Why “Extension” is not a Four-Letter Word for Tax Season

Up until January, I worked in public accounting and remember all too well the feeling when the calendar flipped to March; it seemed like all I was hearing from my individual clients was that they still had not received their 1099s from their brokerage accounts. It seems every year the compression of when these 1099s are received and the deadline to file gets closer and closer. Not to mention the frustration of getting those amended 1099s right after the client’s tax return has been assembled. Talk about adding fuel to the fire!

There are strategies and processes you can implement to encourage your clients to bring in all of their tax return data (with the exception of the late 1099s) so that you will have everything ready to go and can quickly finish the return once the 1099 arrives. However, despite these well intended strategies, the reality is that it feels nearly impossible to move all the returns that have complicated, late arriving 1099s through the entire process before April 18^th (or April 19^th in the case of residents of Maine or Massachusetts).

Management Accounting for a Healthy Bottom Line

Natural Food is a Natural Fit for Shan Staka

Shan was brought up with respect for healthy food and living that influences him in his role as CFO of Western Foods, a gluten-free facility in Woodland, Calif. The company makes flour from rice and ancient grains like millet, sorghum and amaranth.  In this AICPA Insights profile, we look at what prepared Shan to guide the operations of a growing natural foods enterprise.

Tell me about Western Foods and your role there.
The enterprise started five years ago and grew so fast that we were maximizing our capacity by year three. So we put forth additional resources and equipment to increase the production level, which has led to incredible growth. I am planning, forecasting and implementing financials to get the best use of those investments in Western Foods.

ACA: Step Away from that Form 1095 ‘Til You Read This

“Never do today what you can as well do tomorrow” – Aaron Burr

This statement, sometimes written in the context of postponing an unpleasant task, was originally expressed by our country’s third vice-president to acknowledge that in certain circumstances, a premature action may be regrettable. Alexander Hamilton would agree.

The same can be said for reporting on the Affordable Care Act: CPAs may regret completing any related forms without first taking some precautions. We are in the business of helping our clients with a full range of accounting and tax needs, so offering services in this space seems to fall neatly into the area of tax compliance. This is a compliance matter, but the nature of the material required to prepare these information returns adds an additional level of complexity. CPAs who aid clients with the completion of these forms need to consider the applicability of privacy rules under the Health Insurance Portability and Accountability Act (HIPAA).

Advice from a CPA Client - How to Break the News That They Owe

Let’s just get this out of the way up front: I’m not a CPA. I’m a pictures-and-words kind of guy. Numbers never loved me. They were my bully in school. To this day, the sight of long columns of numbers causes me all manner of gastric discomfort. So when I started my own business and realized there would be bookkeeping involved, naturally I addressed the challenge by running to my CPA.

Now, I have to pause here a moment to say my CPA is the most patient guy in the world. A sample of things he said to me over the years:

“No, Adam, you can’t deduct Warcraft.”

“What do you mean you LOST the checkbook? Don’t you use Quicken? Wait—you DON’T TRACK EXPENSES???”

“No, a 1099. Not a W2. No, that’s a K1—no, not a K9, a K1. Look, just hand me the box of papers and I’ll figure it out. Go home.”

Update on Taxes and Terrorism: Why Clients’ Data Could Become Vulnerable

Since this article was initially published in December 2015, the FBI has attempted to compel Apple, Inc. to defeat its own encryption for the purposes of accessing the information on the iPhone of Syed Rizwan Farook, perpetrator of the mass shootings in San Bernardino in December of last year. Apple has thus far refused to obey a federal court order to provide access to the phone, based in part on a first-amendment argument that code-writing constitutes free speech. A federal court in California will hear arguments on March 22, but promises from both the Justice Department and Apple, Inc. to appeal any decision against their respective cases mean the dispute is unlikely to conclude at that time. The case is certain to have far-reaching implications for the nature of digital security both here in the United States and abroad.

Changes to Lease Accounting Have Been Announced. Are You Ready?

Regardless of the type of business that you are in, there is a good chance that you have been involved in a lease transaction. Whether you have rented space in an office building or leased vehicles or manufacturing equipment, you have most likely been exposed to lease accounting in one way or another.

While you may not have been required to recognize these leases on your company’s balance sheets in the past,  with the Financial Accounting Standards Board’s new leases standard, the accounting is about to change. In addition, you will want to pay close attention as the new standard applies to all type of entities— including public, private and not-for-profit organizations.

Under the new standard, lessees are required to recognize assets and liabilities arising from all leases, except for agreements that have a lease term of 12 months or less. Generally, lessor accounting will be similar to current GAAP; however, both lessor and lessee disclosures will change.

6 Ways Women CPAs Can Accelerate Their Careers

March is Women’s History Month, a worthwhile time to consider the many contributions that women have made to our country’s progress. In fact, this is also an interesting time in the history of women in the CPA profession. Given the retirement of the large Baby Boomer generation and the fierce competition for talent, it’s clear that the profession is evolving to create more opportunities and to attract and retain a more diverse range of professionals.

And that’s good news for women, because the accounting profession is a great place for us to be right now. The career opportunities for women are endless -- both in public practice and management accounting. How can you take advantage of these opportunities to find the success you’re seeking?

Here are a few tips for making the most of the options I believe are awaiting female CPAs today.

5 Cybersecurity Precautions for Small CPA Firms

With busy season off to another running start, it’s important to remember that cyber attackers are busy too. With readily monetizable information on hand that can be sold easily on the black market, your practice is an especially attractive target for attackers.

Frequent news reports of breaches at large organizations and government entities might lead you to believe you don’t stand a chance if targeted. Fortunately, this is not the case. The following basic precautions can significantly reduce your risk and mitigate damage if you experience a cybersecurity incident.

1. Locate, classify and separate information by risk level. The highest risk information for most firms is going to be financial account information such as bank routing and account numbers, credit and debit card numbers, and usernames and passwords for online account access. This information should be protected with a high level of security and stored separately from other client records. Because industry safeguards typically require names of authorized users, billing addresses, employer identification numbers and Social Security numbers to gain access to accounts, a system that stores information used to authenticate account numbers separately from the numbers themselves can mitigate losses should a security breach occur.

