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19 posts from July 2013

Managing IT Risks and Compliance: A Growing Major Concern

Managing-riskManaging IT risks and compliance are major concerns for many organizations, including those in public accounting, business and industry, consulting, and government/ not-for-profit. Organizations that do not understand, or have not considered, the risks associated with information technology are generally not prepared to mitigate such risks. As a result they are ill-prepared to face the pressures that accompany increased vulnerability within the IT environment.

According to the results of the first Regulatory and Risk Management Indicator conducted by Wolters Kluwer Financial Services, financial institutions are feeling even greater regulatory and risk management pressures than ever before as issues surrounding IT risks and compliance seem to exponentially increase from year to year. The Regulatory and Risk Management Indicator highlights the concerns that financial professionals have with risk management and the obstacles they face in managing those risks effectively. 

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Tax Reform: How Do We Catch Up with the Maldivians?

Time-for-changeGet ready for a test. What will be the biggest driver of fundamental tax reform?

  • Bipartisan compromise?
  • Congressional leadership changes?
  • Current events?
  • Revenues?
  • Good tax policy?


In my last blog, I predicted that fundamental tax reform would not come before 2014 so we have some time before the test answer arrives. But I do want to talk about good tax policy in this blog.

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In the News: Learning to Lead

Derek-jeterThroughout my career in communications, I’ve sought out every opportunity to develop the skills that will hopefully help me become an effective leader in the future. Almost all of the dedicated and successful professionals I know - in every field - have done the same. Some people, like Derek Jeter and Winston Churchill, are viewed as being great natural leaders – the kind of individuals who can motivate and bring out the best in the people around them. But the vast majority of individuals – even successful leaders - have needed a little guidance along the way to develop and refine the qualities that may eventually allow them to help steer their organizations to great heights.

To help develop the future leaders of the accounting profession, the AICPA recently announced the 2013 Leadership Academy class. This group of 38 rising stars will attend the 5th annual Leadership Academy, held in Durham, N.C. this fall. The five day program will be an opportunity for participants to learn leadership theory and strategic planning techniques, while developing tools for handling complex management challenges.

As a recent article in Accounting Today notes, CPA leaders, including AICPA Chairman Richard Caturano, CPA, CGMA, and Barry Melancon, CPA, CGMA, the Institute’s president and CEO will engage the participants, all under the age of 36, and discuss the issues currently facing the accounting profession.

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Another Lesson on Unreasonably Low Compensation

Payroll-taxPayroll tax collection continues to vex the Internal Revenue Service despite several court cases that have resulted in rulings favorable for the IRS regarding unreasonably low compensation. A recent high profile case was David E. Watson, P.C. v. United States on which the Eighth Circuit ruled in 2012. Watson was an indirect partner in a CPA firm, practicing through an S corporation that paid him $24,000of salary per year and between $175,000 and $203,000 in profit distributions. The court adjusted his compensation to $93,000.

It isn’t hard to see why shareholders of S corporations attempt to justify wage levels below what the IRS considers “reasonable compensation” (assuming the understated compensation is below the FICA wage base). Both the S corporation and employee save the 7.65% FICA and Medicare taxes on the wages not reported.

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Opportunities for Innovation: It's Time to Change the Way We Think

Auditors, and others in the accounting profession, think logically. We have to in order to do our jobs. However, as the world changes, so must we – and logic only gets you so far. Aside from logical thinking and reasoning, we also must be creative. It's that creativity, which can often be found in your existing staff, that can provide us with opportunities for innovation.

Take a look around and you'll see that the world is simply moving away from, and beyond, how CPAs have traditionally practiced. While CPAs still give an opinion on a set of historical financial statements, real-time technology is here to stay. People want information now, not later – and there's a big difference in providing one versus the other. That's where our profession, and the future of auditing, must change. It means taking a closer look at technology, standards – and people. I recently filmed a video for the AICPA addressing these issues

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AICPA Report Finds Record Hiring for Accounting Grads

Trends
in the Supply of Accounting Graduates and the Demand for Public Accounting
RecruitsAccounting has always been a popular major as well as a great career choice, and a new report has shed some light on just how hot the accounting profession is right now.

The AICPA recently released the results of the Trends in the Supply of Accounting Graduates and the Demand for Public Accounting Recruits, which showed a record 40,350 accounting graduates hired by public accounting firms in 2012 and 89 percent of those firms forecasting the same or increased hiring of graduates this year.

In addition to promising demand, the pipeline of future accountants is stronger than ever, with historic levels of student enrollments in accounting programs and record numbers of accounting graduates in 2012.

To gain insight into why accounting is more popular than ever, and to better understand the content of the Trends report, I sat down with Scott Moore – AICPA Director of Students and Professional Pathways, who led the effort to compile the Trends report.

James Schiavone: One of the things that really struck me about the report is that the number of students who are earning their master’s degree in accounting has doubled in the last ten years. Can you explain why we’ve seen such a sharp increase?

