Three New GASB Exposure Drafts

GASB is continuing its pursuit of placing all governmental debt on the statement of net position. With GASB 68 (Accounting and Financial Reporting for Pensions), governments will include unfunded pension debt on their balance sheets and, later, once the other postemployment benefit plan (OPEB) standards are reviewed and passed, you will likewise–it appears–place unfunded OPEB debt on the balance sheet. But the OPEB decisions are, at present, in the exposure stage.

In late May, GASB issued three exposure drafts (comment deadline for all three is August 29, 2014):

  1. Financial Reporting of Postemployment Benefit Plans Other Than Pension Plans
  2. Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions
  3. Accounting and Financial Reporting for Pensions and Financial Reporting for Pension Plans That Are Not Administered through Trusts That Meet Specified Criteria, and Amendments to Certain Provisions of GASB Statements 67 and 68.

1. above applies to OPEB plans themselves.

2. above applies to employers who offer OPEB plans.

3. above addresses pension plans not administered through trusts (most pension plans are administered through trusts).


Evernote for CPAs

Here's how you can use Evernote to make yourself more productive

Evernote is a game-changer for CPAs.

What is Evernote?

Think of it as your personal digital library. 

Evernote is a cloud-based storage system which allows you to capture and file voice recordings, documents (including Word, Excel, PDFs), pictures, and videos. Once information is placed in Evernote, it is searchable in a Google-like fashion. Even hand-written notes are searchable (provided your handwriting is legible).

Evernote for CPAs

Picture is from

Things CPAs Can Do with Evernote

  • Create a personal digital library (e.g., use an Evernote digital notebook to store Journal of Accountancy articles, CPE material, and even videos of class instruction)
  • Share individual files or notebooks (a compilation of files) with others (with the premium version you can collaborate with others, allowing them to change Excel or Word files)
  • Capture meeting conversations with your smartphone and save them to Evernote
  • Use your smartphone to take a picture of meeting notes on a whiteboard (remember manually written words are searchable in Evernote)
  • Encrypt selected text within an Evernote note (password protected); it can’t be viewed without the password
  • Add selected web information to Evernote using an Evernote clipper–see below
  • Email any document directly to your private Evernote email address (which adds the emailed information to a “to be filed” folder in Evernote)–see below
  • Create a local Evernote notebook for sensitive information (the local notebook resides only on the device with which it is created – e.g., your PC – and does not synchronize to your Evernote cloud account)

The Skeletal Framework: Notes, Notebooks, and Tags 

Evernote for CPAs

1. The basic element of Evernote is a note.

Think of a note as a blank piece of paper on which you can type. You can also attach other files to the note (e.g., an Excel spreadsheet or a video file or a voice message).

2. Notes are placed in notebooks.

Think of a notebook as a three-ring binder.

For example, if I want to create a note about comprehensive income, I can do so and then, if I like, attach related files (e.g., PDFs) to the note. Next, I might add a note about other comprehensive income and another about reclassifications from other comprehensive income. The separate notes can be, for example, a text file, an Excel file, and a voice message.

All three notes can be added to a notebook titled: Comprehensive Income.

3. You may also tag each note.

Think of a tag as a yellow-sticky applied to a note with a descriptive term.

For example, the other comprehensive income note can be tagged: (1) OCI, (2) Pension, (3) Hedges, and (4) Investing – use as many or as few tags as you like. (Tagging will make searching easier.)

Getting Information Into Evernote

Feed your Evernote account in multiple ways. You can use Evernote apps or programs on your iPad, PC computer, and smartphone. (You can also access your account using a web browser–without a download.)

I use this smartphone app to make and save pictures, notes, and voice messages to my Evernote account.


Evernote also provides you with a unique email address that can be used to feed information into your personal cloud; when you find something you want to store, you can email it to your Evernote account.

Capture web pages on the fly using an Evernote clipper; just download the clipper program from the Evernote web site. 

Another neat way to get information into Evernote is with a scanner. I use a Fujitsu ScanSnap scanner for PC to feed my scanned pages directly into Evernote.

To Create Your Account

Go to the Evernote website and follow the directions. There is a free version if you desire to try it out. The premium version is $70 per year.

