Experience:

• At least three to five years of accounting & bookkeeping experience
• Public Accounting Experience a plus
• Knowledge of Microsoft Excel, Microsoft Word, QuickBooks, Peach tree and other accounting software
• A commitment to providing outstanding client service
• Ability to multi-task and the ability to work in a fast-paced environment
• Strong communicator, both verbally and in writing
• Excellent organization and time management skills

The AICPA’s Auditing Standards Board is scheduled to meet in Boston on May 1-3, 2012, to consider a vote on finalizing a standard to replace the audit guidance for going concerns. The exposure draft, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern (Redrafted), was issued in November 2011 to replace Statement on Auditing Standards (SAS) No. 59. The proposal is part of the AICPA’s clarity project to make its audit guidance easier to understand.

The draft introduced two changes to the standard, but the AICPA doesn’t expect the changes to affect existing practices.

Auditors will have to “obtain written representations from management if conditions or events have been identified that indicate there could be substantial doubt about the entity’s ability to continue as a going concern.” Auditors already tend to follow this procedure because the interpretive guidance encourages them to do so.

The second change concerns Interpretation No. 1, “Eliminating a Going-Concern Explanatory Paragraph From a Reissued Report,” of AU Section 341. “We redrafted it for clarity purposes,” said Ahava Goldman, the ASB’s senior technical manager. “When the FASB does finalize their project on going concern, we will have another project to revise the standard.”
In 2011, the FASB shifted the emphasis of its going concern project to focus on disclosures about risk and liquidation accounting.

The board is also scheduled to begin the next stage of its clarity project and start converting the attestation standards to the clarified format. Goldman said the board is starting with AT Section 101, “Attest Engagements,” which has been called “the umbrella standard” for all other attestation standards.

In clarifying that standard, Goldman said, the ASB is considering a draft exposure of the IAASB’s International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information, which was issued to help improve the understanding of the different types of assurance work auditors do. ISAE 3000 includes guidance addressing the types of engagements that are common in the public sector and becoming more prevalent in the private sector. The ASB is looking at converging with this standard, which has not been finalized.

The board will also be reviewing a report from its Strategic Planning Task Force, which has begun an effort to produce a guide the ASB will use to determine its standard-setting agenda. The board will use the strategy guide to map its course now that the clarity project has been completed.

The task force received about 240 responses to a survey it sent out last summer. The group met in September and November to review the responses and develop initiatives and action items for the ASB, Goldman said. She said the ASB had accomplished a great deal in terms of harmonizing auditing standards since the publication of 1997 strategic document. “The ASB thought it was time to sit down and take another look at the strategic activities and what they should be focused in the next three to four years,” Goldman said.

The agenda also includes an IAASB update, which Goldman said will probably be a standing item on future agendas as auditing standards converge. This particular update will focus on auditors reports because the IAASB will be devoting a lot of time to auditors reports for the next year. The meeting will close with a discussion of internal auditors.

Goldman said the IAASB revised ISA 610, Using the Work of Internal Auditors. However, the international body has not finalized one part of the standard dealing with internal auditors providing direct assistance to the external auditor, which is being reviewed by the International Ethics Standards Board for Accountants (IESBA).

Goldman said the IESBA has an exposure draft of proposed changes to the definition of an engagement team, to resolve a perceived inconsistency between the ISAs and the IESBA Code regarding the ability of external auditors to use internal auditors to provide direct assistance. “We’re working to converge with what they’ve released,” Goldman said.

IR 2012-36; 2011 Data Book

IRS has issued its annual data book, which provides statistical data on its fiscal year (FY) 2011 activities. As this article explains, the data book provides valuable information about how many tax returns IRS examines (audits) and what categories of returns IRS is focusing resources on, as well as data on other enforcement activities such as collections. The figures and percentages in this article compare returns filed in calendar year 2010 and audited in FY 2011 to returns filed in calendar year 2009 and audited in FY 2010.

What are the chances of being audited? Of the 140,837,499 total individual income tax returns with a filing requirement, 1,564,690 were audited. This works out to roughly 1.1%, the same as the rate for the previous year. Of the total number of individual income tax returns audited in FY 2011, 483,574 (30.9%) were for returns with an earned income tax credit (EITC) claim, a slight increase from the 473,999 (30%) of all audited returns for FY 2010.

