The GSCPA House of Blogs
For the members. By the membersAICPA April 2012 Board Meeting
Written by: Bill Schneider
It hit me as I was preparing for this Board meeting that this was my next to last meeting in New York with the Board. My three year term is nearly up. It has been a great three years, and I am looking forward to the last meeting in August and my final act of making the audit committee presentation at the October AICPA Council meeting. Of course this just marks the end on one stage of my involvement with the profession. I will continue to serve on the AICPA council for two more years as I was nominated to complete the remaining two years of an unexpired term as a member at large. I will also continue to serve through the end of 2014 as the AICPA representative on the IFAC Professional Accountants in Business committee as well as the TSCPA Business and Industry Issues committee. Even though my term on the Board is nearing an end, there are plenty of issues that the Board will have to deal with this year and beyond. Some of them are highlighted in the remainder of this blog.
Mandatory Auditor Rotation – a big topic of discussion was the PCAOB and EU proposals around mandatory auditor rotation for public companies. We had a specific agenda item covering the results of the recent PCAOB roundtables on the subject, but it was also discussed within several other agenda items including the report from the CEO, the report from the Center for Audit Quality (CAQ), and the report on what is happening in Washington. The PCAOB proposals were seriously questioned by members of Congress (both Democrats and Republicans) at recent congressional hearings. The focus of the questions was on what issue is mandatory rotation trying to solve and are there better, less invasive ways to solve those issues. The PCAOB has made it clear they will be discussing this for a while before they even consider proposing any actual rule changes, so we all need to keep up with this issue as it continues to develop.
Cyber Security – If you weren’t aware, the AICPA was the subject of a spoofing attack recently. Over 90 Millions emails were sent out under a spoofed AICPA address stating that the AICPA was canceling your license. Putting aside the fact that the ACIPA has no authority to cancel your CPA license, the incident had many impacts. Clicking on the link in the email resulted in an attempt to install malware on your computer that would potentially send key financial information to the people who launched the spoof. In addition, millions of the emails had bad addresses, so the AICPA email system was temporarily brought down by getting hit with millions non-delivery email responses in less than 15 minutes. Keep in mind, this email didn’t come from AICPA systems – they simply sent out emails from other systems that made it look like they came from the AICPA. The costs of dealing with this attack were significant, but not nearly as much as they would have been had the AICPA systems been actually breached. And this goes beyond just the immediate costs as shown by these statistics.
- 25% of businesses have had a merger, acquisition or new product roll-out stopped or delayed by a Cyber breach per a McAfee/SIAC study
- 20% of victims who have had data compromised cut ties with the institutions that compromised their privacy.
Like all businesses, the AICPA takes security and privacy very seriously and we have extensive controls and procedures to protect your personal information, but as always the controls start with you. If you get an email that looks or sounds strange, don’t be afraid to question it. Did it really come from the purported sender? Is this legitimate? Always ask those questions, no matter who the email is from and don’t be afraid to call the sender to make sure it is real.
Total Tax Insights – the last thing I want to do is mention a tool that will soon be introduced by the AICPA in conjunction with its 125th anniversary in May. This tool will enable people to determine their total tax burden from all taxes (income, property, sales, gasoline, telephone, electricity, alcohol, cigarette, etc.) they pay down to the county level – all 3,035 of them. It will be a great way for people to understand the full tax burden incurred by different people at different income and wealth levels across the country. Be on the look-out for the launch of this fantastic tool.
The AICPA Spring Council meeting and 125th anniversary will take place in mid-May and I will update you on what happened at that meeting and other items impacting our great profession in the coming weeks.
Clarity
Written by: Lee Woodward
As an accounting instructor I’ve had the opportunity to work with a number of textbooks, some better than others. As a consultant I get to work with software manuals, some better than others. It seems that written communication has become, for many of us, a forgotten art. This is especially true of such exciting topics as advanced accounting and production costing.
This is no trivial matter. Every year companies and students invest untold millions in training. Their goal is to convey sufficient understanding so that students can perform their professional duties. There’s a pretty obvious correlation, for example, between the quality of financial statements and how well the accountants and auditors involved understand their respective roles.
