An audit is a process in which an auditor examines a subject matter against specified criteria. During this process, the auditors use various audit procedures to obtain assurance regarding the subject matter.
Several types of audits may exist. Usually, audits refer to external or internal audits conducted by independent auditors. These processes include examining a company’s financial statements and internal controls.
However, there are other types of audits as well, which are less common. Even tax authorities may conduct audits of a taxpayer.
Usually, taxation is a process that gets performed behind closed doors. However, taxation authorities may suspect issues with a taxpayer’s taxes. Therefore, they may conduct audits of the taxpayer, usually at their home or other similar places.
What is a Field Audit?
A field audit is a comprehensive tax audit usually conducted by a taxation authority. For the US, it may include audits performed by the Internal Revenue Service (IRS).
However, this isn’t an examination of a taxpayer’s records in the taxation authority’s office. Instead, these audits get conducted at the taxpayer’s home, business, or accountant’s office.
During tax audits, tax auditors examine a taxpayer’s financial records. Usually, these audits occur when taxation authorities suspect these records to have issues or unexplained transactions.
The primary purpose of the field audit is to ensure that taxpayer files their tax return accurately. However, it may also be to ascertain there is no fraud or errors in these returns.
Field audits are crucial in helping taxation authorities catch fraudsters. Similarly, it can be critical in preventing the flow of black money or avoiding money laundering.
Either way, field audits are a part of a taxation authority’s procedures to ascertain they receive accurate taxes. Usually, these authorities send one or more individuals known as field auditors to conduct these audits.
A field audit is when tax auditors leave their offices to conduct audits. That is why it gets the term “field.” These audits may occur to taxpayers, including individuals, businesses, or organizations.
Regardless of whose audit it is, the primary objective is usually the same. However, the process will differ since auditors check different financial records.
How do Field Audits work?
Field audits begin with a tax authority identifying taxpayers who appear doubtful. These may include individuals whom the tax authorities suspect are paying fewer taxes.
It may also consist of those who have had a sudden rise or drop in income. Sometimes, the selection may also happen randomly. Either way, the process begins with a tax authority.
Once selected, the tax authority will send the taxpayer a notice regarding the field audit. In this notice, the authority mentions the taxpayer’s selection for audit.
The notice will also include details on what the taxpayer will need to do to make the process smoother. Similarly, it will provide them with a date for when the audit will commence. Usually, the notice does not mention how much time the field audit takes since it may differ.
On the specified date, the field auditor visits the taxpayer. As mentioned, this is usually at a location where the taxpayer is available. For individuals, this location is usually their home. For businesses, however, it will be the corporate office or the finance department.
At this point, the field auditor commences work on the financial records to ascertain the proper filing of tax returns.
During field audits, auditors will review financial records. Based on the type of taxpayer, this process will differ. The field auditor usually examines receipts, bills, payslips, etc., for individuals.
For businesses, the process is more complex. It may include reviewing the financial records of different branches or outlets of the business.
Who is a Field Auditor?
A field auditor is someone who conducts field audits. However, they are usually employees of the taxation authority.
These individuals don’t always perform their work in the field. Sometimes, they also operate from a central location, which is the tax authority’s office.
However, the nature of their job requires them to travel extensively. Based on the type of audit, these auditors will spend substantial time in several locations.
The field auditor visits a taxpayer after the taxation authority sends them a notice. Once they get there, they will meet with the taxpayer or their representatives.
The auditor will require access to detailed records to help them conduct the audit. These auditors are organized and able to recognize any discrepancies in the records.
The primary objective of a field auditor isn’t to prove fraud or catch differences. Instead, they must ensure that all figures reported in the taxpayers’ returns are accurate and backed by evidence. However, auditors may come across some variances during their work.
The consequences of these variances depend on the size. Usually, smaller differences don’t require any action other than a footnote on the official report. However, large variances will follow an extensive investigation.
However, field auditors must ascertain that the differences exist before taking action. Once they do so, they must carry out a thorough fraud investigation.
They may also request help or backup from the taxation authority. During this process, they will prepare a legal report to the tax authority.
What are the responsibilities of a Field Auditor?
The responsibilities of field auditors are the same across various audits. Based on the type of taxpayer, the process may differ for the field audit.
However, the responsibilities will include the same duties. Some of the most prominent field auditor responsibilities consist of the following.
