Tax & Accounting Blog

New Year’s Resolution: Preparing for the income tax provision audit

Global Tax Compliance, Tax Provision, US Income Tax Compliance December 22, 2011

When the Holiday celebrations are over, you wake up New Year’s Day with resolve to be organized; hit the gym; and of course, be prepared for the audit of the income tax provision! The work you have done to make your process efficient; improve data collection; communicate with management and the board; and address tax risk management will be put to the test.

Here are a few tips to be prepared for your auditors:

  1. Consider data sources. Identify gaps in core system data and review risk management actions taken with auditors including software data collection tools. Automate data movement from source into provision calculation.
  2. Determine audit requirements for the IT environment, software products, and spreadsheet risks. Be ready to respond.
  3. Identify gaps in technical skills. Consider tax jurisdictions, technical issues, and non-routine matters. Supplement your team with specialist skills as needed.
  4. Prepare analysis and reconciliations. Include account reconciliations; valuation allowance assessments; plans regarding foreign earnings repatriation or cash flow reinvestment; and accuracy of estimates used. Use software with self-reconciling reports and automated journal entries to assist.
  5. Prepare detailed disclosures. Establish summary reports for footnote and management reporting with an audit-ready roll-up trail.