CPA Success

Top 5 mistakes in implementing new auditing standards

If you’re an auditor, chances are you’re grappling with the slew of new auditing standards that have been implemented recently.

• There’s Statement of Auditing Standard 103, a documentation rule that requires auditors to document their work so that it can be recreated by third parties.
• There’s SAS 112, which requires auditors to report material deficiencies and weaknesses in internal controls to their clients in writing.
• And there’s Statements of Auditing Standards 104-111, the new risk assessment standards that ask auditors to consider the risk that a plan’s financial statements may be misstated and to design their audit steps so that the risk of misstatement is reduced.

Lots of new complexity to deal with. And not surprisingly, some auditors are making lots of mistakes as they try to comply with the standards.

Jennifer Louis has been documenting those mistakes and teaching CPAs how they can avoid them …and conduct better audits in the process. Louis is president of Emergent Solutions Group, which offers training specifically for financial and accounting professionals. She is also an instructor with the Business Learning Institute, where she teaches a number of programs, including one titled, “Integrating the New Risk Assessment Standards into the Audit Process.”

In this MACPA podcast, Louis identifies the top five mistakes she believes auditors are making with regard to the news standards. Those mistakes are:

1. Relying too much on standard audit tools and not really understanding how to assess specific risks.
2. Failure to hone in on the biggest risks for specific clients. Some auditors don't identify anything as a risk, while others identify everything as a risk.
3. Thinking of the audit at the transactional level, rather than seeing the big picture of what's going on after a transaction occurs.
4. Relying too much on clients' internal controls when those controls haven't really been tested.
5. Not adjusting audit procedures to align with the level of audit risk.

Listen to the podcast in its entirety to hear Louis' take on these mistakes -- as well as her advice for how to avoid these mistakes in future audits.

• Subscribe to our free weekly podcasts here, or open your copy of iTunes and search for "CPA Spotlight."

Learn more at the Expo
Louis will lead a pair of programs --  a Sarbanes-Oxley update and a look at internal controls -- at the first-ever Maryland Business and Accounting Expo, slated for June 17-18 at the Baltimore Convention Center. Get details about the Expo and register here.

The human cost of the mortgage mess

There's been plenty of discussion about the causes and impacts of the mortgage debacle, but two new podcasts capture aspects of the crisis in ways I hadn't heard before.

The first is "The Giant Pool of Money," the May 9, 2008 edition of the Public Radio International program This American Life. Rather than dissecting the crisis in econo-speak, the program goes straight to the people who played the most important roles in the crisis -- the bankers, the analysts, the mortgage brokers and, yes, the homebuyers themselves -- and asks them to tell their stories. Those stories are enlightening, angering, heart-breaking and, in true This American Life form, fascinating. Check it out.

The next is a Morning Edition interview with fanancier George Soros, who calls the mortgage mess "the worst, most serious crisis of our lifetime." Soros also takes issue with the notion that the markets will eventually correct the mistakes made by humans. "Markets are also human and they are also bound to make mistakes," says Soros. "Instead of markets always being right, they're actually always groping at trying to find out what the facts are. But they never get it right."

I'm not sure I agree with everything Soros says, but it's an interesting interview nonetheless. Give it a listen here, then tell us: Just how bad do you think this crisis is?

Tag that data: SEC proposes XBRL mandate

As expected (and reported earlier), the SEC has put forth a timetable that leads to the required use of XBRL in the preparation of financial statements.

XBRL, of course, stands for eXtensible Business Reporting Language. It's a language that helps companies electronically communicate their business and financial data to investors, analysts and other people who need that information. Skeptics exist, but supporters are convinced the technology could revolutionize the financial-reporting process.

