Tax Performance System

CHAPTER VII

FIELD AUDIT

COMPONENTS

INTRODUCTION
COMPUTED MEASURES
PROGRAM REVIEW

INTRODUCTION

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

INTRODUCTION

The Field Audit operation examines employer records to assist employers in their effort to
comply with State law and regulations and to determine if wages and taxes have been reported in
accordance with the law and agency policies. The major tasks performed by the Field Audit
function are:
Select employers for audit
Audit employer records
Process and record all information (Account Maintenance)
Handle appeals as appropriate

PRIMARY OBJECTIVE
The primary objective of the Field Audit function is to promote and verify employer compliance
with State laws, regulations and policies. Successful completion of this objective may be
accomplished through achievement of four sub-objectives:
1.

Identify employer noncompliance (Accuracy)

2.

Direct audit selection at noncompliance (Accuracy)

3.

Maintain a defined level of audit production (Completeness)

4.

Ensure that the Field Audits meet the key requirements of the Field Audit
Function section of the ES Manual (Completeness)

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Accuracy
To evaluate the achievement of Sub-objectives 1, 2, and 3, Computed
and
Measures will be generated based on data routinely reported by States.
Completeness These data elements will be converted into three indicators by the TPS ADP
system.

Completeness The effectiveness of Sub-objective 4 will be assessed through findings from a
Program Review designed to measure State conformity to ETA audit policy as
defined by the Employment Security Manual (ESM). A Program Review will
assess how closely the State has followed ETA audit policy.

REVIEW METHODOLOGIES
Computed Measures
Computed measures will provide indicators for analysis of improper employer reporting and
audit penetration by both number and size of employer. The three indicators which will be used
are:
1.

Percent of change in total wages resulting from audit

2.

Percent of contributory employers audited

3.

Percent of total wages audited. (Annualized)

Program Review
The Program Review to be conducted for Field Audit has two components - a Systems Review
and an Acceptance Sample.

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REVIEW METHODOLOGIES
Program Review cont.
The Systems Review covers the following topics:
Recorded Information and Instructions
Training
Recording of Transactions and Events
Systems to Assure Execution of Events
Review of Completed Work
The Systems Review will be used to examine the controls and quality assurance systems known
to be required for a quality field audit operation and to determine if the State has such controls.
A State's utilization of these controls should result in a quality field audit operation.

The Acceptance Sample examines the following:
Completed Audits

In conjunction with the Systems Review, an Acceptance Sample of completed field audits will
be examined using the Field Audit Acceptance Sample Checklist. The Field Audit Acceptance
Sample Checklist, containing questions on key audit policy requirements, will aid the reviewer
in determining if the sampled audits conform to the requirements. It is presumed that States
which do well on the Program Review (i.e., have an adequate system of internal controls and
pass the Acceptance Sample) have a quality audit program.
Through the use of computed measures to assess productivity, and a Program Review to assess
quality, TPS will gather data on what constitutes an effective audit program. TPS analysis of
this data should indicate where States may need to improve operations or be aware of
vulnerabilities they may have in their program.

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INTRODUCTION

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COMPUTED MEASURES

COMPUTED MEASURES
Computed measures in the Field Audit function will provide for analysis of improper employer
reporting and audit penetration by both number and size of employer. These measures will be
generated by using data elements reported by States through routine reports currently submitted.
Some States accumulate the data elements required for the Field Audit measures through ADP
systems. Other States keep manual records. Either way it is important that accurate records be
kept from the beginning. Upon implementation of the TPS program, the State TPS reviewer
must ensure that the State ADP system captures these data elements as defined so that the
National Office ADP system can produce accurate reports based on these data elements. The
data needed will be automatically extracted from the system currently used to electronically
transmit these reports from the States to the National Office. Appendix B explains the technical
process for gathering this information.

Field Audit Indicators. Three indicators have been developed for Field Audit:
1. Percent of change in total wages resulting from audit
2. Percent of contributory employers which are audited
3. Percent of total wages audited (Annualized)

Indicator 1 - Total Wage Change. The percent of change in total wages resulting from audit
for a given calendar year.
Rationale. The objective is to encourage the search for misclassified workers and to
assess whether States are targeting their audits to maximize the discovery of improper employer
reporting. The State will be able to compare results when changes in the audit selection
parameters are made that accommodate the identified areas of noncompliance.
COMPUTED MEASURES
To minimize differences among States in wage and salary levels, the audit change measure is
being computed by taking the ratio of the audit-found change in total wages to the pre-audit total
wages originally reported by the audited firms reviewed in a specified calendar year. (The
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COMPUTED MEASURES

numerator for the following formula includes total wages overreported (ETA 581 # 56) and total
wages underreported (ETA 581 # 53). The denominator, total wages audited - pre-audit, is
reported on the ETA 581 # 49.)
It should be noted that the absolute value of all changes (i.e., both underreported and
overreported wage changes) will be used in the numerator. This is to ensure that all mistakes are
valued in the indicator. Although net audit yield may be preferable from a cost-benefit
standpoint, it does understate the extent of employer reporting errors, and the need to take
remedial action to improve voluntary compliance.
Formula
Total wages overreported (581 #56) + total wages underreported(581 #53)
Total wages audited - Pre-Audit (581 # 49)

Data Elements
The total wages underreported and the total wages overreported are the amounts
of total wages reported in error by employers as discovered by audit. These
amounts should be the same as currently reported on Form ETA 581 #53 and #56
respectively.
The denominator, total wages audited, is the pre-audit total wages originally
reported by audited accounts. These amounts are reported on the Form ETA 581
# 49.

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COMPUTED MEASURES
Indicator 2- Employers Audited. The percent of contributory employers which are audited for
the calendar year under review.

Rationale. This indicator reflects the percent of contributory employers which are
audited for a specified calendar year. It is intended to provide a measure of State audit
production. Because audits of employer records are an effective means of not only determining
the extent of employer non-compliance, but also of ensuring employer compliance, it is
important that States perform such audits.
Audit production has been measured by the number of audits completed relative to the number of
contributory employers (penetration rate) and judged against a desired level of achievement
(DLA). The current formula of measuring audit production will be similar, but with a slightly
different period of review. The desired percentage of contributory employers audited, will
depend upon the performance enhancement indicator established by the State's annual plan of the
audit program quality measure sub-objectives.

