Internal Audits Fix Financial Accounting Problems –

Have You Read the Rest of This Special Report?

IF YOU FIND yourself at this point not knowing what the answer is, you have either turned directly to this page without reading the rest of the special report, or you have missed the point of this special report—be proactive, get internal audit to double-check the main tax risk areas, get help through a tax team to identify the tax risk areas, work according to a tax strategy document which is continuously revisited, avoid being insular and get out of the ivory tower, go and chase down all the facts to get an accurate picture of any tax problems around any major transaction. Communicate, communicate, and communicate again, get to know the business and all its facets, get internal audit involved to check again, and Read More

Internal Audits Fix Financial Accounting Problems –

Internal Auditors

QUESTION: “WHAT ARE they doing, and what are they focusing on?” Tax is usually not high on the agenda. “Why not?” Because this area of risk is not being emphasized enough. “Why not?” The board of directors has not given it priority. The audit committee is not pushing for tax transparency, and so the BO/CFO does not have a pressure point to deal with and will cover it when it becomes a priority, usually as part of crisis management. The tax problems are what they are. If they are serious enough, they will emerge in good time, and the business can deal with the consequences at that point in time. Other priorities have been placed on the internal auditors ‘ plates such as fraud in its Read More

Internal Audits Fix Financial Accounting Problems –

Executive Summary –

MANY BUSINESSES PUT their blind faith in reactive reporting by their auditors or accountants and expect that their tax manager through the route of normal tax compliance will resolve all tax risks. In the difficult regulatory environment that taxpayers operate in, this is not a prudent tax risk management strategy. Businesses need to have their own internal control and check mechanisms. The tax team that has been formed will also assist in performing internal audits associated with tax risk management. They must be privy to all information, subject to legal privilege, in order to identify, analyze, and solve tax risks effectively, such as accounting provisions, for instance. The tax team, with internal Read More

More Facts Resolve Tax Risks –

Legal Privilege –

ANY OPINIONS OBTAINED from the outset, before and pursuant to an IRS query, must be protected by legal privilege . This will ensure they do not have to be disclosed to the IRS at all, even if the matter eventually goes to court.

Opinions may contain qualifications or provisos. For example, counsel may arrive at a finding on the assumption of something. If this gets into the IRS’s hands, they could focus on that qualification and misinterpret it entirely.

Taxpayers must make sure to furnish counsel with every last detail in order to avoid such Read More

More Facts Resolve Tax Risks –

The Essence of a Transaction –

THE ENTIRE TRANSACTION, and its individual parts, must be carefully scrutinized to ensure that each component is legally and properly implemented. It may be that one of the transaction legs was not implemented properly by the financial institution and is therefore invalid. This flaw, if a fundamental pillar of the transaction, could shift the liability to the financial institution, or another party that failed to execute it properly.

In summary, the taxpayer must investigate the transaction from all angles as they will be held accountable. In recent times, it has become apparent that with the execution of a Read More

More Facts Resolve Tax Risks –

Aiming toward a Letter of Findings –

IDEALLY THE TAXPAYER’S representatives should attempt to establish a high-level relationship with representatives from the IRS. In so doing, an introductory meeting should be convened wherein the representatives discuss the way forward and the amicable approach they intend to adopt.

This is also an important forum for the taxpayer to emphasize that a letter of findings must be issued by the IRS prior to any assessments and that the taxpayer be given reasonable opportunity to respond to the letter of findings. Read More

More Facts Resolve Tax Risks –

Repricing Agreements –

A REPRICING AGREEMENT can be in the form of a separate agreement, a clause, or an addendum; but it essentially provides for circumstances which occur or manifest later into the transaction and which impacts on the financial model of the structure, which may not have been contemplated.

Circumstances may include the introduction of and changes to any law, rule, regulation, directive, or banking practice applicable to the transaction, the rate and practice of levying tax, damages, and other costs which may become payable due to a breach. Of course Read More

More Facts Resolve Tax Risks –

Bringing the Financial Institution to the Party –

THE FINANCIAL INSTITUTION played the main role in selling the transaction product to the taxpayer and most times assured the taxpayer that the structure was not untoward in light of expert opinions obtained. Accordingly, the financial institution should be held partially responsible for their role in devising and offering the product.

Similarly, the opinions the financial institution obtained could assist the taxpayer’s case and should be disclosed to the taxpayer, who in turn may elect to provide the contents to the IRS. Read More