The Treasury Inspector General for Tax Administration yesterday released Steps Can be Taken to Enhance the Quality of Audits Involving Small Corporate Returns (2011-41-083):

The IRS should continue to improve the quality of its audits of small corporations. … TIGTA reviewed whether IRS examiners followed proper procedures and guidelines when auditing the returns of small corporations. The IRS defines small corporations as corporations with assets of less than $10 million. … TIGTA reviewed a nonstatistical sample of 51 closed corporate audits and found potential quality concerns in 19 of them. For example, IRS examiners did not always document the steps taken to investigate significant differences between the labor costs deducted in the corporate return and the amounts reflected on employment tax returns filed with the IRS.