Sunday, September 6, 2009

We are Hiring!

Maddox Ungar Silberstein, PLLC, a rapidly growing PCAOB registered CPA Firm in Bingham Farms, MI, needs additional audit staff, both full time and seasonal/part time. Candidates should have:
  • CPA or CPA candidate
  • Recent audit experience in public accounting (SEC audit experience a plus)
  • Minimum of one year experience
  • Ability to travel
  • Strong computer skills, including proficiency in Microsoft Office and Excel
  • Working knowledge of relevant professional standards
  • Working knowledge of GAAP and PCAOB standards a plus
  • Desire to work overtime when needed to get the job done

We offer a competitive salary and benefits, including health, dental and SIMPLE IRA plan.

Tuesday, July 28, 2009

PCAOB Adopts New Auditing Standard

Got this in an email from the PCAOB:

PCAOB Adopts New Auditing Standard On Engagement Quality Review And Issues Concept Release on Requiring
the Engagement Partner to Sign the Audit Report

Washington, DC, July 28, 2009 – The Public Company Accounting Oversight Board today voted to adopt Auditing Standard No. 7, Engagement Quality Review (EQR), and to issue a Concept Release on requiring the engagement partner to sign the audit report.

The EQR standard provides a framework for the engagement quality reviewer to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement.

“The EQR standard focuses the engagement quality reviewer’s attention on the areas that are most likely to contain a significant engagement deficiency and increases the likelihood of identifying and correcting those deficiencies before the audit report is issued,” said PCAOB Chairman Mark W. Olson. ”The new standard goes a long way in clarifying the process."

The Sarbanes-Oxley Act of 2002 directs the Board to include in its auditing standards a requirement that each registered public accounting firm "provide a concurring or second partner review and approval of [each] audit report (and other related information), and concurring approval in its issuance, by a qualified person (as prescribed by the Board) associated with the public accounting firm, other than the person in charge of the audit, or by an independent reviewer (as prescribed by the Board)."

The Board initially proposed the auditing standard on February 26, 2008, and reproposed it on March 4, 2009.

AS No. 7 applies to all audit engagements, and engagements to review interim financial information, conducted pursuant to the standards of the PCAOB. The standard supersedes the Board’s quality control standard, SECPS Requirements of Membership, Section 1000.08(f); 1000.39, Appendix E. The standard, if approved by the U.S. Securities and Exchange Commission (SEC), will become effective for both the EQR of audits and the EQR of interim reviews for fiscal years beginning on or after December 15, 2009.


Separately, the Board also is seeking comment on a Concept Release to consider the effects of a potential requirement for the engagement partner to sign the audit report. Any such requirement would be in addition to the existing requirement for the audit firm to sign its name on the audit report.

“The PCAOB has discussed the engagement partner signature with its Standing Advisory Group three times, and taken a close look at the Treasury's Advisory Committee recommendations as well as the new signature requirements for Member States in the European Union,” said Chairman Olson. “We want to take a hard look at this issue and its potential benefits for investors, and look forward to a robust and informative comment period.”

The Board is seeking comment on the Concept Release for a 45-day period.




Monday, July 27, 2009

Deloitte Survey Finds Preference for Separate Accounting Rules for Private Firms

WebCPA posted an interesting article that starts with something not surprising at all: "Slightly more than half of small and midsized businesses prefer to have a separate set of accounting standards for private companies."

Many, including myself, have addressed this topic repeatedly. The plain truth is that accounting standards are more complex than ever. Small and midsized businesses that issue GAAP financial statements have been asking for a simpler alternative. IFRS has come out with an "IFRS Light" that may win adoption in the US, but even that is still full of complex rules.

There is an alternative out there already - non GAAP statements. Many small and midsized businesses issue their financial statements on an income tax basis. This is not a perfect alternative because this makes those financial statements more difficult to compare to a GAAP statement, and lenders may not accept income tax basis financial statements.

My opinion: if something doesn't happen to ease the burden on small and midsized businesses, you are going to see more income tax basis statements because the extra cost to produce GAAP statements won't be worth it.

Friday, July 24, 2009

Accountants’ Group Calls for Single Set of International Rules - Bloomberg

Bloomberg posted an interesting article on the continuing debate for a single set of international accounting standards. This is a debate that is going to on for a while.