Formula
Number of audits completed during the four (581) report quarters
Number of Contributory Employers at end of the (581)report quarter
two quarters prior to the four quarters in which the audits were performed
Data Elements
Numerator - The number of audits completed during the four (ETA 581 # 47)
report quarters is the total number of audits completed by the State during the
specified four quarter period. This should be the same number as the sum of
Form ETA 581 # 47 for the four quarters of a given calendar year.

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COMPUTED MEASURES

Denominator - The number of contributory employers at the end of the report quarter two
quarters prior to the four quarters in which the audits were completed. The total number
of known contributory employers for a given period should be the same number as Form
ETA 581 #1 for the end of the quarter two quarters prior to the four quarters in which the
audits were completed. In other words, this is the number of contributory employers at
the end of September prior to the calendar year in which the audits were completed.

Indicator 3 - Wages Audited. The annualized percent of total wages audited for the calendar
year under review.

Rationale. Because it is simpler and less time-consuming to audit small employers, a
simple employer penetration rate measure encourages small employer audits. However, noncompliance among large employers may have a greater impact on the State's trust fund. To
encourage audits of larger firms, TPS has an additional penetration measure: the percent of total
wages audited.
The following formula gives a fairly precise estimate of annualized audit penetration of total
wages using available data.
Formula
(Total Wages Audited Post-Audit (#50) for four (581) report quarters/Total
Quarters Audited (#48) for four (581) report quarters) x
Total number of Audits (#47) for four (581) report quarters x 4 quarter
Total Wages of Contributory Employers for prior four quarters (ES 202)

EQUALS (=) annualized percent (%) of total wages audited
(total wage penetration rate)

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COMPUTED MEASURES

COMPUTED MEASURES
Calendar year instead of fiscal year is used in this formula the same as for the employer
penetration rate formula. This formula provides a measure of wage penetration based on
average wages per quarter audited from which a comparison of audit production could be
drawn.
Available data indicates that the average audit consists of slightly over four quarters. As
a result the average audit contains wages of more than one calendar year. Averaging the
quarters compensates for this fact and gets a comparable percentage of quarterly wage
penetration. Multiplying it by four quarters in a year annualizes the audited payroll.
Multiplying this result by the total number of audits in the year results in the numerator
(annualized total payroll audited).
Dividing this numerator by a denominator of total wages of contributory employers for
the target year expresses wage penetration as the annualized percent of total wages
audited.
To further illustrate how this formula compensates for audits with wages outside the
target year, see the example below:
Available data indicated that the State completed 1000 audits, covering 5000 quarters and
$10,000,000 gross payroll and total wages of contributory employers for prior year (ES
202) $200,000,000.
If we apply the proposed wage penetration formula, it becomes easier to understand how
the formula minimizes the effect of audited wages outside the target year. In this case the
National Office would make the following calculation:
$10,000,000 = $2000 (average quarterly gross payroll audited)
5000
$2,000 X 4 X 1000 audits = $8,000,000 (annual gross payroll audited)

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COMPUTED MEASURES
$8,000,000
= 2% penetration rate
Total wages of contributory employers
for prior year (ES 202) $160,000,000
Since most of the audits will be of a given target year, the fact that some wages of other
years may be included in some of the audited quarters will be minimized. The
penetration figure resulting from the formula will be comparable from year to year and
the impact of wages outside the target year will be diminished over time by this
averaging. Inflation in the total wage picture will also help offset the effects of wages
outside the target year. As wages in the numerator that are outside the target year would
normally tend to suppress the denominator (i.e., the percent of wage penetration for the
target year should be greater because the numerator is inflated by wages outside the
target year), the suppression is offset by inflationary effects on the wages of the target
year in the denominator. (i.e., wages tend to rise from year to year due to inflation and
the inflated wages in the denominator divided into the less inflated non-target year wages
in the numerator will lower the percent of wage penetration)
Data Elements
Numerator - For audited wages, the measure should be total wages-post audit per audited
quarter, times the number of audits conducted. To analyze a year, the quarterly gross
payroll audited for the calendar year should be divided by the numbers of quarters
audited for the calendar year, then multiplied times 4 to annualize the data, then
multiplied times the number of audits conducted for the calendar year.
Denominator - For total wages, the measure should be total wages per employer (ES 202
quarterly total wages for the prior four quarters).
Indicator - The indicator would be the ratio of annualized audited gross payroll to total
wages for the year.

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COMPUTED MEASURES

COMPUTED MEASURES
Drawing Conclusions.
An analysis of the results of the Field Audit Computed Measures will reveal how well the
State is managing its Field Audit program. Looking at trends of the three indicators can
indicate the degree of "penetration" into both the number of employers and amount of
total wages being audited and whether this "penetration" is productive in revealing the
amount of misreported wages.
Findings or trends from these Computed Measures should be considered along with
findings in the Systems Review and Acceptance Sample for evaluating the effectiveness
of the State's Field Audit program and be included in the TPS Annual Report.

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PROGRAM REVIEW
COMPONENTS
SYSTEMS REVIEW
ACCEPTANCE SAMPLES

SYSTEMS REVIEW

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CHAPTER SEVEN

FIELD AUDIT

PROGRAM REVIEW

SYSTEMS REVIEW INTERVIEW SHEET
Function

Reviewer

Persons Interviewed
Date

Name:

Documents Reviewed
Title:

Title:

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SYSTEMS REVIEW

Recorded Information and Instructions
For Field Audit, the recorded information and instructions should include requirements
for unemployment insurance coverage and procedures for conducting field audits. As a
general rule, TPS will consider a State's recorded instructions to be current, accurate and
complete if it contains, as a minimum, the requirements specified in the ESM as it appears
in the appendix of this handbook and presents the State's unemployment insurance
coverage rules. While ESM 3683 requires a formal Field Audit manual, this requirement
may be met by handbooks, desk aids, computerized help screens, etc. that include the
specified requirements.

The reviewer should examine recorded information and instructions
available to employees involved with performing Field Audit functions.
Compare the procedures to the laws and written policies of the State.

In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no recorded
instructions, describe in the narrative how personnel know the laws and
written policies and procedures to perform their assigned tasks.

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SYSTEMS REVIEW QUESTIONS

1.

Are the State's recorded instructions:
Yes
a.
b.
c.
d.

2.

No

Current? .....................................................................................................................
Accurate? ...................................................................................................................
Complete? ..................................................................................................................
Readily available to staff?..........................................................................................

Does the State have recorded instructions to assist the auditor in understanding the Field
Audit requirements of the (ESM) in sufficient detail to properly complete a Field Audit?
Yes

No ___

If yes, do the instructions explain to the auditor how to perform the following:
Yes No
a.

