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The impact of tax law uncertainty on the development of the Sarbanes-Oxley auditor independence rules with regard to tax shelters

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  • Terando, William D.
  • Kurtenbach, James M.

Abstract

The paper examines the impact of tax rule uncertainty on the development of the Sarbanes-Oxley auditor independence rules. We show that the inability of Congress to articulate a concise and agreed-upon tax shelter definition forced the SEC to adopt their own definition that incorporates two characteristics common to most tax shelters: contingent fee arrangements and confidentiality. We also consider whether this definition eliminates the subjectivity in the tax shelter identification process because it reinstates the significant purpose standard (used for tax enforcement purposes) to assist auditors (and their public company clients) identify tax shelter transactions. We conclude that the new definition has reduced the incentive of auditors to provide tax related services to their public company clients.

Suggested Citation

  • Terando, William D. & Kurtenbach, James M., 2009. "The impact of tax law uncertainty on the development of the Sarbanes-Oxley auditor independence rules with regard to tax shelters," Research in Accounting Regulation, Elsevier, vol. 21(2), pages 118-124.
    • Handle: RePEc:eee:reacre:v:21:y:2009:i:2:p:118-124
    DOI: 10.1016/j.racreg.2009.06.006
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    References listed on IDEAS

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    1. Bankman, Joseph, 2004. "The Tax Shelter Problem," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(4), pages 925-936, December.
    2. Beeman, E. Ray, 2005. "Keeping the Faith: The Permanent Campaign Against Tax Shelters," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(3), pages 449-470, September.
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    Cited by:

    1. Thompson, Dave & Booker, Quinton, 2015. "Bank loan officers' perceptions concerning independence, objectivity, and reliability when external auditors also perform tax compliance activities for nonpublic clients," Research in Accounting Regulation, Elsevier, vol. 27(1), pages 14-20.

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