United States General Accounting Office

GAO Report to the Commissioner, Internal

Revenue Service

April 1997 TAX

ADMINISTRATION

Factors Affecting

Results from Audits of

Large Corporations

GAO/GGD-97-62

GAO United States

General Accounting Office

Washington, D.C. 20548

General Government Division

B-261745 

April 17, 1997

The Honorable Margaret Milner Richardson

Commissioner of Internal Revenue

Dear Ms. Richardson:

This report focuses on the second phase of our work on the Internal

Revenue Service’s (IRS) program to audit the tax returns of about 45,000

large corporations that are not in the Coordinated Examination Program

(CEP)—IRS’ program to audit the returns from the largest and most complex

corporations.1

 In the first phase, in a comparison of data from fiscal years

1988 and 1994, we found that IRS had invested additional time in these

audits of large corporations but revenue agents recommended fewer

additional taxes per audit hour.2

 For these years, IRS ultimately assessed

27 percent of the recommended taxes against these corporations.3

This assessment rate and these audit results raise issues about the

productivity of such audits. Initiated under our basic legislative authority,

this review identified factors that contributed to the assessment rate and

audit results.

Background For audit purposes, IRS splits large corporations (those reporting

$10 million or more in gross assets) into two groups. Of the 46,700 large

corporations in 1994, IRS placed about 1,700 corporations, usually

exceeding $250 million in assets, into CEP. IRS audits the large corporations

not in CEP (hereafter referred to as “large corporations”) under the

Examination Division’s general program.4

 The Examination Division audits

tax returns to determine whether taxpayers paid the correct amount of

tax.

As discussed later in detail, IRS audit staff are to take various steps before

auditing a return. First, the staff must classify and select a return for audit.

IRS classifies returns to highlight tax issues (e.g., income, deductions,

1

We identified factors affecting CEP audits and appeals in an earlier report. See Tax Administration:

Compliance Measures and Audits of Large Corporations Need Improvement (GAO/GGD-94-70, Sept. 1,

1994).

2

Tax Administration: Audit Trends and Taxes Assessed on Large Corporations (GAO/GGD-96-6, Oct.13,

1995).

3

The assessment rate includes the amount of recommended taxes that the large corporations agreed to

pay at the end of the audit as well as those amounts sustained after any appeal.

4

In fiscal year 1994, IRS audited about 10,400, or 24 percent, of the large corporations.

Page 1 GAO/GGD-97-62 Audits of Large Corporations
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credits) that should be audited. Then, an IRS revenue agent is to plan how

to audit such issues and collect information from the large corporation, as

needed. If the corporation does not provide all requested information in a

reasonable period without a valid excuse, IRS may issue a legal summons

to compel the taxpayer to comply. The Department of Justice works with

IRS to enforce the summons in court.

For each audit issue, if the revenue agent views this information as

insufficient support for the position taken on the return, the agent is to

recommend adjustments to the return and compute a corrected tax

liability. On the other hand, if the information supports the return filed by

the large corporation, the agent is to recommend no tax change. The

revenue agent presents the audit results to the large corporation officials,

who may either agree or disagree. If the large corporation agrees, any

additional tax that the revenue agent recommended becomes assessed. If

the large corporation disagrees, it may file a protest with IRS’ Office of

Appeals, which is tasked with settling tax disputes without litigation on

the basis of what is fair to the government and the taxpayer.

An appeals officer is to evaluate the relative strengths of the government’s

and taxpayer’s positions by reviewing the facts, including additional

information provided by the taxpayer, pertinent court decisions, and the

results of informal conferences with the taxpayer. To settle a tax dispute,

an appeals officer can consider the hazards of litigation.5

 The officer is

then to negotiate mutual concessions in an attempt to arrive at a

settlement. If a case is settled, any additional tax is assessed and the

appeals officer is to prepare an Appeals case memorandum, or written

summary, of how the case was handled. The summary is to include the

issues raised; pertinent facts; applicable regulations, rulings, and court

decisions; and the merits and hazards of litigation of each side. If a case is

not settled, Appeals is required to issue a notice of deficiency and the

taxpayer has 90 days to file a petition with the Tax Court. Even after a case

is docketed in court, IRS District Counsel, by itself or by reengaging

Appeals, may attempt to settle the case prior to trial.

IRS data showed that in fiscal year 1992, Examination sent 2,235 large

corporate cases to Appeals. As of late fiscal year 1995, Appeals had settled

about 1,800 of those cases. Of those not settled by Appeals, three were

settled by District Counsel, two were settled by trial, and the remainder

were still open in Appeals.

5

Hazards of litigation include the probability of a taxpayer prevailing in court.

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Results in Brief IRS is investing more in audits of large corporations and getting less in

return. IRS invested 25 percent more hours in audits of large corporations

during 1994 than it did in 1988. Yet it recommended 23 percent less

additional tax per hour and doubled the rate at which it closed audits with

no tax changes (i.e., no-change rate). During this 7-year period, IRS

assessed 27 percent of the additional taxes revenue agents recommended.

Our analysis of questionnaire responses and interviews of officials from

across IRS identified at least four factors that had a negative effect on both

the audit results and the assessment rate.

First, the complexity and vagueness of the tax code caused legitimate

differences in interpretation between IRS and corporations over the correct

tax liability. This complexity and vagueness made it difficult for IRS

revenue agents to find the necessary evidence to clearly support any

additional recommended taxes without investing a lot of audit hours. Such

recommended taxes, lacking clear evidence, were less likely to survive the

Appeals process and be assessed. Also, complex and vague tax laws

increased the tax burden on large corporations by increasing their

uncertainty about what actions they had to take to comply with the tax

code.

Second, Examination and Appeals used different performance measures.

Examination focused on the amount of additional taxes recommended and

time spent to do the audit and Appeals focused on whether they settled tax

disputes without litigation and the time spent to do so. This difference in

measures resulted in a lower assessment rate. Revenue agents may

recommend as much tax as possible in some cases without developing

sufficient evidence, particularly with vague and complex tax laws. Appeals

officers may settle some disputes without litigation even when the

recommended taxes have some justifiable basis under the tax laws.

Third, revenue agents had difficulty developing sufficient support to

recommend tax changes that could survive an appeal due to various

aspects in the audit process. These revenue agents worked alone on

complex audits without much assistance from district counsel or their

group managers, who tended to be responsible for managing all types of

audits—not just large corporate audits. Further, audit staff had a limited

basis on which to classify and select returns that had the most audit

potential. Unlike the approaches for selecting other corporate returns, IRS’

approach for these large corporate returns gave a great deal of discretion

to audit staff. However, the staff had little information on previously

audited corporations or industry issues to serve as guideposts. Finally, the

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agents had difficulty obtaining information in a timely manner from large

corporations. In sum, all of these aspects can contribute to a reduction in

the amount of taxes recommended per audit hour and, with the possible

exception of the problems in selecting returns, can affect the assessment

rate.

Fourth, Appeals usually did not share with Examination information that

could be used to educate revenue agents. Appeals’ staff shared new

information submitted by large corporations in less than half of our

sample cases because of the time pressures to settle cases or their

uncertainty in defining “significant.” Appeals is required to share only

significant new information with Examination. Without the new

information, revenue agents have a harder time understanding the

rationale(s) Appeals used in resolving a dispute. Even if Appeals did share

information, revenue agents did not always have time to review the new

information due to time pressures to do other audits. Further, although

Appeals usually shared the final settlement on disputed issues,

Examination management often did not distribute those results to the

revenue agents. Such feedback can help agents decide whether and how to

audit similar issues in the future with better support for any recommended

taxes.

Objectives, Scope,

and Methodology

Our objective was to determine what factors affected the results of

auditing large corporations as well as the amount of additional taxes

recommended in these audits that are ultimately assessed. To accomplish

our objective, we used two methodologies. First, we sent questionnaires to

IRS revenue agents, IRS appeals officers, and corporate taxpayers

associated with a nationally representative sample of audits in which a

large corporation agreed with the additional recommended taxes at the

end of either the audit or appeals processes during fiscal year 1994.6

 To

focus on larger audits, we restricted this questionnaire study to the

universe of large corporate audits with $75,000 or more in recommended

additional taxes and concentrated about one-third of the sample in a

stratum with recommended taxes of $1 million or more. Our sample of 500

included about $2.3 billion of the $2.6 billion in recommended additional

taxes and $648 million of the $810 million in taxes assessed from the 1,266

large corporate audits in our universe. Appendix I provides a detailed

description of our sample selection methodology.

6

We chose fiscal year 1994 because it was the most recent year for which data were available on such

closed audits.

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We also sent a more general questionnaire to IRS group managers because,

being responsible for many types of audits, they were not as likely as the

above respondents to recall information about specific audits of large

corporations. We randomly sampled group managers nationwide who had

large corporate audits in their inventories as of August 1995. Questionnaire

results for revenue agents, group managers, and appeals officers are

presented in appendices II through IV, respectively. Because the

questionnaires were sent to a sample rather than all members of their

respective universes, all of the sample results are subject to sampling

error. Unless otherwise noted, all estimates presented in this report have a

95 percent confidence interval of less than plus or minus 10 percent.

Questionnaire results for the large corporations are not included because

of a low response rate that did not allow us to develop estimates.

Second, we obtained input from various IRS staff. We visited IRS’ National

Office, its 4 regional offices, and 7 of its 33 district and appeals offices to

interview key officials. During the design phase of our review, we visited

three additional districts and two additional appeals offices. In the

National Office, we contacted officials in the Examination Division,

National Appeals Office, and the Strategic Planning Division. In

conjunction with our site visits, we interviewed selected Appeals, District

Counsel, and Examination officials to obtain their views. Appendix V lists

all locations visited and the officials interviewed at each location. In

addition, we asked the Examination Chiefs in all 33 IRS district offices

nationwide and Appeals Chiefs in all 33 appeals offices nationwide to give

us their written comments on certain factors related to these large

corporate audits. We received responses from 31 (94 percent) of the

Examination Chiefs and 30 (91 percent) of the Appeals Chiefs. Their views

are incorporated throughout this report.

We obtained oral comments on a draft of our report from IRS and the Tax

Executives Institute (TEI).7

 We discuss such comments and our evaluation

of them at the end of this letter. Overall, we conducted our work at IRS’

National Office, 4 regional offices, 10 of the 33 district offices, and 9 of the

33 appeals offices. In addition, we used questionnaires received from all of

IRS’ 33 district offices. We also asked Examination Chiefs and Appeals

Chiefs nationwide to give us their comments on factors related to these

large corporate audits. We did our work from May 1995 to November 1996

in accordance with generally accepted government auditing standards.

7

TEI represents about 3,600 of the largest corporations, including most CEP corporations.

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Recent Statistics

Raise Issues About

Audits of Large

Corporations

Our 1995 report on large corporate audit trends provided statistics on IRS

audits of large corporations between fiscal years 1988 and 1994. These

statistics covered the audit results and assessment rate over this 7-year

period. Neither we nor IRS knows what the assessment rate should be, but

these statistics indicate that IRS has been investing a lot of time and money

recommending additional taxes that do not get assessed.

For example, in a comparison of data for 1988 and 1994, we found that IRS

invested more resources in large corporate audits but recommended less

additional tax per hour. IRS spent 25 percent more hours and audited only

3 percent more returns. Even so, the amount of taxes recommended (in

constant dollars) dropped 23 percent per audit hour and 7 percent per

audited return. In addition, IRS’ no-change rate doubled from 8 percent to

16 percent.

Further, for the 7-year period, we computed that IRS assessed, on average,

27 percent of the additional taxes that IRS revenue agents recommended in

these audits. The assessment rate includes the amount of recommended

taxes that the large corporations agreed to pay at the end of the audit as

well as those amounts sustained after any appeal. Over the 7 years, large

corporations appealed between 66 and 85 percent of the additional taxes

recommended and agreed to pay the rest. Since 1990, corporate taxpayers

have been appealing a lower percentage of the recommended taxes and

agreeing to a higher percentage.

Factors Affecting

Assessment Rate and

Audit Results

We identified four factors that affected the assessment rate and/or audit

results, such as the lower recommended taxes per audit hour in 1994

compared to 1988. Although the exact impact is unknown, each factor can

affect both the rate and results. For example, three of the four

factors—complex tax laws, conflicting performance measures between

Examination and Appeals, and limited coordination between these two IRS

functions—can produce a lower assessment rate.

As for lower audit results, the three factors can each have a different

impact. Complex laws cause IRS’ audits to be very time consuming, which

can lower the amount of recommended taxes per hour. Although

Examination’s performance measures would encourage higher amounts of

recommended tax, Appeals measures would not be as likely to affect the

audit results. Limited coordination between Appeals and Examination was

unlikely to affect the audit results being disputed by corporations because

the audits had already been done. On the other hand, future audit results

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on similar tax issues were likely to be reduced when revenue agents did

not receive feedback on which disputed issues were conceded and why;

such knowledge could enhance future audits.

The fourth factor entailed a number of aspects of an audit that could

reduce the taxes recommended per audit hour or the assessment rate.

Because revenue agents generally worked alone without much assistance

from counsel or their management, they needed more time to develop

enough support to recommend taxes that could be assessed after an

appeal. These agents also did not have a sufficient basis for selecting

corporate tax returns with potential for significant tax changes. Generally,

audits of returns with low potential were more likely to result in

recommendations for little or no tax change and were less likely to be

appealed. Thus, these audits would generally have little effect on the

assessment rate. However, when a revenue agent tried to recommend

taxes without sufficient support, such recommended taxes would not

likely be sustained in Appeals, and the assessment rate would be lower.

The following sections discuss each of these four factors in more detail.

Tax Law Complicates IRS’

Audits of Large

Corporations

IRS and large corporate taxpayers can have legitimate differences over how

tax laws should be interpreted. We found that complex, ambiguous laws

have created opportunities for both large corporations and IRS to interpret

the tax laws differently. This discretion, in turn, increased the likelihood of

tax disputes. Without clear tax laws, resolution of these disputes can get

complicated and can ultimately depend on the negotiating skills of the IRS

and corporate representatives. Because the corporate representatives have

usually prevailed in Appeals or the courts, recommended additional taxes

have tended not to be assessed.

We have previously reported that the federal tax laws are complex,

difficult to understand, and in some cases indecipherable.8

 Some of the

large corporate officials who responded to our survey indicated that a

major reason for disputing recommended taxes was revenue agents’

interpretation of tax laws. We estimate that revenue agents judged that

about 86 percent of the corporate tax disputes were due to different

interpretations of the tax laws.9

 Appeals officers in our universe cited the

8

Tax System Burden: Tax Compliance Burden Faced by Business Taxpayers (GAO/T-GGD-95-42,

Dec. 9, 1994).

9

Because the revenue agent and appeals officer questionnaires pertain to a sample of tax returns,

rather than to all returns, all results are subject to sampling error. Unless otherwise noted, all

estimates presented in this report have a 95 percent confidence interval of less than plus or minus

10 percent.

Page 7 GAO/GGD-97-62 Audits of Large Corporations
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hazards of litigation as the primary reason for resolving these interpretive

differences in favor of the corporations for an estimated 56 percent of the

additional taxes being appealed.10 The National Director of Appeals told us

in a letter that these audits often raise issues involving substantial doubt or

variances of opinion because these issues are complex and not definitively

answered by litigation.

The complex tax laws also affected IRS’ ability to conduct audits, according

to 21 of the 33 Examination Chiefs and 27 of the 33 Appeals Chiefs

nationwide. Such complexity, in combination with the broad scope of the

tax laws, made it difficult for IRS to ensure that its revenue agents stayed

current in their tax law knowledge and for large corporations to comply

with the tax laws.

Our interviews of Examination, Appeals, and Counsel officials at the

national and field levels showed a consistent belief that IRS’ system created

little risk for corporations in appealing the recommended taxes. In a letter

to us, the National Director of Appeals wrote:

“Taxpayers are aware of the difficulty of determining with exactness the liability that they

have. They are also aware that the courts cannot resolve all disputes arising out of the audit

process. Therefore, the Service must pursue the administrative resolution of these cases

whenever possible. The fact that the Service is highly motivated to resolve cases without

litigation means that compromises on difficult and controversial issues will take place.

Knowing this, taxpayers naturally take advantage of the process to dispute those issues on

which some doubt exists.”

To help resolve problems with tax law complexity and recurring issues in

CEP audits, our 1994 report recommended that IRS should more strongly

propose changes to the tax laws.11 IRS agreed and has established a work

group to evaluate ways to implement this recommendation. To the extent

that IRS is successful in getting Congress to simplify the various complex

tax issues, large corporations are likely to benefit as well as IRS.

Differing Measures in

Examination and Appeals

May Have Reduced the

Assessment Rate

IRS’ overall mission is to collect the proper amount of taxes in a manner

that is efficient and fair and promotes public confidence. The Examination

and Appeals functions also have important missions that should contribute

to IRS’ overall mission. Revenue agents are charged with protecting the

government’s interest in receiving the proper amount of tax. They are

10The 95 percent confidence interval (plus or minus 32 percent) ranges from 24 to 86 percent.

11GAO/GGD-94-70, Sept. 1, 1994.

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instructed to make their audit recommendations without deviating from

IRS’ legal positions or considering the hazards of litigation (i.e., the chance

of losing in court). On the other hand, appeals officers are charged with

resolving tax controversies without litigation to the extent possible while

being fair and impartial to both the government and the taxpayer. They are

instructed to consider the hazards of litigation and may concede the

recommended taxes in part or in whole on that basis.

Performance measures typically move a function toward desired ends

within a mission. In doing so, the performance measures within the two

functions reflect their respective missions and may not encourage the

functions to work together effectively to accomplish IRS’ overall mission.

For example, Examination has traditionally focused on measuring the

amount of additional taxes recommended per audit and per audit hour. On

the other hand, Appeals has focused on measuring the number of tax

disputes settled as quickly as possible without litigation. These different

measures have the potential to lead to a lower assessment rate. The audit

measures may encourage revenue agents to propose tax adjustments

regardless of whether they can be sustained on appeal and discourage

agents from fully developing issues because of time pressures to close the

audits. Appeals’ measures may encourage appeals officers to settle more

cases in less time even when some of the recommended taxes have a

justifiable basis under vague or complex tax laws. As a result, a high

proportion of recommended taxes may not be assessed, but Examination

could claim success for recommending high amounts of taxes and Appeals

could claim success for settling the case without litigation.

In our 1994 CEP report, we reported a similar situation for CEP audits and

recommended that IRS add an IRS-wide measure, such as the collection

rate, to the functional measures. Although IRS disagreed with this

recommendation when commenting on a draft of the CEP report, IRS

officials subsequently told us they plan to implement such an IRS-wide

measure in some form during fiscal year 1998. Such a measure could

similarly be applied to various types of audits, including audits of other

large corporations.

An IRS-wide measure such as the collection and/or assessment rate could

encourage IRS functions to work together to accomplish IRS’ overall

mission of collecting the proper amount of tax. National Office

Examination and Appeals officials expressed concerns about possible

unintended effects from creating such a measure. For example, they said

an overall IRS measure such as the assessment rate could encourage

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revenue agents to avoid raising difficult audit issues or appeals officers to

settle disputes just to drive up the assessment rate. However, this measure

of the tax outcomes also would be likely to encourage revenue agents to

more fully develop audit issues that could be sustained if appealed.12 As

discussed later, such a measure also could encourage appeals officers to

coordinate with Examination while still remaining impartial and

independent in settling tax disputes.

As measures are emphasized over time, they become ingrained, making

changes very difficult. At every location we visited, we heard about the

driving force of existing measures from Examination or Appeals officials

and the difficulty of changing or adding to them. These officials noted that

as new measures are introduced, the culture of the organization will resist

change and cling to the past.

Many Examination and Appeals managers we contacted also expressed

concerns over using an assessment rate as a measure for the large

corporate program. In part, they pointed to impurities in IRS’ databases

that do not allow them to separate audit actions from nonaudit actions,

such as claims or net operating losses. IRS has been developing a new

database to help identify these problems and their impacts on the revenue

collected due to audits and other enforcement efforts.

One case in our sample epitomizes the concerns about the assessment rate

being skewed by nonaudit actions. In this case, the revenue agent

recommended several hundred million dollars in additional taxes. Appeals

sustained 100 percent of the issues and the taxes recommended by the

revenue agent. However, the large corporation submitted additional

information as well as a net operating loss and other claims during the

Appeals process. Appeals accepted and approved these losses and claims.

The losses and claims almost completely offset the additional taxes

recommended by the revenue agent. As a result, about 1 percent of the

recommended taxes was assessed. Until the databases account for them,

nonaudit actions that are considered during the Appeals process will

continue to overstate or understate the rate at which taxes recommended

in audits get assessed.