How to complete a pre-audit discussion and who
should be involved in the discussion?........................................................................

b.

How to verify the existence of the business?.............................................................

c.

How to verify the ownership of the business? ...........................................................

d.

How to perform tests to verify the accuracy and
completeness of reported payroll and how to
record the findings? ...................................................................................................

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e.

Yes No
How to perform tests to search for misclassified
workers and hidden wages and how to record the
findings?.....................................................................................................................

f.

How to determine the minimum number of
consecutive calendar quarters necessary to
constitute an audit and how to record in the
audit when the minimum or tolerance guidelines
are disregarded? .........................................................................................................

g.

How to conduct a post-audit discussion and who
should be involved in the discussion?........................................................................

h.

How to resolve the collection of the debt incurred
by the audit?...............................................................................................................

i.

How to properly prepare adjustment reports and
the routing of the adjustment reports when the
audit resulted in change?............................................................................................

VS:(Questions 1 and 2________________________________________________________)

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3.

If any of the preceding evaluative questions are answered "no", does the State have a
substitute or compensating control?
Yes

No

N/A ___

If Yes, describe in the Narrative Section following these questions.

VS: (Question 3

)

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SYSTEMS REVIEW NARRATIVE

Question
Number

Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)

Question
Number

Answers to "if yes, describe", and "Other":

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Training
New employees need to learn the requirements for unemployment insurance coverage and
the procedures for conducting field audits. Existing employees benefit from periodic
refresher courses and need additional training when changes occur, and when quality
defects or a significant number of errors appear in a particular area.

The reviewer should become familiar with methods and systems used to
identify and meet field audit training needs.

In the narrative section following the questions, explain "other" responses
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no training
programs, describe in the narrative how personnel know the laws and
written policies and procedures to perform their assigned tasks.

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SYSTEMS REVIEW QUESTIONS

1.

Does the State have methods or procedures to provide training for newly hired
employees?
Yes

No __

*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.

*Formal Classroom Training? ...................................................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................

Describe the type and frequency of training in the narrative.

2.

Does the State have methods or procedures to provide refresher training for experienced
employees?
Yes

No __

*If yes, identify the type of training:
Yes No
a.
b.
c.
d.
e.

*Formal Classroom (e.g., refresher courses)? ...........................................................
*On the Job Training?................................................................................................
*One-on-One Training? .............................................................................................
*Individual Self-guided Training?.............................................................................
*Other?.......................................................................................................................

Describe the type and frequency of training in the narrative.

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3.

Does the state provide training when there are:
Yes No N/A
a.
b.
c.
d.
e.

State law changes?. . . . . . . . . . . . . . . . . . . . . . . . . . .
Policy/procedure changes?. . . . . . . . . . . . . . . . . . . . . .
Needs identified from review of finished work
(e.g., supervision, quality assurance review)?. . . . . . . . .
Hardware/software changes?. . . . . . . . . . . . . . . . . . . .
*Other?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

VS: (Questions 1-3

4.

)

Does the state have processes (e.g., back-up training or organizational flexibility) to
assure that staff absences will not disrupt operations?
Yes

No __

If Yes, describe in the Narrative Section

5.

*In the opinion of the supervisor or manager, does the training meet the needs of the
Field Audit function? (e.g., are sufficient resources available--training packages,
facilities, staff, etc.)
Yes

6.

No __

If any of the preceding evaluative questions were answered "No", does the state have a
substitute or compensating control?
Yes

No

N/A __

If Yes, describe in the Narrative Section

VS: (Questions 4 and 6

)

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SYSTEMS REVIEW NARRATIVE
Question Explanation Of "N/A" and "Compensating Controls"
Number (when deemed necessary)

Question
Number

Answers to "if yes, describe", and "other":

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Recording of Transactions and Events
The State should have procedures and controls to assure that at a minimum, completion of
the basic requirements of a Field Audit are recorded in the completed audit. Whether the
State’s system is automated or manual, an audit trail should exist. It is reasonable to
assume that events of a completed audit should be sufficiently documented to enable
persons such as supervisors, reviewers or subsequent auditors to understand the reason for
the audit and to understand the audit procedure, findings and conclusions. It is also
reasonable to assume that if these procedures or internal controls are in place, the audits
have an increased probability of being of acceptable quality.

An effective audit should document the major steps entailed, such as preaudit interview, and tests of the employer's payroll records, and tests to
search for misclassified workers and hidden wages. Documentation in the
form of work paper(s) for each test should contain the test performed,
employer name and account number, and the period under review. These
instructions are to be considered as a minimum and each State should
develop their own work paper format and their respective method for
organizing the work papers. It can take the shape of a check list of actions
taken or a description in narrative form.

In the section following the questions, explain "other" responses, and
describe "compensating controls". Identify the question being explained
by referencing the number and section.

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SYSTEMS REVIEW QUESTIONS

1.

Does the State have a method to assure that Field Audit findings and conclusions can be
traced to their information sources?
No __
Yes

2.

Can the following be identified through the audit trail:

a.

Yes No
The name and title of employer or designated
representative involved in pre-audit discussion? .......................................................

b.

How the auditor verified the existence of the
business? ....................................................................................................................

c.

How the auditor verified the ownership of the
business? ....................................................................................................................

d.

The tests performed to verify the accuracy and
completeness of reported payroll? .............................................................................

e.

The employer records that were examined to search
for misclassified workers and hidden wage? .............................................................

f.

That four consecutive calendar quarters were
audited or that an acceptable explanation was
provided? ...................................................................................................................

g.

The name, title, and telephone number of employer
or an identified designated representative
involved in the post-audit discussion? .......................................................................

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Yes No N/A

3.

h.

When the audit resulted in the employer owing
additional tax, that the auditor either collected
it or provided an acceptable explanation why the
monies were not collected? (If the State policy
does not require the auditor to attempt collection,
answer "N/A" to the question.) ..................................................................................

i.

The adjustment reports prepared and submitted
(when an audit results in a change)?..........................................................................

Are Field Audit support documents retained and accessible for State use?
Yes

4.

No __

Are the Field Audit completion date and results retained and accessible for State use?
Yes
No __

VS: (Questions 1 – 4

5.

)

If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes
If yes, describe in the "Narrative" section following these questions.

