It seems that many in-house Tax Directors do not use their auditors for tax work and advice.This is one of the conclusions from Winmark’s third benchmarking survey of in-house Tax Directors.

Out of over 100 respondents to the Tax Director Network survey, only one-third use their auditors for corporate tax planning, and only a quarter use their auditors for international tax planning or even tax disclosures in the accounts.

Many Tax Directors also made clear why they prefer to obtain advice from other Big 4 firms. Tax Directors cite conflict of interest, the need to obtain audit committee approval and the level of fees involved. Higher costs arise when the auditors have to obtain second opinions where they cannot audit their own firm’s advice and that advice could have been obtained at lower cost elsewhere.

Two-thirds of the Tax Directors who responded to the survey use external advisers other than their auditors for corporate tax planning. Even more use other Big 4 firms for VAT advice and over half use other Big 4 firms for international tax planning.

When I was in practice, all the talk was of ‘cross-selling’ additional services to audit clients. Clearly this no longer a worthwhile use of time and effort – at least as regards larger corporates.

Are FDs in medium-sized companies (ie: those without in-house tax directors) as reluctant to seek tax input from their auditors I wonder?  If that were the case then what is the future for firms outside the Big 4  who expect to cross- sell to their audit clients? Should the focus be on other services rather than tax advice?

There is an ever increasing need for auditors to be seen to be independent. This survey suggests that the number who are able and willing to audit the impact of advice provided by their tax colleagues will continue to fall.

Copies of the executive summary of the survey report are available on request from Winmark Research. The full report will only be available to members of the Tax Director Network and to others who completed the survey.