What’s a Hooraycation, and How Can I Go on One?

Getting Away from it All After Busy Season: Trips for Any Budget

As busy season finally draws to a close, your senses dulled by long nights staring at a monitor and routing through piles of disorganized receipts, you might understandably be thinking about taking a well-earned break. Recharging your batteries, getting acquainted once again with those people who share your house and enjoying a few days of relaxation mean different things to different people, but in the end it always comes down to budget. Here are three family-friendly vacation types you can plan today, designed for modest, moderate and extreme budgets.

From the Frontlines: Meet Kimberly Ellison-Taylor, CPA, CGMA

Welcome to the first post in a series focused on sharing the perspective of diverse CPAs

Full disclosure: All through my years in school, I was known as a teacher’s pet. Some kids may have been discouraged by this status, but it didn’t bother me. I had my heart set on a career—at the ripe old age of 8—and that was to become a CPA.

So I went out of my way to surround myself with educators — teachers, principals, librarians — that set high expectations for me and helped get me closer to that goal. Moreover, they returned the favor by setting high expectations for me. There was always a voice in my childhood saying, “This little girl has potential.”

Of course, having potential is just the beginning. Moving the needle to accomplishment takes hard work and the right people in your corner, a combination I’ve wholeheartedly embraced on my path to success.

Writing Off Expenses on a Martian Farm: The Trouble with Oscar-Nominated Clients

It’s Oscar season, and this year’s list of nominated films includes many characters you definitely wouldn’t want to meet in your reception area on a frantic Saturday morning. As busy season gets into full swing, here are some potential nightmare clients from current and past Oscar-nominated movies that you’ll be happy you don’t have to face in person.

Hugh Glass, “The Revenant.” The bearskin coat kind of says it all, doesn’t it? It’s certainly going to set this man apart from most of the usual clients. Glass is a fur trapper who’s left for dead and faces extraordinary hardships during a long, harrowing journey through the wilderness. At some point he wins a tough fight with a grizzly and uses its skin as a coat. Understandably, he’s not a big talker, so it will be hard to determine his long- and short-term financial goals. You also have to expect that much of his documentation for income and expenses is hard to locate.  

Mark Watney, “The Martian.” Talking about working with a client remotely! This takes virtual services to a new level. And while you may have wrestled with the complications of filing for U.S. expatriate or foreign clients before, when you deal with interplanetary tax situations you’re really breaking new ground. Another wrinkle: Where and how are you supposed to report information on income and expenses from Watney’s Martian farm?

Expert Advice on Not-for-Profit Board Service

The AICPA Not-for-Profit Section recently hosted a Facebook chat providing advice for those looking to join a board of directors. The event was an opportunity for the public to engage in a conversation with experts working with not-for-profits and serving on boards.

Two members of the AICPA Not-for-Profit Advisory Council were online to answer participants’ questions during the chat. Carolyn Mollen, CPA, is the Chief Financial Officer at Independent Sector, a leadership network for nonprofits, foundations and corporations. Brian Yacker, JD, CPA, is the Managing Partner of YH Advisors, a CPA firm focused solely on addressing the tax, legal, audit and accounting needs of all different types of charitable and other tax-exempt organizations.

Since the chat was such a success, we wanted to share a few of the top questions on AICPA Insights.

 

Question: What are the challenges faced by nonprofits today?

Carolyn: Too many to list! In all seriousness, non-profits face many of the same challenges as the private sector, including information security issues, changing technology, talent recruitment and retention, and general economic pressures. However, not-for-profits also must deal with challenges unique to the sector, such as a changing funding landscape and how to find effective ways to measure impact and evaluate performance.

 

Question: Is it standard for not-for-profits to expect board members to act as fundraisers? If so, would it be better to turn down a position as a fundraiser if you aren’t confident in your fundraising abilities?”

Carolyn: In my experience, asking board members to assist with fundraising is very common in organizations that rely on donations as a revenue source. The board has a fiduciary responsibility to ensure that the organization has adequate resources to serve its mission, and fundraising is often a key component to this. Before joining a board, it is always a good idea to ask about fundraising requirements and make sure that it is something you can commit to comfortably. From an organization’s perspective, I’d recommend evaluating fundraising requirements carefully to ensure that you are able to recruit the right balance of skills and backgrounds, however. While having a well-connected board focused on fundraising can be a great thing in terms of bringing in revenue, it can lead to problems if the board lacks diversity and skills in other areas.

 

Question: What has been the most rewarding aspect of being a not-for-profit board member for each of you?

Brian: For me, being able to play my part in the furthering of an organization’s charitable mission is most rewarding aspect to me.

Carolyn: Board service has been a way for me to connect with organizations and causes that I feel close to and feel like I'm able to add value. I've been drawn in particular to theater organizations because in my past life, I was a theater major and thought for a long time that would be my career. Board service has allowed me to take my professional skills and apply them to causes I care about.

 

Question: What is a conflict of interest and how do I know if I have one?

Brian: A conflict of interest exists when the personal or professional interests of a person affects his or her ability to be objective. In the board context, a conflict of interest arises when a board member (or anyone considered to be related to the board member) undertakes a transaction with the organization, even if the transaction involves the board member providing a discount for their services. Conflict transactions need to be highly scrutinized by the board before they are undertaken. Some conflicts may need to be reported on an organization’s IRS Form 990, the annual information return filed by most tax-exempt organizations, so it is important to have a conflict of interest policy. The AICPA Not-for-Profit Section has addressed the most common conflict-of-interest issues and crafted sample language for inclusion in a policy document you can download here.

The AICPA’s Not-for-Profit Section is a community that supports not-for-profit professionals and business advisors. For more information visit aicpa.org/NFP.

Sandi Matthews, CPA, Technical Manager, Not-for-Profit Content Development, American Institute of CPAs.