My opinion: Theoretically a single set of international accounting standards makes sense, and I'm not going to go into all of the reasons for it.

The unsettled question is what are those standards going to be? All of the momentum is behind the International Financial Reporting Standards ("IFRS"). As I've noted previously, the Financial Accounting Standards Board has been working for several years to "converge" US standards to IFRS. Many affected parties in the US are against this process for a host of different reasons. I think ultimately this is where things are going.

The article concludes with something I strongly agree with: the politicians have to stay out of this. Leave this to the standard setters.

SEC Sues CSK Auto Ex-CEO under SOX Clawback - WebCPA

Found the following on WebCPA. It was only a matter of time before the SEC used the Section 304 clawback provisions. Now that they have succeeded, expect the SEC to do more of this.


The Securities and Exchange Commission has asked a court to order the former CEO of CSK Auto Corp. to reimburse the automotive parts company and its shareholders more than $4 million he received in bonuses and stock sale profits while CSK was committing accounting fraud.

The SEC’s enforcement action charges Maynard L. Jenkins of Scottsdale, Ariz., with violations of the Sarbanes-Oxley Act. It is the first action seeking reimbursement under the SOX “clawback” provision (Section 304) from an individual who is not alleged to have otherwise violated the securities laws. The SOX “clawback” provision deprives corporate executives of money that they earned while their companies were misleading investors.

“Jenkins was captain of the ship and profited during the time that CSK was misleading investors about the company's financial health,” said Rosalind R. Tyson, director of the SEC’s Los Angeles Regional Office, in a statement. “The law requires Jenkins to return those proceeds to CSK.”

According to the SEC’s complaint filed in U.S. District Court for the District of Arizona, Jenkins made $2,091,020 in bonuses and $2,018,893 in company stock sales that should have been reimbursed to CSK pursuant to SOX Section 304.

This is the third enforcement action in the SEC's investigation into CSK’s alleged accounting misconduct. In March 2009, the SEC charged four former CSK executives with securities fraud. In May 2009, the SEC brought a settled enforcement action against CSK for filing false financial statements for fiscal years 2002 through 2004.

In July 2008, CSK became a wholly owned subsidiary of O’Reilly Automotive, Inc. According to the SEC’s complaint against Jenkins, CSK was required to prepare an accounting restatement due to its fraudulent conduct. While Jenkins served as CEO, CSK filed two such restatements related to its overstated vendor allowances.

The SEC alleges that, in violation of Section 304, Jenkins failed to reimburse CSK for bonuses, or other incentive-based or equity-based compensation, and profits from the sale of CSK stock he received during the 12-month periods following the filing of each of CSK’s fraudulent financial statements. The SEC’s complaint does not allege that Jenkins engaged in the fraudulent conduct.

Wednesday, July 22, 2009

SEC Offers Email News Digests

Thanks to Rick Telberg at CPA Trendlines whose post on Twitter pointed me to the SEC's new email service for instant, daily, weekly or monthly email digests on all things SEC. I defaulted to signing up for everything and will adjust it down overtime, and I chose the daily digest option.

Companies: New Lease Rules Mean Labor Pains - CFO.com

Found an interesting article on CFO.com on the pushback from over 150 companies on indications on the direction for new lease accounting, and I encourage you to read it.

I agree with a lot of the criticisms of SFAS 13, Accounting for Leases. The brightline tests for whether a lease is operating or capital has always been susceptible to abuse.

On the other hand, I have difficulty accepting the financial calamity some predict from turning what are now off balance sheet operating leases onto the balance sheet as an asset with a corresponding liability. True, ratios will be hurt and could impact existing lending agreements. But all of this information has been (or should be) disclosed in the notes to the financial statements and should be comprehended by the readers and lenders.

This was reminding of an earlier post on mark to market accounting that wondered if that standard caused the financial market meltdown. My opinion and that of an accounting professor from Wayne State University in Detroit was no. Since publishing that post, I asked the same question to another Wayne State accounting professor who completely disagreed with me and his colleague. I am reminded of that comment about putting pig on a lipstick. That was what we were doing before the mark to market rules, and it is pretty much what we are doing with the current lease accounting rules.

