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Tax Audits
Tax audit refers to the examination and verification of returns and other relevant tax documents submitted by a legal entity or an individual to the state’s tax agency. The audit is usually conducted by a certified public accountant.
1,102 Questions
What does provisional assessment mean?
Assessment of tax made before it is possible to make a final assessment which is often based on, for example, estimated figure or the previous year's figures.
What does IRS reference number 109 mean?
Usually when applying for a federal ID number. It means that there already is a federal ID associated with the social security number.
Why do businesses need to keep financial records?
It is required by the FASB and the government. It is your legal obligation.
What is the difference between audit and appraisal?
An audit is a systematic examination of financial records and processes to ensure accuracy, compliance with regulations, and to assess the effectiveness of internal controls. In contrast, an appraisal is an evaluation of the value or worth of an asset, property, or business, often conducted for purposes such as sales, taxation, or investment decisions. While audits focus on financial integrity and compliance, appraisals concentrate on determining value.
What is the difference between Generally Accepted Auditing Standards and auditing procedures?
In the US, Generally Accepted Auditing Standards (US GAAS) are 10 principles developed by the American Society of Certified Public Accountants (AICPA).
These standards provide the criteria (ground rules) for conducting every audit in such a way that the CPA conducting the audit is able to properly express an opinion on a client's financial statements and give reasonable assurance to users of those statements about whether (or not) the statements fairly present the company's financial condition in all material respects.
Among other things, GAAS requires that an auditor must: have adequate technical training and proficiency, exercise due professional care, and maintain independence, in order to properly perform any audit. There are additional US GAAS standards that apply to Fieldwork (the actual planning and performance of the audit) and Reporting (statements that the auditor must include in any report the auditor issues about the audited financial statements). A more detailed statement of US GAAS principles is readily available online.
Think of GAAS as the "competence/thoroughness/quality" standards that apply to every financial statement audit. For publicly-owned companies, US GAAS also includes any auditing standards issued by the SEC.
Audit procedures, however, are the individual steps, the nuts-and-bolts procedures and tests used to verify account balances and other management assertions during a given audit. These procedures are planned by the auditor and outlined in an audit program, which gives the audit team a "roadmap" to follow for this particular audit.
Although GAAS requires very few specific audit procedures (or else documented justification by the CPA of why any required procedure was omitted, and of what procedure was done instead to make up for it), in general, GAAS doesn't concern itself with testing what is on a given client's financial statements.
That is where auditing procedures (aka audit testing procedures) come into play. Auditing procedures are those tests and procedures used to test this client's actual account balances, and/or to gain knowledge of and test the design and effectiveness of this client's internal control.
In any given audit engagement, it is generally up to the auditor's professional judgment to select the most appropriate auditing procedures in order to reasonable satisfy himself that the client's financial statements fairly present the client's true financial condition. The auditor must always follow GAAS, but he has a good deal of latitude in choosing which auditing procedures he will perform.
One example of an auditing procedure is a confirmationrequested from an outside party; this is used to see whether the client's records match those of an outside third party. For example, the auditor might send a confirmation form to the client's customers, asking them to verify the amounts the client says they owe. This tests the accuracy of the client's reported Accounts Receivable, and is also a way to test for possible fictitious sales reported by the client on its financial statements.
A second (and very important) audit procedure is to observe the client's inventory count at the financial statement year-end date. This procedure is used to test for the existence of the inventory, and the reasonableness of the value at which the client has reported it.
Some audit procedures are designed to determine those areas in which the client has a well-designed and effective internal control system over the recording of financial information in its accounting records (and therefore in its financial statements). Other audit procedures are designed to directly test the amounts on the financial statements (account balances). Still other procedures involve ratio analysis and other analytical procedures to identify unusual relationships between related account balances and reasonableness of estimated amounts. Some procedures can accomplish more than objective.
How does the money supply expand?
Central banks control the money supply. In the U.S. the central bank is the Federal Reserve.
The Federal Reserve (Fed) has 3 main tools at its disposal to manage the money supply. They are i) the discount rate; ii) the reserve requirement; and iii) open market operations.
The discount rate is the interest rate that federal reserve banks charge to qualified private lending institutions for overnight loans accessed from the "discount window". The higher the rate, the less inclined private banks are to borrow. Thus, a higher discount rate constricts the money supply and a lower discount rate expands the money supply.
The reserve requirement is the level of funds that a depository institution must hold against specified liabilities. This relates to the whole idea of fractional reserve banking. That is, we expect that banks will make loans from their deposits but they should hold adequate reserves to meet withdrawal requests. A lower reserve requirement expands the money supply.
