Thursday, May 31, 2007

End of May Notes

(1) I just completed the third of my three presentations this spring, this one at the Academic Business World conference in Nashville, with this presentation concentrating on accounting blogging (I used the Twelve Blogs of Christmas in my presentation). Relatively few accounting topics on the docket, but their were some interesting papers on accounting and business ethics.

(2) My wife and I just started Dave Ramsey's Financial Peace program at our church. Dave is a major name in the personal finance area and it will be interesting to see how this goes.

(3) Tomorrow starts my third year of accounting blogging (I did a few practice posts in May 2005 but started in earnest on June 1). Looking forward to doing the best I can on this blog.

A Taxpayer Advocate for Canada

The Canada Revenue Agency (CRA) announced that a Tax Ombudsman, similar to the National Taxpayer Advocate of the IRS, would be in place this fall. A new complaint-resolution process called CRA Service Complaints will accompany the new position and will supplement present appeals procedures available to Canadian taxpayers. The legislation also adds nine new rights to the Canadian Taxpayers' Bill of Rights; including one which may allow Canadian taxpayers to avoid interest and penalties are due to extraordinary circumstances outside their control.

For the sake of Canadian taxpayers; I hope that the new ombudsman is as good as Nina Olson has been for the IRS.

Tuesday, May 29, 2007

Tax Pros Search the IRC Through URLs

Improved content, functionality and integration with both non-tax software and tax software of competing providers increasingly means that tax pros start research with online sources. Many online tax source providers are combining their materials with materials of erstwhile competitors; for instance, BNA Portfolios are also available at RIA, CCH and LexisNexis with LexisNexis also providing access to CCH, Tax Analysts and Matthew Bender. Continuing changes in the tax code makes top-quality research available; additionally, financial accountants and tax professionals increasingly are realizing how interdependent financial reporting and taxation are in a Sarbanes-Oxley environment. Highly desirable features include ease of use, sychronized searching (the best approach Google search engine capabilities) and ability to handle international tax issues. Intuit's Tax Almanac effectively provides a chatroom where Wikipedia tax definitions and tax professional advice is available.

Given the increasingly demanding expectations laid on professional accountants and tax experts, improved online resources are a tremendous blessing. Just looked at the Tax Almanac page; what a tremendous resource, definitely will be linked in the news section of links soon.

Saturday, May 26, 2007

Don't Underestimate Upkeep Cost on Five Common Purchases

Jeffrey Strain mentions the importance of considering "lifetime" cost of purchases and provides five common purchases with greater "upkeep" cost than you might estimate. These include: homes (insurance, utilities, lawn and house maintainence), cars (gasoline, repairs and insurance), pets (food, health care, toys), printer (ink cartridges primarily) and razors (blades or blade cartridges).

I love having a nice home, a dependable car, loving dogs and a computer which allows me to print off exams and other things at home. I will admit, however, that it would be much easier to live frugally with an apartment, a bus pass, no pets and doing all my computer work at school.

Friday, May 25, 2007

PCAOB Replaces Statement 2 with Statement 5

The Public Company Accounting Oversight Board adopted Statement 5 (An Audit of Internal Control over Financial Reporting) to replace polarizing Statement 2. PCAOB claims that Statement 5 is principles-based and should allow businesses to detect and correct material misstatements before material misstatements occur. Concurrently, PCAOB suspended requirement of inspections of accounting firms which do not audit publicly-traded companies. PCAOB announced that Standard 5 has four objectives: focus internal control audit efforts on the most important issues; eliminate unnecessary procedures; scale the audit based on corporate size and complexity and simplify the text of the standard.

Gone is the controversy which was PCAOB Statement 2. Will Statement 5 be an improvement--time will tell.

Wednesday, May 23, 2007


As I have said many times before, thanks to my readers and special thanks to bloggers who link to Tickmarks.

