What level of information should a company be given during a tax audit of computerized accounting?

In the context of a tax audit of computerized accounting systems, the tax authorities, via their auditors, who are planning to implement computerized processing, must detail this in a letter sent to the company concerned. This was reiterated by the Conseil d'Etat in a ruling handed down on January 5 concerning the level of information to be communicated to the audited company.

What are companies' obligations?

The tax audit procedure for computerized accounting systems is now widespread, and the relative leniency hitherto accorded to beneficiaries is now a thing of the past.

Computerized accounting covers all systems that contribute to the production of accounting entries. Companies falling within the scope of this procedure are subject to two types of obligation:

  • an obligation to present documentation,
  • an obligation to present data and computer processing.

The first is to provide the tax authorities with up-to-date and exhaustive documentation, enabling the auditor to understand the information system used during the period under review. The second requires companies to provide information, data or computer processing contributing directly or indirectly to the formation of accounting or tax results and the preparation of mandatory returns.

In accordance with these obligations, companies are required to provide the auditor with a dematerialized copy of their accounting records.

What are the auditor's obligations?

The auditor is subject to certain obligations. In the event of a tax audit involving a company with computerized accounting systems, there are three ways in which computer processing can be implemented:

  1. by the auditor outside the audited company's premises, using copies provided by the audited company on computer media;
  2. by the auditor on the company's equipment;
  3. or by the company itself on its own equipment.

The company being audited must be able to choose between these three options. This means that the auditor must send the company a letter containing precise information. In a ruling handed down on January 5, 2023, the Conseil d'Etat rightly pointed out that the administration was not obliged to mention the possibility of reconstituting revenue in this letter.

In this case, a company operating in the restaurant sector was subject to an accounting audit, as a result of which the tax authorities assessed it for value-added tax arrears for the period from January 1, 2010 to May 31, 2013, additional corporate income tax assessments, penalties and the fine provided for under article 1759 of the French General Tax Code. The company had requested that these items be discharged, arguing that the auditor had not been sufficiently precise about the nature of the investigations requested. The Conseil d'Etat did not rule in the company's favor, considering that the letter sent by the auditor allowed the company to make a choice between the three aforementioned options in full knowledge of the facts and with sufficient time to do so.