Author: FFC

Move over, Gen X; millennials are now the largest generation in the U.S. workforce. Look around your office and you’ll likely see that one in three of your coworkers is a millennial (born between 1977-1995; a.k.a. Gen Y). Currently there are over 83 million Gen Yers in the United States, and that number is expected to grow. As this generation continues to mature and enter the workforce, understanding millennials and what motivates them has never been more important.

For the first time in U.S. history, four generations are working together, and the age gap between co-workers can be as wide as 60 years. You’ll find traditionalists, baby boomers, Gen Xers and Gen Yers working side by side in many offices. Each of these generations has defining traits that are shaped by a variety of factors. These factors include parenting styles, economic trends, technology advancements, historical events and lifespan. This results in different work and communication styles, career goals and values.

Predictably, these differences often cause friction, and tensions can arise. When there is discord between the generations, it can have a negative impact on your bottom line, causing your operational costs to go up and your operational effectiveness to go down. Knowing the distinctive traits associated with each group and developing the skills to work across the generations will help companies smooth over issues and increase productivity.

Thankfully, generational expert Jason Dorsey, who also happens to be a millennial, has written a book to help you navigate the generational divide. Dorsey is the chief strategy officer at the Center for Generational Kinetics, and he’s also a Gen Y researcher and speaker. In his book, Y Size Your Business, Dorsey shares the defining characteristics of each of the generations currently in the workforce and explains what sets Gen Y apart.

Some key things to note about millennials (and no it’s not their tattoos, piercings and facial hair):

1. Gen Y is the first generation to have no expectation of lifetime employment. Millennials consider long-term employment as being at the same company for 13 months.

2. They have a feeling of entitlement. Their parents want things to be easier for them.

3. They bring big expectations for their career and have a strong desire to make a difference.

4. Millennials crave instant gratification and are outcome-driven.

 

5. They depend on technology and use it to communicate with friends and family 24/7. This dependence is often at the cost of interpersonal communications skills and face-to-face conversational skills.

6. Millennials have a high tolerance for diversity—both racial diversity and diversity of thought.

7. They aspire to be entrepreneurs and run the show.

8. Millennials like to control their own schedules.

9. They have a need for ongoing feedback.

10. Millennials lack real-world experience and need to be taught how to act like professionals.

11. Gen Y values their lifestyle over their career.

Many of these defining characteristics are wildly different from those of prior generations. Luckily, Dorsey provides strategies and tactics to help you leverage these traits, starting with how to get millennials to apply for your job and tips to keep them in that job once you’ve hired them. Unlike previous generations, millennials decide on day one whether to stay at a company. Connecting with them and helping them see how they fit into your culture should be priority number one.

Once a Gen Yer has made the decision to commit, you’ll need to keep them engaged and provide regular feedback as you develop their talent and teach them how to conduct themselves professionally. If you can align your company goals with their personal goals, you can expect millennials to be loyal, hardworking members of your team.

Learning how to motivate, manage and lead millennial employees will help ensure the success of your firm. Leveraging their diverse thinking and desire to make a difference could even give you a competitive advantage.

Learn more about millennials in the workplace at AICPA ENGAGE from the expert, Jason Dorsey, in his keynote, “Crossing the Generational Divide: Unlocking the Power of Generations to Grow Your Business,” on June 12, 2017.  Register to attend virtually or in person.

Jennifer Gardner, Communications Manager–Social Strategy, Association of International Certified Professional Accountants.

Millennials courtesy of Thinkstock.

     

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How do you place a value on human cells that have changed the entire trajectory of cancer treatment and have paved the way for medical breakthroughs in diseases like polio, HIV and HPV?

The best-selling book The Immortal Life of Henrietta Lacks – now also an HBO movie starring Oprah Winfrey – examines how, in 1951, cancer cells were harvested during a biopsy of an African-American woman without her knowledge. Those cells, known as HeLa cells, are the oldest and most commonly used human cell line in biomedical research and have had a significant impact on medical research and advancements in treatment for decades.

The story of Henrietta Lacks raises moral and ethical questions about patients’ rights. To start, the Lacks family was unaware their mother’s genetic tissue was taken and being used for research. Further, they never received any form of financial compensation for the profits gained by the medical community for more than 65 years. To this day, Lacks’ eldest son continues the family’s fight for compensation.

Her story also sheds light on the importance of valuation as a tool in cases involving intangible assets. In the Lacks case, at issue is the value both of Ms. Lacks’ cancer cells and the patents derived from their use, which have generated millions in revenue for the researchers who have used them. CPAs involved in economic damages calculations that include intangible assets may be faced with a variety of challenges. There are several best practices that can be applied no matter what assets are the subject of valuation. Here are a few to keep in mind:

Stick to Basic Practices

Henrietta Lacks’ cells made a sizable contribution to medical research. If a CPA or finance professional who performs fair value measurements were called upon to value that impact, he or she would follow standard practices that apply in any valuation, no matter the circumstance. The valuation specialist would use their research to determine which factors led to or could lead to outcomes in the case. They would also consider the expected financial results and the risks associated with those financial outcomes to determine a final value.

Perform Sufficient Research

Any analysis of economic damages begins with a series of questions. The valuation specialist must fully understand the premise of the case, alternatives available and the financial implications of those alternatives.

In a situation like the Lacks case, a valuation specialist would consider the time when the cells were first harvested to fully understand the context. Were there alternatives to this material that were readily available at the time or since then? Were these cell samples one in a million? One in 100,000? Knowing how many other similar cells were available then and now would have an impact on supply and demand issues and would affect value.

Valuation specialists would also have to explore legal issues, such as who had the rights to the cells at various points in time. In this case, even though the cells have been used since the 1950s, the Lacks family did not reach any agreement with the medical community until 2013. Valuation specialists wouldn’t make or offer any legal conclusions, but they would turn to experts for opinions that would be considered in determining asset value.

Identify Necessary Experts

Valuation specialists often specialize in specific areas based either on the industry or situation – such as health care or divorce – or the type of valuation – such as economic damages. In a highly specialized case like this one, a valuation specialist without sufficient background in medical research could enlist experts with the proper knowledge to help them understand the financial implications of the case. He or she would work with experts to assess the potential economic damages or economic benefit that would have been gained through use of the cancer cells.

Epilogue

In 2013, a court ruling established biomedical researchers must apply for and be granted permission by the National Institutes of Health (NIH) to use HeLa cells for research purposes. Further, it was determined that two members of the Lacks family would sit on the NIH committee responsible for reviewing those applications.

After more than 65 years, the outcome of the Lacks family’s fight for restitution will depend heavily on the valuation of their mother’s contribution to the vital field of cancer research. The question remains: How does one value such a significant contribution? A transparent and consistent methodology can give us our best answer.

Valuation is an intriguing field that offers practitioners a range of unique engagements. There’s widespread demand for CPAs with expertise in providing forensic and valuation services and computing economic damages, and that’s why the AICPA offers the Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF) credentials. CPAs and finance professionals can learn more about how they can improve the transparency and consistency in valuations of intangible assets by following the new performance framework for the Certified in Entity and Intangible Valuations™ (CEIV™) credential.

Paul Wapner, CPA/ABV, CGMA, Lead Manager – Forensic and Valuation Services, Association of International Certified Professional Accountants.

HeLa cells courtesy of Shutterstock.

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Part I

On a mission to help people and entrepreneurially spirited, Jeff Badu represents the next generation of CPAs. At 24 years old, he runs his own firm, hosts a weekly radio show, volunteers his time, and is preparing to take the PFS exam this summer. The AICPA spoke with Jeff about his passion for the profession and his dedication to helping millennials save on their taxes and plan for their financial future.

AICPA: You’ve accomplished quite a bit for someone in their mid-twenties. Can you give us some background on yourself and how you became a CPA?

Jeff Badu: I came to the United States from Ghana when I was just 8 years old. My family settled on the north side of Chicago, where I still live. I have always been a numbers guy, but it was very early on that I discovered my love for accounting and business, and the opportunities those industries present. I was introduced to my first tax return in the eighth grade, and that was when I knew I was interested in this sort of work.

Graduating from the University of Illinois at Urbana-Champaign with both a Bachelor’s of Science and a Master’s of Science in Accountancy, I began doing tax returns for friends my freshman year of college and really enjoyed it, and that helped me set a path for my future. I developed a business plan and mapped out my road to the CPA. I only took one class my second semester of graduate school so I could focus on it. I was the first person in the library every day, and the last to leave at night. I was ecstatic – and exhausted – when I found out I passed.

The journey to passing the CPA exam is no easy feat but very doable. In fact, I wrote a blog post about my experience, so I could share what I learned. I encourage anyone considering this path to make sure becoming a CPA is what you want to do, and begin preparing yourself as soon as possible.

AICPA: What ultimately inspired you to sit for the exam and become a CPA?

Jeff Badu: I am very passionate about helping people, especially when it comes to their financial future. It seemed a natural fit to become a CPA with a focus on tax preparation, tax planning and tax representation for individuals and businesses. I wanted to become a CPA for this reason: to help people save on their taxes, and ultimately, for their future. Having a CPA license enhances a person’s reputation and credibility. To me, it was critical to have those three letters after my name. Becoming a member of the AICPA adds even more credibility, especially for someone just starting their career.

AICPA: You only became licensed as a CPA last year, in 2016, yet you have your own firm, a radio program and a substantial social media presence. Can you give us some background on what drives you and how you got where you are today?

Jeff Badu: There are three steps to becoming a practicing CPA in Illinois: education, certification and experience. I became a CPA in December of 2016 after completing my education, getting certified and gaining experience working at one of the Big 4 Accounting firms. I started as an intern and then moved to the Audit department after I graduated. It was a great company with an enjoyable culture where I learned a lot about the business and myself.  Ultimately, while it was an excellent place to work, I realized I wanted to have a more influential role in the business and in people’s lives while I was young.  Similar to many millennials, I like having the flexibility to choose how and when I work. I also think millennials like to work with people who understand them – and I do, since I am one! It made sense to open my own firm, which I strategically launched as Badu Tax Services, LLC in January 2017.

What drives me is my passion to help people have a successful financial future. One way to do that is by guiding them to make good decisions to lower their tax burden, allowing them to save more for the future.  I host a radio show every week to help boost the public’s financial knowledge. My primary client base is millennials, and it’s important to reach them where they spend the most time – online. I have a website, blog, vlog, and Facebook, Instagram and Twitter accounts, and just launched a new app called Connect that will help people with their taxes. I plan to take the PFS exam this summer, so I can be in an even better position to help people and provide more value to my clients.

I believe that everyone has something to offer; I am passionate about inspiring people. My family has helped me virtually anytime I needed them, and it’s only right to return the favor to them and to society.

 

     

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“The best laid plans of mice and men often go awry.”

As it turns out, poet Robert Burns was onto something. All too often, CPAs and advisers construct tax, estate, retirement, risk management and investment plans that are either never implemented or are misaligned with their clients’ values. Some common missteps could keep a client from adopting a well-crafted financial plan, thus diminishing the value you add to the process.

Let’s take a look at some of these silent killers and how to avoid them before another financial plan goes awry.

Unrealistic Expectations

Perhaps the most common (and avoidable) mistake is building a financial plan on highly aspirational, or worse, totally unrealistic expectations. A sound financial plan is only as good as its inputs, so it’s important to ensure that you are forecasting an appropriate rate of return, inflation rate and honest gauge of spending and cash flow needs. Digging into the client’s cash flow today can help determine a realistic spending level in retirement.

Emotional Decision Making

Emotions are often the enemy of financial well-being. To make matters worse, clients may not even be aware of the detrimental effect emotions have on decision making. You must engage in an honest conversation with your clients about behavioral biases to uncover vulnerabilities in their plan. Some questions you may ask your clients are, “Do you find yourself reacting to news headlines? Are you following the advice of your peers at cocktail parties?”.

Sometimes, a client is confused over needs versus wants. An irresponsible pursuit of wants (e.g. vacation homes, toys, lifestyle maintenance) masked as needs can wreak havoc on a financial plan when circumstances unexpectedly change, and particularly when the costs of the desires are underestimated by the client.

Inflexibility

Does the plan allow for flexibility during events that are out of your client’s control? Can it evolve to their changing needs? For example, should a client retire during a bear market, have you built in a flexible withdrawal and spending plan during years of negative returns? Make certain that you model and discuss “Plan B” options should they need to be exercised, such as working longer, cutting spending, and lowering goals. Also, help your client plan to build an appropriate emergency fund to address unforeseen circumstances.

Inaction

A perfect financial plan is worthless without proper follow-through. You can build a realistic, flexible, comprehensive plan for your client that they either are unmotivated to, or uncertain of how to implement. A clear action plan can circumvent this scenario.

Further, clients who hesitate to leverage and implement sound professional advice end up paying for that inaction. Examples of how this may manifest include:

• Not having proper property and casualty insurance coverage and having a large claim put their nest egg in jeopardy

• Exposing their dependents to undue hardship in the event they are disabled or die prematurely without adequate life and disability coverage

• Failing to address how they want their assets distributed and who will care for their children in a comprehensive estate plan

• Disregarding a tax management strategy and paying too much tax or maintaining a tax inefficient portfolio

You can step in as the quarterback to coordinate between various players including investment advisers, insurance brokers and estate planning attorneys to ensure all bases are covered and the client is acting on that advice.

Unclear Values and Priorities

A plan that fails to resonate with a client or ignores their immediate and future needs, is like an airplane on the wrong flight path landing in the wrong destination. Are your clients uninspired? Do they lack commitment to their plan? If a plan doesn’t closely align to their values, a client will likely be less motivated when life or the markets require a course correction.

Structure your planning process to include time for discussion and reflection on priorities. Encourage your clients to step back and consider their values by asking questions such as, “What are the non-negotiables of your plan and where do you have flexibility? Are you allocating your resources in line with priorities?”.

If you find that your clients’ plans have been victims of these silent killers, the AICPA Personal Financial Planning (PFP) Section can help. As the premier provider of information, tools and guidance for practitioners who advise individuals, the PFP Section can equip you to steer clear of these hazards and partner with your clients as you plan for many life-changing moments to come. Or, learn more at the upcoming Advanced Personal Financial Planning Conference as part of AICPA ENGAGE.

Mark Astrinos, CPA/PFS, RLP, principal and founder of Libra Wealth in San Francisco. Mark works with clients across the country to design the life they want by integrating their financial resources and human capital. Drawing on his tax and business background, as well as his training as a Registered Life Planner, he focuses not only on creating wealth, but finding a healthy balance between money and life.

Silent killer courtesy of Shutterstock

     

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Enhancing quality in various areas of the audit and various kinds of audits is a top priority for us at the AICPA. We recently issued an exposure draft entitled Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA. Its goal is to provide a report that clarifies audit procedures and the responsibilities of auditors and management, thus improving quality and transparency. The Auditing Standards Board (ASB) is encouraging auditors and preparers who are involved in audits of the financial statements of Employee Retirement Income Security Act (ERISA) plans to familiarize themselves with this proposal, and we are very interested in receiving feedback on the proposed changes. Comments should be sent to Sherry Hazel at Sherry.Hazel@aicpa-cima.com by Aug. 21.

Working with the DOL

We issued the exposure draft in response to concerns over the quality of employee benefit plan (EBP) audits, including some expressed by the United States Department of Labor (DOL). In a report released in May 2015, the DOL’s Employee Benefits Security Administration (EBSA) found that 39 percent of audits studied had one or more major deficiencies. The DOL turned to the ASB for help because regulatory requirements call for many employee benefit plan audits to comply with generally accepted auditing standards. In response, the ASB created a task force to enhance the overall quality and the end product of an EBP audit.

According to the EBSA report, 17 percent of auditors’ reports didn’t comply with one or more of ERISA’s reporting and disclosure requirements. Since compliance problems are more likely for auditors who aren’t trained in ERISA audits, one of the ASB’s goals was to make auditor’s reports more specific to these plans, rather than having them fit formats that suited other industries. Both the ASB and DOL believed auditors’ reports could be more informative and transparent both about an auditor’s role and management’s responsibilities, resulting in greater quality. Here are some of the ways the exposure draft would achieve those goals.

New Form and Content Requirements

DOL rules allow EBP management to impose a limitation on the scope of an audit of an ERISA plan. These limited-scope audits enable auditors to forgo auditing certain areas (mainly investments) if they obtain certifications from a qualified institution that holds the investments. The exposure draft provides new requirements that would improve the auditor’s understanding of his or her responsibility in a limited-scope audit and enhances these audits’ quality and consistency. Among other changes to existing practice, the auditor would have to obtain additional written representations from management about their responsibilities for these audits. 

The exposure draft enhances the description of both management’s and the auditor’s responsibilities to provide more transparency into such limited-scope audits, including required procedures relating to the certified investment information.

A New Report on Findings

Another key change would affect the testing of certain procedures and would create new performance requirements that serve as a basis for a new reporting requirement, Report on Specific Plan Provisions Relating to the Financial Statements. Based on information provided by the DOL, along with other feedback, the new requirement focuses on plan instrument provisions that could have a direct effect on the financial statements. Auditors would be required to perform audit procedures related to the specific plan provision without respect to the assessed risks of material misstatement. The goal would be to enhance the consistency and quality of audit procedures in this area, including related disclosures.

Other important proposals in the exposure draft include:

• Proposed audit procedures relating to Form 5500, Annual Return/Report for Employee Benefit Plans, filed by private-sector employee benefit plans.
• Enhanced engagement acceptance requirements.
• An expanded description of management’s responsibilities.

Your Comments Encouraged

The exposure draft, which would apply to audits of single employer, multiple employer and multiemployer plans subject to ERISA, includes a series of questions soliciting feedback on specific key proposals, including ones on cost benefits. The ASB is aware that the document may change practice and is eager to gather input about the effect on CPA firms, preparers and other interested parties. The ASB considers every comment. In the coming months, we will post discussions on the comments we receive on aicpa.org, as part of our meeting agenda materials. We urge you to review the exposure draft and share your comments by the Aug. 21 deadline so that you can play a part in enhancing the quality of ERISA audits.

Linda Delahanty, Senior Manager- Audit and Attest Standards, Association of International Certified Professional Accountants

Professionals meeting image courtesy of Shutterstock

     

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The basic reason for diversity and inclusion (D&I) is obvious: supporting people from various diverse backgrounds is the right thing to do. The business drivers are also becoming more widely recognized—D&I fuels innovation, increases business performance, attracts top talent and more. Specifically within accounting, when we recruit, retain and advance diverse individuals, our profession is more reflective of the clients and the communities we serve.

Despite these excellent reasons, there’s still a hesitation within the accounting profession to fully embrace D&I—perhaps due to a perceived lack of time, resources or understanding of where to begin or how to move forward. So how can D&I make its way to the top of an accounting firm’s agenda?

Leadership can send a powerful message, by elevating D&I to a strategic priority and going beyond just adopting it as a philosophy. Leaders who are bringing success to their organizations by prioritizing D&I also accept that it must be ever-evolving. They recognize that it is a business imperative that not only keeps them competitive but also resonates with their personal values.

D&I at RSM

Just a few years ago in 2013, RSM US LLP (RSM) redefined its mission and put D&I at the forefront. Leading these efforts was (and is) Richard Caturano, CPA, CGMA, National Leader of Culture, Diversity and Inclusion and partner with RSM. Caturano is also past chair of the AICPA Board of Directors, and in 2016 he became the chair of the AICPA’s National Commission on Diversity and Inclusion (NCDI). 

To gain insights into how a firm can use D&I to drive success, we asked Caturano to elaborate on what’s happening at RSM:

 

AICPA: How does RSM define success in D&I?

Caturano: RSM has developed a semi-annual scorecard which includes key metrics related to our goals. Metrics include workforce representation by diverse group/gender, workforce attrition, partner diversity, recruitment mix, cultural climate, and involvement with our employee network groups. In addition, we have adopted a modified version of the AICPA’s Accounting Inclusion Maturity Model that provides us with an annual score on our diversity readiness and allows us to track progress.

AICPA: Does RSM tie any financial compensation to partners for effectively executing on the D&I strategy or for not doing so?

Caturano: RSM recently changed our partner competency model for FY17 to include execution on our D&I strategy. The goal, like all other aspects of our competency model, is to drive to successful execution of our strategy in its entirety. Our board is holding our CEO accountable for our D&I strategy. He is a big champion of D&I, and he’s holding our senior executives accountable, who in turn are holding our office managing partners accountable and so forth. We have seen changes in behavior; however, because the strategy is in its early stages, it’s too soon to determine the effect on any individual partner’s compensation.

AICPA: How do you get other ‘Straight White Bald Guys’ (as you’ve defined yourself) to embrace diversity initiatives?

Caturano: It’s not an easy thing to do because many SWBG’s believe it’s not their issue and, in many cases, not easy to relate to. It has to start with those at the top leading by example and taking the time to learn and understand. Learning and understanding were key for me because once I understood the challenges, the urgency to find solutions increased.

I urge all leaders to attend some of the diverse, professional and organizational conferences available today, as well as conferences around gender diversity, LGBTQ, veterans and all other diverse groups. Interact and set aside time to focus on and understand the issues. I have often maintained that the wrong people are attending these conferences: so many seem to be the people who already understand the challenges. Imagine if each participant in these conferences brought along a colleague from a different diverse group! At RSM, we invite not just those aligned with various diverse conferences to attend, but also advocates. This approach goes a long way toward building understanding.

AICPA D&I Resources

The AICPA continues to support and raise awareness of the need for and value of D&I as a business imperative that drives member, firm and organizational engagement and accountability to make the profession attractive and welcoming to underrepresented populations.

To help organizations and individuals move forward, the AICPA offers free tools to enhance growth.

• 2017 Diversity Webinar Series (series of workforce and global diversity webinars)
• 2017 AICPA Accounting Profession Diversity Pipeline Symposium (May 18-19 | Houston, TX)
• Accounting Inclusion Maturity Model (firm self-assessment tool)
• Recruitment and Retention Toolkit (best practices for diverse workforce development)
• Inclusion Solutions (monthly diversity and inclusion toolkit)

Communications, Association of International Certified Professional Accountants

     

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The number 75 has various meanings around the world. It can sometimes denote a diamond anniversary. It’s the age limit for a juror in England and Wales. Science junkies know it as the atomic number for the chemical element Rhenium. And here in the U.S., it’s the number of balls in a standard game of Bingo; something which I’m sure fans of the game are quite aware of at their Friday night get-togethers.

But, the number 75 holds no greater significance in this world than for the 100,000-plus of you who sit for the Uniform CPA Examination each year. Achieve that number or higher on any of the four sections of the exam, and you’re one step closer to licensure.

A common misconception for those new to the CPA exam is that 75 is a percentage or number of questions answered correctly. No, you don’t get a “C” on the exam if you score a 75. It’s simply the passing mark that signifies you have demonstrated the minimum knowledge and skills necessary to protect the public interest as a CPA.

The passing score of 75 will remain in place even though an updated version of the exam debuted on April 1. How, you might ask, is it possible to have the same passing score with all the recent changes?

The scores reported for the CPA Exam are scaled scores, not score percentages or percentile scores. Section scores are reported on a scale that ranges from 0 to 99. The scale is set so that a passing score is equal to a scaled score of 75. The total score in the AUD, FAR, and REG sections is a weighted combination of scaled scores from multiple-choice questions (MCQs) and task-based simulations (TBSs) that you complete. For the BEC section, the weighted combination comes from MCQs, TBSs, and the written communication tasks.

Regardless of whether you pass a section with a 75, an 81, or a 91, what matters most to the AICPA is maintaining the exam’s validity, reliability, and scoring accuracy, and ensuring it remains legally defensible.

As is common practice within the world of high-stakes testing, a substantially updated exam must be fully analyzed, statistically validated, and have its passing score approved. The AICPA Board of Examiners (BOE) will begin this process, known as “standard setting,” following the close of the current testing window on May 31.

The standard setting process requires score holds for the Q2, Q3 and Q4 testing windows. The AICPA will release scores only once following the close of each window. Exact score release timelines may be found on the CPA Examination Scoring section of the AICPA website, while complete scoring details are explained in the white paper, How is the Exam Scored?

Whether you take the exam for the first time this quarter, or you have a couple of sections under your belt, it’s important to consider how the pending score holds may impact your 18-month exam completion timeframe. If you have a concern about the score hold, contact your state board of accountancy for guidance as soon as possible. All jurisdictions, as well as our partners at National Association of State Boards of Accountancy (NASBA), are aware of the score holds. 

As you wrap up your section and await your score in the coming months, thoughts of bingo balls and diamond anniversaries will be the furthest from your mind. The legendary 75 is first and foremost the top thought for those of you pursuing the CPA. And while it’s easy to zero in on the calculation of the score and what the number 75 represents, you are best served to dedicate your time and energy to the initial study and preparation that is essential to hitting that mark.

John Mattar, Ed.D., Director-Psychometrics & Research, Association of International Certified Professional Accountants

Bingo balls courtesy of Shutterstock

     

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According to the Center for Disease Control (CDC), one in every 68 American children is diagnosed with Autism Spectrum Disorder (ASD). A newer government survey boosts the prevalence of this condition to one in 45 children. Though the frequency of autism remains debatable, it’s undeniably among the fastest-growing developmental disorders in the U.S., with diagnoses having increased 119.4% since 2000.

Now, pivot to the inevitability of Generation Z post-millennial youths constituting 20% of the workforce by 2020. When you consider the staggering prevalence of autism in this particular age group and combine those occurrences with the even more daunting unemployment rate of people with autism, the implication for our economy’s future is alarming.

Enter: Tom Iland, who at 13 was diagnosed with autism. Affectionately called The Calculator by his junior high schoolmates, Tom discovered at a very young age that, despite certain shortcomings, he was a wiz with numbers. Among his many mathematical talents, he can – in no more than a second – provide the sum of a word by adding its letters’ corresponding numerical values:

If A=1, B=2…Z=26, then autism = 83.

Tom was also an unabashed Star Wars fanboy, so it seemed only logical to him that with his unique mathematical abilities, he could become George Lucas’s accountant. It was a dream that some mothers would have discouraged. Luckily, Tom’s mother was different. Rather than dissuade him, she helped him map out a plan to achieve his ambitious goal. He’d have to take certain courses, study for exams and amass experience interning in the field.

Ultimately, Tom exceled – but not without first reflecting on his limitations and developing a strategy to compensate for them. After securing an internship doing property tax for Disney, for example, he disclosed his disability within the first week on the job: he forewarned his manager he may ask the same question repeatedly until the answer finally stuck, and he requested written instructions for tasks, which he’d learned over time were easier for him to grasp than verbal directions.

The same level of self-awareness and planning was key when sitting for the CPA exam. “I clearly hadn’t done a single day of audit fieldwork,” Tom said, “so I went so far as to memorize the Standard on Qualified Audit Opinion word for word.”

Tom worked at Disney for three years and was promoted after the second year. He also earned his CPA. The story likely would have unfolded differently, however, had he not acknowledged how ASD uniquely affected him.

But the most extraordinary thing about Tom is not that he’s a licensed CPA thriving with autism; rather, it’s that he’s put a successful seven-year career in corporate accounting on the backburner to answer what he refers to as “a higher calling.”  His life’s work now involves building a bridge of understanding between those living with autism and their parents, their friends, their teachers and, above all, their potential employers. Tom’s all too familiar with the near-countless challenges people with autism face, not the least of which is the aforementioned unemployment rate for individuals with autism, estimated between 75-85%. In the rare cases in which people with autism are employed, they are far more likely to be underemployed than their non-spectrum counterparts. Tom wants to use his experiences to remedy that.

He recalls how his mother, an adjunct professor of special education and former president of the Los Angeles Autism Society, once had been approached by the Los Angeles Police Department to learn more about autism. She helped train thousands of officers, “but then she realized that people with autism need to know how to interact with the officers too.” He describes it as a two-way bridge. The same bridge should be built between business owners and people with autism. He acknowledges that many organizations have learned the benefits of hiring differently abled people (Walgreens, Boston Scientific and Freddie Mac to name a few), but the bulk of responsibility should lie with those who have the condition.

“You can train employers all day long about the benefits of hiring someone with a disability like autism, but it’s the young people who have to be educated about what they need to do, why they need to follow the rules and why they need to adapt to certain procedures,” Tom says. “People with autism are going into interviews and into jobs unprepared, not knowing how their condition affects them and not knowing what reasonable accommodations to ask for. As a result, it makes their job experience go south rather quickly.”

Among other things, he coaches people with autism on interviewing skills and maintaining high performance once hired. With a forthcoming book titled Come to Life: Navigating the Transition to Adulthood and with speaking engagements scheduled across the country, he’s helping to build that two-way bridge, one person with autism at a time.

When asked whether he’ll ever return to the profession to continue working toward his goal of becoming George Lucas’s accountant, without missing a beat, he mentions in an “indirect and retroactive way,” he already has, reminding me that he’d done accounting for Disney, which purchased LucasFilms in 2012.

Brock Faucette, Corporate Communications Manager, Association of International Certified Professional Accountants

     

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You’re trying out a pound cake recipe, but when you pull your pan out of the oven, you realize the cake didn’t rise. Instead of being fluffy and moist, it’s flat and dense. You double-check the recipe and stop short when you see baking powder on the ingredient list. You left that out because you didn’t have any and you figured it wouldn’t matter. You did everything else perfectly, so how could leaving out this one ingredient have such a big impact?

You may never have thought there could be a similarity between baking and auditing, but in both cases, leaving out one key ingredient can ruin the outcome. You’d be amazed how often it happens.

Why You Need to Document

Through its research, the AICPA Peer Review Program determined that a lack of proper audit documentation is the most common form of non-conformity with professional standards. So how do generally accepted auditing standards define sufficient audit documentation? Documentation should provide an experienced auditor who has no connection to the audit with an understanding of—among other things—the nature, timing and extent of the audit procedures performed. Auditors may be performing proper procedures, but they may incorrectly assume that being able to verbally explain what they’ve done is enough to meet the standards. However, documentation isn’t just icing on the cake. If an auditor hasn’t met the requirements of AU-C section 230, Audit Documentation, no amount of oral explanation can serve as a substitute. By leaving out the critical ingredient that is documentation, these auditors failed to obtain sufficient evidence to support their audit opinions.

To address this misconception, the AICPA has created a free documentation toolkit that helps firms improve their audit documentation and comply with the standards. It includes resources that can be used for a variety of audits and helps address three particular areas where audit documentation challenges are most common:

1. Evaluating SOC 1 reports in employee benefit plan audits. The new AICPA Audit Documentation Resources include a tool that focuses on the auditor’s use of a Type 2 report and addresses some of the most common deficiencies that the AICPA has identified.
2. Dual purpose testing in single audits. A template from the Governmental Audit Quality Center illustrates the necessary documentation steps when testing compliance requirements and internal controls over compliance.
3. Detail testing. Another template offers a hypothetical test of short-term notes receivable, showing what information should be obtained and how it should be documented.

Turn to the Toolkit

The documentation toolkit is a component of the Private Companies Practice Section (PCPS) Invigorate the Focus on Quality Toolkit and contains resources beyond those I’ve mentioned. You’ll find presentations on audit documentation with a version for staff that includes speaker notes, a nano-learning presentation and an aid to support an effective internal inspection, so be sure to make the most of all the toolkit has to offer.

If you’re hoping to celebrate with cake after your next peer review, you’ll be in for an unpleasant surprise if all your hard work falls flat because of insufficient documentation. Fortunately, if you need to enhance your audit documentation, the AICPA toolkit has the ingredients you need.

Carl R. Mayes, Jr., CPA, Senior Manager, Special Projects — Public Accounting, Association of International Certified Professional Accountants

Pound cake courtesy of Shutterstock.

     

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As auditors and management begin to prepare for June 30 year-end audits, it’s a good time to share some of the top concerns for not-for-profits this year. How can not-for-profits reassure donors that their contributions are in safe hands? What key implementation issues on new accounting standards updates are not-for-profits grappling with? Outlined below are four topics that should not be overlooked.

1. Cybersecurity

In addition to common hacking risks, not-for-profits that accept electronic contributions are targets for credit card fraud. While retailers collect certain personal information to set up customer accounts and ship goods, not-for-profits often forgo requiring that level of detail to make donating simple. Unfortunately, this makes not-for-profits an easier testing ground for stolen credit card data. Not-for-profit entities with real-time credit card authorization and settlement are even more likely to fall victim because real-time verification makes the stolen data more valuable. These organizations then bear the burden of repaying fraudulent donations in addition to paying fees related to the refunds. Organizations that use electronic methods to accept contributions should consider adopting appropriate controls to ensure revenues are properly recognized and that cash receipts are safeguarded.

2. FASB Not-for-Profit Financial Statement Presentation Standard

This past summer Financial Accounting Standards Board (FASB) issued a financial reporting standard for not-for-profits (ASU No. 2016-14), which constitutes the most significant change to not-for-profit financial statement presentation since the mid-1990s. The new standard will simplify and improve how not-for-profits classify net assets and present information about liquidity, financial performance and cash flows. In turn, the financial statements of these entities will provide more relevant information to donors, grantors, creditors and other users.

Given the significance of these changes, it is important for not-for-profit accounting and assurance professionals to familiarize themselves with the requirements of the new standard and consider how the financial statements, as well as the systems and processes used to produce them, will change. Early adoption of ASU No. 2016-14 is permitted and may reduce the complexity of financial statement preparation for not-for-profits whose contribution streams currently affect all three net asset categories and those whose endowment funds currently have material unappropriated earnings or are underwater. Not-for-profit auditors also will be called upon for assistance as their clients begin implementing this standard and must be careful not to impair their independence.

3. Currently Effective ASUs

As I mentioned in my recent blog post, there are several significant Accounting Standards Updates (ASUs) effective for 2016 year-ends. Here’s a quick recap:

• Under FASB’s new going concern standard (ASU No. 2014-15), management will now have to evaluate and disclose whether there is substantial doubt about an entity’s ability to continue as a going concern.
• To clear up confusion among not-for-profits regarding the previously amended consolidation requirements, FASB issued ASU No. 2017-02 to clarify when a not-for-profit that is a general partner in a limited partnership (or similar entity) should consolidate a for-profit limited partnership.
• FASB simplified the presentation of debt issuance costs via ASU No. 2015-03, which aligns the balance sheet presentation requirements for debt issuance costs with those of debt discounts.
• Also simplified, and aligned with International Financial Reporting Standards (IFRS), are subsequent measures of inventory. Under ASU No. 2015-11, inventory should be measured at the lower of cost or net realizable value.
• Fair value disclosure requirements have changed for investments measured using the net asset value per share practical expedient. ASU No. 2015-07 removes the requirement to categorize those investments within the fair value hierarchy.

4. Data-Driven IRS Inquiries

Data-driven decision-making for the Internal Revenue Service Exempt Organizations (EO) division involves running over 200 data queries on Form 990-series returns to ascertain whether a return might warrant examination. The IRS has experienced return change rates over 90 percent since implementing the new EO audit selection methodology. Practitioners who prepare Form 990-series returns should focus upon accuracy and completeness.

For a deeper dive into these important issues, be sure to attend the webcast, Not-for-Profit Entities: 2017 Audit and Accounting Issues, hosted by the AICPA’s Not-for-Profit Section on May 5, 2017 from 3-5 pm ET.

Thank you to the AICPA Not-for-Profit Audit Risk Alert Task Force for their contributions to this blog post.

Christopher Cole, Associate Director- Product Management and Development. Association of International Certified Professional Accountants. 

Business people meeting courtesy of Shutterstock

     

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