Hi Russ, I’m in the middle of an audit and I’m supposd to meet the auditor in person this week. I don’t feel prepared but I know my business better than anyone so does it make sense for me to go? Thanks, Amy
You have to take a test to get a driver license, but you don’t take a test to get a business license. Still, you are held accountable for knowing all the rules and laws regarding keeping accurate records, and those records must be kept according to GAAP (Generally Accepted Accounting Principles). GAAP dictates that there are rules denoting how you must keep track of your business finances, and failure to do so can result in costly penalties. During an audit, the auditor is attempting to discover whether you did things right, and if not, then you will owe.
Everyone feels good when they do a good job, this includes auditors. When an auditor is looking at your business financials, they’re looking for clues to a puzzle. They’re looking for mathematical and logical consistency tied to source documents like bank statements and point of sale reports. They’re also determining whether a business owner is being helpful or deceitful. I’ve represented clients during an audit and have been successful in getting the auditor to reduce the period of time they were looking at as well as reducing the overall amount due. Similarly, if you are found to owe, you want to be sure the payment plan you enter into is workable, which is where the insight of a pro can be extremely beneficial.
Your job as the business owner is to do whatever you need to do to keep your business alive right? Auditors can be sneaky, and they get acknowledgement and promotions based on how much money they collect, and on how well they manage their cases. Besides the benefits you get by having someone represent you who is unemotional about the audit, they are much happier talking to a professional who speaks their language, because it speeds up their ability to manage cases and it gives them some confidence that they can believe the information that’s being given to them. So, in my opinion, the way to handle an audit is to let somebody represent you, and somebody you feel is knowledgeable enough to help keep you out of trouble.
If you do choose to represent yourself, at least let someone with an accounting background review the financial information you plan to give the auditor. And to be clear, financial information means invoices, bank statements, copies of checks, profit and loss statements and point of sale reports.