Either way, XBRL is now a mandate, with the SEC proposing a three-year timeframe for adoption. "The plan," writes CFO.com's Alan Rappeport, "initially would require companies with market capitalization of more than $5 billion —- about 500 firms total -— to make disclosures in XBRL format beginning in the fiscal periods ending in late 2008. They would become public in that format in early 2009. The following year, all other companies that file their statements using U.S. generally accepted accounting principles would have to follow suit. In the third year of the proposal, international companies that file with the SEC using international financial reporting standards would also be required to file in XBRL format."

The sooner the better, according to this AICPA whitepaper. Titled ""The Shifting Paradigm in Business Reporting and Assurance," the paper claims that private and public companies alike will benefit from the adoption of XBRL and Enhanced Business Reporting.

"The current reporting and assurance model does not effectively meet user needs in today's global markets," said Alan Anderson, chair of the AICPA's Assurance Services Executive Committee. "We wrote this paper to highlight changes in the global business environment and help organizations understand and appreciate emerging reporting needs.

• Download the white paper in its entirety.

What's your take on XBRL and this new era of business reporting?

Learn more at the Expo
XBRL will be discussed in detail during a session at the first-ever Maryland Business and Accounting Expo, slated for June 17-18 at the Baltimore Convention Center. Get details about the Expo here, then register here.

Can you be trusted? Take this test and find out

"Trust," writes Charles H. Green, "is the glue that holds together the networked relationships defining the new economy. The ability to trust and be trusted is at the core of business as well as personal relationships."

So how trustworthy are you?

Now you can find out by taking the Trust Quotient Self-Diagnostic.

Compiled by Green (co-author of The Trusted Advisor with David Maister and Robert Galford), the 20-question test rates your trustworthiness on a scale of 0.6 (the lowest possible score) to 15 (the highest).

Given CPAs' reputation as the most trusted business advisors, we figured you should give it a try. And be sure to share your results with the rest of us.

Not everyone gets to stimulate the economy

Economic stimulus payments are flying into taxpayers' mailboxes, but not everyone is happy.

A provision designed to keep illegal immigrants from receiving economic stimulus payments apparently is having some unintended consequences. Namely,  it's keeping thousands of taypayers -- people who otherwise would qualify without issue -- from receiving their checks.

The provision requires taxpayers to have a Social Security number to qualify for the payments. Thousands of U.S. taypayers are being denied payments under this provision because they filed joint returns with spouses "whose immigration status doesn't allow them to have a Social Security number," according to this Associated Press article. "Among them are some of the 288,000 U.S. troops stationed overseas who may have married a foreigner."

The IRS issued a clarification on April 14, 2008, suggesting that those who wanted to receive the payments might want to consider filing separately. Trouble is, the benefits of filing jointly often outweigh the $600 an affected taxpayer would receive by filing separately.

Is this a case of unfair bureaucracy, or just the price we pay for reasoned legislation?

Thanks, Mom

Why do we celebrate Mother's Day?

Garrison Keillor knows, and in this Salon column, he tell us. It's because Mom is our biggest fan, no matter what kind of trouble we cause. She's the one person who will never give up on us.

"She knows when you're in trouble," Keillor writes. "And you will get into deep trouble someday. Count on it. Someone will file a lawsuit against you and subpoena your e-mail and it will all come flooding out, your dark secrets, your nefarious dealings, and your friends will cross the street to avoid you and your brothers and sisters will fade into the woodwork, but your mother will still love you. Like an old lioness, she'll come running even if you're 2,000 miles away."

Thanks, Mom. And happy Mother's Day.

What are your customers thinking? Find out here

Saturdays at CPA Success are usually spent reviewing online tools that can help increase our productivity. Keep in mind that we do not endorse any of these services. We simply offer them up for your consideration. Do your own homework and find the service that best meets your needs.

One of the best metrics you can hope to obtain is direct feedback from your customers. But what's the most efficient -- and cost-effective -- way to obtain that information?

There are a number of online services that can help you out in this area. Some of you might already be using SurveyMonkey or Zoomerang, but there are lots of other options as well, including Wufoo (which came highly recommended at the recent DigitalNow conference in Orlando) and PollDaddy. Each of these offers you the opportunity to experiment with the service at no cost, or to add more bells and whistles for a monthly fee.

