Computer Assisted Audit Program
The Computer-Assisted Audit Program (CAAP) provides a method of gathering and receiving data in electronic format rather than paper. The use of CAAP benefits both the taxpayer and the Department of Revenue (Department) by building an environment that uses technology to ensure efficient use of government and taxpayer resources. This program is extremely helpful to taxpayers because using the CAAP for a sales and use tax audit allows the Department to review, analyze and verify taxpayer data more efficiently and effectively.
Most taxpayers maintain at least a portion of their accounting records electronically. CAAP allows for the electronic submission and review of this data, reducing the amount of paper output for the Field Compliance Bureau to conduct an audit. CAAP is adaptive to a wide variety of output files and data types. This eases the process of transferring taxpayer data to the Field Compliance Bureau.
Section 144.320 of the Missouri Revised Statutes requires all businesses to keep records as may be required for federal income tax purposes. Such records are subject to inspection by the Director of Revenue or his/her designated agents and employees.
If those records are maintained in an electronic format, they should be made available for inspection in electronic format.
The first stage of the process is a conference that will be scheduled to discuss audit objectives and approach. The following topics will be discussed:
- General audit procedures
- Computer-assisted audit procedures
- Sampling techniques, if applicable
- Specific data needed in electronic format
A data integrity check is performed to verify that the electronic data provided by the taxpayer to the Department is both complete and accurate. This is accomplished by reconciling the electronic data with the taxpayer's books and records.
Sampling is the selection and analysis of a finite number of items from a larger population to obtain information about that population. Related to electronic data, a sampling approach is typically used only when the entire population cannot be efficiently reviewed.
The Department employs various sampling approaches when using electronic data as a source. To ensure the taxpayer agrees with the sampling methodology, approach, sampling unit selection, etc., the taxpayer will be asked to sign an Audit Sample Agreement Form, which should be mutually agreeable to both the taxpayer and the Department.
As with any audit, following the completion of the sampling process, but prior to projecting the results, the Field Compliance Bureau auditor will share the preliminary results with the taxpayer. The taxpayer may be requested to obtain additional documentation or indicate agreement/disagreement with potentially taxable transactions identified by the auditor.
- Auditors spend less time at the taxpayer's place of business, making the audit process less disruptive to the taxpayer's business activities.
- Duplication of effort is eliminated related to data input. Transactions are reviewed as they were initially recorded in the taxpayer's business records.
- CAAP sampling methods result in more precise sampling results.
- CAAP results in increased efficiencies related to summarizing electronic data, sampling, and data conversions.
- In many instances, sampling is not necessary due to the efficiencies gained through electronic data access. This results in the taxpayer having full assurance related to the accuracy of audit results.
Related to the confidentiality of data, Missouri law specifically prohibits taxpayer data from being used for purposes other than its intended use.
Section 32.057 of the Missouri Revised Statutes makes it a class D felony for any current or former Department employee to make known, in any manner, to permit the inspection or use of, or to divulge to anyone, any information received in the conduct of an audit, except as specifically authorized by law. In addition to the aforementioned criminal penalties provided by law, the Department has set policies regarding confidentiality. Violations of these policies can result in employee discipline, up to and including termination.
Related to the security of data, all auditors maintain electronic records on secured workstations. Computer hard drives are encrypted and password protected. Computers are physically secured, when not attended, by locking security cables.
Confidentiality and security are of utmost importance to the Department.