Everything But The Kitchen Sink

Posted by Traci WheelercloseAuthor: Traci Wheeler Name: Traci Wheeler
Email: traci@redmoonsolutions.com
Site: http://blog.redmoonsolutions.com
About: Traci is a member of the executive leadership team and leads our sales and marketing efforts at Red Moon Solutions. She has over ten years of software business experience serving small and large clients in a variety of industries.See Authors Posts (120) on Jul 13, 2011 | 0 comments

Unfortunately for most taxpayers going through a property tax audit, having the auditor ask for “everything but the kitchen sink” may be an all too familiar request. General ledgers and trial balances? Fixed asset ledgers? Sample invoices? As attendees learned two weeks ago at the Institute for Professionals in Taxation (IPT) conference, most of the above information is ok to share, depending on the type of audit a company is going through. In a very informative session, What Information Do Auditors Really Need, co-presented by Bryant Bartolone, Manager State & Local Tax at The Timken Company, and David Hurrell, Senior Manager at Ernst & Young LLP, attendees actively shared their experiences while the presenters reviewed the types of audits – review, informal and formal – and associated information requests. While most attendees were familiar with what auditors like to see, they were more intrigued by the information the presenters suggested should not be provided, including:

• Return or rendition work papers
• Tax accrual work papers or files
• Cost segregation studies
• Board of Director or committee minutes
• Personal information for any employee or officer
• Any other information not specifically requested

To help those companies that might be the subject of an audit in the future, Bryant and David shared some of the following audit best practices:

• Vigilantly prepare and document your return or rendition, keeping in mind this information will prove invaluable to you when you are preparing for an audit.
• Look for a posted audit or assessor manual on the appropriate jurisdiction’s website to get familiar with procedures and information needs.
• Notify key stakeholders at your company of the impending audit and their expected roles.
• Review the information request with the auditor prior to the audit start to make sure you are clear on the items that are being requested.
• Make sure there is a clear understanding of audit scope and periods covered.
• Settle on time lines for providing information site visits, etc. Make sure all conversations are well documented to avoid miscommunication.
• Discuss confidentiality with the auditor to determine if a confidentiality agreement is needed.

If you have been reading our blog over the last several weeks, you have probably noticed all of the posts related to states and audits. These areas have been hot topics at the conferences we have attended over the last several weeks. With states and local taxing jurisdictions scrambling for revenue, audit activity will continue most likely continue to rise. Take the extra time to prepare and document, as David and Bryant suggest, and you won’t be left turning everything over but the kitchen sink!

Have you been the subject of a property tax audit recently? Do you agree with David and Bryant on the information that should not be shared? Do you follow the audit best practices above? Which one do you think is the most important when going through an audit? Please share in the comments below.