Archive Page 2

31
Jul
13

Gifts-in-kind: Contributions and valuation

In the August 2013 Journal of Accountancy, the AICPA published this article on Gifts-in-kind: What are they worth?   It summarizes many challenges an NFP faces valuing GIK.  It touches on GIK valuation considerations (ASC 820), GIK contribution considerations (ASC 958), and management considerations, and it provides insight into how an organization may navigate these GIK challenges.

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20
Jul
13

Are you a continuous learner?

What are you doing to challenge yourself to learn today, to grow and become more equipped?  How are you identifying new tools, new responses, new approaches so that you have more to offer today then you did yesterday?

It is certainly possible to attend 40 hours of CPE a year without learning.  That’s not the “learning” I’m talking about.  What has changed or transformed you lately?  Anything?

I found several blogs about continuous learning I want to share with you.  One is about where continuous learning fits within a model to prepare you for the next stage in your career.  Another is about learning to equip yourself.  Don’t stagnate with what you learned in school, or the tasks you were trained on the job.   The technical standards side of accounting is in constant change, just go to the FASB project roster to see evidence of that.  The technology we leverage advances before its even implemented – what is your approach to stay ahead?

Benjamin Franklin said “Tell me and I forget.  Teach me and I remember.  Involve me and I learn.”  I know I learn best from actively engaging in a discussion.  How do you learn best? If its by being involved, how are you involved?  Are you reading books, periodicals or blogs?  Are you taking a class online or are you teaching a class for others?  Are you speaking at an event?  Commit yourself to learn in whatever way is most effective for you.   Be disciplined to following through.

03
Jul
13

COSO’s Internal Control – Integrated Framework: Updated 2013 Edition

After its initial release of the framework 20 years ago, COSO has now come out with an updated edition in May 2013.  The updated Framework has considered changes in business and operating environment and accordingly expanded the operations and reporting objectives. What is more interesting (and the most prominent / significant one!!!) is that the updated Framework has articulated 17 principles of effective internal control.

 

I. Control Environment:

  1. The organization demonstrates a commitment to integrity and ethical values.
  2. The board of directors demonstrates independence from management and exercises oversight of the development and performance of internal control.
  3. Management establishes, with board oversight, structures, reporting lines, and appropriate authorities and responsibilities in the pursuit of objectives.
  4. The organization demonstrates a commitment to attract, develop, and retain competent individuals in alignment with objectives.
  5. The organization holds individuals accountable for their internal control responsibilities in the pursuit of objectives.

 

II. Risk Assessment:

  1. The organization specifies objectives with sufficient clarity to enable the identification and assessment of risks relating to objectives.
  2. The organization identifies risks to the achievement of its objectives across the entity and analyzes risks as a basis for determining how the risks should be managed.
  3. The organization considers the potential for fraud in assessing risks to the achievement of objectives.
  4. The organization identifies and assesses changes that could significantly impact the system of internal control.

 

III. Control Activities:

  1. The organization selects and develops control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels.
  2. The organization selects and develops general control activities over technology to support the achievement of objectives.
  3. The organization deploys control activities through policies that establish what is expected and procedures that put policies into action.

 

IV. Information and Communication:

  1. The organization obtains or generates and uses relevant, quality information to support the functioning of internal control.
  2. The organization internally communicates information, including objectives and responsibilities for internal control, necessary to support the functioning of internal control.
  3. The organization communicates with external parties regarding matters affecting the functioning of internal control.

 

V. Monitoring Activities:

  1. The organization selects, develops, and performs ongoing and/or separate evaluations to ascertain whether the components of internal control are present and functioning.
  2. The organization evaluates and communicates internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors, as appropriate.

 

Apart from listing these 17 principles, the updated Framework has also described important characteristics of these principles though ‘points of focus’ aimed at clarifying requirements for effective internal control. ‘Points of focus’ are anticipated to provide helpful guidance to assist organization in designing, implementing and conducting internal control and in assessing whether relevant principles are present and functioning.

The updated Framework is expected to increase the ease of use and broaden application by expanding operations and reporting objectives. It seems that the updated Framework is intending to create a more formal structure for designing and evaluating the effectiveness of internal control. In my view, it is also reflecting the increased relevance of technology.(Principle 11) Considering the Enron, WorldCom saga, 2008 global financial crisis, etc, the updated Framework has given specific consideration to anti-fraud subject in relation to internal control.

