🛡️ Is Hedgi Audit-Proof?
What “audit-ready” really means — and how Hedgi protects you.
No software can guarantee you won’t get audited. But Hedgi is designed so that if you are, you’re ready.
From our deterministic categorization engine to explainable AI logic and proper recordkeeping, every layer of Hedgi is built to help you defend your books with confidence.
Here’s how.
🧠 What Makes a Business “Audit-Ready”?
The IRS (or state tax agencies) don’t just want to see your numbers — they want to see:
Consistent categorization logic
Clear business purpose for deductions
Proper treatment of gray areas (e.g. meals, vehicle use, reimbursements)
Supporting documentation and audit trails
Most DIY bookkeeping apps fall apart here — either using vague auto-categorization, or letting you create messy custom categories with no reasoning behind them.
✅ How Hedgi Keeps You Audit-Ready by Design
1. Deterministic Categorization Engine
Hedgi uses a strict pipeline:
Vendor rules →
User-created rules →
Plaid-to-Hedgi mapping →
AI fallback (Pro) →
LLM Agent (Agentic)
Each step is traceable. If you reclassify a transaction, the system logs it and adapts — but never guesses. This creates consistency and repeatability, two key IRS standards.
2. Explainable AI & Journal Entry Logic
For Pro and Agentic users:
Each AI-based categorization includes an internal reasoning trace
Journal entries created in Agentic Mode follow double-entry standards
Any gray-area logic (e.g., partial business use) is flagged or memo’d for review
Your accountant can see the “why” behind every decision — not just the result.
3. Locked, Tax-Aligned Chart of Accounts
Hedgi’s categories are:
Pre-aligned to IRS deductions
Uneditable to preserve integrity
Mapped to real Schedule C / 1120 / K-1 treatment
This prevents user errors like double-categorizing expenses or mislabeling owner draws as deductible wages.
4. Transaction Notes, Memos, and Flags
Users can attach a memo to any transaction, such as:
“Client lunch at Starbucks”
“50% personal use – adjust at year end”
“Bonus depreciation eligible”
These show up in reports and help your CPA prep for any questions.
5. Automatic Monthly Summaries & P&Ls
Hedgi generates clean, timestamped summaries with:
Total income & expenses
Journaled adjustments (Agentic)
Flagged exceptions
Category-by-category breakdowns
Perfect for handoff during tax prep or in the rare case of an audit.
🧾 Bonus: “Unknown” Handling for Safety
If Hedgi can’t confidently classify a transaction, it gets flagged as:
"Unknown – For Hedgi+ Review" (Code 9999)
This ensures nothing is misclassified silently — another audit win.
🔐 Bottom Line
Hedgi can’t stop the IRS from knocking — but if they do, your books will:
Be consistent
Be categorized with logic
Be explainable and supportable
Be ready
That’s what audit-proof looks like.