On the other hand, of the 40 regional and district officials we interviewed,

14 told us they supported using the assessment rate. One Appeals Chief

told us “The measurement standards would be more appropriately based

12Given Examination’s mission and the complex tax laws, revenue agents still will raise some issues

that are unlikely to be sustained upon appeal.

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on dollars ultimately assessed and collected.” In addition, at least one

official from each function—Appeals, Counsel, and Examination—in the

four regions told us that both Examination and Appeals should be

accountable for the assessment rate. Further, 7 of 33 Chiefs of

Examination said they already used a cross-functional measure, such as

the amount of additional taxes recommended that gets assessed, as an

additional way to evaluate audit effectiveness.

Audit Circumstances

Hindered Revenue Agents

From Developing

Recommended Taxes That

Could Be Sustained

Audits of these large corporations can be complex and technical but are

generally done by a single revenue agent. Although they worked alone,

these revenue agents received little assistance from district counsel or

their group managers. Also, IRS’ approach for classifying and selecting

these large corporate returns did not help ensure that revenue agents

spent their audit time on the most noncompliant returns. Finally, the

agents had difficulty obtaining information from the large corporations. In

combination, these circumstances made it difficult for revenue agents to

recommend taxes that had enough support to be assessed without

investing a lot of time.

Revenue Agents’ Corporate

Audit Experience and Training

Limited

IRS officials said the level of large corporate auditing experience for

revenue agents was not as high as they would like it to be. For the large

corporations in our study, the average return was audited by a single

revenue agent with about 8.5 years of corporate auditing experience.13 IRS

has lost about 1,800 experienced revenue agents over the past 3 years. IRS

National Office Examination officials as well as regional and district

officials interviewed noted that if IRS continues to lose its senior revenue

agents without being able to replace them, corporate audits will become

less productive.14 Furthermore, these agents could not easily develop

corporate expertise because they generally conducted many other types of

audits, such as those of partnerships and individuals.

Given the level of experience of these revenue agents and the complexity

of the tax law, training in corporate income tax practices and the tax laws

is important. In this regard, the revenue agents in an estimated 38 percent

of the audits in our study population believed that they needed, but had

13For comparison, CEP revenue agents averaged about 18 years of corporate auditing experience.

Unlike revenue agents conducting large corporate audits, CEP revenue agents also tended to

continually audit CEP corporations. Further, CEP revenue agents were assisted by other revenue

agents and specialists, including counsel. An on-site team coordinator directed the work of the agents

and reported to a CEP case manager, who usually oversaw several audits.

14According to a National Office official, IRS compliance staffing, including revenue agents, is expected

to decrease further during fiscal year 1997.

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not received, training that would have improved their ability to conduct

their audits. A common need cited was for more industry-related training.

Further, 25 of the 33 Examination Chiefs nationwide indicated that

additional training in specific industries would enhance audits of complex,

technical issues. A regional task force cited a need for additional training

so revenue agents could become more proficient in recognizing and

developing corporate issues.15 In February 1997, National Office

Examination officials told us they were developing a specific course that

will be used to train all revenue agents assigned to large corporate audits.

To help guide revenue agents doing large corporate audits, they also

planned to have audit criteria and procedures in place by the end of

calendar year 1998.

However, six Examination Chiefs pointed out the difficulty in providing

additional training when training funds have been diverted to other areas

because of budget limitations. For example, one Examination Chief told us

that for fiscal year 1996 the training budget was cut so severely that

Examination could not conduct continuing professional education for

revenue agents.16 National Office Examination officials told us during

November 1996 that IRS added $10 million to fiscal year 1997 training funds

across IRS, of which Examination received $1.4 million. According to one

of the officials, these funds should help Examination provide most, but not

all, of the basic continuing professional education training to its revenue

agents. Moreover, this official said funding for training is unlikely to

improve for fiscal year 1998 under the current budget environment.

Limited Counsel and

Managerial Assistance

Working alone on these corporate audits, revenue agents may need

assistance in planning and developing their audits. However, we found

that revenue agents usually did not request assistance from district

counsel or their group managers on planning and doing the audits.

Revenue agents for most of the 1,266 audits in our study population said

they did not request any legal assistance on matters of tax law or overall

issue development. We estimate that revenue agents reported requesting

assistance from the Office of District Counsel for about 14 percent of the

audits, and from the Office of Chief Counsel for about 8 percent of the

audits. However, for an estimated 55 percent of those audits in which

revenue agents requested assistance, they judged that such assistance had

a positive or very positive effect on their ability to obtain the taxpayers’

15The Western Region Corporate Results Task Force Report, dated March 1995.

16The purpose of continuing professional education is to provide revenue agents with the current

knowledge and skills needed to successfully conduct audits.

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agreement.17 Appeals officers consulted with district counsel during

resolution of an estimated 20 percent of the most significant issues raised

by revenue agents. For about half of these consultations, the appeals

officers indicated that District Counsel helped them to resolve the disputes

to a great or very great extent.

Our interviews with district office officials identified a major reason for

infrequent requests for legal assistance. These officials were concerned

about revenue agents and appeals officers not receiving the assistance in a

timely manner. Counsel officials in the four districts we visited

acknowledged that responding to requests for formal legal assistance can

be time-consuming. However, these officials told us they could help

improve the effectiveness of the large corporation audits by assisting the

revenue agent in developing audit issues and obtaining requested

information. They believed that such involvement could be justified and

helpful. In February 1997, National Office Examination officials told us

that Counsel involvement in CEP cases is working well and support looking

for ways to increase Counsel’s involvement in the large corporate cases.

However, Counsel officials cautioned that increased involvement would

have to be on a selective and informal basis due to staffing constraints.18

Less than half of the revenue agents in our universe indicated their group

managers were involved in identifying audit issues, discussing complex

audit issues, obtaining information from the taxpayer, or resolving

disputed issues. In well over half of those audits in which revenue agents

indicated their managers were involved, the revenue agents indicated that

such involvement helped them. For example, we estimated that in 207 of

the audits in our population, revenue agents indicated that their group

managers were involved in obtaining requested information from

taxpayers; in an estimated 83 percent of those audits, the revenue agents

viewed such involvement as either very positive or somewhat positive.

Examination officials and the regional task force report provided insights

on why managers were not more frequently involved in agents’ audits. For

example, they said most group managers did not have sufficient

experience or time to substantially assist revenue agents. Examination

officials from the districts we visited told us that group managers were

responsible for many revenue agents and other auditors who audit a range

of tax entities, from individual returns through complex corporate returns,

17The 95 percent confidence interval (plus or minus 15 percent) ranges from 40 to 70 percent.

18District Counsel officials said they can provide informal assistance more quickly at a lower cost

compared to formal assistance. They did not provide data on the differences.

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that involve different tax rules and issues. Officials said that group

managers tended to focus their attention on newer staff and administrative

duties. They said that as a result, revenue agents were left to conduct

these corporate audits with minimal managerial involvement, and group

managers lost the opportunity to develop their corporate audit experience.

Both the Examination officials and the regional task force report

concluded that these large corporate audits were more effective when

group managers with corporate audit experience were actively involved.

For example, 20 of the Examination Chiefs nationwide indicated that

group manager involvement was crucial to the success of these audits.

To increase managerial involvement and audit effectiveness, four districts

we visited had recently created groups of existing revenue agents that

specialized in large corporate audits. Managers with extensive corporate

auditing experience led these groups to help their agents get assistance in

selecting, planning, and doing audits. District officials believed that these

groups, although fairly new, have improved the effectiveness of large

corporate audits because, in part, of the focus and assistance of group

managers.

IRS’ National Office has not yet issued any uniform guidance on how to

measure the success of these groups. Accordingly, not all districts were

consistently measuring the impacts; some were focusing on different audit

results (e.g., recommended taxes per hour versus no-change rate).

National Office Examination officials told us that they would like to learn

more about the impacts of these specialized groups across the districts

that had created them.

In evaluating these groups, it is important to recognize that some districts

may not have enough corporate workload or revenue agents to justify

these specialized groups. That is, such districts may wish to maintain

flexibility in using revenue agents on other than large corporate audits. At

least one Examination Chief was concerned about the potential impacts

on audit results in the short term. Even so, officials in these districts

believed that these specialized groups will ultimately yield better large

corporate audit results, cancelling out any initial decline in the results.

And, if the districts who were experimenting with such groups maintain a

similar level of investment in large corporate audits, shifting the agents

into specialized groups would not necessarily increase IRS’ costs or reduce

resources for other types of audits.

Page 14 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

Inconsistent Approach Among

Districts for Selecting

Corporate Returns for Audit

Compared to CEP tax returns, the approach for selecting these large

corporate returns was more subjective and varied. To determine which

large corporations to select for CEP, IRS scores corporate tax returns on

specific criteria, such as corporate structure, assets, and income. IRS does

not have a consistent approach or criteria for classifying and selecting tax

returns for large corporations not in CEP. The approach and criteria varied

by district.

In general, revenue agents and/or their group managers selected the

returns to audit, depending on the IRS district. Many districts charged

revenue agents with both classifying and selecting issues for audit, and

some districts had other auditors do the initial selection and classification.

Some districts relied on service center staff to classify large corporate

returns, using criteria provided by that district, or subjectively without

using any such criteria before sending the selected returns to the district.

In sum, our analysis of questionnaire responses and our interviews with IRS

officials showed that the IRS staff doing the selection and classification had

to ultimately rely on their experience and judgment about audit potential.

They had limited criteria and little information on (1) any previous audits

of the large corporation or (2) overall large corporate audit results by

issue and industry to guide their decisions. Some of these staff may be

sufficiently experienced to find returns that would be productive to audit.

However, the audit results in fiscal year 1994 showed that more returns

were audited without any recommended tax changes or with lower

amounts of recommended tax per audit hour than in fiscal year 1988.

National Office Examination officials have expressed similar concerns

about their selection and classification system for large corporate audits.

They established a task force to develop a more structured system, but

budget constraints have stalled the task force’s efforts. In lieu of the task

force, the National Office is testing the benefits of providing additional

information on a corporation, such as Securities and Exchange

Commission (SEC) reports, to the revenue agent reviewing the corporate

return. Examination is also testing potential improvements to the

classification system; none of the tests are far enough along to have

useable results. Selected IRS districts are testing classification of returns by

market segment.19

Also, IRS is developing the Examination Operational Automated Database

in an attempt to capture audit results by issue and industry. Examination

19A market segment is a specific group of taxpayers that share certain characteristics and behaviors.

Page 15 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

officials believe that this database could be used to enhance any selection

and classification system by providing feedback on tax issues (e.g.,

unreported gross receipts, overstated travel expenses) by industry (e.g.,

manufacturing, wholesale trade) that have proven to be productive to

audit. That is, IRS could identify issues and industries in which audits

generated more recommended taxes per audit hour. By tracking such

audit results, Examination officials believed that this database will be

particularly helpful in classifying audit issues. These officials said IRS

already had most of the necessary hardware and software. They estimated

that enhancements in fiscal year 1997 would cost about $320,000 and that

administrative costs would average a staff year per district. This system is

being tested in two IRS districts and is expected to be operational by the

end of calendar year 1998.

Further, IRS officials from some districts with groups specializing in audits

of large corporations told us such groups have helped improve the return

selection and classification processes at these districts. These groups can

improve not only the selection process but ultimately the productivity of

these corporate audits. For example, in one district, an Examination

official told us that while the overall percentage of audits closed with no

additional tax recommended was about 10 percent, the rate within the

specialized group was only about 3 percent.20 Such audits can result in

ineffective use of IRS’ as well as the corporations’ resources.

Difficulty in Obtaining

Information to Support Tax

Recommendations

During audits, revenue agents may question items on the return, such as

income, deductions, or credits. If a corporation cannot provide adequate

information as support, the revenue agent may adjust the items, which

usually results in additional taxes being recommended. Both the revenue

agents and large corporations contributed to problems in obtaining such

information. Not having the information hindered IRS’ ability to do

effective audits and support tax recommendations.

Appeals and Counsel officials in all four districts we visited told us that

revenue agents do not always have adequate information to support

recommended taxes. Taxpayers provided information to Appeals that had

not been provided to the revenue agents in an estimated 53 percent of the

disputed audits.21 Appeals officers for some of the audits noted that

20As discussed earlier, the nationwide no-change rate doubled (not decreased) between fiscal years

1988 and 1994.

21Because large corporations can appeal numerous issues, our questionnaire focused on the three

disputed issues involving the highest amounts of recommended adjustments. In these instances

taxpayers may have provided Appeals new information on at least one of the top three dollar issues.

Page 16 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

revenue agents had provided insufficient information to justify their

development of an audit position. For example, appeals officers for an

estimated 27 percent of the disputed audits indicated that not all of the top

three dollar issues had been fully developed by the revenue agents during

the audit.

Examination and Appeals officials told us that some corporate taxpayers

did not always provide requested information in a timely manner, if at all.

Corporations can have difficulty providing information when IRS’ requests

are vague, for old data, or made late in the audit. On the other hand,

corporations have little incentive to provide all information, particularly if

it will lead revenue agents to make adjustments or to audit other areas on

the tax return. IRS officials we interviewed believed that problems in

obtaining all the information needed to support tax recommendations

were becoming more prevalent.

Examination, Appeals, and Counsel officials said agents should ensure

that they have adequate information to support tax recommendations.

They also expressed the opinion that the recently formed specialized

groups can increase managerial and counsel involvement in helping

revenue agents obtain the information needed to support their

recommended taxes. They noted that these group managers, when

involved, were usually able to help agents obtain requested information

from taxpayers.

Counsel officials told us that their involvement, including the discussion

and issuance of summons when needed, could help secure information.

They noted that revenue agents need to make information requests early in

the audit so that the summons process, if needed, can begin as soon as

possible, enhancing its effectiveness. IRS generally uses a summons as a

last resort, meaning IRS has tried all other administrative means of

obtaining requested information. Although used infrequently, a summons

can prompt large corporations to provide the requested information. If it

does, the investment in time and money can prove to be worthwhile

compared to spending time awaiting information that may not be received.

Coordination Between

Appeals and Examination

Was Limited

During the appeals process for large corporate audits, coordination

between Appeals and Examination was limited. Appeals generally did not

share with Examination new information from large corporations. Sharing

this information would give revenue agents the opportunity to review it

and provide their comments to Appeals before the settlement. After the

Page 17 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

final settlement, Examination did not always distribute Appeals’ summary

of that settlement to its revenue agents. Our work showed that such

limited coordination resulted from insufficient requirements and

incentives to coordinate. Although Appeals’ independence in settling tax

disputes is critical, limited coordination between the two functions can

hinder IRS’ efforts to reach a balanced settlement as well as to improve

future audits.

Appeals officers for an estimated 25 percent of the disputed audits

indicated they had no interaction with revenue agents while resolving the

disputed tax issues. Appeals and Examination officials have acknowledged

such limited coordination overall. An Appeals task force draft report cited

Examination’s concerns about the current Appeals process not providing

Examination with an opportunity to present its views on key issues prior

to resolution.22 Knowing that large corporations usually have unlimited

access to the appeals officer to discuss the dispute, Examination officials

said limited involvement and coordination with Appeals creates the

appearance that the government’s interest is not fairly represented and

that the Appeals process is not balanced.

This appearance of bias can be aggravated when an appeals officer does

not share with Examination staff new information provided by large

corporations. Appeals officers for an estimated 53 percent of the disputed

audits in our study population indicated that large corporations provided

additional factual information for at least one of the top three dollar

issues. However, the appeals officers asked Examination to review the

new information in 139, or an estimated 43 percent, of those disputed

audits in which corporations provided new information.23 Revenue agents

reported a similar lack of coordination. They indicated that Appeals asked

them about new information in only an estimated 17 percent of all

disputed audits. Neither we nor IRS knows whether the appeals officers

should have shared the new information in these cases. Our CEP work

indicated that CEP corporations are more likely to win more disputes when

they provide information to Appeals that Examination has not had the

opportunity to review.

In addition, Examination officials told us that Appeals seldom shared the

proposed settlement with Examination so that revenue agents could have

one last look at how the dispute was to be settled and whether any new

information played a part. National Office Examination officials told us in

22Proposed Procedure for Settlement of CEP Cases in Appeals (Western Region).

23The 95 percent confidence interval (plus or minus 14 percent) ranges from 29 to 57 percent.

Page 18 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

February 1997 that they do not believe it is realistic for Appeals to share

proposed settlements in every case. However, Examination wanted the

opportunity to review and discuss new information submitted after the

audit closed.

Two reasons help explain this limited sharing with Examination staff.

First, although IRS does require appeals officers to share significant new

information with Examination, it left the definition of “significant” to the

discretion of each appeals officer, recognizing that sharing all new

information would not be realistic. Given the uncertainty over this

requirement, Appeals could not ensure that the significant information had

been shared. Without a definition of significant and without adequate

controls to ensure that all significant new information is shared, neither

we nor IRS knew whether the appeals officers involved with our study

population had met the requirement for sharing significant new

information. Also, IRS did not require Appeals to share its proposed

settlements with Examination.

Second, the limited sharing partially resulted from the differing roles and

incentives driving the work of Examination and Appeals. Appeals Chiefs

we interviewed said they encourage appeals officers to involve the

revenue agents in reviewing new information but advised their appeals

officers to be conscious of the time and costs to do so. That is, if the

appeals officers believe they can review the information in a shorter

period of time than a revenue agent can, the appeals officers should most

likely do it. Our interviews with Examination officials also indicated that

many revenue agents have little incentive to spend time reviewing new

information on a case that Examination has already closed. Further, both

Appeals and Examination officials at the National Office said that sharing

all new information would be unnecessary and too time-consuming. In

February 1997, these Appeals officials told us they believed much of the

new information submitted by taxpayers was not significant.

Regardless, sharing significant new information, especially that relating to

issues that may not be sustained, would help IRS to maintain its designed

separation of duties—revenue agents could audit the new information and

appeals officers could focus on settling the entire dispute. To help meet

this end, our 1994 CEP report recommended that IRS improve controls to

ensure that Appeals provides CEP teams an opportunity to comment on

proposed settlements. IRS disagreed at the time, but Appeals subsequently

proposed a procedure to promote better communication with

Examination and better settlement of key issues in CEP cases. Under that

Page 19 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

proposal, Examination could identify five key issues in a case nearing

settlement and Appeals would not settle the key issues until it had

considered feedback from Examination. This way, Examination would

have the opportunity to review the proposed settlement and advise

Appeals of any significant facts, laws, or other factors that may need

further consideration. According to many Examination and Appeals

officials we interviewed in the districts, allowing Examination to provide

this input could add balance to the appeals process without adversely

affecting Appeals’ independence. The proposed procedure also could help

ensure that Appeals provides Examination with significant new

information that taxpayers submit and an opportunity to comment just

prior to settling a case.

Recognizing that taking these steps could involve some additional time,

both Examination and Appeals officials told us during our field visits in

early 1996 that the steps were worth taking. However, in November 1996,

National Office Appeals officials told us that IRS had recently decided not

to implement testing of this proposed procedure because of concerns by

both Appeals officials and large corporations that such a procedure could

impede Appeals’ ability to independently settle tax disputes. However,

these Appeals officials said that Appeals’ independence would not

necessarily have to suffer under this proposal.

Regarding final settlements, Appeals has a procedure for sending a copy of

the final written summary to Examination, but Examination has no

process in place to ensure that this feedback reaches the appropriate

revenue agent. Revenue agents indicated that they received the written

summary in an estimated 61 percent of the disputed audits. Examination

officials and revenue agents told us that this summary can provide insights

on why a recommended tax adjustment was or was not sustained on

appeal. For example, the summary typically discusses the reasons for

settling the disputes, such as hazards of litigation.24 Without knowledge of

significant facts or laws followed in the settlement, the revenue agents

lose an opportunity to learn about the types of tax issues involved in the

case and the support needed to sustain future tax disputes.

In summary, Appeals attempts to provide large corporations with a review

of their tax disputes that is independent of Examination or other IRS

functions before these corporations decide whether to litigate. However,

24Appeals is studying the effectiveness of the written summary and whether it can be shorter. One

Appeals official told us about concerns with reducing the discussion of important settlement

considerations. Any reduction could also reduce insights that revenue agents garner from the

summaries.

Page 20 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

both Examination and Appeals officials told us that increased

coordination and communication could help to improve their working

relationship and to correct the appearance of imbalances during appeals

without reducing the independence. To illustrate this point, a Regional

Chief Compliance Officer told us about the need for more balance

whenever large corporations withhold information during the audit but

provide that information to Appeals. Examination Chiefs told us more

interaction would afford an opportunity for their agents to better explain

their recommended taxes as well as any difficulties they may have had in

obtaining information to support their recommendations.

