Reliance on ext tax services on internal control documention 1875

  • Hi,
    I just wanted to check the reasonableness of this. Our Tax manager has just drafted Key controls and narratives for our taxation process, and has documented within them, that once internal reviews are completed, that external tax advisors will review and approve.
    I feel uncomfortable with this as our external tax advisors are from the same firm as our auditors, and so any review they perform, would be based on reasonableness of our year end computations, which to me would classify their role as tieing in with the auditor’s.
    As far as an am aware. you are not supposed to rely on any workings or reports performed by your auditors as part of your SOX controls and procedures. Therfore, i feel that such a statement together with an additional statement re. ad hoc advice received should be removed from our narratives. Our tax manager, who has recently come from practice, disagrees.
    What do you think?

  • I agree with you. You should not reference any work provided by your auditor as a control that you rely on. While tax work is not a prohibited service by the external auditors, the only reliance that management should place on this work is that he is relying on a professional to properly calculate/review the tax provision. Management should have controls in place to ensure that the information provided to the external firm is complete and accurate. The guidance from the SEC is clear that management (alone) is responsible for the operating effectiveness of ICOFR.

  • Thanks for the validation Kymike.
    Just need to work out how to put this to her in a way that she will accept. it’s all politics here - I’m sure it’s the same everywhere.

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