For Immediate Release
October 19, 2006
AUDITS OF BANKRUPTCY PAPERS
BY INDEPENDENT PUBLIC ACCOUNTANTS
START IN OCTOBER
WASHINGTON, D.C.–On October 20, 2006, independent public accountants will
commence audits of papers filed in individual bankruptcy cases, the Executive Office for U.S.
Trustees (EOUST) announced today. The debtor audit requirement was enacted as part of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). It applies to
chapter 7 and chapter 13 cases filed by individuals on or after October 20, 2006. The audits are
to determine the accuracy, veracity, and completeness of petitions, schedules, and other
information required to be filed or provided in a bankruptcy case.
At least one out of every 250 individual chapter 7 and chapter 13 cases filed in a judicial
district will be randomly selected for audit. In addition, an individual debtor’s chapter 7 or
chapter 13 case will be selected for audit if the debtor’s income or expenses reflect greater than
average variance from the statistical norm of the district in which the case was filed.
To support the information disclosed under penalty of perjury in his or her bankruptcy
documents, a debtor whose case is chosen for audit will be requested to provide information to
an independent firm under contract with the U.S. Trustee Program. The audit will be performed
by a certified public accountant or independent licensed public accountant selected through
competitive bidding. The audit firm will ask the debtor to provide the firm with documents such
as tax returns, account statements, and pay stubs, and the debtor is under a statutory duty to
cooperate with the audit firm. This duty is in addition to the debtor’s statutory duty to file these
documents with the court, and to provide these documents to designated parties.
The audit is not the same as a tax audit or financial audit conducted in accordance with
“generally accepted auditing standards,” because bankruptcy documents are typically not
prepared using generally accepted accounting principles. Therefore, as required under
BAPCPA, the audit firm will follow auditing standards developed by the U.S. Trustee Program.
These standards are published in the Federal Register at 71 Fed. Reg. 58005 (Oct. 2, 2006).
The audit firm will review the debtor’s information and file a report with the bankruptcy
court specifying any material misstatement of income, expenditures, or assets. If a material
misstatement is found and is not adequately explained, the debtor may be subject to civil
enforcement actions by the U.S. Trustee and/or criminal prosecution by the U.S. Attorney. A
civil enforcement action may also be brought against a debtor who does not satisfactorily explain
a failure to provide papers requested by the auditor.
The U.S. Trustee Program is the Justice Department component that protects the integrity
of the bankruptcy system by overseeing case administration and litigating to enforce the
bankruptcy laws. The Program has 95 offices in 21 regions. By law, Alabama and North
Carolina are not part of the U.S. Trustee Program; in those states, bankruptcy court officials
known as Bankruptcy Administrators will supervise debtor audits.
Contact: Jane Limprecht, Public Information Officer
Executive Office for U.S. Trustees
(202) 305-7411
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