Sam Brotman, JD, LLM, MBA January 3, 2018 4 min read

EDD Independent Contractor Audit - Initial Compliance Interview

The first thing that happens in an EDD independent contractor audit is the initial compliance interview. The initial compliance interview serves a couple of different purposes. Number one, it is to get background information on the client. Number two, it is to get answers in place for different questions in case there is any problems or factual disputes that come up later. For example, one of the questions they ask you is “How many locations do you have?”.  That way if they later get information on a location that you did not disclose, you could potentially dig yourself into trouble.

The initial compliance interview lays the framework for the auditor’s line of questioning. A lot of the times in independent contractor audits, like with most audits, these auditors are basically writing a form audit report. The auditors are going through and they are completing their due diligence in the beginning of the audit. They are recording your answers in the initial compliance interview and then are going to take your answers and incorporate them into their report later. At the EDD independent contractor audit level, here are the questions that you are going to be asked in the independent contractor audit interview:

  • When did business operations commence?
  • What is the nature of the business?
  • What are the hours of operation?
  • How many employees do you have and what are their job titles/functions?
  • How many independent contractors do you have?
  • What services are performed by the independent contractors?
  • Are the full-time, seasonal, or part time workers?
  • Is the business incorporated, did the business have a different entity form either before or after the audit period?
  • How many locations does the business have?
  • How many workers at each location?
  • Can you please list all of your officers, including names, job titles, and responsibilities?
  • Who manages and directs the business’s operations?
  • Who are the authorized check signers on the bank account?
  • Who prepares and files payroll tax returns?
  • Who prepared and files income tax returns?
  • What is the frequency of payroll?
  • How often do people get paid?
  • Who provided the business with any guidance for any 1099s that they have issued?
  • What's the business mailing address?
  • What is the personal mailing address for the officers?
  • What is the business's total revenue for the last year?
  • What is the business’s total revenue year to date?
  • What is the salary amount for each officer?
  • What is the K1 amount for each officer?

Those are the questions that are going to establish the background information for your EDD independent contractor audit. In the next article, we will discuss some of the purpose and the meaning behind some of those questions.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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