Betsy's Pretty Good Blog

Is an audit failure really an audit failure?

March 24, 2014
Fail

Did you know that the PCAOB pre-screens audits for inspections? I didn’t. Did you know that the PCAOB uses the term “audit failures” in place of “audit deficiencies”? I didn’t.

A short article on CFO.com opened my eyes about some issues around PCAOB inspections.

A recent comment made by the chief auditor of the PCAOB - “When we look at an audit, the rate of failure has been in a range of 35-40%.” That doesn’t mean that 35-40% of all public company audits are failures. Pre-screening obviously eliminates the majority of these audits from scrutiny, but the comment by the chief auditor would lead one to believe the failure rate applies to all public company audits.

Perhaps even more concerning is the way the PCAOB defines the term “audit failure”. Audit failure is an alarming term that typically means there was a clean audit opinion on misleading financial statements. That’s a big deal. Now the PCAOB uses the term when “in their judgment, the auditor failed to obtain sufficient appropriate evidence to support its opinion on the financial statements, irrespective of the fairness of the financial statements in question.”

It was worthwhile for me to read this short article. Clearly, everyone benefits from the best audits possible. Now I have a better understanding that a PCAOB designated “failure” may not be as bad as that word makes it sound.

Comments (0) | Link to this post

IRS program in competition with you

March 13, 2014
freefile logo

CPA Trendlines reports that the IRS program called “FreeFile” may be the reason that 769,000 tax returns are missing from the marketplace. Do-it-yourself software is taking an increasing slice of the tax preparation business.

“FreeFile is a public-private partnership between the IRS and the FreeFile Alliance LLC. The alliance is a corsortium of 14 leading tax software providers who make their products available exclusively at IRS.gov.” FreeFile does not support any state tax returns – a bit of good news.

Read the article

Comments (1) | Link to this post

Are you ready for Generation Z?

February 26, 2014

Future next exit signGeneration Z?????????? I’m still adjusting to Generation Y, so I was caught off guard that there’s this whole other group that I should now begin to learn about. The oldest kids in Gen Z will turn 18 this year, so it won’t be long till they're on our doorsteps, freshly minted accounting degrees in hand.

Called a generation of realists by Sarah Sladek of XYZ University, this group has been born into “school shootings, climate change, terrorism and the Great Recession.” And they’re the ones who are going to have to find solutions to lots of problems that we older people will be leaving behind.

Here’s a short blog by Sarah that will introduce you to Gen Z and I think you’re going to like what you see.

Comments (1) | Link to this post

Have you been visited by a Patent Troll?

February 3, 2014
Patent Troll

Have you or one of your clients been accosted by a patent troll? Well, welcome to the club…and it’s a big club. We’ve had the experience here at the MNCPA. “Patent Assertion Entities” or PAEs purchase patents for the express purpose of filing patent infringement lawsuits against companies to get licensing fees or a legal settlement without actually making any goods or providing any services.

I’ve learned that the seriousness and impact of PAE activities are debated heavily online.
Here’s a good list of posts 

Here’s a recent discussion of whether it’s a real phenomenon 

There are concerns that some small businesses will be hurt by the proposed legislation.
Learn more 

The AICPA is working in Congress to get legislation passed that will curtail patent trolling.
Read up on AICPA's efforts 

This is complex issue for sure, but when you or a client have been hit up by a patent troll, it certainly feels abusive.

Comments (0) | Link to this post

What do you do when a client approaches you with a crazy business idea?

January 20, 2014
Crazy ideas

It’s the New Year and lists get posted online about a lot of things, including crazy business ideas. Of course, the fascinating thing about crazy business ideas is that some of them actually work. I imagine that most of them don’t, but how can you advise a client who wants to make goggles for dogs, or a device that turns a hot dog into an octopus?

I’m interested in hearing from CPAs about the craziest business ideas they’ve heard from clients or potential clients. Tell me how you handled the situation….and tell me if you got in early and made a bundle on backhair advertising!

Comments (0) | Link to this post

Are you ready for another government shutdown?

December 10, 2013
Sorry, we're closed!

Tax season is just around the corner……and so is another possible government shutdown. I don’t know about you, but it seems to me that it is entirely possible that our dysfunctional Congress could fail to agree on funding the government one more time. The deadline is January 16 and with the holiday break, and the seeming lack of concern being demonstrated, we could be in for major pain.

The AICPA notes that during the October shutdown only 9.3% of the IRS was deemed “essential” and kept functioning. The AICPA has already contacted the IRS about the shutdown issue urging that their contingency plan keep the Taxpayer Advocate functioning.

Learn more 

It’s depressing to everyone that Congress just can’t get its act together, but it will be a calamity for CPAs and their clients if the IRS isn’t available during any part of tax season.

Comments (0) | Link to this post

The story behind the numbers

October 28, 2013
The Story Behind the Numbers

One of the most valuable skills that CPAs bring to the table with public accounting clients and within businesses as CFOs and Controllers is being able to ferret out the story behind the numbers. Long gone are the days of simple number-crunching and financial reporting. Here to stay is the CPA as interpreter and guide.

What does it take to be a good storyteller? It’s not about throwing a bunch of numbers up in a PowerPoint presentation. In fact, that’s a straight line to your audience tuning out. Look here for excellent advice on what makes a good PP presentation. You need to analyze the numbers and find the story behind them. What do the numbers mean? What patterns do you see? What are the most important numbers and what are they telling you? What are the implications? What choices do they point to? What happens if they are ignored? Who is affected? What is the future if nothing changes? There are lots of other questions you need to ponder as well.