VS:(Question 5

No

N/A __

)

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SYSTEMS REVIEW NARRATIVE

Question
Number

Question
Number

Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)

Answers to "if yes, describe", and "other":

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Systems to Assure Execution of Events
A central or district office control system for assigning and monitoring field audit
assignments serves as a management tool. It provides the State with a means of monitoring
the number of audit assignments, to whom the assignments are made, the State of work in
progress, the completion of audit assignments and if they were completed timely. It also
gives the State control over certain requirements for audit assignments such as four
quarter scope and any criteria for audit selection the State may use.

The reviewer should become familiar with the systems used by the State
for completing field audits.
In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there are no internal
controls or safeguards, describe how it assures accurate and timely
completion of work.

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SYSTEMS REVIEW QUESTIONS

1.

Does the State have a control system for assigning and monitoring field audit
assignments?
Yes

No __

a. If yes, does the control system:
Yes No
(1). Indicate the issue date of the assignment? .........................................................
(2). Identify the office/individual receiving
the assignment?...................................................................................................
(3). Indicate the actual assignment completion
date? .....................................................................................................................

b. If yes, (to question 1 above), is the control system:
(1).* Automated? ..................................................................................................... .
(2).* Located in the central office?............................................................................
(3).* Located in a district/regional office? ................................................................
(4).* Located elsewhere? (Describe in narrative)......................................................

VS: (Question 1

)

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2.

*Are individual auditors allowed to select employer accounts to audit and/or convert nonaudit assignments into audits?
Yes
No __
If yes, does the State:
a.

Have standards to determine whether an auditor may select an employer account
to audit and/or convert non-audit assignments into audits?
Yes

b.

Require that the auditor's reason for selecting an employer account for audit
and/or converting non-audit assignments into audits, be recorded in the audit
report?
Yes

3.

No __

Does the State have a system or procedure to assure that audit results (i.e., adjustments,
changes, corrections, etc. to the employer's account file) are properly prepared?
Yes
No __

VS: (Question 2 and 3

4.

No __

)

*Following the completion of the audit, are employers contacted concerning the conduct
of the audit?
Yes

No __

If yes, describe the procedure in the narrative. If correspondence is used, obtain a sample
if possible.

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

SYSTEMS REVIEW QUESTIONS

5.

If procedures are automated, is a systems check performed every time a program is changed?
Yes __ No __

6.

If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes
No
N/A __
If yes, describe in the "Narrative" section following these questions.

VS:(Question 6

)

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FIELD AUDIT

CHAPTER SEVEN

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SYSTEMS REVIEW NARRATIVE

Question
Number

Question
Number

Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)

Answers to "if yes, describe", and "other":

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SYSTEMS REVIEW
Review of Completed Work

Ongoing supervisory review to ensure the quality of individual audits improves the quality
of the entire Field Audit function. The review process may vary from reviewing all audits
without exception to random sampling of audits in order to detect problem areas. The
review may also take the form of a periodic Statewide review which measures the quality of
the overall audit program. Utilization of these review processes helps the State meet the
requirement of ESM 3691.
A system of post-audit verification also helps management assess the audit program by
providing a method of feedback from audited employers on how the audit was conducted.
Other feedback systems on quality trends may provide information to field audit
supervisors with which they could compare audit quality between their office and other
offices in the State.

At a minimum, field audits should be reviewed to assure they meet the
requirements as set forth in the Field Audit section of the ESM. As well
as meeting the ESM requirements, field audits should be reviewed to
assure they meet the minimum level of documentation as defined in the
section on Recorded Instructions.
In the narrative section following the questions, explain "other" responses,
and describe "compensating controls". Identify the question being
explained by referencing the number and section. If there is no review of
completed audits, describe how the State ensures that accurate and
complete field audits are being conducted.

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For staff members involved in processing Field Audit documents, are the following components subject to some form of systematic review?
For Yes answers, enter a "Y" in the appropriate column(s). For Yes answers, also enter "Y" in column 6. If there are no reviews, answer
"N" for No in column 6. Column 6 is the only evaluative question.
Type of review
Component

a.

That a pre-audit discussion was held?

b.

That the existence of the business was verified?

c.

That the ownership of the business was verified?

d.

That payroll record tests were performed?

e.

That a search for hidden wages was made?

f.

That 4 consecutive calendar quarters were audited?

g.

That a post-audit discussion was held?

h.

That money was collected or an explanation was
documented?

i.

That adjustments were properly prepared?

VS:

(Question 6

* Informational

*1
Supv

*2
Peer

*3
QR
(Qual.
Rev.)

*4
Support
(Clerical)

*5
Other

6
Review
Conducted?
Y/N

)

ET HANDBOOK NO. 407
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CHAPTER SEVEN

FIELD AUDIT

PROGRAM REVIEW

SYSTEMS REVIEW QUESTIONS
7.

Is a periodic Statewide review of completed field audits performed to ensure uniform
quality throughout the State?
Yes, all audits

Yes,

% of audits No __

VS: (Question 7

8.

)

* If field audits are reviewed, is a different review procedure used for large employers or
other special audits?
Yes

No

N/A __

If yes, describe the review procedure in the narrative section following these questions.

9.

* Are field audit supervisors informed about quality trends between their offices and
other offices within the State?
Yes

10.

No __

If any of the preceding evaluative questions were answered "no", does the State have a
substitute or compensating control?
Yes

No

N/A __

If yes, describe in the "Narrative" section following these questions.

VS:(Question 10

)

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FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

SYSTEMS REVIEW NARRATIVE

Question
Number

Question
Number

Explanation Of "N/A" and "Compensating Controls"
(when deemed necessary)

Answers to "if yes, describe", and "other":

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CHAPTER SEVEN

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SYSTEMS REVIEW QUESTIONS

Additional Controls

1.

* Does the State have internal controls or quality assurance systems in the Field Audit
function which this review failed to identify?

Yes

No __

Yes

No __

If yes, describe below.

2.

* Are there any exemplary practices for the Field Audit function?

If yes, describe below.

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ACCEPTANCE SAMPLES

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ACCEPTANCE SAMPLE INSTRUCTIONS

Purpose/Intent

To assess the degree to which completed audits meet the
requirements of the Employment Security Manual.
To assess the accuracy of posting audit results in the State's
employer records.

Scope

The scope of the review will focus on audits completed in
the first, second and third quarters of a calendar year.

Universe

There is one universe to be identified for the Field Audit
Acceptance Sample:

Timing/Frequency

1.

All audits completed on Contributory Employers in
the first, second and third quarters of the calendar
year.

