How to Reduce Audit Risk with Smart Tax Documentation Strategies
The passage of The One Big Beautiful Bill Act (OBBBA) is ushering in a new era of transparency in tax, while at the same time recent ASC 740 updates are reshaping what companies must disclose in their financial statements. The result: heightened audit scrutiny ranging from tax compliance to internal control audits.
These actions require proper documentation, processes, and data management. And they place additional pressures on already overburdened tax professionals, which is leading many corporate tax leaders to examine and update their tax documentation strategies, build more audit-ready tax workflows, and empower their teams with technology that reduces audit risk and improves corporate tax planning processes.
In this article, learn how Bloomberg Tax can help teams embrace proactive tax documentation strategies to stay compliant while avoiding audit exposure and delayed filings. Read on to discover why tax leaders leverage our market-leading tools that power workflows to withstand the toughest inquiries of tax positions.
OBBBA and ASU 2023-09 complicate the tax landscape
Today’s corporate tax teams are tasked with a lot, from understanding the nuances of changing federal and state laws to balancing the demands of compliance with clients’ goals – all while keeping up with ongoing economic developments on a global scale. And now, OBBBA and ASU 2023-09 are adding to the complexities these teams already face.
In addition to the significant revisions to individual and business tax provisions that OBBBA recently introduced, the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2023-09 – effective for public companies with annual periods beginning after Dec. 15, 2024 – has changed how entities disclose income tax provisions in financial statement footnotes and introduced heightened transparency and granularity in tax disclosures.
Now, companies must recognize the effects of income taxes on their financial statements – a time-consuming process that requires a nuanced understanding of reporting, accounting standards, and legislation.
Given these changes, the IRS and auditors in our current tax environment are expecting more traceable logic for reporting. Enterprises and the tax professionals who work for them must collect accurate documentation that reflects current federal guidance and evolving state positions.
The cost of manual processes and reporting
Today’s tax teams are still relying on manual calculations in their workflows. For instance, 76% of tax professionals use Excel for tax calculations in workpapers, and 63% manually gather ERP/GL data, making it harder to implement tax law changes efficiently, according to a Bloomberg Tax survey.
But relying on outdated programs like Excel for today’s tax processes (including workpapers) can introduce unnecessary risks and the possibility for errors – serious issues that smart tax professionals strive to avoid. This reliance can be especially problematic if tax professionals need to respond to audits or other controversies.
Manual processes can lead to common gaps in documentation and process failures, including:
- Static spreadsheets that cannot incorporate evolving OBBBA compliance and state conformity decisions, and growing business complexities
- Disconnected research and calculation tools that create workflow friction and weaker documentation
- Version control issues in manual tax workpapers made worse by rapidly changing positions across federal and state requirements
- Lack of integrated citation tracking that creates vulnerability in complex OBBBA audits and fragmented systems that are unable to handle federal-state integration requirements
- An increased risk of material misstatements in financial statements in addition to an increased likelihood of missed deadlines
- Problems with managing inconsistent data from multiple ERPs
Plus, documentation gaps can lead to additional failures when there is IRS and state audit scrutiny. These manual process failures can result in:
- Extended examination timelines due to multi-jurisdictional position coordination
- Potential strict liability exposure under prohibited foreign entity rules
- Position adjustments across multiple jurisdictions with associated penalties and interest
- Additional resource drain if tax professionals must dedicate additional hours to manage audit tasks and responsibilities
Another timely issue? The IRS’s adoption of artificial intelligence. As of April 2025, the agency reported that it had initiated more than 100 projects involving the use of AI, with a focus on improving overall operations, customer service, and enforcement.
The IRS “has also used AI to improve the efficiency and effectiveness of audits,” according to an October 2025 report from the Inspector General for Tax Administration. This new federal focus on AI enablement means that tax teams must work at a higher level to ensure that files supporting tax positions are more complete, machine-verifiable, and consistent than before.
