(redirected from audits)
Also found in: Dictionary, Thesaurus, Medical, Financial, Encyclopedia.
Related to audits: Environmental audits


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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.


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)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
References in periodicals archive ?
One result of the accounting scandals of recent years is the enormous attention given to audit committees of public companies and the subsequent change in the committee's role and practices.
Since then, Congress has expanded the GAO's statutory authorities and frequently calls upon it to thoroughly examine federal programs and their performance, conduct financial and management audits, perform policy analysis, provide legal opinions, adjudicate bid protests and conduct investigations.
The panel's recommendations were principally directed to three groups able to influence audit conduct: the Auditing Standards Board, auditing firms and the former SEC Practice Section of the AICPA.
1, 2005--provides easy-to-follow guidance to prepare, audit and report on financial statements of employee benefit plans.
The report showed a 14.8% increase in total audits and an 18% increase in audits of individual returns.
Wilson responded that while MTC joint audits may make it easier, one advantage of individual state audits is that the taxpayer's workload can be staggered by scheduling one state at a time.
In the highly cutthroat commercial real estate industry, brokers must demonstrate an understanding of lease "audit clauses" in order to maintain their long term relationships with tenants and their competitive edge in the marketplace.
"The Parmalat affair," notes the Bank for International Settlements (BIS) in its 2004 Annual Report, "indicated shortcomings at every possible level: senior management, internal audit, external audit, bank lenders, bond underwriters, rating agencies, investment bank analysts, and the overseers of many of the above."
But while the industry has made many advances since the Equity Funding scandal and some safeguards have been put in place, has it gone far enough in the area of underwriting audits?
* Infrared pyrometer with laser sighting: This is useful to conduct temperature audits on all steam-heated vessels of a corrugator.
This discussion of privacy legislation and codes provides a context for understanding privacy audits as discussed in the balance of this article.
In the chapter titled "Variety Police Audits," the author makes a relevant point that law enforcement auditing is not tied just to financial records involving allocation and expenditures of the budget and grants.