Avoiding the consequences of poor tax risk oversight.

• Author: Robason, Randy D.

Russian roulette, walking across a minefield blindfolded, or serving as head of tax at a publically traded U.S. company: Which is the least risky?

If you were the tax leader at a company that disclosed a tax-related material weakness or a significant deficiency related to tax accounting and financial reporting, or--heaven forbid--had a tax-related restatement; or if your company inadvertently entered into a tax shelter transaction and you now have newfound friends at the U.S. Department of Justice; or if the audit or tax partner who signed off on your incorrect tax provision and is now spending "quality time" with regulators at the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB), ... then you might prefer either of the first two options.

The TEI's 2011-2012 Corporate Tax Department Survey provides tremendous insight into the operations of a modern tax department, as well as new and emerging trends, including those related to leading practices for minimizing tax risk. If you lead the tax organization at a public company, you can take comfort when comparing yourself with your counterparts at private companies. You have comparatively abundant tax resources to help keep you out of trouble.

How Did We Get into This Mess?

Seasoned professionals remember a peaceful time in the profession. Yes, we had the Tax Act of 1986, and it effected major changes from its predecessor, the Internal Revenue Code of 1954. But tax professionals made the transition and perhaps even appreciated a little excitement after years of relative calm. And besides, auditors seemed to decide around the mid-1980s that tax provisions were not very important in the overall scheme of financial statements. Another 16 years of relative bliss ensued.

In 2002, a sea change--or rather changes--occurred in the tax world. Changes came from every direction, with some changes seemingly triggering others, as though national and international regulatory authorities were involved in a large, coordinated effort. At other times, changes seemed to occur randomly. But the changes were massive and had, and will continue to have, significant implications. TEI's 2011-2012 survey results reflect the beginning of a long period of increasing expectations for in-house tax practitioners.

So, let's recap the mega-events that changed the tax world:

* Circa 1986: New tax act enacted, tax professionals in audit firms begin doing less work on audit provisions, and tax accounting skills decline.

* 2002: Triggered by a...