Tuesday, July 21, 2009

Updates to SEC Regulations and Staff Interpretations

Thanks to the good folks at The SEC Institute for the following:
SEC Issues SAB 112
In early June the SEC Staff issued SAB 112 to update the codification of SABs, (the Staff Accounting Bulletin Series), in order to make the interpretive guidance consistent with current U.S. GAAP. Most of the revisions deal with material made unnecessary because of SFAS 141R, Business Combinations and SFAS 160, Noncontrolling Interests in Consolidated Financial Statements.

The new SAB and the SAB codification can be found at:

www.sec.gov/interps/account.shtml

SEC Issues Technical Amendments, including to Regulations S‑X and S‑K
In the same vein, in April the SEC adopted a final rule, Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies, in order to conform them to SFAS 141R and 160.

The final rule can be found at:

www.sec.gov/rules/final/2009/33-9026.pdf

SEC Issues new C&DIs on Executive Compensation
In May the SEC staff added new Regulation S‑K C&DI’s related to questions they have received on executive compensation disclosure.

The C&DIs can be accessed at:

www.sec.gov/divisions/corpfin/cfnew/cfnew0509.shtml

Help for New Cover Page Check Box For XBRL

Thanks to the good folks at The SEC Institute for this:

As you likely know, the SEC added a check box on the cover pages of Forms 10‑K and 10‑Q concerning the filing and posting of XBRL (interactive data) files. The wording in the check box is a bit ambiguous, so the staff issued this C&DI to clarify how to complete the check box:


Question 105.04

Question: If a company is not yet required to submit Interactive Data Files with its Exchange Act reports, should it check the box on the cover pages of the reports relating to compliance with Interactive Data File submission requirements?

Answer: No. A company should not start checking the cover page box relating to Interactive Data File compliance until it is required to submit those files. For example, if a company is first required to include an Interactive Data File with its second quarter Form 10‑Q and, as permitted by the grace period rules, includes such file in a Form 10‑Q amendment 30 days after the date the report is due and filed, the company should not check the Interactive Data File box on the cover page of its initial Form 10‑Q. Rather, it should check the box once the first Interactive Data File is submitted — in this case, with the Form 10‑Q amendment. Companies that have been voluntarily submitting Interactive Data Files should not check the box until they are required to submit the files. [Apr. 30, 2009]


You can find this C&DI at:

www.sec.gov/divisions/corpfin/guidance/interactivedatainterp.htm

Monday, July 13, 2009

Friday, July 10, 2009

New Option for Private Companies in Streamlined IFRS

Very interesting article in The Journal of Accountancy that might be a very attractive option for companies: use a slimmed down version of International Financial Reporting Standards ("IFRS") as the basis for accounting instead of US GAAP.

This would be very interesting. Many privately held companies continue to complain, rightfully so, about the complications of US GAAP. Much of the accounting pronouncements coming out these days seem pointed at larger, publicly held companies and can be very difficult and expensive to implement. Privately held companies have been asking for an alternative, essentially a GAAP Lite.

This might be it.

I encourage you to read the article. But I am going to copy one key paragraph:

Private companies in the United States can prepare their financial statements in accordance with U.S. GAAP, an “other comprehensive basis of accounting” (OCBOA), such as cash- or tax-basis; or full IFRS, among others. The governing Council of the AICPA recognizes the IASB as an accounting body for purposes of establishing international financial accounting and reporting principles. Full IFRS and IFRS for SMEs are generally accepted accounting principles.

"SME" stands for small- and medium-size entities.

I admit I have not read these standards yet, but on the surface I can see two potential problems:
  1. Loan agreements often specify US GAAP be used in financial reports provided to the lender. It could take time for banks and other lenders to understand this different basis of accounting and accept it.
  2. Accountants - both those in public accounting and those inside of small- and medium-sized entities don't know this basis of accounting and it will take time to learn how to use it.

That being said, I look forward to following this option.

Thursday, July 9, 2009

Considering BusinessWeek's Article: How Good Is Your Audit Firm?

