A Forensic Investigation Opens IRS-Floodgate! In this article, the author critiques the IRS Participant Guide for Marijuana Companies. This 200-page guide provides general instructions to the service on the valuation of cannabis farms. The author argues that the compliance guide is completely inaccurate concerning the audit of cannabis cultivation. The author proposes that forensic and valuation professionals employ a series of tests in lieu of the IRS guidance. William Fowler, a former IRS Large Case Exam Officer, agrees with renowned attorney, Nick Richards of Greenspoon Marder, that the general suggestions of the IRS pertaining to its Cannabis Compliance Initiative is…
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Five Ways Professional Services Websites Fall Short (Part I of II) Business leaders today know that how a firm’s website is planned and organized matters more than ever. What worked well enough five years ago to separate your firm from your competition may simply not work today. At Hinge, we audit hundreds of professional services websites a year—and we see many of the same mistakes repeated. In this article, I will explore five of the most fundamental mistakes professional services firms make long before a single page has been designed and published. Whether it was due to a broken planning…
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Publicly sharing diversity numbers—positive and negative—can be beneficial to companies because it shows a willingness to openly address diversity issues. Sharing the numbers also allows for a company to be held accountable for future progress in reaching diversity goals. To read the full article in CNN, click: Why Sharing Diversity Data Publicly can be Good for Your Company.
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Preparing for an audit by the Securities and Exchange Commission can be a significant undertaking for a small firm. During stressful times such as this, leaders should stay confident and set a positive example for others. To read the full article in Smart Brief, click: Preparing for an Unexpected SEC Audit.
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A newly released international auditing standard for auditing accounting estimates and related disclosures is designed to help auditors keep pace with changes in accounting standards for loan provisions and insurance contracts. To read the full article in the Journal of Accountancy, click: International Audit Standard Addresses Estimates.
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As public company auditors prepare to deliver new information in auditors’ reports, firms need to develop consistent processes for determining what should be disclosed. As auditors prepare for a new auditing standard requiring the disclosure of critical audit matters (CAMs) in their reports, they are traveling in uncharted territory and contemplating new information that they will be providing to investors. To read the full article in the Journal of Accountancy, click: Critical Audit Matters Coming into Focus.
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Hermann Sidhu, CPA, global assurance digital leader at EY, walks us through EY’s exciting new project to use drones to help audit large warehouses and outdoor inventories. The goal of the project is for drones to autonomously scan bar codes, QR codes, and other labels and transmit that data to EY’s online auditing platform. It has the potential to make audits faster and more seamless for both auditors and clients. To read the full article in the Journal of Accountancy, click: Using Drones to Enhance Audits.
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Like many members of the CPA profession, single audit practitioners will be managing a change process while maintaining an intense focus on quality. To read the full article in Journal of Accountancy, click: Strategies for Quality Work in Single Audits.
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The Consolidated Appropriations Act, 2018, H.R. 1625, which is the $1.3 trillion spending bill that Congress passed, contains a few tax-related provisions, including funding for the IRS and technical corrections to various recent pieces of tax legislation. It also amends the centralized partnership audit regime and changes the Sec. 199A deduction for farmers who sell grain to agricultural cooperatives. To read the full article in the Journal of Accountancy, click: Federal Spending Bill Includes Tax Provisions.
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The accounting profession sits on the cusp of unprecedented change. Transformative technologies will reshape virtually every corner of the accounting world. For CPAs to survive and thrive, they will need to learn—and unlearn—on a scale and at a pace that can seem overwhelming. To help CPAs prepare, the JofA gathered three of the profession’s top technology experts for its annual accounting technology roundtable. To read the full article in the Journal of Accountancy, click: How AI, Blockchain, and Automation Will Reinvent Accounting.
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Since enacting the Securities Exchange Act in 1934, Congress has repeatedly expanded the arsenal of the SEC to protect investors through enforcement actions. As a result, the SEC has steadily increased the number of enforcement actions. The author’s analysis of 1,563 accounting and auditing enforcement cases from 2008 to 2014 shows the most frequent securities law violations adjudicated by the SEC, the penalties rendered, and the person most often at the center of a case during this period. By studying and understanding the findings, accountants can learn where standard accounting practices failed or were subverted and how to best deter,…
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What is the purpose of audit planning if the audit may not ultimately follow the carefully thought out plan? As may be inferred from Dwight D. Eisenhower’s words—”Plans are worthless, but planning is everything”—the value of audit planning is not derived solely from the resulting audit plan. Daniel Gartland, risk control consultant at CNA, describes the importance of detailed planning. To read the full article in the Journal of Accountancy, click: The Importance of Audit Planning.
