Author: FFC

Your clients are counting on you to be up-to-date on the latest in tax. This means keeping them informed on how major storms, floods, and wildfires could affect their returns.

We saw the hurricane headlines, and they were shocking. Three major storms stood out for their ferocity and damage. Hurricanes Harvey and Irma killed more than in the United States and caused more than $150 billion in property damage. Puerto Rico was hit hard by Hurricane Maria. The island lost all power and nearly all cell service. In some places, these services have yet to be restored.

And it wasn’t just hurricane season that was unusually active. Wildfire season has been one of the worst on record. Almost 9 million acres have burned in wildfires across the western states.

And the year isn’t over just yet.

In November, TEC Chair Annette Nellen, CPA, CGMA, spoke on this topic and offered advice at the National Tax Conference in Washington, D.C. Here are some of the key considerations she shared to get you and your clients ready for busy season.

Leave-based donations. Employees and employers can help victims of disaster through leave-based donation programs. In these programs, employees pass on the cash value of their sick, vacation, or personal time. In exchange for their time, their employers make a charitable contribution to eligible Sec. 170(c) organizations. These donations must be made before Jan. 1Employees may not use their leave-based donation as a charitable deduction on their income tax return, but employers may deduct it as a business expense. Right now, this type of donation is available for Hurricanes Maria, Harvey and Irma and the California . Check with your human resources department to see if your company participates.

Disaster relief for affected taxpayers. Those affected by the California wildfires and the three major hurricanes may be eligible for special tax relief and assistance from the IRS. Also, disaster victims can claim some disaster-related losses on either their 2016 or 2017 returns. The IRS offers a recap of key tax relief provisions available to storm victims.

Some states are also extending deadlines for individuals who reside in disaster areas. The Council on State Taxation (COST) provides a document outlining available relief. 

Legislation. The Disaster Tax Relief and Airport and Airway Extension Act of 2017 became law at the end of September. This provides tax relief for those people and businesses that reside in areas affected by the three major hurricanes. Filers must have experienced a financial loss to be eligible for relief. Under this Act, filers may receive:

1. relief of penalty for early withdrawal of retirement fund for qualified hurricane distributions;
2. an increase of loan limit from a qualified employer plan;
3. an employment retention credit to employers equal to 40% of qualified wages up to $6,000, and;
4. a more favorable tax treatment of the casualty loss.

A full list of provisions is available here.

Beware of fake charities. People want to help victims of disaster, and scammers are taking advantage of their goodwill. They often do this by using dummy websites that pose as real charities. Before you donate to any charity, search Select Check to make sure your money is going to the right people. Scammers may also claim to be from well-respected organizations. They reach out via phone, email, or social media to get Social Security numbers and other pieces of personal and financial data.

Disaster victims are also at risk. Con artists may pretend to be IRS representatives who are helping victims file casualty loss claims and get tax refunds. Disaster victims should call 866-562-5227 if they need IRS assistance.

The IRS offers extensive guidance for those seeking disaster relief. And for more information, visit the AICPA Disaster Relief page.

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

California wildfire courtesy of Shutterstock.

     

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Can a small firm thrive by building a niche within a highly specialized audit area? My firm, Clausell & Associates, P.C., in Decatur, Georgia, has found the answer is a resounding “yes.”

Our 10-person firm opened in 1987, three years after Congress passed the Single Audit Act. This landmark legislation standardized audit requirements for states, local governments and Indian tribal governments that receive and use federal financial assistance. Our firm’s founders saw an opportunity to establish themselves in this new and growing niche. Today, single audits make up about 60 percent of our practice, so the original decision to specialize in single audits was a great move for our firm. 

For practitioners thinking that specializing may limit their practice, don’t worry. Over the years, our single audit expertise has helped to set us apart in the marketplace and drive our growth. Here are some of the rewards that we have found through single audit specialization. 

1. You will spend less time and money trying to be all things to all people. Instead of attempting to keep up with a wide variety of standards and regulations, specialization allows you to concentrate your efforts in one area. It’s easier to train staff and maintain their skills in one field, and you can streamline processes to achieve peak efficiency.
2. The quality of your work will enhance the demand for your firms’ services. We have gotten most of our engagements because of our reputation for quality. Finding a narrow niche allows you to focus your energies and stay up to date, which significantly impacts the quality of your work. Once people know about your niche expertise, it will help enhance your reputation in the community and with referral sources. For example, in our case, grantors who know of our reputation have asked us to provide assistance such as developing internal controls and grant management systems to organizations to which they provide awards.