Roundtable of SEC Chairs Past and Present Today

Present Securities and Exchange Commission Chairman Christopher Cox has invited five previous SEC chairs to a roundtable discussion on the future of the SEC this afternoon. The other participants are William Donaldson, Harvey Pitt (both from President Bush's [43] first term), Arthur Levitt (from President Clinton), David Ruder (finishing years of President Reagan) and Roderick Hills (from President Ford). The webcast is available through and is likely to cover proposals to modify internal control requirements for smaller publicly-traded businesses among other topics.

Thursday, May 17, 2007

Salad Days for Internal Auditors

The Institute of Internal Audit (IIA) asserts that Sarbanes-Oxley provisions and desire to protect interests of various stakeholders of corporations have generated tremendous demand for internal auditors. While internal auditors (IAs) still may have to endure stereotypes such as the "financial police," they are increasingly seen as adding value through improving efficiency and effectiveness of organizations and accordingly are seeing job growth and increased salaries. Salaries have grown by 18% since 2004 and the IIA has added over 50,000 members in the last five years. To increase the supply of internal auditors, the IIA is looking to establish IA tracks and even IA major plans at universities.

Given the growth in internal auditing, larger universities would be well advised to work with the IIA toward an IA degree track. For smaller universities, a reasonable option would be to incorporate an IA course as an accounting elective.

Wednesday, May 16, 2007

How Well Does Your State Administer Taxes?

The Council on State Taxation (COST) recently released a evaluation of the administration of taxes by each of the 50 states. Criteria included: even-handed statutes of limitations, equalized interest rates, adequate time for filing protests, a due date for calendar year corporate returns at least 30 days before individual returns, an automatic extension provision similar to federal law, an independent non-judical body for appeals and provision for a procedure to appeal without paying the tax first. Top-rated states, which received an "A" included: Alaska, Arizona, Hawaii, Idaho, Iowa, Montana, South Carolina and Virginia. North Carolina had the lowest rating (D-), other states with low ratings included Alabama, California, Connecticut, Louisiana, Rhode Island and Texas.

Congratulations to the highest-rated states, many of which are from the West.

Monday, May 14, 2007

Telephone Tax Refund Available for Nonprofits

The telephone tax credit which has been claimed on individual returns is also available on returns for exempt organizations if they can show that they paid the tax. The credit would be completed on Form 8913, which generally would be attached to a Form 990-T. The author also lists common names given on telephone bills for this tax and references the IRS webpage for answers on additional questions.

This is good news for nonprofits, since many run on a shoestring. Be careful on the amount claimed; the IRS has been going after taxpayers making excessive tax credit claims.

Saturday, May 12, 2007

Tax Carnival 18 plus New Links

Kay Bell's 18th Carnival of Taxes was well worth the wait; many of the top tax and personal finance bloggers contributed posts and I was happy to see Tracy Coenen of Fraud Files as well--hopefully, more tax bloggers will participate in her Carnival of Fraud. As a side note, I also enjoyed her post about the musical fundraiser for college scholarships put on by the Washington Society of CPAs--who knows, there may be another Blake Lewis or Sanjaya Malakar in the ranks of the WSCPAs.

Back to business--I've added new links, including "From Greg's Head" (a blend of practice management and technology issues from a Texas CPA) and two news links--one about XBRL and one linking to annual report access.

Friday, May 11, 2007

Bogle Rains on Parade of "New" Index Funds

Former Vanguard CEO John Bogle, understandably viewed as a guru on index mutual funds, has criticized the most recent wave of index funds. Bogle argued that the desire for higher fees has caused mutual fund managers to create hybrids of managed and index funds which emphasize past performance. The problem, Bogle says, is that the strategies employed in these new "index" funds were short-to-mid-term strategies that will not work indefinitely.

Bogle has forgotten more about mutual funds than I have ever known. Buy into the "new index" funds at your peril.

