Some Accounting Benefits Are Obscured In “The Cloud”

by Mark Gibbons 1. August 2016 14:21
The use of “cloud” storage technology supported by services such as iCloud, Amazon Web Services, and Dropbox has achieved ubiquity in our everyday lives for applications such as photo storage, transferring documents, and remote server hosting. The business applications are many, and accounting is among the professions that is enthusiastically embracing the cloud for a variety of obvious, and some less obvious, reasons. In addition to well-documented advantages such as cost, accessibility, bandwidth, and disaster recovery, assurance professionals are discovering that the use of cloud-based technology can make service delivery better in a variety of other ways. Audit teams are often in different locations utilizing the same data, which can cause version control as well as security issues. Cloud services can eliminate difficulties inherent in multi-location audits by allowing teams to contemporaneously access the same data, eliminating version control ambiguities. Using cloud services reduces the exposure to human error by keeping information from being directly loaded on multiple users’ laptops, which are particularly vulnerable to loss from theft and human error. Software updates can be implemented with minimal disruptions to an engagement. And, data privacy and cybersecurity are better than what many accounting firms could promise on their own, because the companies that host services for accounting and financial firms are held to strict SOC2 standards, their livelihood depends on their ability to keep sensitive information secure, and they have access to and budgets for the latest cybersecurity resources. The result is cloud services are increasing productivity and reducing costs, adding value to the audit process. It is this value that is driving adoption of cloud services by the accounting profession. According to the most recent Management of an Accounting Practice (MAP) Survey from the AICPA’s Private Companies Practice Section, use of cloud-based systems has increased by 66% in two years and is used by 59% and 77% of firms with $5-10 and $10+ million in revenue. Cloud technology is here to stay in the accounting profession, and clients are receiving the benefits.

Do Your Diligence – Cyber Risk in Mergers & Acquisitions

by David Ritzert 10. November 2015 11:34
As M&A activity increases, so too does the need for cyber security assessments. Cyber breaches are often in the news headlines, however, many companies have been slow to adopt cyber security risk procedures as part of their due diligence process. Companies that plan growth through M&A activity should assess the cyber risk associated with their acquisition targets. The value of the target, as well as the overall enterprise, could be significantly impacted by a cyber breach. In addition to the potential loss in market value, an acquiring company that comes under attack can experience a major disruption to their normal operations, including increased costs and management efforts being diverted to remediation and shoring up defenses, rather than the integration efforts necessary to achieve the anticipated synergies from the transaction. When cyber security procedures are incorporated into the due diligence process, companies can proactively understand and mitigate the potential risks of acquiring a compromised entity. If your company is involved in M&A activity and you don’t incorporate cyber security procedures into the due diligence process, you could be putting your company and the contemplated transaction at risk.
Categories: Assurance

No COLA Increase in 2016

by Ben Wainwright 30. October 2015 13:00
The Internal Revenue Service (IRS) recently announced that for only the third time in 40 years, there will not be a cost of living adjustment (COLA) for Qualified Retirement Plans in 2016. COLA is tied very closely with Social Security (SS), and as a result Social Security beneficiaries will not receive an increase in their monthly benefits. However, due to the hold-harmless provision[1], anyone whose Medicare costs are deducted from their SS benefits will not see an increase in their monthly premium. Indeed, the last decade has seen small increases for SS beneficiaries—the total COLA increase over the past 8 years has only been 14.3%, compared to nearly 70% in the first eight years that it was introduced. Due to the lack of a cost of living adjustment, many Medicare beneficiaries will not see an increase in their benefits. In fact, it is expected that roughly 30% of Medicare Beneficiaries will see an increase in the cost of Medicare. The groups of Beneficiaries expected to be impacted include: · New Enrollees · Enrollees that do not receive SS benefits · Enrollees with higher incomes As a result of this Medicare cost increase, AARP and 70 other consumer advocacy groups has asked Congress to extend the hold-harmless provision to all Medicare beneficiaries; not just the 70% who currently receive Medicare Part B and are eligible for the provision. AARP sent Congress a letter on October 14th, 2015 urging them to extend the provision before it goes into effect on January 1st, 2016. For a summary of the Cost-of-Living Adjustments by Code Section for the past 5 years, follow the link: http://www.urishpopeck.com/pdf/EBPCommentator-COLA-SE2015.pdf [1] A legal statement prohibiting an increase to Medicare B premiums for the vast majority of American citizens. The Medicare hold harmless provision ensures that Medicare B premiums cannot rise more than the previous year's cost of living increase in Social Security benefits.
Categories: Assurance