Only 25% of the individual audits were conducted by revenue agents, tax compliance officers, tax examiners and revenue officer examiners. That’s higher than the 21.7% figure for the previous year. The 75% balance of the audits were correspondence audits, down from 77.1% for the previous year.

Following are selected audit rates for individuals not claiming the EITC:

• For business returns other than farm returns showing total gross receipts of $100,000 to $200,000, 4.3% of returns were audited in FY 2011, down from 4.7% in FY 2010.
• For business returns other than farm returns showing total gross receipts of $200,000 or more, 3.8% of returns were audited in FY 2011, an increase from 3.3% in FY 2010.
• Of the returns showing farm (Schedule F) income, .6% were audited in FY 2011 versus .4% in FY 2010.
• For returns showing total positive income of $200,000 to $1 million, 3.2% of returns not showing business activity were audited, and 3.6% of returns showing business activity were audited. The audit rate for such returns was higher than the 2.5% and 2.9% respective rates for the previous year.
• For FY 2011, the audit rate for returns with total positive income of $1 million or more was 12.5%, close to forty nine percent higher than the 8.4% rate for FY 2010.

Not surprisingly, examination coverage increased for higher income earners. For example, the percentage was 1% for those returns with adjusted gross income (AGI) between $100,000 and $200,000 (up from .71% for FY 2010), and 2.66% for those with $200,000 to $500,000 of AGI (up from 1.92% for FY 2009). Exam coverage jumped to 11.8% for those with at least $1 million but less than $5 million of AGI (up from 6.67% for FY 2010). Similarly, coverage increased for those with at least $5 million but less than $10 million of AGI, as well as for those with AGI of $10 million or more.

Select audit rates for business returns were as follows:

• For all corporate returns other than Form 1120S, 1.5%, versus 1.4% for the year before.
• For small corporations with balance sheet returns showing total assets of: $250,000 to $1 million, 1.6%; $1–$5 million, 1.9%; and $5–10 million, 2.6%. For FY 2010, the percentages were, respectively, 1.4%, 1.7%; and 3%.
• For large corporations with returns showing total assets of $10 million or more, the overall audit rate was 17.6%, up from 16.6% for FY 2010. The audit rate for these corporations increased with the size of the entity. For example, the audit rates were 13.3% for those with total assets of $10–$50 million (slight decrease from 13.4% for FY 2010); 17.4% for those with $250–$500 million (versus 16.1% for FY 2010); 50.5% for those with $5–20 billion (up from 45.3% for FY 2010), and 95.6% for those with $20 billion or more (down from 98% for FY 2010).
• For partnership and S corporation returns, the audit rate was .4%, the same as for the year before.

IRS’s activity on other fronts. Here’s a roundup of some of the other valuable information carried in the new IRS Data Book.

Number of returns filed. The number of partnership returns filed (Form 1065) increased by 1.9%, and the number of S corporation returns (Form 1120S) grew by .8%. The number of C or other corporation (e.g., REMIC, REIT, RIC) returns dropped by 1.8%.

The number of individual income tax returns (e.g., Forms 1040, 1040A, 1040EZ) increased by 1.7%, a turnaround, due no doubt to improvement in economic activity, from the 2% drop exhibited in FY 2010, and the 6.7% drop shown in FY 2009.

The number of estate tax returns filed in FY 2011 plunged by 62.1%, reflecting recent tax law changes. (The estate tax was temporarily repealed for deaths in calendar year 2010 before being reinstated retroactively with a $5-million exemption as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. As a result of this legislation, estates of 2010 decedents could elect to file either Form 706, due Sept. 19, 2011, or Form 8939 (allocation of increase in basis for property acquired from a decedent), due Jan. 17, 2012.)

Math errors on individual returns. Of the roughly 6.6 million math error notices that IRS sent out relating to the 2010 return, 49.5% were attributable to the making work pay credit (MWPC), which was a refundable tax credit based on earned income and was available to taxpayers in 2009 and 2010.