Conclusions Our analysis of questionnaire responses and interviews with IRS officials

identified at least four factors that contributed to the low assessment rate

or decline in audit results for 1988 to 1994. First, complex tax laws

impeded revenue agents’ efforts to determine the correct tax liability and

appeals officers’ efforts to fairly settle tax disputes. Second, differing

performance measures prompted revenue agents to recommend as much

tax as soon as possible and appeals officers to settle tax disputes without

litigation as soon as possible. We recommended in our 1994 report that IRS

more strongly propose legislative changes to reduce tax law complexity

and consider cross-functional measures, such as the collection and/or

assessment rate. IRS is taking action on both of these recommendations.

We make no new recommendations on these issues because our 1994

recommendations can also apply to audits of other large corporations.

Third, various aspects of the audit process impeded revenue agents’ ability

to develop recommended taxes that can survive appeals. IRS recognized

these aspects but faced constraints in surmounting them. Budget

pressures limited the use of team auditing to buttress agents’ lack of

expertise in auditing large corporations. The broad and complex nature of

tax administration complicated efforts to carve out more time for group

managers and district counsels to formally assist revenue agents—who

often work alone without much assistance. Revenue agents viewed such

assistance, whether formal or informal, as helpful in identifying and

discussing audit issues, requesting corporate information, and pursuing

requests that have not been answered. Further, IRS initiated efforts, such as

a task force to study ways to improve return selection and classification,

but these efforts stalled due to budget constraints.

Some IRS districts have taken a step that could address many of these

problems. They have combined senior revenue agents and managers into

Page 21 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

groups that specialize in large corporate audits. Examination officials in

districts that created these groups believed that their initial experiences

indicated that the groups helped improve return selection and

classification, information gathering, and audit productivity. They also

believed that the groups allowed managers and agents to share knowledge

and assistance in a focused, timely way. However, the districts generally

had limited data on the actual impacts of these groups, and IRS’ National

Office has not provided criteria or oversight to guide the measurement of

the impacts. National Office Examination officials said they would like to

learn about the impacts of these groups across the districts.

Fourth, the Appeals and Examination functions did not always share

information. Unlike CEP teams that have an ongoing audit presence,

revenue agents who audit these large corporations move on to other

audits. We recognize that sharing all information would not be realistic;

however, Appeals could inform Examination officials of any new

information that would cause the appealed issues to not be fully sustained.

Doing so would help IRS to maintain the intended separation of duties.

Examination could have an opportunity to audit the new information and

Appeals officers could then focus on their responsibility for settling the

entire dispute. After a dispute was settled, Examination did not have a

system for regularly sharing Appeals’ summaries of the final settlements

with revenue agents. Knowing about the final settlement could help agents

to learn about and support tax issues that could sustain appeals. For any

form of enhanced sharing, maintaining Appeals’ independence would be

paramount.

In recommending improvements, we tried to recognize the costs and

constraints to IRS. Most of our recommendations will entail limited costs.

For example, providing more specific, objective guidance and criteria on

return selection need not be an expensive proposition, particularly if the

new database on audit results helps to identify the types of large

corporations and tax issues that have proven productive to audit. The use

of more informal legal assistance would create some costs, but that

assistance could be provided more quickly and at less cost than formal

assistance. Further, providing more structure and guidance to districts on

evaluating the impacts of the specialized audit groups should not cost

much and could provide big dividends if IRS had more certainty about the

impacts of these groups on the productivity of large corporate audits.

Appeals’ sharing of significant new information with Examination could

add some time to resolving the disputes, but that investment should be

worthwhile if the revenue agents learn how to do better audits or help to

Page 22 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

determine the correct tax liability. Even if some costs increase, the

accompanying improvements should help IRS to better invest its limited

enforcement funds in trying to ensure that large corporations are paying

the correct amount of taxes.

Recommendations To improve the audits of tax returns filed by large corporations, we

recommend that the IRS Commissioner

• provide more specific objective criteria and procedures to guide the

selection of large corporate tax returns and classification of tax issues

with high audit potential across the districts;

• develop criteria and procedures to guide the evaluation across the districts

of the impacts of groups specializing in audits of large corporations;

• encourage District Examination management to work with District

Counsel officials on finding cost-effective ways to provide revenue agents

with the necessary legal assistance;

• require Appeals to notify Examination of new information received from a

large corporation that could cause the appealed issues to not be fully

sustained, and require Examination to (1) indicate whether it wishes to

review the new information and, if so; (2) review the information and

notify Appeals of the results of the review as soon as possible; and

• require Examination management to provide feedback to its revenue

agents on the final settlements that Appeals reaches with large

corporations.

Agency Comments

and Our Evaluation

We obtained comments on a draft of this report in a meeting on

February 20, 1997, with IRS officials who represented you. These officials

included a representative of the Commissioner’s Office of Legislative

Affairs, a representative of the Chief of Staff to the Assistant

Commissioner of Examination, as well as representatives of the Large

Business Examination Programs, and representatives of the National

Director of Appeals.

In general, they agreed with our findings and conclusions and provided a

few technical comments on specific sections of the draft. We have

incorporated these comments, such as on additional training funds for

revenue agents, Appeals’ discretion to share significant new information,

and performance measures, in the sections of the report where

appropriate.

Page 23 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

As for our five recommendations, IRS agreed to implement four, as

discussed below.

• First, IRS officials said they have already started to analyze closed large

corporation audits to develop an objective system for better classifying

and selecting large corporation returns to audit. IRS plans to begin testing

this system in selected districts within each IRS region by the summer of

1997 and to implement it by the end of 1998.

• Second, IRS officials said they plan to develop criteria and procedures to

guide the evaluation of the district groups that specialize in audits of large

corporations. IRS hopes to finish these actions during 1998.

• Third, IRS officials said they plan to issue an IRS-wide memo by May 1997 to

encourage district Examination management to work with District

Counsel officials on finding cost-effective ways to provide revenue agents

with the necessary legal assistance, including the use of field service

advice and technical advice memoranda.

• Fourth, IRS Examination management said it plans to change the Internal

Revenue Manual to require that revenue agents be provided with feedback

on Appeals’ final settlements with large corporations. Because the next

series of changes to the Manual will not be done until the end of fiscal year

1997, Examination officials plan to issue a memorandum on this

requirement during May 1997.

IRS officials did not agree to implement the fifth recommendation that

would require Appeals to share its proposed settlements with Examination

so that Examination could see whether the large corporation provided

new information that affected the settlement. Examination officials said

they want to see significant new information, but requiring Appeals to

share all proposed settlements may be too formalized and too strong a

process for obtaining the new information.

Appeals officials expressed concern that sharing proposed settlements

could create perceptions that Appeals’ settlement authority would be

subject to an Examination veto. This perception could prompt large

corporations to close off Examination’s reinvolvement by taking the

dispute to court. They also believed that this sharing would add time to the

settlement process that usually would be significant and would not change

the final settlement. Finally, they believed that reinvolving Examination

could produce an adversarial relationship to the extent that appeals

officers felt pressured to justify their settlement proposals.

Page 24 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

We also asked TEI to provide comments on the same draft report. We met

with TEI officials on February 21, 1997, to obtain their comments. They

also supported or had no opposition to the same four recommendations

that IRS agreed to implement. Although we made no recommendations on

these topics, they supported creating an IRS-wide performance measure

and more training for revenue agents as well as applying CEP processes to

non-CEP audits. Like IRS, they expressed similar concerns with the

recommendation on sharing proposed settlements with Examination so

that it could see how new information affected the settlements. They also

expressed the concern that sharing the proposed settlement may prompt

Examination to go beyond the new information and try to re-audit other

issues.

In recommending that Appeals share proposed settlements to allow

Examination to see whether new information significantly affected the

settlement, we did not intend to undercut Appeals’ settlement authority or

grant Examination veto power over settlements; in fact, our draft report

pointed to the importance of retaining Appeals’ independence in settling

disputes. Thus, we did not envision that the act of sharing would require a

highly formalized process or much time in the majority of cases.

Rather, our intent was, and still is, to provide an inducement for appeals

officers as well as large corporations to share significant information with

Examination. We believed that some control or check was needed to

better ensure that Examination had the opportunity to play its appropriate

role in reviewing information to determine the correct tax liability and

protect the government’s revenue. We intended that the requirement to

share would provide a control over the appeals officers’ use of discretion

in judging the need to share new information. We also intended that this

requirement would send a signal that large corporations cannot

intentionally bypass the audit process by providing new information to

appeals officers during negotiations over tax liability.

Our focus on the need for a control stems from responses to our

questionnaires and to our interviews with district office officials during

1996. Although Examination officials recognized that communication with

Appeals has been improving, Examination officials and staff still pointed

to instances in which they did not have a chance to review significant new

information that a large corporation had provided to Appeals. In some

cases, they noted that they had asked for similar information during the

audit.

Page 25 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

Even so, we understand the concerns expressed by Appeals and TEI

officials about sharing the significant new information through the

proposed settlements. We discussed several other ways to address the

concerns and still have IRS provide a control over Appeals’ sharing of new

information with Examination. These discussions prompted us to change

our recommendation on how to better ensure that Examination has an

opportunity to review the new information. Under our changed

recommendation, Appeals would notify Examination as soon as possible

after a large corporation provided new information that could cause the

disputed issues to not be fully sustained. Upon notification, Examination

could choose to do nothing, ask for details, or ask to review the

information. Examination and Appeals would need to develop procedures

on how much time Examination has to request and review the

information, how the information would be shared, how extensive the

review would be, and how the results of the review would be

communicated to Appeals.

We believe that this option would provide Examination the opportunity to

fulfill its intended roles—determine the correct tax liability and protect

the government’s revenue—while mitigating the concerns raised by

Appeals and TEI. As we envision it, this recommendation would not delay

or disrupt many final settlements because the information would be

shared soon after being received. One exception, of course, would be if the

information was significant enough and the review was revealing enough

to change the settlement that the appeals officer would have made without

Examination’s involvement. Even with this exception, settlement authority

would still rest with the appeals officers.

This report contains recommendations to you. As you know, the head of a

federal agency is required by 31 U.S.C. 720 to submit a written statement

on actions taken on the recommendations to the Senate Committee on

Governmental Affairs and the House Committee on Government Reform

and Oversight not later than 60 days after the date of this letter. A written

statement also must be sent to the House and Senate Committees on

Appropriations with the agency’s first request for appropriations made

more than 60 days after the date of this letter.

Copies of this report are being sent to the Chairmen and Ranking Minority

Members of the House Committee on Ways and Means and the Senate

Committee on Finance, various other congressional committees, the

Director of the Office of Management and Budget, the Secretary of the

Page 26 GAO/GGD-97-62 Audits of Large Corporations
B-261745 

Treasury, and other interested parties. We also will make it available to

others upon request. Major contributors to this report are listed in

appendix VI. Please contact me on (202) 512-8633 if you or your staff have

any questions about this report.

Sincerely yours,

Lynda D. Willis

Director, Tax Policy and

 Administration Issues

Page 27 GAO/GGD-97-62 Audits of Large Corporations
Contents

Letter 1

Appendix I 

Sampling and Data

Analysis Methodology

30

Sample Selection Methodology 30

Appendix II 

Revenue Agent

Questionnaire Results

35

Appendix III 

Group Manager

Questionnaire Results

54

Appendix IV 

Appeals Officer

Questionnaire Results

71

Appendix V 

Offices Visited and

Officials Interviewed

91

Appendix VI 

Major Contributors to

This Report

92

Tables Table I.1: Corporate Audits Closed Agreed in Examination or

Appeals During Fiscal Year 1994 With $75,000 or More in

Additional Taxes Recommended

30

Table I.2: Response Rate and Disposition of Initial Sample

Selection by Type of Questionnaire

33

Table V.1: District and Appeals Offices Visited and Officials

Interviewed

91

Page 28 GAO/GGD-97-62 Audits of Large Corporations
Contents

Abbreviations

AIMS Audit Information Management System

BMF Business Master File

CEP Coordinated Examination Program

IRM Internal Revenue Manual

IRS Internal Revenue Service

SEC Securities and Exchange Commission

TEI Tax Executives Institute

Page 29 GAO/GGD-97-62 Audits of Large Corporations
Appendix I 

Sampling and Data Analysis Methodology

This appendix describes how we identified our universe of large corporate

audits closed agreed in Examination or Appeals during fiscal year 1994

and our sampling methodology. In addition, it discusses our methodology

for developing and administering questionnaires to IRS audit and Appeals

staff and taxpayers for our sample.

Sample Selection

Methodology

In order to send questionnaires to IRS audit and Appeals staff and

taxpayers, we identified a universe of corporate taxpayers related to

corporate audits closed agreed in Examination or Appeals during fiscal

year 1994. We chose fiscal year 1994 for two reasons. First, it provided us

with the most recent cases closed agreed in Examination or Appeals.

Second, IRS revenue agents and appeals officers and taxpayers would be

more likely to recall specific case information on the most recent closed

cases.

Our computer analysis of IRS’ databases identified a total population of

1,266 audits closed in fiscal year 1994 with $75,000 or more in additional

taxes recommended. Table I.1 shows the division of the 1,266 audits by

additional taxes recommended.

Table I.1: Corporate Audits Closed Agreed in Examination or Appeals During Fiscal Year 1994 With $75,000 or More in

Additional Taxes Recommended

Range of additional taxes

recommended on returns

Number of

audits Percent of total

Dollars

recommended

(in millions) Percent of total

Dollars

assessed

(in millions)

$3 million and more 117 9 $1,961.5 76 $459.5

$1 million to $2,999,999 194 15 343.0 13 162.1

$300,000 to $999,999 334 26 188.9 7 118.7

$75,000 to $299,999 621 49 96.9 4 69.5

Totals 1,266 100 $2,590.4 100 $809.8

Source: GAO analysis using IRS data.

We determined that a survey of the revenue agents, appeals officers, and

taxpayers associated with a nationally representative, stratified random

sample of 500 audits would be sufficient to accomplish our objective. The

sample is divided into six strata based on the assessment rate and the

amount of additional taxes recommended. Since those audits with the

greatest amount of dollars recommended have the most affect on the

assessment rate, the sample includes a relatively large number of the

Page 30 GAO/GGD-97-62 Audits of Large Corporations
Appendix I 

Sampling and Data Analysis Methodology

larger dollar cases. We included in our sample all of the 117 audits with

$3 million or more in additional taxes recommended; 133 of those audits

with between $1,000,000 and $2,999,999 in additional taxes recommended;

120 of those audits with between $300,000 and $999,999 in additional taxes

recommended; and 130 of those audits with between $75,000 and $299,999

in additional taxes recommended.

The 500 cases in our sample accounted for $2.3 billion, or 88 percent, of

the total $2.6 billion in additional taxes recommended in our population.

Similarly, the $648 million in additional taxes recommended that were

assessed accounted for 80 percent of the total $810 million assessed from

the corporate audits shown in table I.1. In the study analyses, the sample

selections have been properly weighted to represent the total population

of 1,266 audits with $2.6 million in recommended additional taxes.

Because group managers are responsible for a large number of audits of

different entities, not just corporations, we sampled these managers

without respect to their involvement in any particular audit. To do this we

asked the 63 district offices to identify all group managers having large

corporate audits in their inventories as of August 1995.25 The districts

identified 555 group managers meeting this criterion. From this universe

we randomly selected a sample of at least a third of the group managers at

each of the 63 district offices. This resulted in a total sample of 215 group

managers. In our analyses, the 215 sample selections have been properly

weighted to represent the total population of 555 group managers.

Questionnaire

Methodology

We developed four mail-out questionnaires to obtain the views of IRS

revenue agents, appeals officers, group managers, and corporate taxpayers

on the factors affecting the audit and appeals processes, such as obtaining

needed information, the effect of the tax laws, and the interaction between

Appeals, Counsel, and Examination staff involved with these audits.

We pretested the questionnaires on several separate occasions for

technical accuracy. We tested the revenue agent and group manager

questionnaire in the Baltimore, Chicago, and St. Louis District Offices; the

appeals officer questionnaire in the Baltimore and St. Louis Appeals

Offices; and the taxpayer questionnaire in the St. Louis District Office. In

addition to these pretests, we asked National Office Examination and

Appeals officials to review, for technical accuracy, all questionnaires for

25In August 1995, IRS was organized with 63 district offices nationwide. However, those 63 district

offices were consolidated into 33 districts as of October 1995.

Page 31 GAO/GGD-97-62 Audits of Large Corporations
Appendix I 

Sampling and Data Analysis Methodology

IRS staff. We asked the Tax Executives Institute (TEI) officials to review the

taxpayer questionnaire for technical accuracy. From comments received

from both IRS and TEI, we made changes to the questionnaires as

appropriate.

In August 1995, we sent letters to IRS’ 33 district offices requesting the

names and addresses of the revenue agents responsible for the 500

corporate audits in our sample. We also requested the districts to provide

us the names and addresses of their group managers who had corporate

income tax audits in their inventories as of that date. In addition, we

requested from the National Appeals Office the names and addresses of

the appeals officers who considered any tax disputes involving any of our

sample cases.

We initially mailed revenue agent and group manager questionnaires in

October 1995. We subsequently sent follow-up questionnaires in November

1995. We initially mailed the appeals officer questionnaires in November

1995 and sent follow-up questionnaires in December 1995. We initially

mailed the taxpayer questionnaires in January 1995 with follow-up

questionnaires sent in February 1996. Table I.2 shows the response rate

and disposition of initial sample selection by type of questionnaire.

Page 32 GAO/GGD-97-62 Audits of Large Corporations
Appendix I 

Sampling and Data Analysis Methodology

Table I.2: Response Rate and

Disposition of Initial Sample Selection

by Type of Questionnaire

Revenue

agent

Appeals

officer

Group

manager Taxpayer

Initial sample size 500 500 215 500

Ineligible sample selections 0 199a 20b 3c

Eligible sample selections 500 301 195 497

Questionnaires not completed 174 161 28 333

No response 97d 21e 21 333

Recipient no longer

availablef

64 21 7 0

IRS could not locate

individual associated with

case

13 119 0 0

Questionnaires received 326 140 167 164

Response rateg 65% 47% 86% 33%

aIncluded 196 audits in which the taxpayers did not exercise their appeal rights; two audits in

which the taxpayers exercised their right to appeal, but Appeals subsequently returned the case

to Examination, where it was ultimately settled; and one audit that was still open in Appeals.

bManagers were not responsible for any large corporate audits.

cTaxpayers involved in ongoing disputes with IRS.

dIncluded one audit in which the revenue agent could not remember the case well enough to

complete the questionnaire.

eIncluded three audits in which the appeals officers did not complete the questionnaire because

they lacked support records.

f

Included individuals who had retired prior to receiving the questionnaire, transferred to another

agency, or had died.

gComputed response rate by dividing the number of questionnaires received by the eligible

sample selection.

Questionnaire results for the revenue agent, group manager, and appeals

officer questionnaires are presented in appendixes II, III, and IV

respectively. Results from the taxpayer questionnaire are not presented in

this report nor are they used in the report because of the low response

rate to the questionnaire.

Sampling Errors for Key

Estimates Used in the

Report

Because the survey results come from samples, all results are estimates

that are subject to sampling errors. We calculated sampling errors for all

of the survey results presented in this report. These sampling errors

measure the extent to which samples of these sizes and structure can be

expected to differ from their total populations. Each of the sample

Page 33 GAO/GGD-97-62 Audits of Large Corporations
Appendix I 

Sampling and Data Analysis Methodology

estimates is surrounded by a 95 percent confidence interval. This interval

indicates that we are 95-percent confident that the results for the total

population fall within this interval.

In addition to the reported sampling errors, the practical difficulties of

conducting any survey may introduce other types of errors, commonly

referred to as nonsampling errors. For example, differences in how a

particular question is interpreted, in the sources of information that are

available to respondents, or in the types of people who do not respond can

introduce unwanted variability into the survey results. We included steps

in our audit for the purpose of minimizing such nonsampling errors. For

example, we carefully pretested the questionnaires and made follow-up

mailings to people who did not initially respond.

Page 34 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

U.S. General Accounting Office

IRS' Audits of Large Corporations -

Revenue Agent Questionnaire

1

Case ID - 1 (1-7)

INTRODUCTION

The U.S. General Accounting Office (GAO), an agency of

Congress, is conducting a study of IRS' audits of corporations

with assets of $10 million or more (activity codes 219 to 225). 

The scope of our review does not include corporate returns in

the Corporate Examination Program (CEP). The overall

objective of our study is to determine what factors affect the

rate at which taxes recommended by revenue agents on these

corporate returns get assessed. We are surveying a random

sample of revenue agents who worked on corporate audits

closed agreed in either Exam or Appeals during fiscal year

1994. 

You have been selected to complete this questionnaire due to

your involvement with the corporate returns for the tax years

indicated at the bottom of this page. Because of your work on

this case, your response to this questionnaire will help us to

identify the factors that affected these audits, both positively

and negatively. We cannot develop meaningful information

without your frank and honest answers to the questions.

GAO will safeguard the privacy of your responses to this

questionnaire. They will be combined with those of other

respondents and will be reported only in summary form. The

control number is included only to aid us in our follow-up

efforts. We will not identify specific taxpayer information in

our report.