Board of Directors image courtesy of Shutterstock

Pumping Up the CPA Pipeline with AICPA Legacy Scholars Program

College can be very expensive – I’ve got reams of cancelled checks to my student loan provider to prove it - but it’s also the best way to increase one’s chances of economic mobility. A college degree is essential if you’re planning to earn a CPA license.

The AICPA has long been committed to ensuring that there is a strong supply of talented CPAs in the pipeline to help the profession continue to meet the needs of U.S. capital markets. One of the ways the AICPA does this is through our AICPA Legacy Scholars Program.

The program, established in 2011, awards recipients with a one-year scholarship. It uses on-campus service work to help them develop the soft skills, including leadership and communications, needed to thrive in the accounting profession. Scholarship recipients plan, promote and execute specific on-campus events each semester that promote the value of the profession to others. To date, more than 300 students have participated in the AICPA Legacy Scholars program

The AICPA Legacy Scholars program comprises four distinct awards:

AICPA/Accountemps Student Scholarship

AICPA Foundation Two-Year Transfer Scholarship

AICPA John L. Carey Scholarship

AICPA Scholarship for Minority Accounting Students

CPAs Well-Positioned to Help Manage Cybersecurity Risk

Cybersecurity is becoming a critical issue as consumers increasingly entrust their most confidential information – including Social Security numbers, tax identification numbers and financial information – to companies that store this data electronically. As companies look for third-party assessment and verification of their cybersecurity risk management program, CPAs are well-positioned to provide these services – and the more comprehensive definition of attest that many states have adopted ensures that only CPAs can provide cybersecurity attest services in accordance with the AICPA’s high standards.

Attest services are those services that are limited to licensed CPAs and can only be performed by licensees through CPA firms. They include audits, reviews of financial statements and examinations of prospective financial information.

Two Lies & One Truth about Personal Financial Planning

Friends and colleagues ask me all the time, “Why do you specialize in personal financial planning (PFP)?” That’s easy to answer, but let’s see if you can figure it out based on a game you’ve probably heard of: two truths and a lie, or in this case, two lies and one truth.

Lie #1: PFP is only about product sales and investments.

Clients are looking for more than tax advice and tax planning. Based on my experience of working with clients, as well as networking with leading CPAs who offer financial planning and those who hold the CPA-exclusive Personal Financial Specialist credential, what clients really want is integrated advice on all of their financial affairs. This includes tax, estate, retirement, investment and risk management/insurance planning.

Gaming for Change: How Technology is Changing Financial Literacy

With the financial landscape shifting seemingly every year, it comes as no surprise that consumer finance tools are also transforming and becoming more necessary. This is especially true when it comes to educating younger generations, and the AICPA’s Feed the Pig campaign knows this all too well.

Since the campaign’s launch in 2006, the promotion of our tools evolved from focusing on TV, radio spots and other traditional media to instead looking to the digital space. As much as this shift has followed advancements in technology, it has also tracked the developing needs of our audience. Young adults look to social media for socialization, news, advice, just about everything. Feed the Pig has taken our message and resources to where our target audience is already: Facebook, Twitter, Pinterest, Tumblr, and now Snapchat. Through these platforms, we can reach hundreds of thousands of people who are in need of personal finance tips.

As Estate Basis Deadline Looms, Executors’ To-Do List Spirals

Update: Since this blog post was published, the IRS extended the due date for Form 8971 basis reporting from Feb. 29 to March 31. For more informaiton, see Notice 2016-19.

Who thinks being an executor (or trustee) of an estate is a glorified and envied position? Have you always dreamed of being an executor and having that wonderful title – and I guess a few fees?  Have you ever served as an executor or trustee and wished to never be in that role again? 

In case you didn’t know it already, executors have many duties and responsibilities, including:

• Setting up a bank account for incoming funds and paying any ongoing bills;
• Maintaining property until it can be distributed or sold, and then distributing assets and disposing of other property;
• Dealing with the probate court – filing the will and an inventory of the estate’s assets with the probate court, and representing the estate in court; and
• Dealing with liabilities and taxes – providing notice to creditors, paying the estate’s debts and taxes, and, starting at the end of February, preparing and filing estate basis statements with the IRS and beneficiaries.

Young Love Birds: Take Heed of Old Marrieds on Valentine’s Day

How to Celebrate Love While Staying on Budget

This year, Americans will spend an estimated $17 billion on Valentine’s Day gifts for significant others, family members, and pets. (Don’t laugh—Americans spent more than $700 million on their pets last Valentine’s Day.) According to the National Retail Federation, the average person spends $142.31 on the day of love. Less likely to spend that much? Those married or coupled for more than five years. Whether they’ve lost that loving feeling or they’ve wised up about inflated prices on Valentine’s Day, young people can learn a thing or two from long marrieds and save a few bucks.

Absurd Tax Break Requests: Darth Vader and Other "Clients" Weigh In

‘Tis the season that tax practitioners must break it to clients that no, you can't write off that trip to the Bahamas as a medical expense (yes, we understand it reduced your stress), claim the Golden Retriever as a dependent or tell the IRS that Botox use is a legitimate business expense because it helps you sell more homes. To put this annual ritual of wishful thinking in perspective, perhaps it would help to consider what types of tax breaks some of our most famous characters in film, TV and literature would try to claim.

Below are excerpts from focus group interviews with these characters talking about the tax breaks to which they feel that they are entitled. It seems as if they didn't all get along, and maybe it had something to do with that good versus evil thing. Or maybe it was the "but my tax break makes more sense" philosophy that can infect anyone, even the good guys.

Focus Group 1

Facilitator: Thank you all for coming here today to share insights on how the tax code could be improved and made fairer for you. Our group includes Frank Underwood, from “House of Cards,” Sheldon Cooper, star of “Big Bang Theory”, Superman, and Cruella de Vil, of “101 Dalmatians” fame. President Underwood, we'll start with you:

Frank Underwood: Thank you, it's a pleasure to be here. I think with so many people needing help, let's eliminate any provisions that benefit people like Jackie Sharp. She's the Assistant House Minority Whip and married to a surgeon – now why would they need a tax break? You really need to take a look at what she's doing. And, I think, perhaps, I should get a deduction just for being me. Maybe even named after me.