BusinessWeek recently published an article titled How Good is Your Audit Firm? The Public Company Accounting Oversight Board ("PCAOB"), at the request of the SEC, has been requested "to examine the feasibility of requiring audit firms to periodically report on key indicators of audit quality", and this article explores the subject.

One of the authors is a retired partner at KPMG, and is now, along with the other two authors, a college professor. This explains the looking at the world with rose colored glasses approach suggested in this article.

I agree 100% that audit quality is important. The suggestion to report on input and processes isn't going to change a thing.

The article suggests audit firms, which mind you in the US are privately held, report things like:
  • Years of experience of professional staff by partner, manager and staff level
  • Areas of expertise
  • Relative time spent on client service, administration, training and nonchargeable time
  • Number of public clients per partner
  • Audit firm personnel-retention rates by professional level
  • Specific types of industry relevant training

Most firms already disclose information such as years of experience and areas of expertise. I submit that years of experience is overrated. Yes, generally speaking someone with 20 years of experience knows a lot more than someone with 2 years of experience. But 20 years isn't necessarily better than 10. I have unfortunately seen people with far more experience than me not get it right.

I am very bothered by the notion of disclosing "relative time" because it suggests that hours are an important input in this equation. I don't track my hours. It is not relevant to my clients. My experience and ongoing growth and training is important to them.

The market place drives competition and audit quality. An artificial set of criteria imposed on audit firms isn't going to make things better.


Tuesday, July 7, 2009

Mark to Market Accounting - Did it Cause the Meltdown

I was involved in an interesting discussion last week on "mark to market" accounting. For those not up on the subject (at least 99% of the population falls in that category!), the mark to market rules required banks and other entities to adjust the carrying value of various assets to current market values. That is what they mean by mark to market - as in marking it down.

Most GAAP financial reporting is done on a historical cost basis. There has been an ongoing trend to more fair value reporting, especially as the US account principles start to converge with international standards. One area that has been switched to market value was investments in marketable securities - stocks, bonds, mutual funds, etc. Depending on how you classify these assets impacts how the gain or loss on them is recognized - unrealized gains and losses on securities held for trading purposes directly hit the income statement, while those on available for sale securities go through comprehensive income, a component of the equity section of the balance sheet.

The mark to market rules have gotten a lot of criticism and taken heat as being a cause of the financial market meltdown. Why? Because subprime loans and other financial assets had to be marked down to current value. And that made the companies holding these assets look bad! The argument was that if these rules were done away with then the companies would look better and none of this would have happened.

A large number of members of Congress have written the Securities and Exchange Commission asking that these rules be rescinded for public companies. That alone should tell you the rules are not the problem.

The truth here is that these companies were holding a lot of bad assets. The mark to market rules made this clear. Not having the rules in place would have hidden this information, but either way the companies were holding bad assets.

Did the mark to market rules create the financial meltdown? No. That was going to happen. Did it help accelerate it? Maybe, but that is ok.

Any contrary thoughts?

Monday, June 29, 2009

Benchmarking: More Similar Between Industries Than I Realized

I attended Restaurant CFO Boot Camp in Las Vegas, sponsored by SS&G Financial Services, last week and learned a lot more about the restaurant industry. Glad I went.

SS&G does an annual benchmarking survey of the restaurant industry, and I was struck by how similar the issues they encountered were to the experiences I had in a past life. Prior to founding Maddox Ungar Silberstein, PLLC, I worked for 4 years in the ready-mixed concrete industry, and I still am a member of the National Ready Mixed Concrete Association. For several years, I was on the committee that did the annual benchmarking survey of concrete producers - financial results and various operating statistics.

The industries are very different, yet the issues were the same:
  • How do you normalize for excess owner compensation in privately held industries?
  • How do you make sure you are looking at apples and apples - in concrete where are the benefits for the loader operator going - variable or fixed costs? And in restaurants, where is all the expense for paper that touches the product going? Same, but different.
  • And more.

Both industries are focused on controlling costs. Restaurants and concrete companies generally have fixed pricing for their products - restaurants sell based on menu price, and concrete generally sells based on fairly standard pricing for the different mixes. Keeping an eye on your costs is critical as improvements in costs essentially drop right to the bottom line.

Intuitively, I knew this, but it took this seminar to make it clear.

