August 2011


Whether your financial practice is in the public sector, industry, government, education, or somewhere else entirely, one of your to-do list essentials is keeping up with the latest accounting and auditing rule changes.

CPE Link instructor Russ Madray points out that monthly A&A updates mean not only following new number-crunching techniques, but also reviewing the latest in areas such as ethics and client confidentiality.

Madray is president of The Madray Group, an author, lecturer and adjunct professor at Clemson University. He says that every month there are new accounting issues, new audit issues, new compilation and review issues — and it’s never exactly the same mix.

For example, in late summer SSARS 19 revised reporting requirements for a review engagement to provide more transparency.

“When you review financial statements for a client,” he says, “Identify the financial statements reviewed in the opening paragraph, describe management’s responsibility for the financial statements in a second paragraph, describe the accountant’s responsibility in a third paragraph, and describe the results of the engagement in the fourth paragraph.”

Madray says that earlier standards “did not provide a framework for the level of assurance you were seeking to obtain. As a result, some review engagements were performed by blindly using an illustrative checklist rather than applying professional judgment to tailor the nature and extent of review procedures to the client’s situation.”

Are the majority of financial statements you prepare based on GAAP? Or International Financial Reporting Standards or Other Comprehensive Basis of Accounting? Whatever you use, there are various fine points of each month’s changes that you need to know.

A proposed financial interest change, for example, provides new guidance on evaluating potential threats to integrity and objectivity and applying appropriate safeguards when necessary.

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Gearing up for Fall? Now is the perfect time to sit back, take a deep breath, and re-evaluate your tax business and how it’s performing for you.

CPE Link instructor Dominique Molina points out, “They say an apple a day keeps the doctor away,” and adds that a critical reassessment of the health of your tax business is just the apple you need for good financial health.

Molina points out just a few of the key questions practitioners should ask themselves:
• Do you know the value of a client?
• Do you have a dashboard to stay in touch with your business from anywhere?
• Have you created an individual, tailor-made business model?

Molina, co-founder and president of the American Institute of Certified Tax Coaches and an author and frequent lecturer, also urges practitioners to look below the surface at the “happiness factor” of their business.

That factor, she says, is made up of a range of variables that include “relationships, meaningful and important work, progress toward goals, and connecting to something larger than yourself.”

In the more nuts and bolts area of running a successful and satisfying business, Molina says practitioners should consider whether they “offer real value” and also whether the values of their customers have changed over time.

She urges practitioners to be more eclectic, broaden their scope and offer an array of services so that they serve varying needs of their clients.

And she says that to keep your financial house in order, make sure you always have a clear view of which of your services and products are the most popular.

Summer is coming to an end. Time to shop for school supplies, exchange your flip-flops for boots, and make sure you’re on top of the latest tax rules and regulations.

CPE Link instructor Annette Nellen is a CPA, attorney, and a professor in — and director of — the Masters of Science in Taxation program at San Jose State University. Nellen says quarterly updates are crucial to keep practitioners up to date about the latest developments that affect their practice and their clients.

Nellen’s focus is on key guidance from legislatures, tax agencies and the courts. She teaches graduate-level tax courses on tax research, property transactions, tax considerations for high-tech companies, tax policy and tax accounting methods.

“The world is changing, yet tax systems have been slow to change,” Nellen says. “This can hinder economic progress, lead to a loss in tax revenue and frustrate taxpayers.”

For example, she pointed out in a recent op-ed piece in the San Jose Mercury News, that even with a sales tax rate that dropped July 1 in California the state’s sales tax remains the highest in the nation. She calls it “a relic of the early 20th century.”

Nellen advocates for the base being changed to reflect purchases that are made today, rather than ones made when the tax was created in 1933. Back then, she points out, primarily tangible personal property was consumed. Today consumption of services, digital goods and entertainment outweigh personal property.

Second, she says, business exemptions should reflect the “reality of greater interstate competition” that is part of today’s society.

Nellen in a recent blog post says that applying principles of good tax policy to the overall system would likely “lead to reform or even elimination of some tax expenditures (of which there are about 250 in the tax law). Tax system modernization would consider how we live and do business today and what are appropriate tax rules for taxing income and consumption AND how administrative processes can be modernized to make better use of today’s technology.”

If your experience with Facebook is limited to viewing pictures of your co-worker’s cats and snooping into your son’s party plans, you’re missing out on a major professional tool.

So says CPE Link instructor Garrett Wasny, a web productivity consultant who advises financial professionals on Internet discovery and social media.

“With so much of our professional and personal lives spent online,” Wasny says, “this knowledge is beyond relevant. It is the absolute core of how we gather information, make decisions and live our lives in today’s digital age.”

In fact, Wasny says, a thorough understanding of social media such as Facebook and micro-blogging site Twitter can be used to build your practice, network and career.

Facebook counts more than half the U.S. population among its users, and Wasny says there’s a lot to consider: How to register and control privacy, how accounting organizations use its services across the globe, and how to leverage its tools to boost online productivity, workflow, communication and collaboration.

