Tax Planning After the Split

Tax and audit services are no longer provided by the same firm at many companies, so CFOs must refocus to ensure tax savings.

Sarbanes-Oxley's requirements for auditor independence and new rules from the regulatory agencies have reshaped tax and audit services. Many companies that once achieved certain efficiencies by using one firm for both tax and audit are now struggling to maintain the same level of tax savings with separate providers and a long list of new restrictions.

CFOs must ensure that optimal tax planning continues under the new structure. This means that they must build a deeper relationship with tax advisers and strengthen internal tax capabilities to guarantee adequate controls. "The biggest piece is making sure that the provider is jointly investing in institutionalizing knowledge about the company," says Brad Brown, national director for Sarbanes-Oxley Section 404 at KPMG LLP in Los Angeles. This effort includes consolidating the work product and information in a single place that provides a team gateway to background information on the company.

"Saving all of the tax work in a Web-based portal or repository allows the team to harvest the knowledge from previous and current projects," Brown notes. "There's a growing trend to use technology to enable the cooperation between the client and the professional firm."

CFOs need to push more information out to tax advisers, and advisers need to pull more in. "To ensure that the tax adviser sufficiently understands the company's business operations and finances, it is incumbent on the tax provider to request from the CFO and other representatives of the company the information -- not just factual information but also strategies and financial goals -- it needs to provide useful advice to the company," says Tom May, tax partner in the Washington, D.C., law firm of Baker & McKenzie LLP. "It is incumbent on the CFO and the other representatives of the company to provide that information on a prompt and clear basis. If this is done, the tax planning provided will be the best possible, whether or not tax and audit are within the same provider."