Wednesday, June 24, 2009

Audit Reveals 257 Ghosts On Detroit Public Schools Payroll

Robert Bobb, the emergency financial manager for Detroit Public Schools, is doing the job nobody, especially the School Board and its administrators, would do: routing out fraud and corruption.

The Detroit Free Press reports today that a payroll audit revealed 257 ghosts on the payroll. A ghost employee is what it sounds like - they are not a real person. They exist only for someone else to collect the paycheck. This is a routine procedure when payroll fraud is suspected in any business, and it looks like it succeeded spectacularly.

Can't wait to see what else comes out on this one.

Tuesday, June 23, 2009

The Main Reason My Kids Won't Go Into Accounting

I was doing a phone interview today for an accounting magazine. The interviewer was asking a wide variety of questions about the business of accounting - what were the biggest challenges, what would you differently, etc. At one point I stopped him and asked him if I could tell him what my biggest disappointment was. I don't know if he is going to use it, but this is what I told him:

"My kids will never consider going into public accounting. That is my biggest disappointment."

I don't think they would find the subject interesting. But that isn't the reason.

They don't see me from early January to about the middle of April. That's the reason.

I generally blame the U.S. Congress for this, but the accounting profession bears some blame too. I blame Congress because pretty much all S Corporations, Limited Liability Companies and partnerships have to have December 31 as their year end; C Corporations can have any year end but there aren't nearly as many C Corporations out there. This pushes vast amounts of work into a tiny window of time. I always joke that at least it happens during the winter but still.

The balance of the blame goes to the accounting profession. Many CPA Firms fan the flame of the fear of the extension. Or they will say "Why are you going on extension? I can do it on time." Sometimes it doesn't matter how good of a job you have done. They fear the extension raises their audit risk (it doesn't) and they jump ship.

I really enjoy the vast majority of the work I do; I'm aiming to get that percentage to 100%. There is a tremendous amount of mental stimulation in the work. I work with wonderful people, both in my Firm and at our wonderful clients.

It is just unfortunate that we don't get to see our families for about 3 1/2 months. And it is unfortunate to think of the all the people who never consider public accounting because of that.

Friday, June 12, 2009

Sbarro's, Krispy Kreme Among The Most Vulnerable Restaurant Chains

Saw on, of all places, The Huffington Post an article covering restaurant chains especially vulnerable in this economy. I'm not familiar with Mastro's, as they are located in California and Arizona. The others I've eaten at; I've had too many Krispy Kreme donuts in my day.

As I would expect, the chains here are on extremes - Sbarro's, Captain D's, Perkins and Krispy Kreme are definitely in the inexpensive part of the spectrum. Krispy Kreme nearly collapsed a few years ago after over expansion. Mastro's is on the high end. Restaurants in the middle seem to be faring better, especially the fast casual sector.

Thursday, June 11, 2009

GAAP Codification is Coming! You Didn't Know?

The FASB has been working its GAAP codification project for a long time, and it is going effective July 1, 2009.

What? You didn't know about it?

You aren't the only one. I freely admit to only catching on this sometime after April 15. Robert Stewart at AccountingNation.com found out a bit more recently, and to his credit pokes fun at himself; obviously he and I have something in common!

As Robert's post says, GAAP shouldn't change. But whatever isn't in the codification won't be considered GAAP. This will be effective for year ends after September 15, 2009 - all of you calendar year-end entities will be affected.

I think I better learn more about it too.

Follow up: GAAP Depreciation and Paying Higher Taxes Makes You More Bankable?

My immediate previous post discussed how the bank of one of my clients was asking to know what accumulated depreciation would be on a GAAP basis. The Company reports using income tax basis depreciation, and the bank was especially confused because of a huge increase in depreciation resulting from the results of a cost segregation study.

Just when I thought I was done, the bank calls again, and says the number provided by the Company wasn't what they wanted. Ultimately, the bank asked to speak with the accounting firm that performs the monthly bookkeeping work and maintains the depreciation records to resolve this.

So what did the bank ultimately request? They had to know what accumulated depreciation would be on a straight-line basis in order to properly analyze the Company! I've been in accounting for almost 25 years and this is a first for me.