2.

60 completed audits will be selected.

The samples will be selected once per calendar year.
The population of transactions will be identified after the
end of the third quarter.

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Sampling Procedures

The following describes the steps to be taken to build the
universe for the samples:
1.

Identify all contributory employers audited in the
first three quarters of the calendar year. These
should be the same employer accounts that are
being reported as Total Audits on the ETA 581.

2.

Select a sample of 60 cases.

3.

The sample should be selected after the third
quarter ends.

Appendix A describes what action needs to be taken for
sampling in both manual and automated systems.
If the system is automated, the reviewer must work closely
with the ADP unit to ensure a thorough understanding of
what, when, and how the samples should be selected.

Reviewing Samples

Assemble the following information for each of the
completed audits selected for review.
1.

The complete audit report.

2.

The supporting documentation.

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Reviewing Samples
cont.

Drawing Conclusions

3.

Any adjustment forms needed due to changes
resulting from the audit.

4.

The account information on the State's computer
files.

Using this information, answer the questions on the
Acceptance Sample Questionnaire for each audit selected.
1.

A pass/fail question has been added to the
Acceptance Sample Questionnaire. "Was this
assignment correctly identified as an audit in
conformity with ETA audit policy as defined in the
Employment Security Manual?" A "No" answer
will fail the entire case. By answering no, the rest
of the questions in the Acceptance Sample
Questionnaire would not need to be answered. Note
that cases failing under this criterion are a
potentially serious problem as the data being
reported on the ETA 581 are skewed. These
failures will need to be written up as part of the
findings of the Annual Report.

2 a.

A score of 80 points or more on the nine (9)
acceptance sample questions is required for a case
to pass.

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Drawing Conclusions Cont.

b.

If any of the cases score less than 80 points, it
means that the reviewer must conclude that the
audit is not an acceptable audit for this review.

c.

Of the 60 cases, if three or more are not acceptable,
then the reviewer must conclude, that quality in the
State's audits cannot be confirmed.

For all unacceptable cases, the reviewer must provide an
explanation for the unacceptable case on the Acceptance
Sample Explanation Sheet.

Documentation

All source documentation (gathered to review samples)
must be kept until the completion and Regional Office
approval of the Annual Report. Either hard copy
documentation or (in some highly automated systems) the
ability to recreate the identical information used in the
review must be maintained.

NOTE: For each of the 60 Audit cases both a review of adherence to ESM requirements and (if
the audit resulted in any change or adjustment to the information on the employer's account), a
review of posting accuracy must be completed. It is important to verify that the posting of field
audit adjustments is accurate in order to ensure the State is processing the information provided
by the field audit unit. The purpose of TPS is not to find fault with any particular unit, but to
identify strengths and weaknesses within a system regardless of what unit is responsible for the
execution of the process.

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ACCEPTANCE SAMPLE INSTRUCTIONS

For each case that passes the initial question of "Is this an Audit?", all Acceptance Sample
questions must be answered, even for those cases where it is apparent early in the review that the
case will not have sufficient points to pass. This is necessary to pinpoint any other areas of
weakness regarding the quality of the State field audit program.
Furthermore, for question 5 in the Acceptance Sample, if no records or partial records are
maintained by the employer, the auditor must document that in the report. The audit is not to fail
simply because the employer does not maintain all of the records listed in question 5. Such an
audit would only fail if the auditor did not document that necessary records were not maintained.

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ACCEPTANCE SAMPLE RATIONALE

Pass/Fail Initial Question
Prior to answering the Acceptance Sample Questionnaire to award points for the
quality of the audit, the case should be reviewed to ascertain that it was correctly
identified as an audit in conformity with ETA audit policy as defined in the
Employment Security Manual (ESM). (Pass/Fail)

RATIONALE: The ESM defines a field audit as well as identifying the scope. Some cases will
not meet the criteria to be included in the Audit Universe (e.g., Assignments issued to resolve
report and money delinquency, blocked claims and status assignments should not be routinely
converted or expanded to audits). In all instances the cases will need to be reviewed to ascertain
if they meet the criteria of an audit.
DOCUMENTATION: If the completed audit was a converted or expanded assignment issued to
resolve report and/or money delinquency, blocked claim(s) or status issue it must contain
documentation to identify the problem and/or conditions, not apparent when the assignment was
made, that warrant the expansion or conversion of the assignment to include an audit.

After determining the case passes the initial question of "Is this an Audit?", the following
Acceptance Sample Questions will be used to assess the quality of the audits.

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The following questions assess the quality of completed Field Audits. For each question, a
score and a rationale are given. The "Documentation" section presents examples of
acceptable documentation to confirm that a particular audit activity has been performed.
Work papers can range from checklists of actions taken and documents reviewed to a
narrative by the auditor. The total score for a case of acceptable quality is 80.
1.

A pre-audit discussion concerning the purpose of the audit must be held with the
employer or an identified designated representative. (10 points)

RATIONALE: A preliminary discussion must be held with the employer or an identified
designated representative, in which the purpose of the visit and any pre-audit questions are
discussed. At a minimum, the owner, a partner, or a corporate officer should be advised in
person, by telephone or letter that an audit is to be performed and have the opportunity for a
meeting.
DOCUMENTATION: The completed audit must record the name and title of the individual
involved in discussion. If the employer designated a representative, record the name and title of
the designated representative, and also record the name and title of the employer who designated
the representative.

2.

An acceptable explanation will be given as to how the auditor verified the existence
of the business. (5 points)

RATIONALE: Conducting the audit at the employer's place of business is the best way to verify
its existence. Otherwise, the business entity must be verified in accordance with State audit
procedures to ensure it is a bona fide operating establishment and not part of a fictitious
employer scheme.
DOCUMENTATION: The completed audit must contain documentation of an on site visit,
personal knowledge of the business, or other sources of verification in accordance with State
audit procedures (e.g., business license, business advertisement in yellow pages).