You need to have more than solid technical skills in order to get the numbers – that’s a given. Beyond that are those “soft skills” that everyone says they are looking for. You need to be able to communicate what you find and what it means. If you can’t write well or get up in front of a challenging group and explain it all, then those solid technical skills will only land you in a cube at the back of the office.

Your value to any employer or client goes way up if you can find the meaning behind the numbers and communicate it effectively. It seems to me that utilizing that skill would also make your job much more enjoyable for you.

Comments (0) | Link to this post

''Creative Accounting''

October 21, 2013
Christine Lagarde

On October 13, Christine Lagarde, the International Monetary Fund Managing Director, appeared on Meet the Press and said -

"It's very, very concerning," said Lagarde, referring to the risk of a U.S. debt default. "But creative accounting is not the solution and markets know that."

"When you are the largest economy in the world, when you are the safe haven in all circumstances, as has been the case, you can't go into that creative accounting business," she added…

So just what is "creative accounting"? Obviously it’s a pejorative phrase – the implication being that nothing good comes from "creative accounting".

One definition said it’s "the exploitation of loopholes in financial regulation in order to gain advantage or present figures in a misleadingly favorable light." Another defines it as following the letter of the accounting rules, but deviating from the spirit of those rules.

We certainly have an impressive list of scandals that used "creative accounting" in various ways. Enron and its "special purpose entities" is the poster child, but Lehman Brothers "Repo 105", WorldCom, Tyco, AIG in 2005, and Waste Management all got caught playing games.

Are we in danger of the Feds resorting to "creative accounting"? I hope not.

Comments (0) | Link to this post

Do you have an EpiPen at your office?

September 19, 2013
EpiPen

You probably have a defibrillator in your office in order to help someone with sudden cardiac arrest. Here’s something else to think about. Severe allergic reactions can occur in people with no prior allergy diagnosis. Anyone can develop an allergy to anything at anytime. You are probably aware that all types of allergies, including food allergies, are becoming more common. Anaphylaxis, the most extreme allergic reaction in which the airway swells shut, can become fatal within minutes.

Fortunately there is a simple solution for us all – stocking an undesignated EpiPen in our workplaces. (Undesignated simply means that it hasn’t been prescribed for a particular individual.) An EpiPen is an autoinjector that is incredibly easy to use. Take it out of the container by unscrewing the yellow cap. Remove the gray safety cap. Grasp the pen in a fist and press the black rounded tip hard against the thigh (through clothing is okay) and count to ten. It then automatically injects epinephrine into the victim, reducing the allergic reaction. Meanwhile someone should be calling 911 because you need to get this person to the hospital.

The EpiPen does need to be purchased once a year because they expire and, of course, if it is used it has to be replaced.

(You may also want to check with your child’s school to see if they have undesignated EpiPens that could save a child’s life. Also find out who is authorized to use them. If it’s only the school nurse/ health aid or an administrator and that person isn’t available, that could be a huge problem. Classroom teachers and aides should be allowed to use them. MN statute “allows” schools to have undesignated EpiPens but doesn’t mandate it. There is a program called EpiPen4Schools through which schools can acquire free undesignated EpiPens.)

Comments (0) | Link to this post

Is a culture of long hours hurting your firm/business?

September 12, 2013
Balance

I know I’m a bit late to this discussion, but the death of Moritz Erhardt, an intern with Bank of America Merrill Lynch in London, has sparked a lot of online commentary. It also got me to thinking about work culture inside CPA firms and other businesses where our members work.

Now I know that Moritz was interning in the finance division of banking, not a CPA firm, but the long hours culture isn’t unknown (and rewarded) in CPA firms and other businesses. It may not be as extreme as it was in this case, but we need to look at the downsides and see if it actually brings any benefit to the workplace. Also, this young man, by all accounts, was particularly driven internally and may not have allowed himself to acknowledge any problems.

Given all that, we still have the question about the assumption that long hours = exceptional productivity and dedication = the “best” employee. It’s interesting that this belief is so persistent, especially in light of all the recent discussion of how important innovation and creativity are to successful businesses. Innovation and creativity are known to require down time and space to think and explore.

So do long hours really equal exceptional productivity? One thing to consider is that spending long hours at work typically leads to less sleep and it is well-documented that sleep deprivation reduces productivity. Also, variation in productivity is completely normal. (We’ve all had days where we spend our time staring at a screen getting nothing done and also days where we produce brilliantly and consistently throughout the day.) It’s been clearly shown that working more hours after 40 increases errors and mistakes – 28% increase after a 10 hour day. (Makes you really wonder about hospital residents taking care of patients, doesn’t it?) Here’s one of the best short articles on work hours and productivity.

Apparently, at Bank of America in London, weeding out was done by watching who put in the most hours. Easy to measure, but definitely not any kind of indicator of quality or good fit. It only measures some kind of tolerance for self-punishment and maybe work addiction. The supervisors believed that those long hours reflect loyalty and commitment. So it looks to them an efficient way to weed out the undesirables or weak. Is working long hours really the characteristic we want in our employees? Don’t we really want thinkers, learners, relaters, creators?

Why does this myth persist in our work cultures?

Comments (1) | Link to this post