Estate Planning for the 99 Percent

The CPA financial planner has a new challenge: the majority of our clients’ estates will not be subject to the federal estate tax when death occurs. If this is true, then how do we help them plan for the future, as well as convince them that planning is still important and necessary?

I call this the “new reality” in financial and estate planning. In 2015, the applicable exclusion from the federal gift and estate tax was $5.43 million, indexed annually for inflation, and the 2015 applicable exclusion from the generation-skipping transfer tax (GST) was also $5.43 million. These numbers are now adjusted to $5.45 million for 2016. Clients whose estates fall below this threshold make up 99 percent of the clients we work with in our practices.

However, we can no longer say, “I will plan your estate and save you taxes.” With estate tax savings almost a non-issue, we must adjust, motivating the client to focus on non-transfer tax and income tax aspects of planning that have a large impact on their lives.

What Do Super Bowl Commercials and CPA Marketing Have in Common?

I don’t know about you, but my favorite part of the Super Bowl isn’t the first kickoff or the half-time show, it’s the commercials. They are known as being some of the best, and definitely the most expensive, in the industry. In fact, thirty second spots for Super Bowl 50 have sold for as much as $5 million apiece. Companies spend months developing commercials that will capture the audience’s attention during the game and be remembered long after the last touchdown. Brand recognition is key. However, what good is it if the viewer has a good laugh but can’t remember the product being promoted? This year’s ads are rumored to feature the likes of Christopher Walken, Alec Baldwin and Amy Schumer. Given that the Super Bowl is the most watched television event each year, it is no wonder that companies like Amazon, Budweiser and Doritos return with commercials time and time again.

The Super Bowl advertising phenomenon got me thinking about CPA marketing. Although CPA firms do not often have $5 million to spend on a thirty second commercial, there are several techniques firms can implement to raise awareness of the services they provide. In order to learn more about CPA marketing efforts, I spoke with two experts: Kari Schott from Inovautus Consulting and Brian Swanson from FlashPoint Marketing. Below are some tips on how to enhance your firm’s branding and marketing.

Personalized messaging is key. Some of the best Super Bowl commercials leave the viewer feeling as if they are being spoken to directly. Research has found that communicating 1:1 is more effective than communicating 1 to many. For CPAs, this might mean creating ads that speak to a specific audience, such as those placed in an industry association publication, and having personalized messages designed exclusively for that audience.

Chinese New Year Brings Business Relationship Lessons: 12 Tips

Chinese New Year, sometimes known as Spring Festival, is a centuries-old celebration of the lunar New Year. Widely celebrated in China, the festival is the pinnacle event of the year, also honored across Asia, particularly in areas with large Chinese populations, including Macau, Taiwan, Singapore, Thailand, Cambodia, Indonesia and the Philippines. It is considered a major holiday in Chinese culture, and is a time for families to be together.

If you have clients or co-workers in China or of Chinese descent you may want to learn about do’s and don’ts during next week’s Chinese New Year, which begins officially Monday, Feb. 8 and lasts for two weeks. The holiday really kicks off on Sunday, with the traditional New Year’s dinner, which is thought to be the most important meal of the year.

Whether you have colleagues who celebrate Chinese New Year or not, this list of do’s and don’ts can help you have a luck-filled New Year.

4 Steps to Creating a Social Media Policy for Your Firm

One way to deepen existing client relationships and connect with more prospects is to use social media. While LinkedIn, Twitter, Facebook and other applications will help your practice evolve, social media also presents several compelling challenges, especially when it comes to compliance.

If your firm is planning to use social media, you’ll want to create and maintain a social media policy. Keep in mind that this policy is not meant to restrict activity for tweeting and posting, but instead to establish parameters to meet these challenges and satisfy compliance requirements.

Four Steps to Your Policy

Your social media policy should outline what outcome you hope to achieve from social media and how you will achieve it. Here are four areas to consider:

1. Vision. Your vision will detail how you and your team perceive social media, respond to engagement and think creatively for ongoing communications and initiatives. Consider it the extension of the culture of your business – the reason why you come to work and why clients stay with you.
2. Planning. Having conceptualized and defined how you want to use social media, your plan should identify the platforms you will participate in, such as a blog, Twitter, LinkedIn, Facebook and others. During this stage, you should also determine who will manage these platforms. Will it be comprised of internal staff, external parties or both
3. Purpose. Financial planners choose to use social media in different ways. How will you define your experience? Consider the following when determining how to engage:  

• Do you want to use social media as a customer service channel?
• Do you want to share educational tips, often delivered in client letters, conference calls and meetings, via social media?
• Are you interested in leveraging the business development nature of social media? If so, you might focus on expanding your network of connections on LinkedIn.
• Do you want to be known as a thought leader in your area of expertise? If so, developing credible content such as articles, videos and podcasts might be a good way to get your name out.

Certainly, it would sound natural to respond with, “I’d imagine we’d do all of those things at some point.” That is a safe assumption; however, in getting started, opting for a focused starting point helps you shape that voice and cultivate a rhythm to your use of social media.

4. Goals. By the time you are ready to set goals, your social media vision has taken on a clear shape for you and your team. Like that financial plan, you can now start to envision mile markers and longer term goals you would like to achieve. Don’t neglect to consider how you could measure your progress of these goals, ensuring you factor analytics into your strategy.

Final Checklist

Social media policy is the ticket to entry to the use of social media. Start there and you will be more prepared to move ahead. In the meantime, here are a few areas to address:

• When selecting a compliance solution for social media – think about ease of use. Choose a provider who can accommodate this with simplicity and meet your needs.
• Recognize that content that gets shared widely and publicly may fall into the advertising and marketing materials classification. Understand who regulates you – FINRA, SEC, states – and know how advertising content is treated.
• Keep in mind that testimonials are prohibited. We may not like it – and we know they are very valuable for word of mouth referrals, but when they are written, they are like ads. Just steer clear until the regulatory bodies change their minds.
• If in doubt about what part of social media is static content (blog posts, articles, profile backgrounds and bios) versus interactive (tweets, status updates), have your content compliance-reviewed before you use it.

