The ATO have released their lowdown on its review and audit processes.
Reviews and audits usually involve looking at your affairs to ensure the information you have given us is accurate and you have complied with your obligations.
Reviews and audits are both considered ‘tax audits’ but there are differences between the two as they vary in their complexity.
Depending on the complexity, we sometimes need to contact other parties such as banks, employees, customers and suppliers to get information.
In general terms, the ATO selects businesses/individuals by their risk indicators and benchmarks.
We suggest you follow the link below and have a read of how they handle their audit processes.
http://www.ato.gov.au/General/How-we-check-compliance/In-detail/Cash-economy/Overview/Cash-and-hidden-economy-review-and-audits/