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Fair value measurement has been a hot topic during the last few years, increasingly attributable to PCAOB identified audit deficiencies and heightening scrutiny over the existing fair value framework and related auditing standards. In this post, we take a look at the causes of attention and recent responses from professionals and professional organizations. To read the full article in Mercer Capital’s Financial Reporting Blog, click: PCAOB Inspection Scrutiny of Fair Value Measurement Continues. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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Was it a bargain purchase or not? The SEC has reached a $6.2 million settlement with a Big 4 audit firm relating to auditing failures associated with Miller Energy Resources. This post will examine the particulars of the case and provide some observations on fair value accounting that can be gleaned from the SEC settlement order. To read the full article in Mercer Capital’s Financial Reporting Blog, click: $475 Million Bargain Purchase Leads to an SEC Settlement. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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In the Crosshairs of Regulators In this article, Mark Zyla of Acuitas discusses trends in fair value measurements in financial reporting and enforcement actions. Mr. Zyla notes that financial reporting is increasingly scrutinized by regulators. He observes that recent inspection reports of accounting firms that audit publicly traded entities by the Public Company Accounting Oversight Board (PCAOB) have indicated an increasing focus on the audit procedures related to fair value. The Securities and Exchange Commission (SEC) has also showed concerns regarding outside valuation specialists who assist management in determining fair value measurements. The increased scrutiny has put a spotlight on…
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Audit Risk and Use of Defined Value Clauses Estate planning attorneys and their clients are aware of the risk of an audit. Despite knowing this risk, they seek certainty. Business valuation is as much art, as it is science. Estate planning attorneys have devised techniques to hedge the aforementioned risk and provide their clients with a greater degree of certainty. One such technique utilized by estate planners is the use of Formula or Defined Value Clauses. The merit of defined value clauses seeks to mitigate audit risk, while providing the client with the certainty of knowing, at the date of…
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Audit quality concerns raised by a spike in unsatisfactory results from firm/engagement inspections performed by the regulator and the possibility of audit firms being sued for corporate failures warrants a fresh look at professional skepticism. Here is Brian Monegi’s take on this. To read the full article in ASA, click: Analysis: Professional Skepticism: in the Age of Fair Value Measurements.
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Part III of III This is Part III of a three-part series discussing the basic components of a professional liability lawsuit brought against an accounting firm and its partners, and factors a firm’s managing partner should consider before and during this type of litigation for utilizing applicable insurance coverage, maximizing effectiveness of defense, and, where possible, bringing the controversy to conclusion by settlement. Part I covered the current litigation environment for accounting firms, relevant provisions in engagement letters, responding to subpoenas, professional liability insurance, and the risk of instigating a professional liability counterclaim in a fee collection action. Part II…
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Part II of III This is Part II of a three-part series discussing the basic components of a professional liability lawsuit brought against an accounting firm and its partners and the factors a firm’s managing partner should take into consideration before and during this type of litigation for utilizing applicable insurance coverage, maximizing effectiveness of defense and, where possible, bringing the controversy to conclusion by settlement. Part I covered the current litigation environment for accounting firms, relevant provisions in engagement letters, responding to subpoenas, professional liability insurance, and the risk of instigating a professional liability counterclaim in a fee-collection action.…
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Part I of III This is Part I of a three-part series discussing the basic components of a professional liability lawsuit brought against an accounting firm and its partners; and the factors a firm’s managing partner should consider before and during this type of litigation for utilizing applicable insurance coverage, maximizing effectiveness of defense and, where possible, bringing the controversy to conclusion by settlement. Part I focuses on the current litigation environment for accounting firms, relevant provisions in engagement letters, responding to subpoenas, professional liability insurance, and the risk of instigating a professional liability counterclaim in a fee-collection action. Part…