Form BOE-472 Fillable Use of Sampling in Auditing

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View all CA - California Sales, Use and Other Taxes

A minimum of three errors are required in a statistical sample or stratum before the errors may be projected Assess or allow known errors on an actual basis for the audit period Cluster samples do not require a minimum number of errors to project Errors in block samples should be projected even if the errors are from the same customer or vendor when the sample is Examine specific customers vendors accounts known errors etc on an actual basis for that stratum If feasible expand that sample or stratum It is a method approved and recommended by the American Institute of Certified Public Accountants (AICPA) It provides a selection process representative of the types of transactions involved and eliminates bias since every item in It provides an advance estimate of the sample size required for a given objective Multiple samples may be combined and evaluated Properly conducted statistical sampling can yield more reliable results than judgment sampling Sample unit is a partial/down/installment or progress payment: Partial down installment or progress payments will not Sample unit is an error but the transaction is corrected at a later date: If a sample unit is an error but the transaction is Sample unit is an error but the transaction later resulted in a bad debt: Allowable bad debts will either be offset against The results can be objectively evaluated (DOLLARS) (UNITS) 1 916 XXX XXXX FAX 1 916 XXX XXXX 450 N STREET SACRAMENTO CALIFORNIA a refund of an overpayment as we are to propose a deficiency determination The information and methods documented in this form accomplish this purpose ACCOUNT NUMBER accuracy or reliability of the test The advantages of statistical sampling over non statistical sampling are: ADDITIONAL INFORMATION OR STRATA are known and then make a decision on the alternative to use: are not binding on either the taxpayer/feepayer or BOE staff This sampling plan may be modified if new or additional data is AUDIT PERIOD AUDIT SAMPLING PLAN auditing process In addition it is possible that stratification or expansion of this sample may be necessary depending on the AUDITOR S SIGNATURE Auditors must justify their decision to project or not to project the errors in the verification comments availability of business records The auditor and taxpayer/feepayer should discuss the most beneficial approach to examining available information to determine if the sample unit represents an error Based upon the facts of the situation the auditor and the BETTY T YEE Block Sample BOE 472 REV 8 (2 12) BOE 472 REV 8 (BACK) (2 12) BOE 472 REV 8 (FRONT) (2 12) California State seal CASE ID Computer Audit Specialist Consider correct (non error) Other (describe) considered an error upon investigation (as set forth in section 1302 25 of the Audit Manual) constitute differences for sampling purposes because they do not represent a sale On the other hand payments made corrected at a later date the sample unit will be considered a non error However if a sample unit is an error but the CYNTHIA BRIDGES DATE (copy of this sampling plan was provided to the taxpayer/feepayer) Difference Estimation DUPLICATE SAMPLE UNITS WILL BE economically impractical to audit all transactions the BOE encourages the use of sampling whenever feasible encountered Should any deviation to this plan be required it will be fully discussed with the taxpayer/feepayer error purposes and an offset credit should be allowed in the amount of the error Executive Director expenditure of time for both the taxpayer/feepayer and the BOE the accuracy of reported amounts Sampling serves to First District San Francisco Fourth District Los Angeles If a selected document is missing the auditor should ascertain the reason for the missing or incomplete documents and/or use other IF ERRORS FROM A SAMPLE WILL BE PROJECTED THEY WILL BE PROJECTED USING THE FOLLOWING METHOD If it is decided to not project the error(s) the auditor may use one of the alternatives listed below to handle the error(s) in that If you have any questions regarding this form and accompanying information please contact your auditor in conjunction with an act that constitutes a sale will be considered a difference for sampling purposes and may be in order to establish the most effective and efficient means of developing a sampling plan The form covers many common JEROME E HORTON JOHN CHIANG Leave voids and cancelled transactions in the population and treat as a non error Mean Per Unit Estimation Method 1 Remove credits from population Allowable credit transactions may be examined and offset as needed Method 2 Credit transactions will remain in the sample and will be treated as non errors Method 3 Credit transactions will remain in the sample and will be treated in the same manner as positive transactions MICHELLE STEEL MISSING SAMPLE UNITS Not replaced (each duplicate unit will be included in the sample) or whether to substitute another sample unit or whether they should be removed from the sample base