Oracle Corporation as I have worked with their systems. Oracle
currently has a tax and two legal related contingent liabilities. I have
chosen to write about the tax related contingent liability disclosed on
the 10-K report on the SEC website.
a Oracle Corporation is under audit by the IRS and various other
domestic and foreign tax authorities regarding income tax, indirect
tax matters, and involved in various challenges and litigation. “As of
May 31, 2022, the total amount of unrecognized tax benefits was
$7.3 billion, of which $4.3 billion, if recognized would impact the
Company’s effective tax rate.” (Inline XBRL Viewer, n.d.) The
countries in particular include Australia, Brazil, Canada, India,
Indonesia, Israel, Italy, Mexico, New Zealand, Pakistan, Saudi Arabia,
South Korea and Spain, where the amounts under controversy are
significant. “In some, although not all, cases, we have reserved for
potential adjustments to our provision for income taxes and accrual
of indirect taxes that may result from examinations by, or any
negotiated agreements with, these tax authorities or final outcomes
in judicial proceedings, and we believe that the final outcome of these
examinations, agreements or judicial proceedings will not have a
material effect on our results of operations.” (Inline XBRL Viewer,
n.d.) If these liabilities are unnecessary the liabilities will need to be
reversed but if these liabilities are less than the assessment, than
Oracle will need to charge the excess as an expense.
a Ernst and Young audited Oracle and stated they obtained an
understanding of the company, “…evaluated the design, and tested
the operating effectiveness of the controls over management’s
process for interpretation and application of tax laws and legal
rulings, as well as development of the assumptions and estimates
used in the measurement of uncertain tax positions.” (Inline XBRL
Viewer, n.d.) They also performed audit procedures which include
reading and evaluating management’s assumptions and analysis,
communication with taxing authorities, and involved their tax subject
matter professional. They utilized the subject matter professional
when assessing the tax positions based on their knowledge of
relevant tax laws and experience with taxing authorities. I feel that
E&Y followed the necessary procedures when auditing these tax
related contingent liability.
References
Inline XBRL Viewer. (n.d.). Retrieved October 13, 2022, from
https://www.sec.gov/ix?doc=/Archives/edgar/data/1341439/0001
56459022023675/orcl-10k_20220531.htm
Messier, W. Glover, S. Prawitt, D. (2019). Auditing & Assurance
Services: A Systematic Approach 11th Edition. McGraw Hill
Education.
