This report presents the results of an audit of the financial statements of the Internal Revenue Service (IRS) as of and for the fiscal year ending Sep. 30, 2000. The report contains: (1) an unqualified opinion on IRS' financial statements; (2) opinion that internal controls at IRS as of Sep. 30, 2000, were not effective; and (3) report on IRS' noncompliance with two provisions of laws and regulations that were tested and IRS' financial management systems' lack of substantial compliance with the requirements of the Federal Financial Management Improvement Act of 1996.