and projection (as set forth in OTHER Other (describe) Other (describe) Other factors to be considered in determining the best type of sample to conduct are the format condition storage and PART A SAMPLE SET UP PART B SAMPLE PARAMETERS PART C SPECIFIC TESTING SITUATIONS PART D PROJECTION OF ERROR PART E TAXPAYER S/FEEPAYER S SIGNATURE FOR RECEIPT Percentage of Error period of time (for example day week month or quarter) A statistical or random sample is a sample in which each item in the PO BOX 942879 SACRAMENTO CALIFORNIA 94279 00XX POPULATION population has an equal or known chance of being selected for examination Examples of statistical or random sampling Random Number Generator Random Number Tables REASON FOR SELECTING THE TEST PERIOD AND SAMPLING UNIT Remove voids and cancelled transactions from the sample and population Replaced or representative of the business for the time period in question This applies even when there are three or fewer errors results produced by this process However should any deviation to this plan be required it will be fully discussed with the SALES AND USE TAX DEPARTMENT SAMPLE BASE sample items or be tested and adjusted separately (as set forth in section 1302 25 of the Audit Manual) sample of that information Sales and use taxes are transaction taxes meaning that tax is determined on a sample or stratum The auditor if necessary will discuss the alternatives with the taxpayer/feepayer after the sample results sample results will be evaluated The purpose of this form is to obtain information regarding the taxpayer s/feepayer s operations SAMPLE UNIT IS A CREDIT INVOICE CREDIT MEMO OR DEBIT MEMO SAMPLE UNIT IS FOR TAX ONLY samples obtained by non statistical sampling methods The most common type of judgment sample is the examination of a block Sampling is a process of drawing a conclusion about an entire body of information based on measurements of a representative sampling plan can and should be continually evaluated (and changed if necessary) based upon information obtained during the SCHEDULE NUMBER Second District Lancaster section 1302 25 of the Audit Manual) SEN GEORGE RUNNER (RET ) should aid the taxpayer/feepayer in gaining a correct understanding of the law and demonstrate that we are as willing to recommend situations that might arise in sampling which should be discussed with the taxpayer/feepayer This form should be completed source documents after the auditor has had an opportunity to review the business records but prior to the selection of the sample STATE BOARD OF EQUALIZATION State Controller STATE OF CALIFORNIA Statistical Sample TAXPAYER S/FEEPAYER S SIGNATURE FOR RECEIPT OF COPY taxpayer/feepayer and documented in the audit and on the sampling plan TAXPAYER/FEEPAYER NAME taxpayer/feepayer together should discuss whether to consider missing or incomplete documents as incorrect (error) correct (no error) techniques include unrestricted sampling stratified sampling systematic sampling with random start and cluster sampling TEST PERIOD OR STRATA BOUNDARIES SAMPLE BASE the accuracy of reported amounts and establishing an estimated percentage of error if any for the population being tested BOE staff The attached BOE 472 Audit Sampling Plan was developed to document the sampling plan and to set the criteria by which the The BOE s minimum error policy is as follows: THE FILING METHOD FOR THE RECORDS TO BE EXAMINED (for example numerical alphabetical electronic) The following situations will be handled accordingly: THE FOLLOWING WILL BE USED IN THE SAMPLE SELECTION The information and methods documented in this form are not binding for either the taxpayer/feepayer or BOE staff The THE OBJECTIVE(S) OF THIS TEST THE POPULATION AND PERIOD BEING TESTED the population has an equal or known chance of being selected THE POPULATION WILL BE VALIDATED TO THE BOOKS AND RECORDS USING THE FOLLOWING METHOD The primary purpose behind the Board of Equalization s (BOE) audit program is to determine with the least possible THE SPECIFIC SAMPLING UNIT EXAMINED IN THE SAMPLE (for example invoice purchase order line items manifest bill of lading) THE SPECIFIC TYPE OF RECORDS TO BE EXAMINED IN THE POPULATION There are generally two methods of sampling: judgment sampling and statistical sampling A judgment sample includes all Third District Orange County This sampling plan is a collaborative effort by the auditor and taxpayer/feepayer to determine the most efficient method of determining transaction by transaction basis Therefore verification must be done at the source document level Since in many cases it is transaction is corrected as a result of the audit investigation the sample unit will be considered an error for projection of TYPE OF SAMPLES Use of Sampling in Auditing Voids are not included in the population and will be disregarded VOIDS OR CANCELLED TRANSACTIONS While judgment samples are not necessarily less accurate than statistical samples there is no way of objectively evaluating the with the assistance of the taxpayer/feepayer prior to the selection of the sample www boe ca gov

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