Saturday, June 19, 2010

Tax vs. Audit


Or Audit vs. Tax

Not exactly a unique topic here, judging from the fact that there are a lot of forums discussing this very issue. But then again, I thought that I just have to throw my two cents’ worth in and write about this.

As a bit of a background, I worked for eight years in an auditing firm in the audit division. I never once considered working in tax simply because I hated tax even when I was still in college (and it ‘hated’ me back, one of my lowest grades was in taxation). On the other hand, my sister – in – law also worked for the same auditing firm and she worked in the tax advisory division (for eight years also, I might add). So, I was able to see both sides, albeit the audit side was clearer than the other side.

So here are my thoughts about this subject…

Hours. During the tax season, audit people spend grueling hours, more than the tax people. We went home at 12:00 midnight or 1:00 am or 2:00 am and by that time, the tax people were long gone. We also worked during the week-ends, but the same can’t be said for the tax people.

But these hours are, most oftentimes than not, limited only during the tax season (which is about two to three months).

Tax people, on the other hand, do not work such long hours during the busy season but when they get a special tax job or when they are filled with tax audit jobs, you can just bet that they will work these long hours and even, during week-ends. And there’s a chance that they will do this all year round (especially if the firm is able to get a lot of special tax jobs)!

Knowledge, Updates and Training. Tax is more technical than audit. The tax findings, recommendations , etc. are all based on tax regulations or tax codes. On the other hand, audit is more flexible because the accounting standards are not made in stone, special circumstances involving the company being audited may involve certain ‘unique’ accounting treatments not found in other companies.

When it comes to updates, it really depends if there are any updates on either tax or audit. Same goes for training. Tax updates are part of the tax people’s life. On the other hand, I’ve never seen them have a one – week or two – week training for the new accounting standards (i.e., IFRS) that were given to the auditors before IFRS were first implemented. And with the current changes / amendments / new accounting and auditing standards, you can just bet such trainings will be maintained for these auditors.

Availability of work. Inside the auditing firm, audit people always have work (unless you’re currently unassigned). Slack season or busy season, doesn’t really matter, there’s plenty of work to do all year round. However (and I’m not trying to be insulting here, just pointing out facts), tax people may sometimes find themselves idle at some point in time when there are no tax jobs available. We used to ‘borrow’ some tax juniors for a week or two during the busy season just to do some tasks because of the lack of audit people to do them. We did this every busy season and, as far as I can remember, we always get some tax people to help us out during the busy season.

Outside the auditing firm? I believe audit people have more options when they go out of the firm. They have accounting, finance, financial analyst, internal audit, external audit, government audit and controllership (just to name a few). On the other hand, if you come from the tax division of an auditing firm, chances are, your job when you go to a private company is still related to (if not all about) taxation.

That said audit people, when they go outside, may face more competition than tax people. There are more ex – auditors out there than ex – tax people so chances are, if you’re an ex – auditor, you will be competing with more people for the same job.

Travel, here and abroad. Auditors are more likely to travel to other places than tax people. Auditors also have more chances of working in another country than tax people. Why? Because auditing standards and accounting standards (especially if you have a working knowledge of IFRS) are relatively the same in other parts of the world, whereas, tax codes and regulations (unfortunately) are not.

Lastly, if you’re planning to open your own accounting firm, having a tax background will be more advantageous than having an audit background. This I found out firsthand when I took over my father and became the head of his accounting firm. Sure I know how to calculate income taxes, fill out the income tax return form and stuff. But the nitty – gritty, the deadlines, the forms, the required documents, the registration requirements, etc. – all these I have to learn on the job whereas if I had a tax background, I’m pretty sure I would have had an easier time adjusting to my new role. As it is, I sometimes have to call my sister – in – law for some advice regarding taxes! But then again, I don’t regret my audit background because it’s a lot easier for me to understand the figures, the balances and the accounts plus I am capable of handling auditing jobs for smaller companies.

So there you have it, some thoughts on which among the two is better. Despite having an audit background, I really can’t say which is better (or my sister-in-law will kill me! – just kidding). All I can say is it depends on one’s preferences, on what you like to do and what your future plans are.

If you’re facing the dilemma of whether to choose tax or audit, I really hope the above helps. Thanks for reading!
 

14 comments:

  1. Hello!
    Thanks for the article.
    Which department, tax or audit, has higher salaries for entry level positions in general?

    ReplyDelete
  2. Hi,

    They are mostly the same. From my experience, you need to enter Tax after getting a couple years audit experience. They are folks who get in directly as well. From my understanding salaries are pretty same when starting off and into the manager positions. If others can back me up or refute me i would be interested to know the answer.

    ReplyDelete
  3. To the first Anonymous, I don't know about the other firms but when I went into auditing, I know we have pretty much the same starting salary. After that, the salaries depend on one's evaluation or performance during the past year.

    To the second Anonymous - entering Tax after getting an audit experience is actually a very good step but it's not commonly done. At the top of my head, I can't think of anyone I know who transferred from one department to another.

    Thanks for your comments.

    ReplyDelete
  4. thanks emie, very insightful post

    ReplyDelete
  5. very nice article.

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  7. To emi and to the anons: Previously at the big 4 you'd transfer from audit into tax after your 3rd year (some after 2nd year). Now they are returning to "direct to tax" as an option - however, you still have to do audit busy season to get your assurance hours (and then go right into tax busy season).

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  8. Great post ! I am auditor turned tax guy and your bang on on whta you say

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  9. it is true that tax needs more pre-requisite experience than auditing....true. thanks for the comments.

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