A unified strategy for reducing audit risk
So, how can savvy tax professionals guard against audits – and make sure they’re audit-ready if they do face such a challenge? In addition to harnessing their hard-won professional knowledge, they should use the proper tools for today’s tax landscape.
Tax tools with audit-ready capabilities – such as data traceability, accurate numbers, and strong workflows – create a foundation of transparency and reliability that benefits both tax compliance audits and financial statement audits, even though they have different objectives, both of these kinds of audits rely on trust in your data and processes.
In addition, strong internal controls can help with internal control audits (SOX compliance). Establishing and maintaining strong internal controls also allows tax teams to produce more accurate calculations, because only people with authorized access are able to make changes.
The benefits of audit-ready features
Instead of managing separate documentation processes, or relying on outdated manual tools, companies should rely on tools that provide audit-ready support. Tax tools that incorporate audit-ready features can:
- Reduce time and enterprise costs during audits, including by improving operations and processes and allowing for a more efficient audit process
- Lower risk of disputes or restatements
- Enhance credibility with stakeholders, including tax authorities, auditors, and investors
Real-time, cited authority
As regulations continue to evolve, including those that have changed under OBBBA, tax professionals could face even more pressure when it comes to citing law and determining when a particular law was in effect as it relates to their calculations.
This constant churn means tax teams could spend countless hours looking up new rates, dates, calculation methods, and other pertinent tax information.
But with the latest integrated tax automation technology from Bloomberg Tax, teams can cut out time-consuming manual research and enrich their workpapers with integrated tax guidance contextualized to their company’s specific facts and circumstances.
For example, Bloomberg Tax Research integrates seamlessly with Bloomberg Tax Workpapers, making it simple to ensure that the latest rates and tax law updates are informing your calculations without having to leave your spreadsheets.
Built-in formulas draw directly from expert-verified primary source materials including Internal Revenue Code versions dating back to 1913, legislative history, state laws, comprehensive international tax treaties database, and full text of standards and regulations from the FASB, IASB, AICPA, and more.
This automation not only speeds up the tax calculation process but also improves the reviewability of your workpapers, with embedded citations to primary source guidance and links to related Bloomberg Tax Research content.
In this way, our tools put critical information right at your fingertips, with integrated intelligence to support tax positions with increased confidence in less time.
ASC 740 documentation
Bloomberg Tax Provision is built for ASC 740 and designed to incorporate new FASB updates to income tax reporting. This platform enables companies to ditch the blended rate approach for state deferred taxes to be more compliant with ASC 740, and to avoid the headache of calculating and tracking their work in Excel.
Users simply add a new state, and the software automatically updates applicable apportionment rates and state tax rates, recalculating deferred balances precisely and quickly.
[Case study: Learn how the switch to Bloomberg Tax Provision streamlined audits and led to quicker resolution of year-end reporting for one Fortune 500 country.]
Automated reports
Today’s tax professionals know all too well the problems that workflow bottlenecks, inefficiencies, and heightened compliance pressure can cause. To lighten the load, tax leaders are turning to audit-ready reports that can help busy tax teams avoid delays and complications during the audit process.
For instance, with Bloomberg Tax Provision, teams can generate audit-ready Excel reports that embed all necessary formulas, providing auditors with all the information they need to understand how calculations were made and how elements of the provision relate to one another.
These audit-ready reports include rate reconciliation reports, tax-effecting reports, and valuation allowance reports, which helps avoid delays and complications during the audit process, as auditors can access well-organized, comprehensive documentation that ties all elements of the provision together. It also makes it easier to provide auditors with comparative reporting if there are multiple versions of the provision.
For state taxes, state tax expense reports and state effective rate reports streamline the process. Excel report outputs show simple math, allowing for easy review, traceability, and auditability.
In addition, the integration of Bloomberg Tax Workpapers with Bloomberg Tax Fixed Assets allows you to set up a workflow to automate your reconciliation tasks or feed depreciation values directly into a workpaper for other tax calculations. And this automation delivers time-savings along with an audit trail.
