Author: FFC

Teaching children about money management is a big job for parents, and there are many ways to go about it. Money talk often starts by paying an allowance. According to new research from the American Institute of CPAs (AICPA), two-thirds of parents (66%) give their child an allowance at an average of $30 a week. An allowance is just part of a larger conversation about effective financial management. Parents must make sure the lessons sink in. The good news is that nearly half of parents (49%) say they take time to teach their child about money at least once a week. However, nearly a third (32%) say they only teach their children about money no more than once a month, including the 7% who admit they never teach their kids about money.

Margaret Poster, CPA, an AICPA National CPA Financial Literacy Commission member, spoke to AICPA Insights about the importance of starting financial lessons at home and shared the following insight for parents.

Why is it important for parents to have the money conversation?



Margaret Poster: Parents are already focused on teaching good habits to their children — brushing their teeth, eating healthy food and being kind and helpful to others. Managing money is one more habit where starting early helps children better understand the value of money and how to manage it. It gives them a longer lead time to ensure that these habits become ingrained before their children begin making independent financial decisions that have greater consequences. A strong foundation of financial knowledge will benefit a child their entire life.

According to the survey, only 3% of parents say their child primarily saves their allowance. What steps can parents take to encourage their children to be better savers?



MP: When children want bigger purchases, such as a skateboard that costs $100, you can help your child come up with a plan for how they’re going to save up to buy it and how long it will take. If, for example, their allowance is $30 and $10 of that amount is for discretionary items, they can save that $10 toward the purchase of that skateboard. It will take them 10 weeks to have the $100 they need to buy it. That may seem like a long time, but you can do things along the way to keep track of their progress, such as creating a chart and marking off how much has been accumulated to date. As they make progress toward the goal, you can discuss which one to purchase, and understand the pros and cons of different models. As they get closer, you can talk about where they’ll use it, who they’ll use it with, etc. In other words, focus on different aspects of owning the skateboard to take some of the focus away from just the money. This will build understanding of the value of the purchase and why they want to have it. It will also build excitement as they get closer to the goal.

What advice do you have for parents who are undecided about giving an allowance?

MP: There are many perspectives on an allowance: when to start, how much it should be and what purchases the allowance money should cover. There’s no right or wrong answer to this; but, in general, an allowance increases with age, ability to take responsibility and may include more categories of expenses over time.

But teaching children about money is not limited to a conversation about allowance. There are other opportunities that can be turned into teachable moments. Before buying groceries, create a budget with your child. You can talk about the staple items the family needs to have for healthy eating and, where possible, you can give children choices about items for their school lunch. Then, with any money that may be left over, you can allow them to choose a treat. The more they help you save — the more money they have to spend on a reward. Similarly, for older children, you can set a clothing budget and help them select and manage their purchases. This is a great way to demonstrate the trade-offs that come with good money management.

For those parents who pay an allowance, how would you advise they set it up to help their children understand the value of money?

MP: By the time children are 5 or 6, they understand the concept of a pie and dividing it into portions. This is a useful tool to help them learn how to allocate spending between instant gratification and longer-term purchases that require savings. For older children, you can explain how much of their allowance they need to save to reach their goal. More savings will get them there faster, so they have a tradeoff to make.

Overall, giving children some say in how money is spent gives them valuable experience and builds their confidence and ability to make smart decisions.

The more you engage your child in financial discussions, the more likely they are to learn. For insight on how to talk to your kids about money, check out the AICPA’s 360 Degrees of Financial Literacy website at 360FinLit.com. There, you will find an assortment of free videos and articles about the basics of budgeting, as well as a collection of calculators to help show and track financial progress.

Jon Lynch, Manager – Public Relations, Association of International Certified Professional Accountants

     

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In my 25 years as a peer reviewer, I’ve reviewed thousands of audits from a variety of firms. You may be surprised by how often I see errors related to a fundamental audit step: documentation.

Audit documentation is important to get right because it provides evidence to support your audit opinion. It’s also crucial for auditors to document their work if they are going to comply with generally accepted auditing standards (GAAS).

I’ve found that several documentation missteps trip up auditors more than others. Keep reading to find out what these errors are and how to avoid them.

For help with all of these missteps, review the audit documentation standard. You may also find it helpful to download some of the free resources in this audit documentation toolkit.

1. Documentation of threats to independence and mitigation

In my peer reviews, firms have been doing a better job documenting independence and non-attest services performed for clients. However, I still see problems with auditors not specifically identifying threats to independence and whether those threats are significant threats.

Many auditors stop documenting threats to independence after realizing they can proceed with performing the audit. However, under AU-C 220.13, you still need to consider whether specific threats are significant. These represent significant judgments under AU-C 230.08 and should be documented. You also need to include details about the safeguards that will prevent the threats from affecting both your independence in fact and appearance.

To avoid this, make sure you don’t stop documenting threats right after determining your independence is not impaired. Be sure to carry it all the way through and think more specifically about what kinds of threats to independence exist and how you plan to mitigate them.

2. Documentation of risk assessment

Many firms I’ve reviewed say they’ve identified, assessed and responded to their clients’ risks of material misstatement, but they don’t document those steps or how their risk assessments carry into their audit approaches.

