Your sales are lousy. Your biggest customer just went bankrupt owing you a few hundred thousand dollars. Your health insurance costs are rising rapidly and you're having trouble financing your accounts receivables.

But that's not the half of it. There's an Internal Revenue Service auditor poring over your books in the conference room. A state sales tax agent has left you a phone message that he wants to come in for a visit, and city fire inspectors just dropped off a violations summons.

With government budgets sharply constrained and likely to be under pressure for years to come, businesses struggling in the recession are now facing intense and rising scrutiny from tax and regulatory authorities. Across the country, governments are ramping up their audits of businesses,...