Author: FFC

Cape Town’s Day Zero has been postponed—for now. That’s the term being used to describe the impending extreme water crisis in my native South Africa. I’ve seen how it affects the people who live there, as they scramble to hold off what seems inevitable. My friends in Cape Town only shower twice a week and save their shower water to water their gardens. Local pools around the city are empty, hotels can’t wash linens as often as in the past and the agriculture sector has been hit.  The severe water shortage threatens employment, tax revenues and municipal credit ratings. The trickle down (a term that has never been so literal) reaches business owners and investors as they consider the rising costs of a resource they once took for granted.

 

Both a concern and an opportunity for investors

Cape Town’s experience is just one example of the ways that economies and individual organizations are affected by environmental, social and governance (ESG) issues. And it’s increasingly of interest to investors— they want to know more about how companies are managing ESG issues or capitalizing on related opportunities.

About three-quarters of investment professionals worldwide consider these factors in their analysis and decision making, according to CFA Institute study. A total of 61% of investment professionals also believe public companies should have to report at least annually on sustainability indicators. When asked why they included ESG concerns in investment decisions, the investment professionals cited risk management, client or investor demand, their fiduciary duty and the identification of investment opportunities as some of their reasons.

CPAs can play a critical role in helping organizations convey the ESG information investors want.

A role for accountants within organizations

ESG information can provide an indication of how well a business is run and how well it manages its risks, factors that can help investors make relevant investment decisions.  Accountants within an organization can contribute to ESG efforts to help satisfy and address investor concerns. Here are two ways:

1. Sustainability reporting can show how companies are managing or innovating around their sustainability risks and opportunities. The CFA Institute study showed the main reason investors didn’t use nonfinancial information when they made investment decisions was due to a lack of appropriate quantitative ESG information. Not because they didn’t want to include the information. Accountants, however, have the skills to help gather, analyze, measure and report on ESG efforts, and can thus help provide investors with the information they need.
2. Risk management. Investors want to see that companies are considering all relevant risks. Accountants can help identify risks and develop strategies to address them. One tool they can use is new draft guidance from COSO (The Committee of Sponsoring Organizations of the Treadway Commission) and the World Business Council for Sustainable Development. Applying Enterprise Risk Management to Environmental, Social and Governance-related Risks helps companies leverage their existing enterprise risk management processes to identify, assess and mitigate ESG-related risks.

A role for CPAs in public practice

In addition to various advisory services, CPAs in public practice can also help clients’ efforts to enhance the reliability of their reported ESG information by providing assurance services. A total of 69% of investment professionals say it is important for ESG disclosures to be subject to some level of independent verification. The AICPA guide, Attestation Engagements on Sustainability Information (Including Greenhouse Gas Emissions Information), offers comprehensive guidance on applying the clarified attestation standard when performing examination or review engagements on sustainability information.

You may be interested in registering for the Sustainability Investment Leadership Conference, taking place on May 2 online and in-person in New York. Attendees will discover how good governance, environmental sustainability and social stewardship can drive profit. AICPA member can get #100 off registration using the code aicpa100. 

Desire Carroll, Senior Manager, Assurance and Advisory Innovation, Association of International Certified Professional Accountants

     

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Pop culture seems to be obsessed with the 1980s.

Remakes of popular blockbuster hits are now the norm for movie-goers. From “RoboCop” to “21 Jump Street” to “Footloose,” today’s entertainment is all about nostalgia.

So, it’s no surprise that television’s favorite action drama, the “A-Team,” would make a comeback. Updated for 2018, the reboot is coming to prime time. And this time, the fearsome foursome is taking on the single greatest threat to our security: cybercriminals.

Airing at 8 p.m. Wednesdays on your television or tablet is America’s newest special task force: “The (CP)A-Team.” Each half-hour episode features the all-CPA unit as they travel the world detecting and responding to cyberattacks and data breaches.