Of the total math error notices, 14.1% were for tax calculation/other taxes (which includes errors related to self-employment tax, alternative minimum tax, and household employment tax), 7.2% related to exemption number/amount, 6.1% related to the EITC, 6.2% related to the standard/itemized deduction(s), and 2.2% related to the child tax credit.

Penalties. In FY 2011, IRS assessed 28.75 million civil penalties against individual taxpayers, up from 27.1 million civil penalties assessed in the previous year. Of the FY 2011 assessments, the “top three” penalties in percentage terms were 58.6% for failure to pay, 25.6% for underpayment of estimated tax, and 13% for delinquency. On the business side, there were a total of 1,080,027 civil penalty assessments (down from 1,145,931 for the year before), and the “top three” penalties in percentage terms were 55% for delinquency, 24% for failure to pay, and 18.4% for estimated tax.

Offers-in-compromise. In FY 2011, 59,000 offers-in-compromise were received by IRS (versus 57,000 for FY 2010), and 20,000 were accepted (14,000 for the year before).

Criminal cases. IRS initiated 4,720 criminal investigations in FY 2011. There were 3,410 referrals for prosecution and 2,350 convictions. Of those sentenced, 81.7% were incarcerated (a term that includes imprisonment, home confinement, electronic monitoring, or a combination thereof). By way of comparison, in FY 2010, IRS initiated 4,706 criminal investigations, there were 3,034 referrals for prosecution, and there were 2,184 convictions. Of those sentenced, 81.5% were incarcerated.

The IRS Data Book can be viewed at http://www.irs.gov/pub/irs-soi/11databk.pdf.  IR-2012-36 can be viewed at http://www.irs.gov/newsroom/article/0,,id=255853,00.html.

Source:  Federal Tax Updates on Checkpoint News tab 3/26/2012

The FASB made the announcements in its formal response to a recent FAF critique of how FIN No. 48 has been applied since it was published six years ago. (See article “Review Endorses Implementation of FIN No. 48” that appeared in the January 13, 2012, edition of Accounting & Compliance Alert.)

“The FASB welcomes the PIR team’s recommendations to continue to improve our processes and we are taking steps to make enhancements in those areas,” said FASB Chairman Leslie Seidman in a letter addressed to FAF trustees Jeffrey Diermeier and Edward Harrington, the chairs of the panel that monitors the FASB’s standard-setting.

The FAF review said the FASB should involve investors earlier in the process, do a better job describing its cost-benefit analysis, and provide more information about decisions such as seeking a second round of public comment on complex proposals. Overall, however, the FAF gave the FASB good marks for FIN No. 48 and said its findings indicated that the standard resulted in more consistent estimates of tax liabilities and more relevant information about the factors that could cause the tax payments to deviate from the estimates.

Most companies said their costs for applying the standard were relatively modest. Still, some companies told the FAF that they were concerned about the amount of judgment required to estimate taxes, and the likelihood that the methods for producing the estimates could vary widely among companies. Other companies were concerned that the estimates that appear in financial reports could be larger than the amounts they ultimately owe to tax authorities, according to the five-page response the FASB submitted to the FAF.

“No approach to accounting for tax uncertainties can eliminate the judgment involved in interpreting and applying the tax code,” the FASB wrote, while acknowledging the concerns that were raised.

The FASB also admitted that it could have done a better job in soliciting feedback from investors earlier in the standard’s development. “At the time of the FIN No. 48 project, we were in the early stages of a longer term effort to improve the involvement of investors and other users in the standards-setting process,” the board wrote. “We believe that we have made significant progress in gathering user input since the time of the FIN No. 48 project through various means, including consistently involving users in our various advisory groups and roundtable meetings and adding senior staff members with investment analysis experience to proactively lead project-specific outreach efforts with a board range of investors and other users.”

FIN No. 48 was controversial almost from the moment it was published. The principle requires companies to analyze each tax liability and determine the level of confidence they have in the measurement. Less than a year after the standard was finalized, the accounting board published FASB Staff Position (FSP) No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48, to clarify how the word “settlement” was used in FIN No. 48.

Risk acumen is at the core of internal audit’s transformation. CAEs and their teams are now being asked to expand their more traditional assurance and consulting roles, and apply their business insights and audit expertise in key organization-wide initiatives, particularly those pertaining to fraud and risk management.