Organizations currently using the original 1992 Framework should be able to establish their transition plan to move to updated 2013 Framework. The onus is on these organizations to apply the updated Framework by December 2014 for external reporting.

20
Jun
13

The benefits of properly planning an audit

I found a few jars of jam recently in my freezer. These jars came from my good friends and neighbors who had moved to Africa two years ago. They were cleaning out their freezer prior to their move and gave us the jam.

I am not a big fan of jams but my family is, especially for peanut butter and jelly sandwiches so I have been using these jams alot. This week I was down to my last jar of jam and was pondering the planning and process that went into preparing and preserving these jams. It dawned on me that a process that had happened at least two to three years ago was still benefiting my family. By investing her time in food preservation (i.e. canning jams), my neighbor saved my family time and money. She delayed our need to go to the store to buy a jar of jam.

This example made realize that the value of good planning translates into all facets of life including work. In my case, work involves planning an audit. I go through this process at least three times a year for my audits.

If you are in doubt that good planning pays off, here are some of the benefits, amongst many:

1. Good planning saves time

-helps you prioritize audit procedures to focus on the important things

-frees up time to respond to emergencies or unanticipated events during the audit

-frees up time to help others

-frees up time for value add opportunities

2. Good planning helps you stay organized

-helps you organize the deluge of data that is always part of an audit

-helps you document audit work in a linear framework consistent with auditing standards

3. Good planning helps you keep the client happy

-helps you meet expectations on timeframes and deadlines

-respects the client’s time

  • by getting on their calendar early before it gets filled up with other meetings
  • by giving them enough time to prepare the items requested for the audit
  • by being strategic about the number of necessary meeting times (Less vs. more is always best. This can be    accomplished by methodically gathering questions and open items and possibly meeting fewer times with the client but maybe for longer periods)

4. Good planning reduces the overall stress of the audit

In a future post, I will talk about some of the ways to plan well for an audit. Hopefully you can share some of your tips with me as well.

06
Jun
13

Reader Survey

Over the past year we have noticed our readership steadily increasing and wanted to get a better idea of who is reading our blog and the issues that you are dealing with.  We’d appreciate you responding to our poll.  Thanks!

28
May
13

Advice for Accounting Graduates and Students

Dear accounting graduates – Way to go!  I’m sure you are receiving an abundance of advice from your friends, family and faculty, but that won’t stop me from throwing in my two cents.  Why do you need one more opinion? I think its good for you to hear from those in the business you are joining as you make decisions and navigate these first steps outside of school.  I’ve also gathered advice from my accounting colleagues so you have many industry perspectives all right here.

The top two things I would advise:  First, bite the bullet and work in public accounting.  Second, don’t wait to sit for the CPA Exam.

Bite the bullet and work in public accounting.  Public accounting is a springboard for your future.  For those who have done this, the rewards of the experience outweigh the challenges it brings.  I worked at a medium size local firm and had a great experience in public accounting.  I liked this combination of firm because it allowed me to work on all aspects: tax, consulting, and audit start to finish.  While I didn’t prefer tax then and still don’t now, the exposure I received over my 5 years in public accounting equipped me for the future, and developed competencies I would otherwise have missed if I had gone to a larger firm where you chose either tax or audit.    

Don’t wait to sit for the CPA exam.  I know, I know, you just finished school.  You just finished studying and exams and maybe have even sold your books back already.  If you started in public accounting, the hours will be long.  But you JUST FINISHED SCHOOL.  Your foundation for the CPA exam won’t ever be this solid – don’t let it crumble before you start studying for the exam.

Ok, thats enough from me.  🙂 I’ve gathered advice from my accounting colleagues and want to share it with you.  We all have different backgrounds and experiences, but I value their perspective and know it will be important to you as you begin in your career. 

 Get your CPA licence and keep it active.  Even if you don’t want a long-term career in auditing, get some experience in this area.   It will give you a better perspective on how different businesses operate which will help you better determine what  you like (and don’t like) about the accounting/finance field.