Cyberattacks are on the rise. Personal information is swapped for pennies on the dark web. Ransomware is lurking in the shadows of your desktop. And one team perseveres against it all to expose cyberthieves and other scoundrels.

In 2002, this crack team of auditors met on the job. Fresh out of college and stepping into the vast world of accounting, they found in each other a bond that nothing could shake. Once they graced the cubicles of Metro Zero, New York City’s finest financial institution. Today, they survive as practitioners with a purpose: protecting millions from the loss of sensitive personal and corporate information.

Jane “Caesar” Jones is a master of disguise. She is most commonly seen portraying beauty school dropout “Mrs. Bentley,” a salon owner who uses weak passwords and unsecured wifi devices as part of a ploy to entice small-time hackers. As the leader of the group, it was Caesar’s idea to go rogue after discovering Metro Zero shared client data. Now on the run, she and her team aim to level the playing field and repair the damage done.

Nick “N.N.” (Negative Nelly) Nichols is the muscle for the (CP)A-Team. N.N. is always in a bad mood but is the first on the scene when things get hairy. Armed with only a laptop and personal hot-spot, N.N. attacks hackers before they can reach your server. A reformed hacker, his secret past is known to only Caesar.

S.C. (So Crazy) Miller is the (CP)A-Team’s driver but due to an unfortunate calculator accident, has gone blind. Despite it, he can operate the team SUV with extreme accuracy. S.C. takes this precision into the field with him, overwhelming villains by examining weaknesses in firms’ cybersecurity frameworks and teaching classes on the dangers of phishing emails. 

Tiffany “Flygirl” Packer is a master of persuasiveness who can entice hackers. Occasionally referred to as “Lady Boss,” her ability to out-maneuver the bad guys makes her a force to be reckoned with. She’s the only witness to the accident that stole S.C.’s sight. Some suggest she was holding the calculator.

Has your identity been stolen? Has your company been hacked? If you have a problem with cyber controls, if no one else can help, you can hire the (CP)A-Team. Don’t miss this buzz-worthy new show.

Until then, enjoy your April Fool’s Day.

Allison Carter, Communications Manager–Tax, Association of International Certified Professional Accountants

     

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Your nonprofit is on a mission. Like any other business, your work requires careful accounting and financial reporting. Unlike other businesses, your not-for-profit organization has special requirements on the use and reporting of restricted assets.

As an auditor specializing in the nonprofit sector, I get a lot of client questions about restricted assets. The following are some of the most common issues we encounter and tips for dealing with them.

1. Fundraisers can create unintended restrictions. Donors like to support programs and projects near and dear to their heart. Your fundraising staff is skilled at designing heartfelt appeals. If you’re not careful, overly specific fundraising language can create restrictions that limit your ability to operate. Keep your accounting staff looped into the fundraising communications planning and approval process to avoid problems down the road. When in doubt, run it by your auditor.
2. “Restricted cash” may include more than you think. Many nonprofits present cash and cash equivalents that have restrictions in multiple line items on their statements of financial position. In some cases, these line items are labeled something other than “restricted cash” or “restricted cash equivalents,” such as:

• Advances of grant funds,
• Pledged cash and cash equivalents,
• Cash received with donor-imposed restrictions,
• Contractual insurance reserves, and
• Bond-sinking funds.

A new accounting standard gives guidance on how you should report the above items in your statement of cash flows.

