Voluntary Disclosure Agreements and Auditor Independence

The demand for CPA firms' tax services related to voluntary disclosure agreements (VDA) with state governments has grown dramatically since the promulgation of FASB Interpretation 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which has led to demand for comprehensive nexus studies to...

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Bibliographic Details
Published in:The CPA journal (1975) 2009-12, Vol.79 (12), p.60
Main Authors: Cook, John K, Brown, Kevin F, Lightle, Susan S
Format: Article
Language:English
Subjects:
Accountant independence
Advocacy
Agreements
CPAs
Disclosure
Fines & penalties
Jurisdiction
Liability
Nonaudit services
Participation
Policy making
State court decisions
State taxes
Tax services
Taxation
Waivers
Websites
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Summary:The demand for CPA firms' tax services related to voluntary disclosure agreements (VDA) with state governments has grown dramatically since the promulgation of FASB Interpretation 48 (FIN 48), Accounting for Uncertainty in Income Taxes, which has led to demand for comprehensive nexus studies to determine the existence and extent of state tax exposure. The important benefits of most, if not all, VDA programs are the limitation of periods for which the taxpayer will be liable for unpaid tax (i.e., the look-back period) and the limitation or elimination of otherwise applicable penalties. Both are significant potential benefits of a VDA for taxpayers. Several implications of the classification of a jurisdiction as discretionary or automatic merit discussion, including: 1 administrative practice often not reflective of statutory or regulatory requirements, 2. escalation presents risks, 3. anonymity, 4. informal VDA processes, and 5. tax amnesty programs. In evaluating the potential advocacy threat posed by VDA services, firms may also be motivated to evaluate other tax services for similar advocacy threats.
ISSN:0732-8435