Why is this happening? They may not understand what documentation is required by audit standards. Often, I see auditors using practice aids to guide them through their documentation process, but not delving into the detailed instructions to get an understanding of what specific documentation is required.

While practice aids can be great guides for your audit, they’re only as good as your understanding of them. Be sure to review the more detailed instructions contained in your practice aids instead of going straight to the fillable fields and assuming you know what to look for.

3.Documentation of internal control

You should document your client’s controls to make sure they’ve been properly designed and implemented. Often auditors are documenting processes, but not controls within those processes.

I see this happen when auditors go full steam ahead and do a substantive audit in which they test everything possible instead of focusing on a client’s risks. They may think controls don’t matter if they move straight to a substantive audit approach.

However, not only does this approach not comply with the standards, it doesn’t help your audit, and it’s ultimately inefficient. It’s important that you understand your client’s internal controls over financial reporting to identify and assess risk. This will determine which procedures you perform. The standards require that your audit procedures be responsive to the risks you’ve identified, so you need to document your client’s controls to demonstrate this.

To avoid this issue, start by documenting processes, then take a second pass and identify the controls in that process. The AICPA’s Internal Control Toolkit has a free process memo example that can help you do this. Make it a practice to do a walkthrough on every audit of major transaction classes to determine if controls have been implemented.

If your work isn’t documented, you’re not done.

Overall, the best advice I can give for avoiding these missteps is, “when in doubt, just write it down.”

Keep this in mind while auditing so that you’re always thinking about documenting. And remember that your documentation doesn’t always need to be complicated. You don’t need to use complex practice aids to document every time; you can also use memos to meet documentation requirements.

Finally, you can learn more about proper audit documentation and access free resources to help you comply with the standard by visiting the AICPA’s audit documentation toolkit. You may also be interested in the AICPA’s free resources to assist you with complying with the risk assessment and internal control standards.

Rick Reeder, CPA, CGMA, Owner, Reeder & Associates, PA. His diverse range of clients includes those in not-for-profit, employee benefit plans, construction and CIRAs. Rick is an at-large member of the AICPA Council and serves on the AICPA Quality Control Standards Task Force. He is a past chair of the AICPA Peer Review Board and previously completed a three-year term on the executive committee of the AICPA Governmental Audit Quality Center. Rick was also a member of the AICPA Practice Monitoring of the Future Steering Committee and Architects Task Force and is a member of the AICPA Practice Management Task Force for Government and Compliance Audits.

     

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A day before my meeting with Brooke Salvini, CPA/PFS, she receives a serendipitous note from one of her clients:

… Thank you so much for your genuine way of being. You create such an atmosphere of peace, acceptance, and sincere interest in your work and in individuals. It’s just so clear you care. You’re appreciated by me. Please know you make such a difference in my life…

I call this note “serendipitous” because Brooke and I are scheduled to discuss the results of a recent survey published by Glassdoor and popularized by an article in Barron’s. The study reveals that tax managers have the best job in the United States — a claim supported by several measures including median pay, upward mobility and job availability. The study also echoes a popular notion championed by the AICPA — that automation and other technologies are untethering tax professionals from data entry and other repetitive accounting functions, allowing them more time to forge stronger relationships with clients.

And that message from Brooke’s client? The one I call serendipitous? Just more evidence the study got it right.

Now, cut to a day later. It’s an unbearably hot August day in Atlanta, which — as anyone who’s lived in or visited the city knows — is redundant. Brooke and I finally connect by web conference. And the call couldn’t have come at a better time. Brooke’s philosophy, her passion and (as her client states) her way of being are all so very refreshing. They cut through all the humidity.

Brooke recounts her roots in tax and how, for over 20 years, her career has evolved to where it is today. Now, she specializes in collaborative financial planning and investment management with a goal to help clients make better financial decisions in all areas of their lives. Her expertise has regularly landed her in The Washington Post, the LA Times, Kiplinger’s Personal Finance and more. In short, she knows a thing or two about tax management and how to expand services into uncharted realms — in her case, personal financial planning.

Brooke admits she loves having mastered the technical stuff, but she also found herself eager for engagement with clients. To her, tax and financial planning services is perfect. It marries the two, the technical with the interpersonal.

And recent AICPA research confirms that’s what clients want: Clients are seeking a primary point of contact for handling all their financial needs.

How to strengthen relationships

If you want to strengthen client relationships, “Schedule more time with [them],” Brooke says. “Maybe during semi-off season or add 10 minutes to client interviews. Even focusing on one tax return item can make a big difference.” You see, to Brooke, a tax return means more than numbers on a page. It’s like financial DNA, a fingerprint that — when studied — can divine so much about clients’ lives. Both where they’ve been and where they’re potentially going. And if you take the time to discover the hidden meanings, you’ll be able to translate line items to valuable financial planning strategies. A talk with clients about their kids, for example, may lead to a discussion of striking a fiscally healthy balance between retirement and education planning.

“Something as simple as asking ‘Is there something you’d like me to know?’” Brooke says, can lead to incredible discoveries. She’s seen so many of her clients open up once she places the papers aside, makes eye contact and simply asks them what’s really on their minds. “I mean, how great is that? When someone cares enough to how you’re doing.” And that’s what technologies such as robotic process automation provide. Latitude and space to take client relationships to the next level.

