Audit personnel checklists and the tax preparer.

• Author: Werner, Bernard
• Position: Brief Article

The checklist above and on pages 611-612 is the first part of a checklist used in connection with corporate audits, reviews and compilations to guide audit personnel in accumulating information necessary to test income tax provisions and to identify tax planning issues. The checklist is designed so that "yes" answers indicate instances that may require further action. The remaining portion of the checklist (not reproduced) covers treatment of compensation and certain asset and liability accounts.

The list has proved useful because the audit partner or manager is likely to be more familiar than the tax preparer with changes in a client's operations. Thus, his responses to the checklist are an important supplement to the tax preparer's input.

From Bernard Werner, CPA, Richard A. Eisner & Company, New York, N. Y. Audit Personnel Checklist

1. General organizational and ownership matters

   1. Has the company incurred any organizational expenditures? (Sec. 248) 2. Has the company incurred any start-up expenditures for a new business? (Sec. 195) 3. Is the company a member of an affiliated or controlled group of corporations? (Secs. 1504 and 156 4. Does any individual or other entity own, directly or indirectly, 50% or more of the company? 5. Does the company own, directly or indirectly, 50% or more of another entity? 6. Is the company a member of any partnership or joint venture? 7. Has there been any change during the year in the percentage of stock owned by any 5 %

   shareholders? (Applies to corporations with a net operating loss (NOL) or other tax

   carryovers.) (Sec. 382) 8. Has the company's ownership changed by more than 50% within a three-year period? (Sec. 382) 9. If there was a change in ownership that was the result of the "deemed exercise" of options,

   has there been a subsequent lapse or forfeiture of these options? (Temp. Regs. Sec. 1.382-2T) 10. Have any extraordinary transactions occurred during the year (e.g., redemptions; acquisitions;

   reorganizations; recapitalizations; formation, liquidation or sale of subsidiaries or affiliates 11. Did the company acquire or sell the assets of a trade or business? (Information

   statement required.) (Sec. 1060) 12. Were there any contracts entered into for the sale of stock; or the issuance of additional stock

   stock options or warrants? 13. Have there been any transactions (e.g., sale or acquisition of property, performance of services

   borrowings) with a related party? (Secs. 267 and 1239) 14. Do the...