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3.
An acceptable explanation must be given as to how the auditor verified the ownership
of the business. (5 points)
RATIONALE: The current status of the business must be verified each time an audit is performed.
If there has been a change of which the state was not aware, information on the change must be reported
by the auditor in accordance with the state's policies and procedures.
DOCUMENTATION: The completed audit must contain confirmation that the auditor examined documents
regarding partnership agreement, articles of incorporation, corporate charter, income tax returns and their
findings (the type of income tax returns should be identified - e.g., 1120S - Sub-Chapter S Corp. 1040-Schedule
C - Individual Ownership, 1065 - Partnership, 1120 – Corp.), business license, verification with the Secretary of
State, or other sources of verification in accordance with state audit procedures.
4.
Tests of employer's payroll records must be performed to verify the accuracy and completeness of
reported payroll. (25 points)
RATIONALE: To establish that the auditor can rely on payroll data reported to the state, a minimum of four
tests are required. To begin, the auditor must confirm reliance on the accuracy and completeness of the
employer’s payroll system, and this is done through Test “a” which requires verification that amounts paid were
properly posted to the employer’s payroll records. Then, as further checks on the accuracy of reported wages,
Test “b” involves reconciliation of audited total payroll to reported total wages; Test “c” requires computation of
total taxable payroll; and Test “d” involves reconciliation of total taxable payroll to reported total taxable wages.
(Note that reconciliations may not always be exact due to tolerance levels, rounding and other state-established
procedures. In these situations, the reviewer will determine whether state-established procedures have been
followed. Minor mathematical or typographical errors discovered by the reviewer, such as errors that do not
prevent identification of the employer or of potential UI claimants, should not cause the audit to fail, however,
they should be noted in TPS findings.)
These tests will not be possible for employers or employing units that have not reported wages or have not
registered. Procedures for auditing such employers are described at the end of Question Four.
DOCUMENTATION: The audit must include documentation which confirms that each test was conducted and
supports conclusions drawn from the tests. Any discovered discrepancies greater than state-established tolerance
levels between reported and audited payroll must be documented, reconciled and properly adjusted in order to
pass Question Four. Such documentation could take the form of an annotated calculator tape, or include copies of
records, or consist of work papers, or be notations on a computerized audit program.

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Test a. Verification that amounts paid were properly posted to the employer’s payroll records.
There are two methods to verify that payroll was properly posted to the employer’s payroll system.
Provide documentation showing that the audit verified the gross payroll by adding all payments of the
individual gross wages from source document(s) (e.g., paper or electronic check stubs, cash
disbursements journal, check register, etc.) for the quarter and compared that total to the total gross wages
reported on the state's records. Documentation may be in the form of an annotated calculator tape or
computer printout showing quarter or year and source documents used. Comparison may be for a single
quarter (or more) or annual.
or
Provide documentation showing that the auditor verified at least one employee's wages for one quarter
from evidence of payment through to the employer’s copy of the quarterly contribution and wage report
or to the wages posted in state records. If the auditor is supplied with detailed wage information from
state records prior to conducting the audit, then the wage data of the individual must be traced through the
employer’s payroll system to the state’s records for that quarter.
Most basic evidence of payment, such as timecards, check stubs, check registers, cancelled checks or
copies of automated clearing house (ACH) transactions should be used when available. If such basic
evidence is not available, other records may be utilized, but this situation must be documented in the audit
report. Other acceptable documents include paper and cash payment vouchers. If the employee is paid by
direct deposit, evidence may include employee earnings statements, electronic check stubs, records of
direct deposit, or electronic fund transfer tracking numbers.
Records used in the audit that show only net amounts (e.g., cancelled checks, non-detailed check stubs,
records of direct deposit, or ACH transactions showing only net amounts) must be reconciled for at least
one employee; with supporting evidence of the gross wage amounts paid to the employee such as found in
individual payroll or earnings records.
Work paper(s) for each individual traced must contain the identity of the record examined, name, SSN (all
or part), amount of pay, and dates of payments.
Test b. Reconciliation of audited total payroll to reported total wages.
Work paper(s) must show that the auditor compared quarterly totals of payroll records for all employees
to the total wages on the employer's copy of the UI contribution report, or to the amount posted to the
state's records. Payroll records used for this test could be in the form of individual earnings records,
payroll journals or ledgers, payroll summaries, W2s, W3(s), 941s or 940s. For example: Each quarter’s
payroll summaries are totaled for the entire year, along with a comparison of the total gross annual payroll
to the W2 totals. For an individual’s trace, if W2s are used, the totals for the remaining, untested quarters
for the employee traced in Test “a” must be added and reconciled with the employee’s W2.
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The comparison of audited total wages to reported total wages may be annual or by quarter, and must
include the entire audit test period. If discrepancies are identified which cannot be explained, the auditor
will perform an analysis for each quarter in the audit test period.
Work paper(s) for the reconciliation must include identity of the payroll records examined, calculation of
total payroll, and an explanation of variances/differences.
Test c. Computation of total taxable payroll.
Work paper(s) must include identity of the payroll record used in the calculation and also record the
calculations to verify the total taxable payroll. This computation may be by quarter or annual, and must
include the entire audit test period. Annual records such as W2s that have been validated in Tests “a” and
“b” may be used for the computation i.e., the total gross wages from the W2s equal the total of the gross
annual wages from the source used in Test “b”.
Test d. Reconciliation of total taxable payroll to reported total taxable wages.
The reconciliation can be performed by comparing the verified total taxable payroll figure arrived at in
Test “c” to total taxable wages recorded on the employer's copy of the UI contribution report, or to the
amount posted to the state's records. The comparison may be by quarter or annual and must include all
quarters of the audit test period. If discrepancies are identified which cannot be explained, the auditor
will perform an analysis for each quarter in the audit test period.
Work paper(s) for the reconciliation must contain summary calculations and an explanation of
variances/differences.
AUDITS OF EMPLOYERS WITH NO REPORTED WAGES

Audits of employers/employing units who have no wages reported or have not registered are acceptable under
certain conditions. Approval to conduct such audits must follow guidelines found in Part V, Section 3689 of the
ESM, and should contain explanation for the decision to conduct the audit.
In these situations, the auditor must create quarterly tax reports, sometimes using sources such as blocked claims
affidavits, lists of gifts, records of cash payments, check stubs, time sheets, payroll deductions taken as expenses
on income tax returns, evidence of cash bank withdrawals if employees were paid in cash, evidence of electronic
transfers along with any accounting records available such as W2s, 1099 forms, income tax returns, individual
payroll or earnings records. To qualify as an “audit”, evidence of the payment of wages must be documented in
audit work papers.
The audit must also contain detailed documentation such as calculator tapes or spreadsheet details showing the
methodology followed in preparation of the contribution and wage reports or annual adjustment forms. Such
documentation must include copies or descriptions of records used by the auditor to determine wage for each

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employee as well as evidence of the auditor’s computations of total wages, taxable wages, and contributions due.

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5.