Don’t know what questions to ask? Capitalize on the AICPA’s checklists and other personal financial planning resources.

Once you have a better understanding of your clients’ challenges, you’ll also be able to give them a little homework, a book or an article to read, something that will reinforce your understanding and connection to them and their respective life events. For example, when a young client is entering into marriage, she strongly urges the couple to read Your Money or Your Life. Simple thoughtful touches such as this go a long way.

And when push comes to shove, Brooke says to just go for it. To trust yourself. To surrender.

“We’re all professionals. We’re really good at what we do. And that means we’re also probably too critical of ourselves. And it’s not much fun to put ourselves out there and not be absolutely great in the beginning. But the clients aren’t nearly as critical of us. They’re simply excited we’re asking them something about themselves — and not just for their paystub.”

She recalls how nervous she was meeting with clients in the beginning — how much energy it took back then — but now, she says it’s her favorite part of the job. And the easiest. She likens it to playing tennis. No one has it all right in the beginning. But keep going. Embrace a growth mindset because there’s absolutely no growth, professional or personal, in staying comfortable.

How to get started

As a mentor with a mentor, Brooke reinforces the importance of knowing you don’t have to ‘go it alone.’ The AICPA created an online mentor program, designed to align you with someone who can support you, your skills and the direction you’re headed. It gives you the opportunity to learn from more experienced practitioners and practice building those relationships not only with clients but with colleagues. Brooke assures that you’ll find the community to be incredibly generous with information and resources.

And for those who think taking on the full Personal Financial Specialist (PFS) Credential exam in one bite may be more than they can chew, Brooke points to the Personal Financial Planning (PFP) Certificate Program. At the risk of exhausting a metaphor, it breaks all the exam knowledge into easy-to-digest chunks. If you want to focus on insurance planning, you can. And then, you can move on to investments, retirement planning and so on. Or you can kickstart your financial planning journey by attending the highly rated PFP workshop at AICPA ENGAGE.

However you choose to tackle it, know with confidence that the PFS curriculum leverages your existing CPA expertise to further bolster your value proposition. 

How to expand services if personal financial planning isn’t right for you

Brooke admits personal financial planning may not be for everyone. If you feel it’s the right direction but want a stepping stone between you and the more personal conversations with clients, consider financial planning for clients’ small businesses. The AICPA designed the #CPApowered campaign specifically to educate entrepreneurs on all the value CPAs bring to the table, so take the chance to prove it! If you’re keen on staying more technical, review the AICPA Tax Section’s Tax Technology Resource Center for ideas. And if you’re a wiz at team-building and inspiring your peers, consider going into firm leadership.

No matter the direction you choose, in the 4^th Industrial Revolution, regularly assess the skills you have and strengthen them. And then, assess the skills you must develop, and strengthen those, too. As a CPA, you embrace a core knowledge and high level of ethical standards to which others in the accounting and finance field aren’t beholden. And, with financial literacy as low as it is in the United States, you’re an invaluable contributor to those you serve. No matter your clients’ income or education level, they genuinely need you. You’re standing at the junction of personal fulfillment and impact. And when you expand your skillset, you’ll not only make the best job in America even better, but you’ll bring even more value to your clients — and their communities, too.

Brock Faucette, Manager – Branded Content Strategy, Association of International Certified Professional Accountants 

     

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A day before my meeting with Brooke Salvini, CPA/PFS, she receives a serendipitous note from one of her clients:

… Thank you so much for your genuine way of being. You create such an atmosphere of peace, acceptance, and sincere interest in your work and in individuals. It’s just so clear you care. You’re appreciated by me. Please know you make such a difference in my life…

I call this note “serendipitous” because Brooke and I are scheduled to discuss the results of a recent survey published by Glassdoor and popularized by an article in Barron’s. The study reveals that tax managers have the best job in the United States — a claim supported by several measures including median pay, upward mobility and job availability. The study also echoes a popular notion championed by the AICPA — that automation and other technologies are untethering tax professionals from data entry and other repetitive accounting functions, allowing them more time to forge stronger relationships with clients.

And that message from Brooke’s client? The one I call serendipitous? Just more evidence the study got it right.

Now, cut to a day later. It’s an unbearably hot August day in Atlanta, which — as anyone who’s lived in or visited the city knows — is redundant. Brooke and I finally connect by web conference. And the call couldn’t have come at a better time. Brooke’s philosophy, her passion and (as her client states) her way of being are all so very refreshing. They cut through all the humidity.

Brooke recounts her roots in tax and how, for over 20 years, her career has evolved to where it is today. Now, she specializes in collaborative financial planning and investment management with a goal to help clients make better financial decisions in all areas of their lives. Her expertise has regularly landed her in The Washington Post, the LA Times, Kiplinger’s Personal Finance and more. In short, she knows a thing or two about tax management and how to expand services into uncharted realms — in her case, personal financial planning.

Brooke admits she loves having mastered the technical stuff, but she also found herself eager for engagement with clients. To her, tax and financial planning services is perfect. It marries the two, the technical with the interpersonal.

And recent AICPA research confirms that’s what clients want: Clients are seeking a primary point of contact for handling all their financial needs.