3. Restrictions may not be released evenly throughout the year. Often organizations receive funds earmarked for programing in future periods. These restricted funds may also be tied to program deliverables rather than “evenly divided” across a period. Take meals, for example. A homeless shelter receives a donation for meals served in the 2018 calendar year. The shelter may serve significantly more meals during the fall and winter months. Generally, that donation’s release from restriction should vary by volume of meals served rather than be evenly divided across 12 months.
4. Grants may include “use it or pay it back” provisions. You receive a grant for a project or program in a particular fiscal year. The project or program is delayed and some grant funds have not been spent. Any “use it or pay it back” restrictions need to be identified early in the operational planning process. Prioritize that spending to ensure funds don’t need to be returned to the funder.
5. Insurance contracts and employee benefit plans may create asset restrictions. Sometimes organizations don’t realize that the language in their self-funded workers’ compensation or employee medical plans may place restrictions on assets. Finance/accounting needs to review the actual plan documents.
6. Donations of stock and other investments can be dicey. Investment asset donations for endowments, scholarships, and other purposes should be reviewed by accounting, preferably before they’re accepted—for sure before they’re budgeted or spent. Are restrictions only on the investment principal or are there restrictions on income it produces as well? Are realized capital gains treated differently from unrealized capital gains? Are there special reporting requirements? Tax implications?
7. Real estate property may have long-term restrictions. Some Housing and Urban Development (HUD) programs require recipients to own the property for 40 years. Your organization might be offered donations of buildings that have restrictive covenants. Property and equipment should be reviewed to identify any restrictions.

For more information on nonprofit finance, visit the AICPA Not-for-Profit Section website.

Jennifer Casacchia, CPA, is a member of the AICPA Not-for-Profit Advisory Council and a senior audit manager with Sikich LLP’s not-for-profit and higher education practices team at the firm’s headquarters in Naperville, Illinois.

     

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Over 25 million Americans are still dealing with repairing airbags from one of the largest series of recalls in U.S. history. Car owners are waiting months for repairs – and many are unable to drive their cars while they wait for them to be fixed. Talk about inconvenient, expensive and frustrating.

Now imagine if airbag recalls didn’t have to be such a mess. Blockchain offers an intriguing solution.

Blockchain is a distributed ledger system that can be put to work managing our supply chains. Think of a big spreadsheet or Google doc that you use to record every transaction in a supply chain – from manufacturer to end user. Now imagine that every supplier, manufacturer and seller in the chain has access to that spreadsheet at the same time as you and is updating it with verified information in real time. Except, unlike a Google doc, you can’t retroactively alter information on the blockchain – making it extra secure.

This would mean every single airbag could be tracked from the assembly line to the junk yard. Every car dealer and every user would be recorded. When an error is discovered, the manufacturer could identify the specific airbags with the problem down to the VIN numbers of the vehicles they went into, rather than having to recall entire batches. Using verified information from the blockchain could save money, customer time and manufacturer reputation.

CPAs may someday use blockchain to track a client’s physical assets and follow financial goods throughout an entire lifecycle. Because both the CPA and the client could upload and look at information simultaneously, auditors could get information right away. Think about never having to wait for your client to send you information. You could examine a supply chain in real time, rather than retroactively.

So how can you get involved now? Even if you aren’t already using blockchain in your firm, there are ways to start learning and developing these tools.

• Keep up to date on regulations surrounding blockchain. Because blockchain is still a relatively new technology, the regulations and standards are still in development. It’s vital to pay attention to federal and state regulations as they’ll affect how we can use blockchain.

• Start playing around with the technology. Get up to speed on how blockchain works and how different kinds of information can be stored. Understanding how the technology works will give you a huge leg up as it becomes more commonplace. Think about moving operations to the cloud. Many firms still install software on their desktops, which will make moving information to the blockchain unnecessarily difficult.

• Become a thought leader. CPAs have a huge opportunity to be thought leaders in blockchain’s development. They already are when it comes to other emerging technology like cybersecurity and artificial intelligence. Blockchain should be no different. CPAs are perfectly poised to help shape the environment around blockchain. The more you understand blockchain and how it can benefit your practice, the greater input you can have in shaping the CPA profession.

Remember that blockchain –particularly using blockchain for services like supply chain management – is an emerging space. Take it in baby steps and start experimenting with how blockchain can help your clients. Stay tuned into developments and start thinking about how your firm can best use the technology.

