Burgess J. W. Raby & William L. Raby have published Confidence Levels, Circular 230, and Practitioner Penalties on the Tax Analysts web site (Doc 2005-372, 2005 TNT 3-24). Here is the Conclusion:

The revisions in Circular 230 are of great importance to the tax practice profession. They mark an official recognition by the IRS that tax practice is conducted by groups and not merely by individuals, and they place responsibility on the leaders of those groups for a system of quality control being in place to review the work done by the group members. We think those revisions could be the first step toward requiring tax practice peer review by outside reviewers — preferably, we should add, conducted by members of the profession as is peer review of attest function work within the CPA profession and not by an outside governmental body, such as the Public Companies Oversight Board audit practice reviews mandated by the Sarbanes-Oxley Act.

The recitation of best practices is also a change of emphasis, with the IRS starting to recognize the importance of aspirational standards to true professionalism. We would hope that the common interests of the IRS, the AICPA, the ABA, and the NAEA would lead to an attempt to arrive at a basic statement of standards that could be adopted by all those engaged in federal tax practice. IRS adoption is important because the IRS is the ultimate policeman in the tax practice area. Adoption by the professional bodies is likewise important because, we believe, the ideal system involves cooperation in maintaining voluntary quality control systems within practice units, universal peer review of tax practices, and vigorous and sustained action against practitioners who transgress.

Larger practice units face the challenge of evaluating the adequacy of their quality control systems in light of the standards of Circular 230. Smaller practice units may have to face up to the impossibility in many instances of maintaining a system of quality control without the use of outside resources. Cooperation between independent practice units can often solve the problem of how to review one’s own work by having independent professionals reviewing each others’ work, a practice that many already have incorporated into their systems with increased benefit to both their clients and their own level of comfort with the work they do.

This Circular 230 revision, in other words, could be the start of something big. Now we await the follow-through.