Small business owners try hard to avoid tax audits, but it’s important to be prepared because once the IRS decides to audit you, there’s little you can do to prevent it. Understanding auditing standards and keeping up with tax law changes can be confusing and challenging for most companies. There are also misconceptions about tax forms, deadlines, payments, and potential refunds, which can be frustrating. In the past, small businesses relied on simple bookkeeping or internal accountants, but increased regulatory requirements have made it unclear why some businesses are audited while others are not. The IRS uses a computer program called the Discriminant Function System (DIF) to analyze tax returns and flag them for potential audits. When a return receives a high DIF score, an agent reviews it to determine if an audit is necessary.
Types of Audits
In general, an audit is like an investigation. Audits are done to make sure that a certain area or activity in a business is not hiding any important mistakes. There are different types of audits that serve different purposes:
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Construction
You're building a company, don't let a mistake tear it down.
Construction Accountant and accounting tax services
Construction Audits
Construction audit: External auditors examine all the costs involved in a construction project to ensure that they are reasonable and justified.
Design
Construction
Planning
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Financial
Your company's financial statements will be scrutinized.
Financial statement audit by a certified accountant
Financial Audit Reports
This is the most common type of audit where a company’s financial statements, like the balance sheet, income statement, and cash flow statement, are carefully reviewed. Usually, a certified public accountant or an accounting firm completes this type of audit.
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Operational
Operational Audit will be looking at all your financial Information
Operational audit by a certified accountant
Operational Audit
This audit looks at all the financial information of a business, including its financial position, financial reporting, planning procedures, processes, and operational aspects.
