Repeat Winner Emerges in Deloitte Tax Competition
The revamped tax case study competition, sponsored by the Deloitte Foundation, took place over three days in November at Deloitte University's campus for learning and leadership development outside of Dallas, Texas. Nine teams participated in solving a complex business tax case. Each student on the winning team received a $2,000 scholarship, while the winning school pocketed an institutional award of $10,000.
It's certainly no accident that William & Mary prevailed in the 2011 competition. The juggernaut has produced eleven national champions in the last eighteen years.
The Deloitte FanTAXtic competition is designed to expose students to the tax profession while they're still in school. A new format included more interactive exercises – including case simulations, role playing, and presentations – to help students embark on their tax careers. Deloitte tax practitioners were on hand to lend support and guidance throughout the competition.
Each team participating in the national competition had placed first in the regional competitions held on October 22, 2011, in nineteen different cities. The regional events drew more than eighty teams fr om fifty-three colleges and universities.
"We are very excited about Deloitte FanTAXtic, as it offers a fresh approach to delivering a long-standing tax case competition," said Shaun Budnik, President of Deloitte Foundation, in a press release. "As a result of the interactive nature of the program's new design, students are able to better understand the experiences and business challenges they may face during a tax career. I congratulate the College of William & Mary team, as they demonstrated an ability to work collaboratively while exhibiting a solid understanding of tax issues."
Placing behind William & Mary, in second and third place, respectively, were the University of Texas at Austin and John Carroll University. Students on the University of Texas team received awards of $1,000 each, and the school was awarded $5,000. Each student fr om John Carroll University received $500, while the school received a $2,500 institutional award.
"For years, the Deloitte Tax Case Study Competition has allowed us to play a vital role in developing and nurturing the next generation of tax talent," said Carl Allegretti, CEO of Deloitte Tax LLP. "Deloitte FanTAXtic, the latest iteration of the competition, has raised the bar on how we engage students and enhance their knowledge of tax. This year's winning team fully embraced the new format and delivered thoughtful, technically sound solutions to a very complex business tax case simulation. The results give me great confidence in the future of our profession."
“Perhaps most importantly, a new requirement that the auditor communicate with the audit committee regarding significant transactions not in the ordinary course of business has been added,” Goelzer noted. “Before the standard is finalized, the board should give investors, preparers, and auditors the opportunity to consider these changes and to let the board know what they think the impact will be.”
Another PCAOB board member, Jay Hanson, noted that the standard is aimed at avoiding the information overload and excessive costs that could result if auditors are required to communicate too much information that is not relevant to the audit committee’s monitoring and oversight role. However, he pointed out that nothing would prevent audit committees from requesting more information from auditors if deemed appropriate in light of the relevant circumstances.
“Likewise, nothing prevents auditors from volunteering information above and beyond that required by today’s proposed standard,” said Hanson. He added that while some commenters had asked the PCAOB to require auditors to discuss their assessment of the company’s “tone at the top,” the board was careful to tie its communications requirements in the proposed standard to existing requirements for audit procedures in order to avoid increasing the substantive audit work that must be performed through the communication standard.
As a result, the proposed standard addresses the “tone at the top” issue only insofar as AS 5 includes audit performance requirements to evaluate management in connection with the control environment, he noted. “Audit committees are free, however, to expand on these discussions with their auditors by asking for additional information about management’s philosophies and priorities, in order to develop a more comprehensive picture of the company’s tone at the top,” said Hanson,
Some commenters also suggested that the PCAOB retain the originally proposed requirement that auditors discuss with the audit committee the quality, clarity and completeness of the company’s financial statements and related disclosures. However, the latest version of the standard omits this requirement, Hanson noted, stating only that the auditor must communicate the results of the auditor’s evaluation of whether the presentation of the financial statement and related disclosures are in conformity with the applicable financial reporting framework. “Nevertheless, the standard does not prevent auditors from communicating, or audit committees from asking their auditors to communicate, the auditor’s view about the quality, clarity and completeness of the financial statements and disclosures,” said Hanson. “Doing so may be particularly appropriate in connection with the audits of companies with complex financial transactions or investments and significant use of fair value measurements and management estimates.”
The proposed standard also does not impose a specific timeline for the various communications, he noted. “Recognizing that audits vary in complexity and duration, it requires only that the communications be made in a timely manner and before issuance of the audit report, and it notes that the appropriate timing of communications may depend on the significance of the matter to be communicated and the necessary follow-up actions required,” said Hanson. “However, audit committees always have the discretion to request auditor communications in connection with certain specific audit milestones wh ere appropriate. They also may want to reinforce the standard’s objective by encouraging auditors to communicate important matters early enough during the audit to allow sufficient time for such matters to be considered fully by the audit committee and for any necessary consultation or supplemental audit procedures.”
PCAOB board member Steven Harris pointed to two of the most important communications within the proposal: communication of significant unusual transactions of which the auditor becomes aware and communication of the auditor’s views on the ability of an issuer to continue as a going concern.
“The requirement that the auditor communicate to the audit committee any significant transactions outside the normal course of business for the company—including any transactions that appear to be unusual due to their timing, size, or nature—is new in this re-proposal,” said Harris. “The auditor also would be required to explain his or her understanding of the business rationale for such transactions. In addition, this proposal includes a requirement for the auditor to communicate any conditions that indicate there could be substantial doubt about the company’s ability to continue as a going concern. Furthermore, if the auditor’s doubt about the company’s ability to continue as a going concern is allayed, the proposal requires the auditor to communicate why the auditor is no longer concerned, including a discussion of management’s plans to mitigate those concerns.”
Another board member, Lewis Ferguson, questioned whether the new standard might still lead to a compliance checklist approach. “One question is whether specifying particular items that must be discussed with the audit committee runs the risk of leading to ‘checklist’ compliance wh ere items are ticked off but not made the subject of substantive and thoughtful discussion,” he said. “There are two answers to this concern. Evidence in other areas (checklists used in medicine, particularly surgical procedures, or pre-flight checklists in aviation) have shown definitively that checklists can actually reduce the risk of error in complex tasks and specifying the items that must be discussed with the audit committee in the context of an audit may have a similar, salutary effect. In addition, the proposed standard specifically warns against perfunctory compliance and encourages auditors to have a robust dialogue with the audit committee.”
The proposed auditing standard would supersede PCAOB interim standard AU sec. 380, Communication With Audit Committees, and AU sec. 310, Appointment of the Independent Auditor, and amend other PCAOB standards. Any new auditing standard and amendments to other PCAOB standards adopted by the PCAOB will be submitted to the Securities and Exchange Commission for approval.
Comments on the reproposed standard are due Feb. 29, 2012. The PCAOB said it would carefully consider all comments received before taking final action on the reproposed standard. The proposing release, the reproposed auditing standard, and related amendments to PCAOB standards and comment letters will be available on the website under Rulemaking Docket No. 030. An archive of the webcast and a podcast of the Open Board Meeting also will be available on the PCAOB Web site at www.pcaobus.org.
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