– Stephenie

 My advice to accounting graduates is to not be afraid to be picky while choosing their first job. With the way the economy is, there is a lot of pressure to take the first job that is offered, because there is fear that another job may not come along. Although it is true that finding a job today can be difficult, it does not mean that it’s impossible. Spend time to think about what type of position and industry interests you, then pursue that type of position 100%. Focus on two or three jobs to apply to instead of many at once. By focusing on only a few job possibilities at once, you will be able to build real connections with the recruiters and employees in those companies. If you don’t already have connections within your target companies, you can build these connections by finding recruiters and other employees on Linkedin or at networking events, and asking them what type of applicants their looking for. Once you know what they’re looking for, you can determine if you’re a good fit, and how to present your skills in a way to help them understand why you are a good fit. Most professionals enjoy helping new graduates, and appreciate the initiative it takes to contact someone you don’t know.

– Rachel

 The main thing I would advise an Accounting graduate in a new job would be: Don’t be afraid to ask questions. This is an important concept as many accounting graduates, myself included, are afraid to ask questions because we don’t want to appear to be wrong, or appear to be incompetent. However, it should only be after you really have dug into a problem and need help arriving at a solution that you ask for guidance. Also when asking questions, make sure you thoroughly know the issue at hand.  That way, when a question is asked in connection to yours, you have the knowledge for an appropriate response. Additionally, it should be noted that it is okay to make mistakes at first, because the best way to learn is through trial and error.

– Stephen

There are many paths within the accounting field.  Find a job at a place where you can try out things like tax and audit.  And within those two broad paths, find out what interests you, and specialize in that.  In whatever job you find yourself, be smart, do great work, and get along with others, both co-workers and clients.  Be a team player. 

– B.W. 

My number one advice to any accounting graduate is to try out public accounting for a few years. Public Accounting gave me a wide range of exposure to different industries and improved my technical skills. It helped shape my communication skills and strengthen my ability to become a better team player. My second advice is be open minded about different accounting tasks. There is no job that is too small and too “immaterial.” For example, footing financial statement may seems like a boring job as a new associate but it gave me an opportunity to read through many companies’ financial statements. As a result, I got to ask lots of random questions I wouldn’t otherwise dare to bother managers or partners about during busy season. This in turn helped me build my technical skills and relationships with other managers who I may not have otherwise worked with.

– M.K.

Top 10 thoughts from E.W.:

1. Work for a CPA firm straight out of college – It fast tracks you to better jobs, gives you a variety of experience, and gives you time to figure out what you want to do for the rest of your career while quickly advancing your career.

2. Know what you’re getting into – Working at a CPA firm is tough and the rumors are true, you will face hard times and long hours and little respect, know what it is and work through it.

3. Apply to jobs appropriately – Tailor your resume specifically to the job you’re applying for, use keywords from the ad. Before the interview, research the company/firm you’re applying to, reach out to your alumni network, read every word of the website (that alone can land you a job). At the interview act interested in the job, ask appropriate questions.

4. Take the CPA exam as soon as possible – You may think you are busy now but you’re not. Your life will only get busier from here, take it while you have the chance.

5. Build a good reputation – The reputation of a CPA is probably more valuable than actual job skills, especially while working at a CPA firm. There are tons of resources available for tax and accounting issues, but no available resources will save your reputation.

6. Work on non-accounting skills – Technical accounting will probably make up less than 10% of your job in your career. Figure out how to use the accounting resources available to you then focus on other skills: sales, speaking, writing, relationship building, leadership, project management, etc.

7. Put in your hours – Putting in hours matters, particularly billable hours, and will carry a lot of weight for promotions and raises. If everyone else is staying late, stay late too. Don’t be the one leaving early.

8. Work hard and do what you’re toldThere’s a time and place for innovation and you’re going to need to innovate eventually. At first, though, no one want to hear about what the first year associate learned in their cost accounting class. Work hard, do what you’re told, build your reputation and respect among your peers.

9. Get involved in out of work activities with your co-workers – Play on one of the firm/company’s sports teams (but only if you’re good). Go to the happy hours and parties (but don’t get sloppy drunk, and yes, CPAs can drink A LOT, beware). You’ll need to be friendly with people to help build your reputation.

10. Build a relationship with a decision maker – At some point your firm will gather a group of managers/decision makers and they will decide the raises/promotions for the year. You need to know that there is someone in that room advocating for your promotion. Build a relationship with a manager or higher (without kissing up) who you can stick with and get pulled to the top, choose wisely.

-E.W.