Financial Reporting Framework for Small and Medium Sized Entities-New Option

by Hiller Hardie 9. September 2013 12:20
The AICPA recently released a new reporting framework for Small and Medium Sized entities (“SME”). This is a special purpose framework, not to be confused with the Private Company Council initiative, which will provide GAAP based guidelines for private companies. This is a key distinction-the SME framework is another comprehensive basis of accounting (“OCBOA”), which is non-GAAP. Other OCBOA’s include cash basis, income tax basis and regulatory basis.   The SME framework may be attractive to smaller companies interested in providing meaningful financial data to owners and other users, without the more onerous and rigorous requirements imposed by traditional GAAP. For example, the SME framework simplifies accounting for goodwill, but preserves the pillars of good accounting such as the accrual basis and historical cost.   Small business owners should evaluate the merits of the SME framework, as well as the needs of the financial statement users. Loan covenants and lender requirements will be a key factor in determining their suitability.
Tags:
Categories: Advisory | Assurance

Captive Insurance Benefits: They may be more attractive and available than you think!

by Hiller Hardie 26. August 2013 14:47
When non traditional risk management programs are discussed, most of our eyes gloss over and we quickly lose interest. However, establishing a captive insurance company is a way to formalize self insurance that may provide significant benefits to the business owner. These benefits include the ability to: ·         Insure risks not economically insured in traditional markets;  ·         Stabilize the cost of insurance; ·         Create possible estate planning, business succession and tax planning opportunities; and ·         Enhance cash flow and wealth preservation/accumulation. The ideal captive candidate is the owner of a business with strong cash flow (>$450,000 per year), a history of steady profitability and uninsured risk(s) with in the business. Business owners who meet these criteria would be well advised to consult a knowledgeable professional to determine if they are a good candidate for establishing a captive. A feasibility study can be performed at little to no cost.
Tags:
Categories: Advisory | Assurance

Significant Accounting & Reporting Matters - Q1 2013

by Hiller Hardie 12. April 2013 11:54
    BDO’s National Assurance practice has released “Significant Accounting & Reporting Matters” for Q1 2013. The report includes Final and Proposed Guidance (and other related activities) for the Financial Accounting  Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), the Securities & Exchange Commission (SEC), and the International Accounting Standards Board (IASB). Proposed guidance includes guidance that was issued or was open for comment during the quarter. Additionally, the report includes Effective Dates of US Accounting Pronouncements, along with reference links and resources. 
Tags:
Categories: Assurance

A Look Back at the SEC in 2012

by Ken Urish 4. January 2013 09:42
The national assurance practice of our alliance partner BDO has compiled its annual review of significant SEC developments for 2012. Rulemaking required by the Dodd-Frank Wall Street Reform and Consumer Protection Act continued to dominate the SEC agenda in 2012. While the SEC adopted rules addressing a number of Dodd-Frank requirements that affect corporate governance and disclosure, they did not complete rulemaking on several of the Act’s requirements, including pay-for-performance and pay ration disclosures, compensation clawback policies, and disclosing whether hedging against declines in the value of equity securities granted as compensation is permitted.   In addition to a summary of all of the significant 2012 developments, SEC Year in Review covers implementing legislation, PCAOB developments, the status of IFRS proposed incorporation into U.S. financial reporting, and guidance on a variety of key technical questions. This is a valuable reference guide, and another example of the exceptional resources that are available to Urish Popeck clients by virtue of our alliance with BDO for almost two decades.   To view or download a copy click here.
Tags:
Categories: Assurance

Dealing with the Foreign Corrupt Practice Act and the "Tone at the Top"