One key to building a reputation for quality is raising awareness about your firm’s specialization. To gain visibility, we make a concerted effort to participate in professional activities. For example, early on in my career I became involved in our state CPA society, joining the report acceptance body of the state’s peer review committee. That work was valuable to me professionally, and it also helped enhance our firm’s standing in the community and the profession. Due to our reputation, we’ve received referrals from other firms who either do not have the capacity to take on a new engagement or who prefer to stay out of the single audit space.

3. There are many opportunities for special projects. When we work with clients on single audits, we sometimes identify value-added services that do not compromise our independence. For example, we may assist them in thinking through potential new policies and procedures to help them better comply with laws or regulations or better manage their organizations. Similarly, based on our niche expertise, a number of organizations that are not audit clients have engaged our firm to provide value-added services. When we believe our services would not impair independence, some eventually become audit clients. This chance to expand into other types of related consultative services has been one of the greatest financial benefits of our specialization. Instead of spreading ourselves thin to take on a new service area, we leverage our core knowledge to provide different types of engagements.
4. It cuts down on turnover costs. Professionals who join our firm can easily see the career value of a single audit specialization. They understand that every day they are enhancing their skills in a niche that’s in high demand, which increases their engagement in the firm. That cuts down on our turnover and recruiting expenses and boosts profitability.

Go with Your Passion

Of course, the financial benefits are just some of the many advantages of specialization. Any specialty will be demanding, so be sure to choose one you’re passionate about. For me, there’s satisfaction in serving organizations that are improving the community. Many local organizations that get federal funding have limited resources, but our expertise makes it possible for them to do what they do best. If you’re also interested in specializing in single audits, you may want to check out the Governmental Audit Quality Center.

What specialty will work for you? There’s a strong incentive to decide, because specialization can be quite rewarding.

Tracey Dixon, CPA, is a partner at Clausell & Associates, P.C., in Decatur, Georgia. She is a member of the AICPA Governmental Audit Quality Center Executive Committee and the Report Acceptance Body of the Georgia Society of CPAs.

Focus on single audit specialization courtesy of Shutterstock.

     

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We are all busy. When we aren’t at work we’re juggling a long list of priorities, including spending time with family and friends, partaking in hobbies or running errands that can’t be put off any longer. You will notice, nowhere in that list is attending networking events.  But that shouldn’t be the case.

Here’s a story that might inspire you to slap on a smile, put on a nice outfit, and go to that networking event—even if you’d rather sit on the couch catching up on This Is Us.  When one CPA, Heather Zundel, moved from Las Vegas to Albuquerque, she joined her state society and started showing up at their events. Along the way, she formed strong relationships that helped her feel rooted in her new community.  This involvement led to leadership opportunities as well, such as becoming the youngest woman to chair her state CPA society’s board of directors.

Whether you’re in a new job or location or simply seeking to expand your professional horizons, you likely have heard of the advantages of participation. So, the next time you receive an invite to attend a networking event, think about the prospect of maximizing your visibility and connections and RSVP yes. Here are a few reasons why you should.

You’ll enhance your career options. Does your organization have a clear career path that could lead you to your dream job? That’s not the case in many companies, and even if it is, taking responsibility for your own career means taking steps to develop yourself beyond that path. Involvement in a professional organization can help you do just that, including groups devoted to your area of specialization or expertise–or one you’d like to get into. It can also be a good way to find an objective, external mentor who can provide advice on advancing your career. You just never know if a chance meeting will turn into an opportunity.

You can learn how to work a room. If you’d like to polish your networking skills, a professional organization can be a good place to get some practice. Plus, these events will likely be a less stressful place to hone your networking talent than ones hosted by your employer. For those who aren’t sure how to break the ice, ask simple questions that relate to the evening’s presentation or theme, such as whether the other person has firsthand experience relating to the issues discussed, or share a personal story from your own career. If you hit it off, exchange business cards and suggest getting together for coffee or lunch. The skills you learn will serve you well back at the office and throughout your career.

You may clarify your plans for the future. While it’s easy to get stuck in day-to-day business, there are tremendous benefits when you gather a room full of people together to celebrate leadership. It can help you step back and ask, “What can I learn from her?” or “Where do I want to be in a year?” In my state, the Maryland Association of CPAs is involved in the Women to Watch Awards, a joint effort of the AICPA and numerous state societies that honors experienced and emerging leaders. Participants always come away refreshed, with at least one question or insight for their careers.