Check 'em out. They're fantastically easy ways to get feedback from your customers, and the information you obtain will be invaluable.

Play around with them, then tell us: Which online polling service is your favorite, and why?

Here's how to perform like a Hall of Famer

Do you ever think to yourself, "If only someone would notice me, if only I could catch a break, if only I could find a little luck, I could make something of myself!"

Me, too. Then I read something that made me realize what a load of garbage all those thoughts were. And I read it in the unlikeliest of publications.

When you get an opportunity, pick up the April 28, 2008 issue of Sports Illustrated. Now, in the interest of full disclosure, I'm a sports nut. I used to be an assistant sports editor for a North Carolina newspaper, I worked for the CBS Sports Web site for a few years (I gave up CBS for CPAs, you might say), and one of my college buddies writes for Sports Illustrated, so I'm a little biased when it comes to sports journalism. Still, it's hard to read the cover story in that particular issue and not be inspired.

The article is titled, "The Best Game Ever," and is an excerpt from a book by the same name by Mark Bowden. Its title refers to the 1958 NFL championship game between the New York Giants and the Baltimore Colts. The actual game, though, is an afterthought. The article is really about Baltimore wide receiver Raymond Berry.

Berry was an unlikely NFL star. He was skinny, slow and nearsighted -- not a great combination for a professional athlete. But he made up for all of that by working harder than anyone else on the field.

Here's what he did: While his teammates were out bar-hopping and carousing, Berry meticulously studied game films, focusing only on his position, diagramming every play of every game he watched. "He sought out film of successful receivers and studied their routes and their moves," writes Bowden, "making page after page of notes in his tidy little handwriting."

Then Berry took those handwritten notes to deserted football fields and practiced. And practiced. And practiced. He ran entire games' worth of routes over and over until he knew them by heart -- and until he was in better shape than any of his opponents. He worked with Colts quarterback Johnny Unitas on fakes, timing and precision. And when it came time to put his hard work into action, he made it pay off. In that '58 championship game, he caught 12 passes for 178 yards, including three catches for 62 yards in a late-game drive that helped set up a game-tying Colts field goal. Baltimore went on to win 23-17 in overtime.

Eventually, that skinny, slow, nearsighted misfit turned himself into the greatest wide receiver the NFL had seen to that point -- and redefined the game in the process. Today's best players left the bars behind long ago. Instead, they're studying game films as meticulously as Berry once did.

To me, Raymond Berry's story is a fantastic example that speaks to the power of preparation and hard work. Berry proved that the secret to success isn't catching a break; it's making your own breaks.

ProBlogger's Darren Rowse used a different source of inspiration to arrive at the same conclusion. In a recent post, Rowse quoted poet David Perkins, who wrote, “Do not follow where the path leads. Rather, go where there is no path, and leave a trail.”

What trails are you creating these days, and how are you doing it?

CPA mobility movement rolls on

The CPA mobility dominoes continue to fall.

Maryland became the 18th state to enact mobility legislation when the General Assembly unanimously approved passed House Bill 1296, which is designed to make it easier for CPAs to cross state lines to do business.

As of May 7, 2008, that number had jumped to 23, and the momentum shows no sign of slowing; 10 other states have mobility legislation pending. “The momentum has really built for this mobility initiative,” Barry Melancon, president and CEO of the American Institute of CPAs, said in this AICPA article.

Get the latest mobility-related updates here and here.

CPA exam gets a modern makeover

There's a lot going on in the profession these days -- new regulations, new standards, added levels of complexity. It's time the CPA exam reflected these changes.

That's apparently the stance the AICPA is taking. The Institute wants to update the exam's content to reflect recent developments, and it is seeking the public's feedback on the proposed changes.