How to strengthen relationships

If you want to strengthen client relationships, “Schedule more time with [them],” Brooke says. “Maybe during semi-off season or add 10 minutes to client interviews. Even focusing on one tax return item can make a big difference.” You see, to Brooke, a tax return means more than numbers on a page. It’s like financial DNA, a fingerprint that — when studied — can divine so much about clients’ lives. Both where they’ve been and where they’re potentially going. And if you take the time to discover the hidden meanings, you’ll be able to translate line items to valuable financial planning strategies. A talk with clients about their kids, for example, may lead to a discussion of striking a fiscally healthy balance between retirement and education planning.

“Something as simple as asking ‘Is there something you’d like me to know?’” Brooke says, can lead to incredible discoveries. She’s seen so many of her clients open up once she places the papers aside, makes eye contact and simply asks them what’s really on their minds. “I mean, how great is that? When someone cares enough to how you’re doing.” And that’s what technologies such as robotic process automation provide. Latitude and space to take client relationships to the next level.

Don’t know what questions to ask? Capitalize on the AICPA’s checklists and other personal financial planning resources.

Once you have a better understanding of your clients’ challenges, you’ll also be able to give them a little homework, a book or an article to read, something that will reinforce your understanding and connection to them and their respective life events. For example, when a young client is entering into marriage, she strongly urges the couple to read Your Money or Your Life. Simple thoughtful touches such as this go a long way.

And when push comes to shove, Brooke says to just go for it. To trust yourself. To surrender.

“We’re all professionals. We’re really good at what we do. And that means we’re also probably too critical of ourselves. And it’s not much fun to put ourselves out there and not be absolutely great in the beginning. But the clients aren’t nearly as critical of us. They’re simply excited we’re asking them something about themselves — and not just for their paystub.”

She recalls how nervous she was meeting with clients in the beginning — how much energy it took back then — but now, she says it’s her favorite part of the job. And the easiest. She likens it to playing tennis. No one has it all right in the beginning. But keep going. Embrace a growth mindset because there’s absolutely no growth, professional or personal, in staying comfortable.

How to get started

As a mentor with a mentor, Brooke reinforces the importance of knowing you don’t have to ‘go it alone.’ The AICPA created an online mentor program, designed to align you with someone who can support you, your skills and the direction you’re headed. It gives you the opportunity to learn from more experienced practitioners and practice building those relationships not only with clients but with colleagues. Brooke assures that you’ll find the community to be incredibly generous with information and resources.

And for those who think taking on the full Personal Financial Specialist (PFS) Credential exam in one bite may be more than they can chew, Brooke points to the Personal Financial Planning (PFP) Certificate Program. At the risk of exhausting a metaphor, it breaks all the exam knowledge into easy-to-digest chunks. If you want to focus on insurance planning, you can. And then, you can move on to investments, retirement planning and so on. Or you can kickstart your financial planning journey by attending the highly rated PFP workshop at AICPA ENGAGE.

However you choose to tackle it, know with confidence that the PFS curriculum leverages your existing CPA expertise to further bolster your value proposition. 

How to expand services if personal financial planning isn’t right for you

Brooke admits personal financial planning may not be for everyone. If you feel it’s the right direction but want a stepping stone between you and the more personal conversations with clients, consider financial planning for clients’ small businesses. The AICPA designed the #CPApowered campaign specifically to educate entrepreneurs on all the value CPAs bring to the table, so take the chance to prove it! If you’re keen on staying more technical, review the AICPA Tax Section’s Tax Technology Resource Center for ideas. And if you’re a wiz at team-building and inspiring your peers, consider going into firm leadership.

No matter the direction you choose, in the 4^th Industrial Revolution, regularly assess the skills you have and strengthen them. And then, assess the skills you must develop, and strengthen those, too. As a CPA, you embrace a core knowledge and high level of ethical standards to which others in the accounting and finance field aren’t beholden. And, with financial literacy as low as it is in the United States, you’re an invaluable contributor to those you serve. No matter your clients’ income or education level, they genuinely need you. You’re standing at the junction of personal fulfillment and impact. And when you expand your skillset, you’ll not only make the best job in America even better, but you’ll bring even more value to your clients — and their communities, too.

Brock Faucette, Manager – Branded Content Strategy, Association of International Certified Professional Accountants 

     

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The AICPA recently released the 2019 Trends in the Supply of Accounting Graduates and Demand for Public Accounting Recruits report. The report shows that the accounting profession requires new skill sets because of the rapid advancement of emerging technology, especially in data science and analytics. This is changing who we do business with and how we do it. As a result, non-accounting graduates make up about 31% of all new graduate hires in public accounting — an increase of 11 percentage points from 2016 to 2018.

Accounting graduates and newly licensed CPAs must have the skills and expertise to support the growing technology needs. One of the ways the AICPA seeks to address this trend is through the CPA Evolution project, in partnership with the National Association of State Boards of Accountancy. This project strives to ensure that CPAs can support an accounting profession that plays a critical role in protecting the public interest.

Accounting enrollments for bachelor’s degrees remain high and are the second-highest since the inception of our Trends report. While enrollments declined 4% from 2016, they remained higher than 2014 levels.

This year, there was a continued shift in bachelor’s versus master’s enrollments. Master’s and Ph.D. enrollments continue to decline, with many opting to enter or remain in the workforce or to pursue other avenues for advanced education. Economic conditions and an expansion of the alternatives available to potential graduate accounting students may be behind this trend.