Wednesday, May 09, 2007

Uneasiness at ABA over Tax Strategy Patents

My wife is a lawyer and she receives the ABA Journal; usually I don't pay attention, but I am glad that I did this month. In the "Crisis Pending" article, Steven Seidenberg covers the developing practice of patenting legal strategies and the pros and cons of this procedure. Probably the best known application of this approach is tax patents, Seidenberg mentions that 52 patents have been issued with another 84 applied for. One of the examples given concerns a "grantor retained annuity trust" developed by Floridian Robert Slane as a means for reducing gift taxes when donors give large gifts to family members.

An interesting development here: the ABA Tax Division parts company with the Patent Law section. The tax attorneys are clearly displeased while the patent lawyers believe that attorneys will eventually adjust to the license fees, etc.

As indicated in previous posts, I am no fan of patenting tax strategies. At least one criticism is that the patent approach puts lawyers in a superior position legally to accountants in providing tax planning, a position which I feel is frequently not deserved.

Tuesday, May 08, 2007

New Jersey Seeks an Ethical Start for New CPAs

Interim New Jersey Governor Richard Codey signed legislation last week requiring that new CPAs must receive orientation within six months of receiving their license. While the curriculum for the new course is not set, New Jersey Society of CPAs Executive Director Ralph Allen Thomas was convinced that ethics and state accountancy law would be included. Present New Jersey law requires that CPAs take courses on state fees on CPAs and disciplinary issues in their first three years.

An interesting piece of legislation. I favor the requirement of ethics (though New Jersey should insure that the requirement vary from the AICPA Ethics Exam) , but wonder if this could be in a college/university course in lieu of a orientation program when the accountant has heavy work responsibilities.

Thursday, May 03, 2007

IRS Hits Time Barriers on Offshore Tax Haven Audits

The IRS has cut back on audits of offshore taxpayers with income in tax havens because stallings tactics permit taxpayers to bring the three-year statute of limitations into play. Although only a relatively small number of taxpayers are involved, the amount of taxes involved per taxpayer is greater, as much as $100,000 in some cases running four or five years. Law professor Reuven Avi-Yonah of Michigan estimates that lost tax revenue from offshore activities could easy run to $50 billion.

Given the drastic measures presently under consideration by Congress to reduce the domestic tax gap, American taxpayers will not tolerate some crackdown on offshore havens. A proposed starting point: extend the statute of limitations on tax audits involving offshore tax havens to six years.

Wednesday, May 02, 2007

Graduate School Scandal--34 Found Guilty at Duke

A Duke Judical Court found 34 students guilty of irregularities on a final exam, with nine potentially being expelled and 25 others subject to failing grades. The unusual differentation is because the school's honor code distinguishes between extremely severe, severe and minor offenses.

Certainly, after last year's "rape" case, Duke did not need this type of publicity. The more important issue here, however, obviously is the cheating. Duke had a strong honor code in play; many schools, especially state-supported schools, have systems which make harder for faculty to prevail. Additionally, students have become more sophiscated in cheating procedures and there are Internet sites that make cheating relatively easy. Finally, the "no snitching" culture means that students are very cautious about turning in other students.

I try to provide some safeguards, such as multiple versions of exams. That said, I strongly suspect that students (hopefully not many) have successfully cheated in my classes during my 25+ years of teaching. Clearly, cheating is a major fairness issue; at the same time, the safeguards used to protect students, especially undergradutes, from inaccurate charges of cheating also make sense. Additionally, the short-run benefit that cheating offers certainly is enough to cause some students (hopefully again not many) to do it.

With the increased emphasis that the profession is making on ethics (which I applaud), hopefully one of the issues to be discussed is a reasonable way to provide teachers with some protection from legal retaliation for addressing cheating so long as the consequences are reasonable and the event is not made widely public. If students perceive that cheating is acceptable and faculty have to put themselves at significant risk to address cheating; not only does the university suffer, but the profession eventually as well--a student which succeeds at cheating in college is likely to continue in his/her job, marriage, etc.

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