Internal controls
A crucial consideration when adopting new tax technology is its impact on internal controls. Because strong internal controls are key when tax teams are working to support their tax positions during all types of audits. And complying with tax changes like ASU 2023-09 can require updates to a company’s internal controls to ensure that data is readily available and that review processes consider things like additional income tax disclosures.
To this point, the strong internal controls in Bloomberg Tax Provision give you a complete audit trail that records each change to the provision throughout its life. A closed, double-entry system ensures calculations are never out of balance, and security controls separate users across different portions of the provision.
See how Bloomberg Tax Provision supports internal controls with an audit trail that shows the date and time of each change made and provides lock and sign-off functionality to better manage the moving parts of your provision.
Plus, audit and review-ready Excel output allows you to download any screen into Excel. Also included is a robust Excel output including rate reconciliation reports, tax-effected reports, valuation allowance reports, state tax expense reports, state effective tax rate reports, and an auditor report.
In addition, data controls in Bloomberg Tax Workpapers eliminate unintended changes with automatic saving and version controls. And review controls enhance data integrity, ensure accuracy, and maintain auditability with dashboard view, cell-level track changes, and workpaper signoffs.
Furthermore, Bloomberg Tax Fixed Assets features secure, time-stamped change records, locked books, and easy reconciliation tools, so you’re always audit-ready and able to identify variances across systems with confidence. With the tool’s customizable, role-based permissions and granular access controls, you can protect sensitive data and prevent unauthorized changes.
And instead of offering inflexible single period views of data, our Open Timeline concept gives you full asset visibility and control through a holistic view of the asset’s entire lifecycle. With this tool, tax teams can manage asset revisions through an asset’s life while preserving previously reported numbers.
The integrated tax workflow: alert → analysis → implementation → support
An integrated tax workflow should allow you to efficiently, confidently, and accurately work across four key steps so you can create defensible tax positions. Consider this brief, sample workflow to better understand how Bloomberg Tax can help you streamline your activities.
To learn more about this process and how it can help create audit-ready workflows, request a demo.
Best practices for tax position documentation
Now that you have more information about how tax technology can help you build defensible tax positions and streamline your workflow, here are some best practices to consider for tax documentation strategy and the work that flows out of it.
Notably, these considerations apply to all high-impact tax positions under OBBBA – from bonus depreciation elections to ASC 740 documentation and reporting treatments.
Embed and date your sources
- Leverage the research capabilities of Bloomberg Tax to embed OBBBA authorities and Treasury guidance with auto-updating links
- Track federal-state conformity decisions with integrated updates
- Apply date-stamps and version control to evolving research inputs
Use automation to ensure consistency and accuracy
- Use Bloomberg Tax’s integrated workpapers templates for jurisdiction-specific accuracy
- Automate validation logic across federal and state positions
- Standardize workflows to support scale and repeatability in multi-state environments
Document for audit and peer review
- Align documentation with up-to-date formatting standards so you have audit-ready tax workflows
- Include supporting rationale for each federal and state position
- Build internal review checkpoints for high-complexity scenarios
Stay ahead with proactive law change updates
- Leverage Bloomberg Tax’s real-time alerts on federal and state OBBBA development, as our Daily Tax Report, Federal Tax Developments Tracker, and customized news alerts deliver the latest updates
- Monitor legislative conformity decisions through 2026
- Use regulatory change data to continuously improve tax position workflows
Build stronger, more defensible tax positions with Bloomberg Tax Suite
Our suite of trusted tax tools can help you achieve OBBBA compliance by streamlining tax workflows and providing real-time integrations of tax laws and accounting standards.
Because tax work spans across multiple processes, calculations, and functions, Bloomberg Tax offers a suite of solutions to address various parts of the process. Our products help to ensure accuracy and build defensible tax positions, so you can focus on corporate tax planning and strategic initiatives with confidence and efficiency.
To learn more about the integrated tax position support tools from Bloomberg Tax, request a demo.