After the 2017 launch of the exam led to a significantly higher number of new CPA Exam candidates in 2016, the number in 2018 was the lowest in 10 years.

The report’s more telling projections about the profession come from the demand side in public accounting.

While new hires assigned to audit-related services increased 4%, hiring of new accounting graduates declined about 30% over the last two Trends reports. The marketplace continues to demand different competencies and, while firms still hire accounting graduates, they seek other skill sets. This is especially true as it relates to technological needs to expand services — often met with non-accounting graduates.

The report found that racial and ethnic diversity increased, with the highest percentage of non-white enrollees to date. Enrollment by gender is nearly even at both the bachelor’s and master’s levels.

The decline in new exam registrants and the increase in non-accounting graduate hiring present opportunities. The AICPA is working with key stakeholders on a number of profession-wide initiatives that attract, inspire and engage the next generation of CPAs.

Along with the CPA Evolution project, some initiatives include:

• A CPA Exam practice analysis focused on the impact of technology and the critical skills for newly licensed CPAs — an exposure draft and invitation-to-comment will be published in late December.
• The Accounting Accreditation Practitioner Engagement Program, which places CPA practitioners on AACSB accounting accreditation teams and committees.
• The Accounting Doctoral Scholars Program provides funding for CPAs to obtain their doctorates and teach.
• The Accounting Program for Building the Profession trains high school educators to teach a college-level accounting class.

The Association is also working with organizations to increase the likelihood that racial and ethnic minority students consider accounting early in their career decision-making process. AICPA scholarships and programs such as the Accounting Scholars Leadership Workshop help ensure accounting students have a meaningful and successful experience as they work to earn their CPA license.

On a parallel effort, the AICPA is working with universities to deepen the connection between practice and academia to better incorporate the skills of the future into current curricula and bring more CPAs into the classroom.

While this Trends report focuses on public accounting’s hiring of new graduates, those seeking accounting careers are hired into a multitude of positions out of college and have even more opportunities as they gain experience in the profession. According to the Bureau of Labor Statistics Occupational Outlook Handbook, employment in the broader accounting and auditing field is expected to grow faster than the average for all occupations through 2026.

We believe that for CPAs to continue to serve the marketplace, they must incorporate new and different skill sets and the profession must take steps to cultivate these rapidly changing skills in accounting graduates and newly licensed CPAs. We are committed to achieving this by investing in several initiatives. If you want to get involved by speaking to high school or college students about joining the accounting profession, visit AICPA.org/presentertoolkit to learn how to get started.  

Yvonne Hinson, CPA, CGMA, Ph.D., Academic-in-Residence, Senior Director, Academic & Student Engagement, Association of International Certified Professional Accountants

     

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Many factors have contributed to vast changes in the corporate reporting landscape in recent years. These include accounting standards changes such as revenue recognition, leases, and credit losses. However, it’s widely recognized that financial statements and financial information alone may not tell the whole story when evaluating businesses. What do these changes mean and how can CPAs take a leadership role?  

Surveying the landscape

According to a 2015 Ocean Tomo study, off-balance-sheet intangible assets in 1975 represented, on average, 17% of the market value of companies. That figure drastically increased to as much as 87% in certain sectors in 2015. Intellectual capital (including workforce “know-how”), customer relationships, brand value and confidence in the management team drive more of the value of a business today than ever before. As most of these “assets” are unrecognized on the financial statements, traditional financial metrics alone may not entirely explain the created value and the risks to the value inherent in these off-balance-sheet items.

A growing number of companies and their investors or other stakeholders are trying to better understand performance in this area through environmental, social and governance (ESG) metrics. Given the appropriate framework, these new key performance indicators may help companies and their stakeholders in their ongoing dialogue about generating sustainable, long-term value. Although there’s no single global standard-setting body, several endeavors provide such a framework. One worth noting is the Embankment Project, a joint effort of EY and the Council for Inclusive Capitalism. The final report was the result of a market-driven effort of more than 30 organizations representing all facets of market participants. Additionally, the Sustainability Accounting Standards Board (SASB) — focusing on financially material ESG topics and metrics for investors — codified industry-specific disclosure standards in November 2018.

While sustainability reports are nearly universal today among large and even medium-sized firms, they often lack relevance and reliability for investors. Furthermore, a large part of the value in tracking data is the ability to benchmark against industry averages, peer performance and internal targets. This requires a level of standardization among the company reporters, whether public or private.

Understanding the standards

SASB codified its standards in 2018 after a six-year due process involving technical research, extensive market input and public transparency in response to this need. This process included the input of hundreds of investors, preparers and other market participants. Since ESG issues represent no difference from other general business issues, a sector-specific focus was deemed important as these standards were developed.

SASB’s 77 standards enable consistent, comparable, reliable information about corporate performance on such industry-specific business drivers as:

• Energy and water management
• Employee engagement and labor relations
• Data security and privacy
• Supply chain management, and more

SASB strives to identify topics that are most likely to be financially material to investors and stakeholders in those industries. For example, where the standards address greenhouse gas emissions and water management in extractive industries, they focus on data security and business ethics in the financial sector. Companies, of course, still make the determination about materiality in their own circumstances.

