TOUR OF BUSINESS

The tour of the business will usually follow the initial interview. If the initial interview has been a solid one, there should be an adequate basis from which to examine the premises. The tour is an opportunity to compare a visual interpretation of the business with the interview just received.

A typical auto body shop will usually have a parking area where estimates are made for vehicles, repair stalls for light and heavy work, storage areas for paints and other supplies, and offices where the officers can order parts and perform day-to-day paperwork.

As stated above, the tour should visually confirm what was learned during the pre-audit and initial interview. For example, if the taxpayer has not shown any inventory on the return, are there major parts lying around the premises waiting to be installed? Does the storage area for paint hold a couple of cans of paint or 50? Does it appear that there is adequate space for vehicles to be stored for a few days or even weeks at a time? Note any major equipment lying around and which appears to be no longer in use. The taxpayer may actually still be deducting depreciation although use has been discontinued.

If the taxpayer has stated that the workers are independent contractors, notice if they are wearing uniforms of the taxpayer. Are they utilizing the major equipment provided by the taxpayer? Are they actually working on the premises of the taxpayer? If conditions have not changed since the year of audit there may be a potential issue.

Take a look at the size of the lot and any adjacent areas which may not appear to be related to the taxpayer and note the addresses. In reality, the taxpayer may rent the adjacent area and may be actually sub-leasing it to a third party. A review of the lease agreements at a later date should show the addresses under lease. If so, this should show up as other income or a credit to rent expense.

Ask the taxpayer to explain the repair process from the tear down process to the final drying of the paint. Usually, officers or principals are more than happy to share their business expertise and explain why they are

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Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Glossary