For more information on understanding blockchain, check out this primer and this article. 

Mark Parzygnat, Program Director – Blockchain, IBM. An IBMer for over 20 years, Mark has worked on both legacy products and emerging technologies within IBM and in conjunction with open source product development. He helped lead the creation of Hyperledger Fabric, a popular open source blockchain technology hosted by the Linux Foundation. He works with multiple companies on the use of this and IBM’s enterprise enhancements.

     

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The last stretch of busy season can be tough.

So how do you get that mojo back? Just like your car, your body and brain perform better under certain conditions. Use that analytical brain that makes you a great CPA and run through some key sources of energy to see where you can replenish.

Time to do a quick 6-point check:

1. Air – When was the last time you exercised? How often are you moving around during the day? A runner’s ability to get a second wind in a marathon depends on how well they restore oxygen to their muscles. Your brain needs a little more oxygen to function best in the tax season marathon. Exercise stimulates blood flow to your brain, which leads to more oxygen and more energy. If taking a brisk walk or hitting the gym is not feasible, here are some exercises you can do at your desk.

2. Light – Winter is a tough time to be working a lot, especially if it’s dark when you go to the office and it’s dark when you leave. Just as oxygen has been proven to stimulate brain activity, light can affect your mood, which influences your energy level. Take a moment to go outside and soak up the sun.
   
3. Fuel – I can’t say “lay off the caffeine” without being a total hypocrite. Instead, I will suggest keeping an eye on how often you’re filling up that coffee mug, especially since it may mess with your sleep. Stay hydrated by drinking two glasses of water after each cup.

Sleep – An elusive commodity, for sure, but the more you deprive yourself, the harder it will be to function in the final stretch. While light is great during the day, avoid using cell phones, tablets and other electronic devices right before you go to bed to keep that blue light from disrupting your sleep.

5. Laughter – Laughing reduces certain stress hormones and promotes well-being, which can help boost diminishing energy levels and your immunity.

6. Pot of Gold – What’s waiting for you on the horizon? Is it a vacation, lounging around the house, or maybe baseball season? Whatever it is, steal five minutes every day to plan for it. Even if your goal is to do nothing, visualize it and consider tips for making the most of it.

Lastly, take stock of those mental or emotional energy vampires – these often come in the form of incomplete tasks or unresolved issues in relationships. They may be the nagging voice inside your head. Is there something you can do now to deal with it, at least partially?

Whenever you start to feel stressed, take a few minutes to think about why you became a CPA and the rewards you experience by helping your clients. It may help to hear from a fellow CPA’s grateful client or read short quotes from peers on why they love being a CPA. And for help, lean on the AICPA’s Tax Section, Private Companies Practice Section (PCPS), and our small firm resources for support on the issues that affect you and your clients during busy season and beyond.

Association of International Certified Professional Communications Team

     

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Women’s History Month is a great time to take inspiration from the achievements of outstanding women, and a chance to check in on your own goals. Are you aiming for advancement and trying to decide the best ways to get there? These are some steps you can take to enhance your prospects for getting ahead.

1. Set yourself apart. What does your organization need? Someone to spearhead cybersecurity efforts or to develop a strategy for addressing the impact of blockchain technology? A professional with expertise or a strong interest in a new and promising service area? Becoming the go-to expert in a hot topic area can raise your visibility and put you in a better position to be considered for new roles or leadership opportunities.
2. Get on track with mentoring. Need an objective source for advice and career insights? Be sure to take advantage of any mentoring options inside and outside your company (these free mentoring and networking resources will give you some pointers). Once you have some experience under your belt, it’s also a good idea to offer to become a mentor to a less seasoned professional. It can be a satisfying and educational experience. It also helps you learn and demonstrate leadership skills that will benefit you as you move up the management ladder.