And finally, an interesting perspective from an art school dropout:

Creativity > Intelligence

Let me explain: After receiving my accounting degree, mastering my technical competencies, moving through my career as an accountant, and later controllership, I realized I didn’t have just one narrowly focused talent. I wasn’t just good at math, I wasn’t just good at presentations, I wasn’t just good at understanding complex matters, I wasn’t just good at exercising my intelligence and critical thinking, but everything I learned to that point said that intelligence was paramount, and I had all the measures to prove it.

But I always thought… I have many talents and I want to know how to apply them to the fullest in my work. My epiphany came during graduate school MBA studies. I learned that everyone invited into the MBA cohort was smart, in fact, everyone was exceptionally intelligent. A GMAT in the 700′s was fairly normal, and everyone was a type A over-achiever, just like me.

But you know what truly differentiated us, what set us apart? It was creativity and the ability to summon it during critical times, right when it was most needed to get you out of a complex spot. This is what moved some ahead with momentum. That’s what I want to remind accounting graduates about. Don’t down play creativity in our work: creative problem solving, creative solutions to help the business achieve its goals, creative sessions and openness to innovation. Carve out time to innovate. Place a premium on creativity as you look forward in your career.

Unfortunately creativity, is not something that we encourage in accounting, it is not something that is lifted up as a rule, and there are many jokes about that. However, if you do not practice creativity, like anything that is not used, it will wither, and I think it is essential to lift up this competency and practice. Ideation and creativity is so important as you move down the continuum of your career.

– B.D.

09
May
13

Is internal auditor the protagonist or antagonist?

Being part of the internal audit profession, I am always curious to find out what is inside the minds of the management whom I audit.  Whenever I get a chance, I try to figure out their personal expectations from the function of internal audit.

Recently, at the sidelines of a conference, I got an excellent opportunity to interact with one of the CFOs from a leading manufacturing company based in my city. As he was sharing his experiences with internal audit, I penned down the personal views of that CFO about the internal audit profession.

His first encounter with the internal auditors was back in the early 80′s while he was working as a finance manager for an automobile company. The Accounts Payable process was selected for review and most of the areas selected for review happened to belong to his division. He remembered the enormous amount of activity that went into preparing for the audit, how every document was double checked and triple checked to make sure that every deviation is fixed. And in the process of preparation, missing documents were completed, back dated and inserted into the files, left out signatures were obtained and by the time the auditors turned up everything looked perfect.  As expected, the internal auditors seemed happy enough to check off that they were able to receive everything they expected. That first experience has paradoxically shadowed his opinion on the value addition by internal audit for almost a long time.

However, subsequent to that first bizarre incident, he had faced many more internal audits in various capacities throughout his career in several organizations. Some of his key thoughts from his professional journey:

  1. Meeting some brilliant and extremely efficient internal auditors along the way, he has also come across some incompetent internal auditors in his assignments. In his experience, not all the internal auditors were competent enough. (As I heard this, I had the immediate impulse to refute his statement but continued listening to him silently to elucidate more views!!!)
  2. In several organizations, there is an unhealthy fear of auditors. There is often a fear (even though a misconception) that if any major issues are unearthed someone’s head will be cut off. Internal audit is viewed as a brute police force and no one ever want auditors to poke the nose into their work.
  3. In his experience, he had faced internal auditors who stay at one organization for years but fail to keep their skills updated or relevant. Such auditors did not develop the perspective of understanding how organizations run their businesses and how the competitors/ counterparts in their industry are managing emerging risks. As a result, they failed to provide innovative/ creative solutions through their audit. Internal audit was not seen as adding value, but creating needless interruptions to work.
  4. So, is internal audit viewed as part of the problem? or part of the solution?  Until internal audit is accepted as part of the solution by all the stakeholders, he believes that it will remain to be a problem.  Until business process owners develop an understanding that inculcating a healthy attitude and vibrant conversations with their auditors will only assist and not hurt them, it will continue to be a problem.

After the end of conversation with CFO, I was in a quandary.

  • Where do internal auditors fail to bridge the gap with management?
  • What makes internal auditors always ‘a thorn in the plant of roses’?
  • Why are the internal auditors perceived as ‘human beings with two horns and one tail’?

Though the nature of internal audit profession is prone to resistance across the organizations globally, I am still wondering how trust can be built so that unwarranted apprehensions over internal audit are removed from the minds of various stakeholders.




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