26th Annual Tuesday & Wednesday, January 24‐25, 2017 Hya� Regency Columbus, Columbus, Ohio Workshop RR Ohio Tax Statistical Sampling … Preparation for a Sample Audit Wednesday, January 25, 2017 2:00 p.m. to 3:00 p.m.
Biographical Information Brad W. Tomlinson, Senior Manager, Zaino Hall & Farrin LLC 41 South High Street, Suite 3600 Columbus, OH 43215 btomlinson@zhftaxlaw.com 614-349-4818 Brad has more than 33 years of experience in state and local taxation, specializing in statistical sampling techniques for multiple taxes. From 2007 until joining the firm, Brad was an assistant administrator for the Ohio Department of Taxation, Audit Division, while also serving as the manager of the Computer Assisted Audit Group for more than 11 years. In that position he was responsible for the formulation, implementation, and oversight of the Department's statistical auditing practices; including the approval of data populations, sample designs, and the review of all statistical sampling procedural agreements. Prior to that, Brad spent several years auditing fortune 500 companies in manufacturing, telecommunications, computer services, and retail for sales and use tax compliance. Brad was instrumental in the design and implementation of the Audit Division's computerized auditing program (OFAST) used by multiple divisions to audit personal property, corporate franchise, employer withholding, pass-through entity, and sales and use taxes; as well as managing quarterly updates and releases of the application. Brad's other responsibilities included the establishment of single rate reporting procedures for taxpayers as well as assisting in reviewing and approving the Department's PARSA (Previous Audit Representative Sampling Analysis) agreements. During his tenure, Brad was a frequent presenter on statistical sampling at the Ohio Tax Conference and the Federation of Tax Administrators national computer and technology workshops. He also was consulted by other states and Canadian provinces to assist in the development of their respective statistical auditing programs. He is a graduate of Columbus State Community College (Computer Programming) and The Ohio State University (Business Administration). Jonathan Ross, Senior Tax Consultant , Deloitte Tax LLP 180 East Broad Street, Suite 1400, Columbus, OH 43215 (614)229-5932 joross@deloitte.com Jonathan is a Senior Tax Consultant in the sales and use tax practice with Deloitte Tax LLP in the Columbus, Ohio office and has over ten years of sales and use tax experience. In addition, he has a background in statistical sampling as it relates to sales and use tax audits. Jonathan was a sales and use tax auditor for the State of Ohio for three and a half years. During that time he conducted sales and use tax audits and refund reviews. In addition, he transitioned into the state’s computer audit support group which oversees all statistical samples done by the audit division as well as data manipulation support for the entire audit division. Oversight of the statistical sampling program required: refining populations, designing statistical samples based on certain parameters, generating samples, and evaluation of the samples upon conclusion of audits. Since leaving the state Jonathan has assisted clients with state sales and use tax audits, conducted reverse audits, voluntary disclosure negotiations, and provided sales and use tax and statistical sampling consulting services for a variety of clients in a multitude of industries. During his tenure with Deloitte Tax Jonathan has been involved in design and implementation teams for various bolt-on automated tax solutions. Jonathan is a graduate of the University of Kentucky with a B.S. in Accounting
Biographical Information Roger C. Pfaffenberger, Ph.D., Director, Audit Sampling, Ryan, LLC Three Galleria Tower 13155 Noel Road, Suite 100 Dallas, TX 75240 roger.pfaffenberger@ryan.com 972.934.0022, Ext. 101279 Fax: 972.960.0613 Dr. Roger Pfaffenberger is a Director and Practice Leader for Ryan’s Sampling Analysis and Evaluation practice and is based in the Firm’s Dallas Office. Dr. Pfaffenberger is responsible for the design and evaluation of audit sampling methodologies with an emphasis on the use of multiple audit sampling methods in statistical and non-statistical sampling for transaction taxes. Roger has provided statistical consultation and expert testimony for a variety of companies, government entities, and law firms. Prior to joining Ryan, Dr. Pfaffenberger was Professor of Decision Sciences for Texas Christian University and Founding Director for the Center for Teaching Excellence. Dr. Pfaffenberger has made numerous presentations on audit sampling issues to professional and academic organizations. He has a Doctor of Philosophy Degree in Statistics from Texas A&M University.