• Be inventive. Do you have a great idea for streamlining an office process? Or some thoughts on ways to improve client service? Share them with you supervisors or other organizational leaders. You’ll show them you’re an innovative person who’s focusing on the organization’s needs. Some other options:
• Volunteer for a special team project where you can make meaningful contributions and have a chance to shine;
• Champion an initiative, such as a Women’s Initiative Program in your firm; or
• Be an advocate for the profession by applying to join an AICPA volunteer committee or task force.

4. Speak up. Have you recently received some training or an update that you could share in a team meeting? Or do you belong to a professional organization that uses speakers at its events? Step up and offer to give a talk on a topic of interest. This will help boost your confidence and raise your profile within or outside your firm.
5. Accept a winding road. “There is no perfect career path,” AICPA President and CEO Barry Melancon, CPA, CGMA, notes in a Women in the Profession video. The most important thing is that your road ultimately gets you where you want to go. With that in mind, don’t stress over any decisions you make that may not follow a conventional path, because they’re all part of a journey to your long-term goal.
6. Start a conversation. You know you’re eager for your next professional challenge, but be sure to let you supervisors or others in the firm know about your ambitions. Simply asking for a new opportunity can make a significant difference in your chances for advancement. When you approach the subject, build an unbeatable case. Be as specific as possible about what you want and why your experience or skills qualify you for it.
7. Get recognized for giving recognition. When your good work is called out by your peers, it not only boosts your spirits, it can influence your career. But did you know that acknowledging another colleague’s contributions can be similarly beneficial? Offering much earned recognition gets you noticed as a leader willing to help others succeed. Take advantage of company newsletters, social media and even awards as avenues for showcasing others. With the 2018 Most Powerful Women in Accounting nominations, launched by the AICPA and CPA Practice Advisor, you can acknowledge your peers. The Women to Watch Awards is another program to consider for CPAs in your state.

All these steps involve taking stock of what you offer as a professional and determining the best ways to put your talents to work to reach your goals. Following them can enhance your chances of achieving the success you seek.

Want more great ideas on women’s advancement, as well as practical resources for putting them to work? Join us for the Advancing Women in the Accounting Profession webcast on Mar. 29 from 10 to 11am ET. Or consider attending the AICPA’s Women’s Global Leadership Summit, Nov. 14-16 in New York, NY.

Turn to the AICPA Women in the Profession site at aicpa.org/womenlead for more details.

Kim Drumgo, Director — Diversity and Inclusion, Association of International Certified Professional Accountants and Chair of the PhD Project, an effort to advance workplace diversity by increasing the diversity of business school faculty

Hula hoop courtesy of Getty Images.

     

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Have you ever made your own “leadership skills checklist”? If you have, it probably included things like “active listening,” “decisiveness,” “delegation,” and “motivation,” to name a few. As accountants, we love to create checklists that can get us to a well-defined outcome – so why would we treat our efforts to become great leaders any other way?

The thing is, if we are only checking off skills on a list, are we really developing into the best leader we can be?

I believe the answer is a resounding NO!

To become the best leader we can be, we have to get past our skills checklist and dig into who we are and what drives us. If we can stop worrying about checking off skills and instead focus on our true purpose, we can lead our teams with authenticity and inspiration.

I am sure you are thinking that finding your true purpose sounds pretty touchy-feely. All I ask is that you give yourself permission to try the following steps and see if they change the way you interact with your teams:

Start simple – take an assessment. There are a number of self-assessments that can help you better understand yourself and how you interact with the world.

From the VIA Survey (which is free), to Clifton’s StrengthsFinder, to Wiley’s DISC and Myers Briggs personality assessments, you can begin to develop a detailed picture of how you relate to people, situations and even environments.

While these assessments certainly don’t define who you are, they can help you see traits and preferences you may not have otherwise noticed about yourself. They can also explain how those around you view your style, communication and interactions.

Crank it up – ask yourself “why?” Now that you know a little more about yourself and how others may view you, take a moment to consider the “why” of what you do.

