Audits by association
When it comes to being guilty by association you probably think of those seedy underground types, portrayed so well in sitcoms, and not your slightly dull (possibly brown-trousered) chartered accountant. Well, we have a ‘clanger’ of a real life story for you. A chartered accounting firm, based here in Auckland, had every single client file seized by the tax department. This is unheard of. It’s a really big deal. Word is the IRD were routinely auditing one of the firms clients (yes, just one) but they found so many accounting errors they immediately audited every other client.
Hearing that, we bet you’re super relieved you’re with us because we haven’t had a client audit since Milli Vanilli topped the charts but here’s some other ways you can be audited by association:
Customers
It’s not just your accountants skillset that can land you throat deep in the brown stuff. If your accountants other clients are dodgy and tax aggressive, you might score an audit simply by being a fellow client.
Even your own clients can up your audit exposure. Got a dodgy customer who’s proud of never paying Fringe benefit tax on their work Ute? If the IRD see’s your car parked by theirs, at the boat ramp, they may well take a closer look at your vehicle compliance too.
School
Private school fees hurt but what hurts more is being audited because you’re sending your kids to expensive schools but your tax return says you don’t earn enough to afford them (or your flash car, comfy house and pricey holidays).
Industry
Being part of a high earning profession like Dentistry, or in what’s considered to be a ‘cheaty’ industry’ like Building or running a Corner Dairy, will up the odds of an audit.
Cash suppliers
Do your suppliers insist on being paid in cash? If they get caught, the audit-net may widen to capture you (when the IRD investigates their associates).
Family
Got a family member buying and selling loads of property? If you’re in any way associated (perhaps through a family Trust) you might have an ouchy audit surprise coming your way.
Newbies
New-kid audits are common. A chunk of new businesses are always audited in those first few years in business. This is when you’ll be thankful you’ve had a quality chartered accountant on your team since day dot.