Nine To-Dos for an Optimal Preparation
There's always a lot of fuss when it comes to digital audits. And it gets even more stressful when everyone suddenly has to look for the relevant files. In order to ideally prepare you for this special day, ERP provider proALPHA has compiled nine to-dos.
In the life of a business administration manager, rarely anything is as unpleasant as a digital audit. There are uncountable pitfalls in this process. To have more relaxed audits in the future, observe the following nine to-dos:
1. Manage your data
When the tax audit order arrives, the clock starts ticking: 14 days later the tax audit is upon small and mid-sized enterprises. For big companies, this advance notice usually arrives four weeks before the big day. Those who start to search their archives and databases only then will inevitably end up in chaos. It is advisory to store all relevant information in such a way that it can be easily exported for the auditor.
2. Document your processes
The scope of an audit can be very specific and might be based on particular tax categories, issues, assessment periods or parts of them, like the special audit for sales tax or checking the procedure documentation. The aim of the procedure documentation is to ensure the seamless traceability and verifiability of documents in IT-based business processes. Regardless of its size, every company based in Germany is therefore required to create a procedure documentation.
3. Grant the auditor access
According to Sect. 147 Para. 6 of the German Fiscal Code (AO), the auditor can choose how to access the company's data. With direct data access, the auditor is assigned read privileges and enabled to directly access the company's systems. With indirect data access, they do not log onto to the system themselves but explicitly request exports. With the third option, data carrier provision, the company provides the tax authorities with a data carrier containing all data relevant to auditing, for example, a CD or DVD. In about 80 % of the cases, tax authorities choose this access method for the digital audit.
4. Train and control
It is widely known that auditors have their favorite topics. They just love to poke around in travel and entertainment expenses, canceled invoices, and cash journals since the legal documentation requirements for these are particularly extensive. These requirements also tend to change frequently. Regular employee training, up-to-date check lists, and a control system help you to quickly uncover suspicious data and ultimately avoid errors.
Legally compliant storage of documents can also be a challenge. After all, the data must not be modified anymore. You also have to ensure that they can still be accessed. Companies who use a document management system (DMS) have a clear advantage here. Especially if the system's compliance with accounting principles like the German GoBD has been certified.
6. Know the rights and rules
Of course, tax authorities also have to follow certain rules. With a valid reason, you can still postpone an audit. These reasons include the peak season, vacation close-downs, trade fairs, or the year-end closing. Furthermore, you can request that the audit be performed at a tax accountant's office instead of your site. However, the auditor will most likely still insist on visiting your company.
7. Brief your employees
Auditors are generally allowed to talk to any employee, but not about every issue. Hence, it is recommended to acquaint the auditor with authorized employees. The other employees can then refer the auditor to them. There is one exception, though. Questions about labor or salary must be answered by everyone.
8. Rely on your experts
An audit is an exceptional situation to any company. However, it is the daily business of the company's tax accountant. Their experience helps them to quickly understand the aim of certain questions during the audit, the relevance of certain topics, and the use of statistical methods. You should consider this, at least for the kick-off, interim and final meetings.
9. Check the plausibility
Even at times when no audit is pending, constant plausibility checks can do much good. Suitable, easy-to-use data mining or analysis tools are available as standalones or integral components of the ERP system. They also support ad-hoc queries and analyses of large data volumes.
Even if it might feel different, a tax audit is first and foremost a formal process which follows certain rules. Therefore, it is always good to know your rights and obligations and to be well prepared in order to avoid subsequent payments and keep the stress level low.