Bars and restaurants - audittechnique guide

Internal Revenue Service
Market Segment Specialization Program
Bars and Restaurants
Audit Technique Guide (ATG)
NOTE: This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.
This material was designedspecifically for training purposes only. Under no circumstances should the contents be used or cited as sustaining a technical position.
The taxpayer names and addresses shown in this publication are hypothetical. They were chosen at random from a list of names of American colleges and universities as shown in Webster’s Dictionary or from a list of names of counties in the United States as listed inthe U.S. Government Printing Office Style Manual.
www.irs.gov
Training 3149-118 (11-2002)
Catalog Number 83849L

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v 3149-118
BARS AND RESTAURANTS
Table of Contents
Page
CHAPTER 1,INTRODUCTION
History of the Bars and Restaurants ES&TG................................................1-1
Overview of the Industry..............................................................................1-1
Method of Accounting..................................................................................1-4
Using the Bars and RestaurantsGuide..........................................................1-5
CHAPTER 2, GENERAL INFORMATION
Books and Records ......................................................................................2-1
Internal Controls...........................................................................................2-4
Point of Sales Systems (POS).......................................................................2-5
OperatingRatios...........................................................................................2-9
CHAPTER 3, INITIATING THE AUDIT
Pre-Audit Planning ─ IRM 4.10.2.6.1...........................................................3-1
Setting the Scope................................................................................3-1
Ratio and StatisticalAnalysis............................................................3-1
IRS Research......................................................................................3-3
Coordination with Employment Tax Group......................................3-3
Using the Intranet/Internet to Research..............................................3-3
Non-third Party Public Records Research..........................................3-3
Pre-audit CashT................................................................................3-5
Initial Taxpayer Contact and Information Document Request (IDR) ...........3-5
Initial Interview ─ IRM 4.10.3.2....................................................................3-5
Tour of the Business Premises ─ IRM 4.10.3.3.............................................3-9
Package Audit...............................................................................................3-10
CHAPTER 4, PROFIT AND LOSS STATEMENT
Examination of the Profit and Loss Statement..............................................4-1
Minimum Income Probes...............................................................................4-1
Additional Income Probes and Indirect Methods ─ IRM 4.10.4.6................4-3
SpecificItems methods of Determining Income ─ IRM 4.10.4.5.2..4-3
Bank Deposits Method.......................................................................4-5
Net Worth Method.............................................................................4-6
Percentage Markup Method of Determining Income ─
IRM2.4.6.6...................................................................................4-6...