This questionnaire should take about 1 hour to complete. If

you have any questions concerning any part of this survey,

please call Mr. Kirk Boyer at (913) 384-7570.

Please return the completed questionnaire in the enclosed preaddressed envelope within 2 weeks from the time you receive

it. In the event the envelope is misplaced, the return address

is:

U.S. General Accounting Office

Kansas City Regional Office

Attn: Mr. Kirk Boyer

5799 Broadmoor - Suite 600

Mission, Kansas 66202

Thank you for your assistance.

Case Information:

After completing the questionnaire, please remove the case information sticker before returning your completed questionnaire.

Page 35 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

I. RESPONDENT INFORMATION

Please provide us your current work telephone number to

assist us if we need to clarify a response:

(______)______________________________

Were you assigned to audit the corporate tax returns

shown on page 1?

1. Yes →Please continue with question 1.

2. No →STOP: Do not continue if you were

not involved in the audit. Please return

the questionnaire in the enclosed

envelope. 

1. Approximately how many corporate income tax returns

(activity codes 219 to 225) have you audited in the last 12

months? (ENTER A NUMBER.) (8-9)

Mean = 6.7 Number of corporate tax returns

N=314

2. Please answer the following as it applied to you at the

time the audit shown on page 1 began: (ENTER "00" IF

NONE OR UNDER 6 MONTHS.) (10-19)

a. Total number of years of IRS experience 

in the Examination Division ....... 17.3 Years

N=1,266

b. Number of years as a revenue agent . . 16.3 Years

N=1,266

c. Number of years auditing corporations

with assets of $10 million or more

(activity codes 219 to 225) that are

not in CEP ..................... 6.8 Years

N=1,247

d. Number of years auditing CEP 

corporations .................... 1.8 Years

N-1,217

e. Total number of years of non-IRS

experience in accounting or auditing . . 1.9 Years

N=1,253

3. What grade level were you when you began this audit? 

(ENTER A NUMBER.)

 GS - __________ 

 (20-21)

GS-11 5.2% GS-13 64.2% N=1,262

GS-12 30.3% Other 0.3%

4. Which of the following best describes the type of group

you were assigned to when you worked on this audit? 

(CHECK ONE BOX.) (22)

75.7% Non-specialized General Program group

10.0% Specialized General Program group targeted

toward large corporate tax returns

8.0% CEP group 

6.3% Other (Specify) _________________________

N=1,253

2

Page 36 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

5. Within 1 year before this audit began, did you receive the following training in corporate audit procedures or issues? If you

have received any of the following training, indicate to what extent, if at all, the training improved your ability to conduct

this audit? 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE SECOND PART OF THE QUESTION. IF YOU ANSWER "NO" TO THE FIRST PART, GO TO THE NEXT LINE.)

(23-34)

Did you receive

the following

training in that

year?

If you received any of the following training, to what extent,

if at all, did it improve your ability to conduct this audit?

Yes

(1)

No

(2)

Very

great

extent

(3)

Great

extent

(4)

Moderate

extent

(5)

Some

extent

(6)

Little

extent

(7)

No

extent

(8)

a. Advanced corporate training

or equivalent of Phase 5

N=1,258

14.3% 85.7% 7.8%

N=180

15.7% 44.0% 22.6% 7.4% 2.4%

b. Corporate training or

equivalent of Phase 4

N=1,248

12.6% 87.4% 7.7%

N=157

30.5% 43.1% 8.2% 10.6% 0.0%

c. IRS training (3 days or

more) related to this

taxpayer's primary industry

(including industry

specialization program (ISP)

training) N=1,255

4.1% 95.9% 17.6%

N=52

36.7% 38.9% 6.8% 0.0% 0.0%

d. Non-IRS training or seminars

on any issues related to the

taxpayer's industry N=1,255

2.4% 97.6% 15.8%

N=31

36.4% 42.9% 4.9% 0.0% 0.0%

e. Training on developing

complex technical and/or

legal issues N=1,228

15.4% 84.6% 4.6%

N=184

15.9% 53.2% 15.5% 8.5% 2.3%

f. Other (Specify)

N=415

 _______________________

_______________________

40.7% 59.3% 22.2%

N=169

10.3% 33.4% 16.8% 17.4% 0.0%

6. Was there any other training that you had not received that you felt you needed to improve your ability to conduct this audit? 

 (CHECK ONE BOX.) (35-36)

37.8% Yes → Please describe the training needed:

_________________________________________________________________________________________

_________________________________________________________________________________________

62.2% No

N=1,224

3

Page 37 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

II. GENERAL CASE INFORMATION

7. Which of the following best describes how this corporate tax return was selected for audit? (CHECK ONE BOX.) (37)

13.7% I selected it because it was classified with the greatest audit potential among the corporate tax returns available

10.8% I selected it for some other reason (Specify) _____________________________________________________

57.9% My manager assigned it to me 

17.7% Other (Specify) ____________________________________________________________________________

N=1,239

8. Overall, how satisfied or dissatisfied were you with the following factors related to the audit shown on page 1 of this

questionnaire? (CHECK ONE BOX IN EACH ROW. DO NOT CHECK IN THE SHADED AREA.) (38-43)

Very

satisfied

(1)

Generally

satisfied

(2)

Neither

satisfied nor

dissatisfied

(3)

Generally

dissatisfie

d

(4)

Very

dissatisfied

(5)

Not

Applicable

(6)

a. Your experience in auditing

these corporations N=1,258

28.9% 47.8% 17.3% 4.5% 1.5%

AAAA AAAA AAAA AAAA AAAA AAAAAAAA

AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

b. Your knowledge of tax laws,

rules and regulations N=1,258

33.0% 53.8% 10.1% 3.1% 0.0%

AAAA AAAA AAAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

c. Your knowledge of the

taxpayer's industry

N=1,258

11.9% 31.8% 38.3% 15.4% 2.5%

AAAA AAAA AAAA AAAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA AAAA AAAA

AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

d. Any out-of-district audit

assistance or support audit

N=1,265

4.1% 8.7% 10.7% 2.7% 1.6% 72.2%

e. Extent to which other IRS staff

(including specialists) adequately

developed the issues N=1,258

12.2% 18.6% 12.4% 5.6% 3.5% 47.8%

f. Other (Specify) N=314

_______________________

_______________________

9.6% 4.2% 2.6% 6.8% 7.5% 69.3%

4

Page 38 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

9. Did you do any of the following related to this taxpayer's primary industry during this audit? If yes, please indicate to what

extent these resources helped you develop complex or technical industry issues. 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE SECOND PART. IF YOU ANSWER "NO" OR "DON'T KNOW" TO THE FIRST PART, THEN GO TO THE NEXT

LINE.) 

 (44-57)

Did you do any of the

following?

If yes, to what extent did your use of these resources help you

develop complex or technical industry issues?

Yes

(1)

No

(2)

Don't

Know

 (3)

Very

great

extent

(4)

Great

extent

(5)

Moderate

extent

(6)

Some

extent

(7)

Little

 extent

(8)

No

extent

(9)

a. Contacted the industry

coordinator to discuss any

issue related to this taxpayers

primary industry N=1,248

21.3% 76.0% 2.7% 17.4%

N=266

35.0% 24.0% 12.4% 3.7% 7.4%

b. Obtained a position paper on

an issue N=1,252

24.9% 73.2% 2.0% 31.8%

N=291

29.0% 24.8% 8.8% 0.0% 5.6%

c. Contacted the market segment

coordinator to discuss any

issue N=1,229

9.5% 87.5% 3.0% 11.8%

N=108

27.0% 26.9% 16.5% 7.6% 10.2%

d. Obtained the market segment

audit guide N=1,222

13.2% 84.8% 1.9% 15.3%

N=143

30.2% 25.9% 14.7% 7.9% 5.9%

e. Reviewed a District Office

memorandum discussing an

issue related to this N=1,219

 taxpayer's primary industry

14.8% 80.8% 4.3% 9.2%

N=166

43.9% 20.0% 20.3% 4.7% 2.0%

f. Contacted revenue agents in

other districts on specialized

industries/issues N=1,245

17.9% 80.8% 1.4% 24.5%

N=211

46.3% 15.4% 9.4% 1.6% 2.9%

g. Other (Specify)

______________________

N=309

______________________

44.6% 50.8% 4.6% 29.6%

N=121

39.9% 14.6% 5.5% 7.0% 3.5%

10. Did you reduce the additional taxes recommended from this audit because of net operating losses (NOLs) or credit

carrybacks? (CHECK ONE BOX.) (58)

15.0% Yes → Continue to question 11.

72.5% No 

 Skip to question 12.

12.5% Don't know 

N=1,259

11. If there was an NOL or credit carryback to your primary tax year audited, how was the carryback brought to your attention? 

(CHECK ALL THAT APPLY.) (59-63)

56 Form 1120X

104 Application for tentative refund (Form 1139)

11 Informal claim by the taxpayer during the audit

18 Your review of audit results from another tax year

52 Other (Specify) __________________________________________________________________________________

5

Page 39 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

III. STAFFING RESOURCES

12. In all, how many revenue agents (excluding specialists)

worked on the audit shown on page 1 of this

questionnaire? (ENTER A NUMBER.) (64)

_______ Number of revenue agents

1 82.0% 4 0.7%

2 13.4% 5 0.1% N=1,263

3 3.5% Oth 0.4%

13. In your opinion, were additional revenue agents needed

during this audit? (CHECK ONE BOX.) (65)

8.4% Yes → Continue with question 14.

91.6% No → Skip to question 16.

N=1,266

14. If additional revenue agent(s) were needed, to what extent,

if at all, did not having their services negatively affect the

results of this audit? (CHECK ONE BOX.) (66-67)

1.7% Very great extent

22.8% Great extent

28.8% Moderate extent

34.7% Some extent

10.7% Little extent

1.4% No extent

N=106

Please explain how it negatively impacted these audits.

________________________________________________

________________________________________________

________________________________________________

________________________________________________

15. Which of the following best describes the reason that

additional revenue agents did not work on this audit? 

(CHECK ONE BOX.) (68)

21.5% Additional revenue agents were not requested

12.8% Revenue agents were not available when the audit

began

18.2% Revenue agents were available but temporarily 

diverted to other activities/collateral

duties during the course of the audit

15.3% Request(s) for additional revenue agents to be

assigned was denied

3.3% Request(s) for additional revenue agents to be

 assigned was granted, but the staff was (were)

assigned later than needed

29.0% Other (Specify) ___________________________

_______________________________________

N=101

IV. USE OF LEGAL ASSISTANCE RESOURCES 

16. Were any of the following types of legal assistance

requested to assist you on matters of tax law or overall

issue development during the audit shown on page 1 of

this questionnaire? (CHECK ALL THAT APPLY.) (69-72)

171 District Counsel assistance

99 National office Chief Counsel verbal advice 

32 National office Chief Counsel written technical

advice ------------------------------------------

1,010 No legal assistance requested → Skip to 

question 18. 

6

Page 40 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

17. Please indicate below what type of legal assistance you received. For each type of legal assistance you received, indicate (1)

whether it was provided in a timely manner and (2) if it positively or negatively affected Exam's ability to obtain agreement

with the taxpayer. 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE NEXT PARTS. IF YOU ANSWER "NO" OR "DON'T KNOW" TO THE FIRST PART, THEN GO TO THE NEXT

LINE.) (73-82)

Was the legal

assistance received?

(1)

If yes, was it provided

to you in a timely

manner?

(2)

How did this assistance affect

Exam's ability to obtain the

taxpayer's agreement on these

issues?

(3)

a. District

counsel

assistance

96.4% Yes →

1.0% No

2.5% Don't know

0.0% Not

applicable

N=169

88.8% Yes

6.0% No

5.2% Don't know

0.0% Not

applicable

N=163

21.4% Very positively

33.3% Positively

41.0% Neither positively nor

 negatively

0.0% Negatively

2.1% Very negatively

2.2% Don't know N=158

b. National office

Chief Counsel

verbal

assistance

98.2% Yes →

1.8% No

0.0% Don't know

0.0% Not

applicable

N=99

98.2% Yes

0.0% No

1.8% Don't know

0.0% Not

applicable

N=96

15.4% Very positively

33.5% Positively

41.4% Neither positively nor

 negatively

0.0% Negatively

1.8% Very negatively

7.8% Don't know N=82

c. National office

Chief Counsel

written

technical

assistance

86.8% Yes →

13.2% No

0.0% Don't know

0.0% Not

applicable

N=32

66.2% Yes

33.8% No

0.0% Don't know

0.0% Not

applicable

N=28

27.0% Very positively

21.4% Positively

30.2% Neither positively nor

 negatively

0.0% Negatively

21.4% Very negatively

0.0% Don't know N=28

If you were not satisfied with the timeliness of any legal assistance or you did not receive it, please explain why?

__________________________________________________________________________________________________________

__________________________________________________________________________________________________________

__________________________________________________________________________________________________________

V. USE OF SPECIALIST RESOURCES

18. Were the services of specialists needed to help you

develop any of the issues for this audit? (CHECK ONE

BOX.) (83)

42.5% Yes → Continue with question 19.

55.0% No 

 Skip to question 23.

2.5% Don't know 

N=1,260

19. Were the services of specialists obtained when you

believed they were needed to help you develop the issues

for this audit? (CHECK ONE BOX.) (84)

81.7% All of the needed specialists were obtained when

needed → Skip to question 21.

14.1% Some but not all of the needed specialists were

obtained when needed → Continue with

question 20

4.2% None of the needed specialists were obtained 

when needed → Continue with question 20.

N=535

7

Page 41 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

20. For those specialist(s) that you needed but did not obtain, please identify (1) the specialist(s) that was not obtained, (2) the

primaryreason why you were not able to obtain them, and (3) the affect of not having this specialist on your ability to obtain

the taxpayer's agreement on proposed adjustments. To answer the second column, refer to the reason codes below the

matrix

. (IDENTIFY THE TYPE OF SPECIALIST. FOR EACH ONE IDENTIFIED, CHECK TWO BOXES IN EACH ROW. 

ATTACH AN ADDITIONAL SHEET IF MORE THAN THREE SPECIALISTS WERE NEEDED.) (85-93)

What type of

specialist(s) was needed but

not obtained?

(1)

Primary reason why the

needed specialist(s)

were not obtained?

(Codes are listed

below.)

(2)

In your opinion, how did not having

the specialist(s) affect your ability to

obtain the taxpayer's agreement on

these issues?

(3)

30.4 % Issue/Industry

26.3% Engineer 

14.5% CAS

10.7% International

 5.7% Employee Plans

 4.4% Valuation

 2.3% Economist

 5.7% Other N=75

A. 16.0%

B. 40.2%

C. 0.0%

D. 0.0%

E. 37.6%

F. 6.2%

N=69

9.9% Very positively

16.3% Positively

40.1% Neither positively nor

negatively

3.8% Negatively

0.0% Very negatively

23.9% Don't know

N=67

50.0% CAS

50.0% Issue/Industry

N=13

A. 100%

B. 0.0%

C. 0.0%

D. 0.0%

E. 0.0%

F. 0.0% N=13

50.0% Very positively

0.0% Positively

0.0% Neither positively nor

negatively

0.0% Negatively

0.0% Very negatively

50.0% Don't know N=13

N=0

A. 0.0%

B. 0.0%

C. 0.0%

D. 0.0%

E. 0.0%

F. 0.0%

0.0% Very positively

0.0% Positively

0.0% Neither positively nor

negatively

0.0% Negatively

0.0% Very negatively

0.0% Don't know

REASON CODES DEFINING WHY SPECIALIST(S) WAS NOT OBTAINED:

A. The district did not have the needed specialist(s) on staff

B. Request was not met/denied because of other priority work

C. There was not enough time remaining in the audit

D. Request not met because of non-exam time reasons such as leave, training, collateral duties.

E. Other (Specify) ________________________

F. Don't know

If you did not obtain any of the needed specialists, please skip to

question 22.

8

Page 42 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

Repeat ID - 2 (1-7)

21. For the specialist(s) that assisted you during this audit, please identify (1) the type of specialist(s)

that assisted you, (2) whether they provided you timely assistance, and (3) the affect their assistance

had on your ability to obtain agreement with the taxpayer. (IDENTIFY THE TYPE OF

SPECIALIST. FOR EACH ONE IDENTIFIED, CHECK TWO BOXES IN EACH ROW.) (8-16)

What type of

specialist(s) assisted

you?

(1)

Did the specialist(s)

provide you timely

assistance?

(2)

How did the services of the

specialist(s) affect Exam's

ability to obtain the

taxpayer's agreement on these

issues?

(3)

36.3% Engineer

31.8% International

11.2% Issue/Industry

10.3% CAS

3.3% Valuation

1.4% Economist

5.5% Other N=488

89.9% Yes

9.1% No

1.0% Don't know

N=488

24.8% Very positively

29.0% Positively

32.2% Neither positively nor 

negatively

7.1% Negatively

5.1% Very negatively

1.8% Don't know N=483

38.3% Engineer

33.5% CAS

10.9% Employee plan

6.7% Issue/Industry

4.4% International

2.5% Economist

3.6% Other N=138

89.0% Yes

11.0% No

0.0% Don't know

N=138

25.9% Very positively

22.8% Positively

29.8% Neither positively nor

negatively

4.8% Negatively

9.0% Very negatively

7.8% Don't know N=133

27.7% Issue/Industry

24.0% International

15.6% CAS

8.4% Engineer

8.4% Valuation

16.0% Other N=21

84.4% Yes

15.6% No

0.0% Don't know

N=21

32.7% Very positively

14.4% Positively

45.7% Neither positively nor

negatively

7.2% Negatively

0.0% Very negatively

0.0% Don't know N=21

22. Was the specialist's manager involved in this audit? (CHECK ONE BOX.) (17-19)

36.2% Yes →

 How satisfied or dissatisfied were you with the specialist(s) manager's involvement, or lack of involvement,

51.9% No → on this audit? (CHECK ONE BOX.)

19.0% Very satisfied

32.5% Satisfied

35.1% Neither satisfied nor dissatisfied

10.3% Dissatisfied

3.0% Very dissatisfied

N=350

If you were dissatisfied with the specialist(s) manager's involvement, please explain why. ________________________________________________________________________________________

________________________________________________________________________________________

11.9% Don't know

N=509

9

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Revenue Agent Questionnaire Results

VI. YOUR MANAGER'S INVOLVEMENT IN AUDITS

23. Was your manager involved in the following on the audit shown on page 1 of this questionnaire? In your opinion, how did

his/her involvement, or lack of involvement, positively or negatively affect the effectiveness of this audit? (CHECK TWO

BOXES IN EACH ROW.) (20-37)

Was your manager

involved in the

following aspects of

this audit?

How did his/her involvement, or lack of involvement, affect the

effectiveness of this audit?

Yes

(1)

No

(2)

Very

positively

(3)

Somewhat

positively

(4)

Neither

positively

nor

negatively

(5)

Somewhat

negatively

(6)

Very

negatively

(7)

a. Selecting this corporate

tax return for audit

N=1,243

55.0% 45.0% 20.0%

N=964

8.0% 70.4% 1.4% 0.2%

b. Identifying or selecting

issues for audit

N=1,245

8.5% 91.5% 13.0%

N=784

5.8% 79.9% 1.3% 0.0%

c. Requesting out-of-district

audit work or assistance

N=1,198

3.3% 96.7% 7.0%

N=700

1.8% 89.1% 1.1% 1.0%

d. Requesting specialists

N=1217

17.1% 82.9% 13.2%

N=785

9.3% 75.6% 1.0% 0.8%

e. Meeting with the taxpayer

to obtain requested

information N=1,249

16.6% 83.4% 15.4%

N=787

12.1% 70.3% 1.7% 0.4%

f. Discussing complex or

technical issues with you

N=1,252

45.6% 54.4% 23.8%

N=942

26.5% 46.3% 2.3% 1.1%

g. Reviewing proposed

adjustments N=1,252

58.3% 41.7% 21.8%

N=1005

26.5% 48.9% 1.6% 1.2%

h. Resolving disputed issues

with the taxpayer N=1,228

28.6% 71.4% 22.7%

N=863

8.8% 64.4% 3.1% 1.1%

i. Preparing written response

to the taxpayer's protest

N=1,189

6.1% 93.9% 11.1%

N=709

2.2% 85.1% 1.2% 0.5%

10

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Appendix II 

Revenue Agent Questionnaire Results

VII. OTHER AUDIT RESOURCES

24. In your opinion, did you receive adequate resources in the following areas? If not, please indicate to what extent, if at all,

the lack of these resources negatively affected your ability to develop all identified issues. 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWERED "NO" IN THE FIRST PART, THEN ANSWER THE

SECOND PART. IF YOU ANSWER "YES" OR "NOT NEEDED" TO THE FIRST PART, THEN GO TO THE NEXT LINE.)