by Hiller Hardie 29. August 2012 10:45
The SEC and DOJ have been very active in investigating and prosecuting Foreign Corrupt Practices Act (“FCPA”) related matters of late. Pfizer, Teva Pharmaceuticals, Las Vegas Sands   and Avon are some of the more well known companies that have recently received negative press related to this. While the FCPA has been on the books since the late 1970’s, the fact that this bolus of activity is transpiring serves to remind us that (1) the temptation to use questionable practices to secure business overseas is omnipresent and (2) we as CPA’s, in both public practice and private industry, must play pivotal roles in combating questionable practices. The first line of defense against FCPA issues (or any questionable or fraudulent activity, for that matter) is to establish and maintain a strong system of internal accounting controls. CPA’s in management or internal audit roles can and should provide valuable advice and assistance in that regard. CPA’s in public practice need to diligently fulfill their duty to evaluate internal controls during their audits and communicated potential improvements. Indeed a critical, periodic review of existing controls, by both Management and the auditor can result in meaningful improvements and bolstering defenses. However, FCPA compliance issues often arise where collusion and/or management override are in play. In these situations, the critical importance of Entity Level Controls and the “tone at the top” becomes very apparent. While these may be viewed as “soft” and hard to grasp, especially by less experienced CPA’s, those who have been involved with sensitive issues (such as FCPA non-compliance) know their importance. The CPA must use his or her softer skills in assessing the “tone at the top”.  Often it is a pure “gut” feel that generates questions and ultimately may result in discovery of issues. The recent frequency with which FCPA issues have been noted requires us all to maintain (or elevate) our sense of professional skepticism.
Categories: Assurance

Private Company Audit Standards - Finally a Resolution?

by Kevin McGarry 2. August 2012 11:30
There are many stakeholders in the decade-long debate over financial reporting standards for privately held companies, including lenders, assurers, venture capitalists and the companies themselves. Now, a recently enacted measure may be bringing the debate to conclusion.   Currently, private companies follow U.S. Generally Accepted Accounting Principles (GAAP) when issuing reports, which are viewed as the gold standard for financial reporting; however, private company managers view GAAP as unnecessarily complex and lacking relevance to external users. In 2009, a panel was formed as a joint effort between the Financial Accounting Foundation (FAF), the AICPA, and the National Association of State Boards of Accountancy (NASBA) to determine the future of the standards-setting process for private companies.   Just a few months ago, the FAF Trustee Working Group announced its final decision to create a Private Company Council (PCC) to improve the standards-setting process for private companies. Although all decisions of the PCC are subject to FASB approval, the differences include: The PCC is a nine to twelve-member committee, including a non-FASB chairperson. A FASB board member will be assigned as a liaison to the PCC. The PCC is encouraged to set its own agenda without FASB approval. The PCC and FASB are encouraged to mutually agree on a set of criteria to identify possible exceptions and modifications to existing Generally Accepted Accounting Principles (GAAP) for private companies. Any such exceptions and modifications raised by the PCC are subject to FASB endorsement and a public comment period; FASB makes the final endorsement decision based upon a majority vote (four of seven members). In the instance of non-endorsement, the FASB chairperson will present written documentation to the PCC chair, providing a reason for the non-endorsement and possible changes for the PCC to consider that could lead to FASB endorsement. The endorsement process must be completed within a specified time frame, and all endorsed decisions will be issued as Accounting Standards Updates to the Accounting Standards Codification.   The PCC will provide reports to a newly established committee of the FAF Board of Trustees for the first three years, at which point the PCC will be re-assessed to determine whether further changes to the overall standards-setting process for private companies are necessary. With the creation of the PCC, the FAF trustees will try to avoid two sets of GAAP (one for private companies and one for public companies). The AICPA subsequently announced the development of a financial reporting framework to support self-contained, other comprehensive basis of accounting (OCBOA), intended for use by privately held small- to medium-sized entities preparing financial statements.   To understand how and why the PCC committee was formed or additional information on the newly announced final decision, please see The Controversy over Private Company Reporting Standards in The CPA Journal.
Categories: Assurance

House Approves Some SOX Relief for Issuers < $1B

by Hiller Hardie 14. March 2012 11:00
  The House recently approved a measure aimed at creating jobs and easing the regulatory burden on smaller businesses.   A major component of this bill exempts small and mid size businesses initiating public offerings from some key provisions of Sarbanes Oxley.  As drafted, prospective issuers with less than $1 billion in revenue and $700 million in publicly traded stock would no longer be subject to external audits of their internal controls (among other things).   As I have noted in prior blogs, there has been tension between the conflicting goals of protecting investors and shielding business from excessive regulation.  While the above measure still needs to pass the Senate and be signed by the President, it is a strong indication that the latter goal is gaining traction. I do believe this is a good trend but also urge caution in moving too far. There continue to be major “blows” in financial reporting, such as those recently announced by Diamond Foods.  Moreover, outright fraud can be perpetrated by public companies.  The recent story of Puda Coal (a Chinese company which gained access to the US securities markets via a “reverse merger”) is an excellent case in point.  In this saga, the executives of this company effectively stripped the company of all operating assets, leaving shareholders with a shell company.   
Categories: Assurance