Hiring in PA? Great! (but avoid this common compliance issue)

by Kevin McGarry 29. June 2012 09:23
  In 1997, the Commonwealth of Pennsylvania enacted Act 58, requiring all employers to report information on the employees they hired.  This legislation was created to assist The Commonwealth to locate parents who were not making their child support payments.  This system also assisted The Commonwealth to detect unemployment and workers compensation fraud overpayments.  Most employers have not continued to follow this mandate, as the quarterly unemployment tax reporting appeared to be addressing this issue.  However, The Commonwealth is actively notifying employers that this new hire reporting requirement is still required by law. Our advice to employers: when a new employee is hired, comply with this law.  A new hire form can be obtained through the Commonwealth Workforce Development System website. This is a standard form that employers need to complete and submit on behalf of a new employee, and include a copy in personnel files as you do with the W-4, I-9 and Local Certificate of Residency. You can manually prepare these forms and fax to 866-748-4473 or mail to: Commonwealth of PA, New Hire Reporting Program, P.O. Box 69400, Harrisburg, PA  17106-9400. You can also submit them via web-upload upon registering with PA CareerLink.  If you have any questions or you would like to discuss this, please give Urish Popeck a call.  
Categories: Advisory

Thoughts on PCAOB Oversight

by Hiller Hardie 1. February 2012 11:21
  My recent blog discussed the trend of the last several years of declining revisions of financial statements due to accounting errors or manipulations. As a member of the Accounting profession, I follow the activities of the PCAOB with interest (and often skepticism). Of particular relevance is their current slate of projects including mandatory auditor rotation, expanded audit reports and expanded roles for auditors beyond the traditional financial statements. As I focus on this, in view of the aforementioned decline in restatements, I tend to believe that we are going too far.   However, the unfolding story of Olympus and the depth and duration of the fraud perpetrated by their management paints a different picture.  The announcement that the PCAOB’s recent inspections of Big 4 firms have revealed numerous flaws in their audits is also pertinent   I am often tempted to think that the PCAOB should eventually go in to “maintenance” mode. In other words, they should allow the system to run as designed. Their actions should commence when audit failures transpire. Changes and remedies they put in place should be based on the findings from the investigations of such failures. That may ultimately prove to be naïve but at any rate now is not the time.
Categories: Advisory

Watch for New Revenue Recognition Standard

by Ken Urish 27. December 2011 15:37
  As we witnessed recently in the buildup to Groupon’s IPO, the manner that revenue is recognized is a critical accounting issue. In Groupon’s case, they were forced to restate their financial statements. Revenue recognition has been the cause of audit failures and the focus of corporate abuse and fraud for many years. However, new standards, currently expected to be issued in 2012, are intended to improve the financial reporting of revenues.  Following is an update on the status of the proposed new standards. In November 2011, the Financial Accounting Standards Board (FASB) updated a measure on the financial reporting requirements for recognizing revenue from contracts with customers. The FASB, along with the International Accounting Standards Board (IASB), have made a number of changes to a joint exposure draft, first issued in June, 2010.  According to a press release, both boards have “further refined their original proposals” following review of nearly 1,000 comment letters. The boards are reviewing the proposals because of “the importance of the financial reporting of revenue to all entities and the boards’ desire to avoid unintended consequences arising from the final standard.”  The boards agree that “an entity would recognize revenue from contracts with customers when it transfers promised goods or services to the customer.”  In addition, in its 221-page proposal, the boards added guidance on how to determine when a good or service is transferred over time; simplified the proposals on warranties; simplified how an entity determines a transaction price (including collectability, time value of money and variable consideration); modified the scope of the onerous test to apply to long-term services only; added a practical expedient that permits an entity to recognize as an expense costs of obtaining a contract (if one year or less); and provided exemption from some disclosures for nonpublic entities that apply U.S. GAAP. The proposal contains 26 examples of how the revised revenue recognition requirements would work. 
Categories: Tax

There Could Be an Increase in Financial Restatements

by Hiller Hardie 27. December 2011 15:25
As noted by The Wall Street Journal on November 30, the number of financial statement restatements at large US companies had declined for the 5th year in a row. Restatements spiked upward significantly in the initial years of Sarbanes Oxley implementation (2004-2005). This was due largely to the increased scrutiny on the financial reporting process by management and external auditors. Many companies upgraded their internal accounting staffs in response to the new focus placed on financial reporting. The new controls over financial reporting required by Sarbanes Oxley detected errors requiring restatement. Likewise, the decline in the number of restatements can be at least partially attributed to Sarbanes Oxley. As the processes implemented in response to this legislation have matured and been refined, their effectiveness in preventing and detecting errors in financial statements has no doubt increased. However, as author Tammy Whitehouse pointed out in an article for Compliance Week in 2009, there may be other dynamics in play. The SEC staff may be more likely to accept the judgment of the registrant now than in the past, for example. Moreover, the decline in mergers and acquisitions over the last few years (which typically involve complex accounting) may have had an impact on the number of restatements. Likewise, the use of complex financial instruments has declined since the financial crisis took hold; the complexity of the accounting for these transactions is fraught with pitfalls that often result in errors requiring restatement. All of these factors likely had some impact on the decline in restatements. The takeaway: the financial stress imposed by the current economic downturn may result in more fraud. If this is the case, as these activities are uncovered, watch for an uptick in resulting restatements.
Categories: Tax