Before complying with an audit, businesses must determine which agency has jurisdiction. In California, audits may be conducted by the Franchise Tax Board (FTB) for tax compliance, the California state auditor for financial oversight, or the department consumer affairs for industry regulations. For example, a Sacramento business facing an FTB audit must ensure it adheres to state tax laws before responding.

Understanding the scope of the audit is crucial. Audits canfocus on financial records, regulatory compliance, or operational performance. Businesses should carefully review audit notices to determine what information is required. For instance, a company audited for environmental compliance must prepare records proving adherence to California’s environmental laws. Property identifying the audit type helps streamline preparation and avoid unnecessary disclosures.

Gathering documentation and seeking expert advice is essential. Businesses should compile tax filings, payroll records, contracts, and compliance reports while consulting legal counsel and accountants to ensure accuracy. A healthcare provider undergoing a HIPAA-related audit collaborates with compliance specialists to verify patient data protection. Having the right advisors can prevent errors that could lead to further scrutiny or penalties.

Responding strategically and challenging overreach when necessary can protect a company’s interests. All requested documents should be submitted on time and transparently, but if the audit exceeds its legal scope, businesses can file an objection or appeal findings. For instance, a tech company with multi-state operations might challenge an FTB audit attempting to tax out of state transactions. By following these steps, establishing jurisdiction, understanding the scope, gathering records, and responding carefully, businesses can navigate audits efficiently, minimize liabilities and maintain compliance.