Recommended Books

Evernote Essentials 

Evernote For Dummies 

Preparation of Financial Statements and Independence

Your firm’s preparation of financial statements for an attest client may impair your independence. And, of course, you can’t perform audits or reviews if you are not independent.

When might your firm’s independence be impaired?

When a client does not have a person with suitable skill, knowledge, and/or experience (SKE) to review the financial statements (prepared by the auditor) and assume responsibility.

If the client can’t assume responsibility, the auditor is deemed to be attesting to his own work (the self-review threat).


PEEC Adopts New Code of Conduct

As I recently posted, the AICPA Professional Ethics Executive Committee (PEEC) adopted a revised Code of Conduct that will be effective for engagements covering periods beginning on or after December 15, 2014. The new Code provides enhancements to independence standards, highlighting that preparation of financial statements is a nonattest service.

AICPA and GAO Independence Standards Converging

If you followed the changes to Yellow Book independence standards, this all sounds familiar. And it should. The AICPA and the GAO are intentionally moving in the same direction, which is a good thing–no need for competing standards.

A problem arises however.

Say your small business client does not have a person with sufficient education or experience to assume the responsibility for the financial statements, then what? You would no longer be independent and could not provide audit or review services.

Recently I received my Reviewer Focus newsletter from the AICPA (information provided to peer reviewers), and this letter plainly states that auditors must be “satisfied that management has agreed and can assume all management responsibilities.” This includes overseeing the preparation of financial statements. An engagement would be considered “nonconforming” if the auditor lacks independence (due to the client’s lack of requisite SKE). Clearly, the AICPA is placing more emphasis on clients being able to assume responsibility for their financial statements.

I believe this dynamic creates significant problems for small businesses when CPAs review or audit their financial statements. If the independence issue arises, it may be necessary to involve a second person or firm (another CPA or CPA firm). This second party would review the statements on behalf of the client, thus enabling the client to assume responsibility. (Yes, I know this increases the client’s cost–just saying.)


To remain independent, you need to determine that the client has requisite skill, knowledge, and/or experience.

Documentation of Independence

Documentation of your independence is another issue, but a CPA’s lack of documentation does not–in and of itself–lead to an impairment of independence.

You’re familiar with the standard language that goes into most engagement letters with regard to performing nonattest services such as maintaining depreciation schedules or providing tax services. Well now you will add one more: preparation of financial statements. But remember this issue is more than just adding a few words to the engagement letter.

It’s about determining that the client has sufficient SKE.

2014 Compliance Supplement Issued

On May 19, 2014, the Office of Management (OMB) released the 2014 OMB Circular A-133 Compliance Supplement


The Supplement is effective for audits of fiscal years beginning after June 30, 2013, and it supersedes the 2013 Supplement. 

For a list of changes to the supplement, click here.

Peer Review Reports Being Recalled

It appears that several peer review reports are being recalled. Why?

I heard this week that the Department of Labor (DOL) is cracking down on firms that have not included benefit plans in firm client lists provided to peer reviewers. Some 1,100 reports are being recalled (or so I was told).

DOL’s Scrutiny–How?

Benefit plan audit reports are filed with related tax returns (5500s). It appears that the DOL may have queried governmental data and then compared the results to peer review information. The purpose of the comparison (this is my guess, nothing official): to determine if peer reviews appropriately included benefit plans. So if a firm performs one or two benefit plan audits and does not include those engagements in the firm’s peer review list of engagements, DOL can make that determination.


Peer reviewers are required to pick at least one benefit plan if the reviewed firm has such an engagement (commonly referred to as a “must-select”).

AICPA June 2014 Peer Review Update

This week I received the June 2014 Peer Review Update letter. That letter states that the Peer Review Board “approved revisions to the recall guidance when subsequently discovered evidence indicates that errors or omitted information about a firm’s accounting and auditing practice results in a material departure from the standards.” A material departure is defined in the letter as, “errors or omissions that result in a change in the type of peer review, period covered or must-select categories.”

So what happens if benefit plans exist but a reviewed firm does not include such engagements on its list of engagements?

Basically the report is recalled (by the peer review firm) “if the previously accepted peer review report was not correct in all material respects.” The administering entity will also recall the related acceptance letter.

Then a replacement peer review should be performed.

