In this video, I am talking about Reasonable Basis.
There is no negotiation on Reasonable Basis. So, what is it? The hardest question I had to answer, as I sat across the table from an investigator. Yeah, that’s right. I had to sit across the table from an investigator who said to me, “What made you think this was the right way to do “X”?
Oh my goodness! Hopefully you have never had to have that question come at you. But beware of that question, because if your answer is going to be something like mine which was, “Well, um, I just kind of got put into this job and…”. That’s not a good answer. Or how about this one? “You know, I was voluntold into this.” That’s not a good answer. How about this one? “I inherited this mess.” That’s not a good answer. This next one actually was my answer. “Suzanne is one of my colleagues that works at another company like mine. Suzanne is super smart and whenever I have a question, I just call her and she tells me what to do.”
I thought that was a really good answer. Suzanne is my guide. She’s so smart. She’s where I go for my answers. Yay, me! The investigator was not at all thrilled about Suzanne. As a matter of fact, I was told while Suzanne must be a wonderful person, she was not reasonable basis. So there you go. No Suzanne for you. (For all of you Seinfeld geeks out there.) If these are some of the answers you might give, listen up. These answers are not Reasonable Basis.
The law says that reasonable basis is being able to cite a credible source of information that informs your decisions. Where do you go to get your information? Could point to a statute or a past practice that’s credible and well established. A common practice that is 20 years old in your industry. Maybe that’s reasonable basis. Do you have an attorney or a CPA or a consultant. If this is your defense, make sure you have all advice in writing. You can’t use hearsay to justify your actions.
There ya’ go! Reasonable Basis 101. Stay tuned for more reasonable basis discussions coming to you in various videos and audio files in Audit Security Authority. Check out my podcasts and blog posts, too!
Until next time, Be audit secure.
Lisa Smith
About LISA SMITH
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