Types of Tax Audits
There are three main types of tax audits:
- Correspondence Audit
This is the most common type of audit conducted by tax officials remotely through emails or mail. They review tax returns along with supporting documents requested from taxpayers and ask for clarification or additional documentation on suspicious entries through written correspondence.
- Office Audit
Here the auditor calls the taxpayer to the tax department’s office meeting room for more detailed review. Questions are asked, information is cross-checked with records to gauge income, filing positions, tax computations and resolve discrepancies. Interactions are done face-to-face.
- Field Audit
For a deeper scrutiny, auditors may visit the business or taxpayer’s place for inspection of full financial records. They examine accounting books, systems, invoices, contracts and assets etc to determine correctness of declarations versus factual position from ground evidence. Field audits are more detailed and intensive.