Academic journal article Journal of Accountancy

IRS Audits Focus on Market Segments

Academic journal article Journal of Accountancy

IRS Audits Focus on Market Segments

Article excerpt

The Internal Revenue Service is implementing a new approach to auditing. IRS district offices are instructing their agents to apply a market segment approach to help them develop in-depth knowledge on particular industries and issues. The market segment specialization program (MSSP) will replace auditing techniques that examine compliance problems within a particular geographic region or ones that look at income ranges for individuals or asset ranges for corporations.

"Instead of an agent inventory consisting of a doctor, a gas station, an attorney and a grocery store, our agents will focus on the tax returns by industry," said Ray Smith, director of retail and services in the IRS Office of Compliance Specialization. "This is how the IRS intends to do business. Not only will we become more efficient auditors, but we will learn the problems and issues of each industry. We may learn there is a compliance problem because we didn't understand the industry and the application of particular code sections."

Jeffrey L. Raymon, partner of Rosenfield, Holland & Raymon in New Bedford, Massachusetts, and member of the American Institute of CPAs small business taxation committee, told the Journal that if the AICPA was asked to develop the proper audit techniques for the IRS it would recommend something like MSSP. "When auditors have this specialized experience they can go through the audit quickly," said Raymon. "This will increase the profitability of the whole tax compliance effort." Raymon said the AICPA has not issued a position paper on MSSP because it has not created a controversy. …

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