Taking advantage of opportunities

As corporations have evolved and adopted more sophisticated approaches to these new ESG metrics, there’s a desire among investors and issuers to make sure that the data is high quality and reliable. Broadly, investors say that the quality of the data is more important than the location of the disclosures in terms of whether to include them in regulatory filings. There’s a need for CPAs to consider how they can help companies identify the right metrics for disclosure, help them find ways to accumulate the data to produce those metrics, build controls to enhance trust in the reliability of the information, help companies decide when, how and where to report these new metrics to their stakeholders and provide assurance over the reported ESG metrics.

It’s clear that corporate reporting is changing within and outside of financial statements. CPAs have an opportunity to be integral in the ongoing development of new corporate reporting models and participate in this evolution of the capital markets and marketplace demand.

Looking to dive right in? The AICPA’s sustainability toolkit is designed to help you meet the growing demand for sustainability reporting and assurance. The toolkit includes a brochure outlining the benefits of CPA-provided sustainability assurance; a document defining key sustainability terms; a guide to implementing the United Nations’ Sustainable Development Goals; a checklist to help organizations identify and manage environmental, social and governance-related risks; and a backgrounder on sustainability assurance. The AICPA’s sustainability assurance online course is a good place to start if you are looking to perform examination or review engagements on sustainability information.

Marc Siegel, CPA, Partner – Ernst & Young LLP. Marc is a former FASB member and is on SASB’s standard-setting board.

     

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Five years ago, could you have predicted the challenges you and your team would face in 2019? And if you had a crystal ball, what challenges would you see approaching over the next five years? The AICPA’s Private Companies Practice Section (PCPS) team asked firms of all sizes to predict their top challenges between now and 2024 in the 2019 PCPS Firm Top Issues Survey. They say they’d be most affected by staffing, emerging technologies, competition, changing client needs and the regulatory environment within the next half-decade.

With all the potential disruptions in the works, it’s easy to see the need for strong and resilient staff who can handle themselves with confidence and grace. Especially within small firms.

My team rose to the occasion over the last year to integrate into Pannell Kerr Forster of Texas, P.C. (PKF Texas). I continue to work with staff in a number of ways to make sure they feel empowered to make decisions and act quickly during what I call “triage” moments. Here’s how I do it.

• Require the core technical skills—and more. Technical know-how is table stakes at any firm, but you want your team to connect with clients, think strategically, collaborate with others and build trusting relationships. I expect my staff to complete soft-skill CPE and other training in emotional intelligence, communications and negotiations to make sure they can tackle more than technical concerns in the field.
• Offer job shadowing for real-world learning. Help your team learn how you and your senior staff make decisions on site by including them in client meetings and other pivotal strategic discussions. In these moments, my staff sees how experienced professionals approach challenges in real time. This modeling of behavior allows my team to gain confidence as they learn prioritization and sound decision-making.
• Coach staff about why/how you make the decisions you make. You may not be able to stop and explain in the middle of a client meeting, but taking a moment later to offer your insights will help them understand your decision-making process. In the future, they’ll be better able to determine “what would Fill-in-the-Blank do?” when facing a challenging situation on their own.
• Teach them that it’s OK to have to think about a decision. Sometimes I have to take time to think through a problem. When I’m really feeling challenged, I’ll tell my team about the pros and cons I am debating in my head. I will often explain my thinking and ask them to weigh in about which way we should go. I coach my team to understand there are times when they will need to make the best and fastest decision in the moment, and later develop a long-term solution when they have more time to consider all options.
• Question ideas and not the individual. My team works in a collaborative environment and we are at our best bringing ideas from our diverse backgrounds to the table. The collaboration process involves challenging one another in a professional manner and iterating upon each other’s ideas. This environment is built on trust, so it’s important that everyone feels respected and valued, and challenged to grow rather than shrink.

In 2019, my team faced challenging moments, but because I coached them to be resilient, I never doubted they would rise to the occasion and blossom as a result.

If you’re looking for resources to help you strengthen your team, the AICPA can help. The PCPS Human Capital Center offers solutions to better engage your team. Go Beyond Disruption resources can help you adapt and thrive in these changing times. And, this small firm resource center connects you to technical and soft-skills resources from across the organization.

Danielle Supkis Cheek, CPA, Director, Entrepreneurial Advisory Services, Pannell Kerr Forster of Texas, P.C. (PKF Texas)

     

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You know a lot about your tax clients — their jobs, their kids’ names, what kind of cars they drive — and you know even more about their finances. Most of the time, your clients are happy to share their complete financial lives with you. But, occasionally, when delving into the numbers, you’ll uncover financial moves you didn’t know about. Often, those moves involve their investments.  

You may be hesitant to talk to your clients about their investments. But remember, proactive conversations about all the financial issues affecting them are part of a CPA’s job. In addition, talking about investments as a part of their entire financial picture is a great way to start planning conversations — especially as we head into year-end. Not to mention, this is an added chance to cement your relationship as their trusted adviser.

You want to help your clients avoid investment-related tax headaches, but you can only do that if you know what could cause them. Here are three examples of how investment choices could negatively affect your clients’ taxes and what to do to get them back on track.  

