There are several ways in which the selection process can be performed. The method tries to find inconsistencies or a trend, which is worth checking. Usually comparisons are made with an average compliant business entity carrying out the same kind of business activities. Furthermore, considerations can be given to legal form, the company s size, geographic location etc. Systematic Ratio analysis with a certain purpose is sometimes called Profiling.
Ratio analysis can be much more effective when it is computer-assisted.
The judgement of tax administration staff with several years of experience in the audit area often is an excellent basis for selection of taxpayers for audit. Of course knowledge and experience are equally important for actual audit activities, especially in more difficult cases, however audit selection based on the judgement of experienced tax auditors is so important in practice, that it should be mentioned as a special selection method. This method requires that certain businesses be audited regularly every year or couple of years. It is in practice mostly applied to large businesses or important industry sectors. Such a limitation of the use of this method is recommended to avoid an unnecessary and inefficient allocation of audit resources to businesses with a low need of examinations.