Sarbanes-Oxley will dramatically alter relationships with tax service providers.

• Author: Glennie, J.A.
• Position: President's Corner

This issue of The Tax Executive is late. Optimally, the September-October issue of the magazine should arrive as TEI members are preparing for the Institute's Annual Conference. Often, in fact, the issue has last-minute news about the conference--reminders of conference highlights, announcements of last-minute changes, and even pleas to non-registrants to double check their calendars and departmental budgets in the hope of freeing up both the time and resources to attend.

That was our intention this year as well. But instead this issue won't arrive on members' desks until after the 57th Annual Conference in Toronto. The reason is Sarbanes-Oxley. Enacted in July in the aftermath of various corporate accounting and other business scandals, the Act (sometimes referred to as SOX) effects major changes in the rules governing the interaction of corporate management with outside auditors. One of the hallmarks of SOX is its effect on auditor independence and, specifically, the provision of non-audit services--including tax services--by an audit firm. Depending on how the legislation is interpreted, auditors are either prohibited outright from providing certain services to their audit clients or, at a minimum, such services can be rendered only if the company's audit committee "pre-approves" them.

It is not difficult to grasp the potential effect of SOX on TEI members and their companies. The new law will cause a substantial reworking of companies' internal procedures as corporate boards implement the auditor independence (and other) rules. Inevitably, tax directors will spend more time with their audit committees, and even if the SEC's implementing regulations do not prevent companies from using their auditors for certain projects, internal company procedures may well circumscribe the scope of services provided by an audit firm. And if the new law or a company's own rules limit the choice of tax-service providers, then relationships will be affected, as the "winners" and "losers" between audit firms and other service providers (be they law, accounting, or other firms) are sorted out. Stated bluntly, tax executives ignore or downplay the significance of Sarbanes-Oxley at their peril.

Advancing Professionalism through Education

The enactment of Sarbanes-Oxley coincided with TEI's development of its goals and objectives for the year. In light of the legislation, as well as ongoing challenges to the tax community's professionalism--including continuing...