Importance Of Corporate Tax Executives Grows With Sarbanes-Oxley Work

by Leroy Baker, Tax-News.com, New York

18 November 2005

A survey conducted by 'big four' accounting firm KPMG LLP has found a direct link between Sarbanes-Oxley Section 404 compliance work and the rising profiles of senior tax executives with audit committees.

According to the survey, 57% of respondents stated that they believe both their role and stature has grown with peer groups over the past year, while 58 percent and 42 percent of respondents reported greater visibility and prominence before audit committees and boards of directors, respectively.

As a result of this heightened attention, nearly all (92 percent) respondents indicated plans to add staff over the next 12 months.

"It's clear that the additional responsibilities related to Sarbanes-Oxley Section 404 compliance work have pushed tax executives and their departments to a higher level of prominence in Corporate America, especially at the corporate governance level," noted Brad Brown, KPMG's National Tax Leader for Sarbanes-Oxley Section 404.

Moreover, the survey found that these new responsibilities have brought increased work for tax directors as 92 percent of respondents reported that their departments' workloads had grown significantly due to 404 compliance work. In addition, 90 percent cited increased documentation requirements for tax accounting.

The survey also found that:

• The consensus among tax directors is that a host of new regulations have prompted extensive changes within tax departments in terms of personnel, organizational structure and process.
• Nearly one-third (30 percent) of tax executives said they have added full-time senior tax personnel during the past 12 months, with one-third increasing their staff by more than 25 percent.
• And almost half (45 percent) of those surveyed said they are planning to modify their tax department structure over the next 12 months.
• Tax departments are utilizing outsourcing or co-sourcing arrangements to meet greater workloads and demands.
• Some 58 percent of respondents said they plan process improvements over the next 12 months while 45 percent of those surveyed plan to undertake tax technology improvements over the next year.

"More than half of the tax deficiencies reported during the first round of Sarbanes-Oxley 404 compliance related to tax staffing shortages and competency issues," added Mr Brown.

"Companies are clearly reassessing their tax operating models and allocating more resources to tax departments to address work created by Sarbanes-Oxley compliance and increased tax accounting requirements from regulators and others, such as the Financial Accounting Standards Board," he observed.

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