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.