Read Now California Audit Manual Chapter 8, Bars and Restaurants RTF
It is the purpose of this section of the manual to include information to assist in the audits of bars, restaurants, and other similar establishments. Notwithstanding the information included in Audit Manual Chapter 4, General Audit Procedure, this section is intended to assist the auditor in developing and applying the standard and specialized audit techniques to bars and restaurants. This section will initially address those topics applicable to both bars and restaurants, followed by sections specific to bar and restaurant auditing respectively. The auditor should recognize that there are many variations in the auditing procedures, which are necessitated by the application of the law, rules, regulations, the taxpayer’s method of reporting, and types of records encountered. By the very nature of the business (bar and/ or restaurant), most sales are generally subject to tax. Therefore, in bar and restaurant auditing, it will often be necessary to verify or establish gross receipts and make allowances for exempt or nontaxable sales. A preliminary review of the business operations is essential in bar and restaurant auditing. Although a restaurant may contain a bar or sell alcoholic beverages, not all bars contain restaurants or sell food. Some bars may have a full service restaurant while others provide a minimal selection of food as a courtesy or complimentary to its patrons. In many bars that sell food, the premises where the food is served are separated from the bar. In either case, food and bar sales should normally be segregated in the taxpayer’s records. When performing an audit of a bar combined with restaurant activities, it is imperative that the auditor separates the two activities. The procedures that follow are not intended to be a substitute for independent thinking and sound judgement on the part of the auditor. All information used to establish sales must be included in the audit working papers to support the auditor’s recommendation.
