Which audit function is primarily performed by the information matching program?

• A. It audits the financial statements of publicly traded companies.
• B. It calculates the total tax liability for each taxpayer.
• C. It compares data reported by taxpayers with information provided by third parties to identify discrepancies.
• D. It determines the appropriate tax rate for each income bracket.

Answer: (C)

Verified step by step guidance

1. Understand the concept of the 'information matching program' in auditing. This program is designed to compare data reported by taxpayers with information provided by third parties, such as employers, banks, or other institutions, to identify discrepancies.
2. Recognize that the primary function of this program is not to audit financial statements of publicly traded companies. That task is typically performed by external auditors or regulatory bodies like the SEC.
3. Clarify that the program does not calculate the total tax liability for each taxpayer. Tax liability is determined based on the taxpayer's reported income and applicable tax laws.
4. Note that the program does not determine the appropriate tax rate for each income bracket. Tax rates are predefined by tax authorities and applied based on income levels.
5. Conclude that the correct function of the information matching program is to compare taxpayer-reported data with third-party information to identify discrepancies, ensuring accuracy and compliance in tax reporting.