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3 Questions You Should Consider for Your Succession Plan

Succession-planThe AICPA’s Private Company Practice Section recently released results of its 2013 CPA Firm Top Issues Survey and succession planning is among the top 5 concerns for firms with 11 or more professionals. It’s no surprise to me. In fact, I’m elated firms have succession on their minds. My only surprise is that succession planning wasn’t cited as a top concern for all survey respondents.

Succession planning is an issue many CPAs have been avoiding for the last decade or so. Like many of our clients who may be uncomfortable discussing planning finances for a family that will continue to exist without them, we CPAs are in a tad bit of denial about our own mortality. We may not even realize the opportunity we have to establish a legacy and mentor others as we plan for the future of our firms.

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Cash and Investment Disclosures in Governmental Audits

City-hallAre you ready for your 2013 local government audits?  Cash and investments are a very important area of disclosure in the financial statements for state and local governments, especially for governments that report pension plans as fiduciary funds in their financial statements. Make sure you’re up to date on these cash and investment disclosure requirements. It’s a good idea that your clients are also well aware of these provisions as they prepare the disclosures, as they can help you to provide adequate audit evidence to support the material accuracies of the disclosures being made in the footnotes relative to cash and investments.

Here are a few important reminders about disclosures in this area: 

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Tax and Estate Planning Following the DOMA Decision [PODCAST]

This podcast from Bob Keebler covers tax and estate planning following the Defense of Marriage Act decision by the Supreme Court of the U.S. Bob discusses the complexity of moving from a same-sex marriage state to an opposite-sex only marriage state, income tax planning for same-sex married couples, estate and gift tax planning, the marital deduction, gift splitting and portability issues, as well as IRAs and retirement plans.  [Email subscribers: Visit AICPA Insights to listen to the podcast.]

 

Tax and Estate Planning Following the DOMA Decision

 

Robert S. Keebler, CPA, MST, DEP, Partner, Keebler & Associates, LLP. Bob is a 2007 recipient of the prestigious Distinguished Estate Planners award from the National Association of Estate Planning counsels. From 2003 to 2006, Bob was named by CPA Magazine as one of the top 100 most influential practitioners in the United States. He is the past Editor-in-Chief of CCH's magazine, Journal of Retirement Planning and a member of CCH's Financial and Estate Planning Advisory Board. His practice includes family wealth transfer and preservation planning, charitable giving, retirement distribution planning, and estate administration.  

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Health Care Reform: The Questions Just Got More Complicated

Health-care-file“What will health reform mean to my small business clients?” That was one of the hot topics identified at the recent AICPA Private Companies Practice Section Executive Committee meeting, and it’s a question that I and my colleagues on the PCPS team have been hearing from CPAs across the country. In addition, in the 2013 PCPS CPA Firm Top Issues Survey, “the effect on firms of new federal and state regulations (i.e., increasing complexity, costs to comply)” was one of the top five issues for sole practitioners, possibly due to increased concerns and client inquiries about implementing provisions of the Patient Protection and Affordable Care Act.  PCPS uses the Top Issues Survey results to inform members about the challenges being faced by other firms and to monitor and respond to member needs.

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Finance Chiefs Require Broader Skillset for Their Teams

Amazing-personIn a recent Financial Times article, Sally Fisher of Deloitte noted that while they are not new skills, “you rarely find in one individual strong technical skills, strong commercial acumen and strong behavioral skills.”

She’s right. Fortunately, CGMA designation holders are a step ahead in satisfying the ever-changing needs of their organizations. In the years of experience and education that led to earning their designations, they have worked to complement their financial skills with the business acumen needed to contribute fact-based analysis and recommendations on a range of topics critical to corporate operations and strategy.

Management accountants have a unique opportunity to step in and act as key advisers to their companies by looking at strategic and operational areas outside of finance.

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In Times of Catastrophe and Routine: The Need for Forensic Accountants

Business-continuityIn the aftermath of May’s devastating tornado, the residents of Oklahoma are undoubtedly facing challenges to recovery on multiple fronts… physical, emotional, financial and beyond.

The first responders did their part to begin the recovery process as soon as the storms cleared. But in the weeks and months ahead, CPAs will be providing assistance in their own way, by expertly answering questions and providing essential guidance in the recovery process.

Simply put, we can play a part in reestablishing people’s livelihoods and restoring communities that have suffered great loss.

For example, local business owners dealing with business interruption losses may need answers regarding the optimal time to contact their insurers, how to document the claims or something as fundamental as what their policy will and will not cover.

 

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Placing the Public’s Interest at the Forefront

HandshakeThe CPA profession has a long-standing history of serving the public interest, with more than 125 years of providing services in the highest professional manner. As individual clients’ financial worlds become increasingly complex, many CPAs have responded by expanding their service offerings beyond traditional tax compliance and planning to include investment, estate, retirement and risk management advice.

The landmark Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in the wake of the economic crisis of 2008, required that the Securities and Exchange Commission conduct a study on the effectiveness of the existing standards of care for financial professionals. The study covers CPAs who provide investment advice and personal financial planning services to their individual clients (download the free CPA’s Guide to Investment Advisory Business Models to determine if you have a registration requirement). Currently, broker-dealers and investment advisers operate under different standards of care.