And, speaking of compliance, you’ll want to get some very clear direction from your compliance provider for social media. Some are stricter than others, so check to make sure you are following the rules. And, above all, have fun!

PFP members and PFS credential holders can listen to a podcast on this topic. 

Blane Warrene, MobileGuard. Recognized as an industry leader in financial services marketing, compliance and technology, Blane has worked in progressive roles for broker dealers, investment advisors and asset managers. 

Social media strategy image courtesy of Shutterstock

IRS Service Levels: Don’t Give Me Excuses!

Honest disagreement is often a good sign of progress.

-Mahatma Gandhi

Abysmal service levels; I hear you, I really do. It’s been a long time since I’ve been in practice but those busy season scars are still with me. I half joke but the memories don’t go away completely.

So, another busy season and the prospects for easily – wait, reasonably – representing your clients with the IRS appear to be no better than they were last year, when I blogged several times about service issues. In May, for example, you may have read about the AICPA governing Council resolution directing the Institute to intercede on a long-term solution to the service crisis. We started those conversations but, frankly, the environment in Washington got worse. Hard to believe, but it did. In October, House Oversight and Government Reform Committee Chair Jason Chaffetz (R-UT) joined 18 members of the committee in introducing an impeachment resolution against IRS Commissioner John Koskinen. The resolution is pending before the House Judiciary Committee.

When to Conduct Audits Under PCAOB Standards and GAAS

Your client calls you up asking you to conduct the next audit of their financial statements in accordance with Public Company Accounting Oversight Board standards, however, the entity is not an issuer (as defined by the U.S. Securities and Exchange Commission), nor a broker or dealer registered with the SEC. The audit is not within the jurisdiction of the PCAOB. This seems like a strange request.  Perhaps the client is a clearing agency or futures commission merchant registered with the Commodity Futures Trading Commission, which requires that entities registered with it have an audit performed in accordance with PCAOB standards. Maybe the client has entered into a contractual agreement that requires an audit conducted under PCAOB standards. Or maybe, for whatever reason, the client just wants an audit conducted under PCAOB standards.

Unless the audit is within the jurisdiction of the PCAOB, you are required to conduct the audit in accordance with Generally Accepted Auditing Standards. You may also conduct the audit in accordance with PCAOB standards, but you cannot conduct that audit only in accordance with PCAOB standards.

Five Ways Finance Pros Can Use Data to Unlock Business Opportunities

More than 90 percent of finance professionals agree that finance has an essential role to play in helping their organizations benefit from data-related projects. However, organizations looking to use data to its full potential could face a steep learning curve.  In the CGMA report, From Insight to Impact – Unlocking Opportunities in Big Data, the AICPA and CIMA asked more than 2,000 finance professionals around the world about the role of finance in turning data into insights to maximize commercial opportunities. While 87 percent said big data and better analytics will change the way business is done over the next 10 years, 86 percent said their businesses are struggling to get valuable insight from data.

A few months back, I had the opportunity to listen in on a roundtable discussion with CEOs from some major multinationals about the need to make their organizations more data-centric—and the role of the CFO in this endeavor.

10 Apps to Help You Automate and Streamline Your Life This Busy Season

Busy season is fast approaching. As you prepare this year, consider downloading some time-saving apps that will help automate your life, and as a result, give you back valuable time. Technology has the power to make day-to-day tasks a little bit easier, so why not take advantage of all the following apps have to offer.

1. Amazon’s Subscribe & Save: Never worry about running out of paper towels, vitamins, shampoo or other household essentials again. Parents—same goes for items like diapers and baby food. With Amazon’s Subscribe & Save service, you can select how often you’d like these products delivered, and Amazon will schedule shipments automatically. Best of all, subscribers receive a discount of up to 15% and receive free shipping on these purchases.
2. Automatic Online Bill-Pay Services: Eliminate the stress of paying bills. We all know that time is precious, especially when you are working 60-hour, six-day weeks. Because of this, you may want to consider taking advantage of automatic online bill-pay services. Many banks, cable, phone, internet and electricity providers offer this service. By signing up, you ensure that you never miss a payment deadline. An easy choice for peace of mind.

4 Tips to Prevent Fraud at Faith-Based Organizations

Contributions - whether by cash, check, or online giving - are the lifeblood of faith-based organizations. Many do not realize how often these donations get into the wrong hands.

There are primarily two types of theft that occur in faith-based organizations –larceny and skimming. Larceny occurs after the money has been counted, deposited, and recorded in the books of the organization. Skimming occurs when donations never get logged in the books; that is, they go missing before ever being recorded. It is the counting and depositing process that opens the organization up to skimming, and that is where fraud can be most difficult to detect. 

Faith-based organizations need to take steps to ensure that contributions make it into the bank in the first place. 

7 Financial New Year’s Resolutions

At the start of each New Year, many people make resolutions and vow to stick to them. Some say that they will exercise more frequently or focus on dieting, but what about improving one’s finances? Team AICPA brainstormed some financial New Year’s resolutions to help you meet your 2016 financial goals:

1. Set an achievable budget for the year. Start by reviewing your expenses from last year. Were some of your targeted figures unrealistic? Are there areas where you can cut back? If you’ve never had a budget, now’s the time to make one.

2. Take a deep breath if your December credit card bill is higher than your monthly average. With all of the holiday shopping for family and friends, extravagant parties and meals at restaurants, a larger balance is typical. Remember to reflect on the enjoyment gained from these activities and take the time to plan your upcoming monthly budgets so that you are back on track for the rest of the year. If you really got yourself into an unfortunate financial situation, take time to assess how it happened and address the underlying issues that led you to overspend. Use the 360 Degrees of Financial Literacy credit card pay off calculator to figure out how best to get back on track.

Leveraging the AICPA | CIMA Competency and Learning Website for Your Development

 

The AICPA | CIMA Competency and Learning website has been a very valuable tool to me since its launch in February. It has helped me both build needed competencies on my team and strengthen my own “strategic skills” in communication and leadership.