Why do you get out of bed every day? Most of us will start off by answering – “because I have to.” We have to take care of our families, be there for our colleagues, and be successful. But consider that there may be deeper reasons for why you get out of bed every morning.

Perhaps you get out of bed because you believe that what you do for your clients or company makes a positive difference in the world at large. Perhaps you get out of bed because your family is the cornerstone of your happiness and providing for them brings you true joy.

“There is a deeper reason for why you do what you do, so take some time to find it.”–Mark Twain

Lead with purpose – apply your “why”. So, you have figured out your purpose, what does that have to do with leadership?

In reality, leadership is all about how we connect with one another to accomplish something greater than we could have accomplished individually. So, if leadership is all about our connections, doesn’t it follow that being your authentic self and knowing what you believe make it much easier to build relationships with those around you?

Building relationships by sharing your purpose, living your purpose and translating your purpose into actions invites others to “buy-in” to your vision. When people see your vision and align their own purpose with yours, innovation and success quickly follow.

I know this process may feel uncomfortable at first, as I have been through it myself. It can be a little scary to let go of the checklist mentality. And it is definitely unfamiliar territory to turn away from the technical skills we all thrive on in the accounting space.

But I promise you this, finding your purpose opens up new possibilities in creating relationships and leading in an inspiring and authentic way. Being yourself (and knowing the real you!) just plain feels good.

So, give it a try and see what happens when you chuck the checklist and follow the pathway to purpose, you might be surprised by who you find.

Watch this segment from the Human Intelligence series to learn more and join Lindsay Stevenson for EDGE Career Development at AICPA ENGAGE in Las Vegas, June 12-14.

 Lindsay Stevenson, CPA, CGMA, Vice President of Finance & Tax at 1st Financial Bank USA.

 

     

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Nonprofit organizations are, by definition, on a mission. In pursuit of their missions, they may engage in risk-reward scenarios that for-profit businesses can’t afford to tackle. To further their cause, many nonprofit leaders accomplish more with less funding than seems possible. Unfortunately, limited resources create risk exposures. This may lead nonprofit management and boards to believe they can’t afford a risk management program. But they can’t afford not to.

Public trust is foundational to nonprofit organizations’ sustainability. Left unmanaged, risks can result in all sorts of losses: donors, employees, members, patrons and grants. Often, it’s not until a critical event occurs that risk management moves up the priority list.

In our experience (although risk management can seem overwhelming — especially for smaller organizations), it’s worth the time and resources.

Frequently faced risks

Following are some common situations we’ve seen and some tips for avoiding them:

Unplanned executive retirements create challenges. A large nonprofit unexpectedly found its entire senior leadership team retiring within the same year. The organization’s current leadership had not proactively identified and developed the next generation of leaders and scrambled to fill key positions.

Key takeaway: Seventy-five-million Baby Boomers — the largest birth group in U.S. history — are entering retirement. In the United States, there are 10,000 people turning 65 every day. Succession planning should be on every organization’s risk-management to-do list.

Revenue concentration leads to loss of funding. Another nonprofit relied on one major funder to support more than 50% of its budget. To the organization’s surprise, the funder announced it was changing focus and would not provide any more resources. The nonprofit found itself in a crisis, laying off half of its employees and cutting programs dearly needed in the community.

Key takeaway: Auditors and those with audit backgrounds know that revenue concentrations are risky and should be disclosed in the financial statement notes. It’s important to go a step further. Auditors can provide additional value by connecting the dots about the risks we identify through the audit. In communicating the overall operating risks to the rest of the organization, remedial action can be taken.

Cybercrimes endanger far more than data. Lastly, we would be remiss not to mention the issues we’re seeing with cybercrime. Cybersecurity events often require embarrassing public announcements. And they can cost a fortune to repair. Beyond the harmful effects on those whose private data is compromised, a cyberattack can deal a powerful blow to an organization’s reputation.

