SECTION 9. REVIEW BY DIRECTOR

.01 In general . The director must apply a change in method of accounting made in compliance with all the applicable provisions of this revenue procedure in determining the taxpayer’s liability, unless the director recommends that the change in method of accounting should be modified or revoked. (See section 9.02 of this revenue procedure if a change in method of accounting is made without complying with all the applicable provisions of this revenue procedure.) The director will ascertain if the change in method of accounting was made in compliance with all the applicable provisions of this revenue procedure, including whether:

(1) the representations on which the change was based reflect an accurate statement of the material facts;

(2) the amount of the § 481(a) adjustment was properly determined; and

(3) the change in method of accounting was implemented in compliance with all the applicable provisions of this revenue procedure.

The director will also ascertain whether:

(4) there has been any change in the material facts on which the change was based during the period the method of accounting was used; and

(5) there has been any change in the applicable law during the period the method of accounting was used.

.02 Changes not made in compliance with all applicable provisions . If the director determines that the taxpayer has not complied with all of the applicable provisions of this revenue procedure, the director may:

(1) deny the change in method of accounting and require the taxpayer to continue to use the prior method of accounting;

(2) deny the change in method of accounting and place the taxpayer on a proper method of accounting ( see section 2.10 of this revenue procedure); or (3) make any adjustments (including the amount of any § 481(a) adjustment)

(for example, the taxpayer changes to a method of accounting that varies from the applicable accounting method described in this revenue procedure or the taxpayer is outside the scope of this revenue procedure), the taxpayer has initiated a change in method of accounting without obtaining the consent of the Commissioner as required by § 446(e). See sections 9.02 and 10.03 of this revenue procedure.