Let's think about what is wrong with this:
  1. The bank is now dictating accounting methods to their customer. And they appear to be doing this because all of their loans must fit into a nice neat box, otherwise their analysts get confused.
  2. Why straight-line?? In case you don't know, straight-line means depreciation is recognized evenly (or on a straight-line basis) over the life of the asset; a $6,000 asset with a 5 year estimate life would be depreciated at the rate of $100 a month over 5 years. But the collateral on this loan doesn't depreciate on a straight-line basis. Most of the value is gone from the equipment and other assets in the early years of their life. The Company is using double-declining balance methods, which assigns greater depreciation in the early years of the asset's life. Which should be more meaningful to the bank!
  3. This is a waste of time and money. The Company and I have had to revise and reissue the financial statements because of this request. I'm not getting paid extra for this. Neither is the accounting firm that keeps the depreciation records. We've all had to waste time on the phone and through email resolving this. Time that especially for the Company could have been put to better use building their business so they can repay the bank.

I hope this is the last time I ever get this request from a bank.

Tuesday, June 9, 2009

GAAP Depreciation and Paying Higher Taxes Makes You More Bankable?

I just completed a review of a client's financial statements. Or so I thought because the bank then had an unusual request.

The financial statements were issued on the income tax basis of accounting as opposed to generally accepted accounting principles ("GAAP"). The only real difference here was depreciation - the Company does not keep a separate, GAAP set of depreciation records. The Company has in excess of 750 individually tracked assets. They use an outstanding depreciation software program (the same one we use in our practice) and could do it, but they prefer not to. The big difference is that they record bonus depreciation and basis reductions for financial reporting purposes.

Then they complicated things a bit further. During 2008, the Company engaged consultants to perform a cost segregation study. Essentially, engineers examined their buildings and said something like 40% of the costs are of the type that can be depreciated over 7 years instead of over 39 years, and 25% can be depreciated over 15 years, and so on.

The result is a dramatic acceleration of depreciation charges. The pick up in depreciation in 2008 included depreciation adjustments for prior years as well. The Company reported a loss purely as a result of this non cash charge. From an operating standpoint, they generated plenty of cash from operations.

Their bank, however, totally could not understand this. They had to know what depreciation would have been under GAAP. Because otherwise their analysts couldn't compute their typical ratios on the Company!

Let's see: the Company had significant depreciation charges. Those became a deduction against taxable income. Which in turn means the Company had lower taxable income and therefore could retain more cash that otherwise would have gone to the government. And retaining more cash means they had more money to repay the bank!

But no, the analysts said "please tell us what GAAP depreciation would have been so the Company can be more bankable."

They apparently don't get it.

Are there any bankers out there reading this who would have handled this differently? Because this just doesn't make sense to me.

Monday, June 8, 2009

Is The Audit a Commodity?

I've been in public accounting most of the last 25 years, and for at least that long I've been hearing that audits are a commodity.

Poppycock.

Paraphrasing Ron Baker of Verasage "If bottled water companies can differentiate themselves, why can’t auditors differentiate an audit?"

He's right. At the end of the day, water is water, yet there are how many different brands of water on the shelf.

And the audit is not a commodity either. Each CPA Firm approaches it differently. Find the one that works for you.

Study Predicts Little Benefits to Adopting IFRS in the US

This is the first contrary opinion I've seen on this topic. Everyone else seems to think the International Financial Reporting Standards ("IFRS") are the greatest thing since sliced bread.

There is general agreement that US GAAP is pretty good but could stand to be improved. Lately it seems that "improvement" takes the form of very complex new standards that are designed to conform to IFRS principles.

One way or the other, the US will adopt IFRS. Will it happen during Obama's first term in office (this isn't a prediction on whether there will be a second) - no. But the following term of office is very likely.

Sunday, June 7, 2009

I have an empty Outlook Inbox - Do you?

I think everyone I know has well over 100 emails in their inbox. I've seen people with over 1,500 emails there.

Mine has zero. It rarely has more than 6.

One Saturday night about 18 months ago my daughter was at a Bar Mitzvah party. We were hanging out at a nearby Barnes & Noble passing time until the party was over. About 11:00 pm that night I wandered into the Microsoft Office section and saw a book called Total Workday Control Using Microsoft Outlook by Michael Linenberger. As my typical workday never seems to be in control I took it off the shelf, looked at it and then bought it. I bought the second edition when it came out during 2008.

