Crucial Importance of Cooperation Between Taxation and Audit

BBJ: What are the crucial trends you expect to dominate this year and in the immediate future?

IN: A substantial part of taxrelated procedures (tax returns, communication, audit, and selection for audit) are digitalized, data-driven, and automated. We expect that the focus will remain on specific IT improvements.

Niveus, the 1-stop Shop

The dedicated team of Niveus Consulting Group is constantly working to provide all the benefits and more for its clients. Although we started operations more than 15 years ago as a small boutique advisory firm, we now employ more than 50 professionals and have over 500 clients. We have gradually extended our offering to cover different types of services (for example, accounting and payroll, tax advisory, transfer pricing, M&A advisory, and legal) and we can now provide audit services to our clients as well.

Niveus is part of DFK International, an association of independent audit, accounting, tax, and legal service providers present in more than 100 countries across the world. Thanks to this membership, we can also provide our clients with onestop-shop services for cross-border challenges, winning complex audit tenders as a result.

The Importance of Audit

Audit plays a significant role in the economy, and its emergence was driven by market interests. Audit activity has come to the fore in recent years for several reasons: the changed legal environment may raise the question of efficiency in auditing in a regulated market, on the one hand, and the financial scandals seen in recent years have highlighted its importance, on the other.

contact multiple service providers (of course, independence rules should be considered).

Cooperation Between Tax and Audit

There are several advantages to cooperation between tax and audit services. As mentioned earlier, tax firms have the comprehensive knowledge to analyze tax structures in detail and, as a result, are liable to any tax consequences possibly set by the tax office.

We also often encounter the so-called materiality threshold in auditing. This refers to the effect on the user of the financial statements of omissions or misstatements of information in a company’s financial statements. In planning the audit, the auditor decides what the level of materiality should be. As a result, tax consequences can occur below the materiality threshold, irrespective of the fact that the auditor has been reviewing the company’s books.

Good Examples

Transfer pricing is one of the hot topics in tax practices. In most cases, auditors review the existence of the transfer pricing documentation to prove that the transactions were conducted at arm’s length price. In this context, the transfer pricing experts and auditors should work closely together to ensure the appropriate transfer pricing management of the company.

GB: Implementation of Pillar 2 (the Global Minimum Tax) and Pillar 1 frameworks will likely reshape the global taxation system and require local regulations to be amended accordingly.

PH: Using foreign currencies (EUR, USD) more extensively in accounting, taxation, and labor fields could become crucial to avoid

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In most cases, companies cooperate with tax experts alongside their chosen auditor. Commonly, the auditor is contracted for an annual audit, which typically does not include advisory services. The auditor reviews taxes; however, due to audit materiality, not all taxes may be included in the audit’s scope. Therefore, the auditor is not responsible for any legal consequences of possible tax deficiencies. In other words, it is not liable to compensate the company for tax shortages or any default penalties.

In many cases, one-stop-shop firms can provide clients with accounting, tax, legal, and also audit services within one organization without requiring the client to

Another good example is company restructuring. During the transformation, merger, or division, both the projected and the final balance sheet must be audited by an independent auditor. There could be numerous tax consequences during such a transformation that should also be verified with tax advisors. By cooperating on the audit and tax work, significant tax savings can be achieved, and the client will be more satisfied with the transformation results.