(38-53)

Were the following resources

adequate?

If no, to what extent, if at all, did the lack of resource(s) negatively

affect your ability to develop identified issues?

Yes

(1)

No

(2)

Not

needed

(3)

Very

great

extent

(4)

Great

extent

(5)

Moderate

extent

(6)

Some

extent

(7)

Little

extent

(8)

No

extent

(9)

a. Travel funds for local travel

N=1,260

92.2% 1.0% 6.8% 0.0%

N=13

0.0% 48.2% 0.0% 25.9% 25.9%

b. Travel funds for out-ofdistrict audit work N=1,2526.9% 3.7% 89.4% 14.3%

N=34

9.6% 19.1% 5.2% 5.2% 46.7%

c. Out-of-district assistance or 

support audit N=1,226

12.3% 3.6% 84.1% 5.2%

N=34

29.7% 12.7% 0.0% 0.0% 52.3%

d. Computer equipment

N=1,251

66.8% 13.8% 19.3% 6.4%

N=156

22.0% 35.0% 14.1% 4.3% 18.3%

e. Computer software

N=1,247

56.0% 20.9% 23.2% 6.2%

N=239

20.5% 36.2% 8.4% 12.7% 16.1%

f. Research materials

N=1,254

72.4% 19.8% 7.8% 8.6%

N=226

37.9% 36.4% 8.6% 5.6% 2.9%

g. Audit aides

N=1,244

17.0% 14.5% 68.5% 2.8%

N=170

15.6% 36.7% 21.1% 7.9% 15.9%

f. Other (Specify)

N=309

______________________

1.6% 5.6% 92.7% 0.0%

N=17

27.0% 73.0% 0.0% 0.0% 0.0%

VIII. INFORMATION REQUESTED FROM THE TAXPAYERS

25. Which of the following did you use in obtaining information from the taxpayer or the taxpayer's representative (i.e., power of

attorney)? (CHECK ALL THAT APPLY.) (54-59)

1,234 Issued written information requests to the taxpayer or the taxpayer's representative

983 Verbally requested information from the taxpayer or the taxpayer's representative

249 Discussed obtaining third-party information with the taxpayer or the taxpayer's representative

70 Discussed a summons with the taxpayer or the taxpayer's representative

31 Issued a summons to the taxpayer or the taxpayer's representative

55 Other (Specify) __________________________________________________________________________________

11

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Appendix II 

Revenue Agent Questionnaire Results

26. Regarding the information you requested from the taxpayer or his/her representative for this audit, how satisfied or dissatisfied

were you with the following? (CHECK ONE BOX IN EACH ROW. DO NOT CHECK IN THE SHADED AREA.) (60-66)

Very

satisfied

(1)

Generally

satisfied

(2)

Neither

satisfied

nor

dissatisfied

(3)

Generally

dissatisfied

(4)

Very

dissatisfied

(5)

Not

Applicable

(6)

a. That the information requested was

obtainable by the taxpayer

N=1,245

43.0% 44.7% 6.6% 4.4% 1.7% 0.0%

b. The timeliness of the taxpayer's

responses N=1,247

31.8% 39.6% 9.6% 13.1% 5.9%

AAAA AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

c. The completeness of the information

provided by the taxpayer N=1,247

26.8% 46.8% 10.8% 10.4% 5.2%

AAAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA AAAA

AAAA

AAAA

AAAA

AAAA

d. The relevance of the information

provided by the taxpayer N=1,245

30.3% 54.6% 9.8% 4.1% 1.2%

AAAA AAAA AAAA AAAA

AAAA AAAA

AAAA

AAAA AAAA AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

e. The overall cooperation of the

taxpayer to provide information

N=1,245

42.3% 40.5% 7.3% 5.1% 4.8%

AAAA AAAA AAAA AAAA AAAA AAAA AAAA AAAAAAAA

AAAA AAAA AAAA AAAA

AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

AAAA

f. The overall cooperation of the

taxpayer's representative(s) to

provide information N=1,239

23.2% 37.4% 11.0% 4.3% 4.1% 20.1%

If you were not satisfied with any of the above, please explain why.

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

___________________________________________________________________________________________________________

27. Did you receive all of the information you requested from the taxpayer before the case closed out of Exam? (CHECK ONE

BOX.) (67-68)

84.5% Yes

13.4% No → If no, did the missing information prevent you from proposing certain adjustments?

 (CHECK ONE BOX.)

9.9% Yes

75.1% No

15.0% Don't know

N=168

2.1% Don't know

N=1,254

12

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Appendix II 

Revenue Agent Questionnaire Results

IX. CASE CLOSURE INFORMATION

28. How satisfied or dissatisfied were you with the length of

time it took to complete this audit? (CHECK ONE BOX.)

(69-70)

17.5% Very satisfied

46.0% Generally satisfied

18.7% Neither satisfied nor dissatisfied

14.3% Generally dissatisfied

3.5% Very dissatisfied

N=1,250

Please explain your dissatisfaction.

_______________________________________________

_______________________________________________

_______________________________________________

_______________________________________________

29. If the audit closed later than you expected, which of the

following reasons best describes why this audit closed out

after the expected completion date? (CHECK ONE

BOX.)

(71)

51.8% Not applicable (the audit was completed in a

timely manner)

0.5% IRS delays in beginning audit

3.8% IRS staff/specialists not available when needed

2.5% Taxpayer or taxpayer representative not available

17.4% Taxpayer delays in responding to information

requests

8.4% Exam work took longer than anticipated

15.5% Other (Specify)____________________________

N=1,119

_________________________________________

30. How satisfied or dissatisfied were you with Exam's

emphasis on attempting to obtain more agreements with 

taxpayers on proposed adjustments at the lowest level? 

(CHECK ONE BOX.) (72-73)

34.0% Very satisfied

34.3% Generally satisfied

26.0% Neither satisfied nor dissatisfied

4.2% Generally dissatisfied

1.6% Very dissatisfied

N=1,239

Please explain your dissatisfaction.

_______________________________________________

_______________________________________________

_______________________________________________

_______________________________________________

31. In your opinion, how did the overall outcome of this audit

for this taxpayer affect their compliance with the tax laws

since this audit? (CHECK ONE BOX). (74)

34.5% Taxpayer became more compliant

21.1% Taxpayer did not change their compliance

behavior

1.8% Taxpayer became less compliant

42.7% No basis to judge

N=1,240

13

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Appendix II 

Revenue Agent Questionnaire Results

32. Taking into consideration IRS' corporate audit environment and your district's policies and procedures at the time of this audit, to

what extent, if at all, were you able to sufficiently do the following on this audit? (CHECK ONE BOX IN EACH ROW.) (75-83)

Very great

extent

(1)

Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No extent

(6)

a. Identify balance sheet and

Schedule M issues

N=1,236

36.5% 44.0% 13.9% 5.3% 0.3% 0.0%

b. Probe for unallowable

expenses

N=1,238

27.7% 43.1% 24.1% 2.6% 1.2% 1.3%

c. Examine corporate tax

returns in this taxpayer's

industry N=1,207

11.6% 16.7% 20.9% 6.7% 9.7% 34.5%

d. Examine corporation's books

and records

N=1,233

34.5% 44.8% 15.6% 3.2% 1.5% 0.4%

e. Develop complex or

technical issues 

N=1,245

33.7% 40.8% 19.3% 4.1% 2.2% 0.0%

f. Adequately communicate

your position on issues in

written reports (e.g., RAR or

written response to

taxpayer's protest) N=1,238

36.3% 49.5% 11.7% 1.6% 0.7% 0.1%

g. Compute the corporate tax

liability

N-=1,250

36.9% 48.9% 9.4% 3.2% 0.7% 0.9%

h. Other (Specify)

N=79 _______________________

27.5% 10.6% 10.6% 0.0% 16.8% 34.6%

Please comment on factors that you believe adversely affect your ability to do the above items. If the policies and/or procedures

have changed, briefly discuss the change(s) and its affect. (ATTACH ADDITIONAL SHEETS IF NECESSARY.)

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

_______________________________________________________________________________________________________

14

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Appendix II 

Revenue Agent Questionnaire Results

X. TAXPAYER'S PROTEST OF ADDITIONAL TAXES RECOMMENDED BY EXAM

33. After this audit closed from Exam, did Appeals consider any disputed tax issues? (CHECK ONE BOX.) (84)

34.6% Yes, as a result of the taxpayer's protest → Continue with question 34.

1.9% Yes, as a result of a statutory 90-day letter

56.4% No → Skip to question 42.

7.1% Don't know

N=1,251

34. Was a written response to the taxpayer's protest provided to Appeals? (CHECK ONE BOX.) (85)

74.3% Yes

12.1% No

12.1% Don't know

1.5% Not applicable (no protest filed)

N=451

35. For any disputed issues from this audit, did the following factor(s) cause the taxpayer to disagree? (CHECK ONE BOX IN

EACH ROW. ) (86-91)

Yes

(1)

No

(2)

Don't

know

(3)

a. The interpretation of the law

N=438

86.4% 8.1% 5.5%

b. The facts of the case

N=401

35.0% 54.9% 10.1%

c. The Appeals settlement on a prior

case for this taxpayer N=393

8.7% 61.2% 30.0%

d. The Appeals settlement for a

different taxpayer N=394

15.0% 47.3% 37.7%

e. Other (Specify)

N=100

_________________________

_________________________

60.2% 10.7% 29.1%

f. Other (Specify)

N=44

_________________________

_________________________

11.4% 24.1% 64.5%

36. In order to consider the relevant facts in this case, did you discuss the disputed issues with Appeals? (CHECK ONE BOX.)

(92)

59.2% Yes

33.1% No N=448

7.6% Don't know

15

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Revenue Agent Questionnaire Results

37. Did Appeals ask you about any of the following: (CHECK ONE BOX IN EACH ROW.) (93-98)

Yes

(1)

No

(2)

Don't

remember

(3)

a. The facts relevant to the disputed issue(s) N=448 49.0% 39.9% 11.0%

b. Your legal position on the disputed issue(s) N=444 41.8% 47.4% 10.7%

c. Records provided to Appeals by the taxpayer N=443 17.1% 68.0% 15.0%

d. Information in the unagreed report, 90-day letter, or the

written response to the protest N=440

36.3% 47.5% 16.2%

e. Alternative positions proposed by the taxpayer during

appeal N=443

16.4% 64.2% 19.4%

f. Other (Specify) N=75

_________________________________________

45.6% 38.3% 16.2%

Repeat ID - 3 (1-7)

38. How, if at all, did you learn about Appeals final resolution of disputed issues from this audit? To what extent, if at all, did this

feedback help you understand how Appeals resolved the disputed issues? 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER THE

SECOND PART. IF YOU ANSWER "NO" TO THE FIRST PART, THEN GO TO THE NEXT LINE.) (8-17)

Did you learn

about Appeals

final resolution in

the following

ways?

If yes, to what extent, if at all, did this feedback on Appeals final

resolution help you understand how Appeals resolved the

disputed issues? 

Yes

(1)

No

(2)

Very

great

extent

(3)

Great

extent

(4)

Moderate

extent

(5)

Some

extent

(6)

Little

extent

(7)

No

extent

(8)

a. Exam contacted Appeals to

obtain the final resolution

N=385

10.8% 89.2% 25.3%

N=33

0.0% 15.3% 5.3% 15.3% 38.8%

b. Appeals provided Exam the

Appeals Case Memorandum or

supporting statement N=405

61.0% 39.0% 22.2%

N=218

33.1% 20.7% 10.7% 1.6% 11.7%

c. Appeals contacted Exam after

they resolved the disputed

issues N=376

20.5% 79.5% 18.3%

N=70

34.9% 24.9% 14.4% 5.0% 2.5%

d. The taxpayer told Exam N=366 6.5% 93.5% 91.5%

N=20

0.0% 0.0% 8.5% 0.0% 0.0%

e. Other (Specify)

N=78

69.3% 30.7% 42.3%

N=38

0.0% 0.0% 15.9% 0.0% 41.8%

If you did not receive any feedback on Appeals' final resolution of this

audit, please skip to question 42

16

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Appendix II 

Revenue Agent Questionnaire Results

39. Based on Appeals' resolution of disputed issues in this case, to what extent, if at all, were potential issues (a) dropped on your

cases in-process or (b) not raised on future audits you were assigned? (CHECK ONE BOX IN EACH ROW.) (18-19)

Very great

extent

(1)

Great extent

(2)

 Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No

extent

(6)

a. Potential issues dropped

on cases in-process N=367

3.1% 8.6% 6.0% 7.4% 7.8% 67.2%

b. Issues not raised on future

audits N=372

6.0% 10.0% 5.7% 13.8% 7.2% 57.3%

40. In general, in your opinion, to what extent, if at all, does Appeals final resolution of disputed issues cause Exam to alter the way

it develops similar issues on future audits of either the same taxpayer or different taxpayers? (CHECK ONE BOX IN EACH

ROW.) (20-21)

Very great

extent

(1)

Great extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No extent

(6)

a. Similar issues on future

audits for the same

taxpayer N=369

25.6% 35.5% 10.5% 10.0% 4.4% 14.1%

b. Similar issues for different

taxpayers N=374

14.5% 30.6% 19.5% 13.9% 5.2% 16.3%

41. Taking everything into consideration, what is your opinion on the quality of Appeals' overall resolution of disputed issues on

these corporate income tax returns? (CHECK ONE BOX.) (22-23)

9.1% Excellent

25.2% Good

32.4% Adequate

18.4% Poor

14.9% Very poor

N=361

If you believe the quality of Appeals' resolutions are poor or very poor, please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

17

Page 51 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

VII. GENERAL QUESTIONS AND COMMENTS

42. In your opinion, how positively or negatively do each of the following factors affect the amount of additional taxes recommended

by revenue agents that are ultimately assessed? (CHECK ONE BOX IN EACH ROW.) (24-30)

Very

positively

(1)

Somewhat

positively

(2)

Neither

positively

nor

negatively

(3)

Somewhat

negatively

(4)

Very

negatively

(5)

Don't

know

(6)

a. The revenue agent's workload

N=1,257

13.0% 13.1% 39.7% 28.2% 3.5% 2.5%

b. The revenue agent's group/case

manager's workload N=1,257

7.2% 7.6% 60.8% 15.9% 0.8% 7.7%

c. The revenue agent's skills and

knowledge N=1,253

57.9% 25.6% 7.1% 7.0% 1.6% 0.9%

d. The complexity of the tax laws

N=1,250

16.3% 21.6% 14.4% 33.3% 12.9% 1.5%

e. Appeals resolution of disputed

issues from a prior audit of this

taxpayer N=1,214

8.6% 8.2% 23.2% 20.5% 14.2% 25.3%

f. Appeals resolution of disputed

issues from a different taxpayer

N=1,217

3.8% 10.7% 24.4% 26.5% 13.2% 21.4%

g. Other (Specify)

N=174

________________________

15.6% 2.7% 18.7% 2.8% 21.2% 39.0%

43. In your opinion, to what extent, if at all, do audits of large corporations unreasonably burden those taxpayers selected for audit? 

(CHECK ONE BOX.) (31)

0.3% To a very great extent

2.5% To a great extent

27.1% To a moderate extent

34.9% To some extent

35.2% To a little or no extent

N=1,255

18

Page 52 GAO/GGD-97-62 Audits of Large Corporations
Appendix II 

Revenue Agent Questionnaire Results

44. Please use the space below to provide any additional comments about this case or IRS' audit and appeals processes for these

large corporate taxpayers. You may attach additional sheets if necessary. (32)

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

 __________________________________________________________________________________________________

Thank you for your assistance. Please return the questionnaire in the pre-addressed envelope.

19

Page 53 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

U.S. General Accounting Office

IRS' Audits of Large Corporations -

Group/Case Manager Questionnaire

Case ID - 1 (1-7)

INTRODUCTION

The U.S. General Accounting Office (GAO), an agency of

Congress, is conducting a study of IRS' audits of corporations

with assets of $10 million or more (activity codes 219 to 225). 

The scope of our review does not include corporate returns in

the Corporate Examination Program (CEP). The overall

objective of our study is to determine what factors affect the

rate at which taxes recommended by revenue agents on these

corporate returns get assessed. We are surveying a random

sample of group or case managers who are currently

responsible for these large corporate audits.

You have been selected to complete this questionnaire due to

your involvement with these audits of large corporations. 

Your response to this questionnaire will help us to identify the

factors that affect these audits, both positively and negatively. 

We cannot develop meaningful information without your frank

and honest answers to the questions.

GAO will safeguard the privacy of your responses to this

questionnaire. They will be combined with those of other

respondents and will be reported only in summary form. The

control number is included only to aid us in our follow-up

efforts. 

This questionnaire should take about 45 minutes to complete. 

If you have any questions concerning any part of this survey,

please call Mr. Kirk Boyer at (913) 384-7570.

Please return the completed questionnaire in the enclosed preaddressed envelope within 2 weeks from the time you receive

it. In the event the envelope is misplaced, the return address

is:

 U.S. General Accounting Office

 Kansas City Regional Office

 Attn: Mr. Kirk Boyer

 5799 Broadmoor - Suite 600

 Mission, Kansas 66202

Thank you for your assistance.

I. RESPONDENT INFORMATION

Please provide us your current work telephone number to

assist us if we need to clarify a response:

(______)______________________________

Do you currently have corporate income tax returns

(activity codes 219 to 225) in your inventory?

1. Yes → Please continue with the questions.

2. No → STOP: Do not continue if you do

not currently have these corporate

tax returns in your inventory.

Please return the questionnaire in

the enclosed envelope. 

1. Please answer the following as it applies to you : 

 (ENTER "00" IF NONE OR UNDER 6 MONTHS.)

(8-17)

a. Total number of years of IRS experience

in the Examination Division .......... 20.8 Years

N=506

b. Number of years auditing corporations 

with assets of $10 million or more 

(activity codes 219 to 225) that are 

not in CEP ...................... 5.5 Years

N=506

c. Number of years as a group manager 

over these corporate audits (activity

codes 219 to 225) that are not in CEP . . . 7.5 Years

N=506

d. Number of years auditing CEP

corporations ..................... 2.2 Years

N=503

e. Total number of years of non-IRS

experience in accounting or auditing . . . 1.5 Years

N=500

Page 54 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

2. Which of the following best describes the type of group

you currently manage? (CHECK ONE BOX.) (18)

67.1% Non-specialized General Program group (i.e., a

mixture of revenue agent grades and/or office

auditors)

4.8% Specialized General Program group targeted

toward large corporate audits

14.4% CEP group

13.8% Other (Specify) ___________________________

N=503

3. How many corporate income tax returns (activity codes

219 to 225) do you currently have in your inventory? 

