Tag Archive | "audit"

RoadVantage Successfully Completes SSAE 16 (SOC 1) Type II Audit


AUSTIN – RoadVantage, the fastest-growing provider of F&I programs for the automotive industry, today announced the successful completion of its SSAE 16 (SOC 1) Type II audit.

After successfully completing the SSAE 16 Type I audit in December, RoadVantage sought the Type II audit to emphasize its dedication to best practices as the company continues its rapid growth. The third-party audit evaluated the execution of RoadVantage’s operational controls and critical procedures.

“The SSAE 16 (SOC 1) Type II audit is really the gold standard within the industry,” said Gary Pennington, Partner at SSAE 16 Professionals, LLP, the firm that conducted the audit. “The Type I audit evaluates the design of internal controls, while the Type II audit measures the operating effectiveness of those controls – how do those controls behave when put into action? This makes the Type II audit much more challenging to successfully complete.”

The audit undergone by RoadVantage was conducted in accordance with the AICPA SOC reporting standards by SSAE 16 Professionals, a full service accounting firm providing SSAE 16 (SOC 1) audits, SOC 2 audits, and other IT compliance audits.

“By successfully completing both the Type I and Type II audits, we demonstrate our ongoing commitment to excellence,” said Garret Lacour, CEO of RoadVantage. “Our customers can be assured that even with our rapid growth, our operational standards are best in class.”

About SSAE 16 (SOC 1) Reports 

SSAE 16 (SOC1) audits, which have effectively replaced SAS 70 reports, are in accordance with Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization. SOC 1 reports retain the original purpose of SAS 70 by providing a means of reporting on the system of internal control for purposes of complying with internal control over financial reporting. SOC 1 reports are restricted-use reports for the following areas:

  • Management of the service organization (the company who has the SOC 1 performed),
  • User entities of the service organization (service organization’s clients), and
  • The user entities’ financial auditors (user auditor). The report can assist the user entities’ financial auditors with laws and regulations such as the Sarbanes-Oxley Act. A SOC 1 enables the user auditor to perform risk assessment procedures, and if a Type II report is performed, to assess the risk of material misstatement of financial statement assertions affected by the service organization’s processing.

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Honda Starts Audit of U.S. Injury-and-Death Reporting


Honda Motor Co. asked a third party to determine whether the automaker underreported fatality and injury claims to the U.S. government, which is investigating air-bag failures with potentially deadly defects, reported Bloomberg.

The third-party audit began in September and Honda will soon share its findings with the National Highway Traffic Safety Administration, the Tokyo-based company said in an e-mailed statement. Honda disclosed the audit after The Center for Auto Safety, a watchdog group, said the company didn’t report at least two injury-and-death incidents to NHTSA and called for the U.S. Justice Department to conduct a criminal investigation.

Honda said it excluded verbal claims of fatalities and injuries in reports to NHTSA until last month, a practice it says accounted substantially for the fewer reported incidents compared with other automakers. The Center for Auto Safety said Honda’s failure to share the information hampered the U.S. government’s oversight and efforts to spot auto-defect patterns.

“The damage to their reputation could be very big,” Seiji Sugiura, an auto analyst at Tokai Tokyo Research Center, said by phone. Honda “should take responsible action, especially in the U.S., because it’s their most important market.”

The issues being raised center on Takata Corp. – a major supplier of air-bag inflators to Honda, Toyota Motor Corp. and Nissan Motor Co. – and how the car companies have responded to defects with the components. Honda is the biggest customer of Tokyo-based Takata and has said it’s called back 6 million vehicles for problems with air bags in nine recalls since 2008.

NHTSA Investigating

Regulators are in contact with Honda over its early-warning reporting to determine compliance, Karen Aldana, a spokeswoman for NHTSA, said in a statement. NHTSA has started an aggressive investigation into Takata air-bag failures and urged automakers to immediately recall vehicles with the highest risk.

NHTSA “will take appropriate action, including expanding the scope of the recall, if warranted,” Aldana said.

Honda said it has provided NHTSA detailed information relating to all known ruptures of Takata air-bag inflators. The company also said that current law does not require manufacturers to report verbal death-and-injury claims.

The company’s shares fell 3.5 percent as of 1:05 p.m. in Tokyo trading, while the Nikkei 225 Stock Average declined 1.9 percent.

Honda failed to notify NHTSA of several air-bag incidents that led to deaths and lawsuits, the Center for Auto Safety said in its letter yesterday to David Friedman, the agency’s deputy administrator. The Washington-based group cited a 2009 fatality and an August 2013 incident resulting in serious injury that weren’t included in Honda’s early warning reports.

Warning Reports

Automakers are required under a 2000 law to file quarterly reports to NHTSA about fatalities, injuries, lawsuits, warranty claims and customer complaints. The safety agency is supposed to analyze Early Warning Reports to spot trends suggestive of safety defects as soon as possible.

“The whole purpose is to get to major defects quicker,” Clarence Ditlow, executive director for the Center for Auto Safety, said yesterday in an interview. “You can’t protect the public if a company doesn’t turn over EWR reports.”

General Motors Co. (GM) reported 1,716 early warning injury-and-death claims to NHTSA last year, while Toyota logged 1,774, according to Ditlow’s group. Honda during that same period reported 28, the center said. In the first quarter of 2014, GM reported 505, Toyota 377 and Honda six, it said.

