Preparing for a Business Audit

Anyone who has owned a business for some time can tell you that audits happen. While you never know if or when an audit will happen to your business, it is important that you are prepared.

The most important thing you can do if your business is being audited is to have all the requested documents ready before the audit process begins. If you do not have all the documentation ready, the process can be even more grueling and long.

As long as you have been honest in your tax filings, you should have no problems getting through the audit with relatively little hassle. The purpose of an audit is to make sure you are complying with the particular accounting methods for your business or industry. Financial records and statements will be examined to make sure that there is no misrepresentation or fraud to outside investors or to state and federal governments.

When an audit happens, the auditor will most likely give you a list of items and documents to have ready when the audit begins. Usually, the auditor will be from the IRS, the state government or an insurance company. In addition to the items requested by the auditor, you should also have on hand these items:

Bank Records - Be sure to have your monthly bank statements on hand as well as any bank reconciliations for the year. When an audit happens, your bank and investment records will be checked, so be sure to stay on top of your monthly account statements. The auditor will check your records against the bank's official records and your investment company.

Capital Assets - The auditor may ask you for a list of all capital expenses you spent for the year, and may even review the depreciation method you are using to calculate your figures.

Accounts Receivables - In most cases, the auditor will need to review your potential for income. Reviewing the money that others owe to you is important to see in order to determine your cash and income potential. The auditing agency will may need to verify your records with a third party.

Accounts Payable - As well as what is owed to you by others, the auditing agency will also need to review what you owe to others. Have all of your paperwork concerning debts and credit accounts ready, as well as any documentation of outstanding loans.

Your CPA should be involved in the auditing process from the start. The CPA will have the knowledge and experience to correspond with the auditing agency on your behalf. Once the audit begins, a CPA will be there to remain focused and calm throughout the entire ordeal. If you keep precise records and have been honest, the audit should go relatively smoothly. A professional bookkeeper and accountant will ensure your business remains in good standing with the IRS and state government.

Mr. Abernathy is a marketing agent of Accounting Works. For more information on their Accounting Richmond Virginia please visit their website.