Be prepared with a financial audit checklist

While it’s unfortunate for a business to go through a financial audit by the Australian Tax Office (ATO), it needn’t be the end of the world. With good organisation and a little help from your accountant, you can prevent an audit from becoming a nightmare of paperwork and stress.

Consider this audit checklist your first step in preparing.

Getting an audit notice

When your business is approached by the ATO to conduct an audit, ensure they have the right details. Then assess the specific information they are requesting. This way you can prepare adequately and won’t risk giving unnecessary information.

Also, speak to your legal representatives about whether they need to be present during an audit. You certainly need your accountant to be there, but there’s no legal privilege attached to your communications with them.

“The client would be entirely answerable to the questions the ATO may raise,” says Wallace Kee of Kee & Co. CPA.

Dealing with tax auditors

Check that the auditor’s delegation to your business is authorised and current, and keep a copy of these details. To prevent conflicting information, nominate a single individual within your business to liaise with the ATO.  

While you are required to give ATO officers full and free access to your business, this could disrupt your operations. If possible, set the officer up in an unoccupied office with a telephone if needed.

To prevent giving misleading or inaccurate information to an auditor, stay safe by referring any difficult questions to your tax expert.

Accessing your tax files

If an ATO officer requests documents or computer files, your nominated representative should obtain and deliver these.

“As long as you have nothing to hide, there is no need to panic and it will make the client look better if you have provided all the required items”, Wallace advises.

Provide original documents, and if they need photocopies, make sure to produce your own copy of each file and add it to your own audit paperwork.

Keep control of your tax files

By presenting your documents in an organised manner, you can control how the auditor examines your information. If your documents are in order, the process will be prompt and professional. If they are a mess, the auditor may need to delve deeper and ask more questions.

You should also maintain your own audit documentation, including a record of requests, conversations and correspondence. This could prove vital if there is further questioning or discrepancies between your records and the auditor’s.

Remember to only provide information that is specifically requested by the ATO and ensure that requests are made in writing, so there is a paper trail.

Concluding the audit procedure

By being organised and professional, and keeping your own records, an audit shouldn’t be a trial. But remember that you are liable for the accuracy of your records.

“Ultimately the client is wholly responsible for what they provide”, Wallace warns. “If the accountant is the one to provide the materials, the client is still responsible for the correctness of the materials.”

So if your business has received that daunting call and you’ve got a financial audit checklist in hand, your next call should be to a tax professional.