You can find ways to give back. Are you interested in making a difference but haven’t found the chance to do it? By attending networking events, you will meet people with different interests and may find opportunities to support a variety of meaningful causes, whether they benefit the profession or your community.  

Take the first step

Stuck in your career? Worried about schmoozing clients or public speaking? Check out this Facebook Live session from the AICPA Women’s Global Leadership Summit on the power of positive networking and seek out ways to tackle these roadblocks through participation in a professional group. Attend an event and find out where it might take you.

Jackie Brown, COO, Maryland Association of CPAs. Jackie Brown has worked at the Maryland Association of CPAs since 1980 and been COO for nearly 20 years. She has also served as COO and Vice President of MACPA’s affiliate, the Business Learning Institute, since its formation in 1999. A member of the AICPA Women’s Initiatives Executive Committee, she has also served on the AICPA Future of Learning Task Force as well as the National Commission on Financial Literacy.

Networking event courtesy of Shutterstock.

     

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The office tree has been trimmed, the halls have been decked and everyone is scrambling to get all of their end-of-year work done. But before you can leave the office for the holidays and officially begin the festivities, there’s one thing left to do: the office gift exchange.

More budget-friendly than your typical office party, a gift swap get-together might be the way to go. Consider these three gift giving games for your small firm’s holiday celebration. They will make everyone feel jolly and turn a potentially ho-hum gathering into a ho-ho-holiday team bonding experience.

Game: White Elephant  

How to Play: Have you ever looked at a gift someone just received with envy because you wished it had been given to you instead? With White Elephant—also known as Pirate Santa, Yankee Swap and Dirty Santa—you’re in luck. That coveted gift can be all yours.

To play White Elephant, everyone brings in a wrapped gift and places it on a table in the front of the room. The group sits in a circle and each person is assigned a number. The first person picks a present from the pile, opens it and displays it for the rest of the group to see. The next player can choose to unwrap a new present or steal the gift from the first person. If the first player has their gift stolen, they choose another one. This keeps going until there are no wrapped presents left. At this point, the person who went first has an opportunity to steal a present from someone else.

Tips:

• A gift can only be stolen once per turn.
• A gift can only be stolen three times total.
• If someone steals three gifts, they are out of the game.
• A gift cannot be immediately stolen back from the person who took it.
• To ensure the gifts have a comparable level of desirability, set guidelines for the amount that should be spent and the theme of the gift. Swapping gift cards (of a set amount) is an option you may wish to consider.

Game: Secret Santa 

How to Play: If you want your office holiday gift giving to be more nice than naughty, Secret Santa is the way to go. In this classic gift exchange, each participant picks a name out of a hat to determine who they will buy a present for. No one knows who is buying a gift for them until they open it during the planned exchange.   

Tips:

• Have participants create a wish list so people who may not know each other well can get a present their colleague will enjoy.
• Set a price range to ensure that presents cost about the same amount.
• To add some more fun to the gift exchange, have each person try to guess who gave them the present. If the recipient is unable to figure out who gave the gift, the gift giver reveals themselves.

Game: Left/Right 

How to Play: If you are looking for a gift exchange game that’s less hectic than White Elephant and more interactive than Secret Santa, then Left/Right is the game for you. To start off, everyone sits in a circle with their wrapped present in their lap. A designated leader who isn’t playing reads a story that is peppered with the words LEFT and RIGHT to designate which direction players should pass their gifts.

Sample story:

 

It was a chilly evening in December at the local Performing Arts Center. It looked as though everyone had LEFT their homes and were out and about. Crowds gathered around to see the festive light show which LEFT many oohing and ahhing. The shops were bustling with people running to get last minute presents for the people LEFT on their lists. Many customers at the toy store were looking for a popular train set. They were pleased when the store manager announced that there were plenty in stock. The customers LEFT happy and feeling relieved.  The ice skating rink was filled to the brim with folks in a cheerful mood. Many parents LEFT their children on the ice while they watched from the RIGHT side of the rink. Once the kids LEFT the ice, they ran RIGHT to the hot cocoa stand. They LEFT the rink with a sugar high. Everyone was enjoying the holiday spirit in the city. 

