The Australian Financial Review’s Fleur Anderson reported today on an internal ATO memo to staff. The memo said “We are currently exploring a new initiative for undertaking assurance work through the External Compliance Assurance Process (ECAP) project…This approach will look at how we might use the capabilities of accounting professionals, who are registered company auditors, to conduct certain assurance reviews on our behalf.”
This is an interesting development, but the report does not indicate whether the ATO would engage and pay the external auditor, or that corporate taxpayers would be expected to do so as part of their tax risk mitigation processes.
If the ATO was to engage the corporation’s existing auditor, that would raise ethical questions around conflict of interest. However, given that the new Australian Government is looking to cap public sector employment, it may be that the ATO is seeking ways to more efficiently undertake their own risk assessment process. In that event, they might encourage corporations to voluntarily engage an independent tax risk auditor as a quid pro quo for a lighter touch ATO approach.
The catalyst for the ATO to undertake a pilot study of this proposal may be the degree of expertise developed in the Big 4 and second tier accounting firms over the past quarter century. Most have created tax internal audit programmes to assist client corporate board audit committees to control their tax risk issues. Indeed, this author’s then Parramatta Office tax team developed Deloitte Australia’s first tax internal audit program as far back as 1989-90.