- Perform a risk assessment of the audit.
- Create an audit plan before visiting the taxpayer.
- Obtain and evaluate the taxpayer’s internal accounting and operational documents.
- Ensure the financial reports have the backing of proper and accurate evidence.
- Identify any variances and investigate them.
- Conduct an extensive investigation of the taxpayer’s records to determine if large variances exist.
- Prepare and present reports regarding their findings.
- Conduct follow-up audits if necessary.
- Provide advice to the taxpayer regarding issues found and how to ensure they don’t repeat them.
Although not a responsibility, field auditors must also travel regularly to various taxpayers’ offices. Similarly, they must carry out office work as well. However, their responsibilities usually relate to external work rather than duties inside the office.
What are the qualifications necessary to become a Field Auditor?
There is no specific qualification necessary to become a field auditor. Usually, the requirements for the job come from a tax authority. This authority decides the criteria to qualify someone as a field auditor.
However, some minimum requirements are prevalent among most tax authorities. Sometimes, an associate degree is enough to make an individual eligible for the field auditor job.
However, some authorities may also require field auditors to have a bachelor’s degree. Other qualifications, such as membership with accounting bodies, may also increase the chances of becoming a field auditor.
Similarly, experience in the same or related fields can also help individuals get the job. Apart from the qualifications, some skills may also be necessary for the job.
Field auditors require excellent analytical skills. Their job requires them to analyze financial records and identify discrepancies.
Similarly, presentation skills also play a role in the field of auditing field. The work needs field auditors to have excellent report-writing skills. Furthermore, other similar skills may help them in their job.
What Does a Revenue Field Auditor Do?
A revenue field auditor inspects, evaluates, and audits the financial documents of organizations and businesses.
They are responsible for ensuring the accuracy of financial documents and that all relevant taxes have been paid in full.
They perform a variety of duties, such as evaluating income statements to determine an organization’s or business’s revenue, expenses, and profits; reviewing bank accounts to ensure deposits are recorded accurately; inspecting payroll records to calculate the number of employees; as well as conducting internal audits to verify compliance with regulations.
Revenue field auditors must be proficient in accounting and tax laws, as they will likely be asked to recommend changes and adjustments in accounting procedures.
In addition to auditing documents and accounts, revenue field auditors may be responsible for collecting overdue payments from customers or clients.
They may also contact customers or suppliers to answer any questions related to finance or accounting, review contracts for accuracy and completeness, analyze financial software systems, research variances between actual numbers versus projected numbers from budgeting documents, provide a cost-benefit analysis for potential investments, or strategic decisions taken by the company’s management team, develop procedures for more accurate budgeting/accounting processes and complete special projects requested by management.
Overall, revenue field auditors are integral members of any organization’s finance department due to their knowledge of taxation laws and ability to evaluate financial information quickly and accurately.
10 Things You Should Expect From a Field Audit
- A field audit will involve an on-site visit from a representative or team of representatives who will conduct the audit.
- The representative or team may request to view pertinent documents such as receipts, invoices, and other financial paperwork relevant to the audit.
- The auditor may also need access to computers, software programs, and other technological devices used to manage accounts or finances within the audited organization.
- During their visit, they will inquire and ask questions related to the business’s finances and operations to ensure accuracy and compliance with applicable laws and regulations.
- They may request explanations for various items on financial statements and check inventory records if necessary.
- After they have completed their visit, you should expect a detailed report outlining their findings along with any recommendations for improvements or adjustments that should be made to ensure compliance in the future.
- The auditor may recommend specific changes in accounting procedures or processes to improve internal controls or reduce errors in calculating taxes owed or payment due dates for customers/clients etc.
- Audits can help identify potential fraud sources, which a field auditor should be trained to detect during their visit, saving your organization from potential legal issues down the road (if any).
- A field auditor should also be able to guide how best to use resources efficiently and manage expenses more effectively based on their observations during field visits/audits.
- You should expect detailed yet easy-to-understand feedback from a thorough review of all relevant documentation associated with an organization’s finances over time so that any discrepancies can be identified before tax time arrives!
Conclusion
A field audit is a type of audit conducted by a tax authority through a field auditor. This process involves examining a taxpayer’s financial records. Field auditors work for taxation authorities and are responsible for these audits.
These responsibilities include various tasks, as mentioned above. However, their qualification may differ based on the tax authority’s requirements.