According to a report by The Institute of Internal Auditors (IIA) titled, Internal Auditing in 2010: Shifting Priorities for a Changing Environment, risk management is the number one strategic priority for CAEs and the key area of focus for internal audit activities now—and into the future.

Already steeped in risk identification, internal auditing is increasingly beneficial to strategic transformational initiatives, says Kelly Barrett, CAE for The Home Depot, according to a report by the IIA and Korn/Ferry International. “I believe that audit committees are starting to see how big a role internal auditors can and should play in helping an organization get it right on the front end—especially when an organization is undergoing significant change,” Barrett observes.

Other more traditional risk management roles—such as navigating the complex regulatory conditions of a post-Sarbanes-Oxley era; taming unruly internal controls and data environments; and working with an increasing audit-savvy team of executive stakeholders—remain part of internal audit’s mandate.

Successfully addressing these demands requires a combination of leadership, processes and tools, including, most prominently, a stronger role in boosting the organization’s overall risk management capabilities as well as greater use of automation and analytics, such as continuous auditing, to deliver greater efficiency and effectiveness.

As internal audit departments are challenged to do more with less, technology must play a critical role. Automating audit processes through data analytics and continuous monitoring software not only improves internal audit quality and efficiency, but ultimately adds value with significant contributions to business assurance.

At the General Audit Management conference (GAM), Fortune 250 enterprises overwhelmingly agreed that the promised benefits are now coming to fruition in their organization. One CAE, in fact, said, “Continuous monitoring is not an opportunity now; it is something that we all must do and do correctly as our organizations increasingly move to global ERP [enterprise resource planning] systems.” Correspondingly, some participants said that developing and deploying this and other audit-automation capabilities have emerged as top strategic objectives of their internal audit function.

With its view across all functions of the organization, internal audit is ideally suited to provide risk insights to business leaders on strategic initiatives, and technology enables them to offer recommendations based on real-time, data-driven findings. Data analytics can help internal auditors expose potential risk areas related to M&A, process transformations or expansion into new geographies.

Data analytics also play a critical role throughout the audit cycle and can add significant value through both controls monitoring and bottom-line savings and recoveries. Why? As budgets tighten and the volume of data grows, the risk of fraud and errors increase. Transaction monitoring can reduce fraud and error, while effective analytics add measurable efficiencies to audit and risk management processes.

Audit automation delivers one additional benefit that is particularly valuable in light of a highly volatile economic picture: sustainability. By storing practices, knowledge and data in a user friendly and easily accessible system rather than solely in an individual’s brain, internal audit functions are better positioned to manage the types of significant changes that are occurring with greater frequency today: organizational restructuring, staff reductions and the departure of top internal audit talent.

Dramatic examples of the bottom-line benefits audit analytics provide can be found across industries and geographies:

• One large government department has achieved over $20 million in annual savings through an expense approval and monitoring program.
• Another major telecommunications firm increased its annual billings by $750,000 when analytics technology uncovered an invoice generation error that was undercharging hundreds of thousands of customers.
• And to highlight the value of automated data testing, one of the world’s largest multinationals now uses data analytics to monitor all purchase-to-pay transactions for over 900 entities on a daily basis.

In a few more unusual (and entertaining) examples, data analytics revealed an employee of a well-known organization had spent over $12,000 on tarot card readings, while another firm learned that an employee was using a company credit card to purchase cattle for his ranch. These examples of both quick, bottom-line wins and ongoing business value reinforce the need to manage risk with technology.

As companies implement data analytics, they quickly advance along the audit and compliance analytics continuum from one-off analysis and sample-based testing to repetitive processes. At the far end of that spectrum lies the continual execution of automated audit and monitoring tests—representing the greatest opportunities for organizations to achieve dramatic benefits and efficiencies.

So why do some organizations achieve enviable, quantifiable results from their technology investment while others seem to flounder? The answer lies in best practices that make the analytics both sustainable and well managed. It’s also important to not think of analytics purely in terms of technology, but understand that people and processes are equally important to ongoing success.