Other employer records must be examined to search for misclassified workers and
hidden wages. (25 points)

RATIONALE: Misclassified workers and hidden wages are the most significant areas of
noncompliance among registered employers. Auditors must examine all appropriate documents
or records of original entry as are available or maintained by employer to determine whether
non-wage payments to acknowledged employees were properly classified and whether persons
not in covered employment who received payments for services were properly classified. TPS
has divided employer records into four types that will be examined for the discovery of hidden
wages or misclassified workers. If no records or partial records are maintained by the employer,
the auditor must document that in the report. The audit is not to be penalized when the employer
does not maintain all of the records described on the next page.
The auditor must examine the nature and extent of the employer's business to identify and
resolve any issues of noncompliance. The nature of the business may identify a type of business
with a historical pattern of noncompliance. In this case, the nature of the business may alert the
auditor to perform a detailed investigation of specific accounting records.
Likewise, the extent of the business may indicate multi-State employment, and may require that
the auditor's investigation ensure the employer reported employees to the appropriate State.
DOCUMENTATION: There are, at a minimum, four types of employer records that must be
examined. Each should be considered as a separate source of potential information. Included in
the completed audit file should be auditor-prepared documentation that is the principal record of
the four separate examinations for this test. The documentation must present the evidence
discovered through the test.

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a. The essential test which must be conducted and its required documentation is described
below. If the records deemed essential/necessary to conduct the audit are kept by the employer
they must be examined by the auditor. If no records or partial records are maintained by the
employer, the auditor must document that in the report. There are at a minimum four types of
employer records that must be examined (i.e., contract labor, cash disbursements, detailed
general ledger and miscellaneous reports and accounts). The audit is not to be penalized when
the employer does not maintain all of the records described below.
(1)

Examination of the records of contract labor. These records include, but are not
limited to: 1099s MISC and 1096 summaries, and master vendor files.

(2)

Examination of the cash disbursements. These records include, but are not
limited to: cash disbursements journal, petty cash journal, check register and
canceled checks/check stubs.

(3)

Examination of the detailed general ledger and, if available, any directories of
subsidiary ledgers such as a chart of accounts which may lead to other sources of
misclassified workers and hidden wages.

(4)

Examination of miscellaneous reports and accounts. These records include, but
are not limited to: State tax returns, federal income tax returns, financial
Statements, corporate minutes and records, and federal adjustment reports.

b. Potential outcomes of the test are (1) no suspicion of additional wages, (2) suspicion of
additional wages, and (3) payment(s) of wages not previously identified. If, through one or more
of the tests performed, wages are suspected or found, the audit papers must contain such
information.

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(1)

For Part I (examination of records of contract labor): If there is no suspicion
(payment not suspected to be wages) or the payment was identified and examined
elsewhere in the audit, documentation should contain classification of categories
of payment (e.g., 1099s MISC, and/or
1096, and/or master vendor files) and a brief description of why there was no
suspicion of misclassified workers and/or hidden wages.
For Parts (2), (3), and (4): If there is no suspicion (payment not suspected to be
wages) or the payment was identified and examined elsewhere in the audit, the
documentation will contain a checklist or summary Statement of accounts
reviewed and findings.

(2)

If, initially, wages were suspected, but payment was subsequently not found to be
wages, documentation will contain the number of individuals, the labor categories
examined which turned out to be exempt or non-subject, explanation of evidence
that payments do not constitute wages, and conclusions.

(3)

If payment to individual(s) was found to constitute wages, work paper(s) for each
individual found must contain the audit period, name of payee, total quarterly
amount, explanation of evidence that payments were wages, and findings. Also
acceptable is a summary Statement that the suspect amount was found and can be
traced to a specified account, referencing another work paper. Adjustment reports
can be used as part of the supporting documentation when the reviewer can trace
each individual discovered to the resulting increases and decreases in total wages
and taxable wages. Adjustment reports must be supported by narrative or other
documented sources before they can be used as part of the supporting evidence to
wage changes.

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6. The audit must cover four consecutive calendar quarters or an acceptable explanation
must be provided. (5 points)
RATIONALE: To preserve the integrity of the audit program and to enhance the capability of
the auditor to verify taxable wages, the scope of the audit must be at least four consecutive
calendar quarters. A tolerance level for error in reporting taxable wages and/or tax must have
been established by the State as a guide for justification in extending an audit beyond the four
quarter scope. A State may establish reasons other than monetary for expanding an audit in
which case the auditor will record the reason in the audit report.
DOCUMENTATION: When the auditor elects to extend the audit, the audit file must contain an
explanation for the expansion which conforms to the State's tolerance level guidelines. If the
auditor elects to disregard the established tolerance guidelines, an explanation will be given in
the audit report. When the audit is less than four quarters, the completed audit file must also
contain an explanation.

7. A post-audit discussion concerning the results of the audit must be held with the
employer or an identified designated representative. (10 points)
RATIONALE: Upon completion of the audit, a meeting must be held to discuss the audit
findings and conclusions. Any discrepancies or issues of non-compliance must be discussed
with the employer or designated representative who has authority to make changes in the
organization's reporting procedures. This is also a time when the auditor must inform employers
of their rights and responsibilities regarding the audit. If the auditor does not follow this
procedure, an acceptable explanation must be given.
DOCUMENTATION: The completed audit must contain the name, title, and telephone number
of the individual involved in the post-audit discussion.

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8. If the audit resulted in the employer owing additional tax, the auditor either must
collect it or provide an acceptable explanation why the collection was not accomplished. (5
points)
RATIONALE: The auditor must contact a person authorized to make payment for the business
being audited and attempt to obtain payment of all contributions found to be due as a result of
the audit. If the auditor is unable to collect, an explanation must be provided in the audit report.
If the audit under review is a no-change audit and question 8 is not applicable, the reviewer will
answer the question "NA" and the points will be awarded as though the question had been
answered "Yes". If the audit is a change audit resulting in additional tax due and State policy
does not require the auditor to attempt collection, the reviewer will answer question 8 as "NA"
and system will award the points. However, record of such State policy must be documented
and contained in the TPS systems review narrative.
DOCUMENTATION: The completed audit file must record the amount collected. If the auditor
does not collect the balance due, an explanation as to why the collection was not accomplished
must be recorded in the completed audit file.