Included in the proposals are a renewed emphasis on ethics, more detailed descriptions of the skills that entry-level CPAs are expected to possess, and information about international financial reporting standards -- the first time IFRS has been offered for inclusion on the exam. Additional testing would be required if IFRS becomes generally accepted in the United States.

“The CPA examination tests the knowledge and skills that are relevant for entry-level CPAs. In doing so, the public is protected,” said Craig Mills, executive director of examinations for the AICPA. “That’s why the AICPA Board of Examiners, which oversees the exam, is already assessing strategies to incorporate IFRS into the exam.”

• Download the exposure draft in its entirety.

Comments on the proposals must be submitted by July 31, 2008.

Staffing woes: Is help on the way?

Are we on the verge of a staffing renaissance?

I don't think anyone is ready to go that far yet, but the news out of the AICPA is certainly a breath of fresh air.

The number of students who graduated with bachelor's or master's degrees in accounting during the 2006-07 school year -- more than 64,000 -- was the largest in the 36 years the AICPA has been tracking such data. With recruitment and talent management near the top of everyone's list of the biggest issues facing the CPA profession today, that's certainly welcome news.

• Read the report in its entirety.

It's been evident almost since the moment Enron when under, but the driving force behind this educational resurgence appears to be the spotlight of scandal.

“The years in the aftermath of Sarbanes-Oxley have spotlighted the critical role the accounting profession plays in our capital market system,” said Denny Reigle, AICPA director of academic and career development. “One fortunate result of SOX was greater interest in accounting on the part of students, as this report attests.”

The CPA profession has been devoting increasing time and energy to trying to solve the staffing crisis. Those efforts include:

• Tomorrow's CPA, the MACPA's student-recruitment initiative;
• Candidate membership, a level of membership designed to guide accounting graduates through the process of passing the exam and becoming CPAs;
• a series of BLI seminars that address staffing issues; and
• a wealth of AICPA information and resources geared toward students and candidate CPAs.

What do you think? Will this influx of accounting talent help ease your CPA staffing worries?

A sure-fire solution to financial illiteracy: Teach your children

We've spent lots of time here lamenting the fact that our financial IQs are so low.  There are lots of possible solutions out there, but perhaps the best one is this: Make financial literacy one of the very earliest parts of your children's education.

This Money Management column from the MACPA and the American Institute of CPAs offers some suggestions on how to do this:

• Give your children some financial responsibility along with their allowances. Let them make decisions about what to do with their money ... and allow them to make mistakes, too. Those are often the best lessons.
• Encourage them to save some of their allowances. Help them make goals and explain how they can reach those goals by saving part of their money. You might even consider opening a savings account for them.
• Set rules about what they are expected to do with their allowances. "It may be meant to cover splurge items, such as new toys or pizza after school with friends," the article explains, "or you might ask them to chip in on other expenditures, such as equipment they will need for a sports team."

CPAs themselves offer some fantastic advice how how to make financial literacy a family affair in this YouTube video:

What financial advice works for your family? Let us know, then check out these other financial literacy resources:

• MACPA financial literacy resources
• Money Management columns
• Financial Planning Tips for a Lifetime
• 360 Degrees of Financial Literacy
• Feed the Pig

Twitter: Business tool or waste of time?

Are you using Twitter yet?

Judging from personal experience, I'm guessing your answer is either, "Yeah, isn't it great?" or "You've got to be kidding me."

Twitter is one of the most popular tools for "micro-blogging" -- a form of blogging that allows for brief, text-only posts. And when I say brief, I mean brief. Twitter's posts are limited to 140 characters.

When it comes to opinions, there doesn't seem to be a lot of middle ground: The people I've talked to think Twitter is either (a) the second coming, or (b) a useless time-waster for geeks.

And make no mistake: You can waste lots of time on Twitter. Two of today's posts, for example, read: "Watching Cloverfield," and "Watching American Idol." As if I need to know that.

