- Identify areas that may trigger a tax audit.
- Be aware of significant variances in business activity statements and tax returns.
- An audit insurance policy may protect clients against unwanted hikes in professional fees.
Accountants and financial advisors can add significant value to their practices by being proactive in looking for possible scenarios in their client portfolios that may trigger an audit.
At any given time a client could be selected by the Australian Tax Office (ATO) to be audited. It is therefore important for members in practice to be prepared well in advance, in case this should happen.
The cost to clients of being audited is significant and the trust clients place in their accounting firms may be lost altogether if they feel unprepared.
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Protect your clients
Preparing for a possible audit can involve reconciling business activity statements and tax returns and comparing your client’s outcomes to those of industry peers. This will also help to reduce the risk of an audit.
Karen McDonald, associate director of professional risks at Accountancy Insurance, urges finance and accounting sector leaders to protect their clients in the event of an audit. Accountancy Insurance offers an audit insurance policy (Audit Shield) that can help take the pressure off the client undergoing the audit.
What constitutes an audit?
“An audit is broadly defined under the policy to include any official audit, enquiry, investigation or review in respect of your client’s returns or financial compliance obligations, and which they are obliged to respond to or act on,” McDonald says.
Having an audit insurance policy in place can take the pressure off the client having to worry not only about the ATO’s investigation, but also the professional and legal fees that may be incurred in dealing with the ATO.
What is audit insurance?
Audit Shield provides protection and assistance against the substantial cost that may be incurred should the ATO or another government revenue agency conduct an audit, enquiry, investigation or review.
The Accountancy Insurance offering will cover the costs of processes that are being made to ensure a business or taxpayer is complying with tax and legislative requirements.
By being well prepared, accountants can avoid potential conflicts with clients regarding any fees that may be incurred as a result of an audit request. Clients will appreciate that you are looking out for them and being proactive in an area that could lead to significant costs.
To find out how an audit insurance policy may benefit your practice and your clients visit the Accountancy Insurance website. Alternatively, you can talk to a team member about being better prepared by calling 1300 552 867.
This article is part of a regular Working In Practice column aimed at CAs working in SME accounting practices. If you’ve got something specific that you would like this column to cover, email the Acuity team now.