(ENTER NUMBER.) (19-21)

28.7 Number of corporate income tax returns

N=464

II. FACTORS RELATED TO AUDITS

OF LARGE CORPORATIONS

4. To what extent, if at all, are you currently involved in the following on audits of large corporations? (CHECK ONE BOX

IN EACH ROW.) (22-33)

Very

great

extent

(1)

Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No

extent

(6)

a. Selecting corporate returns to audit

N=503

12.6% 27.5% 22.2% 16.2% 14.4% 7.2%

b. Identifying or selecting issues for audit

N=506

3.0% 13.1% 36.3% 20.2% 19.0% 8.3%

c. Requesting out-of-district audit work or

assistance

N=497

3.0% 8.5% 9.1% 20.6% 23.6% 35.2%

d. Requesting specialists

N=503

6.0% 21.0% 21.0% 31.1% 14.4% 6.6%

e. Discussing complex or technical issues with the

revenue agent N=506

17.9% 33.3% 31.0% 15.5% 1.8% 0.6%

f. Improving the taxpayer's timeliness and/or

completeness in responding to information

requests N=506

11.3% 22.6% 32.7% 16.1% 13.1% 4.2%

g. Reviewing proposed adjustments

N=506

13.7% 42.3% 26.8% 10.7% 4.2% 2.4%

h. Discussing proposed adjustments with the

taxpayer during interim meetings N=503

7.2% 15.0% 31.1% 20.4% 18.0% 8.4%

i. Discussing proposed adjustments with the

taxpayer at the closing conference N=497

11.5% 25.5% 29.1% 21.2% 7.3% 5.5%

j. Discussing unagreed issues with the revenue

agent N=503

25.7% 42.5% 22.8% 7.8% 0.6% 0.6%

k. Developing an unagreed case (such as the agent's

report, statutory notice letter, or written response

to the taxpayer's protest) N=503

6.0% 19.8% 26.9% 15.0% 22.2% 10.2%

l. Discussing unagreed issues with Appeals

N=503

3.6% 10.8% 19.8% 18.0% 25.7% 22.2%

2

Page 55 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

5. Overall, how satisfied or dissatisfied are you with the following factors related to large corporate audits? (CHECK ONE BOX

IN EACH ROW.) (34-44)

Very

satisfied

(1)

Generally

satisfied

(2)

Neither

satisfied nor

dissatisfied

(3)

Generally

dissatisfied

(4)

Very

dissatisfied

(5)

a. Length of these audits

N=506

4.2% 45.2% 20.2% 26.8% 3.6%

b. Thoroughness of these audits

N=506

12.5% 66.7% 15.5% 4.8% 0.6%

c. Any out-of-district audit work or

assistance N=473

0.0% 19.7% 63.7% 12.7% 3.8%

d. Extent to which other IRS staff

(including specialists) adequately

developed the issues N=500

3.6% 56.6% 25.3% 13.3% 1.2%

e. Timeliness of taxpayers' responses to

information requests N=506

1.2% 38.1% 22.6% 36.3% 1.8%

f. Cooperation of taxpayers to provide

information N=506

1.2% 45.8% 26.8% 24.4% 1.8%

g. Cooperation of taxpayers'

representatives to provide information

N=506

0.6% 43.5% 20.2% 32.7% 3.0%

h. Overall level of cooperation of

taxpayers N=506

1.8% 51.2% 26.2% 19.0% 1.8%

i. Overall level of cooperation of

taxpayers' representatives N=506

0.6% 44.0% 26.2% 27.4% 1.8%

k. Corporate taxpayers' compliance with

the tax laws N=503

0.0% 41.9% 37.7% 19.8% 0.6%

l. Other (Specify) N=15 0.0% 0.0% 20.0% 40.0% 40.0%

3

Page 56 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

III. RESOURCES USED TO AUDIT

LARGE CORPORATIONS 

6. How often, if at all, do you or your revenue agents do any of the following during these corporate audits? (CHECK ONE

BOX IN EACH ROW.) (45-51)

90-100%

of the

time

(1)

60-89%

of the

time

(2)

40-59%

of the

time

(3)

10-

39%

of the

time

(4)

Less

than

10% of

the time

(5)

a. Contact the industry coordinator or specialist to

discuss any issue related to this taxpayers primary

industry N=500

20.5% 27.1% 22.9% 17.5% 12.0%

b. Obtain a position paper on an issue

N=500

16.9% 12.0% 13.9% 30.1% 27.1%

c. Contact the market segment coordinator to discuss

any issue N=497

9.1% 18.8% 19.4% 30.3% 22.4%

d. Obtain or review the market segment audit guide

N=494

17.7% 22.0% 14.6% 25.0% 20.7%

e. Review a District Office memorandum discussing

an issue related to this taxpayer's primary industry

N=500

14.5% 16.3% 18.7% 25.9% 24.7%

f. Contact revenue agents or group managers in other

districts on specialized industries/issues N=500

9.0% 17.5% 18.7% 28.3% 26.5%

g. Other (Specify)

N=18

__________________________________________

__________________________________________

16.7% 33.3% 33.3% 0.0% 16.7%

4

Page 57 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

7. Consider the revenue agents you assign to these large corporate audits. How satisfied or dissatisfied are you with their ability

to audit large corporations in each of the following areas? (CHECK ONE BOX IN EACH ROW. ) (52-62)

Very 

 satisfied

(1)

Generally 

satisfied

(2)

Neither

satisfied

nor

dissatisfied

(3)

Generally

dissatisfied

(4)

Very

dissatisfied

(5)

a. Identifying income issues

N=503

35.9% 49.7% 10.2% 3.6% 0.6%

b. Probing for unallowable

expenses N=500

42.8% 51.2% 4.2% 1.2% 0.6%

c. Applying the tax laws to

corporate tax returns

N=503

46.7% 44.9% 5.4% 2.4% 0.6%

d. Examining corporate tax

returns in various industries

N=503

32.9% 50.9% 13.8% 1.8% 0.6%

e. Examining the corporation's

books and records N=503

40.1% 49.7% 7.8% 1.8% 0.6%

f. Developing complex or

technical issues N=503

37.7% 47.9% 9.6% 3.6% 1.2%

g Determining when to request

the services of a specialist

N=500

41.0% 42.2% 16.3% 0.0% 0.6%

h. Determining when to request

legal assistance from District

Counsel or national office

N=503

28.7% 47.3% 21.6% 1.8% 0.6%

i. Securing taxpayer agreement

on audit issues N=503

30.5% 54.5% 12.0% 2.4% 0.6%

j. Computing corporate tax

liability N=500

53.0% 43.4% 3.0% 0.0% 0.6%

k. Other (Specify)

N=18

16.7% 0.0% 33.3% 33.3% 16.7%

5

Page 58 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

8. In your opinion, to what extent, if at all, do the revenue agents conducting these audits receive adequate resources in the

following areas? (CHECK ONE BOX IN EACH ROW.) (63-70)

 Very

great

extent

(1)

Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

 No

extent

(6)

a. Travel funds for

local travel N=506

36.3% 42.9% 14.3% 5.4% 1.2% 0.0%

b. Travel funds for outof- district audit

work N=491

7.4% 6.7% 16.6% 17.8% 22.7% 28.8%

c. Out-of-district

assistance or support

audit N=488

1.9% 7.4% 22.2% 28.4% 23.5% 16.7%

d. Computer equipment

N=503

3.6% 28.1% 32.3% 25.1% 9.6% 1.2%

e. Computer software

N=506

3.0% 21.4% 28.6% 23.2% 22.6% 1.2%

f. Research materials

N=506

4.8% 30.4% 33.9% 21.4% 8.3% 1.2%

g. Audit aides

N=506

1.8% 11.3% 20.2% 15.5% 20.2% 31.0%

f. Other (Specify)

N=15

20.0% 0.0% 0.0% 0.0% 40.0% 40.0%

9. When revenue agents are assigned corporate income tax returns to audit, do you consider each revenue agents' financial

interests to determine if any potential conflicts of interest exist? (CHECK ONE BOX.) (71-72)

55.9% Yes → Please explain how you are made aware of the revenue agents' financial interests.

_________________________________________________________________________________

_________________________________________________________________________________

_________________________________________________________________________________

44.1% No

N=485

6

Page 59 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

10. How often, if at all, are any of the following types of assistance used during these large corporate audits? (CHECK ONE

BOX IN EACH ROW.) (73-84)

90-100%

of the

time

(1)

60-89%

of the

time

(2)

40-59%

of the

time

(3)

10-39%

of the 

time

(4)

Less than

10% of

the time

(5)

Legal assistance: AAAA AAAA AAAA AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAAA AAAA AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAA AAA AAAA

AAAA AAAA AAAA AAAAAAA AAA

AAA

AAA

AAAA AAA AAA AAAA

AAAA AAAA AAAA AAAAAAAA

AA

AA

AAAA AAA AAA AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

a. District Counsel

assistance

N=506

7.1% 17.9% 11.9% 28.6% 34.5%

b. National office technical

advice

N=506

0.6% 7.7% 12.5% 23.8% 55.4%

c. National office Chief

Counsel assistance other

than technical advice

N=503

0.6% 6.0% 8.4% 20.4% 64.7%

Specialist assistance: AAAA AAAA AAAA AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAAA AAAA AAAAAAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAA AAA

AAA

AAA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAAA

AA

AA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

d. Computer audit specialist

N=503

22.8% 20.4% 16.2% 18.0% 22.8%

e. Engineer

N=503

15.6% 22.8% 28.1% 26.9% 6.6%

f. International examiner

N=506

12.5% 23.2% 21.4% 23.2% 19.6%

g. Economist

N=506

1.2% 4.2% 13.1% 19.0% 62.5%

h. Financial products

specialists N=500

5.4% 6.6% 10.8% 17.5% 59.6%

i. Other (Specify)

N=54

0.0% 16.7% 5.6% 16.7% 61.1%

Other assistance: AAAA AAAA AAAA AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAAA AAAA AAAAAAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAA AAA

AAA

AAA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAAA

AA

AA

AAAA AAA AAA AAAAAAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

j. Additional revenue agents

N=482

5.6% 11.3% 13.8% 24.4% 45.0%

k. Discussions with Appeals

while the audit is open

N=497

0.0% 4.2% 7.9% 27.3% 60.6%

If you checked box 4 or 5 (10-39% or Less than 10%) anywhere in the above matrix, please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

7

Page 60 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

11. In your opinion, does the use of IRS specialists positively or negatively affect Exam's ability to obtain the taxpayer's

agreement on large corporate audit issues? (CHECK ONE BOX.) (85)

9.6% Very positively

50.0% Somewhat positively

31.3% Neither positively nor negatively

7.8% Somewhat negatively

1.2% Very negatively

N=500

12. In your opinion, to what extent, if at all, does assistance from each of the following improve the development of issues in

these large corporate audits? (CHECK ONE BOX IN EACH ROW.) (86-96)

Very

great

extent

(1)

 Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

 Little

or no

extent

(5)

No basis

to 

judge

(6)

Legal assistance: AAAA AAAA

AAAA AAAA

AAAA AAAA AAAA

AAAA

AAAA

AA

AA

AAAA AAA

AAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA

AAAA

AAAA

AAAA AAA

AAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA

AAAA

AAAA

AA

AA

AAAA AAA

AAA AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA

AAAA

AAAA

AAAA AAA

AAA AAAA

AAAA AAAA AAAA

AAAA

AAA AAA

AAA

AAA

AAAA AAA

AAA AAAA

AAAA AAAA AAAA

AAAA

AAA AAA

AAA

AAA

a. District Counsel

assistance N=506

11.9% 31.5% 25.0% 11.9% 7.7% 11.9%

b. National office

technical advice N=506

7.1% 28.0% 19.0% 19.0% 8.3% 18.5%

c. National office Chief

Counsel assistance

other than technical

advice N=506

6.0% 18.5% 19.0% 16.1% 11.9% 28.6%

Specialist assistance: AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA AAAAAAAA

AA

AA

AAAA AAA AAA

AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAA AAA

AAAA

AAAA AAAA AAAA AAAAAAAA AAAA AAAA AAAAAAAA

AA

AA

AAAA AAA AAA

AAAA

AAAA AAAA AAAA AAAAAAAA AAAA

AAAA

AAAA

AAAA AAA AAA

AAAA

AAAA AAAA AAAA AAAAAAA AAA

AAA

AAA

AAAA AAA AAA

AAAA

AAAA AAAA AAAA AAAAAAA AAA

AAA

AAA

d. Computer audit

specialist N=503

7.2% 26.9% 29.3% 18.0% 9.0% 9.6%

e. Engineer

N=503

6.6% 38.3% 31.7% 15.6% 4.8% 3.0%

f. International examiner

N=503

7.8% 40.1% 25.1% 11.4% 5.4% 10.2%

g. Economist

N=500

3.0% 15.1% 18.1% 15.1% 10.8% 38.0%

h. Financial products

specialists N=503

4.8% 16.8% 17.4% 10.8% 7.2% 43.1%

i. Other (Specify)

N=48

__________________

12.5% 6.3% 12.5% 0.0% 6.3% 62.5%

Other assistance: AAAA AAAA

AAAA AAAA

AAAA

AAAA AAAA AAAA

AA

AA

AA

AA

AAAA AAA

AAA AAAA

AAAA

AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA AAA

AAA AAAA

AAAA

AAAA AAAA AAAA

AAAA

AAAA AAAA AAAA

AA

AA

AA

AA

AAAA AAA

AAA AAAA

AAAA

AAAA AAAA AAAA

AAAA

AAAA

AAAA

AAAA

AAAA AAA

AAA AAAA

AAAA

AAAA AAAA AAAA

AAA

AAA

AAA

AAA

AAAA AAA

AAA AAAA

AAAA

AAAA AAAA AAAA

AAA

AAA

AAA

AAA

j. Additional revenue

agents N=497

6.1% 24.2% 21.8% 16.4% 11.5% 20.0%

k. Discussions with

Appeals while the audit

is open N=506

3.0% 10.1% 20.8% 20.2% 18.5% 27.4%

8

Page 61 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

IV. CASE CLOSURE INFORMATION 

13. During the past 12 months, how often, if at all, were potential issues dropped by your revenue agents in these audits of large

corporations because these taxpayers did not provide all of the requested information? (CHECK ONE BOX.) (97)

0.0% 90-100% of the time

2.4% 60-89% of the time

0.6% 40-59% of the time

12.0% 10-39% of the time

85.0% Less than 10% of the time

N=503

14 How satisfied or dissatisfied are you with Exam's emphasis on attempting to obtain more agreements with the taxpayers on

proposed adjustments at the Exam level? (CHECK ONE BOX.) (98-99)

29.3% Very satisfied

37.7% Generally satisfied

25.7% Neither satisfied nor dissatisfied

6.6% Generally dissatisfied →

 Please explain your dissatisfaction:

0.6% Very dissatisfied →

 

N=503

____________________________________________________

____________________________________________________

____________________________________________________

Repeat ID - 2 (1-7)

15. How often, if at all, do these large corporate taxpayers provide Exam a written protest of additional taxes recommended by

revenue agents? (CHECK ONE BOX.) (8)

50.0% 90-100% of the time

19.3% 60-89% of the time

12.7% 40-59% of the time

13.9% 10-39% of the time

4.2% Less than 10% of the time

N=500

9

Page 62 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

16. How often, if at all, does your district conduct post-audit critiques on these large corporate audits to determine if the audit

standards were met? (CHECK ONE BOX.) (9)

8.4% 90-100% of the time

6.5% 60-89% of the time

7.7% 40-59% of the time

21.3% 10-39% of the time

56.1% Less than 10% of the time

N=467

V. EXAM'S INTERACTION WITH APPEALS

17. In cases where taxpayers provide new information to Appeals, how often, if at all, does Appeals request Exam to review and

verify this information? (CHECK ONE BOX.) (10-11)

17.3% 90-100% of the time

20.2% 60-89% of the time If Appeals returns cases 40% or more of the time, how often, 

has Exam requested this or similar information from the taxpayers

10.1% 40-59% of the time but had not received it? (CHECK ONE BOX.)

13.7% 10-39% of the time 44.7% 90-100% of the time

10.1% Less than 10% of the time 30.3% 60-89% of the time

--------------------------

9.2% 40-59% of the time

28.6% Do not know

0.0% 10-39% of the time

N=506

2.6% Less than 10% of the time

--------------------------

 13.2% Do not know

N=229

18. When Exam receives a written protest, how often, if at all, do you or your revenue agents provide a written response to the

taxpayer's protest to Appeals in these large corporate cases? (CHECK ONE BOX.) (12)

48.8% 90-100% of the time

19.3% 60-89% of the time

8.4% 40-59% of the time

7.8% 10-39% of the time

15.7% Less than 10% of the time

N=500

10

Page 63 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

19. How often, if at all, do you or your revenue agents discuss the following with Appeals? (CHECK ONE BOX IN EACH

ROW.)

(13-18)

90-100%

of the

time

(1)

60-89%

of the

time

(2)

40-59%

of the

time

(3)

10-39%

of the

time

(4)

Less than

10% of

the time

(5)

No

basis to

judge

(6)

a. The facts relevant to the

protest N=506

11.3% 10.7% 9.5% 18.5% 26.8% 23.2%

b. Legal position cited by the

revenue agent N=506

8.9% 10.1% 8.3% 21.4% 27.4% 23.8%

c. Records provided to Appeals

by the taxpayer N=503

10.2% 9.0% 10.2% 17.4% 25.1% 28.1%

d. Information in the unagreed

report (i.e., RAR) or the

written response to the

protest N=506

10.7% 10.1% 10.7% 16.7% 28.0% 23.8%

e. Alternative positions

considered by Appeals to

resolve disputed issues

N=506

6.5% 8.9% 6.5% 17.9% 28.6% 31.5%

f. Other (Specify)

N=48

__________________

12.5% 0.0% 0.0% 6.3% 0.0% 81.2%

11

Page 64 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

20. How often, if at all, do you receive the following feedback on Appeals' final resolution of disputed issues from these audits? 

To what extent, if at all, does this feedback help you or the revenue agent understand how Appeals resolved the disputed

issues? (CHECK TWO BOXES IN EACH ROW.) (19-28)

How often, if at all, do you obtain the following

feedback on Appeals' final resolution of disputed

issues?

To what extent, if at all, did these types of feedback on

Appeals final resolution help Exam understand how

Appeals resolved the disputed issues? 

Feedback by...

90-

100%

of the

time

(1)

60-

89%

of the

time

(2)

40-

59%

of the

time

(3)

10-39%

of the

time

(4)

Less than

10%

of the

time

(5)

Very

great

extent

(1)

Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

or no

extent

(5)

Not

applicable

(6)

a. Exam contacting

Appeals to obtain

the final

resolution N=485

4.3% 7.5% 9.9% 16.8% 61.5% 3.8%

N=470

16.7% 16.0% 16.0% 21.2% 26.3%

b. Appeals

providing Exam

the Appeals Case

Memorandum or

supporting

statement N=482

27.5% 21.9% 13.7% 14.4% 22.5% 7.0%

N=476

22.8% 26.6% 20.9% 15.8% 7.0%

c. The Appeals

officer contacting

Exam after they

resolved the

disputed issues

N=482

3.1% 5.6% 5.6% 13.8% 71.9% 5.7%

N=476

16.5% 15.2% 11.4% 22.2% 29.1%

d. The taxpayer

telling Exam of

the final

resolution N=482

1.9% 3.8% 5.0% 16.3% 73.1% 0.6%

N=476

5.1% 8.2% 13.9% 31.6% 40.5%

e Other (Specify)

N=12

______________

0.0% 0.0% 0.0% 0.0% 100% 0.0%

N=12

0.0% 0.0% 25.0% 25.0% 50.0%

VI. APPEALS RESOLUTION

OF DISPUTED ISSUES

21. In your opinion, does Appeals' resolution of disputed issues for these large corporate audits positively or negatively affect the

following: (CHECK ONE BOX IN EACH ROW.) (29-31)

Very

positively

(1)

Somewhat

positively

(2)

Neither

positively

nor

negatively

(3)

Somewhat

negatively

(4)

Very

negatively

(5)

No

basis to

judge

(6)

a. Level of cooperation between

Exam and Appeals N=491

2.5% 11.0% 30.1% 35.6% 9.8% 11.0%

b. Level of cooperation between

Exam and the taxpayer N=491

1.2% 9.8% 26.4% 36.8% 16.0% 9.8%

c. Level of taxpayer compliance

N=491

1.2% 8.6% 18.4% 38.0% 20.9% 12.9%

12

Page 65 GAO/GGD-97-62 Audits of Large Corporations
Appendix III 

Group Manager Questionnaire Results

22. Based on Appeals' resolution of disputed issues, to what extent, if at all, are potential issues dropped on cases in-process or

not raised on future audits? (CHECK ONE BOX IN EACH ROW.) (32-33)

Very great

extent

(1)

Great extent

(2)

 Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No

extent

(6)

a. Potential issues dropped

on cases in-process N=494

5.5% 20.7% 22.0% 26.8% 13.4% 11.6%

b. Issues not raised on future

audits N=497

9.7% 26.1% 21.2% 20.6% 12.7% 9.7%

23. In your opinion, to what extent, if at all, does Appeals' final resolution of disputed issues cause Exam to alter the way it

develops similar issues on future audits of either the same taxpayer or different taxpayers? (CHECK ONE BOX IN EACH

ROW.) (34-35)

Very great

extent

(1)

Great extent

(2)

 Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No

 extent

(6)

a. Similar issues on future

audits for the same

taxpayer N=497

14.5% 32.7% 25.5% 17.0% 5.5% 4.8%

b. Similar issues for different

taxpayers N=497

8.5% 26.1% 32.1% 19.4% 9.1% 4.8%

24. In your opinion, to what extent, if at all, was Appeals' consideration of this case fair and impartial to both the government

and the taxpayer? (CHECK ONE BOX IN EACH ROW.) (36-37

Very great

extent

(1)

Great extent

(2)

 Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No 

extent

(6)

a. Fair and impartial to the

taxpayer

N=476

12.7% 31.6% 33.5% 12.7% 4.4% 5.1%

b. Fair and impartial to the

government

N=476

1.9% 10.8% 32.9% 27.8% 19.6% 7.0%

13

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Appendix III 

Group Manager Questionnaire Results

25. Taking everything into consideration, what is your opinion on the quality of Appeals' overall resolution of disputed issues on

these corporate income tax returns? (CHECK ONE BOX.) (38-39)

 0.6% Excellent

 17.4% Good

59.0% Adequate

 18.0% Poor

 5.0% Very poor

N=485

If you believe the quality of Appeals' resolutions are poor or very poor, please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

VII. GENERAL QUESTIONS AND

ANY DISTRICT OFFICE CHANGES

26. In your opinion, how positively or negatively do each of the following factors affect the amount of those additional taxes

recommended by revenue agents that are ultimately assessed? (CHECK ONE BOX IN EACH ROW.) (40-46)

Very

positively

(1)

Somewhat

positively

(2)

Neither

positively

nor

negatively

(3)

Somewhat

negatively

(4)

Very

negatively

(5)

Don't

know

(6)

a. Your workload

N=500

1.2% 10.2% 58.4% 19.3% 5.4% 5.4%

b. Revenue agent's workload

N=497

3.6% 17.6% 50.3% 21.8% 1.8% 4.8%

c. Revenue agent's skills and

knowledge N=503

41.9% 32.3% 7.2% 12.0% 4.2% 2.4%

d. Complexity of the tax laws

N=500

9.6% 14.5% 17.5% 40.4% 15.1% 3.0%

e. Appeals resolution of disputed

issues from a prior audit of

this taxpayer N=500

4.2% 7.8% 21.7% 39.8% 16.9% 9.6%

f. Appeals resolution of disputed

issues from a different

taxpayer N=500

1.8% 6.6% 36.1% 35.5% 5.4% 14.5%

g. Other (Specify)

N=18

________________________

0.0% 0.0% 16.7% 0.0% 16.7% 66.7%

14

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Group Manager Questionnaire Results

27. In your opinion, to what extent, if at all, do audits of large corporations unreasonably burden those taxpayers selected for

audit? (CHECK ONE BOX.) (47)

0.6% Very great extent

4.8% Great extent

29.9% Moderate extent

36.5% Some extent

28.1% Little or no extent

N=503

28. Have you or your district modified any audit procedure for these large corporate cases due to IRS national office's task force

teams reviewing corporate workload identification and/or compliance strategies? (CHECK ONE BOX.) (48)

 13.7% Yes

 38.1% No

 48.2% Don't know

N=506

15

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Group Manager Questionnaire Results

29. Please indicate if your district has implemented or plans changes to its policies or procedures for any of the following. If

yes, briefly describe each change and the impact you believe these changes will have on the amount of dollars recommended

in Exam. (CHECK ONE BOX IN COLUMN 1 IN EACH ROW. IF YOU ANSWER THE FIRST PART "YES" THEN

ANSWER THE REMAINING PARTS OF THE QUESTION.)

