QUESTION 1: Field Audits, Item 47 (calendar
quarters audited) says "Do not include quarters
in which adjustments were made without auditing".
Does item 47 have to correlate to hours spent on
audit and to change audits (amounts over and under
reported)?
ANSWER: A calendar quarter to which an adjustment
was made but was not included in the formal scope
of the audit, cannot be counted as an audited quarter,
even though the adjustment was made as a result
of the audit. There is no set ratio of calendar
quarters audited to hours spent auditing or to
the number of change audits. For example:
If an audit was conducted on an employer's 1993
records which included verification of payroll
and a search for misclassified wages, the pre and
post-audit wages for these quarters would be included
on the 581 report. If an adjustment was made due
to a newly uncovered Christmas bonus paid in 1992,
but no search for misclassified wages was made
for that quarter, neither the 1992 quarter nor
the 1992 dollars should be included in Item 47
(calendar quarters audited), Items 48 and 49 (total
wages audited) or in Items 52-57 (amounts over
reported and under reported). The time spent to
find the 1992 Christmas bonus should not be included
in Item 51 (hours spent in auditing).
December 1994
QUESTION 2: If a field Auditor's supervisor
accompanies the Auditor, do you also count their
time in Item 51 (hours spent auditing)?
ANSWER: If the supervisor accompanies the
Auditor for reasons other than to actually conduct
the audit (observation, training, evaluation of
performance, etc.) then their time should not be
counted as time spent in auditing.
December 1994
QUESTION 3: At what point are audits considered
complete for counting purposes on the ETA 581?
According to our interpretation of RQC, audits
should not be included in the computed measures
count or in the Acceptance Sample universe until
everything is complete, including appeals hearing
and posting of any adjustments resulting from the
audit. Why must appeals be heard and adjustments
posted before the audit program can count the audits
for penetration and before the reviewer can examine
the case?
ANSWER: A field audit should be counted
on the ETA 581 and included in the RQC Acceptance
Sample after the Auditor has completed all work,
and it has been subject to whatever review the
SESA requires and adjustments are prepared. It
is not necessary for adjustments to be processed
nor the appeal to be heard prior to counting the
audit on the ETA 581 and in the Field Audit Acceptance
Sample.
If it is selected for an RQC review, the reviewer
should insure the necessary follow up is in progress,
such as the adjustments posted or the case referred
for appeal.
March 1995
QUESTION 4: What should drive tolerances
used to determine whether a field audit should
be extended? Difference in gross wages? Taxable
wages? Tax due? How much difference in any of these
areas should be established as the tolerance level
(e.g., 2%, 5%, 10%)?
ANSWER: See ESM Part V, Section 3671 Definition
of Tolerance, and ESM 3675B, extending the audit.
Tolerance is an area established by the individual
SESAs for their audit programs, and is based on
criteria established by the individual SESA. Due
to the vast differences in tax rates and taxable
wages among the States, no national tolerance level
nor methodology can be defined that would be applicable
to all SESAs.
March 1995
QUESTION 5: Does the definition of a large
employer refer to pre-audit figures or post-audit
figures?
ANSWER: The audit selection would be based
on the pre-audit figures of the year preceding
the year audited if based on the dollar amount
or on the reported wages of 100 or more workers
in the current or preceding year.
If after completion of the audit, it was found
that the taxable wages were over one million dollars
and/or the employer had 100 or more employees in
the year being counted as such on the 581 report.
Thus, either pre-audit or post-audit figures could
be considered correct.
March 1995
QUESTION 6: If while conducting an audit,
an Auditor finds workers and wages for another
State, should the Auditor conduct an audit which
includes those wages? Should the information be
shared with the other State? Which State counts
the audit? Both? Which State counts the change?
ANSWER: The Auditor should conduct the functions
required by ESM and RQC for the assignment to be
correctly classified as an audit for his/her SESA.
The identification by the Auditor of the correct
payroll for his/her specific SESA should be found
in the documentation of the audit. The audit as
well as any adjustments to their audited payroll
would be counted by the State performing the audit.
The information regarding the other State's reportable
wages should be noted in the body of the audit
and the information should be shared with the other
State based on the auditing SESA's field audit
policy and procedures on initiating out-of-state
contact.
March 1995
QUESTION 7: Large employer computerized
field audits are completed by a State's field Auditors
(a special team which works out of central office)
on behalf of other States as well as their own
State. Results of the audit are shared with the
other States as appropriate and the other State
accepts their findings just as if it had been done
by one of their own Auditors. Should these audits
be included in the universe of audits for the receiving
State?
ANSWER: As the audit was not completed by
a member of the staff of the receiving state, the
audit would not be counted as an audit in
the receiving State's universe. The adjustments
would be processed as needed, but the audit would
not be counted.
Please note that Joint Audits, where more than
one State's Auditors perform the audit together,
would be counted in each SESA's audit universe.
March 1995
QUESTION 8: What is the purpose of Item
51 (hours spent in auditing)? How is this information
used?
ANSWER: The number of hours spent auditing
was originally included on the report for budgetary
purposes (funding of "tax enforcement")
and was used as an indicator of the time needed
to conduct audits at a particular employer penetration
level. The average number of hours spent per audit
is a rough indicator of the quality of audits being
performed. It is unlikely that many "high
quality" audits are being conducted, if a
State's average time per audit is less than 1 hour
consistently from quarter to quarter. With the
new requirements of the revised audit policy and
implementation of RQC, it is expected that audit
hours will increase as the quality of audits improves.
December 1995