I have worked at large firms and now a smaller organization, and based on my experience, I believe the website is beneficial to CPAs from any size and type of organization. It offers small firms a full range of technical and non-technical resources, many of which are free. Larger firms may find that the resources have depth that can complement their in-house learning materials; particularly when it comes to non-technical perspectives, such as developing emotional intelligence.

To help you better understand how to leverage the website, I want to share my favorite resources and how they have helped me.  All the resources mentioned below are free for AICPA members.

Building New Competencies for Your Finance Team

My company has approximately 75 employees. As Director of Accounting and Compliance, I function in many areas, from insurance and risk management to financial reporting and HR. I also assist with legal and marketing.

When we had personnel changes this past year, I turned to the AICPA | CIMA Competency and Learning website to find planning, forecasting and budgeting resources. Using these tools helped my team develop a common language and build new competencies quickly and efficiently. I shared many of the website's resources with a staff person who took over several key responsibilities, and it helped her build needed skills in a short period of time. 

Top 10 Tax Resources for the 2016 Tax Season

Have you “lost” that shiny new FitBit, depleted the family inventory of holiday goodies and now scrambled through the house trying to dig out Aunt Lucy’s famous fruitcake? Rather than investing $2,500 in a standing desk with a treadmill, it may be time to consider a new resolution!

A more practical choice may be to make a commitment that will yield positive results for the next few months. Commit to your staff, your clients, your tax practice and your professional goals during the upcoming tax season.  The AICPA wants to help you jumpstart that success by pointing out useful tools to ensure you flex your tax season muscles.

Scuba Diving and Risk Mitigation: One CFO’s Perspective

What do swimming with sharks and being a CFO in digital technology have in common? According to Rob Leff, CPA, CGMA, CFO of Fandango, both require risk management techniques. In this AICPA Insights Member Spotlight, we find out how Rob is using his management accounting skills to excel in a field that is changing everything.

Tell me about your day-to-day responsibilities.

My role is multi-faceted: It includes the traditional finance and accounting that most CFOs have and also responsibilities that wouldn’t necessarily fall under the official CFO role, such as mergers and acquisitions and business intelligence. Business intelligence includes business analytics and business intelligence reporting, which is data warehousing, database management and more. Fandango is a digital business and the digital space is constantly evolving and changing with new technologies and partners. Strategically, I partner with our president and executive team on the decisions of the organization. We work together on deciding where we’re going to take the company.

How is your role different from the typical CFO?

One of my goals has been to go beyond the job description and add value to the organization. I’m always evaluating the buy, rent, or build scenarios. If there’s an area of business that we want to expand into, I’ll conduct an analysis with the executive team: What would it take to build it ourselves? Or, are there companies we can acquire to accelerate the time to market? Or, could we “rent” [by building] a commercial relationship instead of buying it? I’m constantly evaluating opportunities to grow Fandango. With all of those functions, I'm able to leverage my experience and partner with the executive management team to drive the business forward.

Inspiring TV for Auditors: What We Can Learn from Blake Shelton and Kim Kardashian

As individuals and as a profession we continuously strive to enhance our value proposition and improve the quality of the audit. It’s hard work, and we all need to find time to relax and recharge. Sometimes, while unwinding, I discover unusual parallels between what is portrayed on the TV shows I admittedly watch and the issues facing the profession. I thought I’d share some of my favorites in hopes that you’ll find in them a useful--if not amusing--way to consider the challenges at hand.

1. The Voice of Learning and Competency

I never cease to be amazed by the talent on each season of NBC’s The Voice. As each season progresses, we see that it’s not enough to have a great voice. Contestants must learn from seasoned pros like Gwen Stefani and Blake Shelton to apply their talent to different types of songs in varying high-pressure situations.

We’ve recently seen a substantial increase in the number of young people graduating with degrees in accounting. Many are opting for careers in auditing. These young professionals are extremely talented, but they need great mentors to harness that talent and teach them the secrets and tricks that seasoned auditors employ, like skepticism and professional judgment.

Like the show’s finalists, practitioners learn from their mentors that the audit is a high value service that helps maintain confidence in financial reporting. At the AICPA, we recognize that the new generation of CPAs learns and works differently--and their expectations can be very different from prior generations. Our Future of Learning initiative is addressing these needs by developing new ways to convert talent into professional competence, both prior to licensure and in ongoing practice.

A Lesson from 2015: Help Clients Avoid Unpleasant ACA Surprises

We made it through last year’s tax season thinking Affordable Care Act (ACA) matters were over with until the 2016 filing season, but we were wrong. Individuals who did not indicate on their Form 1040s that they had received the Advanced Premium Tax Credit were surprised to get an IRS notice at the end of 2015 requiring repayment of the credit.

The IRS identified many cases where taxpayers took the credit, but then did not indicate that they did so on their Form 1040. Tax preparers, unaware of the advance credit, calculated it again on the 1040, so taxpayers were effectively paid twice. The IRS caught these double dips, assessed the difference, and included the 20% accuracy penalty (Section 6662) in addition to repayment of the advanced premium tax credit and interest.

It’s Just Hitting and Catching (and 1040s and W2s and 1099s and 1095s)

Baseball offseason: the time roughly between Halloween and Valentine’s Day when Major League Baseball teams take a break from hitting, catching and fielding. While there may be not peanuts, hot dogs, cracker jacks, or $12 beers being peddled at baseball stadiums across North America, it does not mean the teams are idle. In fact, in the days lead up to February 18, 2016 (when pitchers and catchers report!), teams are busy preparing for the coming season, the same way tax professionals are gearing up for the impending busy season.

This work behind the scenes is what ultimately lays the groundwork for a successful tax (or baseball) season. Without adequate preparation, both baseball and accounting organizations would find themselves struggling mightily to keep up with the demands of their professions.

Three Reasons to Learn More about Audit Analytics

In every audit, there are many transactions and accounts that need to be checked, whether they appear especially risky or not. And whether you’re an internal or external auditor, data analytics will help you identify and analyze those audit areas with the same effectiveness as methods auditors have used for decades—maybe even greater effectiveness. Sounds pretty good, right?

