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Once the business has sufficiently grown, audited financials become a necessity.  One important line item in the company’s consolidated financial statements is the provision for taxes.  Accounting for taxes is perhaps the most complicated piece and usually where deficiencies are found by the auditors.


The tax calculation cannot begin before all groups have completed their respective responsibilities for the close and often times, there is limited time for the provider to complete the calculations of the tax provision. Improving the tax consolidation process may assist in reducing the overall preparation time of the financial statements.  Setting up consolidation processes for tax items can shorten the process as well.


In addition to the calculation of the tax provision, there may be certain filing positions that may be more aggressive, however, the financial statements need to reflect the risk that potentially the filing positions taken by the company may be successfully challenged if audited.  Understanding what is commonly referred to as FIN 48 reserves, or ASC 740-10, is essential.  Proper analysis and documentation will be required to be included in the provision file that will be reviewed by the auditors.


Lastly, the tax note on the financial statements needs to be carefully drafted.  It needs to be accurate and yet short and addressing only what needs to be addressed.

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