26 th Annual Ohio Tax Conference Manufacturers’ Workshop RR – Statistical Sampling Presentation Title Education Dr. Roger Pfaffenberger, Ryan LLC Jonathan Ross, Deloitte Tax LLP Council 00/00/0000 Bradley Tomlinson, Zaino Hall & Farrin LLC www.ryan.com January 25, 2017
Presenters: Roger C. Pfaffenberger, Ph.D. | Director, Audit Sampling Practice Ryan Three Galleria Tower 13155 Noel Road , Suite 100, Dallas, Texas 75240 Direct: 972.934.0022 Ext. 10-1279 | Cell: 817.917.0095 Email: roger.pfaffenberger@ryan.com Jonathan N. Ross | Senior Tax Consultant Deloitte Tax LLP 180 East Broad Street, Suite 1400, Columbus, OH 43215 Direct: 614.229.5932 Email: joross@deloitte.com 26 th Annual Ohio Tax Conference January 25, 2017 2
Learning Objectives Apply best practices in planning and managing sample audits to insure they proceed efficiently and effectively Understand and avoid mistakes that lead to sample audits producing inaccurate results Learn taxability determination resolution techniques and steps required to close the audit 26 th Annual Ohio Tax Conference January 25, 2017 3
Session Topics Planning for initial meeting with auditor Managing initial meeting with auditor Discussion topics at initial meeting Discussion topics in later meetings/contacts Resolution of tax determination issues Steps to close the audit 26 th Annual Ohio Tax Conference January 25, 2017 4
Planning for Initial Meeting with Auditor Understand your data sources and how transactions are recorded in your system Know your data well – conduct preliminary investigation of documents before auditor arrives Know the jurisdiction’s sampling policies and procedures, and authority to sample Know the jurisdiction’s recent case law on sampling challenges 26 th Annual Ohio Tax Conference January 25, 2017 5
Planning for Initial Meeting with Auditor Confer with IT, AP, AR on data extraction process and on availability of required data and documents If there was a prior audit with the jurisdiction, review audit results – what went well and not so well If no prior audit, discuss experiences other tax directors have had with jurisdiction’s sample audits Develop preliminary audit plan and audit sampling plan (timetable, grouping transactions, excluding transactions not in scope, treatment of special cases) 26 th Annual Ohio Tax Conference January 25, 2017 6
Managing Initial Meeting with Auditor Take control of the meeting – be proactive in conducting meeting Present your plan for the audit to the auditor Do not provide documentation requested by auditor at initial meeting Do not permit access to firm’s databases Establish audit timetable Set up next meeting with auditor to address auditor questions and requests 26 th Annual Ohio Tax Conference January 25, 2017 7
Discussion Topics at Initial Meeting Determination of audit period Setting the scope of the audit (sales, purchases, types of purchases within scope) Factors that may affect audit planning (mergers, acquisitions, cost centers, multiple plants) Process for extracting relevant data for audit Process of reconciling data (AP reconciled to GL; accruals reconciled to tax returns) Process of situsing data appropriate for jurisdiction 26 th Annual Ohio Tax Conference January 25, 2017 8
Discussion Topics at Initial Meeting Treatment of special situations – Missing documentation – Bad debt – Progress payments – Negatively-valued transactions (reversals, voids, etc.) – Treatment of EDI/ERS transactions (no printed invoice) – Isolation of transactions with potential high error rate (e.g., p-cards) – Tax only transactions 26 th Annual Ohio Tax Conference January 25, 2017 9
Discussion Topics at Initial Meeting Sampling agreement – Binding or not binding – Scope of agreement – Consequences of not signing agreement – Point in audit timeline when agreement must be signed – Option for adding provisions proposed by tax manager to agreement via addenda 26 th Annual Ohio Tax Conference January 25, 2017 10
Discussion Topics in Subsequent Auditor Meetings/Contacts First and foremost, take control of audit - be proactive and on top of audit status throughout audit timeline Meeting following initial meeting with auditor – Items to agree upon before auditor develops sampling plan and pulls sample Agree on accounts of interest Selection of controlling date field Grouping of transactions for sampling (e.g., assets, expenses, taxed, non-taxed, utilities, p-cards) 26 th Annual Ohio Tax Conference January 25, 2017 11
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