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Are Audit
Protection Services Worth It
If you use software to do your taxes, it's almost guaranteed that you'll be
offered an upsell called audit protection. We take a look at this service
and if its worth buying.
Audit Protection Services can be a smart investment if you have a very critical
contract or one that is worth a huge amount of money or that requires the peace
of mind that an Audit Protection Service can provide. People can have different
circumstances where such protection would be worthwhile. There are several types
of audit services provided. The first that comes to mind is that audit liability
that every tax preparation agency proclaims when they prepare your tax return.
This is the reason why they must sign with you when preparing it. It holds them
liable along with you when they prepare your tax return. This is the common John
Doe variety of audit insurance for the everyday of the year type guy or gal.
Some tax preparation agencies have extended plans which provide a limited
insurance plan that gives the tax payer a means of paying a disputed tax during
an appeal procedure. This dates me but I remember the Defense Contractor Audit
Agency back in the 1990’s. These people were some of the most formidable
accountants that I have ever had the privilege to meet. When they visited your
company, one of many that supported the Defense Department, they didn’t fool
around. They were self contained and brought their own computer support.
Literally plugging into your main frame, they sucked every bit of information
about your business. Evaluated and graded you as Defense Department material. My
company and I were very conscientious and meticulous passing every year I was
there.
When I researched for this article I found only sparse information about the
actual meaning of an audit. The proper definition is one that takes a detailed
inventory of your assets and liabilities. It validates each one with extensive
physical evidence and the company’s accounts. It investigates the firm’s
payroll, costs associated with doing business, losses that were associated with
contracts that unfortunately might have gone over budget. It checks and rechecks
tax records for the proper and legal deductions and tax payments. Defense
contractors seem to have gone the way of the dodo and so have companies which
follow National Guaranteed Accounting Procedures. Else, we wouldn’t have had
Enron and the debacle that arose from the once prestigious accounting firm of
Anderson & Anderson.
Today business should probably invest heavily in audit protection services since
they lack the internal checks and balances to guarantee proper accounting. A
strong, internal accounting department is a very wise investment for any
business in America. However, if you follow the current trend then hire an
extremely honest outside accounting firm with a focus in the your business area.
If you are involved with telecommunications pick one that understands the fast
moving pace of your business and the attendant risks or if you are in the retail
business select one that has a long experience in helping businesses involved in
sales. I would add that you should only do this if you yourself are extremely
honest, otherwise it tends to frustrate the accountant. Audit Protection
Services might also be a good investment particularly if your personnel do not
practice attention to the details. Many college educated accountants trust
exclusively in unique one of a kind computer programs without taking a more
skeptical position. This can lead to a “them” against “us” syndromes which will
all but destroy the financial integrity of a firm.
Last, the specter of an audit ought not frighten those who are prepared with the
facts and a set of good and honest accounting books. Tax preparation agencies
like to charge for this service as another “peace” of mind touch. They also know
how well they prepared your tax returns and are not likely to make a huge costly
mistake. If you have a firm that has an unreliable bookkeeper and infrequent
accounting then I suggest that you have your tax prepared by one of these Audit
Production Services.
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