City Audit

[TAX]

New client, s corp, has a motel. I do not do his accounting and/or tax work. City wants to audit for 2006 (Jan-Sep 06). Main goal is to audit taxes paid based on revenue. Motel pays taxes to city on a monthly basis based on revenue. Revenue is recorded in their software "Check In"(designed for motel). Village has hired CPA firm to conduct audit. City and client did not get along very well (per past history)!

Person conducting audit will be the partner of a decent size CPA firm!

Client has retained me to represent.

(0) I have prepared engagement letter which client has signed

(1) I have asked CPA firm to come to my office where I will have records. Is this the right thing to do? Or Should I go to CPA's office with records?

(2) It seems straight forward but any tips would be appreciated.

(3) Is there any thing special in CPA firm conducting audit vs. City? Is there any pros and cons?

Thanks!

[sea-tax]

New client, s corp, has a motel. I do not do his accounting and/or tax work. City wants to audit for 2006 (Jan-Sep 06). Main goal is to audit taxes paid based on revenue. Motel pays taxes to city on a monthly basis based on revenue. Revenue is recorded in their software "Check In"(designed for motel). Village has hired CPA firm to conduct audit. City and client did not get along very well (per past history)!

Person conducting audit will be the partner of a decent size CPA firm!

Client has retained me to represent.

(0) I have prepared engagement letter which client has signed

(1) I have asked CPA firm to come to my office where I will have records. Is this the right thing to do? Or Should I go to CPA's office with records?

(2) It seems straight forward but any tips would be appreciated.

(3) Is there any thing special in CPA firm conducting audit vs. City? Is there any pros and cons?

Thanks!

I am not sure exactly what kind of audit you have but I am assuming it is similar to a Departement of Revenue audit we have in washington state.

I think asking them to come to your turf is a good idea, it makes sense because all records are there.
Having the engagement letter is also a great idea.

I would first go through the clients records and make a spread sheet listing total sales reported by month and then total bank deposits by month. Compare and if there is any differences then you need to have a heart to heart witht the client.Find out why they are not the same numbers. It could be simply that he spent the cash on expenses before he made deposits or maybe he is cheating . It would be better you find out before the auditors.

As for the Cpa's conducting the audit I am no help there in my neck of the woods they are all gov't employees. Good Luck

[TAX]

I am not sure exactly what kind of audit you have but I am assuming it is similar to a Departement of Revenue audit we have in washington state.

I think asking them to come to your turf is a good idea, it makes sense because all records are there.
Having the engagement letter is also a great idea.

I would first go through the clients records and make a spread sheet listing total sales reported by month and then total bank deposits by month. Compare and if there is any differences then you need to have a heart to heart witht the client.Find out why they are not the same numbers. It could be simply that he spent the cash on expenses before he made deposits or maybe he is cheating . It would be better you find out before the auditors.

As for the Cpa's conducting the audit I am no help there in my neck of the woods they are all gov't employees. Good Luck

Thanks!
Here is the exact quote from letter: "To perform an audit of hotel-motel taxes incurred by your motel for the period indicated above" (Jan 06 - Sep 06)

[sea-tax]

Thanks!
Here is the exact quote from letter: "To perform an audit of hotel-motel taxes incurred by your motel for the period indicated above" (Jan 06 - Sep 06)

Well it sounds to me that what you have is an Income Audit and Tax Audit. If it were me I would try to check all the income to make sure that your client properly reported the income and then also look at the taxes he/she was charging and make sure they used the correct rate.

Once I found a client was reporting the correct income he just failed to collect the right amount of tax. The rate was 9.3% and he was collecting the 8.8% .

[Bird Legs]

City Audit

Have not heard of a city hiring outside auditors to audit businesses.
How does the auditor get paid? Percentage of tax collected? Hourly rate?
Flat dollar amount?

[jainen]

In all audits

In all audits, one of your goals is to limit the scope. You do not want to discuss issues that other agencies might be interested in, like licensing, health & safety, parking, sales tax, or income tax. Or illegal aliens. They might bring up these things to put you on the defensive. When you set up the appointment, ask them frankly what they are looking for and write down their answer. That will give you a chance to have the right records (subject to preliminary review of course) and decline any new requests.

Some practitioners say you should only have the source documents and make the auditor add them up. I think that is a strategic error for two reasons--you will be seen as uncooperative, and the source documents are most likely inaccurate (at least in terms of what was actually reported!) So have all the invoices stapled in little packs with your calculator tapes. The auditor may also use indirect methods such as expenses shown on tax return, vacancy rates, advertising, etc. Some of those are not very reliable but they can trip you up if you aren't ready to be flexible.

It might be more comfortable to use the CPA's elegant conference room. That gives them some psychological advantage but they are going to be very confident and in control wherever you are so I wouldn't worry too much about that. At least it helps you to not have additional records available.

[Jiggers]

Jiggers

Here in Texas, the State Comptroller's Office that collects the sales tax, among other taxes, contracts with CPA's to conduct their audits. I had one client audited for sales tax and the client handled himself, which I advised against, so I can't tell you what was involved. The client said it was basically a "rubber stamp approved, no change" audit. I think the state is getting rooked on this deal as I knew that the client was going to owe something for sales taxes! But, I kept my mouth shut.

[sea-tax]

Here in Texas, the State Comptroller's Office that collects the sales tax, among other taxes, contracts with CPA's to conduct their audits. I had one client audited for sales tax and the client handled himself, which I advised against, so I can't tell you what was involved. The client said it was basically a "rubber stamp approved, no change" audit. I think the state is getting rooked on this deal as I knew that the client was going to owe something for sales taxes! But, I kept my mouth shut.

Isn't it like letting the wolves guard the hen house.