Preaudit

AAA

DEFINITION of 'Preaudit'

An accounting practice used prior to the official examination of the accuracy of an organization's financial statements. This preliminary phase of an audit is used to establish the scope of the audit and any special areas of concern. It is also used to gather background information and to request needed documents, records and information. A preaudit may be conducted in the form of a written questionnaire that the auditor gives to the auditee.

BREAKING DOWN 'Preaudit'

A preaudit is also a phase in which an IRS agent examines a tax return that has been selected for audit. Prior to beginning the audit, the agent must check the statute of limitations for the return, review the return, determine the scope of the audit, establish contact with the taxpayer, make an audit appointment with the taxpayer, explain to the taxpayer his rights and get him to sign form 2848, Power of Attorney and Declaration of Representative.



RELATED TERMS
  1. Unqualified Opinion

    An independent auditor's judgment that a company's financial ...
  2. Form 2848: Power of Attorney and ...

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. Unqualified Audit

    Also known as a complete audit. An audit that has been performed ...
  4. Independent Auditor

    A certified public accountant who examines the financial records ...
  5. Audit

    1. An unbiased examination and evaluation of the financial statements ...
  6. Auditor's Report

    Recorded in the annual report, the auditor's report tests to ...
Related Articles
  1. Investing Basics

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  2. Taxes

    How To Appeal Your IRS Audit

    The auditor's review isn't always the last word. Many taxpayers who are audited can successfully appeal their audits and save thousands of dollars.
  3. Taxes

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  4. Personal Finance

    A Look At Accounting Careers

    More than just crunching numbers, this career blends detective work with trouble shooting.
  5. Retirement

    Avoid An Audit: 6 "Red Flags" You Should Know

    Don't make yourself a target - steer clear of these attention-grabbing tax-filing practices.
  6. Professionals

    An Inside Look At Internal Auditors

    Find out why these number crunchers are part of every chief officer's dream team.
  7. Professionals

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  8. Investing Basics

    What's Current Portion of Long-Term Debt?

    The current portion of long-term debt is the part of a company’s long-term debt that must be repaid within the next year.
  9. Economics

    Explaining Cost Control

    For a business, cost control entails managing and reducing expenses.
  10. Economics

    Explaining Accounting Conservatism

    Accounting conservatism is a principal that requires accounting rules be applied with high degrees of verification.
RELATED FAQS
  1. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  2. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>
  3. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>
  4. Do dividends go on the balance sheet?

    The only account recorded on the balance sheet, when dividends are declared and before they are paid out to a company's shareholders, ... Read Full Answer >>
  5. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  6. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!