All of this seems intuitive, yet you wouldn’t know from reading most accounting textbooks. Discussions of such topics as consolidations and non-controlling interests confuse more often than they explain. The instructor then has to go through the material and rewrite it in simpler terms, broken out into steps with explanations as to why these steps are necessary.
Accounting texts typically use manual worksheets to explain the processes involved in consolidation. They still use pencil and paper journals and ledgers to illustrate transaction recording. Students often complain about the disconnect between these illustrations and the things they do in the real world of computers.
The accounting software training manuals I’ve worked with aren’t much better. Rather than explaining how to carry out daily procedures and then showing all the setup decisions needed to support those procedures they jump straight into the setups. Inconsistencies between the terminology used in software manuals and those used in accounting classes only make matters worse.
Maybe someday a textbook publisher will actually hire professional writers as editors. Perhaps software publishers will hire accountants to review their manuals for inconsistencies between design and practice. Until then there is a world of opportunities for those who can translate text speak and manual speak into language that mere mortals can understand.
What Happens If….
Written by: Bill Schneider
It seemed like the whole country was following the arguments before the Supreme Court on the Constitutionality of the Individual Mandate in the PPACA – better know as the Health Care Act (or as some like to call it Obamacare). I do not recall this much interest in judicial proceedings since the OJ Simpson Trial. We are now waiting to see the Court’s decision, but we will have to wait until the end of June to find out. Essentially, there are four possible outcomes.
- The mandate is constitutional and everything stays just the way it is
- The mandate is not constitutional, but it is the only part struck from the law
- The mandate is not constitutional and other integral parts are struck along with it
- The mandate is not constitutional and so integrated with the rest of the law that the whole law must be struck down
As an accountant I have been told more than once I have no business trying to play the part of lawyer, so I won’t venture any opinions on which outcome is likely, but as accountants we are responsible for helping our businesses make plans. In this case, those plans include thinking about the “what ifs” if the law is struck down. With 2,700 pages of law and thousands of pages of passed and proposed regulations, the “what if” list is quite long.
One of the first decisions businesses and insurers will have to make is how to deal with the benefit changes they already made to comply with the law. Does the business still want to insure dependents of employees up to the age of 26 as was required by the law? What about reinstituting lifetime coverage maximums? What changes should be made to preventive care and checkup benefits now that they aren’t required to be without a co-payment?
Another significant impact close to the heart of many CPAs is the elimination of the requirement to include the dollar amount of medical benefits on an employee’s W-2. Most businesses are well underway with their plans to determine the amount and develop ways to include it on the W-2 since it is currently required to be included on the 2012 W-2s to be issued in early 2013. Another change would be around Flexible Spending Accounts or FSAs. Under the law the maximum contribution to an FSA would drop to $2,500 in 2013. Businesses will need to be prepared to modify their annual enrollment process quickly to keep up with the changes.
As I said, the list is long and I could spend the next ten blogs going over the possible impacts, but I think you get the idea that the Supreme Court decision is of more than a passing interest to CPAs in Business. The decision will impact budgets, planning and a number of processes, so like the rest of the country we will be waiting, but unlike the rest of the country, we are already starting to think “what if…”
The 40 Hour Fantasy
Written by: Bill Schneider
The local paper here in Dallas recently had an article in the opinion section on the history of the 40 hour work week and how it cam to be enshrined in the Fair Labor Standards Act (FLSA). There were interesting slants in the article on how the 40 hour work week was already the standard by time it became law in 1937. That’s not what really intrigued me about the article. What I found interesting were the studies on productivity gains from working people more than 40 hours per week that have taken place more recently.
One of the key findings from the studies is there is not a one-for-one relation ship between productivity increases and increasing the number of hours worked. For example, one study found that increasing hours worked by 50% only resulted in a 30% productivity increase. If you’re paying workers by the hour, this does not seem to be a rational way to increase production, especially considering you have to pay time and a half for those increased hours.
