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A systematic examination of financial or accounting records by a specialized inspector, called an auditor, to verify their accuracy and truthfulness. A hearing during which financial data are investigated for purposes of authentication.

The Internal Revenue Service (IRS) conducts two types of audits, called examination of taxpayer returns, and they are typically conducted using one of two types of procedures. The most common auditing procedure involves correspondence between the service and the taxpayer or interviews with the taxpayer in a local IRS office. A less common method involves field audits whereby IRS officials conduct the audit at the taxpayer's home or place of business. Treas. Reg. § 601.105(b)(1). The service determines which audit procedure should be followed in a particular case. During an audit, an IRS official may question the taxpayer about a particular transaction or transactions that appear on the taxpayer's return or may conduct a thorough investigation of the taxpayer's entire tax return.

Although many people fear audits by the IRS, the percentage of returns examined by the IRS is relatively low. For example, of 108,034,700 returns filed by taxpayers in 1997, the IRS examined 1,662,641, or about 1.5 percent of the total number of returns. Despite this low number, several stories surfaced in the 1980s and 1990s regarding abuses by IRS officials, many of which occurred during the audit process. Congress responded by enacting two "Taxpayer Bill of Rights," first in 1989 and again in 1996. The second act, the Taxpayer Bill of Rights 2, Pub. L. No. 104-168, 110 Stat. 1452, established and delegated authority to the Office of Taxpayer Advocate. This office is responsible for assisting taxpayers in resolving problems with the IRS, identifying areas where taxpayers have had problems with the service, and identifying potential legislative and regulatory changes that could mitigate problems between the IRS and taxpayers.

Further readings

Baran, Daniel J. et al. 1997. IRS Audit Protection and Survival Guide. New York: Wiley.


Internal Revenue Service.


n. an examination by a trained accountant of the financial records of a business or governmental entity, including noting improper or careless practices, recommendations for improvements, and a balancing of the books. An audit performed by employees is called "internal audit," and one done by an independent (outside) accountant is an "independent audit." Even an independent audit may be limited in that the financial information is given to the auditor without an examination of all supporting documents. Auditors will note that the audit was based on such information and will refuse to sign the audit as a guarantee of the accuracy of the information provided. (See: auditor)


verb bring into question, certify, check, check on, conduct an inquiry, examine, examine financial accounts, exxmine the accounts officially, go through the books, hold an innuiry, inspect, inspect accounts officially, investigate, monitor, probe, pursue an inquiry, rationes dispungere, reexamine, review, scrutinize, search, study, subject to examination
Associated concepts: allowance of claim, audit of account, audited claims, auditor, auditor's report, disallowance of claim, fraudulent audit
See also: analysis, analyze, bill, canvass, check, computation, examination, examine, indagation, invoice, monitor, scrutinize, study, test
References in periodicals archive ?
An SAS 70 is needed because an erroneous report by the investment firm would result in an erroneous financial statement by the credit union.
Initially, SAS 70 reports were intended to assist in the auditing of third-party service providers whose services affected a company's financial controls.
The SAS 70 certification assures our customers that we maintain and deliver high levels of service excellence and performance for Sarbanes-Oxley, HIPAA, and PCI-compliant organizations that require an SAS 70-audited data center to operate their businesses," said Mark Barlow, chief operating officer of Castle Access.
The purpose of the SAS 70 Type II audit is to demonstrate that a service organization has been through an in-depth examination of their control objectives and activities, which often include controls over information technology and related processes.
The SAS 70 certification is a standard developed by the American Institute of Certified Public Accountants (AICPA) that is internationally recognized as a designation of rigorous internal controls.
This enabled us to hand the auditors the data they required at a moment's notice, an advantage that any service provider using @task for project and portfolio management can employ to expedite their own SAS 70 certification audit.
The SAS 70 Type II certification designates that Mobile Workforce delivers fully secure, reliable, effective operating environments with the proper controls for conducting high-availability IT and Internet operations.
Achieving SAS 70 Type II certification is a significant milestone for an organization.
One of the many advantages of an SAS 70 audit is that it allows First Associates' controls and operations to be independently verified by an unbiased third party, ensuring clients that all customer information is securely maintained and thoroughly protected.
Completing a SAS 70 Type I examination further demonstrates DelaGet's commitment to leading the industry by utilizing 'best of breed' practices and accreditations.
The successful completion of the SAS 70 audit supports our clients' needs and underscores Firm58's commitment to high operational standards," said Jim Mullen, Firm58's co-founder and chief technology officer.
SAS 70 is an acronym for the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standard (SAS) No.