tax and accounting experts

tax and accounting experts

The Role of Tax and Accounting Experts in Modern Business Practices

1. Introduction to Tax and Accounting Experts

Over time, and particularly in the last 20 years, while fresh financial reporting scandals emerged from time to time, it has become increasingly evident that complex rules in both accounting and taxing carried more than just the mere potential that they would be bypassed or circumvented by company executives, sometimes improperly. Complex rules of this nature also raised the possibility that with respect to the discharge of important duties they may not be understood even by experienced and otherwise very competent professionals such as business managers. This controversy, involving complex accounting and taxing rules, spawned two specialist business advisory professions always on call to provide business managers with advice to make sense of new or difficult (or of tiny, technical nuances) accounting and taxing rules. These two professions are of course accounting advisors and taxing advisors.

Accounting advisors and taxing advisors (tax and accounting advisors for short) assist with different but related aspects of business operations and business needs. Such needs span such services as corporate financing to restructuring, business sales and business acquisition strategies, implementing corporate action at lowest cost, investment, tax and business evaluations, understanding and interpreting tax and accounting rules, facilitating compliance with these rules and facilitating contact with tax and accounting authorities to obtain rulings and assurances from these authorities regarding tax and accounting treatments. Often these advisors work as members of corporate management teams. Often, but not always, such advisors can undertake their roles whether on a full-time basis as a part of a corporation’s management team, or on a part-time basis with outside multidisciplinary professional consulting firms providing such services.

2. Key Responsibilities and Skills of Tax and Accounting Experts

Working as tax and accounting professionals involves helping clients to meet their personal, business, and compliance needs by providing an extensive knowledge base of tax laws and accounting concepts. This means that these experts work in a fast-paced business environment and make real-time decisions that produce broader social and economic impacts. Nevertheless, these professionals often operate behind the scenes and might not inform decisions about what business and compliance objectives should be achieved by the company; they do not also assume the task to translate those goals into operational plans. This chapter aims to help bridge that gap by discussing the pivotal roles of the tax and accounting professionals in the firm and the stakeholders with whom they engage in their efforts to achieve client objectives. It also describes some modern business practices.

Magazines and newspapers, when they wish to publish a “special report” about accounting firms, typically include breathless photos and prominent bios of the firm’s top tax and accounting experts. Those profiles are of accomplished professionals. They come from all walks of life, both nationally as well as from the myriad government and regulation extend beyond their legacy historic roles as bookkeepers. Nevertheless, for them to really provide added value to a wider business audience, it is important to stress their role by positioning them in front of an audience who is aware of the opportunity that their collaboration is affording their company.

3. The Impact of Tax and Accounting Experts on Business Performance

Research over the years depicts a two-sided relationship between a business and its tax department. First, the tax department’s characteristics may have performance outcomes that are vital to firm value creation. As explained by D. Dharmapala and J.R. Hines (2009), A. Desai (2005), and D. Guenther and R.J. Sansing (2006) in their researches “Tax-motivated Incentives and Corporate Tax Planning” and “Tax and the Structure of Corporate Transactions”, role structures, centralization, and reporting lines performed by tax departments are determinants of tax planning and compliance decisions, which in turn are related to such firm characteristics as dividend policy, capital investment, and optimal capital structure.

Secondly, observations made by B. Becker, M. Hussey, and G. Beck (2011) in their survey reveal signals that these outcomes can themselves drive role characteristics. The authors found that a tax planning orientation – specialized skills, a relatively flat structure, and direct access to the board – was more common under conditions that favor the use of tax-related incentives, for instance, governance and compensation structure influenced by profit targets, institutional and individual ownership, and weak link of governance and ownership.

Conversely, L. Han, G. Li, and D. Wang (2019), in the research examining whether compromised auditors would increase their provision of tax services while sacrificing their audit quality, established a negative relation between auditors’ repeated disciplinary action and both the likelihood of an audit firm providing tax services for their particular client facing litigation and the proportions of audit fees obtained by the company from a compromised auditor.

4. Emerging Trends and Technologies in Tax and Accounting Services

Control is the primary or critical component in whether a person is a contractor or an employee. Both parties, the person doing work and the party contracting for work to be done, solidify their roles in the work arrangement. Control over the amount and method of doing work is often a two-way street; the company wants to control the outcome but not always how the result is obtained.

Some companies delude themselves into thinking that if they have the right clauses in their work statements or contracts, then they should never have a problem with classification because everyone that takes up the job must sign off on these clauses and should, in effect, be a contractor. However, no matter what you present to the worker at the start date of work, if you control the method, it becomes evidence that you believe that cognitive skill level is generally low on the task.

However, make no mistake that without a sufficient level of skill, individual contributor contractors are not independent contractors.