Internal Revenue Service Could Make Better Use of Computer Audit Specialists
GGD-80-33: Published: Jan 24, 1980. Publicly Released: Jan 24, 1980.
- Full Report:
The Internal Revenue Service's (IRS) computer assisted audit program was surveyed to evaluate the management direction and control of the program and to assess whether it effectively assists the IRS in auditing returns of taxpayers using automated accounting systems. The survey was performed at the National Office in Washington, D.C., and at regional and selected district offices. National and regional policies and procedures for carrying out the computer assisted program were reviewed. When the program began, a selected number of revenue agents were trained in computer systems design and programming. These computer audit specialists were tasked with analyzing and evaluating taxpayers' automated accounting systems and initiating agreements with them to retain financial records on magnetic tape for IRS audit. The computer audit specialists also assist in the audit effort by performing computerized data analysis and retrieval as requested by case managers and examining agents.
Currently, 152 revenue agents have been trained as computer audit specialists. Record retention agreements in effect with about 3,600 taxpayers include almost 1,300 of the large corporations in the coordinated examination program. The computer assisted audit program has significantly contributed to the quality and scope of examinations of large taxpayers with computerized financial systems. Case managers have cited savings of from 5 to 250 staff days per audit as a result of computer audit specialists efforts. Recently, IRS has introduced statistical sampling into the examination program, and computer audit specialists are involved in identifying situations where this auditing technique can be applied. National Office guidelines call for using computer applications to the fullest extent possible in examinations of tax shelters and corporate slush funds and in information gathering projects directed toward tax avoidance or tax evasion schemes, but little guidance exists on how and when to use these techniques; little monitoring is done to determine the extent of their use. There is a wide disparity in computer support among regions. A study revealed that hardware should be acquired before software needs can be met and recommended that equipment requirements be met through time-sharing systems. To assure computer techniques that have nationwide application are made available and used, the National Office needs to manage this program more aggressively.
Recommendation for Executive Action
Comments: Please call 202/512-6100 for additional information.
Recommendation: To further increase the effectiveness of the computer assisted audit program, the Commissioner of IRS should require that National and Regional program managers establish a formal mechanism to consider the use of computer audit techniques in all compliance programs and assure that they are used where applicable. He should also require that the necessary analyses be made promptly to specifically define cost effective hardware support for the computer assisted audit program and initiate its acquisition. Finally, the Commissioner should establish procedures for better coordination and to control duplicate development of computer applications and ensure service-wide use of standard applications when appropriate. The National Office should: monitor and evaluate the use of computer audit techniques in all compliance programs; establish an inventory of techniques and assure that all regions are advised of them; and recommend to the regions those techniques which should be adopted.