So what are the drawbacks preventing further integration of data analytics into the financial statement audit? Most significantly, there’s a need for additional guidance on how to harness the power of audit analytics. Additionally, the profession would benefit from independent research to support the effectiveness of new audit analytics in conducting an audit and meeting audit objectives.

The recently announced Rutgers AICPA Data Analytics Research (RADAR) Initiative seeks to study and find evidence of the effectiveness of automated techniques and data analytics applied in the context of the financial statement audit. This collaborative research effort, which will be hosted by Rutgers University, will explore the application of foundational approaches that can be applied by audit firms of all sizes.

5 Tips for Developing a Successful Enterprise Risk Management Program

Imagine being able to use real time data and analytical tools to help identify and track potential risks that could impact your organization. At IBM, analytics is the next big frontier of risk management, as technology sophistication, coupled with an abundance of data, continues to provide insight into actions.

Effective enterprise risk management programs continually capture, evaluate, analyze and respond to risks arising from changing internal operations such as systems failure or turnover; shifting external markets resulting from political turmoil, a recession or natural disasters; or changing regulations. Risk management requires an organization to align its assets, people, activities and goals, thereby leading to good organizational governance.

IBM has been weaving solid risk management practices into the fabric of our business for nearly a decade. Our program focuses on creating business value and competitive advantage through enhanced risk identification. We embed risk management into the day-to-day operations of our business units and instill a culture that promotes accountability and provides processes and mechanisms for reporting risks.

Is your organization looking to enhance its enterprise risk management program? Following is some advice to help you get started. 

Dreaming of the Jackpot: 8 Tips to Help You Manage Your Money If You Win Big

Your own private island. A villa in Tuscany. A sprawling mansion in Malibu. A ticket around the world. Oh, the things you could do with $1.3 billion in lottery winnings. But before you get carried away, consider those past lottery winners who mismanaged vast fortunes, losing everything. Don’t fall victim to the same fate. 

Live life as usual, until you develop a plan for how you will handle your winnings. You’re excited. Who wouldn’t be? But it would not be financially wise to buy a house, boat or luxury car the day after winning big. You will want to consult both a CPA and a tax attorney who have experience dealing with unexpected windfalls. These professionals can help you determine if you should take the lump-sum or annuity payment option, and help you develop a plan for how to use your new-found fortune.

How much money will you actually walk away with? Just because the jackpot is now advertised as about $1.3 billion does not mean that is the amount that will wind up in your bank account. Winnings of more than $5,000 are subject to a 25% federal withholding tax. The actual federal tax rate is likely to be higher — possibly as much as 39.6%, depending upon other factors such as income, deductions and residence. Additionally, depending upon where you live, your winnings may be subject to state and local income taxes. Of course, if the jackpot sum is enormous, this likely will not make a huge difference. However, it is important to keep in mind.

In the News: CPAs Pessimistic on Economy in 2016

With the stock market dropping sharply to begin the new year, Americans are increasingly focused on the health of the economy. CPAs who hold leadership positions in U.S. companies, such as CEOs, CFOs and controllers, are pessimistic on the U.S. economy for the coming year. That’s according to the AICPA’s 4^th quarter Economic Outlook Survey.

The survey found that overall expectations for revenue growth had declined to 2.9 percent, down from 3.3 percent in the previous quarter and 4.7 percent in the fourth quarter of 2014. In addition, profit growth expectations slid from 2.6 percent in the third quarter of 2015 to 2 percent last quarter.

Life Planning: The Conversation of a Lifetime

It’s just not enough to give your clients the tools they need for long-term financial planning; to really connect with them, it is good practice to humanize your approach by integrating life goals with financial goals. This is “Life Planning.”

When I started my practice, about 50% of my clients were psychologists, psychiatrists and other mental health professionals. After I began attending their workshops and learned more about human psychology, I started thinking about my own business relationships. To truly be a benefit to my clients, I needed to find a way to develop an authentic relationship they would value.

10 Steps to Finding a Career Development Mentor

Quick--what comes to mind when you hear the word “mentor”? Did you envision a well-connected senior leader who is older, wiser and much more experienced than you are? While it’s true that most mentors once fit that description, the current thinking around mentors and mentorship has expanded. Today, we recognize that age, experience or a person’s profession doesn’t necessarily mean they will be an effective mentor. The main requirement is that a mentor is someone you highly respect, who can offer feedback, and is interested in helping you develop professionally and holistically.

Professional development experts have been reassessing other aspects of mentorship as well, including the notion of time. In the past, mentoring relationships were often expected to happen over the course of years, or even without any clear end date. Today, however, professional development experts advocate for mentoring relationships that are for a specific timeframe--ideally, six to 12 months.  

New Version of Bank On It Teaches Financial Literacy Skills

CPAs have an innate calling to educate the public about their finances. The need for this education has never been greater. A recent online survey conducted by Harris Poll on behalf of the AICPA showed that a staggering 75% of college students acknowledged that their student loan debt would require some sacrifices in their lives after graduation. So how can we help students develop a better understanding of their financial situations prior to attending college, while also setting them on a path to financial success?

Tips to Make Your Not-for-Profit Clients’ Next Audit a Success

Times have changed significantly from when I started performing audits over 20 years ago. U.S. Generally Accepted Auditing Standards have evolved, and now emphasize the auditee’s responsibility for financial reporting. Today, not-for-profits are in charge of identifying and recording the adjustments necessary to close their books, gathering the financial statements and designing control systems needed to prevent, detect and correct errors that may occur. As a result, the cost and efficiency of the audit is directly impacted by how well your clients prepare. Here are some best practice tips to help them prepare:

Create a detailed timeline.  It is a good idea to meet with clients at least three months prior to the start of the audit to identify key dates and milestones, such as when the client-prepared information will be completed, when the audit will start, when draft financial statements will be provided to management, and when meetings with the audit or finance committee and board of directors will take place. If your firm is also providing tax services, the timeline should include the expected completion date of the client-prepared tax schedules, as well as the delivery date for the IRS Form 990. All parties should agree to, and receive a copy of the schedule containing these items. This will define each party’s responsibility in meeting the final deadline. 

