Auto Dealerships - Audit Technique Guide - Uncle Fed's Tax*Board

Chapter 3
Standard Audit Index Numbers – SAIN
Automobile dealership audits tend to be ever expanding. It is recommended that Standard Audit
Index Numbers (SAIN) be used when conducting an auto dealership audit. Any well organized
system utilized by the agent, and understandable to others will work. However, the SAIN method
has proven to be the most universal, reliable and expandable. This system gives the agent a
framework around which voluminous and complex information can be organized and placed into
usable form for both the agent and whomever else may be involved with the case file. SAIN
contemplates traditional accounting concepts originating in the financial statement.
Using Standard Audit Index Numbers serves two purposes:
1. To establish a uniform approach to indexing examination work papers,
2. To provide discretionary audit procedures in specific areas.
Each SAIN account is identified by a 3-digit number. The first digit identifies where the tax
account fits within the structure of the balance sheet or income statement, as listed below:
1 – Assets
2 – Liabilities
3 – Equity
4 – Income
5 – Expense
6 – Tax Computations, Special Deductions and Credits
7 – General
8 – Administrative, Case Planning
The second and third digits of a SAIN account relate directly to the line number on the income tax
return. Cash is an asset and is located on line 1 of the balance sheet, therefore the SAIN is 101.
This general scheme is followed throughout where it is practical.
The Other Deductions account is the only area which differs from this general scheme. The Other
Deductions tax account showing as a line item on the income tax return is the summary comprised
of many subaccounts shown on a schedule attached to the return. Other Deductions will generally
be shown as a 526 account with a hyphen. The hyphenated account represents the subaccount.
Using this method there is no need for a SAIN 526 account showing the total Other Deductions
claimed.
SAIN Discretionary Audit Procedures are listed on many SAIN Leadsheets that have been
distributed to revenue agents. They represent a grouping of audit procedures specifically
associated with each SAIN item. These standardized procedures should serve as a guide to the
agent and not as a substitute for their skill and judgment. Please see the IRM for more
information regarding SAIN Leadsheets and SAIN Procedures.
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