Obviously all parties should consult with the administering entity. The guidance in the letter goes on to state, “the reviewer for the replacement review must…at a minimum, prepare a Matter for Further Consideration (MFC) form.” The idea is that the firm has a deficiency in its quality control system if the benefit plan engagement(s) are not identified for the peer review.


Many CPAs still use a pencil and pad because they are not aware of what they can do with an electronic document. I made this Adobe Acrobat video in 2011, so it’s a little dated, but it demonstrates annotation (marking up) capabilities. The video just scratches the surface, but I thought I would share it anyway. I hope you discover a new trick or two.

The toolbar displays change as Adobe Acrobat updates its software, so your particular version may not look just like what you see in the video. But you will still be able to make these types of annotations, provided you have Acrobat.

By the way, you need the full version (paid version) of Adobe Acrobat to perform many of the annotation features. You can purchase the software from Amazon (Acrobat XI Standard Win [Download]) or at your local office supply store. I have found it to be an invaluable tool.


The Little Book of Local Government Fraud Prevention (2014)

After encountering local government fraud several times as an auditor, I thought I would purchase a book about the subject. But when I searched Amazon, I found no such publication. This was the genesis of The Little Book of Local Government Fraud Prevention.

My goals in writing the book were:

  • To provide fraud stories so readers can see how fraud occurs (and to add spice to the book)
  • To provide concrete ways to lessen the risk of theft (fraud prevention steps)
  • To make it short (most fraud books are too technical and too long)
  • To provide humor (who likes boring books?)
  • To provide useful resources (e.g., internal control checklists)

In the book, you will find the story of Rita Crundwell, a comptroller from Dixon, Illinois who stole over $53 million from a city of just 16,000 people. Another scene describes how a beautiful lady made off with funds as she died of cancer. And then there is the tax commissioner who took funds to support her cocaine habit.

So check it out on Amazon. You can read–for free–the first several pages using the “Look Inside” feature on Amazon’s website.

Do you want to fight fraud in government? Then buy this book.

Nonprofits: Possible Changes to Net Asset Classifications

On June 12, 2014, the Journal of Accountancy published an article titled Six Key Developments for Not-For-Profit CPAs. The article stated that the FASB plans to release an exposure draft this fall to potentially change the reporting of net assets. Presently standards call for the use of three net asset categories:

  1. unrestricted
  2. temporarily restricted
  3. permanently restricted

The exposure draft is expected to call for the use of two net asset categories:

  1. with donor restrictions
  2. without donor restrictions

What do you think of this potential change in reporting net assets?

Screen Shots with Skitch

If you follow my blog, you already know I am an Evernote (cloud storage) fan. But I must bring another one of their apps to your attention: Skitch. (It’s free.)

Do you ever need to take a screen shot and then point out particular information? The screen shot could be a page from financial statements you are reviewing.  For example:


Or maybe you want to comment on a blog page. Notice some of the features available in the app (arrows, text, icons, box).


You can download the app here. The app is available for the following:

  • Windows desktops
  • Windows 8 (Touch)
  • Mac OS X machines
  • Android mobile devices
  • Apple mobile devices

Once done with your annotations, you can share the screen shot using your email package. On my Windows PC, I keep Skitch in my toolbar (at the bottom of the screen). I open the app, take a screen shot, annotate, print to PDF, save to my desktop, and then share using my email app.

Want to learn how the app works?

Here’s a video for you Apple users:

Directions for Windows users are here.


Mind Mapping and CPAs

Can CPAs be creative? Can we get a Whack on the Side of the Head?

I believe that linear-thinking professionals, like CPAs, can be imaginative.

One tool you can use to tap into your creative abilities is mind mapping. And one of the best mind mapping apps is iThoughts (cost is $10). Below you will see an example of how I used iThoughts to develop a blog post.



Mind Mapping for Fraud

You can also use iThoughts (or other mind mapping software) to aid you in your fraud brainstorming sessions. If you’d rather not buy mind mapping software, just use a physical drawing pad. The creative principles work with or without software.

How to Mind Map

To mind map, simply start with a central thought and add related thoughts (nodes); pictures stimulate more thought and aid in capturing the overall view.

Try it. Who knows? Maybe your creative genius will bloom.