Happy New Year and a Look Back at the Top 10 Posts of 2015

All of us at AICPA Insights wish you a joyous holiday season and a Happy New Year. This will be our final post for 2015, but we’ll be back with more exciting content the first week of January. In the meantime, in case you missed them, here’s a look back at the top 10 posts of 2015:

3 Initiatives to Improve Employee Engagement in Your Firm

What if the concept of employee turnover was foreign to your firm? What if the Monday morning faces of each of your staff shone like those of children lined up for entrance to Disneyland? What if your firm had so many clients eager for your help that your biggest problem was managing new business?

The best firms have already figured out that motivated and passionate employees equals success. The real challenge lies in retaining those employees and keeping them engaged and inspired so they aren’t tempted to look for work elsewhere. Here are three initiatives to help your firm enhance employee engagement and inspire long-lasting dedication.

1.    Get Employees Involved

An engaged employee is one who has a strong connection with their firm. That connection can be developed when the firm’s vision, mission, and core values are created and lived out through the involvement of all employees – not just trickled down from higher-ups. To help increase employee involvement, establish an engagement system that will benefit everyone in the firm, such as:

Tangible Property Wins Demonstrate AICPA’s Advocacy for Taxpayers

The AICPA continually advocates on tax matters to improve tax policy and administration for tax practitioners and taxpayers alike. Though the issues and challenges we grapple with could be difficult, our goals are simple:  transparency, simplicity and certainty.  Taxpayers and practitioners have scored a major victory for certainty and simplicity as AICPA-supported provisions in legislation will soon become law.  Taxpayers will have to deal with fewer late and amended Forms 1099 that have $100 of income or less impact, fewer identity theft situations due to Forms W-2 will soon have truncated Social Security numbers, and clients will be able to rely on several permanent rather than temporary tax credits.

We also achieved more simplicity when the small business tax community received two big wins to make the “repair regs” more taxpayer friendly.

Member Profile: Rebecca McNeil, CPA, CGMA

Rebecca McNeil, CPA, CGMA is the chief financial officer of The Arts Finance Cohort, a collaboration between five Pittsburgh-based arts organizations including a theater company, a performing arts venue, a community arts space and ceramic studio, a glass studio and a crafts center. As a shared CFO, she provides strategic and operational financial expertise the groups could not afford individually. Her task is to move the organizations beyond year-to-year, break-even operations to long-term sustainability, as she helps each create a capitalization plan. McNeil is also a classically trained clarinet player. In this AICPA Insights Member Spotlight, we find out how Rebecca is using her management accounting skills to help an industry that she is passionate about: the arts.

1. Tell me about your day-to-day responsibilities.

There’s a wide variety of work. I might review one group’s [IRS] 990 and make corrections to the form, perform current-year projections for another group and work on policies and procedures for another. For some organizations, I'm providing higher-level oversight and strategic planning advice and for others I'm offering more upper-level staff support by updating their record-keeping. I have to evaluate with each organization based on the staff they have in place.

2. What are your direct areas of responsibility?

My job is to not just show the numbers, but to tell the story of the organization through the numbers. I’ve redrafted nearly every organization’s financial statements at this point. I’m trying to get more clarity on the numbers and present them in a way that makes sense.

There’s also been some education for the organizations on their financial statements so they can understand where their focus should be. I’m trying to help them manage their cash flow while understanding how much fundraising they need to do. We’re trying to get realistic, achievable budgets, and in some cases that requires resetting the budget process.

4 Benefits of Finding the Right Niche

It’s flu season -- conveniently coinciding with busy season. It’s time to stock up on cough syrup and analgesics to ward off the aches and discomfort of the flu. A visit to your family doctor might also be in order, if you can get an appointment. But what do you do if that ringing in your stuffy ear is a sign of hearing loss and not some flu-induced infection? What if those sniffles just won’t clear up on account of that broken nose you suffered last spring? Well, that’s when you visit the ENT-- the Ear, Nose and Throat specialist. She sees patients who need more focused care. She’s managing a niche practice.

For many CPAs, setting themselves apart in a competitive market is a critical goal. The popularity of practice areas such as personal financial planning, IT specialization, fraud and forensic accounting, business valuation, tax and assurance services demonstrates the value that finding the right niche can offer. Here are a few of the many benefits that help explain why more CPAs are choosing to specialize.

Taxes and Terrorism: Why Data Could Become Vulnerable

The world watched and listened in horror recently as reports of terrorism in Paris and San Bernardino, Calif., dominated the airwaves. In what is becoming a regrettably familiar scene, countries around the world joined the victims in mourning. But as the days wore on, attention increasingly turned to the covert, encrypted digital communications of the perpetrators. The government has begun questioning the wisdom of unbreakable encryption as a result. It might all seem a million miles from the concerns of tax practitioners. But is it?

In the wake of potential terrorist attacks, government officials are again addressing the complexities of obtaining intelligence data in an encrypted world. John Brennan, Director of the CIA, recently outlined these complexities in a talk at the Center for Strategic and International Studies in Washington:

AICPA President & CEO Highlights Profession’s Successes and Future

AICPA President and CEO Barry Melancon, CPA, CGMA, reflects on the accounting profession’s successes in 2015 and highlights how the profession will continue to adapt to today’s changing environment. Citing initiatives to drive quality; support CPAs’ services in accounting, auditing and tax; and boost the CPA pipeline, Melancon sees a strong profession shaping its opportunities for future success.

1) What were the profession’s most significant accomplishments this year?

The profession enjoyed another tremendous year of achievements on many important fronts. I think the growth and retention of our membership is the best evidence of that, and now we are the professional home for more than 412,000 members. Our membership is broad in scope, with members working in many different types of environments. Whether in public accounting, management accounting, government, education or another area, they all see the value in our efforts to support the CPA reputation and market position, help firms and organizations drive success and advance the profession for the future.