Linenberger makes a very good point early in the book about the purpose of the Inbox. He uses a story about how people, in the days before computers, used to have 3 stacked trays on their desk. The top one was usually for receiving items - the Inbox. Once you looked at something there it never went back to the Inbox. You either put it in the Outbox, filed it or put it in an in process tray. Microsoft deliberately named it the Inbox - the intent was never to keep 1,000 emails there. You would read something, act on it, and keep it out of the Inbox.

Most people keep emails in their Inbox so as to not lose track of tasks that have come in with those emails. Others don't have an effective filing system. For some it is both.

At the time I first read the book, I only had about 30 emails in my Inbox. Using the tools Linenberger provides, it now is generally empty. Read it, decide what to do with it, then file or delete it. Simple.

The strength of the system is properly configuring the Tasks module of Outlook. I don't think many people use the Tasks module, but after making some common sense changes it becomes quite powerful. All you do is drag the email from the Inbox to the Tasks button in Outlook and boom it becomes a Task with the text of the original email intact. You can also create Tasks with any attachments - nifty.

Linenberger is an advocate of topic based email filing. I have always created specific folders for filing email, but I see the beauty of this part of his system and am preparing to implement it. All email will be in one folder.

I am not saying my workday is always in control. But using Linenberger's ideas, I am not losing track of nearly as many things I need to do, and my Inbox is usually empty.

Strongly recommended.

Saturday, June 6, 2009

5 Reasons Your Accountant Bills By The Hour..None Good For You

It is fair to say that over 97% of the accountants bill by the hour. Then it is reasonable to presume it works for them. Why?
  1. It's easy for them. An accountant who bills by the hour essentially treats all of his clients the same - he is going to bill you how long it took and multiply it by an hourly rate. This doesn't mean it's good for you. Do you care how long it takes? You want to know how much it is going to cost you.
  2. It's less risky...for the accountant. When you agree to pay the accountant by the hour, you take on all the risk. The accountant has to research an accounting or tax issue, so he bills you the hours. Next time the question comes up, he already knows the answer. And you've paid for it for the next client. By paying by the hour, the accountant has no incentive to be efficient.
  3. They don't know any better. Accounting firms (and law firms too) didn't always keep track of time. They priced each engagement individually. Someone then had the idea to track time to get an understanding of how long different engagements took to complete. Then one day, someone had the idea that the hours accumulated were the inventory - multiply by billing rates and price it that way. This doesn't provide any value to the customer - you. Accountants have been billing this way for so long they just don't know any better. I've heard countless accountants say this is the only they can justify their billings. They think they are selling time; you are buying a solution to a problem not their time.
  4. It is an easy way to raise fees over time, and their income. Everyone knows inflation is a fact of life. So far we've addressed the hours side of this equation. The other side is the billing rate, an artificially set number. How do many accountants a billing rate? One way is to compare what other accountants are billing at, which again means the accountant doesn't have to do any thinking. The other way is to think about how much money they want to make and divide that number by the number of hours they plan to bill. Again, this works to the benefit of the accountant. And not to you.
  5. They are scared of billing by a fixed fee. This one is a no brainer. Say you are looking to hire a new accounting firm. Ask them what it will cost. Odds are they will say something like "Well it depends on the hours we incur and the relative billing rates of our staff that we assign to the engagement." Notice how this puts the risk back on you - they won't tell you what it will cost because they are scared to commit to a number. Because pricing is hard. But this isn't your problem, except they just punted it back to you.

I don't bill by the hour because it does not create a win-win situation for both parties, and because it is wrong. Future posts will address the benefits of fixed fee billings for you.

Tuesday, April 21, 2009

Madoff Auditor in Legal Limbo

Once the Madoff fraud came to light, you knew he wasn't the only one going down. As an auditor, you have to wonder what if this stuff I'm looking at is just gibberish. Looks like this guy didn't have that thought. Also from WebCPA:

Bernard Madoff’s accountant, David Friehling, is facing an extra month of uncertainty over his legal status after prosecutors filed a continuance with the court.

