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Even though audits may seem rather random, certain audit issues tend to surface far more than others. Some of the most common audit issues include asset ownership, asset valuation, and manager representation. While these terms might look complicated, each type of audit can be easily understood following careful examination and explanation.
An asset valuation audit occurs when a person or company has failed to provide sufficient evidence to support specific claims. Sometimes, auditors skip over information that a filer has included. When this occurs, the auditor is at fault. However, most people neglect to send in supporting evidence that proves certain claims are true. In this case, a person has a determined number of days to produce the proper paperwork, or an official auditor will visit with the person at fault.
When an audit is due to an asset ownership, a person or company has failed to include proof that a certain claimed assets are owned. This becomes a problem if a person or company claims to own an asset, but cannot produce evidence to support this claim. Again, an auditor may overlook included paperwork, though this is rare in the case of an asset ownership. Both business and individuals must send the proper paperwork to an auditor within a certain number of days, or an inspector will delve deeper into a case.
Management representation audits are very different from asset ownership or valuation asset audits. If an auditor is not able to support management responses to various inquires, then the management team in question may be further investigated. This type of situation occurs when an auditor attempts to gather information about a company, though a company's management team provides false or misleading information.
Clearly, all of the audit issues mentioned above are unique, though these particular audit issues tend to occur frequently. Generally, an auditor will give a person or company ample time to produce paperwork. However, if a company or individual is under investigation for fraud, then an auditor may prefer to conduct a personalized interview.
Any person or company representative who receives an audit notification should contact a qualified accountant. While most audits can be settled without a lot of confusion, a professional accountant will be able to handle audit details with skill and ease. Audit issues occur on a regular basis, and most of the time the issues that trigger an audit are easy to rectify.
If you are reporting to the IRS, some audits simply consist of them mailing you and asking for more information on a part of your tax form you may have made a mistake on. A good rule of thumb is to have a professional do your taxes for business or personal life, as often they have a guarantee that will support you during an audit.
If you are asked to meet an auditor in person, make sure you ask them what documents they want you to produce. There is no sense bringing a year worth of receipts if they only want to check on your travel deductions or entitlement to homeowner benefits.
If you do your own income tax, the chance of being audited sometime in your financial years is pretty high. A good rule of thumb is to keep all applicable receipts neatly stored in a file folder for a given year. Your deductions and expenditures that relate to your taxes need to be proven somehow.
If you are well prepared for an audit before it happens you won't have the stress of trying to come up with evidence to support your claims in a short period of time.
Auditors who deal with income tax can ask to see you rather quickly, so it is best to be prepared.
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