Tips:

• If you can’t think of a story or don’t have time to create one, feel free to use the one above.
• Make sure the story is written with the number of participants in mind so the gifts don’t wind up with the players who brought them.
• To mix up the game even further, add ACROSS to the story to indicate that players should pass the gift to the person directly across from them in the circle.

No matter which holiday gift exchange game you choose, remember that the rules are not set in stone. You know your coworkers best, so feel free to alter any of these games to make them more fun for your team. In my experience, these games produce camaraderie if you ensure everyone is comfortable with the established price range and you engage your quieter teammates by encouraging them to get involved with steals. Adding in food to the fun is always a good idea. It doesn’t need to involve a full meal, but providing some snacks or dessert always helps add to the get-together. Send everyone home with a bag of sweet treats to finish the event on a (sugar) high.

Small firms, we are here for you. In addition to holiday fun tips we’ve got resources to help make your firm more productive and profitable. Check out these tools today to help your small firm make a big impact.

Lisa Simpson, CPA, CGMA, Associate Director – Firm Services, Association of International Certified Professional Accountants

Secret Santa courtesy of Shutterstock.

     

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You probably know Black Friday and Cyber Monday.

What about #GivingTuesday?

The charitable holiday is a global day of giving – either money or time – that takes place the Tuesday after Thanksgiving. Started in 2012, #GivingTuesday to date has encouraged people from more than 98 countries to donate more than $177 million to charity.

There are so many wonderful and impactful organizations in the world, so we encourage you to choose one that is close to your heart. If you need help deciding, here is one that means a lot to the profession – the AICPA Benevolent Fund.

What is it?

In 1933 during the Great Depression, the AICPA created the Benevolent Fund as a place for members to turn during times of financial difficulty. In cases of serious illness, an accident, or the death of the primary source of family income, the fund helps members meet daily living and medical expenses not covered by insurance. One-time emergency grants are also available to help with natural disasters and other unexpected events.

Who benefits?

Being a CPA doesn’t make you immune to financial catastrophe, and the Benevolent Fund has provided financial assistance to AICPA members in need for nearly 85 years. Whether a member is fighting cancer and unable to pay her bills, or the victim of a natural disaster, the goal is to alleviate financial crises and help people get back on their feet. In 2017 alone there have been a devastating number of natural disasters that have affected members across the country. 15 separate weather and climate disasters have already caused at least $1 billion in damages in the U.S. These natural disasters come at a high cost, and even the most prepared CPA can find themselves in trouble. The Benevolent Fund can help those impacted. 

How can I help?

To participate in #GivingTuesday this year, we invite you to make a difference in the lives of your fellow CPAs. For more information about the AICPA Benevolent Fund, check out this video made by the Fund’s Board of Trustees. And to make a donation to help someone back on their feet, click here.

If you need help, visit the Benevolent Fund web page and follow the instructions to apply. Or call the Benevolent Fund administrator directly at 866-527-2228.

Whether you choose to give to the AICPA’s Benevolent Fund, or another cause, use the hashtags #GivingTuesday and #AccountantsGive on Twitter to encourage others to do the same.

Happy #GivingTuesday!

Samantha Delgado, Manager – Communications, PR & Corporate Responsibility, Association of International Certified Professional Accountants

Donate on #GivingTuesday courtesy of Shutterstock.

     

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When it comes time to file the Internal Revenue Service’s Form 990, Return of Organization Exempt From Income Tax, do you think of it as just another task to cross off your to-do list? If so, you should know that there’s more to it than meets the eye.

Form 990: A refresher course

So, what is the IRS Form 990 anyway? It is an information return required annually for most tax-exempt organizations. It showcases an organization’s mission, programs, governance structure and operations, in addition to financial data.  

Check out this blog post to learn five things you may not know about the IRS Form 990.

Can’t I just fill it out and be done with it?

Well, you could, but because the IRS Form 990 is accessible by anyone out there (think potential donors, clients, media and members of the community), you want to fill out the form thoroughly. As we wrote in an earlier blog post, the IRS Form 990 is an opportunity for not-for-profits to shine. Don’t only think about satisfying the IRS’s requirement. Take the time to illustrate all the great work your organization does to achieve its mission. You never know who might read it and what might happen as a result.

What should I watch out for?