With data analytics, success comes from applying sustainable technology across broad financial, operational and business systems. With effective, automated data monitoring, control gaps can be plugged and problem transactions can be repaired in real time. By combining audit analytics with management’s responsibility to monitor risk and controls, forward-thinking organizations can move toward a more integrated approach to audit and risk management—and that’s smart spending, in any economic climate.

No one has the crystal ball to determine what the future will bring. Yet, amid the great economic uncertainties facing companies and the mounting pressures bearing down on internal audit functions, this much is certain: CAEs have a unique opportunity to solidify their role as a strategic business partner to the CEO and CFO.

Assess the donor’s ability to pay. Check published credit ratings, financial analysis (such as cash flow and ratio analysis) or credit reports.
Determine the donor’s commitment to honor the promise. Consider the extent of the donor’s involvement with the not-for-profit; the donor’s history of charitable involvement and giving; the donor’s financial circumstances; and the donor’s personal circumstances such as family situation, age and health.
Study risk factors that affect certain groups of donors. Examples include economic conditions in certain geographical areas or industries.
Assess the not-for-profit’s prior experience. Consider the extent to which the not-for-profit has enforced previous promises to give.
Determine whether the underlying asset is held in an irrevocable trust or escrow. This may reduce default risk.

To account for risk, not-for-profits can use the discount rate adjustment (DRA) method or one of two expected present value (EPV) methods.

DRA discounts the projected cash flows by a risk-adjusted rate derived from rates of return for comparable assets or liabilities traded in the market. FinREC’s guidance for determining the discount rate includes:

If the donor is an individual, consider using unsecured consumer lending rates. These generally are available from published sources such as major financial institutions. FinREC advises using those rates when the credit characteristics of the donor and borrowers of unsecured debt are similar.
If the donor is a corporation, consider using the yield on its publicly traded debt. Look to the yield on debt issued by the corporation or by a comparable corporation. FinREC advises using that yield when the promise to give is similar to the publicly traded debt. If the donor is a private foundation, FinREC advises using the yield on publicly traded debt, whether issued by the foundation, a comparable foundation or a comparable corporation.
Whether the donor is an individual or a corporation, consider factors specific to the promise. This information, including the payment terms and risk of the promise, will help assess the extent to which the promise to give is similar to publicly traded debt.

The EPV methods also account for risk:

With EPV Method 1, discount the risk-adjusted expected cash flows by the risk-free interest rate. This rate may be indicated by the yield to maturity on U.S. Treasurys. The risk-free interest rate is appropriate because all risk is built into the expected cash flows. EPV Method 1 adjusts the expected cash flows for the systematic risk by subtracting a cash risk premium, resulting in a certainty-equivalent cash flow. Challenges in determining an adjustment for systematic risk can make EPV Method 1 impractical.
With EPV Method 2, discount the expected cash flows by a risk-adjusted rate. This rate is based on the risk-free interest rate, adjusted for general market risk by adding a risk premium. The risk premium is necessary because not all risk is built into the expected cash flows in EPV Method 2.

Alternative Minimum Tax
The alternative minimum tax (AMT) exemption amount increases for tax year 2011 to the following levels:
• $48,450 for singles and heads of household (up from $47,450 in 2010)
• $37,225 for married filing separately (up from $36,225)
• $74,450 for married filing jointly, and qualifying widows or widowers (up from $72,450)

Alternative Motor Vehicle Credit
The alternative motor vehicle credit cannot be claimed for a vehicle bought after 2010, unless it is a new fuel cell motor vehicle.

Capital Gains and Dividends
Lower rates for long-term capital gains and dividends remain in effect for 2011 and 2012. The rate on long-term capital gains and dividends remains at zero for those taxpayers in the 15% income tax bracket and below; the rate is 15% for taxpayers in the 25% bracket and above. Most taxpayers will use new Form 8949 to report capital gain and loss transactions. Schedule D, the form that has been traditionally filed to show these transactions, is now used as a summary sheet.

Child Tax Credit
The 2010 Tax Relief Act extended the credit of $1,000 per eligible child through 2012.