Schedule D woes 

When preparing a client’s taxes, pay close attention to the number of Schedule D transactions. If your client reported significant capital gains from multiple investment sales that will be taxed as short-term gains, something in their lives may be changing their financial situation.  

Schedule a meeting with your client to dive deeper. You may find that they are going through a difficult situation that requires your attention. Or perhaps they just needed cash for that empty-nesters trip to Cabo. In any case, you’ll want to explore whether there are plans for such sales, and plan for the tax liabilities associated with them. 

A short-sighted portfolio  

Year-end investment statements contain more information than just account balances, holdings and transaction information. These statements can reveal when a client is — frankly — too dependent on a couple of assets.  

If you notice your clients’ portfolio is heavily weighted in one or two assets, you may want to find out why. Your client may not realize they haven’t diversified their portfolio. Or maybe they think this emerging company is a “sure winner.” Either way, talk through these investments with them and make sure they’re aware of the potential risks and tax-efficient ways to diversify.   

Publicly traded partnership issues 

If your client owns shares in a publicly traded partnership, make sure they understand that the placement of these investments could result in major tax implications. Unlike other investments, you must carefully plan unique tax treatments for these companies.   

You may also want to explain to these clients that a Schedule K–1 will be needed to complete their taxes. As the K–1 isn’t due until March 15 for publicly traded partnerships, this delay of the receipt of tax documents could mean your client will need to plan to extend their return. Let them know these investments come with more complicated reporting, and their resulting delays could make preparing tax projections and future tax planning more difficult — and more expensive.  

Bonus: Talking about timing 

When your client buys or sells a stock or shares in a mutual fund, it can be just as important as what investment they sell from a tax perspective. Not only should your clients focus on long term vs. short term capital gains, they should consider how sales of stocks during the year could affect how the gains from the sales are taxed. Purchasing shares of a mutual fund before the end of the year could subject the individual to a full year of capital gain distribution without the benefit of the full year of the funds’ appreciation.  

As you head into year-end planning with your tax clients, make sure you’re talking with them about all of the pieces of their financial puzzle. These resources can help:  

• The AICPA Tax Section has a list of valuable busy season tools, webcasts and resources to help you prepare your clients for springand make sure your clients get their most favorable tax result come April.  
• Find a handy checklist to help identify key issues and personal financial planning opportunitiesduring tax return preparation, courtesy of the AICPA PFP Section. 
• Take a deeper dive into investment planning by listening to this AICPA podcast. 
• Expand your knowledge and get CPE by earning the Investment Planning Certificate, letting your clients know they can come to you for help. And it will get you one step closer to the premier personal financial planning credential, the Personal Financial Specialist. 
• Read more tax-smart tips on topics like retirementand estate 

Smart tax planning plays a vital role in a sound investment strategy. Being ready to address this issue and other planning topics with your clients can contribute to your firm’s continuing success. 

Matt Rosenberg, CPA/PFS, President of RoseCap Financial. He is the recipient of the 2018 AICPA Outstanding Young CPA award and is on the National CPA Financial Literacy Commission.  He has received tenure as professor of finance and accounting at Colorado Mesa University and recipient of the AICPA’s Standing Ovation Award for excellence in personal financial planning.

     

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Ron Elving is a senior editor and correspondent for NPR’s Washington Desk. Ron delivered the keynote address at this year’s AICPA Governmental Accounting and Auditing Conference. We sat down with him to get his insights on what’s going on in Washington and how it affects CPAs.

What would you say are some of the legislative and political issues that CPAs should be following? What issues will most affect them?

In the next year, it’s likely that less will change in terms of federal law and regulation than has changed in the past two years. The Tax Cuts and Jobs Act (TCJA) of 2017 was the first big reform in 33 years, and it continues to affect businesses and individuals as regulatory adjustments to its administration continue. Some tax policy may be debated in Congress in 2020, but the next round of real change in tax rules is probably two years away. We should expect that next round to be significant, either by extending TCJA or largely repealing it — depending on who wins the critical races in 2020.

Government spending will be off to the races again in 2020 as all budget caps (and the threat of sequester) from the Budget Control Act of 2011 were removed this month. New debt to finance the federal budget deficit will exceed $1 trillion in each of the next two budget years. There is no end in sight to this reliance on fresh borrowing, and the debt ceiling has been raised as the accumulated debt passed $22 trillion.

What effect will the debate on the taxation of the digital global economy have on the political and economic landscape?

Congress has held hearings on this issue, notably last month. It is a looming issue for the future, but not likely to be salient in the 2020 conversation. Confusion over state laws and over the apparent violations of the Internet Tax Freedom Act of 1997 are bad enough. Efforts to tax digital downloads in other countries — notably in Asia and the EU — are more confusing yet. On the political front, there is great fear and consternation about the power of the big platforms (Google, Facebook and Apple), but there is also a natural reluctance to restrain free enterprise or penalize an innovative and productive industry for its success. Members of Congress are more immediately interested in determining how these platforms might help or hurt their own re-election prospects. But they are getting an earful from constituents in retail and other sectors about the economics of all this as well.

Government tends to be the final frontier on cyber-related changes. The IRS is working with Kennedy-era technology. States and municipalities often need to communicate through systems that don’t “talk to each other.” What is the landscape for cybersecurity that may have trickle-down effects on state and local government today?

