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Chapter 3 INITIAL
INTERVIEW/TOUR OF BUSINESS INITIAL INTERVIEW The quality of the
initial interview and the observation of the business premises will affect the
overall success of the entire examination. The questions asked should generate
an understanding of the background of the taxpayer, a familiarity with the
operation of the business, an understanding of the accounting system, and a
determination of who holds responsibility for the records. The positions held
by the shareholders in the case of a corporate taxpayer also need to be
evaluated. Planning is essential to
ensure a successful interview. A good pro-forma may be
consulted as a guide in constructing a questionnaire or outline that covers
basic information, but if used, it should be augmented to specifically relate
to the business of the body shop under examination. Analysis of the return will
undoubtedly produce questions unique to the particular business or year under
examination that should be incorporated into your interview. The acquisition of
substantial new machinery and equipment might suggest a shift in operations. A
number of luxury autos on the depreciation schedule could prompt specific
questions about the use of the cars in the business and such events as
ownership changes, theft losses, and asset sales would merit specific inquiry. Since this is a service
operation, question the taxpayer regarding the processes involved. Ask about
the type of vehicles repaired. Find out how much time it takes to complete an
"average" job. Determine how the taxpayer treats the workers, that
is, employees or independent contractors. Find out what function
the officers, shareholders, and relatives have in the
corporation. Officer salaries may be subject to excess
compensation issues. Ask if shareholders or their
relatives have dealings with the corporation as perhaps
landlords, suppliers, or customers. When interviewing, it is
usually best to be straightforward, asking specific questions and following up
on incomplete or confusing responses in an 3-1 Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary |