Braddon Group

The COVID-19 crisis accelerated us into a new era of digital engagement — an era characterized by greater personalization and omnichannel access.

At the Association of International Certified Professional Accountants, we have a responsibility to the accounting and finance profession and to our members, and 42% of you have told us that you are unsure that you’ve adapted well to challenges resulting from COVID-19. We want to help, and in collaboration with our partner EY Seren, we present Human Signals: New patterns of behavior and the accounting profession. In this blog, we look at the second pillar of the report — the need for flexibility as we adapt and learn.

Social cognitive theory indicates that you are more likely to be successful learning a new behavior if you:

• Understand the benefits of the change;
• Believe you can master the new skill;
• Identify with the change through a role model; and
• Feel that you have power and influence on your future.

Notably, what many professionals are finding as the competency they need to build most rapidly during this crisis and period of profound change, is the the ability to adapt and be resilient.

Fortunately, studies reveal that resilience is something we build throughout our lives. People can actively develop their ability to respond and adapt to crises.

And, as a leader, you can help people adapt.

• For example, before you provide information explaining necessary changes to clients and staff, consider how you increase their capacity to implement the change. You’ll want to provide resources that are helpful — information that is easy to find, with directions that are easy to follow. When many of us experience “information overload,” we tune out and the instructions don’t stick.
• Adapting to change is not a one-size-fits-all process. Clients and colleagues will emerge from this crisis with various experiences and preferences. The better you understand those differences, the better you can accommodate your clients’ needs.
• As you strategically plan business operations for the next fiscal or calendar year, define the ways in which you will help clients in both digital and physical environments. Some people will be hesitant to conduct business in public spaces, and others will simply like the convenience of teleworking and video chats.

A million new normals

Lockdown restrictions generated a range of responses from individuals as each sought to re-establish stability in their lives.

The health and well-being of ourselves, our loved ones and fellow community members will continue to influence actions, and the erosion of trust in traditional knowledge sources means that individuals are making their own conclusion about what matters most.

Expecting a single ‘new normal’ is unlikely; instead, anticipate a million new normals.

What you can do

• Keep digital alternatives available to support those who are not ready to return to the physical world just yet.
• Include staff input — listen to your teams when creating and adopting new policies and procedures.
• Reconsider how you use physical space and how much physical space is needed for business operations.
• Innovate and develop new ways for your clients to engage and interact with your products and services.

Digital technology drives hyper-personalization and we can’t expect a single concept of new normal to emerge from this crisis. Key factors to thrive in a world that changed overnight: adaptation and agility.

Clar Rosso, Executive Vice President, Engagement and Learning Innovation, Association of International Certified Professional Accountants

     

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How can you expand services to existing clients and attract new clients in the current environment? Here are tips from experts.   

Choose the software that works best for you.

In searching for new ways to maintain ties to clients, Christine DeAngelis, CPA, tax master at 20-person High Rock Accounting has found that video conferencing makes the contact more personal, even when an email would also work.

Being invited into people’s homes virtually opens opportunities for broader conversations about their goals and services you can potentially provide. When it comes to messaging, she prefers Slack over email for immediate responses and exchanges that are closer to a conversation than email. Another advantage: the ability to jump to video conferencing during a Slack conversation as needed.

Highlight your role as the trusted business adviser.

To keep clients informed during a confusing and stressful time, Andrew Jordan, CPA and president of Jordan CPA Services began emailing clients in March with updates on the pandemic and its impact. To alleviate their concerns about their businesses, he also reminded them that they had developed a long-term plan and were well positioned to survive the crisis. As an example, a gym was able to get by during lockdown restrictions because of smart choices the firm had previously recommended about refinancing its debt.

Jordan’s firm also sent informational emails to clients explaining the implications of the CARES Act before it passed. As the crisis progressed, Jordan’s firm launched weekly videos with updates on hot topics, such as changes to PPP guidelines or self-employment issues. He shared the videos with clients and encouraged them to pass them on to interested colleagues or business contacts. Proactive communication strengthens relationships with clients.

Jordan has also offered free consultations to anyone who needs help with areas, such as the PPP or other aspects of the CARES Act. He’s been happy to have the chance to give something back during tough times.

Nurture current client relationships.

At six-person Gray, Salt & Associates, enhancing services to existing clients while relying on referrals for new ones has always been the focus. With that in mind, partner Dalton Sweaney continues to make face-to face connections with clients, within suitable social-distancing guidelines.

In his small college town, Sweaney used to run into clients regularly when he went to lunch or on an errand. Since the pandemic has forced people indoors, he has tried to be intentional about stopping in to see clients. He puts on his mask and picks one client to visit each week. Sweaney says they are typically excited to see him and appreciate the chance to talk face-to-face. Showing this kind of interest “will lead to clients for life,” he said, and the firm’s steadily rising revenues reflect that.

At the same time, remember that not everyone requires old-school communication. His firm has used a software system for a while and most clients, even elders in the community, have been receptive. During the pandemic, the portal has been a great tool when working with clients who are in retirement communities that are not accepting visitors.

Boost your public presence.

Firms need to have an appealing public face, DeAngelis says. With that in mind, she has reviewed her firm’s online presence to ensure it is presenting itself to the world as well as possible.

Updating details on your firm’s website, as well as adding timely information that will be of value to clients or prospects is important. She uses Instagram and other social media, posting blogs and sharing webinars to inform current and potential clients of her firm’s abilities.  You may also consider applying for a .cpa URL to match your website. This not only extends your firm branding but can add a level of security.

Despite the disruptions the pandemic has caused, there are ways to deepen client relations and form new connections. Seize this time to demonstrate the enduring value of CPAs.

Erin K. Carson, PMP, Manager – Young Member Initiatives, Association of International Certified Professional Accountants

     

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“Security is mostly a superstition. Life is either a daring adventure or nothing.”

— Helen Keller

These perilous economic times are nothing short of a daring adventure. The reason the AICPA created the Coronavirus (COVID-19) resource center and SBA Paycheck Protection Program (PPP) resources for CPAs is to help our members — in your critical trusted adviser role — as you nurse the small business world back to economic recovery.

A memorandum issued by President Trump, mandating the Treasury Department defer the collection and payment of employee payroll taxes, has caused confusion and concern among accountants and businesses. The AICPA submitted a letter to Treasury and the IRS in response, requesting additional guidance and clarification, and providing specific recommendations. Treasury issued its guidance on Aug. 28 in the form of Notice 2020-65.

Context surrounding U.S. Treasury guidance and issues

Congress and the Administration have been discussing what we refer to as phase IV or “CARES 2.0 of coronavirus relief for the country” for the last several months. While there’s been bipartisan agreement on some issues, the House has prioritized assistance to states, the Senate liability relief and the Administration payroll tax deferral. The discussions failed to yield a compromise, and Congress is now on recess until after Labor Day and facing a limited legislative calendar upon return.

In response to the stalemate, on Aug. 8, the president signed four executive actions including the presidential memorandum to allow employees to defer certain payroll tax obligations.

The memorandum directs the Treasury Secretary to use his authority to defer the withholding, deposit and payment of employees’ 6.2% Social Security (OASDI) tax for wages or compensation paid between Sept. 1 and Dec. 31, 2020. Also, the deferral is limited to any employees whose wages or compensation is generally less than $4,000 payable during any biweekly pay period. Finally, the memo directs the Treasury to explore avenues, including legislation, to eliminate the obligation to pay the deferred taxes.

Notice 2020-65 answers some of the questions, but leaves many issues open. The notice indicates:

1. An employer’s responsibility to withhold and deposit OASDI taxes on wages and compensation paid between Sept. 1 and Dec. 31 is postponed until Jan. 1, 2021.

2. The amount deferred would be withheld and deposited (paid) ratably from wages and compensation paid from Jan. 1, 2021, through April 30, 2021.

3. If necessary (e.g., if an employee leaves before paying back the deferred taxes), an employer “may make arrangements” to otherwise collect the tax.

 Suggested, appropriate steps when considering the employee payroll tax deferral

1. Communicate the content of the Aug. 8 memorandum and Notice 2020-65 to your clients.

2. Explain that the deferral is optional to employers, in the sense that the notice postpones the due date to withhold and pay the tax but doesn’t preclude earlier withholding and payment.

Similarly, this year, the IRS postponed the 1040 due date until July 15 but didn’t preclude earlier filing. This optional status was confirmed by Treasury Secretary Mnuchin in a public statement.

3. Consider the implementation costs, including reprogramming now and again in January.

4. Consider the implications of employees who may leave before the deferred tax is repaid.

For example, a business that is in economic distress and at risk of closing could be forced to immediately collect the entire amount deferred from employees about to lose jobs. How will employers handle retirements, maternity or paternity leaves, or employees who switch jobs?

5. Consider employee implications.

A) Postponement now will give workers more take-home pay, but starting Jan. 1, the postponed amount comes due. That means the employer would basically double the 6.2% OASDI withholding during the payment period. (Calculate the ratable amount for the exact number.) For employees that cease employment, the entire amount likely comes due.

B) The memorandum directs the Treasury Secretary to consider forgiveness of the deferred amount; however, forgiveness is up to Congress.

The House Ways & Means Committee ranking member, Rep. Kevin Brady (R-TX), has indicated he will introduce such legislation — though the possibility of Congress passing such a law by Jan. 1 is questionable.

C) Some employees may be disappointed if an employer opts out. Clear and complete communications with employees should be offered to mitigate this problem.

D) The deferral also gives the appearance of giving a select group of employees raises in the last four months of 2020 and those same employees pay cuts during the first four months of 2021.

6. The notice places the responsibility of payment of the deferred amounts on the shoulders of the employer.

If the employer does not pay in the deferred amounts by April 30, 2021, they will be subject to interest and penalties, including the onerous “trust fund recovery penalty.”

In addition, the “responsible party” rules allow the IRS to collect unpaid taxes from corporate officers, partnership members, employees and other people responsible for collecting and depositing taxes withheld. Trust fund taxes are non-dischargeable in bankruptcy.

7. Senate Minority Leader Chuck Schumer (D-NY) and Senate Finance Committee Ranking Member Ron Wyden (D-OR) are requesting the Government Accountability Office conduct an expedited review of the memorandum under the Congressional Review Act, a law that could allow Congress to overturn administration regulations.

8. Each client should make a decision that is best suited to their circumstances after considering conversations with liability carriers.

Helen Keller wisely stated: “Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.”

We live in challenging times. Know that we are here to support you.

Edward S. Karl, CPA, CGMA, Vice President of Taxation, American Institute of CPAs

     

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Uncertainty is a common theme these days. People worry about the future and face many personal finance questions. The AICPA Personal Financial Planning (PFP) Trends survey found that 80% of CPA financial planners said their clients had a higher stress level about their financial plan than normal. The CPAs surveyed reported that they spoke with their clients early in the COVID-19 pandemic and often. As a CPA financial planner, you play a key role in reassuring clients and easing their concerns. In this blog post, CPA financial planners and CPAs with the Personal Financial Specialist (PFS™) credential detail the top tips they are implementing with their clients now.    

Paula S. McMillan, CPA/PFS, CGMA, on retirement planning: Help your clients minimize the cumulative lifetime taxes they and potentially their heirs will pay. After all, taxes can erode a nest egg. You can review your clients’ financial plans and recommend they pay taxes during low tax years since this will result in lower taxes overall. They may wish to consider IRA withdrawals if they have cash flow concerns. Roth conversions could potentially be a good idea if your client’s beneficiaries are in the same or higher bracket. But be sure to remember charities won’t get the tax break that an individual would for a Roth IRA, so plan carefully. Now that the SECURE Act requires most beneficiaries to distribute the entire account within 10 years, both IRA withdrawals and Roth conversions could potentially help the next generation with tax planning.

Jennifer E. Birchett, CPA/PFS, on identity protection and credit reports:  As their trusted adviser, remind clients to stay alert so they can spot fraudulent activity. Encourage them to review their credit reports. They can request one free report per year from all the major credit bureaus. Once they’ve reviewed their credit reports and see that everything looks correct, they should consider freezing their credit. This will prevent someone from opening new credit in their name. They can always lift the freeze for a specific period if someone needs to run a credit check. 

Dave Cherill, CPA/PFS on interest rates, loans and mortgages: Now is a good time for clients to consider intra-family loans and refinancing current debt. With interest rates at (or near) all-time lows, loans can be made for little cost. As always, all loans should be documented with the proper payment terms, stated interest rate and timeline. Too often, I see intra-family loans without proper support and documentation. If your clients have loans in place, they may wish to consider refinancing these loans to lower interest rates. If the borrower uses the loan proceeds to purchase other investments, they may be eligible for an investment interest expense deduction. This planning technique allows clients to reduce (or limit) both transfer taxes and income taxes assessed to a family. The low-interest-rate environment also applies to mortgages. Clients should consider whether to refinance their primary or secondary home mortgages to reduce expenses or lock in better payment terms. (Note that mortgage interest deductibility may be limited based on the principal amount being mortgaged, resulting from changes the Tax Cuts & Jobs Act of 2017 imposed).    

Phillip Mitchell, CPA, on the required minimum distribution (RMD): The CARES Act suspended RMDs for 2020 while the SECURE Act changed the beginning age to 72 years old from 70.5 years old. If an RMD was made earlier in the year, the taxpayer had until Aug. 31 to reverse the distribution. Even though the RMD is not required for the 2020 tax year, qualified charitable contributions from an IRA will allow those who do not itemize deductions to have an elevated benefit versus writing a check from their savings account.

As a CPA, clients seek your help with all aspects of their financial situation. The AICPA is here to help:

• The PFP and Tax COVID-19 toolkits have resources to help clients plan in this unprecedented time.
• The Personal Financial Planning and Tax Sections have tax and financial planning guidance and tools to help you advise clients on their finances.
• The PFS credential can set you apart, showing clients and prospects that you have specialized knowledge in the area of financial planning.

Association Staff

     

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Big data. The Fourth Industrial Revolution. You’ve heard it before — automation will change how we work. While exciting, the prospect of mastering new technology — or even the lingo — can seem overwhelming at times. What does automation really mean, and how will it affect your career specifically?

Whether you’re new to the profession, own your own company or work within the finance function of a business, the Association of International Certified Professional Accountants is here to empower you with the knowledge you need to stay relevant. Our resources make it easy to learn about some of the hottest technology, like automation, data analytics and cybersecurity.

Robotic process automation (RPA) is especially important for CPAs. Realizing that everyone is at different places along the adoption curve, let’s break RPA into smaller chunks.

What is RPA?

The reason for the debate? RPA isn’t inherently smart. An RPA “bot” is a software application that performs automated tasks and only follows a human’s instructions. It doesn’t think or learn, and isn’t a physical robot that you might be picturing (Star Wars fans, sorry to disappoint).

Some RPA software vendors are expanding into intelligent bots, and those bots definitely fall under the AI umbrella. RPA is considered a stepping-stone towards AI.

RPA can make people’s work lives easier, including CPAs’. If you’ve ever created mail merges or macros in Excel, you’ve already worked with automation. Check out this this 60-second video for a quick look at automation.

What can RPA do for you?

Think of all those mundane tasks you do on a routine basis. With automation, you can delegate those to bots. Here are just a few of the easy, time-consuming tasks that RPA can handle:

• Data entry
• Auditing high-dollar transactions
• Verifying and processing invoices
• Accounts payable & receivable
• Inventory management
• Tax compliance and preparation
• Regulatory compliance and reporting

Automation’s purpose isn’t to replace CPAs. TurboTax didn’t and neither will RPA. Its role is to work alongside you to save you time — time you can spend on higher value, more profitable work like strategic planning and advisory services.

Businesses are rapidly adopting RPA. According to Deloitte, 58% of large organizations have already embarked on their RPA journeys. In a poll conducted during an Oracle and AICPA & CIMA webcast in July 2020, more than 1,000 finance leaders said implementing automation was one of their top strategies to transform their businesses. Find out more in Reimagining Finance for the New Normal.

What are the benefits of using RPA?

• Speeds up manual processes
• Reduces errors
• Works alongside your current systems
• Improves audit quality and compliance
• Frees staff from labor-intensive tasks to focus on more profitable, high-value work

How to get started

RPA is relatively inexpensive and quick to implement. It overlays existing systems and can replicate human keyboarding, so there’s no re-programming or changes needed to current systems or cloud applications. The proof-of-concept stage is often completed quickly with the launch phase following right behind.

Now that you know about the low cost and relatively easy implementation, you’ll want to further educate yourself about RPA.

1. Read articles and other free resources. Start with our RPA interactive brochure — it’s full of helpful advice.
2. Access free CPE credits through the Digital Mindset Pack, offered to all AICPA members. You can learn about the fundamentals of RPA, data analytics or cybersecurity. For more on RPA, check out our RPA Learning Programs or listen to the latest RPA episode in the Go Beyond Disruption podcast.
3. Evaluate RPA vendor software using our RPA Vendor Checklist.
4. Think about the processes that could be automated in your firm or your clients’ organizations.
5. Build consensus with relevant colleagues and potential senior sponsors in the business. Get their support.

Always remember, bots can’t make judgments. They only do what we tell them to do. Your ability to synthesize, analyze, strategize and communicate insights in a clear and meaningful way means you’re in charge of the high-value, high visibility work — the work that makes careers.

Association Staff

     

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At the Association of International Certified Professional Accountants, we have a responsibility to our members and the accounting profession. A key component of this responsibility is ensuring that we provide informed and robust intelligence across a range of topics. In collaboration with our partner EY Seren, we’re researching the human impact of the COVID-19 crisis and its impact on the profession, its practitioners and the wider community.

The content in the report — Human Signals: New patterns of behavior and the accounting profession — aims to empower readers and provide guidance on how to navigate a highly unpredictable future.

The pandemic has changed the face of communities, meaning the crisis has changed how we gather, socialize and collaborate. For some, the loss of their original routines has left them uncertain of how to connect; for others, it has inspired opportunities to connect in new ways.

Revive a sense of belonging

Lockdown restrictions have removed familiar elements from our daily lives, leading to a collective sense of loss. And too many people have experienced loss at a deeply personal level. The changes to our daily lives need to be reflected in the way we conduct business.

What you can do:

• Recognize the vulnerability of clients and colleagues as a fact, regardless of how confidently they present themselves.
• Normalize emotions encouraging open communication.
• Review business operations. What crucial elements of the human experience are missing? What are ways to facilitate human connection?
• Think of the ways to foster a sense of belonging remotely and support your peers who have created ways to encourage meaningful connection.

Reinvent work routines

On the back of this crisis, the variety of altered work patterns has yielded an organic real-life experiment.

Creativity has flourished. Professionals have launched their own webinars; virtual meetings and networking events happen while people ride stationary bikes; team-building exercises include teaching colleagues how to make a dish or cocktail.

On the flip side of the creativity boon, some people struggle with establishing a routine and using time efficiently.

What you can do:

• Clarify the purpose of the work routines you are trying to recreate. You may discover they never had a significant purpose.
• Leverage these times to consider and test new ideas. Clients may even be open to brainstorming ideas for new service offerings with you.
• Share your strategies for spending time efficiently with colleagues who are missing the old routines.
• Consider the similar changes in work patterns on your colleagues and clients. Do you see any benefits in revised models?
• Consider newly discovered digital ways of connecting with people as an opportunity to expand your client base or join new communities.

Burst bubbles

Social-media algorithms tend to drive people into extreme filter bubbles, fostering polarized points of view and behaviors and creating two camps that become entrenched. We’re seeing this division play out across racial, ethnic, political and economic lines.

There’s a risk that COVID-19 has created two new camps — those who are negatively affected by the lockdown restrictions and those who are neutrally affected. Those having a negative experience represent more than half of the population and tend to already be disadvantaged, with women and ethnic minorities disproportionately vulnerable. In contrast, roughly 30% of the population has remained neutral, retaining most of their income and adapting relatively easily to working from home.

What you can do:

• Return to your company’s mission and purpose with strong and affirmative positions on current events. Provide forums for debate and discussion around divisive issues. Healing requires open and rounded discussion.
• Confirm your commitment to diversity, equity and inclusion.
• Make sure you aren’t inadvertently channeling your workforce into two streams with the neutral group being looked after at the expense of the group that’s been affected negatively.
• Review how machine-driven technologies are being applied, so that they don’t unintentionally encourage polarization.
• Expand connections between employees and clients to encourage awareness and empathy and to burst filter bubbles.
• Ensure that you are aware of and understand how to meet the daily needs of your teams. Consider normalizing practices, like the increased need for flexible working hours in order to care for children.

Lockdown restrictions have shown that we can adapt quickly. But check in with your teams and clients to nurture the relationships that have been built over all these years.

Sue Warman, Vice President – People, Association of International Certified Professional Accountants

     

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Amid continued business uncertainty the COVID-19 pandemic caused, CPAs have successfully moved their professional lives to a virtual environment. But while they may have learned that it’s possible to conduct business interactions online, maintaining personal connections with clients, referral sources and other key contacts can be more challenging. Virtual networking can be done, though, if you follow these tips.

Focus on the personal

Since there may be no client visits or lunches and networking events, CPAs must be proactive to maintain contact. Be sure to go beyond work concerns in client conversations and take some time to find out how they’re doing, advises Amanda Gessner, CPA, at 24-person Schmitz-Holstrom in Bismarck, ND.

If there are indications of problems, such as a client who seems stressed or distracted during an online meeting, take time to show you care about any challenges they may face.

At the same time, it’s important to communicate strategically. With clients bombarded with information, CPAs should be aware of how much contact people may need or want. Customize your outreach based on their business situation, their levels of anxiety and other relevant factors. 

Use technology for casual contacts, too

Although face-to-face contact can keep relationships strong, will digital options work for informal conversations?

Jeff Wilson II, CPA/PFS, CGMA, was not originally enthusiastic about virtual happy hours. The founder of the seven-person W2 Group LLC, in Upper Marlboro, MD, Wilson questioned the merits of socializing while sitting at his desk and staring at a screen as people talked over each other.

Wilson recently used virtual happy hours to maintain close ties with a networking group of fellow accountants and other contacts. He’s seen how well they can be managed. Leveraging the functionality of the platform you’re using can enhance the experience. For example, use Zoom breakout rooms so people can have more in-depth conversations.

Expand your reach

Sarah Bilant, CPA advises getting involved with your state CPA society and discovering what virtual networking options it may offer. She also suggests contacting people with whom you may have lost touch, including former networking group acquaintances or even college friends, or starting online networking groups. Bilant is a manager at the 10-person Elliott CPA Group Inc. based in Santa Rosa, CA, but works remotely from Nevada.  

Consider the advantages

Many see online options as a temporary fix for client or referral source contact. You may succeed and enjoy it more if you see ways it can improve networking.

Given the distances between Gessner’s firm and some of its clients, for example, digital contact can reduce travel costs and allow more face-to-face interaction. Bilant, who lives in a town of fewer than 8,000 people, is excited to possibly to expand her network significantly, well beyond her immediate area.

Online networking may also be valuable for introverts. Rather than stressing about initiating a conversation or being uncertain what to say during a client or networking meeting, they can schedule online meetings and prepare notes to use while working in a familiar environment.

Be a resource

As technology becomes a lifeline for clients, CPAs can add value by helping more traditional individual clients and organizations grapple with operating in the new environment. At his firm, Wilson offers advice to clients and other CPAs in his networking group on how best to harness their digital options.

Show the true you

CPAs have a reputation for being great with numbers and data, but Bilant says that this is a good time to show that you are multifaceted. One way to do that is by sharing some personal interests on social media or the firm website, which can help deepen your connections.

Whatever digital networking choices work best for you and your clients, the good news is that it’s still possible to maintain or build strong relationships with clients and other key contacts.

Erin K. Carson, PMP, Manager — Young Member Initiatives, Association of International Certified Professional Accountants

     

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As we were finalizing Statement on Auditing Standards No. 142, COVID-19 arrived and caused major disruptions to the country’s economy, including changing the ways auditors were working. Automated tools and techniques — like conducting remote observation using cameras or drones — became necessary to perform certain audit procedures, such as observing the physical count of inventory. These and other automated tools and techniques are referenced in the guidance accompanying the audit evidence standard that was issued last month. After practitioners’ experiences over the past several months, these techniques likely will feel more familiar today than they did several months ago.

Before you dive in to read the standard, we’d like to highlight some key changes; the standard:

Is principles based. You won’t find a step-by-step procedure manual or a formula in SAS No. 142. What you will find are requirements and guidance that set up a conceptual framework on what to consider when evaluating audit evidence. This is not a “check the box” performance standard.

Reconsiders broad generalizations that were once relied upon. Given the evolving nature of today’s business environment, information that can be used as audit evidence should be viewed through a different lens than the one used for the audit evidence standard issued a decade ago. Rules of thumb from the days of the old standard aren’t necessarily true today. For instance, auditors shouldn’t assume that information obtained from an external source is necessarily better quality than information from an internal source. Given the substantial increase in sources of information available to auditors today, it’s more important than ever to consider the reliability of information to be used as audit evidence regardless of its source.

Focuses on a framework to evaluate audit evidence. When evaluating audit evidence and assessing whether it’s sufficient and appropriate for the auditor’s purposes, it’s important to consider attributes of quality information such as accuracy, completeness, authenticity and whether it’s susceptible to management bias.

Improves audit quality by emphasizing judgement. Audit standards require auditors to think critically and maintain professional skepticism. In evaluating audit evidence, this includes considering biases (such as availability bias, confirmation bias, anchoring bias and others), and exploring whether the audit evidence obtained corroborates or contradicts management’s assertions.

Helps auditors work remotely. By referencing examples of different types of automated tools and techniques that may be used in performing audit procedures, the standard highlights innovative ways of gathering audit evidence, regardless of the location of the auditor.

Encourages auditors to broaden their view of evidence. New automated tools and techniques provide auditors with access to greater amounts of information. Instead of relying on traditional techniques like audit sampling, practitioners may use technologies like audit data analytics to examine greater amounts of information and in some cases entire populations of transactions. This may include performing audit data analytics that may simultaneously accomplish the objectives of a risk assessment and substantive audit procedures. This leads to enhanced audit quality.

It’s forward looking. The standard is intended to be reflective of today’s business and auditing environment. The guidance is intended to be “future proof,” since it’s written in such a manner that it can be applied today and in the future.

It’s effective for audits of financial statements for periods ending on or after December 15, 2022. Early implementation is also permitted.

To help practitioners prepare to implement this standard we’ve developed resources:

Audit Evidence at a glance (document)

How the new audit evidence standard can improve audit quality (podcast)

Bob Dohrer, CPA, CGMA, Chief Auditor, Association of International Certified Professional Accountants

     

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You may be familiar with CPA Evolution, a joint initiative of the National Association of State Boards of Accountancy (NASBA) and the AICPA that we’ve been discussing for more than a year.

In May, I wrote about the AICPA Council voting in support of advancing CPA Evolution. On July 24, NASBA’s board of directors also voted in support of advancing the initiative. Thank you to AICPA’s board of directors, AICPA Council, NASBA and NASBA’s board of directors for their support and the leadership they’ve provided since our two organizations began this initiative in 2018. I’d like to thank all of you as well for providing us with advice and ideas along the way.

With the votes of AICPA Council and NASBA’s Board, it’s official: we are pursuing a new model for CPA licensure.

This is a historic moment for our profession. The CPA licensure model is transforming — the Uniform CPA Examination is changing to better reflect the skills that newly licensed CPAs need today and will need in the future.  

We are moving forward with a core + discipline model for CPA licensure, with a goal of launching a new exam in 2024.

In this model, all candidates will complete a robust common core of accounting, auditing, tax and technology. Then, each candidate will choose a discipline in which to demonstrate deeper skills and knowledge. Regardless of chosen discipline, this model will lead to full CPA licensure, with rights and privileges consistent with any other CPA.

This new licensure model will continue to place our profession in the best position to meet the needs of firms, organizations, clients and the public we serve. And the model will be flexible enough to evolve as those needs and CPAs’ roles evolve in the future.

The changes to exam and education requirements won’t happen overnight. For the next few years, NASBA and the AICPA will work together along with the accounting academic community, state boards, state CPA societies, students, practitioners and other stakeholders to implement changes and ensure the successful rollout of the new licensure model.

What’s next for accounting academic programs and educators

A gap analysis with accounting program department chairs will be conducted in August to determine where curriculum changes are needed. This process will inform the tools we’ll develop for faculty to support them through the entire transition process, including a resource library, a high-level model curriculum, a model internship program and other faculty resources for the core and the disciplines.

Leadership of NASBA, in collaboration with the AICPA, determined that the Uniform Accountancy Act Model Rules around educational requirements for licensure need to be updated to create more consistency while incorporating additional subjects and skills reflective of the evolving profession. Those changes, which were endorsed by the AICPA’s Board of Directors, are currently exposed for public comment through August 31, 2020.

What’s next for the Uniform CPA Examination

The specific content of the core and the disciplines will be determined by a CPA Exam practice analysis, which is currently underway.

Practice analyses — gathering information about the current state of the profession and the work of newly licensed CPAs — are conducted by the AICPA periodically as part of ongoing efforts to maintain the validity and reliability of the Exam. The current practice analysis will likely wrap up in 2022, and an exposure draft laying out proposed changes to the Exam will be made available for public comment in mid-2022.

However, we don’t want to disrupt the pipeline of candidates who will have started their CPA journey before the new Exam launches. Accordingly, we’ll be working on a transition plan with state boards of accountancy for candidates who have started, but not completed, the CPA Exam process by January 2024.

A bright future ahead for the CPA profession

Thank you again for sharing your feedback on evolving the CPA licensure — we’ve heard from more than 3,000 CPAs, members of the accounting academic community, practitioners, students, technology experts, state CPA society leaders, state boards of accountancy and more stakeholders. Your feedback, questions and dedication to the profession helped guide us toward this solution for evolving CPA licensure. Together, we’ll keep the CPA strong for the future.

Susan S. Coffey, CPA, CGMA, EVP — Public Practice, Association of International Certified Professional Accountants

     

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A half-century ago, tax withholding was one of the simpler issues for taxpayers and practitioners. A more mobile society makes state tax withholding more complicated today given the ease of conducting cross-jurisdictional business and the increase in teleworking or remote work arrangements.

Meanwhile, the web of inconsistent state and local income tax and withholding rules affect employees and employers. As the AICPA testified, the myriad state income tax withholding laws and varying de minimis exceptions make compliance difficult and time-consuming.

In the wake of the coronavirus pandemic, more employees are teleworking, and state income tax withholding is a larger burden on employers.

Pandemic telework state tax issues

Determining the jurisdiction where an employee owes state and local taxes has become complicated as work arrangements have changed drastically during the pandemic. In addition to owing income taxes in an employee’s state of residency, without specific relief, the employee may also owe income taxes in any jurisdiction where they may have worked.  

The employee and employer may need to track all of the employee’s working locations. While some states issued guidance on withholding during the pandemic, that guidance has not been uniform or widely adopted. Additionally, whether a state has a reciprocity agreement may further affect withholding.  

Regardless of reciprocity or pandemic guidance, employees may still have a state and local tax obligation, even if employers are not required to withhold.   

Some states adopt AICPA recommendations

To address concerns with state income tax withholding during the pandemic, the AICPA developed recommendations for state CPA societies that want to advocate at the state level.  Specifically, the AICPA suggested states allow businesses to continue to withhold income tax (and the employee income tax liability) based on the location of the employer for newly telecommuting workers instead of the employee’s location. 

Using the location of the employer would help prevent a double tax when one state uses the convenience of employer test (AR, CT, DE, NE, NY and PA) to source wage payments and another state uses the physical presence standard. It’s possible that a resident’s state credit for taxes paid to another state may not cover all the nonresident state taxes paid. 

The AICPA suggested state and local jurisdictions:

• Allow businesses to continue to withhold income tax in the state where an employer is located.
• Allow the employee who is temporarily telecommuting to continue to pay tax to the state where employer is located.

Thirteen states (AL, GA, IL, IN, MA, MD, MN, MS, NE, NJ, PA, RI and SC) have followed our suggestion in providing guidance. We hope more states will follow with similar guidance.

In addition, 13 states (AL, GA, IA, IN, MA, MD, MN, MS, ND, NJ, PA, RI and SC), DC and Philadelphia followed AICPA’s recommendation (for state CPA societies to advocate) that an employee working remotely in a state due to restrictions would not create nexus and apportionment for tax purposes. Additionally, five states (GA, IN, IA, MA and RI) have provided that newly remote workers (because of COVID-19) will not count against companies taking P.L. 86-272 positions.

Federal legislation

To address this issue on a national level, the AICPA supports federal bipartisan legislation, S. 3995, the Remote and Mobile Worker Relief Act of 2020. The bill provides uniformity for nonresident state and local income tax withholding, and a reasonable de minimis exception from the assessment of state and local income tax in a jurisdiction in which an employee doesn’t reside.

The bill also provides businesses a framework to address the numerous state and local tax issues that have unavoidably arisen because of the changing location of employees during the coronavirus pandemic. With the increase of employees working remotely during the pandemic, the AICPA urged Congress to enact the legislation as soon as possible to ease our country’s nonresident state income tax withholding and compliance burdens.

Federal withholding issues and AICPA advocacy

The AICPA has worked on federal withholding issues as well. Over the past few years, taxpayers and practitioners faced challenges with the elimination of personal exemptions in the Tax Cuts and Jobs Act (TCJA). This change has complicated federal withholding on the new 2020 Form W-4 resulting in the IRS tax withholding estimator and FAQs. Many taxpayers did not have enough federal withholding for the 2019 tax year.  

The AICPA provided feedback on the draft 2019 Form W-4, Employee’s Withholding Certificate,  and urged the IRS to provide penalty relief for estimated taxes. The AICPA also supported federal legislation, the Taxpayer Penalty Protection Act of 2019 (H.R. 1300), that would have provided additional penalty relief.

With the pandemic and the July 15 filing and payment deadline, many taxpayers and tax preparers continued to struggle to calculate and pay tax payments and prepare and file tax returns.  

In early July, the AICPA advocated for further IRS tax administrative and penalty relief:

• To automatically waive the failure to file and failure to pay penalties for the millions of taxpayers affected and working through the challenges the pandemic created.
• To provide an expedited process to help taxpayers establish or revise an installment agreement based on current financial circumstances to comply with their tax obligations.
• To delay collections activities at least 90 days after July 15, 2020.

The AICPA continues to track state tax guidance and to advocate on various issues related to the coronavirus pandemic. We will keep you updated as developments occur.

Eileen Reichenberg Sherr, CPA, MT, Senior Manager — AICPA Tax Policy & Advocacy, Association of International Certified Professional Accountants

     

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