billion, you can pretty much be guaranteed that you will be audited. In 2012, 415 out of the 446 corporations in this category were audited--that’s 93%.
  • SELF-PREPARED RETURNS ARE TARGETED. There are more than 75,000 pages of tax code. Even tax professionals specialize in certain fields and refuse to take on tax returns or certain types of transactions because of the complexity involved. Once you become self-employed, the ante goes up; there is so much more to know about the tax code, more than can be dealt with through a Q & A session with tax preparation software designed for the individual filer. The IRS knows that there will likely be a lot of mistakes on self-prepared income tax returns that include a Schedule C. Therefore, many of those are pulled for examination.

--------------
READ MORE>> SmallBusiness.FoxBusiness.com: Will Your Business Return be Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE




Wednesday, January 6, 2016

What the IRS Looks for to Flag for an Audit

Contact GBC Audit Services today.
"The IRS examined 1.1 percent of all individual tax returns in 2010 and 2011, so the chances that your tax return will be audited are only about 1 in 90." -Moneywatch.

That is the good news, but nevertheless it's wise to be prepared, since being chosen for this is an unpleasant experience. Hire external auditors to come and evaluate your company for you and ensure you are taking care of business. Here is a brief summary of how the IRS looks for returns to audit:

The IRS uses a computerized process to check all tax returns for math and clerical errors, such as incorrect Social Security numbers and addresses, and also runs tax returns through a process that compares the information you report from your bank, employer, and W-2, 1099 and other forms and documents. If you omit an item from your tax return, it's very likely to be picked up by the IRS's computers.

A few newer items that can trip up some taxpayers include payments received by businesses from credit and debit cards and investors who report the sale of their investments. These amounts are reported by banks etc and it's important the amounts be accurate. Also, individuals who report gains from the sale of their investments should also take note that the securities industry is now reporting to the IRS the cost basis of investments that were sold as the gross proceeds from the sale.

Meanwhile, the IRS assigns numerical weights to certain tax return characteristics. These weights are added together to obtain a national composite score for all tax returns. When the total score of all selected items on your tax return exceeds the national average score set by the IRS, the agency will flag the return for a possible audit. The exact items the IRS zeroes in on and scoring method is a closely guarded secret, but some of the things the agency is believed to scrutinize include:

  • Large amounts of income not subject to tax withholding 
  • Unusually large amounts of deductions claimed than seem unreasonable when compared to your income 
  • A large number of dependent exemptions claimed that doesn't square wtih reported SSNs, tax withholding allowances and so forth 
  • Large deductions for charitable contributions, casualty losses, home office expenses, and travel and entertainment expenses 
  • Indicating a change of address when not reporting a sale of your residence and not changing your home related deductions

While an IRS audit is not something most sane folks want to go through, it also isn't something to be feared. If you have kept complete and accurate records of all of your deductions and have reported all of your income, you should be fine. In fact, in about a quarter of audits, the IRS makes no changes or issues a refund. Contact GBC Audit Services today to arrange for smooth-sailing this tax season.

----------------------------
READ MORE>> www.CBSNews.com: "What Triggers an IRS Tax Audit?"

----------------------------
READ MORE GBC Tax Services Website
For All Your Accounting Needs Call GBC 678-366-9232

Wednesday, September 30, 2015

7 Red Flags to Trigger an Audit: 4 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #4:

*EXCESSIVE DEDUCTIONS FOR BUSINESS MEALS, TRAVEL AND ENTERTAINMENT:

*Maintain receipts for all expenses, along with detailed records, and don’t overstate these expenses.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 23, 2015

7 Red Flags to Trigger an Audit: 3 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #3:

*UNREASONABLY HIGH SALARIES PAID TO SHAREHOLDERS WHO ARE ALSO EMPLOYEES:

*Determine reasonable salaries for your type of business based on industry, skill level and geographic location.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 16, 2015

7 Red Flags to Trigger an Audit: 2 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #2:

*CONSISTENT LATE FILING OF TAX RETURNS AND PAYMENT OF TAXES: 

*Failing to follow filing requirements and meet deadlines triggers penalties, interest and unwanted attention. Always ask for an extension if you won’t be able to meet a deadline.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 9, 2015

7 Red Flags to Trigger an Audit: 1 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #1:

*REPORTING A NET LOSS IN YOUR BUSINESS FOR MORE THAN 2 OUT OF 5 YEARS:

*You will be well-advised to follow the IRS Publication 535 guide for business expenses, because if a business cannot satisfy three years of profits in a five-year period, it will likely get audited.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Monday, September 7, 2015

Strategies to Beat a Small-Business Audit: HOW TO DEAL

How to triumph over an audit?
There are a number of ways a small business can become targeted for an audit by the IRS. Some of the most common are DIF Scoring, Examination Referrals, and Document Matching. It's essential to understand why your business has been selected to be audited.