Before filing your IRS Form 990, consider potential red flags like:

• A “no” response to a question about whether certain governance practices have been established
• A deficit in unrestricted net assets (“net assets, without donor restrictions” on your financial statements upon implementation of FASB ASU 2016-14)
• An indication of engagement in political campaign and lobbying activities

For a complete list of potential red flags, check out this article from the AICPA Not-for-Profit Section. (Temporarily available to nonmembers.)  

We’ve got resources to help

Those who work with and for not-for-profits can find valuable tax compliance and financial management resources from the AICPA Not-for-Profit Section by visiting www.aicpa.org/nfp. Tax compliance resources available to section members include an overview of IRS Form 990 series of returns, errors commonly made, schedule-specific information, and checklists for completion of each type of return. For a limited time, nonmembers can access Form 990 Red Flags for 501(c)(3) Charitable Organizations.

Lana Richards, Manager- Not-for-Profit Content Development, Association of International Certified Professional Accountants

     

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The information encoded in your DNA determines your unique biological characteristics, such as sex, eye color, age and Social Security number. –  Dave Barry

The fight against identity (ID) theft is starting to bear fruit: The number of taxpayers who reported that they were victims of identity theft to the IRS dropped in 2016. This means 376,000 fewer taxpayers reported ID theft, a drop of 46%. Also, the IRS stopped 883,000 tax returns with confirmed identity theft links from getting through the system in 2016. That helped lead to a 37% drop in stolen returns that year.

Dave Barry is a funny guy, but ID theft is no laughing matter. Fraud detection is still one of National Taxpayer Advocate Nina Olson’s “most serious problems” as indicated in her 2016 Annual Report to Congress.

Olson sites a 2015 Treasury Inspector General for Tax Administration (TIGTA) report that said although the IRS’s fraud detection efforts were able to stop between $22 billion and $24 billion of false refunds from being issued, identity thieves were still able to steal approximately $5.75 billion in the 2013 filing season.

ID theft is such a concern to her that she recommends the IRS consider initiating a research study that considers the costs and benefits of holding taxpayer refunds until after filing season ends. It’s a controversial suggestion, given 70% of taxpayers expect a refund and want it NOW. The delay would give IRS time to match information it receives from third-party information filers with the 1040s filed, and a better shot at stopping the fraudulent returns.

This topic is so important that when the AICPA recently updated its Guiding Principles of Good Tax Policy, “information security” (tax administration must protect taxpayer information from all forms of unintended and improper disclosure) was added as one of two new principles.

One law passed by Congress to control the ways that financial institutions deal with individuals’ private information is the Gramm-Leach-Bliley Act (GLB), also known as the Financial Modernization Act of 1999. The Act has three sections:

1. The Financial Privacy Rule, which regulates the collection and disclosure of private financial information;
2. the Safeguards Rule, which specifies that financial institutions must implement security programs to protect such information; and
3. the Pretexting provisions, which prohibit the practice of pretexting (accessing private information using false pretenses)

The Financial Privacy Rule requires financial institutions (defined to include tax return preparers) to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter. CPAs (“accountants and auditors”) are exempt from this rule. (§313.15(a)(3)) The Safeguards Rule requires financial institutions to develop a written information security plan that describes how the company is prepared for, and plans to continue to protect, clients’ nonpublic personal information. CPAs are not exempt from the safeguards requirements; CPAs must still have a written information security plan. 

In a recently publicized case, TaxSlayer LLC entered into a settlement with the Federal Trade Commission (FTC) for violating both the Financial Privacy and Safeguard Rules. The violations came to light because hackers gained access to roughly 9,000 TaxSlayer taxpayer accounts and filed fraudulent returns. As part of its settlement with the FTC, the company must obtain biennial third-party compliance assessments with these rules for the next 10 years.

The FTC provides information on how to comply with the safeguards rule. The IRS also has useful information on this topic, including in Publication 4557. The AICPA provides information and tools related to identity theft, too.

Finally, I’d recommend having a conversation with your professional liability insurance carrier about ID theft and information security. The digital world has created the need for cybersecurity protection. And while every firm must do their best to ensure their client’s information is secure, they should also obtain a cybersecurity policy to protect the future of the firm in the event of a breach.

Dave Barry also said that “[g]ravity is a contributing factor in nearly 73 percent of all accidents involving falling objects.” The connection between the lack of information safeguards and ID theft may be almost as compelling. Don’t become a statistic.

Ed Karl, CPA, CGMA, Vice President –Taxation, Association of International Professional Accountants

 ID theft courtesy of Shutterstock.

