Jefferson Wells isn’t naming any names, but a cautionary tale included in a new advisory from the audit firm definitely has the ring of truth.

It started when an electronics firm wanted to move from a spreadsheet-based provision process to a new FAS 109 software package.

Here’s what happened, according to JW:

“Before completing the migration project, the company reached a quarter close and needed to use its legacy spreadsheets to prepare its provision. In the middle of the close, the tax department discovered that a federal net operating loss (NOL) related to a subsidiary was incorrectly stated. On one spreadsheet tab, the NOL was multiplied by the federal rate. The calculated amount was carried to another tab where, once again, the result was multiplied by the federal rate. Deferred tax assets were understated by $20 million, raising issues internally and with the company’s external auditors.”

Oops. I bet it did “raise issues.”

The advisory brief is short and sweet (titled Automating FAS 109, it’s available here), but it makes a good case for investing in provision software. The vendors have been steadily improving these systems, but integration with other tools has been problematic in the past, and it’s important to site any tax tech investment within a holistic view of your processes, as I argued here. ###