Monthly Archives: January 2017

Preparation Enagement
Jan 12

Bookkeeping, Preparations, Compilations, and Reviews

By Charles Hall | Preparation, Compilation & Review

Today, we’ll answer various questions regarding bookkeeping, preparations, compilations, and review engagement.

Compilation Enagement

Q: Should I issue management letters for preparation, compilation, or review engagements?

A: While not required, it is advisable to provide management letters when performing SSARS services. Why? Two reasons: (1) It’s a way to add value to the engagement, and (2) it’s a way to protect yourself from potential litigation. Clients do–sometimes–sue CPAs in these so-called “lower risk” engagements. If we see control weaknesses (while performing a compilation for example), we should communicate those–even though standards don’t require it. Then, if theft occurs in that area and you are later sued regarding the fraud, you have a defense. If you don’t issue a management letter, at least send an email regarding the issues noted and retain a copy.

Q: Why obtain an engagement letter for nonattest services such as bookkeeping and tax (standards don’t require it)?

A: In all engagements, we want to state exactly what we are doing. Why? So, it is obvious what the client has hired us to do–and what they have not hired us to do. If a client says, “I told you to do my monthly bookkeeping and to file my property tax returns,” but you have no recollection of being asked to perform the latter, you need an engagement letter that specifies monthly bookkeeping (and nothing else).

Q: Should I say–in a bookkeeping engagement letter–the service is not designed to prevent fraud?

A: We should obtain a signed engagement letter for bookkeeping services, even though not required by standards. And yes, by all means, include a statement that the bookkeeping service is not designed to detect or prevent fraud.

Q: If I note fraud while performing a bookkeeping, preparation, compilation, or review engagement, should I report it to the appropriate levels of management?

A: Standards require this communication for review engagements. I would do likewise for the other services.

Q: Am I required to be independent if I perform bookkeeping and preparation services?

A: No, since both are nonattest services.

Q: If I create financial statements as a byproduct of an 1120 tax return, am I subject to AR-C 70 Preparation of Financial Statements?

A: No, you are only subject to AR-C 70 if you are engaged to prepare financial statements.

Q: If I perform bookkeeping services in a cloud-based accounting package such as QuickBooks, am I subject to AR-C 70?

A: It depends. Yes, if you are engaged to prepare financial statements. No, if you were not engaged to prepare financial statements. Who “pushes the button” to print the financial statements has no bearing on the applicability of AR-C 70.

Q: Am I required to have a signed engagement letter for all preparation, compilation and review engagements?

A: Yes.

Q: Can I act as a controller-for-hire and perform a compilation engagement?

A: Yes, but you need to state that you are not independent in the compilation report.

Q: Can I act as the controller-for-hire and perform a review engagement?

A: No. Independence is required for review engagements.

Q: If I prepare financial statements and perform a compilation, am I performing one service or are these considered two separate services?

A: They are two separate services. The preparation is a nonattest service, and the compilation is an attest engagement. Both can be specified in one engagement letter.

Here’s a video explaining the differences in preparation and compilation services.

YouTube player
Using Slack for CPA Project Communications
Jan 04

Are You Using Slack for CPA Project Communications?

By Charles Hall | Technology

Do you ever find yourself digging through hundreds of emails to find one message? You know it’s there somewhere, but you can’t put your electronic finger on it. Use Slack to communicate by project–that way, you’ll have all messages (by project, e.g., individual audit engagement) in one place.

Using Slack for CPA Project CommunicationsWhat is Slack?

Slack is software designed to allow project teams–e.g., audit team–to send and store messages. Why use Slack rather than traditional email? Messages are stored by channel (by project), making it much easier to see project conversations.

The Slack website says the following:

Most conversations in Slack are organized into public channels which anyone on your team can join. You can also send messages privately, but the true power of Slack comes from having conversations everyone on the team can see. This transparency means it’s quick to find out what’s going on all across the team, and when someone new joins, all the information they need is laid out, ready for them to read up on.

How CPAs Use Slack

How can you as a CPA or auditor use Slack?

Create a channel for each project, and ask all team members to communicate using Slack (rather than email).

In CPA firms, some activities are year-round such as quality control reviews (we perform several hundred a year). Other activities are a true project, such as an audit engagement. Either way, you can use a separate (Slack) channel to communicate and store all related messages.

Using Slack for Quality Control Reviews — An Example

Below you see an example of how Heather, my associate, and I use Slack to communicate about file reviews in our quality control department. By doing so, we can see who is doing what and when. Also, all of the messages are searchable by channel. So, suppose I’m wondering when we reviewed the ABC Bank engagement. I can search the CPR (cold partner review) channel to see who performed the review and when. Notice, in this channel, Heather and I are posting status comments. We do so for the following reasons:

  • To create a history of each review
  • To notify each other that the review has commenced (Slack automatically sends a notification message to those included in a channel)

To select our quality control channel, I click the CPR channel on the left (where all the channels appear). Once I click CPR, I see the most recent messages for this channel.

 

Slack

Made with Stitcher

Audits – Another Example

Think about a typical audit. You have three to five team members, with some individuals coming and going. To maintain continuity, you need a message board that allows all audit team members to see what is going on. That’s what Slack does when you create a channel for a particular audit. Think of it as a message board in the cloud since the designated personnel can see the audit communications with their PC, iPad, or cell phone.

Other Advantages of Slack

Advantages of Slack include the following:

  • Accessibility from all devices, including cell phones and tablets
  • Shareability of documents such as PDFs and spreadsheets
  • Integration with other apps such as Trello and Google Calendar
  • Configurable notifications of messages to team members
  • Private messaging (when needed)
  • Basic plan is free

Give It a Try

The best way to see how Slack works is to try it yourself. You don’t need any training since it’s easy to use. To see more information about Slack, click here.

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