Key takeaway: Nonprofits of all sizes can take steps to develop and implement sound policies and train staff on how to recognize phishing attacks. While a risk management plan may not prevent negative events from occurring, it will help your organization better understand its risks and promote faster recovery when something does occur. The AICPA has developed a cybersecurity risk management reporting framework to help organizations demonstrate that they are managing cybersecurity threats and have implemented effective controls to detect, respond to, mitigate, and recover from these events. Learn more at aicpa.org/cybersecurityriskmanagement.

All three of these crises could have been reduced, if not avoided entirely, with a little more time devoted to risk management — specifically, risk identification and mitigation strategies.

Key questions to identify and mitigate risks

Consider these questions as part of your risk identification and mitigation efforts:

• What are our major risks? (What keeps our board members and management up at night?)
• How do we know we have identified all risks?
• What is our mitigation plan to reduce the negative effects of the identified risks?

More and more nonprofits are seeking board members with financial and risk management expertise. To help boost your knowledge in this area, the AICPA Not-for-Profit Section is offering a webcast called Risk Management for Not-for-Profit Organizations on March 29 from 1–3pm ET. The session will be geared toward those involved in

• Risk management, including board members
• Not-for-profit risk management and finance staff
• Not-for-profit auditors and advisors.

Register here.

Robert J. Fleming, CPA, is a Senior Consultant with Clark Nuber P.S., serving over 750 not-for-profit organizations in the Seattle area.

Mitch Hansen, CPA, is a Shareholder in Clark Nuber’s audit and assurance practice where he primarily works with not-for-profit and governmental organizations.

Risk courtesy of Shutterstock.

     

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If your organization or client handles personal data of any person residing in the European Union—even if the organization itself isn’t located there—pay attention. The way you store and manage that data may need to change significantly.

Enforcement of the EU General Data Protection Regulation (GDPR), which was ratified in 2016, will go into effect May 25, 2018. The GDPR was created to allow individuals to have greater control over their personal data and provide consistency across the EU member countries when it comes to data privacy rules. According to EUGDPR.org, personal data is defined as “any information related to a natural person or ‘Data Subject’ that can be used to directly or indirectly identify the person. It can be anything from a name, a photo, an email address, bank details, posts on social networking websites, medical information or a computer IP address.”

Given that times and technology have both changed since the previous Data Protection Directive 95/46/EC of 1995 was implemented, GDPR will both replace that directive and bring the regulation up to date based on how customer data is used today. And the standardization across EU countries reduces some of the compliance burden for organizations who do business in multiple EU countries.

Any company that processes or holds personal data of a person who lives in the EU is required to follow GDPR. And UK citizens will most likely be afforded the same data protections, regardless of Brexit. The United Kingdom has committed to creating a new Data Protection Bill that will bring GDPR into UK law, so even post-Brexit, organizations will likely need to follow GDPR rules for UK citizens’ personal data. Organizations that are in violation of GDPR can be fined up to 4 percent of their annual global revenue or 20 million euros, whichever is higher.

Since there are only around two months left before GDPR officially starts being enforced, if you haven’t started preparing yet, now is the time. Here’s where to start:

1. Educate yourself and your organization or clients on GDPR. The International Association of Privacy Professionals’ EU GDPR Resource Center is a good place to start. EUGDPR.org also has an overview of key changes as well as other information. And you may be interested in reviewing some of our courses on data protection and GDPR.
2. Evaluate how GDPR relates to how your organization or clients do business. Once you understand how GDPR will affect your organization and the risks involved, you can develop an effective plan to mitigate those risks. For example, you may need to make an external change, such as updating your privacy policies to provide more transparency to end users about how their data is used. Or, you may need to change how you do business internally when it comes to data processing and data storage, adding additional structure to those processes depending on your GDPR-related risks.
3. Consider engaging a data protection officer (DPO). Under GDPR, some organizations will be required to have a DPO. However, even if your organization doesn’t fall under that category, a DPO could be beneficial for helping you navigate the new compliance requirements. On the flip side, CPAs who provide risk advisory services might also consider providing data privacy-based advisory services to organizations that will be impacted. As trusted, independent business advisors who are familiar with an organization’s risks and how to mitigate those risks, CPAs can play a beneficial role in helping organizations stay compliant.

