Monday, January 23, 2012

One way of treating your auditors

The Last Boss

Years ago, I was the controller of a company with a very cooperative owner.    "Chet" had a pretty luxurious office with TV, video games, bar, lots of space including a private gym, and his own shower and bathroom.  He had also hired a very competent secretary by the name of Jane (and in those days, they were actually called "secretaries").  Truth be told, Jane pretty much ran the company.  Chet just went along for the ride.

By the way, the picture is not of Chet, but I thought this article could use a mildly relevant illustration.

Whenever we got word that the sales tax auditor (or any other enemy auditor) was coming, we'd tell Chet he had to go on the road for a couple of weeks.  His response was, "Got auditors coming, eh?  Great!  I've got to get out of here anyway.  Jane!  What customers should I go visit?"

So we would put the auditors in Chet's office and told them they'd have it for three weeks - until Chet returned.  And Jane continued in her role as secretary, but now she was the mother hen for the auditors instead of Chet.  And she did even more for them than she did for Chet.  She NEVER got Chet coffee, but she'd bring the auditors coffee, pop, snacks, make copies for them, etc.  She'd even order lunch in for them.  And she kept the door to their office closed so they'd have "privacy."  She would also "sssshhhhh" any conversations among the other executives that might be occurring outside of Chet's door so the auditors didn't hear anything embarrassing. If the auditors needed to go anywhere in the company she would escort them.  The auditors were isolated pretty effectively from the staff of the company.  Jane enjoyed her job as the auditor's "guard."

And the auditors lived in the lap of luxury for three weeks.  But ONLY three weeks.  They knew that, when Chet returned, they would be relocated to the dimly lit room in the sub-basement behind the furnace where we used to keep the asbestos.  They were motivated, in other words, to wrap it up.  

Just kidding...about the asbestos part.

We never knew exactly what they did for those three weeks, but they usually missed really important things that we worried about them catching.  One IRS auditor completely blew the LIFO inventory adjustment, for example.

If you don't know what that is, rest assured it was a big "estimate" on our part.  It's the kind of thing you REALLY don't want the auditors to ask questions about.

Every day, those auditors seemed to go home well rested. And that was important because we cared about the health of state and federal employees.

Whenever we put the auditors in Chet's office, we always had very fair, reasonable assessments.  And we never found the need to appeal.  Amazing.

This article was inspired by revisiting this one.  I've often talked about this story in seminars, but never wrote it up.  And touching up the old post convinced me to do this entry.

The Sales Tax Guy

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Anonymous said...

I worked for many years as the audit guy. Your treatment was rather common. One example, while at a PC business (think real big) I was placed in an empty office off the lobby. I had a phone and number for my contact person. I say contact person because the guy knew nothing about taxes. I give him a list and the next day he brought the stuff to me. If I asked a question, he would ask me to write it down and he would have a response the next day. Talk about controlling information. But I did have time each day to visit San Franscisco. I was gone for a long time.

Jim Frazier said...

Hilarious. Thanks for the contribution