Friehling was arrested last month and charged with securities fraud, aiding and abetting investment advisor fraud, and filing false audit reports for his role in Madoff’s estimated $65 billion Ponzi scheme (see Madoff’s Auditor Arrested). The continuance, filed last Friday, gives prosecutors another 30 days to indict Friehling, file further charges against him, or negotiate a plea bargain with him and his attorney.

“The government has requested a continuance of 30 days to engage in further discussions with counsel about the disposition of this case,” said the order, according to Reuters.

Friehling, a partner in the now-defunct New City, N.Y., accounting firm Friehling & Horowitz, took over the CPA practice after his father-in-law, Jerome Horowitz, retired. Horowitz was Madoff’s auditor for 30 years and died the same day Madoff pleaded guilty to 11 fraud charges in March.

Friehling, a past president of the Rockland County Chapter of the New York State Society of CPAs, was expelled from membership in the American Institute of CPAs after an ethics investigation, soon after he was arrested. Friehling is also facing civil charges from the Securities and Exchange Commission, which accused him of merely pretending to audit Madoff’s accounts and filing false audit reports.

Friehling was released on a $2.5 million personal recognizance bond that he had to guarantee with four of his real estate properties. He also had to surrender his passport to authorities as a condition of his bond and agree to restrictions on his travel. He faces up to 105 years in prison if convicted.

IFRS To Converge With Islamic Accounting Standards

I didn't know there were Islamic Accounting Standards, which is an interesting notion. This article courtesy of WebCPA:

Even as the Securities and Exchange Commission weighs the comments that were due this week on its proposed roadmap to International Financial Reporting Standards, IFRS could be on a convergence path of its own with Islamic accounting standards.

In addition to converging IFRS with U.S. generally accepted accounting principles, the International Accounting Standards Board is also looking to extend the standards globally, claiming that about 113 different countries have either adopted IFRS or agreed to adopt the standards. Now the IASB is looking to the Middle East to adopt the standards. Board member Robert Garnett spoke at an IFRS breakfast briefing in Dubai about the standards and how they could converge with Islamic accounting standards.

“We have to embrace all financial products so we will need to change our standards,” he said, according to Emirates Business. He said that the IASB would need to meet with the Middle Eastern standard-setter, the Accounting and Auditing Organization for Islamic Financial Institutions, “to have a better understanding of their concerns and how we can accommodate those with a revised IFRS.” He sees only slight differences between the standards now and believes they can be reconciled with the help of professional judgment.

Garnett also chairs the International Financial Reporting Committee and he plans to begin holding talks with the AAOIFI this year to try to work out the differences between IFRS and the Islamic standards.

Monday, April 20, 2009

ICAEW Urges the SEC to set an IFRS timetable

Got a link to this article in today's email. We've been wondering if President Obama might recommend holding off on IFRS due to the cost for companies.

ICAEW: Global Accounting Rules Needed For Financial Crisis

The ICAEW institute has urged the US Securities and Exchange Commission to decide quickly on a timetable for moving to International Financial Reporting Standards in order to limit uncertainty for US companies.

In its submission to the US markets watchdog's consultation on IFRS, Europe’s largest professional accountancy body said the global financial crisis had highlighted the need for global accounting rules.

Nigel Sleigh-Johnson, head of the ICAEW’s financial reporting faculty, said: 'The close scrutiny of accounting for financial instruments
during the financial crisis has made the need for comparable financial reporting even more obvious.'

'We believe strongly that the transition by US companies to IFRS would not only benefit US companies, but the whole world, as it will improve transparency and comparability globally.'
The comments come amid growing opposition to global accounting standards in the US.

Earlier this month, Paul Boyle, chief executive of the UK's chief financial regulator, the Financial Reporting Council, said adoption of international accounting standards for all listed US companies will not be achieved by 2014, potentially threatening global convergence efforts.

The adoption of IFRS in the US will only succeed by educating people who use and prepare company accounts, the ICAEW also said in its submission.

The ICAEW added: 'We know from our 2007 study into IFRS implementation across the EU that companies need a significant amount of time to prepare properly. A 2011 decision with potential mandatory use of IFRS from 2014 might be tight.'