Computer modernization is an enormous obstacle for contemporary governance. The funding is often a slow process over multiple sessions of Congress, meaning that software and even hardware that’s approved is superannuated before it’s even been bought. The Air Traffic Control system is an egregious example. Treasury is probably light-years ahead of some other agencies, yet not state of the art. All this is complicated by issues of cybersecurity, in part because the government has so much of our vital data and generates so much of it (Social Security numbers, for example). It is also caught up in the political crossfire over the security of our computer systems vis-a-vis government-sponsored hackers from hostile countries. Even discussing it becomes fraught with these tensions.

We’re not far from a world in which governments may begin accepting cryptocurrency and CPAs might one day be required to work with cryptocurrency or value it in some way. What does the regulatory environment look like for cryptocurrency?

Congress has done little but talk about cryptocurrency. There was a lot of anxiety about Libra earlier this summer in Senate Banking and House Financial Services and Facebook backed off, claiming it welcomed regulation. Since then, congressional committees have also held back because they are concerned about restraining legitimate private enterprise — even as they fret about the effect on conventional banks and other entities with long histories of supporting congressional campaigns. Ultimately, the Fed may need to be the lead actor here in concert with Treasury. Congress would rather play the role of approving or disapproving what these agencies decide to do. Members still tend to see cryptos as more a tool for anti-governmental or extra-governmental actors than for legitimate business or for government itself. But this is still an evolving space and greater acceptance could come rapidly.

If our audience could take away one point from our conversation, what would it be?

It is difficult to overstate the importance of the election of 2020. The campaigns for president, Congress and in the states will be tumultuous. It will be the longest, most intense, most expensive election in our history, and possibly the most divisive since the Civil War. We may see a test for the 230-year tradition of a peaceful transfer of power, and we may hear questions raised about the long-term viability of a 50-state union. Major issues to be discussed include the longtime U.S. leadership in world business and economics, our commitment to free trade as a means of raising world living standards, our immigration principles and practices, our tax and spend policies and our willingness to carry a national debt that exceeds our GDP.

Watch our interview with Ron to hear more about his views on the current political landscape.

Veronica Vera, Senior Manager, Public Affairs, Advocacy & Media — Tax, Association of International Certified Professional Accountants

     

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Did you know one in five women say they’re the only woman in the room at work? If you’re like me, unfortunately, you’re not too surprised by this information. Industries like the finance, accounting and tech spaces have been known to have a harder time attracting and retaining female talent.  Yet, companies that have a higher percentage of female leadership have been proven to excel. A report released by Credit Suisse states that companies that have women making up at least 15% of senior management are 50% more profitable than those where less than 10% of senior managers are female. So, here are four strategies that will help you attract top female talent to your firm and retain them, too.

Promote gender equality and offer influence

Most organizations have a diversity statement, but some don’t share it. Make your statement visible and promote it regularly. To attract top female talent, you must be willing to take a clear stance and let the public know how serious you are about endorsing gender equality and implementing programs that let women influence the workplace culture. For example, peer-to-peer support initiatives and mentorship programs provide a direct opportunity for women’s voices to be heard and for their decisions to shape company behavior.

Also keep in mind that creating an environment that supports the growth and prosperity of female talent means letting women have a say in designing the company culture – a leading voice. Are you promoting women fairly and putting them in positions where they can make impactful decisions? It’s important that women themselves are granted the agency to implement procedures and processes that suit their needs.

Gender-neutral parental leave

Sure, maternity leave is a thing. However, restricting parental leave to maternity leave alone can still leave women with the short end of the stick. Encouraging paternity leave — or better — a gender-neutral parental leave policy, can even the playing grounds. With gender-neutral parental leave, women don’t have to deal with the stress of worrying whether they will be singled out and blocked from advancement opportunities for taking time off to parent because, after all, their partners will be doing it too. This is a sound way to prove your organization supports women and working families.

Flexible schedules

It’s one thing to recognize the importance of a healthy work-life balance, it’s another thing to create a system that allows it. Flexible work schedules benefit everyone, not just women or people with children. Allowing flexible work schedules is another way to show your employees you trust them and are giving them autonomy over their work. They’re also another way to support working families because they allow for school visits, after-school program attendance, doctor’s visits etc. Consider formalizing flexibility to prove your overall investment in your employees’ personal happiness.

Fighting sexism

Another priority when trying to attract and retain top female talent is denouncing sexism and taking actions to eradicate it altogether. Start by examining your pay and promotion practices. Are they fair and equal? Many women leave or switch jobs because they feel stalled in their careers. Prove your commitment to retaining female talent by getting external auditors to examine and approve the fairness of your practices.

Another step to take towards fighting sexism in an organization is to engage and educate male allies. Introduce the concept of unconscious bias and teach your staff how to identify it in order to minimize its negative impacts in the workplace.

Over the years, women have walked a difficult road in hopes of attaining gender equality. So, retaining women in your firm means taking on their burden as yours. It means creating an environment where they’re heard, and where they don’t have to fight harder than anyone else for what they deserve. It means rewarding their talent and their successes in the same way as their male counterparts and creating a culture where everyone is on the same page about the importance of women’s contributions.

 

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Mballa Mendouga, Manager – Social Responsibility & Campaigns, Association of International Certified Professional Accountants

     

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