Finally, open market operations relate primarily to the Fed's activity buying and selling US Treasury obligations. The most active markets are in 2-, 5-, and 10-year notes. When the Fed sells bonds for US dollars, dollars are coming out of the system, thus constricting the money supply. When the Fed buys bonds on the open market with US dollars, this injects new dollars into the market, thus expanding the money supply.
There are more complicated topics related to your question that you may be interested in reading about, including: Capital Adequacy, the Velocity of Money, Fed guarantee programs.
There are essentially two ways your return could be selected for examination. One is the infamous "Red Flags". These are not printed anywhere but when the tax returns have very high expenses without corresponding income that is a Red Flag. Tax returns claiming the Earned Income Tax Credit that show someone earning just enough Self Employment Income that allows the filer to get the maximum amount of EITC is a Red Flag. That sort of thing.
However, the MAJORITY of tax returns selected for examination are through the Differentiation process. All tax returns filed are compared against some "models" of returns on file on the Cray Supercomputers at the IRS Computing Centers. How "different" a return is from the model results in a "Differentation Score" commonly referred to as the Dif Score. A Dif Score above a secret number level qualifies a return to be eligible for examination. Then it's just a matter of "luck" whether the computer will select your return from amongst the millions of others eligible for examination.
How much taxes does a person pay on an eeoc settlement?
The tax implications of an EEOC settlement can vary based on the nature of the settlement. Generally, compensatory damages for lost wages are taxable and should be reported as income, while damages for emotional distress may be non-taxable if not tied to physical injuries. It's advisable to consult a tax professional for personalized guidance, as individual circumstances can affect tax liability. Additionally, legal fees may be deductible in certain cases, impacting the overall tax situation.
Is the payroll tax cut applied to both employer and employee?
yes
ABSOLUTELY NOT!! (Not sure who wrote 'yes.)
The IRS regulations state that the employee tax rate for social security tax in 2011 is 4.2%. The employer tax rate for social security remains unchanged at 6.2%. The 2011 social security wage base limit is $106,800. In 2011, the Medicare tax rate is 1.45% each for employers and employees, unchanged from 2010. There is no wage base limit for Medicare tax. Employers should implement the 4.2% employee social security tax rate as soon as possible, but not later than January 31, 2011.
Under what auspices do loan brokers offer their professional services?
Though they are self-employed, some brokers act as agents, working only for a single lender. Such agents and brokers usually operate on 100 percent commission, but may also receive health benefits or application fees
What is the turnover limit for statutory audit?
Statutory audit is mandatory by statue hence it does not have any turnover limit.
What is a business profit-and-loss statement?
This statement is a projection of the sales expected in a given period of time, the cost of the merchandise that will be sold, and the operating expenses of the business.
What is the difference between dividends paid on common stock and preferred stock?
Dividends for preferred stockholders are often stated in advance and do not tend to fluctuate as much as those for common stock.
What is materiality and inmateriality in an audit?
Materiality is the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement. While that the relevant financial statement bases and presumptions on the effect of combined misstatements or omissions that would be considered Immaterial. It does not affect the financial statement.
What is the provision under ra no 4917 on gross estate?
RA 4917 pertains to the non taxability of retirement benefits established for individuals which are not subject to levy or execution other than unpaid payments to the said retirement fund or to answer for criminal liability.
The said amount is included in the provisions of "exclusions from gross income" under the national internal revenue code and is likewise treated as a deduction from the gross estate of the decedent, provided that the same was included in the "gross estate" of the deceased. In Section 86 (A)7 of the NIRC it is provided that:
(7) Amount Received by Heirs Under Republic Act No. 4917. - Any amount received by the heirs from the decedent-employee as a consequence of death of the decedent - employee in accordance with Republic Act No. 4917: Provided, That such amount is included in the gross estate of the decedent.
Why perform freight bill audit?
Depending on your volume, having your freight bills audited monthly or quarterly is an important step to keeping your freight costs in line and maximizing all your supply chain logistics management. Enlist in the help of Tutelam.com for your freight audit and we will store, track, analyze and adjust every freight shipment efficiently. Our auditing will help you reduce your cost to ship for all freight shipping. Our experienced auditors are well trained to handle any invoices from carriers in any mode of freight transportation and can expertly address the complex pricing and service options available.
What is asserted in an operational audit?
In an operational audit, the management of an organization asserts that the operations of the organization are being conducted in accordance with management's established policies and procedures.
What are the big four accounting firms?
The largest firms are commonly referred to as "The Big Four." These four firms are: Deloitte and Touche, Ernst and Young, KPMG, and PricewaterhouseCoopers.
Are CPAs who do not audit public companies under the jurisdiction of the SEC and the PCAOB?
CPAs who do not audit the financial statements of publicly listed companies do not fall under the jurisdiction of the SEC and the PCAOB.