“It is our understanding that some manufacturers choose to include these types of verbal claims, and that these constitute the majority of the injury-and-death claims that they report to the NHTSA,” Honda’s U.S. unit said in the e-mailed statement. “We believe this practice accounts for the vast majority of the difference between the total number of injury-and-death claims reported by Honda compared to certain other manufacturers.”

Senators’ Letter

Democratic U.S. Senators Edward Markey of Massachusetts and Richard Blumenthal of Connecticut wrote to NHTSA yesterday expressing alarm over the agency’s use of limited “regional” recalls to address defects like the Takata air bags.

Noting the allegations by the Center for Auto Safety against Honda, Markey and Blumenthal asked NHTSA for additional information about how the agency ensures compliance with reporting requirements.

“We are concerned that NHTSA has not made real efforts to determine whether automakers have complied with this requirement to alert the public to potentially deadly defects,” they said in a statement.

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Audit Tips for Small Business Owners


There are several factors that can raise eyebrows at the IRS and trigger an audit, but knowledge is power, and understanding what agents are looking for in a return can help you avoid the hot seat.

The IRS website contains detailed information that taxpayers can tap into to eliminate–or at least minimize– the fear and dread that most people experience when dealing with the IRS. The site also provides the training tools used by auditors that can provide clues on what they are looking for in a return. Once you know agents’ mode of thinking, you can adequately prepare. In fact, if you own a small business, you want to organize your documentation so that you are always ready in the event of an audit.

The analysis of income plays a major role in tax returns, and techniques on how to document these figures properly to avoid any issues applies to every entity type: sole proprietorship, LLC, partnership, or corporation.

When it comes to income, auditors will first look at internal controls. The agent wants to know if you are keeping a decent set of books which tie out to your bank accounts and reflect your current lifestyle. To the IRS, a lack of internal controls signifies a potentially inaccurate reporting of income. Not having books or decent records is a major red flag. The auditor will dig in, possibly expanding the audit to cover every line item on the tax return or to include other open tax years. That can get expensive– not to mention stressful.

Tip No. 1: Maintain your books and records on computerized software and reconcile your bank accounts.

Auditors are trained to detect unreported bartering income. Remember that even if no money changes hands, you are required to report all bartering income, and the IRS knows this is an area of high noncompliance. It’s a tough economic climate right now, and many entrepreneurs turn to bartering to help protect cash flow.

Agents know to look for Forms 1099-B filed with the IRS, which report barter income, and they will look around your place of business for stickers or plaques that announce your participation in a bartering exchange club. They will check your website to see if you’ve listed a bartering exchange organization. While examining your books, agents will look for fees paid to bartering exchanges. And of course, an agent will straight up ask about your participation in bartering activities. Tell the truth, and take the knocks if you must. Remember, the agency has ways of finding out.

Tip No. 2: Make it a matter of course to record all bartering activity in your books at its fair market value.

Assigning income to other parties—such as another business that you own to reduce net operating losses in that company and avoid self-employment and income tax on the income can be a hairy issue. If the auditor goes through your contracts and finds one that appears to be unfulfilled (because the income was shifted), be ready to provide copies of tax returns for your other businesses for examination. Do I hear the popping sound of the can of worms being opened?

In the case of Lucas v. Earl, U.S.T.C. 496 (1930), the Supreme Court ruled that income is taxable to the one who earns it regardless of the fact that he may enter into a legally-binding agreement to have it paid to another.

Tip No.3: Don’t play games with the money. Keep your businesses separate from each other and record all income and expenses accordingly.

When looking at bank statements, an auditor will add up all the bank deposits for the year and compare them to your reported sales. If there is a discrepancy, the agent will want an explanation. Amounts deposited that exceed the amounts reported on a tax return will raise eyebrows, but there may be plausible explanations. You may have transferred personal funds into the business account to remedy a cash flow problem, or there may be deposits of other nontaxable income such as loan proceeds, or a cash gift from mom and dad.

Tip No. 4: Make sure you have an audit trail for all funds deposited to bank accounts that are not taxable income. Keep copies of cancelled checks of monies deposited with your bank statements to identify any transactions that do not represent sales.

When examining your income stream, the auditor will consider the doctrine of “Substance over Form.” In the case of Commissioner v. Court Holding Co., 324 U.S. 331 (1945) C.B. 58 it states, “How a transaction is taxed depends upon its substance. A transaction must be viewed as a whole, and each step from the beginning of negations to final consummation is relevant. The true nature of a transaction cannot be disguised by a mere outward appearance that exists solely to alter tax liabilities.”

Tip No. 5 – This again is an admonition to not play games with money. Every transaction you enter into should be for a purpose other than just making the tax code work to your benefit.

This article was written by Bonnie Lee and published in Foxbusiness.com.

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Small Businesses Hit Harder by Audits


Although tax day has come and gone, small businesses increasingly may face a follow-up by Uncle Sam, according to a new report by the Transactional Records Access Clearinghouse at Syracuse University.

Since 2005, the IRS has cut back the number of hours spent auditing large corporations with more than $250 million in assets by 33 percent, the report shows. However, that figure jumped 30 percent among small companies with fewer than $10 million in assets, reported AOL Small Business.

The study contends a “perverse quota system” may be driving the trend, causing agents to pursue audits among smaller companies with fewer assets, which typically take less time. “These quota pressures may well influence revenue agents and their managers when making their decisions about which business will be audited and which will not,” the study said.

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