United States: Executives of Public Companies May Be Required to Retain Independent Tax Services for Personal Use

In December 2004, the Public Company Accounting Oversight Board (PCAOB) adopted and approved rules requiring that audit firms DO NOT prepare the tax returns or provide tax planning advice to corporate executives involved in the company financial oversight role. This could apply to the CEO, COO, vice presidents, most certainly the CFO, and other executives for whom the company auditor provides tax planning and compliance services. These rules are awaiting SEC approval and, if approved, are expected to take effect on or about October 20, 2005. The rules represent the continued efforts of government to restore public confidence in corporate governance.

Prior to these proposed rules, auditors frequently provided tax preparation and planning services both to public companies and to the executives of those companies. Audit committees and the registrants they serve now may be required to engage tax service professionals other than those who are with the same accounting firm as the corporate auditor of record.

As a result, many executives and audit committees are now focusing on the auditor's dual role of independent auditor and personal tax advocate to the corporate executive. As they begin to manage compliance with the pending rules, which are more likely than not to become effective before the end of the year, we have been contacted by many executives seeking independent tax planning and compliance services.

Many corporate governance practice experts are proposing to corporate executives that they should not wait to see how the SEC reacts, but should pursue initiatives that demonstrate excellence in governance now.

To avoid entanglements with the new ethical standards, corporate executives should now consider engaging independent tax professionals and certified public accountants to perform their personal tax services. Corporate executives may also wish to consider engaging these same tax professionals to manage not only the executives' personal tax matters, but also the corporate tax compliance and planning functions. This will serve to achieve total and complete separation of company executive tax services from auditor services as well as corporate governance excellence.

Duane Morris' Tax Accounting Group, composed of tax professionals and certified public accountants, has offered a flexible tax assistance program designed for corporate executives and their companies for many years, providing individual and business tax preparation, planning and consulting services. Participants in this program benefit from quality, highly personalized, uninterrupted, comprehensive and confidential tax preparation, planning and consulting services. At the same time, executives have access to other valuable resources and services in the legal and non-legal fields.

The principal objectives of the program are to streamline interaction between the busy executive and needed advisors and to assist the executive in achieving tax, financial and related objectives. This is accomplished through a coordinated approach delivered by a primary core of specialists intimately familiar with, and taking a personal interest in, the executive's tax and related financial objectives. The results are more effective solutions and greater peace of mind for the busy executive without the conflict of interest issues outlined above.

The Group, which is one of the largest non-legal groups of its kind in a law firm, has an active and varied practice, including more than 60 service lines in more than 45 industries. It serves clients in 43 states and eight foreign countries. The Group's certified public accountants, certified fraud examiners, financial consultants and advisors provide a broad range of cost-effective tax preparation, planning and consulting services; accounting, financial and management advisory services; and litigation consulting services to a wide range of entities.

The Tax Accounting Group also provides an array of consulting services to numerous lawyers and law firms representing clients in regulatory and transactional matters and throughout various stages of litigation, including case assessment and strategy development; asset recovery investigation and locator services; damage assessment; marital disputes; forensic and investigative accounting; fraud and embezzlement detection; and civil and criminal tax controversies.

For Further Information

If you have any questions about the information in this article or would like to learn more about Duane Morris' highly personalized and confidential tax preparation, planning and consulting services, please contact Michael A. Gillen, Director of Tax Accounting.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, among the 100 largest law firms in the United States, is a full-service firm of more than 600 lawyers. In addition to legal services, Duane Morris has independent affiliates employing approximately 100 professionals engaged in other disciplines. With offices in major markets, and as part of an international network of independent law firms, Duane Morris represents clients across the nation and around the world.