But what if you aren’t paying workers by the hour like most CPAs (who are generally considered exempt employees under the FSLA). In that case you are getting extra production for free – who cares if the increase in production is not equivalent to the increase in hours. That’s where another study came in with a very interesting finding. The study found that the production gain from extra hours deteriorates over time. That is, you may start out with a 30% production gain for 50% extra hours, but over time that 30% shrinks as workers don’t have enough time to handle personal matters, family and sleep. In fact, eventually productivity goes negative according to this study. The point of the study was that the productivity surge does work a little while and is a good way to handle a temporary serge in work (can we say busy season or year-end close), but you can’t expect it to go on forever.
As with anything, there are always exceptions to the rule. I would consider most CEOs and CFOs (and managing partners) to be exceptions, but therein lays the problem. They don’t personally experience the productivity fall-offs from working the extra hours and therefore don’t understand why it happens in others (or worse assume it happens because the workers are lazy and not trying hard enough).
On the other hand I think the studies might be a little dated and don’t take into account the location flexibility of the modern knowledge worker. In today’s world it is possible to leave the office on time (even early?) to get to the kid’s ballgame and eat dinner with the family, take the dog for a walk and help with the homework and then get a little more work done with a refreshed state of mind and a remote connection that is just as efficient as being in the office prior to heading off to sleep for the night.
As usual, I think the answer may be somewhere in the middle. Today, I think it might be possible to get a one-for-one increase in productivity to increase in hours with the right mix of flexible work arrangements. The magic is, if that is true, then it doesn’t take as many hours to get the same increase in productivity as it used to which leave more hours for everyone to enjoy themselves with family and friends.
I would love to see more studies on this subject.
Dorothy You’re Not in Kansas Anymore
Written by: Bill Schneider
That famous phrase came to my mind a lot the week I spent in India. It hit me as soon as I got off the plane and was walking through the airport. It’s hard not to notice the soldiers walking around with AK 47s on their shoulders. I reminded myself that this was India that was subject to several terrorist bombings in the last year and they were taking security seriously, but this was a high profile airport and things would change once I was on my way to the Hotel. Yeah right.
The first thing you notice on the roads in India is that the white lines are merely suggestions, and not serious ones at that. There might be three lanes at an intersection, but there are often six or even eight vehicles across and when the light changes, watch out! They also take their horns very seriously. They use them so often the cars often have special buttons on the steering wheel so they don’t have to lift their hand to honk the horn (yes I am serious). I thought a New York taxi ride was wild, until I road around India for a week.
Once I survived my ride to the hotel I thought it would finally be time to relax, but once again I was wrong. As my car got into queue to go through the gated entrance to the hotel, I realized that all of the cars were popping their hoods and trunks and the guards were using a mirror device to look under the cars for bombs. I guess after the bombing of the hotel in Mumbai last year, they decided to get very serious about making sure it didn’t happen again. Tip for those traveling without their spouse – do like I did and don’t tell them about the bomb inspections until you get home. There is nothing they can do about it anyway, except worry, so why put them through that.
After being sequestered in the Hotel for the conference, we finally got to get back out on the roads for some more eye opening experiences. The 150 kilometer (less than 120 miles) trip to the Taj Mahal took five hours one way – and that was on one of the better highways. The concept of slow vehicles staying to the right (or I guess the left in the case of India since they drive on the opposite side of the road like the British), does not enter the Indian psyche. We were weaving (as best you could do in a bus) around tractors pulling trailers, Camels and Cows (yes cows) pulling carts and the ever popular Tuk-Tuks (a three wheeled motorized vehicle that often functions as a taxi).
Please don’t get me wrong. India is a very modern country with all of the latest gadgets available to its citizens. There is a large and growing middle class, and you can see the potential with every turn. But being in India for a week also made me realize how wondrous our country is and why so many people want to come here. Even our poor live in sizable apartments with multiple rooms and at least one nice T.V. – not the mud huts that we saw some of the farmers living along the highway. As crumbling as you hear the politicians describe our highways and infrastructure, it is still light years ahead of what they have in India.
As interesting as India was, I was happy to return to the U.S. and drive 30 miles in 30 minutes to get to my house from the airport. In fact, sitting in traffic this week didn’t seem nearly as bad as it did the week before I left. Maybe that is the most important lesson I learned from my trip to India – to appreciate the many blessings I have by living here in the U.S. and being part of the greatest profession in the country.
