Vanderbilt Law Review


Robert G. Nath

First Page



Every modern public corporation has obligations of accountability and disclosure to the public and to its shareholders. These accepted duties of disclosure, however, become the source of conflicts when government agencies make unanticipated inquiries of accountants about otherwise private or background data concerning the corporations they audit. This is particularly true when a public corporation's duties of financial accountability, which stem chiefly from securities law requirements and fiduciary duties,evoke the Internal Revenue Service's interest in information that may reveal or be probative of the corporation's tax liability. Most corporate taxpayers and their accountants understand and accept--if only reluctantly--their obligations to provide the Internal Revenue Service (IRS or Service) with relevant documents generated during everyday business activity. More recently, however,the complexity of financial accountability requirements has prompted some corporations to ask their independent accountants to prepare a set of "sensitive"1 papers for the audit of the corporation's financial statements. These papers, which the accountants and their client corporations originally did not intend for revenue agents to examine, have attracted the Service's interest because of their potential impact on the corporation's tax liability...

This Article explores the IRS' efforts to resolve the dispute in its favor, the availability of the summons power to obtain sensitive accountant work papers, the public policy controversy generated by the Service's efforts, and the course that the debate is likely to take on these issues in the future...

Part III of this Article explores the rationales underlying the accountants' defenses and concludes that the courts should find them unpersuasive.