(49-81)

Has your district implemented the following or does it plan to in the future?

(1)

If yes, what impact will this

change have on the amount

of dollars recommended by

revenue agents?

(2)

Please use this space to describe the change(s).

(Attach additional pages if necessary.)

(3)

a. Method for selecting returns for audit 54.7% Yes →

45.3% No

N=479

68.6% Positive impact

3.5% No impact

2.3% Negative impact

25.6% Don' know

N=259

b. Assigning more revenue agents to

these audits 

26.8% Yes →

73.2% No

N=473

75.6% Positive impact

2.4% No impact

4.9% Negative impact

17.1% Don't know

N=123

c. Having revenue agents specialize in

an industry

82.1% Yes →

17.9% No

N=488

66.9% Positive impact

7.7% No impact

1.5% Negative impact

23.8% Don't know

N=391

d. Placing all revenue agents for these

audits in one group

27.3% Yes →

72.7% No

N=485

69.0% Positive impact

2.4% No impact

2.4% Negative impact

26.2% Don't know

N=126

e. Requesting or using legal assistance or

technical advice

41.7% Yes →

58.3% No

N=470

78.0% Positive impact

6.8% No impact

3.4% Negative impact

11.9% Don't know

N=178

f. Involving specialists in more of these

audits

41.6% Yes →

58.4% No

N=464

74.2% Positive impact

4.8% No impact

3.2% Negative impact

17.7% Don't know

N=187

g Issuing summons for

information 36.9% Yes →

63.1% No

N=473

66.0% Positive impact

5.7% No impact

5.7% Negative impact

22.6% Don't know

N=160

h. Securing agreement with corporate

taxpayers on

proposed audit

adjustments

46.1% Yes →

53.2% No

N=470

80.6% Positive impact

11.1% No impact

0.0% Negative impact

8.3% Don't know

N=217

i. Increasing

management

involvement

55.6% Yes →

44.4% No

N=482

72.1% Positive impact

14.0% No impact

2.3% Negative impact

11.6% Don't know

N=259

j. Submitting proposals to clarify vague and

complex tax laws

17.2% Yes →

82.8% No

N=455

56.0% Positive impact

12.0% No impact

0.0% Negative impact

32.0% Don't know

N=75

k. Other (Specify)

_____________

_____________

37.5% Yes →

62.5% No

N=24

33.3% Positive impact

0.0% No impact

33.3% Negative impact

33.3% Don't know

N=9

16

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Group Manager Questionnaire Results

30. Please use the space below to provide any additional comments about this case or IRS' audit and appeals processes for these large corporate taxpayers. You may attach additional sheets if necessary. (82)

Thank you for your assistance. Please return the questionnaire in the pre-addressed envelop.

2

17

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Appendix IV 

Appeals Officer Questionnaire Results

U.S. General Accounting Office

IRS' Audits of Large Corporations -

Appeals Officer Questionnaire

3

 Case ID - 1 (1-7)

INTRODUCTION

The U.S. General Accounting Office (GAO), an agency of

Congress, is conducting a study of IRS' audits of corporations

with assets of $10 million or more (activity codes 219 to 225). 

The scope of our review does not include corporate returns in

the Corporate Examination Program (CEP). The overall

objective of our study is to determine what factors affect the

rate at which taxes recommended by revenue agents on these

corporate returns get assessed. We are surveying a random

sample of appeals officers who considered corporate income

tax disputes closed from Appeals during fiscal year 1994.

You have been selected to complete this questionnaire due to

your involvement with the corporate returns for the tax years

indicated at the bottom of this page. Because of your work on

this case, your response to this questionnaire will help us to

identify the factors that affected these audits, both positively

and negatively. We cannot develop meaningful information

without your frank and honest answers to the questions.

GAO will safeguard the privacy of your responses to this

questionnaire. They will be combined with those of other

respondents and will be reported only in summary form. The

control number is included only to aid us in our follow-up

efforts. We will not identify specific taxpayer information in

our report.

This questionnaire should take about 1 hour to complete. If

you have any questions concerning any part of this survey,

please call Mr. Kirk Boyer at (913) 384-7570.

Please return the completed questionnaire in the enclosed preaddressed envelope within 2 weeks from the time you receive

it. In the event the envelope is misplaced, the return address

is:

U.S. General Accounting Office

Kansas City Regional Office

Attn: Mr. Kirk Boyer

5799 Broadmoor - Suite 600

Mission, Kansas 66202

Thank you for your assistance.

Case Information:

After completing the questionnaire, please remove the case information sticker before returning your completed questionnaire.

Page 71 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

I. RESPONDENT INFORMATION

 Please provide us your current work telephone number to assist us if we need to clarify a response:

 

(______)______________________________

 Were you assigned to resolve the disputes on the corporate tax returns shown on page 1?

1. Yes → Please continue with the questions.

2. No → STOP: Do not continue if you were not involved in resolving the disputes on these corporate tax returns.

Please return the questionnaire in the enclosed envelope. 

1. Please answer the following as it applied to you at the time you were assigned to the work unit shown on page 1: (ENTER

"00" IF NONE OR UNDER 6 MONTHS.) (8-21)

Years reported are means

a. Total number of years of IRS experience ................................. 22.9 Years N=630

b. Total number of years of IRS experience in Appeals ........................ 12.5 Years N=630

1. Number of years as an Appeals Officer ............................... 12.3 Years N=630

2. Number of years as an Appeals Officer resolving

deficiency disputes over $10 million ................................. 5.2 Years N=621

3. Number of years as a Team Chief .................................. 0.2 Years N=547

c. Total number of years as a revenue agent ................................ 9.2 Years N=618

d. Total number of years in other government or private industry position(s) related 

to tax/auditing .................................................... 2.5 Years N=510

(Specify the position(s) you've held under d above) ___________________________________________

2. What grade level were you at the time you were assigned to this work unit? (ENTER NUMBER.) (22-23)

GS - 13 9.6%

GS - 14 86.1%

GS - 15 3.3%

GS - 16 1.0%

N=623

2

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Appeals Officer Questionnaire Results

3. Did you receive the following formal training prior to being assigned the work unit shown on page 1 of this questionnaire? If

yes, indicate to what extent, if at all, the training improved your ability to resolve the taxpayer's disputed issues? 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE SECOND PART OF THE QUESTION. IF YOU ANSWER "NO" TO THE FIRST PART, GO TO THE NEXT LINE.) (24-39)

If yes, to what extent, if at all, did it improve your ability to

resolve the taxpayer's disputed issues?

Did you receive the

following training

prior to being

assigned?

 Very

great

extent

(1)

 Great

extent

(2)

Moderate

extent

(3)

 Some

extent

(4)

 Little

extent

(5)

 No

extent

(6)

a. Advanced corporate training

or equivalent of Phase 5

N=613

81.9% Yes →

18.1% No

N=502

2.5% 25.5% 36.3% 16.9% 8.6% 10.3%

b. Corporate training or

equivalent of Phase 4

N=618

92.7% Yes →

 7.3% No

N=573

1.1% 25.4% 35.0% 24.0% 8.7% 5.8%

c. Appeals officer training

N=618

97.7% Yes →

 2.3% No

N=603

7.9% 30.0% 31.5% 21.7% 6.7% 2.2%

d. Training on resolving

complex technical and/or

legal issues

N=627

48.9% Yes →

51.1% No

N=303

7.0% 31.3% 38.2% 14.5% 1.1% 8.0%

e. IRS training (3 days or

more) related to this

taxpayer's primary industry

(including industry

specialization program (ISP)

training)

N=630

 5.6% Yes →

94.4% No

N=35

21.3% 18.4% 43.8% 9.2% 7.3% 0.0%

f. Non-IRS training or seminars

on any issues related to this

taxpayer's primary industry

N=630

10.6% Yes →

89.4% No

N=62

4.2% 41.4% 54.4% 0.0% 0.0% 0.0%

g. Topical training provided by

Appeals, Exam, and/or

Counsel relevant to this

corporate taxpayer

N=626

25.0% Yes →

75.0% No

N=157

5.6% 26.3% 38.3% 29.8% 0.0% 0.0%

h. Other (Specify)

_______________________

N=277

12.8% Yes →

87.2% No

N=36

9.2% 43.1% 21.2% 26.5% 0.0% 0.0%

4. Was there any training that you had not received before you were assigned to this corporate work unit that you believe you

needed to improve your ability to resolve the taxpayer's disputed issues? (CHECK ONE.) (40-41)

14.6% Yes → Please describe the training needed.

______________________________________________________________________________

N=624

______________________________________________________________________________

85.4% No

3

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Appeals Officer Questionnaire Results

III. TOP THREE DOLLAR ISSUES

PROTESTED BY THE TAXPAY ER

You will need the Appeals Case Memorandum to 

complete this section.

5. For the corporate entity shown on page 1 of this questionnaire, how many issues were protested by the taxpayer? 

(ENTER NUMBER.) (42-43)

Number of protested issues Mean = 4.9

N=568

6. Did this return have any related entities? If yes, please indicate the type(s) of related entities and the tax years associated

with each type. 

(CHECK ONE BOX. IF YOU ANSWER "YES", THEN COMPLETE THE REMAINING PARTS. IF YOU ANSWER

"NO", GO TO THE NEXT QUESTION.) (44-62)

26.9% Yes → → → Type of related entities

(e.g., S corp, partnership, individual, etc.)

Tax years for 

 each type

32.2% Form 1120C 1.

31.1% Form 1040C 2.

16.2% Form 1120 3.

 8.4% Form 1065 4.

 6.2% Form 1120S 5.

 5.8% Other 6.

73.1% No

N=151

N=560

4

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7. Please provide the following information on the top three dollar adjustments to income or credit protested by the taxpayer for

the entity shown on page 1 of this questionnaire.

Issue #1

(Largest dollar adjustment)

Issue #2

(Second largest dollar

adjustment)

Issue #3

(Third largest dollar adjustment)

a. Identify the

issue as shown

on the ACM

(63) 

___________________________

___________________________

(64)

___________________________

___________________________

(65)

__________________________

__________________________

b. Identify the

applicable IRC

section

(66) 

___________________________

(67) 

___________________________

(68) 

__________________________

c. Exam's

Adjustment was

to: 

(69) 

97.0% Taxable income

 1.4% Credit

 1.6% Other N=606

(70)

83.3% Taxable income

 9.8% Credit

 6.9% Other N=408

(71)

89.4% Taxable income

 3.7% Credit

 7.0% Other N=295

d. Adjustment per

Exam

(72-80)

 Mean = $6,383,953

N=630

(81-89) 

Mean = $5,519,661

N=403

(90-98) 

Mean = $2,699,566

N=297

e. Final

adjustment per

Appeals

Repeat ID - 2 (8-16) 

$2,360,910

N=563

(17-25)

$2,440,946

N=407

(26-34)

$906,316

N=293 

f. Basis for 

Adjustment 

(Check all that

apply.)

(35-41) 

430 Legal interpretation

 58 Unsupported deductions

 129 Valuation

 130 Allocation

 5 Whipsaw

 93 Timing

 137 Other (Specify)

(42-48)

 249 Legal interpretation

 59 Unsupported deductions

 56 Valuation

 67 Allocation

 0 Whipsaw

 69 Timing

 72 Other (Specify)

(49-55)

169 Legal interpretation

 46 Unsupported deductions

 47 Valuation

 39 Allocation

 0 Whipsaw

 29 Timing

 47 Other (Specify)

g. Dispute

between Exam

and taxpayer

involved: 

(Check all that

apply.)

(56-60) 

460 Disagreement over

interpretation of law

387 Disagreement over

facts/evidence

 6 Appeals settlement on

prior tax years

 3 Appeals settlement of same

issue on a different taxpayer

 73 Pending litigation of same

issue for a different taxpayer

(61-65)

269 Disagreement over

interpretation of law

266 Disagreement over

facts/evidence

 9 Appeals settlement on

prior tax years

 0 Appeals settlement of same

issue on a different taxpayer

 8 Pending litigation of same

issue for a different taxpayer

(66-70)

183 Disagreement over

interpretation of law

200 Disagreement over

facts/evidence

 6 Appeals settlement on

prior tax years

 0 Appeals settlement of same

issue on a different taxpayer

 0 Pending litigation of 

same issue for a different

taxpayer

5

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Appeals Officer Questionnaire Results

Questions 8 through 24 relate specifically to the three top dollar adjustments

to income or credit you identified in question 7.

8. Please identify the reason code(s) (from those listed below) which best describe your basis for resolving these issues. 

 (ENTER THE LETTER CORRESPONDING TO THE REASON IN THE APPROPRIATE BOX.) (71-76)

Please note: In many cases, a single reason will be adequate. However, you may select two codes if necessary, to

adequately describe the action taken on these issues. If more than one reason code is selected, please list them

in the order of impact on the resolution of these issues.

Issue #1 Issue #2 Issue #3

 Reason Code # 1 

 (Highest Impact) _____ _____ _____

 Reason Code #2

 (2nd Highest Impact) _____ _____ _____

Reason Code #1 Reason Code #2

Issue 1 Issue 2 Issue 3 Reason Codes As Follows Issue 1 Issue 2 Issue 3

13.3% 18.1% 30.2% A= Appeals/Counsel fully sustains the issue 0.0% 0.0% 2.6%

0.6% 1.2% 0.8% B= Continuing issue - followed prior cycle settlement 0.0% 1.5% 2.6%

7.2% 9.8% 7.4% C= New facts/evidence obtained and evaluated by Appeals/Counsel 8.9% 18.7% 12.6%

5.0% 3.7% 1.9% D= New facts/evidence obtained and evaluated by Exam 1.6% 1.2% 2.0%

30.9% 30.2% 30.8% E= Hazards - Facts/evidence are open to judgement 18.1% 20.3% 21.6%

9.7% 5.8% 0.0% F = Hazards - Conflict between Service position and case law 4.7% 6.9% 11.6%

29.1% 24.0% 23.1% G= Hazards - Application or interpretation of law 24.6% 29.3% 15.6%

0.6% 0.8% 1.9% H= Offsetting considerations 13.7% 15.5% 22.0%

0.0% 1.4% 0.0% I = Changes in law 13.5% 3.8% 2.6%

0.0% 1.2% 0.0% J = Whipsaw 0.0% 0.0% 0.0%

1.8% 3.2% 3.8% K= Technical error 4.8% 0.0% 2.0%

1.9% 0.6% 0.0% L= Tax Court decision 10.0% 2.9% 4.8%

N=573 N=416 N=305 N=355 N=215 N=127

9. If you did not fully sustain any of these top three dollar issues, did you document your position in the written summary (i.e.,

Appeals Case Memorandum)? (CHECK ONE BOX FOR EACH ISSUE.) (77-79)

Issue #1 Issue #2 Issue #3

Did you document your

position in the written

summary?

N=566

87.4% Yes

12.6% No

0.0% Not applicable

 (fully sustained)

N=401

88.1% Yes

 2.0% No

 9.8% Not applicable

 (fully sustained)

N=297

74.0% Yes

 2.2% No

 23.8% Not applicable

 (fully sustained)

6

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IV.EXAM'S DEVELOPMENT OF

THE TOP THREE DOLLAR ISSUES

10. Were all of the top three dollar issues you listed in question 8 fully developed when the case was transferred to Appeals? 

(CHECK ONE.)

(80)

73.1% Yes →Skip to question 13.

26.9% No →Continue with question 11.

N=601

11. For the issue(s) that were not fully developed, did you request that Exam further develop the issue(s) before you attempted

to resolve the taxpayer's dispute? (CHECK ONE.) (81-82)

50.6% Yes →Continue with question 12.

49.4% No →Please explain below and then skip to question 13.

N=155

If you did not request Exam to further develop the issue(s), please explain why.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

12. For the issue(s) you requested Exam to further develop, did they (1) provide you the requested feedback, (2) provide it to you

in a timely manner, and (3) did it help you resolve the disputed issues? 

 (CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE REMAINING PARTS. IF YOU ANSWER "NO" TO THE FIRST PART, THEN GO TO THE NEXT ISSUE.) (83-91)

Did Exam provide you the

feedback you requested?

(1)

If yes, was the feedback

provided to you in a timely

manner?

(2)

Was the feedback helpful

in resolving the disputed

issue?

(3)

Issue #1 75.2% Yes 

 0.0% No N=79

24.8% Not applicable

(Issue fully developed)

95.6% Yes

 4.4% No

N=59

95.6% Yes

 4.4% No

N=59

Issue #2 74.6% Yes 

 4.5% No N=57

20.9% Not applicable

(Issue fully developed)

93.9% Yes

 6.1% No

N=43

100% Yes

 0.0% No

N=43

7

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Appeals Officer Questionnaire Results

Issue #3 65.7% Yes 

N=42

34.3% Not applicable

(Issue fully developed)

90.7% Yes

 9.3% No

N=28

100% Yes

 0.0% No

N=28

13. Did Exam use an IRS specialist(s) or outside consultant(s) to develop any of these three issues? (CHECK ONE BOX.)

(92)

31.8% Yes → Continue with question 14.

68.2% No → Skip to question 16.

N=596

Repeat ID - 3 (1-7)

14. Identify the specialist(s) or outside consultant(s) that Exam used to develop any of these three issues. 

(IDENTIFY THE SPECIALIST OR OUTSIDE CONSULTANT. FOR EACH ONE IDENTIFIED, CHECK TWO BOXES

IN EACH ROW.)

(8-17)

Type of IRS specialist or outside

consultant used

Identify the

related issue.

To what extent, if at all, did the use of their services help you

resolve the disputed issues?

Very 

great extent

(1)

Great

extent

(2)

Moderat

e extent

(3)

Some

extent

(4)

Little

extent

(5)

No

extent

(6)

Engineer 62.4%

International 7.3%

Valuation 6.5%

Issue/Industry 6.0%

77.9% Issue #1

13.2% Issue #2

 7.5% Issue #3

N=189

N=189

14.5% 22.3% 28.0% 10.9% 8.8% 15.5%

Engineer 65.5%

Issue/Industry 19.4%

Valuation 10.5%

Economist 4.6%

14.7% Issue #1

56.1% Issue #2

24.5% Issue #3

N=56

N=34

9.7% 24.4% 26.0% 39.8% 0.0% 0.0%

International 45.3%

Issue/Industry 19.6%

Valuation 19.6%

Economist 15.6%

19.6% Issue #1

29.7% Issue #2

50.7% Issue #3

N=17

N=8

38.6% 0.0% 30.7% 30.7% 0.0% 0.0%

15. Did you consult with any of the specialist(s) and/or outside consultant(s) listed above while you were considering the

disputed issues? (CHECK ONE BOX.) (18-19)

60.3% Yes

 39.7% No → Please describe why you did not consult with them.