     

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Some say that leaders are born. Others believe that leaders are made. I’m definitely a fan of the hybrid approach. There have been moments in my career where I’ve harnessed some inherent abilities and cultivated others to move up the ladder. Even from a young age, I knew I wanted to make a significant contribution to my community. But, to be effective as the Treasurer of the Cherokee Nation, I’ve had to draw from personal and professional experiences and build my confidence. You can do it too. Here are some tips.

1. Lead by observation. Closely observing a respected leader’s approach to strategy is key to developing your own. I became a math hound from watching and helping my grandmother run her business. That’s really where my leadership training began. Later, when I started working for the Cherokee Nation, I had a terrific mentor who took me under his wing and allowed me to be involved in decision-making for the tribe. By watching how others lead, you can gain their 30,000-foot view while simultaneously working with your boots on the ground.

2. Lead by listening. Listening to and understanding the perspectives of others can help you determine how to tackle new challenges and gain the trust of your colleagues. When I became Treasurer of the Cherokee Nation, I was suddenly managing an experienced team of 98 people. I had to prove myself to everyone, and I did that by listening to them. I asked them what they felt the tribe’s opportunities and challenges were. Also, I wanted to hear about the ideas they had and what they would focus on if they were in my position. My team felt heard and saw firsthand my eagerness to put their thoughts and ideas into action.

3. Lead by taking on new responsibilities. You don’t have to have a leadership title to build your confidence and leadership skills. All you have to do is raise your hand. Whether you’re offering to manage a work project, volunteering for the board of a nonprofit organization or taking a leadership role at your alumni association, step up. This is how you learn and demonstrate to others that you’re willing to lead.

4. Lead by learning. Any professional will tell you that you learn new things every day, CPE-required or no. Take the audit, for instance. By performing an audit, you learn about planning, project management and how to form an argument. It’s a proving ground for many CPAs as they build real-world leadership qualities, which was certainly the case for me. I pass the spirit of constant learning on to my staff by encouraging them to take advantage of opportunities to broaden their horizons on a variety of topics, from Standards for Excellence to public speaking. I’m a big believer in demonstrating the desire to learn; it’s a leadership quality all on its own.

5. Lead from the heart. My love for the Cherokee people is what drives me to find creative solutions to our problems. So every day, I use my head to achieve the goals of my heart. Don’t be afraid to reveal your passion and how it drives you. You’ll foster stronger relationships with colleagues, clients, business partners and staff and they’ll respect knowing what motivates you.

No matter where you are in your career, you can always use the AICPA’s professional education resources to become a more confident leader. The AICPA Diversity and Inclusion team offers CPE through its D&I webcasts, a professional development series. The next webcast “Global diversity: driving innovation through inclusion” will be held in January.

Lacey A. Horn, CPA/CGMA, is Treasurer of the Cherokee Nation Treasure. She oversees all financial functions of the tribal government, including the tribe’s $1 billion annual budget including the Cherokee Nation’s tribal health care system, which is the largest of its kind. In 2015, Ms. Horn was appointed to the U.S. Department of Treasury’s Tribal Advisory Committee. The Native American Finance Officers Association selected Ms. Horn as “Executive of the Year” in 2014 and she appeared in Oklahoma Magazine’s 40 Under 40 list in 2012. She has two degrees from SMU and was named SMU’s 2017 “Emerging Leader.”

     

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We heard from members. Their clients want them to perform procedures and report in a format similar to an agreed-upon procedures (AUP) engagement, with more flexibility. To be responsive to the needs of our members and the public, the AICPA Accounting and Review Services Committee (ARSC), got together with the Auditing Standards Board (ASB) and developed a new proposed standard, Selected Procedures. If adopted, it will address several practice issues that CPAs are experiencing today and result in a standard that is in the public interest.

Development of the procedures

In an AUP engagement:

• The CPA performs procedures that are established by specified parties.
• The specified parties are responsible for the sufficiency of the procedures for their purposes.
• The engagement letter is required to include agreement on the procedures.
• In circumstances where the procedures evolve or are modified over the course of the engagement, the CPA is required to amend the engagement letter to reflect the modified procedures.
• The practitioner’s report is restricted to the use of those parties that established and agreed on the sufficiency of the procedures

In practice, many CPAs find that the specified parties are unable or unwilling to develop the procedures needed.

