Auditing Mailbag: Examples from “Audit by Mail” Cases

Posting by Kurt Needles, CPA

1) The Internet as an Auditing Tool

In performing an audit by mail, the employer in question provided all the records required except a roster that classified everyone on the payroll.   All but a handful of the employees were reported to the two trades for which we were performing the audit.  Repeated queries to the employer went unanswered and I was at a loss as to how to proceed.

Trying to find possible leads to these questions, I searched the company on the Internet and located their Web site.  To my delight, on their site was a company directory listing names, titles and contact numbers.  I was then able to determine by the titles that the individuals in question were not performing covered employment, but instead were in management positions.

2) Forcing an Employer Reaction When the Answers Don’t Come Voluntarily

In another case, I performed an audit by mail but was only given the payroll for employees who were reported to the several trades I was auditing.  I requested the complete payroll but the company kept stalling, and it became obvious that they were never going to provide me with the complete payroll.  I did, however, have the unemployment reports.

To proceed with my plan, I made a list of all the questionable people I had and requested that the Fund office check to see if any of them had a history of being reported.  The Fund office reported back to me that almost all of the employees in question had histories with other employers at some point in time.  I then divided the gross wages on the unemployment reports by scale to get hours on a quarterly basis.  I sent my “estimates” to the employer for review, and THAT got a response!

One of the lessons in these examples is that just because a payroll audit is performed primarily by mail, employers are not exempt from answering truthfully or completely, and trained auditors do have tools and techniques from experience to ensure those answers are delivered.

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