SEARCHING FOR CROSS-FUNCTIONAL OPPORTUNITIES IN FINANCE: MY MID-WEST US EXPERIENCE

By Cenen Herrera

Writing from Mount Pleasant Square, Iowa, USA

I just completed a 3 month project reviewing a sales and consumer use tax audit. There is a cultural metaphor among Finance Consultants that the samples to be selected in an audit should represent the population with a reasonable degree of reliability, i.e., an appropriate margin of error. Cases in sales and consumer use tax audit are readily available in the internet. Most of these cases focus on the sampling methodology that is used during the audit. The main issue is whether the samples selected during the audit represent the population. In addition, when records are inadequate, the question that arises is how sales could be accurately determined to compute the amount of sales tax or consumer use tax due from the entity.

My assignment appeared to be exceptionally boring save for the tension that dramatically transformed a rather lousy linguistic opening into a classic audit gambit. The tense climate was created by the usual hostile auditee-auditor relationship.

Typical reactions I observed during the audit included the following:
Auditee to Auditor: Could you please be more specific in your questions before I waste my time searching for useless reports.
Auditee to Auditor: Time and again, I have told you that the information you are requesting is not available, so please do not bother me next time requesting for non-existing information.

Avoiding a critical recommendation resulting from the audit is the primary reason why some auditees appear to be very sensitive whenever their works are examined by auditors. In such cases, the auditor has to exhibit extreme professional patience (what I call audit gambit no. 1) by outlining the strategic and tactical moves necessary to obtain information, and be prepared to display extreme humility (audit gambit no. 2) by maintaining a positive working attitude despite a hostile environment. In addition, the auditor should maintain a high level of discipline (audit gambit no. 3) by ensuring that audit risk is at a low level, and obtain sufficient appropriate audit evidence (audit gambit no. 4) to support the auditor's overall findings.