Field auditing and company audit

If the local tax office announces that it will perform a field audit the alarm bells start ringing for a lot of companies. However, in general it is not necessary to feel fearful or ill at ease. If the accounting or merchandise management systems and in particular the cash management systems in the case of companies that have a lot of cash transactions are in order then you rarely have any cause for concern.

Field auditing and company audit

If the local tax office announces that it will perform a field audit alarm bells start ringing for a lot of companies. However, in general it is not necessary to feel fearful or ill at ease. If the accounting or merchandise management systems and in particular the cash management systems in the case of companies that have a lot of cash transactions are in order then you rarely have any cause for concern.

However, it is worthwhile preparing well for an audit. This also includes the timely collaboration with us as your consultant.

Additional forms of external auditing include for instance the VAT special audit or the income tax audit.

Appointments for the external auditing, at odds with the gut feeling of a lot of tax payers, are not by any means arranged in an arbitrary manner. There are clear regulations in accordance with which the company audits are stipulated. In principle the frequency of the company audit is based on the size of the company.

In addition to these “routine” audits there is also a requirements-based ordering of an external audit which is performed if the local tax officer feels there is the need for an audit based on the documents submitted (tax return, balance sheet, profit and loss accounting etc.). In principle the rule applies that every irregularity arouses the suspicion of the local tax office.

Even if everything is in order for you and your company based on the categorisation in accordance with the scale of the business – viewed statistically micro-entities are only audited every 53 years and small businesses only every 21 years, whilst large companies are constantly audited - is not due for an audit for a long time, it is nevertheless still possible that an audit will be performed. On the one hand company audits should give rise to a certain element of surprise which is why a portion of the companies to be audited each year are selected at random. On the other hand, special annual criteria that are to be stipulated are taken into consideration in particular such as occupational groups or, at the suggestion of the assessor, certain matters in the tax returns submitted, such as persistent high losses, investments and fluctuating profits or turnover, as well as the discontinuation of business activities, restructurings or the absence of cash withdrawals.

The audit is frequently performed by means of deviations in the gross profit margins, the validation of hourly rates, quantity calculations, intercompany comparisons, balance sheets, maintenance expenditure, plant depreciations, cars, (bogus) loans, entertainment expenses, travel expenses, employed spouse and relatives, hidden distribution of profits and foreign relations.

In general the last three years assessed are audited. If necessary the period can be extended. In the event of the suspicion of tax evasion the audit period may be extended to up to 10 years.

However, an audit does not occur completely by surprise. You receive an audit order at least 14 days before the actual audit. In these two weeks you have a little time to prepare for the visit of the auditors with our support.

However, as soon as you are in possession of the audit it is already too late for a self-indictment that exempts you from punishment. However, it may still be worthwhile considering such a self-indictment due to the fact it generally has the effect of reducing the punishment.

The company audit must determine ex officio the actual and legal relationships which are essential for the tax liability and the collection of the taxes. The auditor is also statutorily obliged to perform an audit for the benefit of the tax payer.

Bookkeeping that is performed in a formally correct manner gives rise to the statutory assumption that everything is in order in substantive terms. This is why orderly basic records are especially important.

The right attitude towards the auditor helps in ensuring the speedy and smooth progression of an external audit. This includes respect towards the auditor as a person. The auditor is a well trained expert and makes the decision as to whether an offence can be viewed as having been proved from the point of view of the local tax office or not. The auditor’s work should not unnecessarily be made more difficult for instance by refusing to providing information or the hesitant surrender of documents or poor working conditions, especially in view of the fact that your cooperation may be enforced and delay fines can be imposed. Mutual respect improves the working climate. We as the experts and the counterpart to the auditor ensure that your rights are observed and the audit is not just performed to your disadvantage.

The auditor generally poses several audit requests during the audit. In this case it is worthwhile paying attention to the fact that they are posed in writing and also responded to in writing. Copies should be made of all the documents submitted so that it is subsequently clear which documents the auditor has inspected in particular.

The auditor informs you of the results in provisional audit findings the content of which is then ideally conclusively and unanimously gone through in a joint final meeting.

The audit is concluded with the meeting and you receive a final report. This report serves as the basis for the new tax assessments, against which we do of course have the same legal remedies on your behalf as we did have against the previous assessments. For this reason the tax officer who processes your tax return at the local tax office also receives a copy of the report. However, it is worthwhile reaching an agreement during the final meeting. This is due to the fact that the objection to a tax audit would very probably lead to a judicial dispute in which we can indeed represent you competently again, but which can be very expensive and often drag on for years.

 

Non-binding consultation

We would be very pleased if you contact us. So we can find out what we can do for you in a non-binding conversation. We are happy to take time for you.

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