But I joined Twitter anyway, mostly to see if it has any useful business applications. So far, I'm cautiously optimistic. I love the fact that you can communicate with many people almost instantly across multiple networks. (Twitter posts can be accessed online, on mobile devices, through instant messaging or via third-party social networks like Facebook. There's even a widget that will post your latest Twitter entries on your blog via an RSS feed.)

I wanted to find out how other people are using Twitter for business, so I posed the question on my LinkedIn network. Here are just a few of the responses:

• "(It can be used) as an emergency / important message beacon. (It) allows you to distribute emergency or important messages to a list of Twitter users."
• "Twitter can be an ingenious tool for team collaboration, especially when they are in disparate locations. Say, for example, you have teams in the (Pacific Rim) and America working collaboratively on a project. Having the ability to ‘chat’ via Twitter can prove valuable in maintaining real-time communications."
• "I often describe Twitter as a cafe or pub, but lately I've come to see it as a non-stop, 24/7 'networking event.' In that context, the business application is clear: relationship-building."
• "It does take some time to immerse yourself in Twitter to come to terms with how powerful it can be. In my case, I only started 'unlocking' these ideas once I began using the third-party tools built around the Twitter platform, such as Tweet Scan. This way, it is very easy to search for a brand or product name and join conversations according to subject matter. There seem to be new customer service examples every day, but this recent one by Mario Sundar about Comcast is also particularly relevant."
• "Primarily, as a marketer / community guy, it's an interesting tool on three fronts: (1) Global focus group. (2) Real-time responses (3) Stay in touch with users. All of these center around the need for companies to better communicate with their users. A caveat, though, is that you shouldn't be too liberal in your connections, or you'll be drowned in noise."

ProBlogger's Darren Rowse takes it a step further in this blog post. He sees Twitter's potential in research, branding, content promotion and networking, among others.

On the other hand, here are some practical thoughts from Seth Godin, who has chosen to NOT use Twitter: "I don't want to use a tool unless I'm going to use it really well. Doing any of these things halfway is worse than not at all."

What do you think? Does Twitter have any real business value?

Here are some other Twitter-related resources:

• Follow me on Twitter.
• How to use Twitter for marketing and PR
• The business value of Twitter

AICPA issues new peer review standards

Attention, firms: You might have already heard, but just in case ...

The American Institute of CPAs has issued revised standards for performing and reporting on peer reviews. "The new standards are intended to produce simpler, more readable reports that will provide greater transparency to state boards of accountancy, federal agencies such as the Government Accountability Office, and the private sector," the AICPA reports.

The new standards are effective for peer reviews that start on or after Jan. 1, 2009.

• Download the revised standards here.
• MACPA peer review resource center
• AICPA peer review resource center
• Center for Public Company Audit Firms Peer Review Program

Three new takes on the mortgage mess

How far has the subprime-mortgage debacle progressed? Far enough so that we now have:

• official rankings of the worst cities for homeowner debt. The list, compiled by Forbes.com's Matt Woolsey, takes into account the impacts of mortgages, home equity loans and second loans. Washington D.C. comes in at No. 5.
• calls to prosecute the worst of  the mortgage predators. "We may be a long way from the right solutions to avoid another mortgage meltdown," writes The Washington Post's Michelle Singletary. "But one thing officials can do now is prosecute those who have engaged in unlawful activities. And when I say prosecute, I don't mean handing out civil penalties that do little to discourage dishonest brokers, lenders and loan officers. I mean criminal prosecution."
• choruses of "I told you so!" from those who saw it coming. According to CFO.com's Tim Reason, in December 2005 the Financial Accounting Standards Board issued FASB Staff Position SOP 94-6-1, which warned readers that the FASB was "aware of loan products whose contractual features may increase the exposure of the originator, holder, investor, guarantor, or servicer to the risk of non-payment or realization." It wasn't exactly Nostradamus, but it was still some pretty impressive foresight on the FASB's part.

What do you think? Do we need stiffer penalties for those responsible for this mess?