December 31, 1969

How Well Do You Understand Your Future Leadership Needs?

 

 

December 31, 1969

AICPA Audit Clarity Standards are Coming: Planning for Possible Changes in Your Audit Engagement

[caption id="attachment_4364" align="alignright" width="346" caption="New audit standards will make your yearly audit more user-friendly."][/caption]

by Guest Blogger Barry T. Omahen, CPA, Managing Partner, Lindquist LLP Certified Public Accountants

The American Institute of Certified Public Accountants (AICPA) has issued new standards that may impact your future audit engagement. Statements on Auditing Standards (SAS) Nos. 122–125 (referred to as “Clarified Auditing Standards” or “Clarity Standards”) introduce changes that go into effect for financial statement audits for periods ending on or after December 15, 2012. For most entities, that means the standards will be effective for the year ending December 31, 2012, or later.

Some changes may affect all audit engagements

  • Auditors are now required to review the terms of the engagement with you annually, even if you have a multi-year engagement letter.
  • Management’s responsibilities are spelled out more clearly in the engagement letter as a result of the new standards, but management responsibilities are unchanged.

    • The audit team is now required to ask you more questions regarding your legal and regulatory framework and to review correspondence with licensing or regulatory agencies, if applicable.

  • All confirmations are now required to be in writing (verbal confirmation is no longer an option).
  • Internal control communications (management letters) will now include a description of the potential effect of significant deficiencies or material weaknesses that the auditors identify through their procedures.
  • The audit report (opinion letter) has changed, with added headings to distinguish each section and a more complete description of management’s responsibilities.

Certain changes may only apply in unusual circumstances

  • When performing an audit on your organization for the first time, auditors are now required to perform and document various procedures on opening balances and consistent accounting procedures.
  • If your organization uses a financial reporting framework (previously called basis of accounting) other than Generally Accepted Accounting Principles (GAAP), your auditors will need to discuss the appropriateness of the framework and may perform additional procedures regarding related-party transactions.

Some of the benefits of the clarified auditing standards include enhanced communication between your team and your auditors, improved audit quality and increased confidence in the audited financial statements.

These new standards will require auditors to redo much of the system evaluation work and memorandums that they carry forward from one audit to the next. As such, it’s encouraged that you work closely with your auditor to make these changes as smooth and efficient as possible!

For a more detailed version of this article, refer to Lindquist LLP’s website:  http://www.lindquistcpa.com/AICPA-Audit-Clarity-Standards-11092012.htm

Barry T. Omahen, CPA, is Lindquist LLP's managing partner based in the firm’s San Ramon office.  Barry specializes in serving the audit, accounting and reporting needs of not-for-profit organizations and employee benefit plans. He serves as the partner in-charge of the firm's quality control review and audit and accounting practice.  He can be contacted at (925) 498-1546 or bomahen@lindquistcpa.com.

Lindquist LLP provides this information for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

 

December 30, 1969

5 Things Your Nonprofit Should Know About Unemployment Insurance

Last week our partners over at the Maine Association of Nonprofits (MANP) published the following article in their e-newsletter and on their blog. Breaking down the top 5 things that Maine every nonprofit should know about unemployment insurance, we're excited to share this with you.

Because keeping unemployment costs low is vital to so many agencies, we've added state-by-state information for taxable wage bases, and

MANP Help Desk FAQ: 5 Things Your Nonprofit Should Know About Unemployment Insurance

We get a variety of questions related to unemployment tax – also known as unemployment insurance – and encourage nonprofits to be proactive in learning about this system.

  1. What is Unemployment Tax?

    The MDOL provides a helpful overview of the program, and this summary: “Unemployment is an insurance program providing temporary, partial wage replacement to workers who are unemployed through no fault of their own. The program is funded by Unemployment Taxes paid by employers based on the amount of wages paid for covered employment. The Unemployment Tax is paid on the [taxable wage base] an employer pays to an individual in a calendar year.”

  2. Is Your Nonprofit Liable?

    501(c)3 nonprofits are exempt from federal unemployment taxes, but may be liable for state contributions if they meet something called the “4 for 20″ provision. This provision is triggered when four or more individuals are employed on the same day for 20 weeks in a calendar year, though not necessarily for consecutive weeks. It is important to note that who is considered “employed” for these purposes is not always straightforward – see #4 below.

  3. Why You Should Consider Coverage Even If You’re Exempt

    While many nonprofits in Maine are very small and potentially exempt, MANP encourages all nonprofits – as a best, ethical practice – to pay into the unemployment tax system or alternative coverage (see #5) to protect their current employees. At the very least, your employees should be made aware of whether or not you provide unemployment coverage.  Unemployment compensation is a safeguard for people – and our communities as a whole – against the potential economic and emotional domino effects of losing a job.

  4. Why Independent Contractors May Still Be Considered Employees

    There are different rules and tests used by government agencies to determine independent contractor status, because different agencies are responsible for separate aspects of law. For the purposes of unemployment insurance, the Maine Department of Labor uses something called the “ABC test”, which makes it sound simple, but is more complicated when applied to real situations.  The ABC Test establishes criteria that an work relationship must meet in order to for the services of that individual to not be considered employment. The three parts of the ABC Test relate to employer control/direction of the worker, place(s) of business or courses of business, and proof that the worker is independently established in the trade.  A nonprofit may have to pay unemployment taxes even if IRS or Maine Revenue Services determine that, for income tax purposes, individuals may be independent contractors. Nonprofits should be familiar with this FAQ resource on Independent Contractors, and with this guide about Independent Contractors and the ABC test.

  5. Cost-Saving Alternatives

    The Unemployment Services Trust (UST) provides an alternative to paying into the Maine unemployment tax system, and can be a cost-saving option for nonprofits, especially those with more than 10 employees. Through UST, agencies directly reimburse the state only for the claims of their former employees, rather than paying the state unemployment insurance tax which covers all Maine employees.

This post does not constitute official or legal advice, and MANP suggests consulting the Maine Department of Labor’s full Guide to Maine Unemployment Laws, the relevant section of Maine law, staff of the Maine Department of Labor, or an attorney with employment law expertise for your organization’s specific questions.

A version of this article originally appeared on blog.nonprofitmaine.org.