According to a recent New York Times article, "a new report by the Government Accountability Office concludes that from 1998 to 2003, 114 companies in the Fortune 500 bought shelters from accounting firms, with 61 of them buying from their own auditor. Some shelters were legitimate, the Internal Revenue Service says, but many were not."

Of 61 Fortune 500 companies who used their external auditor for tax shelter services from 1998-2003, the GAO report estimates a loss to the government of $3.4 billion on these shelters. Also of interest is that, according to the GAO, in 17 of the 61 companies individual executives or directors used the firm's auditor to provide them with personal tax shelter servies.

A bill curently being considered before the Financial Accounting Standards Board would require companies to report new liabilities for the taxes they would have to pay if tax authorities figure out what games were played in the past and opt to send them a bill. The external auditors, who in some cased were ther ones who help orchestrate the shelters, would be the ones to say whether a company had reported correctly.

-- MDT

Labels: GAO