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Steps to manage overall tax risk.

1 Clearly define and update the roles and responsibilities of tax personnel, including review and authorization roles.

2 Regularly reconcile all tax accounts to underlying data.

3 Assign a tax representative to your company's financial disclosure committee to ensure adequate consideration for tax risks.

4 Develop an annual tax Sarbanes-Oxley (SOX) 404 calendar to track, create reminders and reiterate the importance of internal controls on the tax processes.

5 Prepare and retain tax documents, knowing they may be reviewed by third parties. All work papers should be self-explanatory, and any assumptions should be documented.

6 Maintain tax-basis accounting records by entity level.

7 Hire trained tax professionals in non-domestic locations to provide reliable tax accounting.

8 Create a tax technical training curriculum that avoids a material weakness due to lack of experienced personnel.

9 Assess the company's risk with other types of taxes such as international and sales tax; don't focus only on income taxes.

10 Build lines of communication with the appropriate level of management and the audit committee to help access issues before they become problems.

11 Create a framework for hiring tax help outside the company so the tax department can easily access reliable and current information. No tax department can know everything about tax, so make outside experts accessible.

Increased communication in your company is a key to managing your tax risk. Using the SOX framework, you can develop a solid plan for your company.

--Contributed by Christine M. Lourens, CPA, tax manager at the Minneapolis office of Virchow, Krause & Company LLP.
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Author:Lourens, Christine M.
Publication:Financial Executive
Date:Dec 1, 2007
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