Through GDPR, individuals will benefit from having more control over their data—and organizations who may not have been impacted previously will have to make changes to be compliant. If you’d like to learn more about GDPR and how to prepare, sign up for our upcoming Association of International Certified Professional Accountants webcast on GDPR implementation, which will broadcast March 22 at 12 p.m. ET.

Jon Mabe, Senior Manager – IT Audit, Security & Privacy and Data Privacy Officer, Association of International Certified Professional Accountants

GDPR courtesy of Shutterstock

     

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In case you haven’t heard, blockchain technology has the potential to change the auditing profession. A new whitepaper co-authored by the American Institute of CPAs details what opportunities could emerge for auditors.

Not sure what blockchain is? Don’t worry, you’re not alone. It’s a digital, distributed ledger that contains every transaction since its creation. Once transactions are entered, they can’t be changed or deleted. Every user on a blockchain has an identical version of the ledger, and all copies are updated automatically when a new transaction occurs. Each entry refers back to the previous entry across all versions, creating a “chain” of information.

What does this mean for auditors? In an earlier blog, we talked about how the work auditors do every day may change. The AICPA’s new whitepaper goes further. It explains how blockchain technology could both evolve audit and assurance practices and create totally new opportunities. Specifically, the paper identifies 4 new jobs that we might see in a blockchain ecosystem:

1. Auditor of smart contracts

One intriguing capability of blockchain technology lies in smart contracts. This capability allows for a computer program to digitally transfer assets between parties once pre-specified conditions are met. However, users of such smart contracts will still want assurance that the contracts are implemented with the correct business logic. This is where the CPA comes in. Additionally, CPAs could verify the interface between smart contracts and external data sources.

2. Services auditor of consortium blockchains

As the technology becomes more mainstream, businesses will likely develop blockchain platforms that other organizations can use for their own purposes. Before subscribing to one of these platforms, though, organizations will want independent assurance as to the stability and robustness of the blockchain’s architecture. Thus, the blockchain business may choose to engage a CPA to provide assurance as to the effectiveness of controls over a private blockchain.

3. Blockchain administrator

For private blockchains, organizations may want an independent party – such as a CPA – to perform the functions of a central access-granting administrator. CPAs could validate the enforcement and monitoring of a blockchain’s protocols. If one of the blockchain’s users were to perform these functions, that individual might have an undue advantage over the blockchain’s other participants. Having an independent auditor serve in this role creates greater trust for the blockchain’s users.

4. Arbitrator

While blockchain technology can execute contracts, people still determine those contracts’ terms. This means there is room for error. In a world with blockchain, CPAs may be able to serve as an arbitrator in those cases when the spirit of a smart contract departs from a legal document, contractual agreement or letter.

As the CPA’s role evolves in the blockchain ecosystem, standards and education have to evolve as well. These new opportunities raise questions that the profession must consider, such as:

• What types of skill sets does the profession need to remain relevant?
• When providing assurance across a blockchain, who is the client?
• How would a CPA assurance provider assess engagement risk for an autonomous system?
• How would independence rules apply to users of a blockchain?

As the technology gains wider acceptance and new applications become apparent, the AICPA’s Assurance Services Executive Committee, working with other AICPA committees, will be at the forefront identifying answers.

To learn more now, check out the webcast Blockchain Technology – Impact on the Accounting and Finance Profession, airing March 26.

Lindsay N. Patterson, CAE, Senior Manager, Communications and Public Relations, Association of International Certified Professional Accountants 

Blockchain courtesy of Shutterstock.

     

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