Designated Roth Accounts
Taxpayers who rolled over an amount from a 401(k) or 403(b) plan to a designated Roth account during 2010 and did not elect to report the taxable amount on a 2010 return must report half on the 2011 return and the rest on the 2012 return.

Due Date of Tax Return
Because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia, tax returns are due on Apr. 17, 2012.

Estate Tax
For individuals who died after 2010, the federal estate tax provides a $5 million exemption and a maximum 35% rate. These estate tax rules are scheduled to end following 2012.

First-Time Homebuyer Credit
In order to claim the first-time homebuyer credit for 2011, a taxpayer (or their spouse, if married) must have been “a member of the uniformed services or Foreign Service, or an employee of the intelligence community on qualified official extended duty outside the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.”

Foreign Financial Assets
For tax years beginning after Mar. 18, 2010, certain taxpayers may have to file the new Form 8938 with their returns. Form 8938 is used to report the ownership of specified foreign financial assets (including any financial account maintained by a foreign financial institution) if the total value exceeds a specified threshold. The threshold amount varies depending on if the individual resides in the U.S. and if the tax return is filed jointly with a spouse. It is a separate form and does not replace existing requirements for reporting foreign assets to the Treasury Department using Form TD F 90-22.1.

Health Savings Accounts and Archer MSAs
Beginning in 2011, the additional tax on health-savings account and Archer medical savings account distributions not used for qualified medical expenses has increased to 20% (up from 10% for HSAs and 15% for Archer MSAs). Also, starting in 2011, only prescribed drugs and insulin are considered qualified medical expenses.

Income Tax Rates
The 2011 rates carry over from 2010, but the income brackets are higher to account for inflation. The 2011 tax rate schedule can be found on page 273 of IRS Publication 17 “Your Federal Income Tax: Tax Guide 2011 For Individuals.”

Mailing Your Return
The mailing address for paper returns may have changed because the IRS has changed the filing location for several regions. Taxpayers are advised by the IRS to read the “Where Do You File?” page at the end of the 1040 instruction booklet.

Making Work Pay Tax Credit
The making work pay tax credit has expired and cannot be claimed on the 2011 return.

Energy Tax Credits for Homeowners
The “25(C)” credit for energy-efficient improvements has been extended, but the amount of the credit has been reduced to a maximum of $500 per taxpayer per lifetime. Taxpayers who took the maximum $1,500 credit in 2010 are not eligible.

Personal Exemptions
The amount one can deduct for each exemption has increased to $3,700 (up from $3,650 in 2010).

Repayment of First-Time Homebuyer Credit
Taxpayers who must repay the credit may be able to do so without using Form 5405.

Roth IRAs
Unlike 2010 conversions, all income resulting from a 2011 conversion must be included in that year’s return. For 2010 conversions, half of the resulting income must be reported in the 2011 return, and the rest in the 2012 return.

Self-Employed Health Insurance Deduction
For 2011, qualified self-employed taxpayers and S corporation shareholders can use the self-employed health insurance deduction to reduce income tax liability. The taxpayer must not be eligible to participate in an employer-sponsored health plan, and the insurance plan must be set up under the taxpayer’s business. Premiums paid for health insurance for the taxpayer, spouse and dependents typically qualify for the deduction. The deduction is taken on Form 1040 Line 29. The deduction from self-employment income for determining self-employment tax, available for tax year 2010, no longer applies.

Standard Deduction Increased
The standard deduction for certain taxpayers who do not itemize their deductions on Schedule A of Form 1040 has been increased. The amount of the deduction depends on the taxpayer’s filing status. The standard deduction for most people is $5,800 for single or married filing separately, $11,600 for married filing jointly or for qualifying widow or widower with a dependent child and $8,500 for heads of household.

Standard Mileage Rates
The standard mileage rate for the business use of a car, van, pick-up or panel truck has increased to 51 cents a mile for the first half of 2011, and 55.5 cents per mile for the second half.

The Bottom Line
The Internal Revenue Service’s website provides detailed information on these important tax law changes. If you have questions about these changes or about your 2011 tax return, please consult one of our qualified tax professionals.

Please note: While every attempt has been made to provide timely and accurate information, this article should not be considered a definitive tax guide, nor should it replace the advice of a qualified tax professional.