California State Corporation Commission Audit Checklist

Legal Compliance Audit Checklists assess an enterprise’s internal operations for compliance with labor laws, corporate policies and registration paperwork. In addition to this assessment process, these checklists include questions related to equal treatment policies and data security measures.

Engaging EDD tax auditors involves providing financial documents for assessment. Accurate information helps prevent expensive fines and penalties due to misclassifying workers as independent contractors.

Pre-Audit Questionnaire
The pre-audit questionnaire assists auditors with defining the scope of an onsite audit, while simultaneously soliciting admissions from an agency and offering an initial analysis of its documentation. Submitting and returning it promptly reduces the length of any subsequent onsite audits.

The questionnaire asks about your business model, year-round or seasonal services provided, and company description. This helps the auditor understand your work better so he covers the relevant areas during his audit of your company.

Prepare yourself to answer questions regarding various security measures, including perimeter protection (firewalls), logical access control (access to CJIS), boundary management, malicious code protection and patch management. Furthermore, demonstrate that there is an established policy in place for responding to security incidents, such as accidental loss or disclosure of sensitive data. Typically the audit process lasts up to one month depending on scheduling needs.

Entrance Interview
When the commission issues audit notices to taxpayers, they arrange an entry interview in which taxpayers can question and get clarifications from commission agents. This interview offers taxpayers a great chance to ask any necessary questions and gain answers regarding why their audit was initiated.

At this interview, you’ll also be asked questions regarding your business’s financial documents. These documents include ownership verification forms, payroll registries/stubs/bank statements/canceled checks/general ledger. It is best to consult an experienced tax attorney beforehand such as Brotman Law so as to ensure an efficient process and swift resolution.

When answering these questions, it’s essential that you present an interesting picture of your business to set yourself apart from other applicants. Avoid general descriptions like “hardworking.” Instead, explain what specifically defines this trait within your company and why it matters for its success.

Proposed Notice of Assessment (PNA)
Once the EDD auditor has reviewed your business documents and issued you a Proposed Notice of Assessment, or PNA, they will present you with a Proposed Notice of Assessment listing all taxes due by your company for the past calendar year and any penalties due to late filing of state income tax returns. However, you have the right to file an appeal via the protest by date printed on its front; consulting with an experienced tax attorney could help file an effective protest in order to save yourself money.

PNAs will include information regarding your Real Property Assessment value and valuation details, the commission’s rationale for conducting audit, an entrance interview date for you to meet with an EDD agent, as well as providing copies of all financial documents necessary for audit such as annual financial statements, vouchers and payroll records; additional documents may also be requested in order to clarify any discrepancies or inconsistencies found within them.

Tax Audit
After reviewing your documentations, an auditor may conclude that adjustments must be made that result in either an amount owed to or refund being due. He/she then holds a final conference with you and/or your representative to present his/her proposed audit report; after which, you have 60 days in which to appeal the changes.

EDD audits require careful scrutiny of your business financial documents, such as receipts, bills, cancelled checks, legal papers, tickets, theft/loss records and staff accounting records. A knowledgeable tax EDD attorney or certified public accountant can prepare you for meetings with an EDD auditor and ensure that their evaluation of these financial documents is accurate.

EDD Investigation Division audits are intended to ensure businesses have accurately collected, reported and paid state payroll taxes on wages. Auditors also look for any under- or overpayments of state taxes by evaluating whether certain items were included as gross income in their assessment of whether an audit will take place. A tax EDD attorney can offer strategic moves that help mitigate its effects.