CCH Learning Center

Indirect Methods of Reconstructing Income

Forensic accountants working in the private sector can learn much from their public sector counterparts in the IRS. Understanding the IRS practices helps a forensic accountant gain an understanding of the special tools and concepts involved in the indirect methods.

Although private sector forensic accountants lack access to some of the tax return information and the authority to summons third-party records available to IRS agents, many of the techniques used by the IRS may be used by forensic accountants to indirectly calculate net income, expenditures, and net worth.

Indirect Methods of Reconstructing Income explores the major indirect methods of proof used by the IRS, discusses the significance and application of these methods from the viewpoint of an IRS agent, and describes which method is appropriate for each type of business. Specifically, it covers the following topics:

• Direct versus Indirect Reconstruction Methods
• Forensic Audit Approaches Used by the IRS
• Indirect Reconstruction Methods