This lesson provides a detailed examination of field audits, the second main type of tax audit. It covers the scope, procedures, and appropriate application of field audits in cases requiring more intensive investigation.

• Definition: Field audits are detailed examinations of taxpayers’ books and records conducted at the taxpayer’s place of business, home, or at the office of their accountant, attorney, or other representative. The auditor selects the place most appropriate under the circumstances and most convenient .

• Scope and Coverage: Field audits usually include one or more of the following taxes: income, franchise, sales and use, withholding, and excise taxes. They may cover several taxes and tax periods .

• When Used: Typically conducted for cases deemed high-risk from prima facie checks or issue-based audits, based on careful risk assessment and audit selection. Used when complex issues require on-site verification .

• What to Expect: The auditor reviews financial records such as chart of accounts, general ledger, cash receipts, disbursements, and supporting detail for returns filed. May also look at tax returns journals, payroll registers, payroll forms, cash register tapes, credit card statements, and bank statements .

• Process: At the beginning, discuss the audit process, timelines, and test periods. Issues are discussed as they arise. Factual issues should be resolved during the audit, while legal differences may need to be resolved through appeal if the taxpayer disagrees .

• Statistical Audits (TCMP): A type of comprehensive field audit practiced in the US, selected on the basis of random sampling from different targeted taxpayer groups. Used purely to facilitate risk profiling of taxpayers, under the Taxpayer Compliance Monitoring Program (TCMP) .