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We’re Two Years Old!

Two-cakeAICPA Insights® is celebrating its two year anniversary today! Now that we’re two years old, you can expect us to ask “why?” a lot more, refer to our imaginary friends frequently and throw a temper tantrum or two.

Joking aside, it has been an amazing and wonderful journey together. By focusing on news, trends and innovations important to the CPA profession, we’ve reached into 211 countries/territories, received more than 1,000,000 page views and attracted more than 600,000 individual visitors since our birth. Our more than 25 different highly qualified and diverse bloggers will continue providing you with the valuable, thought-provoking information you’ve come to expect from this blog. We’d like to say thank you for your participation and engaging with your colleagues and subject matter experts. Here are some of the top blog posts over the past two years:

You are the reason the blog has become an essential resource. Please take a few minutes to fill out this short survey about your preferences so we can continue to meet your needs.

Thank you again for your readership! 

Two cake image via Shutterstock

Will The Research Tax Credit Be Extended Permanently?

Stop-go-switchThe research tax credit has been around since 1981.  The credit is generally available if you incur research and development expenditures for qualified research that are technology based and intended for the development of new or improved processes, products, techniques, or formulas (among other requirements).

Do you know how many times the credit has expired and been extended since it was enacted back in 1981? The answer is at least eight expirations and 15 extensions.  The credit expired as recently as the end of 2012 but was extended through 2013 with the American Taxpayer Relief Act of 2012.  If you answered that question correctly, I applaud you for keeping up with the changes.  I don’t know about you, but I am getting tired of looking up to see when the credit will be expired.

If you are tired of never-ending expirations and extensions, I have some good news to report. 

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The Moans and Groans of Student Loans

When I graduated from college I thought I had all my finances under control. Sure I had some student loan debt, but I had been able to get through four years with only the equivalent of one year’s worth of expenses and tuition in debt; compared to those with hundreds of thousands of dollars in student loans, I felt pretty good. Then I entered the “real world” and everything changed. I’ve been out of school four years now, paying the optimal monthly payment on my loans every month, and I’ve barely made a dent. Student-loan-debt-2

As a student applying for loans, I assumed that as long as I made my monthly payments I would see the number go down, plain and simple. I figured that those high school teachers I had that were still paying down their loans in their 40s must have put off payments or took out enormous loans; why else would it take that long? As the reality of the situation sunk in, and I realized the impact of this magical “interest rate,” my student loan debt suddenly felt much heavier. And I’m not alone. According to a recent survey conducted on behalf of the AICPA by Harris Interactive, only 39% of respondents fully understood the burden student loan debt would have on the future, and a whopping 75% have made a personal or financial sacrifice because of monthly student loan payments, like postponing getting married, having children, buying a house and saving for retirement.

This spring I proudly watched my little brother graduate from college, but as I looked out at the sea of graduates, my mind couldn’t help but think of the immense amount of student debt that lay before many of them. Lucky for my brother, working at the AICPA and with our members has given me access to a treasure-trove of tips and information for managing and paying down student loan debt. Here are a few basics that I passed along to him from 360 Degrees of Financial Literacy.

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Social Media: Time Sink or Productivity Booster?

During a recent live chat about social media on the AICPA Facebook page, we asked participants, “Do you think social media is a time sink?” 50 percent said, “No,” and the other 50 weren’t so sure.

Time Sink graph

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IT Security Key Concern for CPAs and Their Clients

IT-securitySecuring the IT environment is a key issue in today's business world as organizations attempt to manage the risks in cloud computing, the use of mobile devices and defending against cyber-attacks. The importance of security is becoming more apparent each day. Earlier this year, Yahoo Japan experienced an IT security breach in which the user names of 22 million people were stolen. Back in 2010, Google reported that it was the victim of a Chinese cyber-attack; a similar attack is believed to have been launched against the U.S. government. But it’s not just big businesses and governments that have to fend off cyber-attacks; small businesses experience the same problems. Securing the IT environment is clearly a universal issue and can be a constant challenge when it comes to identifying threats.

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Gaining a Professional Edge with AICPA Membership Benefits

First-wanted-to-be-a-cpaI take great pride in being a CPA, and I know you do too. Earning the credential is something that gives us tremendous confidence and opportunities in our professional lives. The self-assurance comes from having passed the rigorous CPA exam and maintaining lifelong learning. The endless possibilities stem from our experience, expertise and skills that are highly regarded and necessary in any organization.

Of course, I am able to stay current and knowledgeable about both professional and technical issues through my membership in the AICPA. As fellow members, you know the Institute gives us a professional edge by providing 24/7 access to trusted information and reliable tools. In an increasingly complicated and competitive business world, it’s good to know that I can turn to the AICPA to tap into the information I need when and where I need it.

In addition to technical information, I rely on many other member benefits that make my work more efficient or more profitable. They also may save my firm, my family or me money and some members find the discounts more than pay for membership. Below are some of the member benefits I’ve used:

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