9. If discrepancies or unreported wages and tax were found, adjustments must be made in
accordance with the completed audit. If the audit is being appealed, adjustment reports
must be made in accordance with the completed audit. (10 points)
RATIONALE: Establishing a system to ensure the proper accounting of audit results is an
important component of a State's tax operation. The State has a fundamental obligation to
guarantee the accuracy of the posting to ensure the employer is given the correct tax rate;
subsequent billings are correct and that the collection unit is provided with timely information to
process indisputable legal documents.

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

ACCEPTANCE SAMPLE RATIONALE

By assessing the accuracy of the posting of Field Audit adjustments, the reviewer will have
sufficient information to confirm the existence of a system which assures that audit results are
properly posted. If discrepancies are found, the reviewer will note this in the Annual Report.
Posting errors of non-material nature such as typographical mistakes, minor misspelling, leaving
off middle initials, or other errors that generally do not influence proper administration of an
employer’s account, will not result in the loss of points for this question. In cases of uncertainly,
benefit of the doubt should be given. Points will also be granted, if discrepancies or unreported
wages and tax were found that did not require adjustment according to established State
procedures.
If the audit under review is a no-change audit and question 9 is not applicable, the reviewer will
answer the question "NA" and the points will be awarded as though the question had been
answered "Yes".
DOCUMENTATION: Adjustments to employer's account, quarter and year, total wages,
taxable wages, and tax/contribution due, resulting from the completed audit must be posted
accurately.
In addition, if the audit is being appealed and actual posting is not made, the completed audit file
must contain a copy of the adjustment forms when prepared manually. The form(s) must record
title of report, the audit period, name and account number of employer, and findings.
If computer-assisted, a printout of the adjustments which includes the audit period, name of
employer, and findings will be sufficient documentation.

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

ACCEPTANCE SAMPLE QUESTIONNAIRE
The initial question Pass/Fail, must be a Pass, before the audit needs to be reviewed on
Questions 1 thru 9. (For details, see the Initial Question Rationale)
If answers to Questions 1 thru 9 are not documented in the completed audit file, then the
answers to those questions must be "No." (For details on the level of required
documentation, see Acceptance Sample Rationales.)

Pass/Fail

1.

Was the assignment correctly identified as an audit in conformity with the ETA
audit policy as defined in the ESM?
Pass
Fail __

Was a pre-audit discussion, concerning the purpose of the audit, held with the employer
or an identified designated representative? (Was the name and title of the employer or
designated representative documented? If a representative was designated, was the name and
title of the designator documented?) (10 points)

Yes

2.

No __

Was an acceptable explanation documented as to how the auditor verified the existence
of the business? (e.g., audit performed at the employer's place of business, partnership
agreement, personal knowledge, business license, telephone directory, etc.) (5 points)

Yes

No __

3. Was an acceptable explanation documented as to how the auditor verified the ownership
of the business? (e.g., partnership agreements, articles of incorporation, corporation charter,
income tax returns, business license, verification with Secretary of State) (5 points)

Yes

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

ACCEPTANCE SAMPLE QUESTIONNAIRE

4.

Does the audit contain documentation to show that the following four payroll record tests
were performed: (25 points)
a.

b.

c.

d.

Verification of gross payroll posting system?
Yes

No __

Yes

No __

Yes

No __

Yes

No __

Reconciliation of total payroll to total wages?

Computation of total taxable payroll?

Reconciliation of total taxable payroll to total
reported taxable wages?

Note: You must answer "Yes" to a, b, c and d to score 25 points.

5.

Does the audit documentation indicate: (a) that the following employer records, if
available, were examined to search for misclassified workers and hidden wages, and (b)
the findings from the examinations conducted in the audit? (25 points)
a.

Were the following employer records, if available, examined:
(1)
(2)
(3)
(4)

Records of contract labor
Cash disbursements
Detailed general ledger
Miscellaneous reports and accounts
Yes

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FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

ACCEPTANCE SAMPLE QUESTIONNAIRE

b.

Did the audit contain the findings from the records examined:
(1)

If payment was not suspected to be wages or was examined elsewhere in
the audit, the audit must contain a checklist or summary Statement of
accounts reviewed and findings.

(2)

If payment was suspected, but found not to be wages, the audit must
contain the number of individuals examined, labor categories examined,
and explanation of evidence that payment does not constitute wages.

(3)

If payment was found to be wages, the audit must contain for each
individual: the amount paid, name of payee, total quarterly amount,
explanation of evidence and findings. A summary Statement that can be
traced to specific accounts, referencing other work papers can also be
used. Adjustment reports can act as supporting documents if each
individual discovered can be traced to the resulting changes in wages.
Yes

No __

Note: You must answer "Yes" to both a and b to score 25 points.

6.

Were four consecutive calendar quarters audited or was an acceptable explanation
documented when the audit is less than four quarters or expanded beyond four quarters?
(5 points)

Yes

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TAX PERFORMANCE SYSTEM
FIELD AUDIT

CHAPTER SEVEN

PROGRAM REVIEW

ACCEPTANCE SAMPLE QUESTIONNAIRE

7.

Was a post-audit discussion concerning the results of the audit held with the employer or
an identified designated representative, and documented in the field audit? (The name,
title, and telephone number of the individual involved should be recorded.) (10 points)

Yes

8.

If the audit resulted in the employer owing additional tax, did the auditor either collect it
and record the amount collected or document an acceptable explanation why the
collection was not accomplished? (5 points)
Yes

9.

No __

No

N/A __

If discrepancies or unreported wages and tax were found or a credit is established, was
the adjustment (monetary or non-monetary) posted in accordance with the State
requirements. If the audit is under appeal, adjustment reports should be made in
accordance with State policy. (10 points)

Yes

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No

N/A __

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TAX PERFORMANCE SYSTEM
Field Audit Sample Coding Sheet
State: _________
Period Covered: ______________
Sample Type: Acceptance
Expanded
Case
Number

Employer
Identification
Number

Is this an
audit?
Pass/Fail

1
(10)

Audits passing the initial "Is this an audit" are subject to scoring
Audits scoring 80 or more points are acceptable.

Date: ________________

2
(5)

3
(5)

4
(25)

5
(25)

Reviewer:____________________

6
(5)

7
(10)

8
(5)

9
(10)

Total
Points

Total Acceptable ______ of ______
Page ______ of ______

TAX PERFORMANCE SYSTEM

Field Audit
Sample Explanation Sheet

State: _____________________

Period Covered: _______________
Sample Type:

Case
Number

Employer
Identification Number

Date: ___________

Acceptance

Reviewer: _______________

Expanded

Explanation

Page _____ of _____