Sensitive audits present the tax practitioner with unique challenges. They require the exercise of judgment and discretion, as well as an understanding of administrative procedure and even a command of constitutional and evidentiary rules. At times, they may also require that the practitioner carefully balance duties to a client with their own ethical and legal obligations.
Sensitive audits come in several forms. An “eggshell” audit, for instance, is a civil audit that has the potential to turn criminal. There are lurking issues—potential tax fraud or evidence of other legal violations such as money laundering or structuring—that the auditor may discover. A “reverse eggshell audit” involves a civil tax audit that is being conducted alongside a parallel criminal investigation. Sensitive audits may also involve undisclosed parallel investigations by other state or federal agencies.
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