The "discriminant index function," or "DIF," is a computerized score assigned to filed returns. The mathematical formula used to derive this score is not revealed to the public, but the higher the score the more likely the audit. Factors such as reported deductions being higher than reported income are red flags. Audits of a related party can also trigger an audit for you. (i.e. If the IRS sees that company XYZ made payments to ABC Inc., they may check if the payment was reported by ABC.) In addition to these practices, the IRS also matches income reported by the payer on 1099 or W-2 forms to the payee's individual tax return to ensure the income is reported.

So, need some help? Hire a professional CPA with experience in IRS Representation. Call GBC Audit Services for help now at 678 366-9232!
And take some advice from a former IRS Agent's angle:

  • DISPUTE THE "HOBBY LOSS" THEORY: According to the Internal Revenue Code Section 183, deductions are limited when an activity is not engaged in for profit. This is known as the "hobby loss rule." If business losses have been disallowed due to the hobby loss rule, it is essential to prove both a business profitability strategy (marketing plans) and prior success to show that the current losses are temporary.
  • CLAIM MISSED DEDUCTIONS: Many business owners may not know it, but an audit is also  a great time to submit documentation for overlooked deductions. Such deductions may reduce the taxpayer's liability or possibly generate an overpayment of taxes, which can offset any deficiencies determined by the IRS.
  • BE CREATIVE IN SUBSTANTIATING YOUR DEDUCTIONS: Keep in mind that the IRS allows for third-party documentation, oral testimony and other forms of verification substantiating expenses, so if your business lacks documentation to support business mileage reported, consider using Google maps, clients' records and past invoices to estimate mileage. Another example would be if you no longer have receipts or documentation for certain expenses claimed, take the time to retrieve prior bank records or credit card statements. It is also beneficial to make contact with vendors to request proof of payment.
  • GET PROFESSIONAL HELP: If you feel overwhelmed by the mere mention of the IRS, it may not be a bad idea to get a tax attorney, accountant or enrolled agent to fight on your behalf. That way, you can remove yourself, emotions and fears from the equation completely. Begin by submitting Form 2848, "Power of Attorney and Declaration of Representative," to the IRS. They will be required to make direct contact with the agent on your behalf.
--------------------------------
READ MORE>> www.bankrate.com: 4 Ways to Beat Small Business Tax Audit
-----------------------------------------

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------











Wednesday, August 19, 2015

The Benefits of An External Audit

Evaluate your system accurately!
In an external audit, expect that professional accountants will interview the owner, discuss the accounting system and test the company's accounting information and procedures.

External audits offer several benefits for small business owners:

  • Providing ValidityMany small business owners do not have an in-depth understanding of accounting principles.  Professional accountants can review this information objectively and thoroughly and provide business owners with insight on the accuracy and validity of the accounting process. Valid accounting information can help business owners secure external financing from lenders and investors, and is also pleasing to the IRS.
  • Uncovering ErrorsBusiness owners can use external audits to discover errors in their accounting process. Errors in accounting information may prohibit managerial staff from making the best decisions. Business owners can also find it difficult to review historical financial information and discover trends if errors are in place. Trends allow business owners to plan future production output and estimate sales for the upcoming months.
  • Limiting Tax and Legal IssuesLegal issues arise when business owners provide inaccurate or fraudulent accounting information to lenders, investors and the general public. Overstating income, inventory value or other items can significantly increase the amount of taxes owed by the company. Small businesses organized as a sole proprietorship also need accurate accounting information since income will be reported on a personal income tax return. Inaccurate accounting information can trigger a personal and business tax return audit.
  • Educating the Business OwnerBusiness owners often work closely with external auditors to improve their accounting process. External auditors will provide business owners with information on current accounting issues. Public accounting firms may also provide business owners with free educational seminars to improve their accounting process. Creating a personal relationship with a public accounting firm provides business owners with professional insight for future accounting questions.
--------------------------------------------------
READ MORE>> smallbusinessChron.com: What Are the Benefits of An External Audit?
-------------
READ MORE

LinkWithin

Related Posts Plugin for WordPress, Blogger...