Tax practice responsibilities: tax practice quality control.

• Author: Schreiber, Gerard H., Jr.

IN RECENT YEARS, LEGISLATIVE, ADMINISTRATIVE, and other developments have created a new era in tax practice. Changes to the Internal Revenue Code, including to Sec. 6694 and other preparer penalty provisions, have had a significant impact on CPA tax practices, as have revisions to Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10); new IRS pronouncements, including preparer registration; an increased emphasis on ethical responsibilities, including in the AICPA Code of Professional Conduct (AICPA code) and Statements on Standards for Tax Services (SSTS); state and local law changes; state board of accountancy rule changes; increased client expectations regarding services; and a generally more litigious society. In this context, practitioners should consider implementing a tax practice quality-control (TPQC) system as an appropriate professional response.

Overview

A TPQC system is a set of organizational structures, policies, and procedures that provides reasonable assurance of compliance with applicable statutory, regulatory, and professional requirements. It generally is evidenced by a TPQC document. The system applies to all sizes of practice units, assists compliance with statutory and regulatory requirements and professional standards, and minimizes the risk of professional liability.

Circular 230, Section 10.36(b), Requirements for tax returns and other documents, states:

Any practitioner who has (or practitioners who have or share) principal authority and responsibility for overseeing a firm's practice of preparing tax returns, claims for refunds, or other documents for submission to the Internal Revenue Service must take reasonable steps to ensure that the firm has adequate procedures in effect for all members, associates, and employees for purposes of complying with Circular 230. ... [Emphasis added.] This section of Circular 230, along with the IRS's preparer visits and registration, indicates an increased emphasis by the IRS on monitoring practice units and their procedures. This emphasis increases the responsibility of preparers within these firms. Although Circular 230, Section 10.36, does not require a quality-control system, having one should be considered an adequate procedure within the meaning of that section.

A System of Quality Control

The AICPA has long-standing and well-established principles of quality control for accounting and auditing practices, which are outlined in AICPA Statement on Quality Control Standards No. 8, A Firm's System of Quality Control.

The AICPA Tax Practice Responsibilities Committee is drafting sample tax practice quality-control guides for different sizes of firms. It is anticipated these sample documents will provide firms (or practice units) with a sample to follow in preparing a firm TPQC guide.

A system of quality control is influenced by:

* Size of practice;

* Number of offices;

* Degree of authority granted;

* Knowledge and experience...