Alerts and Updates

Executives of Public Companies Will Be Required to Retain Independent Tax Services for Personal Use

May 2006

In July 2005, the Public Company Accounting Oversight Board (PCAOB) adopted and approved rules requiring that audit firms DO NOT prepare the tax returns or provide tax planning advice to corporate executives of their audit clients who are involved in the company financial oversight role. This applies to the CEO, the COO, vice presidents, most certainly the CFO, and any other executive involved in a corporate financial oversight role. These rules were approved by the SEC in April 2006 and will take effect on October 31, 2006. The rules represent the continued efforts of government to restore public confidence in corporate governance.

Presently, auditors commonly provide tax preparation and planning services both to public companies and to the executives of those companies. Audit committees and the registrants they serve will be required to engage tax service professionals other than those who are with the same accounting firm as the corporate auditor of record.

As a result, many executives and audit committees are now focusing on the auditor's dual role of independent auditor and personal tax advocate to the corporate executive, as indicated by many who have contacted us seeking independent tax planning and compliance services.

Proactive Path

Corporate governance experts are advising corporate executives to immediately commence the process of identifying, interviewing and engaging independent tax professionals to perform the personal tax compliance and planning services for all executives involved in a financial oversight role within the company.

Additionally, these experts anticipate there will be increased scrutiny regarding the nature of services provided by CPA firms to nonpublic entities and recommend that nonpublic entities also separate tax and audit service providers.

The Tax Accounting Group of Duane Morris offers an Executive Tax Assistance Program (ETAP), which is designed to provide an effective solution to the requirements of the new rules outlined above. This program also streamlines interaction between the busy executive and needed advisors, and assists the executive in achieving tax, financial and related objectives. This streamlined interaction is accomplished through a coordinated approach delivered by a primary core of specialists intimately familiar with, and taking a personal interest in, the executive's tax and related financial objectives. The results are more effective solutions and greater peace of mind for the busy executive, without the conflict of interest prohibited by the new rules.

These services, furnished by seasoned professionals, provide individual and business tax preparation, planning and consulting services at group rate discounted fees designed specifically for corporate executives. Being a successful executive in today's fast-paced world leaves little time to properly investigate and achieve tax, financial and related objectives. Participants in the ETAP receive highly personalized, comprehensive and confidential tax preparation, planning and consulting services.

The Group, which is one of the largest nonlegal groups of its kind affiliated with any law firm, has an active and diverse practice, including more than 60 service lines in more than 45 industries. It serves clients in 43 states and eight foreign countries. The Group's certified public accountants, certified fraud examiners, financial consultants and advisors provide a broad range of cost-effective tax preparation, planning and consulting services; accounting, financial and management advisory services; and litigation consulting services to a wide range of individuals and businesses.

The Tax Accounting Group also provides an array of consulting services to numerous lawyers and law firms representing clients in regulatory and transactional matters and throughout various stages of litigation, including case assessment and strategy development, asset recovery investigation and locator services, damage assessment and measurement, marital disputes, forensic and investigative accounting, fraud and embezzlement detection, and civil and criminal tax controversies.

For Further Information

If you have any questions about the information in this Alert or would like to learn more about Duane Morris' highly personalized and confidential tax preparation, planning and consulting services, please contact Michael A. Gillen, CPA, CFE, Director of Tax Accounting.

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As required by United States Treasury Regulations, you should be aware that this communication is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under United States federal tax laws.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.