Multistate Audit Best Audit Practices - California Franchise Tax Board

MULTISTATE AUDIT BEST AUDIT PRACTICES
INFORMATION DOCUMENT REQUESTS
Penalties for Failure to Furnish Information will be assessed if there is a reasonable
need for the information requested given the relevant circumstances of the audit.
PASS Forms 1512 and 4973 may be used as the formal notification process and
modified to meet the specific case needs.
See MAPM 8040 and 8050 for a full discussion of the steps necessary to assess the
failure to furnish information penalty.
g. Audit Workpaper Requirements and Techniques
The use of the "tickler" feature in PASS is a valuable tool. See PASS Help for
additional information on how to use this effective method for reminders on needed
follow-ups.
For team audits, auditors will need to coordinate methods of generating IDRs,
numbering and logging IDRs and presenting the history on unanswered IDRs.
h. Draft Correspondence vs. Separate Issue Folders
To provide for efficiency and effectiveness in issuing IDRs, auditors are given the option
of using Draft Correspondence or a separate issue folder to prepare IDRs.
If IDRs are issued from a separate issue folder, a separate issue folder called “IDRs
and IDR Master Log” will be maintained. This folder will contain the Master IDR
Log and a separate electronic copy of each issued IDR and follow-up. In addition, a
hard copy will be maintained of each issued IDR. This method also allows the
supervisor or Lead Auditor an opportunity to review and approve the IDR before it is
finalized and issued to the taxpayer. This method may be preferable on a large case
because it provides the ability to segregate IDRs from all other correspondence and
thereby keep the files more manageable.
If IDRs are issued from the Draft Correspondence file, a separate issue folder called
“Master IDR Log” will be maintained that contains the Master IDR Log. Copies of
the IDRs will, of course, be in the Sent Correspondence after issuance and hard
copies are not required.
Some have noted that this step may add additional time to complete the audit. We
must bear in mind that others, such as reviewers, hearing officers and attorneys, will
be using the audit file. The additional time may be more than offset by a better
organized file for these users.
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