The proposal would provide greater flexibility by:

• Allowing the practitioner (or any combination of parties) to develop the procedures.
• Allowing the procedures to evolve during the course of the engagement.
• Not requiring any party to take responsibility for the sufficiency of the procedures.
• Letting users of the CPA’s report make their own determination as to whether the procedures are sufficient for their intended purpose.
• Permitting the issuance of a practitioner’s report that is not restricted as to use.

The proposal would require the CPA to provide the engaging party with the actual procedures performed prior to the issuance of the CPAs report – thus providing an opportunity for the engaging party to provide feedback on the procedures to be performed.

Elimination of the reporting penalty when the CPA does not obtain a written assertion

In an AUP engagement, when the responsible party does not provide the practitioner with a written assertion, the CPA is required to disclose this refusal in his or her report.

In practice, specifically in situations where the engaging party and the responsible party are different, the responsible party may not be in a position to provide a written assertion. Also, in order to provide the written assertion, the engaging party would have had to measure or evaluate the subject matter against the criteria – which is not always practical. The proposed standard does not require the CPA to request or obtain an assertion from any party. This provides flexibility, permitting the CPA to perform the initial measurement or evaluation of the subject matter and still be able to issue an unrestricted report.  

The Accounting and Review Services Committee (ARSC) and the Auditing Standards Board (ASB) encourage CPAs to consider the proposed standard and provide feedback. The exposure draft includes a series of questions soliciting feedback on specific key aspects of the proposal and both committees will consider all comments received. Comments should be sent to me at mike.glynn@aicpa-cima.com by December 1.

Mike Glynn, AICPA Senior Manager, Audit and Attest Services, American Institute of CPAs.

Slinky courtesy of Shutterstock.

     

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Personal finances are like fingerprints, everyone is unique. With the AICPA’s Personal Financial Satisfaction Index (PFSi) at an all-time high, you may be wondering what it means for you.

Let’s start with some background. The PFSi is a quarterly economic indicator that measures the financial standing of the average American. It’s calculated as the difference between two sub-indexes: The Personal Financial Pleasure Index, which measures the growth of assets and opportunities, and the Personal Financial Pain Index, which calculates the loss of assets and opportunities. Most recently, the Pleasure Index (68.1) greatly outweighed the Pain Index (42.1), bringing the PFSi to a positive reading of 25.9, the highest reading since 1994.

I recently sat down with Michael Eisenberg, CPA/PFS and member of the AICPA’s National CPA Financial Literacy Commission, to discuss what the record-setting quarter means for Americans.

Jonathan Lynch: What do you think about the PFSi reaching this record high?

Michael Eisenberg: It’s great for Americans. The stock market is in its second longest bull market in history, overall job openings are setting records and inflation remains favorably low. While we can all benefit from the current environment, we need to remember that the economy is cyclical, so what goes up is going to come down. Don’t let current satisfaction steer you away from long-term goals. Staying aware and positioning your financial plan appropriately can help safeguard your finances for when the economy is less prosperous.

JL: What financial opportunities and decisions should Americans consider?

ME: This is a perfect time to analyze your cash flow. Calculate how much money you’re bringing in after taxes and how much you have left after covering your monthly bills. If you have extra cash, consider increasing your savings. This may be a good time to build up that emergency fund. If your financial situation allows it, put some money aside to treat yourself, too. Whatever you do, keep in mind how your decision impacts your financial plan.

JL: What’s your advice for people who are still feeling the effects of the 2008 recession?

ME: It’s important to not let your current financial situation get you down. Start small. If you pay all your bills, be proud. If you’re taking steps to fund your retirement, give yourself a pat on the back. Think logically and reasonably – don’t dwell on something that you have little or no control over. Instead, choose to focus on what you can control and create a plan that puts you on the path towards your goals.

JL: What do you think will happen in the months ahead?

ME: It’s tough to predict the future. Based on previous trends, it’s likely that the regions affected by the recent hurricanes, floods and wildfires will see a negative impact on the housing market and a significant increase in loan delinquencies. Those who weren’t affected should take this opportunity to prepare in case they ever face a similar situation. The AICPA’s Disaster and Financial Planning: A Guide for Preparedness and Recovery is a great resource. Remember, if you’re having trouble navigating your financial situation, consider meeting with a CPA financial planner.

Jon Lynch, Manager, Public Relations, Association of International Certified Professional Accoutants

 

     

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