PCAOB Proposes New Rules for Audit Committee Talks

The Public Company Accounting Oversight Board has a proposed new standard on Communications with Audit Committee. Topics include: the importance of judgment and estimates in financial reports, clear agreement on terms of audit made explicit in the engagement letter, communication of audit strategy (including analysis of risks and use of internal auditor materials), discussion of the going-concern issue and external auditor evaluation of the quality of communication.

The proposal for the most part seems sensible--though I wonder what measurable metrics PCAOB plans to use to evaluate two-way communication.

IRS Updates Congress on Preparer ID Regulations

IRS Commissioner Doug Shulman recently testified before Congress regarding the requirement of paid tax preparers to have a federal ID number, pay annual fees and, for some, be tested on their tax competency. Shulman indicated that proposed regs will require that tax preparers obtain and use a taxpayer identification number on any returns signed after this December 31. Preparers will also be required to renew the numbers periodically, use the number on all tax returns prepared and pay yet to be determined user fees. Many preparers will also have to take a competency exam to be eligible, although enrolled agents, certified public accountants and tax attorneys will be at least temporarily exempted from this testing. It is possible that the IRS will develop an audit process to review the competency of preparers which use the TPID (tax preparer identification) number. Shulman also addressed the use of figurehead tax return signers.

The whole registration of tax preparers issue was addressed in depth last January and this basically is an update. It is somewhat unsettling that the comment period on the proposed regs appears likely to end before the periodic identification fees are known.

Where Tax Returns Stand--The IRS Comments

The Internal Revenue Service indicates that tax returns are coming in more slowly this year compared to last. The proportion of e-filed returns remains strong and refund amounts are up slightly at an average of just over $3,000. The IRS believes that the larger refunds could be a function of stimulus incentives such as the American Opportunity Credit and homebuyer credit.

One wonders if one reason for slower tax filing could be with higher unemployment, fewer citizens may have taxable income and may not need to file (additionally, the fraud triangle suggests that failure to file issues could increase this year). From a personal finance standpoint, the $3,000 refund is also a bit concerning--perhaps this could have been pushed out to taxpayers more quickly to build consumer confidence.

Mid-March Notes

[1] My "Tax Tips for Twentysomethings" post was included in Kay Bell's 67th Carnival of Taxes (Pot of Tax Gold) yesterday. The cite at "Don't Mess with Taxes" is linked through the title of this post.

[2] Co-researcher Lesley Davidson is presenting a paper on CPA mobility and the 150 hour rule for sitting for the CPA exam this Thursday in Williamsburg, VA this Thursday. I look forward to hearing from Lesley next week; we intend to add specific ethics CPE to the project and then I will make a presentation at Destin, FL next month.

[3] Ahh, yes, March [hoops] madness. Present employer Austin Peay got their women's team in (and probably right back out, they play Pam Summitt and UT in Round 1). As for guys, Purdue will have no problem playing the disrespect card for as far as they can make it in the NCAAs, Missouri faces a "mirror image" team in Clemson and Ole Miss takes to the NIT. I will need to make out some brackets soon--haven't yet decided who I expect to win.

Stiff Cover Charge: Ex-Bank Exec Arrested for [Alledged] TARP Theft

Charles Antonucci, former president of Park Avenue Bank, has been arrested on the charges of attempting to steal $11 million in Troubled Asset Recovery Program (TARP) funds. Additionally, Antonucci has been accused of attempting to bilk a Florida churches out of $100,000 in building funds. Antonucci used a variety of somewhat elaborate schemes to defraud the bank and its stakeholders, but FDIC regualtors started to figure out that things were amiss.

Add Antonucci to the Bernie Madoff line of those who convince themselves that they will never be caught. Hope he enjoyed his lifestyle of the last several years, it will be a long time before life is this good for him again, even if he "beats the rap."

PCOAB Goes on the Road

The Public Companies Accounting Oversight Board starts its 2010 road show in Charlotte, NC this April with trips to seven cities planned (though the New York and Jersey City stops effectively are two days in the same general area). Among agenda topics are: PCAOB Standard 7 (Quality Review), risk assessment, internal control auditing for non-accelerated filers, current economic trends and future standard-setting priorities. Members of any PCAOB-registered CPA firm are eligible to attend.

The idea of the PCAOB getting out and meeting CPAs throughout the country is good, though I regret that their coverage of the upper South and Midwest this year is weak. Those living near one of the cities on the tour may wish to consider attanding.

Tax Tips for Twentysomethings

The Illinois CPA Society has come up with six tax recommendations for younger filers: [1] take full advantage of available deductions and credits (such as the first-time homebuyer credit, child credit and lifetime learning credit). It is important to make sure that you have appropriate documentation, [2] e-file for faster refunds (but avoid like the plague any refund anticipation loans), [3] file a 1040A or 1040EZ rather than Form 1040 if you qualify and don't miss deductions or credits by doing so, [4] pencil in the work before filing to avoid errors (you don't want to hear from the IRS in July), [5] if you think that you might qualify for a deduction or credit but aren't sure how to get it, read IRS material such as form/schedule instructions or Publication 17 or sign up with a tax pro (such as an enrolled agent (EA) or certified public accountant (CPA)), [6] make sure that you acknowledge all income sources, especially if you receive Forms W-2 or 1099. Again, if you end up needing to file Forms C (business), F (farm) and/or SE (self-employment), it might well be time to sign up with a tax professional.

All the hints given by the Illinois CPAs are good, and not necessarily just for filers under 30. Two added things to consider: [1] schedule your W-4 to keep your refund low (the IRS gets your money free for more than a year in some cases if you have a large refund). If saving is hard for you, have your employer withhold a small amount each month to invest in a conservative mutual fund or savings account (most but not all will do this), [2] do not procrastinate. You get your refund faster and find professional help easier to get (and less grumpy) if you file by the middle of March.

GAO Goes After PCAOB on Audit Risk Disclosure

The Government Accountability Office has criticized the Public Companies Acccounting Oversight Board for its risk assessment audit standards. GAO says that the new standards could confuse auditors and unnecessarily push audit costs higher. Last year, PCAOB's chairman essential to user confidence and bedrock for future standards. CPA firms are mixed with PWC and BDO Seidman approving of the standards while McGladrey Pullen and Patrick Montgomery,CPA criticizing the standard.

Auditors need to assess risk to plan an effective audit and to evaluate internal control effectively--perhaps for other reasons as well. GAO's criticism indicates an opportunity for academic researchers to ascertain the effectiveness of the PCAOB audit standards.

Tax Bill Introduced; Money Trees Needed

Senators Harry Reid (D-NV, for now) and Max Baucus (D-MT) have introduced the American Workers, State and Business Relief [Tax] Act in the Senate. Former sponsor Charles Grassley (R-IA) criticized the bill's cost and other facets. Provisions in the bill include an extension of unemployment benefits, 65% subsidy for COBRA payments, yet ANOTHER annual extension (see since about when this blog started in 2005) of certain tax deductions such as sales tax deductibility and deductibility of certain costs paid by K-12 teachers (though, to be fair, at least this time they are not waiting until December), a provision to annul a drop in the federal poverty level, Small Business loan and Medicaid funding to states and a number of other provisions.

Apologies for the editorializing in the title and first paragraph. Having said that, while most of the provisions individually are defensible and some are even good, one wonders when Congress will EVER come to the conclusion that the Federal spending spree is unsustainable.