The Internal Revenue Service (IRS) may review a business's or individual's financial information to confirm the accuracy of the amount of tax reported. This examination process is known as an IRS audit. Businesses and individuals may be chosen for audits by the IRS for several reasons and does not always indicate that there were errors made on previous tax reports or returns.
First, the IRS may choose people to audit by random selection and computer screening. Statistical formulas may be entered into the IRS's computer database to select entities to audit.