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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 ?
Alcoa is currently audited by the IRS under the Coordinated Examination Plan.
For example, transactions and events audited for the current year may well provide evidence concerning the reaudit year's financial statements.
While the taxpaying public at large benefits, the incremental inconvenience to the audited taxpayer is severe, as can be the incremental costs.
The audit committee must meet with management and the independent auditor to review audited annual and quarterly financial statements, including the company's disclosures under management's discussion and analysis (MD&A) of financial condition and operations.
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The National Association of Hispanic Publications (NAHP) and the National Hispanic Press Foundation, in partnership with the Verizon Foundation, is launching a certified audit program that would enable the NAHP to become the first ethnic publication association with a 100% audited membership.
8, Other Information in Documents Containing Audited Financial Statements, cautions the auditor to discuss the information with the client if he or she becomes aware that such information conflicts with his or her knowledge of such matters, or if a material misstatement of fact exists, the auditor should consider notifying the client in writing of his or her views concerning the information and consulting legal counsel.
Under the DOL regulations, any such plans that include employee contributions, whether made on a before-tax or after-tax basis, must be audited unless the employee contributions are used solely to pay insurance premiums and are forwarded to an insurance company within 90 days of receipt or withholding by the employer.
Originally audited in September 2000, PVCS Dimensions was the first SCM solution ever to be audited through the PDA process and included in ARC.
Moreover, the audit committee must state whether it recommended to the board that the company include its audited financial statements for the previous fiscal year in the company's annual report to the SEC on form 10-K.
Having been audited and having done auditing, I saw how painful and disruptive it could be.
Ultimately, the dental plans would like to be able to share audit results so that the same dentist need never be audited more than once in the same year by different plan auditors," said Dr.