N=189 ______________________________________________________________________________

______________________________________________________________________________

8

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Appeals Officer Questionnaire Results

16. In your opinion, did Exam need, but not obtain, an IRS specialist or outside consultant to develop any of these three top

dollar issues? If yes, please identify the type of IRS specialist(s) or outside consultant(s) that Exam needed, but did not

obtain, for each issue. 

(CHECK ONE BOX IN EACH ROW. IF "YES", IDENTIFY THE ISSUE AND THE NEEDED SPECIALIST OR

OUTSIDE CONSULTANT.) (20-28)

 Did Exam need but not obtain an

IRS specialist or outside consultant?

 Identify the

 related issue

Identify the type of IRS specialist or

outside consultant needed but not

obtained.

 9.7% Yes 90.3% No

N=575

80.9% Issue #1

 4.9% Issue #2

 9.3% Issue #3

N=53

Economist 30.9%

Engineer 24.6%

Valuation 20.4%

Issue/Industry 14.8%

 1.8% Yes 98.2% No

N=506

100% Issue #2

N=9

International 35.8%

Issue/Industry 35.8%

Other 28.4%

 2.4% Yes 97.6% No

N=470

100% Issue #3

N=11

Engineer 43.2%

Issue/Industry 28.4%

Other 28.4%

17. For each of the top three dollar issues identified, did Exam obtain technical advice to develop the issue? If yes, please

indicate to what extent, if at all, the technical advice helped you resolve the taxpayer's disputed issues. 

 (CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN CHECK

ONE BOX IN THE SECOND PART. IF YOU ANSWER "NO" OR "DON'T KNOW" TO THE FIRST PART, THEN GO

TO THE NEXT LINE.) (29-34)

Did Exam obtain

technical advice?

If yes, to what extent, if at all, did it help you resolve the taxpayer's disputed

issues?

Very 

great extent

(1)

Great

extent

(2)

Moderate

extent

(3)

Some

extent

(4)

Little

extent

(5)

No extent

(6)

 Issue #1

N=577

 4.7% Yes →

89.6% No

5.7% Don't know

N=27

0.0% 59.7% 0.0% 30.8% 0.0% 9.5%

 Issue #2

N=406

 3.0% Yes →

96.4% No

0.6% Don't know

N=12

0.0% 0.0% 51.2% 48.8% 0.0% 0.0%

 Issue #3

N=323

 2.7% Yes →

97.3% No

0.0% Don't know

N=9

0.0% 70.3% 0.0% 29.7% 0.0% 0.0%

9

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Appendix IV 

Appeals Officer Questionnaire Results

18. For those issue(s) that Exam did not obtain technical advice, do you believe Exam should have obtained technical advice

from the national office? (CHECK ONE BOX FOR EACH ISSUE.) (35-37)

Should Exam have obtained technical advice from

the national office?

 Issue #1

N=580

 6.3% Yes

91.2% No

 2.5% Not applicable (Technical advice used)

 Issue #2

N=409

 2.6% Yes

94.4% No

 2.9% Not applicable (Technical advice used)

 Issue #3

N=314

 2.1% Yes 

95.2% No

 2.8% Not applicable (Technical advice used)

10

Page 80 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

V. ADDITIONAL INFORMATION PROVIDED BY THE 

TAXPAYER FOR THE TOP THREE DOLLAR ISSUES

19. For any of the top three dollar issues you identified, did the taxpayer provide additional factual information or documentation

to Appeals to support its protest on the issue? (CHECK ONE.) (38)

53.1% Yes → Continue with question 20.

46.9% No → Skip to question 22.

N=586

20. For those issues that the taxpayer provided additional factual information, did you request that Exam review or verify the

accuracy of the information? (CHECK ONE.) (39-40)

43.2% Yes → Continue with question 21.

56.8% No → Please explain below and then skip to question 22.

N=303

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

21. For those issues that you requested Exam to verify additional information, did Exam (1) provide you the requested feedback,

(2) provide the feedback to you in a timely manner, and (3) was the feedback helpful in resolving the taxpayer's disputed

issues? (CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN

ANSWER THE REMAINING PARTS. IF YOU ANSWER "NO" OR "NOT APPLICABLE" TO THE FIRST PART,

THEN GO TO THE NEXT LINE.) (41-49)

Did Exam provide you

the feedback you

requested?

(1)

If yes, did Exam provide

the feedback to you in a

timely manner?

(2)

Did this feedback help you in

resolving the disputed issue?

(3)

Issue #1

N=119

86.5% Yes →

 0.0% No

13.5% Not applicable

N=103

100% Yes

 0.0% No

N=103

97.5% Yes

 2.5% No

Issue #2

N=81

46.4% Yes →

 7.6% No

46.0% Not applicable

N=38

100% Yes

 0.0% No

N=38

100% Yes

 0.0% No

Issue #3

N=60

35.1% Yes →

10.2% No

54.7% Not applicable

N=21

100% Yes

 0.0% No

N=21

100% Yes

 0.0% No

11

Page 81 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

V. APPEALS PROCESSING OF THE TOP THREE DOLLAR ISSUES

22. Were any of the top three dollar issues disputed by this taxpayer recurring (i.e., the same issue) from previously audited tax

returns? If yes, please explain what you did, if anything, to resolve the recurring issue(s). 

(CHECK ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN COMPLETE THE

SECOND PART. IF YOU ANSWER "NO" OR "DON'T KNOW" TO THE FIRST PART, THEN GO TO THE NEXT

LINE.) (50-55)

Was this a recurring

issue?

(1)

If yes, what did you do, if anything, to resolve these recurring issues?

(2)

 Issue #1

N=601

 4.9% Yes →

86.3% No 

 8.8% Don't know

 Issue #2

N=424

 4.1% Yes →

81.3% No

14.5% Don't know

 Issue #3

N=322

 1.0% Yes →

86.6% No

12.4% Don't know

23. Did you discuss any of the top three dollar issues (either formally or informally) with District Counsel? If yes, did this

discussion positively or negatively affect your ability to resolve the taxpayer's disputed issues? 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE SECOND QUESTION. IF YOU ANSWER "NO" OR "NOT NECESSARY" TO THE FIRST PART, THEN GO TO

THE NEXT LINE.) (56-61)

Did you discuss this issue with

District Counsel? 

(1)

If yes, to what extent, if at all, did it help

you resolve the taxpayer's disputed

issues?

(2)

 Issue #1

27.0% Yes →

67.0% No

 6.0% Not necessary

N=579

19.7% Very great extent N=151

28.3% Great extent

26.1% Moderate extent

 8.2% Some extent

 8.9% Little extent

 8.9% No extent

 Issue #2

16.9% Yes →

76.9% No

 6.2% Not necessary

N=405

16.5% Very great extent N=69

31.5% Great extent

30.2% Moderate extent

 9.5% Some extent

 3.8% Little extent

 8.5% No extent

 Issue #3

11.7% Yes →

79.5% No

 8.9% Not necessary

N=312 

 0.0% Very great extent N=36

29.7% Great extent

14.2% Moderate extent

49.0% Some extent

 0.0% Little extent

 7.1% No extent

24. Were any of the top three dollar issues referred to Counsel for litigation? (CHECK ONE BOX FOR EACH ISSUE.) (62-64)

Issue #1

N=598

 14.0% Yes

 86.0% No

Issue #2

N=421

 4.2% Yes

 95.8% No

Issue #3

N=322

 100% Yes

 0.0% No

12

Page 82 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

VII. GENERAL QUESTIONS RELATING TO THESE TAX RETURNS

Please consider the entire case (not just the three issues you

identified previously) as you answer the remaining questions.

25. Did Exam provide you with a written response to the taxpayer's protest? (CHECK ONE.) (65)

43.5% Yes → Continue with question 26.

14.8% No 

Skip to question 28.

41.7% Don't know 

N=611

26. To what extent, if at all, did this written response help you resolve the taxpayer's disputed issues? (CHECK ONE.) (66-67)

 4.5% Very great extent

19.6% Great extent

30.4% Moderate extent

23.4% Some extent

11.8% Little extent

10.2% No extent

N=266

Please explain your response.

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

27. Did you discuss (e.g., telephone calls, meetings, etc.) the written response with Exam? (CHECK ONE.) (68-69)

 71.7% Yes → To what extent, if at all, did this discussion help you resolve the taxpayer's disputed issues? (CHECK

ONE.)

 9.1% Very great extent

20.7% Great extent

N=248

32.3% Moderate extent

25.5% Some extent

 6.6% Little extent

 5.7% No extent

N=173

 28.3% No

13

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Appendix IV 

Appeals Officer Questionnaire Results

28. Were you satisfied or dissatisfied with the level of cooperation between you and Exam? (CHECK ONE.) (70)

26.6% Very satisfied

31.8% Generally satisfied

16.1% Neither satisfied nor dissatisfied

 0.9% Generally dissatisfied

 0.4% Very dissatisfied

---------------------------

24.2% Not applicable (No interaction with Exam)

N=607

29. Did the taxpayer use any of the following specialist(s) or representative(s) to assist them with the resolution of the disputed

issues? (CHECK ONE BOX IN EACH ROW.) (71-76)

Position Yes

(1)

No

(2)

Don't know

(3)

a. CPA firm N=539 75.7% 17.6% 6.7%

b. Attorney N=482 62.9% 18.0% 19.1%

c. Engineer N=377 5.4% 61.8% 32.7%

d. Economist N=369 5.5% 61.9% 32.5%

e. Appraiser N=393 16.2% 55.6% 28.3%

f. Other (Specify)

 ___________________________________

30. Overall, how satisfied or dissatisfied were you with the following concerning the taxpayer? (CHECK ONE BOX IN EACH

ROW.) (77-80)

Very

satisfied

(1)

Generally

satisfied

(2)

Neither

satisfied

nor

dissatisfied

(3)

Somewhat

dissatisfied

(4)

Very

dissatisfied

(5)

No basis

to judge

(6)

a. Overall attitude/cooperation of

the taxpayer N=607 32.7% 48.5% 9.5% 5.9% 0.0% 3.4%

b. The timeliness of taxpayer's

responses to information

requests N=607

28.4% 47.4% 9.2% 10.3% 1.0% 3.7%

c. The completeness of

information provided by the

taxpayer N=604

26.1% 49.0% 15.5% 7.2% 0.5% 1.7%

d. The relevance of the

information provided by the

taxpayer N=604

29.4% 49.9% 16.0% 2.1% 1.0% 1.7%

14

Page 84 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

31. Did the taxpayer file any of the following while this case was in Appeals' jurisdiction? If yes, did you refer these to Exam? 

(CHECK AT LEAST ONE BOX IN EACH ROW. IF YOU ANSWER "YES" TO THE FIRST PART, THEN ANSWER

THE SECOND QUESTION. IF YOU ANSWER "NO" TO THE FIRST PART, GO TO THE NEXT LINE.) (81-86)

Did the taxpayer file any of the

following while this case was in

Appeals' jurisdiction?

(1)

If yes, did you refer these to Exam?

(2)

a. File a claim for a refund 3.0% Yes →

 97% No N=601

82.1% Yes

17.9% No N=18

b. Raise an affirmative

issue

12.9% Yes →

87.1% No N=607

31.5% Yes

68.5% No N=78

c. File a request for a

tentative refund 

(e.g., NOL carryback)

 2.1% Yes →

97.9% No N=593

25.8% Yes

74.2% No N=13

Continue with question 32 if you checked "Yes" to any box above. 

If the taxpayer did not file a claim for a refund, raise an

affirmative issue, or file a request for tentative refund, skip to

question 34.

32. How much did you increase or decrease the taxable income or credits because of the claim(s), affirmative issue(s), or

requests(s) for tentative refund identified in the previous question? 

(CHECK THE APPROPRIATE INCREASE OR DECREASE BOX AND ENTER THE APPROPRIATE AMOUNT. 

 IF NONE, DO NOT CHECK A BOX AND ENTER "00".) 

Taxable income 0.0% Increased 100% Decreased by . . . .Mean = $23,445,831 (87-96)

N=66 Repeat ID - 4 (1-7)

Credits 100% Increased 0.0% Decreased by . . . .Mean = $18,753 (8-17)

N=6

33.Were any of the above the result of a carryback from a subsequently filed return? (CHECK ONE.) (18)

33.9% Yes

66.1% No

N=91

15

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Appendix IV 

Appeals Officer Questionnaire Results

34.Was this work unit assigned to an Appeals Team Chief? (CHECK ONE.) (19)

 3.8% Yes → Skip to question 37.

96.2% No → Continue with question 35.

N=614

35.To what extent, if at all, did the associate chief participate in resolving these disputed issues by (1) meeting with the taxpayer,

and (2) providing you guidance, advice, or other assistance.? (CHECK ONE BOX IN EACH ROW.) (20-22)

 Very great

extent

(1)

 Great

extent

(2)

Moderate

extent

(3)

 Some

extent

(4)

 Little

extent

(5)

No extent

(6)

a. Associate chief meeting with

the taxpayer

N=583

0.4% 2.7% 0.0% 1.1% 3.5% 92.3%

b. Associate chief providing

you guidance, advice, or

other assistance N=588

0.8% 3.8% 9.1% 7.2% 8.9% 70.2%

Please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

36.To what extent, if at all, did the associate chief's participating in the following ways improve your ability to resolve these

disputed returns? (CHECK ONE BOX IN EACH ROW. IF ASSOCIATE CHIEF DID NOT PARTICIPATE, CHECK "NOT

APPLICABLE".) (23-25)

Very

great

extent

(1)

 Great

extent

(2)

Moderate

extent

(3)

 Some

extent

(4)

 Little

extent

(5)

No

extent

(6)

Not

applicable

(7)

a. Associate chief's

meetings with the

taxpayer

N=582

0.0% 2.3% 0.0% 1.5% 1.6% 3.8% 90.9%

b. Associate chief's

providing you guidance,

advice, or other

assistance N=582

0.0% 3.1% 6.8% 9.4% 5.2% 3.0% 72.5%

Please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

16

Page 86 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

37. How did you inform Exam, if at all, of the final resolution of the disputed issues? (CHECK ALL THAT APPLY.) (26-29)

218 Discussed the final resolution with Exam

535 Sent the Appeals Case Memorandum to Exam

 82 Other (Specify) _______________________________________________________________________

 20 No feedback provided to Exam

38. Considering the overall case, did the following positively or negatively affect your ability to resolve the taxpayer's disputed issues for the case shown on page 1 of this questionnaire? (CHECK ONE BOX IN EACH ROW.) (30-35)

Very positively

 (1)

Positively

(2)

Neither

positively nor

negatively

(3)

Negatively

(4)

Very negatively

(5)

Not

applicable

(6)

a. Exam's documentation of

audit issues

N=581

13.1% 53.4% 26.6% 4.3% 1.1% 1.5%

b. Exam's factual development of the issues

N=581

13.1% 56.3% 21.3% 6.6% 1.1% 1.5%

c. Exam's development of the

legal positions for the issues

N=581

12.6% 36.5% 40.1% 5.3% 1.7% 3.8%

d. IRS specialist assistance in developing audit issues

N=594

10.9% 12.5% 12.7% 2.8% 0.0% 61.2%

e. Legal assistance from District

Counsel or national office

used to develop the issues

N=589

15.6% 17.5% 7.8% 0.0% 0.0% 59.0%

f. Other (Specify)

N=243 14.6% 0.0% 2.7% 0.0% 0.0% 82.7%

39. Were you satisfied or dissatisfied with the length of time it took to resolve the taxpayer's disputed issues? (CHECK ONE.) (36-37)

 14.9% Very satisfied

 57.8% Generally satisfied

20.9% Neither satisfied nor dissatisfied

 5.4% Generally dissatisfied

If dissatisfied, please explain. 

 1.0% Very dissatisfied _______________________________________________________________________ N=614 _______________________________________________________________________

_______________________________________________________________________

17

Page 87 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

40. In your opinion, to what extent, if at all, did the Appeals' final resolution of these disputed issues influence the way Appeals

will consider (a) recurring issues for this taxpayer, and (b) similar issues for different taxpayers? 

(CHECK ONE BOX IN EACH ROW.)

(38-40)

Very great

extent

(1)

 Great

extent

(2)

Moderate

extent

(3)

 Some

extent

(4)

 Little

extent

(5)

No extent

(6)

a. Recurring issues for this

taxpayer

N=594

16.0% 23.9% 7.2% 5.4% 10.2% 37.2%

b. Similar issues for

different taxpayers

N=596

5.6% 15.1% 10.7% 6.8% 8.7% 53.1%

Please explain your response.

______________________________________________________________________________________________________

______________________________________________________________________________________________________

______________________________________________________________________________________________________

41. In your opinion, to what extent, if at all, was Appeals' dispute resolution processing of this case fair and impartial to both the

taxpayer and the government? (CHECK ONE BOX IN EACH ROW.) (41-42)

Very great

extent

(1)

Great

extent

(2)

Moderate

extent

(3)

 Some

extent

(4)

Little

extent

(5)

No

extent

(6)

a. Fair and impartial to the

taxpayer

N=601

41.1% 51.4% 4.0% 0.0% 0.0% 3.5%

b. Fair and impartial to the

government

N=601

40.3% 50.3% 5.4% 0.5% 0.0% 3.5%

18

Page 88 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

VI. GENERAL 

42. Taking everything into consideration, what is your opinion on the quality of Exam's overall development of the issues on this

case? (CHECK ONE BOX.) (43-44)

14.0% Excellent

53.4% Good

22.9% Adequate

 9.2% Poor

 0.5% Very poor

N=607

If you believe the quality of Exam's issue development is poor or very poor, please explain your response.

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

43. In your opinion, to what extent, if at all, did the dispute resolution process for large corporations unreasonably burden this

taxpayer selected for audit? (CHECK ONE BOX.) (45)

 0.5% Very great extent

 0.4% Great extent

 9.5% Moderate extent

14.2% Some extent

75.3% Little or no extent

N=598

19

Page 89 GAO/GGD-97-62 Audits of Large Corporations
Appendix IV 

Appeals Officer Questionnaire Results

44. Please use the space below to provide any additional comments about this case or IRS' audit and appeals processes for these

large corporate taxpayers. You may attach additional sheets if necessary. (46)

Thank you for your assistance.

 Please remove the yellow case information sticker from page 1 and return

 the questionnaire in the pre-addressed return envelope.

20

Page 90 GAO/GGD-97-62 Audits of Large Corporations
Appendix V 

Offices Visited and Officials Interviewed

This appendix describes the various IRS offices we visited and the officials

we interviewed. In addition, it discusses the scope of our requests to

selected officials for written comments on factors related to large

corporate audits. Included in this appendix is table V.1, which shows the

offices we visited and officials we interviewed.

In addition to the questionnaires, we interviewed numerous IRS National

Office, regional, district office, and Appeals officials to obtain their views

on the factors that affected the amount of additional taxes recommended

by revenue agents that were ultimately assessed. At the National Office we

interviewed the Executive Director, Corporate Audits Section; the

National Director, Strategic Planning Division; the National Director of

Appeals; and selected members of their staffs. At each of IRS’ four regional

offices we interviewed the Regional Compliance Chief, Regional Counsel,

and the Assistant Regional Director for Appeals. In addition, we visited 10

of IRS’ 33 district offices and 9 appeals offices. Table V.1 shows the district

offices and appeals offices we visited and the titles of the individuals we

interviewed.

Table V.1: District and Appeals Offices Visited and Officials Interviewed

Offices visited

District

Director

Chief of

Examination

Examination

Branch Chiefs

District

Counsel

Chief of

Appeals

Atlanta, Georgia √ √ √ √ √

Baltimore, Maryland √ √

Chicago, Illinois √ √ √

Dallas, Texas √ √ √ √ √

Hartford, Connecticut √ √ √

Manhattan, New York √ √ √ √ √

Oklahoma City, Oklahoma √ √ √

San Francisco, California √ √ √ √ √

San Jose, California √ √ √

St. Louis, Missouri √ √ √

Totals 8 9 7 4 9

Further, we also asked Examination Chiefs in all 33 IRS district offices

nationwide and Appeals Chiefs in all 33 appeals offices nationwide to give

us their comments on certain factors related to these large corporate

audits. We received written responses from 31 of the Examination Chiefs

and 30 of the Appeals Chiefs. Their views are incorporated throughout this

report where appropriate.

Page 91 GAO/GGD-97-62 Audits of Large Corporations
Appendix VI 

Major Contributors to This Report

General Government

Division, Washington,

D.C.

Thomas D. Short, Assistant Director

James M. Fields, Senior Social Science Analyst

Stuart M. Kaufman, Senior Social Science Analyst

Kansas City Regional

Office

Royce L. Baker, Tax Issue Area Coordinator

Terry Tillotson, Evaluator-in-Charge

Kirk R. Boyer, Senior Evaluator

Kathleen J. Squires, Evaluator

Bradley L. Terry, Evaluator

Thomas N. Bloom, Computer Specialist

(268661) Page 92 GAO/GGD-97-62 Audits of Large Corporations
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