Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board
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Chapter 2 Getting Started The key to a quick and competent closure of any new vehicle dealership examination hinges on narrowing the scope of the examination to items that may prove productive. This section addresses tools necessary to frame the scope of the examination, influenced by financial status concerns, and to make the transition present in each examination from planning to the next step: where do we start our examination of the books and records. In order to determine what focus the agent may take in the examination, it may be prudent to request copies of a few audit necessities even before the initial interview. These documents form the cornerstone of any auto dealership examination: 1. Unadjusted Trial Balance and Adjusting Journal Entries 2. Tax Classification Work Papers 3. Manufacturer’s Statement An agent obtaining this information before the initial appointment will be able to accomplish two objectives. First, the agent will be able to reconcile the trial balance to the tax return. Second, the agent will be able to ask more pointed questions during the initial interview. Regarding the reconciliation, it is recommended the agent do a full reconciliation of the trial balance and the adjusting journal entries to the tax return. By doing a little work up front the agent should have a specific understanding of the underlying transactions that make up the return. More on this in the next section. Often in a dealership examination the liability accounts have special significance. If the dealer is "taking money out of the business" the agent may be able to spot the issue here. The recommended reconciliation will enable the agent to analyze liability accounts to determine if any issues exist regarding loans or intercompany transfers. When the initial interview is held, the agents’ questioning may be more specific regarding liabilities or any transaction analysis made possible through the reconciliation. The agent has requested the tax classification work papers. It is difficult to envision a return at the level of a new vehicle dealership to be prepared without the assistance of such work papers. Most representatives are forthcoming and do provide these work papers. If received, most of the reconciliation is completed and the agent has saved the up front time previously scheduled. In order to open and maintain a franchise, the auto dealership is required to furnish financial statements with the manufacturer on a regular basis, usually monthly. These manufacturer’s statements are usually reliable, as shareholders in automobile dealerships do not want to risk 2-1
- Page 1 and 2: Internal Revenue Service Market Seg
- Page 3 and 4: Preface One of the goals envisioned
- Page 5 and 6: Table of Contents Preface .........
- Page 7 and 8: The Reinsurance Transaction .......
- Page 9 and 10: Part 1 General Focus and Procedure
- Page 11 and 12: 1. Type A Return Information Schedu
- Page 13 and 14: Percentage has gone down. The incre
- Page 15 and 16: the principal shareholders to finan
- Page 17 and 18: Rents $ 500,000 Interest $ 50,000 C
- Page 19: Conclusion "Financial status" is on
- Page 23 and 24: entities and their purpose and rela
- Page 25 and 26: It is recommended that officer comp
- Page 27 and 28: Chapter 3 Standard Audit Index Numb
- Page 29 and 30: Chapter 4 Books and Records Charact
- Page 31 and 32: c. Reconcile (2): Beginning Trial B
- Page 33 and 34: 3 Repair Order Sales 4 Parts Sales
- Page 35 and 36: Conclusion Although intimidating at
- Page 37 and 38: Chapter 5 Balance Sheet Why do we c
- Page 39 and 40: When an adjustment to a balance she
- Page 41 and 42: Part 2 Inventory Chapter 6 General
- Page 43 and 44: . Purchasing c. Handling, processin
- Page 45 and 46: dealerships use specific identifica
- Page 47 and 48: Chapter 7 LIFO Background Overview
- Page 49 and 50: A Short History of LIFO Application
- Page 51 and 52: improper inflation through unwarran
- Page 53 and 54: Introduction Chapter 8 Computing LI
- Page 55 and 56: The double extension index formula
- Page 57 and 58: as one item, there would probably n
- Page 59 and 60: (existing items) and non-comparable
- Page 61 and 62: The current-year costs that can be
- Page 63 and 64: Assuming the dealership elects LIFO
- Page 65 and 66: matching of revenues and costs. Thu
- Page 67 and 68: section 1.471-9. Both of these regu
- Page 69 and 70: providing to the credit subsidiary
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