Twitter is a free micro-blogging service that allows users to send and receive “tweets” — text-based posts of up to 140 characters. Those tweets can seem like the height of self-involvement (@kittykat Im goin to make that soup u talked about #whatieatfordinner).

However, Wasny points out that since its rollout in 2006, Twitter “has been embraced by everyone from Senator John McCain to Britney Spears and grabbed headlines all over the world.”

But with financial professionals “already overwhelmed with e-mails, overloaded with websites, and swamped with Facebook friends, do they really need one more Internet service in their professional and personal lives?” Wasny says the service can be used for business research, network building, marketing, recruitment, reputation management, idea sharing, regulation monitoring and much more.

Turns out social media isn’t just about how much beer your kid drank last night and what kittykat is having for dinner.

Considering the massive amounts of data businesses generate minute by minute – not to mention the urgency to go “green” for the sake of an increasingly fragile planet – the idea of “less paper” technologies become very attractive.

CPE Link instructor Roman Kepczyk says the digital realm provides practical ways to decrease an administrative department’s paper pile while upping its efficiency and security.

For example, most firms have adopted digital paystub delivery, but may be more hesitant to switch from integrating expense reimbursement with payroll. However, by doing so a firm can not only cut down on the paper it uses, but also cut down on bank transaction fees – a double win. And time can be saved that was formerly used schlepping back and forth to the bank by using remote check scan for deposits.

Kepczyk also suggests having personnel enter all expenses each day into Practice Management when they enter their time, rather than using separate Excel-based expense reports.

In teaching firms digital best practices, Kepczyk points to an “explosion of data and information” that can be handled by a corresponding expansion of connection options. Therefore, he stresses, system access and resiliency are an absolute must, as is reliable security.

Consider having firm owners log into a secure portal to read financial reports, rather than distributing them as PDFs or in paper format. One benefit to this practice, Kepczyk says, is that the digital controls triggered will leave an audit trial that shows exactly who viewed what, when.

And as a general rule, he says, everyone who works out of the office at least once per day and does not have home remote access to firm applications should have a a laptop as their only machine. He points to a study that shows 35 percent of firms utilize laptops for owners/managers as their only machine.

Kepczyk, who is director of consulting for Xcentric, works with accounting firms to hone their internal production processes. It’s a tough economy, he points out, and the time is right to focus on “improving your firm’s production processes and educating your personnel on best practices for this turnaround.”

The Affordable Care Act crossed another hurdle this month when an appeals court denied a challenge from a doctor and one of his patients, saying they lacked standing.

While the decision certainly was not the first victory for the Act, Wednesday’s ruling by the U.S. Court of Appeals for the Third Circuit marked the first time that a related case was completely dismissed.

It’s a brave — and confusing — new world, and the impact of the political debate on individuals and on client planning will go on and on.

CPE Link instructor William Murphy is very aware of this. He points out that CPAs need to be on top of the new exclusions and restrictions that will affect the insurance and health-care industries, and provisions are taking effect in 2011 through 2014 — and beyond.

Paying for health care “will change drastically in the future,” Murphy points out, and it will most definitely “impact the client’s bottom line.”

Murphy is an expert in tax consulting and financial planning who works with corporations, news and publishing organizations, and professional practices in Indiana. He’s well equipped to talk about the legal ramifications of the Act, having appeared as an expert witness in court and as a lecturer on valuation and tax issues for professional groups across the country.

Murphy — who is also a contributing expert to FOX News, CNBC and other media — warns that decisions will have to be made well in advance of the key implementation year of 2014.

In short, there’s not a moment to lose in helping clients plan for the changes ahead.

In a seminar held by CPE Link instructor Larry Perry, a CPA firm partner shared an eye-opening story: Invited to submit a proposal for an audit of a medium-sized nonprofit, he arranged a meeting with the executive director. But during his meeting, something just didn’t feel right, the partner recalled.

“Call it intuition, the auditor’s sixth sense or psychic ability — the partner’s fraud detector was working,” Perry said.

Wanting to explore his discomfort further, the CPA firm partner invited the exec to a round of golf. He watched as the man cheated — major, no-holds-barred cheating — and became more convinced that his fraud detector was operating correctly. Sure enough, a short while later news came to light that the man had embezzled thousands of dollars from his organization.

Perry points out that many frauds, large and small, have been missed because auditors are too busy performing procedures to be attuned to the people around them. “SAS No. 99 instructed engagement teams to hold brainstorming meetings to identify fraud risks,” Perry points out. “Sadly, many frauds have occurred and gone undetected in spite of these meetings.”

Why? Some believe that after the first year the meetings become routine and our fraud detectors are desensitized.

“I don’t know about you,” Perry says, “but I can’t shut mine off! At the fast-food store when the clerk doesn’t ring up the sale, at the toll booth when I’m not offered a receipt, when a CEO pays for personal lunches with a company credit card, when friends pad their expense accounts — and on and on.”

He believes that experience should teach auditors to be constantly alert, and their fraud detectors should be tuned to “on” at all times.

He adds, “If it looks like a duck, walks like a duck … you know.”