What Is The Purpose Of An Audit?
By Andy Miofsky, Illinois Bankruptcy Attorney on Apr 15, 2007 in General Bankruptcy Information
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ushered in a new audit program affecting bankruptcy cases. Individuals who file for relief under chapter 7 or chapter 13 are subject to audits conducted by independent professional auditors chosen by the U.S. Trustee. At lease one out of every 250 cases will be randomly audited and additional cases will be selected based on income and expenses.
If your case has been selected for audit, you are required to cooperate with the auditor and verify your income, expenses and assets. You will not be charged by the audit firm for this procedure, however, you will have to produce copies of records at your cost.
The audit firm will file a report with the bankruptcy court and provide a copy to you or to your attorney if you are represented. If the audit firm cannot verify information contained in your schedules it will report that it found a material misstatement. This term is not defined under bankruptcy law and could mean anything from insufficient documentation to a flat out mistake. If a material misstatement report is filed in a case, the debtor must provide a reasonable explanation to the bankruptcy court or the case may be dismissed or a discharge may be denied. Information for this report was obtained from the U.S. Trustee Program website.
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