XYZ Corporation, a large multi-national entity, "managed" the prior IRS examination as follows. The IRS audit team, including a member of IRS Chief Counsel, was housed in a large comfortable room adjoining the accounting department. The Controller, an especially busy person, dealt directly with the various IRS auditors. These interactions were friendly and informal. The modus operandi for handling IRS written requests for records was for the Controller to assign the Revenue Agents to deal directly with the accounting personnel responsible for the applicable records. This worked well for the IRS because it resulted in a prompt receipt of requested information. Furthermore, the Revenue Agents informally obtained additional information and records from the recordkeepers and, thereby, developed many issues well beyond the scope of the original written requests. The company kept no records with respect to information or records turned over to the IRS.

On the other hand, this "system" did not work well for the taxpayer. At the end of the audit, the IRS raised numerous, often meritorious, issues which generally came as a complete surprise to the Controller. Some of the issues were later resolved at Appeals, but other issues currently await trial in Tax Court.

XYZ Corporation receives notice that the IRS will start a new audit cycle. What advice would you give XYZ Corporation on how to establish procedures for this new IRS audit?