The first exam for the Chartered Global Management Accountant designation will be held in May 2015. While management accounting and public accounting are defined as two different disciplines, I think many accountants in public practice will benefit if only they have a better understanding in the management accounting practice of their clients. Based on my 10+ years of public accounting experience, a lot of the audit deficiencies are caused by the lack of their CPA's understanding of their clients's management accounting system and accounting estimates. One aspect I hate about being the auditor is the fact that the clients often don't see value in the public accounting firms they engage to do their audits because they only see them as the necessary evil to get that rubber stamping on their financials.
Sunday, December 21, 2014
Tuesday, December 2, 2014
Bottom Line Advice Of The Day
"The strongest improvements in market performance come from businesses that go beyond lip service and actually treat their workforce as a strategic asset rather than a cost to be minimized." - The Custom-Fit Workplace, pg 24.
Sunday, March 9, 2014
Are CPAs and Accountants Properly Informed On Competitive Billing Rates??
As a CPA, I am often in awe to see a lot of my peers are reading articles or advice provided by others without questioning, be they from the peers in our profession or even others who aren't in any kind of profession at all. An example is this article on billing rates for solo accounting practice and small firms (click to read). The article cited average billing rates for various services provided by small firms or solo practice, and yet it didn't say how many small firms were surveyed and what the sampling methodology was regarding to variances on geographic, years in practice, revenue range and client sizes. All it said was the data was obtained from a "new survey"? But it didn't say conducted by who and where?
According to the article, the average billing rate for tax prep is $110 per hour and $513 fixed flat fee. Throughout my years of hanging around in small firms, I have seen many fixed rate tax returns at $75, and also $150. As for per hour rate, many are charging under $50 and under $75. May be many of these low billing firms are totally eliminated in the survey? Recently, I have been having a hard time trying to get new clients from scratch, because many of them are telling me that they are paying only $125 for their tax returns with their CPAs. And I truly resent these low billing CPAs who are degrading the profession to those tax prep services inside the hair salons. But who can blame them when literally any doofus are allowed to practice tax, bookkeeping and even accounting. Auditing and attestation is the only service that requires a CPA license.
Now back to the topic, am I the only CPA out there who reads articles like this unknown survey and always feel this kind of data reporting should be left to be done by us, the CPAs??? And yet, many CPAs in America are very weak in Mathematics, logic or even basic arithmetic so many of us are totally incapable of writing even an article like that one which I consider it to be very inadequate and unprofessional. Lots and lots of us can't even write an email to begin with. In America, and particularly in California, everybody is providing accounting, tax and bookkeeping services. One of my former tax clients is actually doing it and she is telling me she is studying to become a CPA and she is now having her own bookkeeping practice serving a few law firms already. Her original degree is early childhood education but she couldn't pass the certification test to get a job at the kindergartens. Now she is taking evening accounting classes in some community college while providing book-keeping services. God bless her clients. I took a brief look on a few tax returns she did and they were full of outrageous mistakes. Her clients are unaware of these mistakes and seem to be happy with her because she charges only $30 an hour for her full charge bookkeeping service. Meanwhile, I am having a hard time trying to get anybody to switch to me when I am asking $150 per hour, even though I am a CPA with many years of hardcore tax and audit experiences.
It's really frightening and disheartening to see the billing pressure in the profession, and it actually feels much worse than the article reported.
According to the article, the average billing rate for tax prep is $110 per hour and $513 fixed flat fee. Throughout my years of hanging around in small firms, I have seen many fixed rate tax returns at $75, and also $150. As for per hour rate, many are charging under $50 and under $75. May be many of these low billing firms are totally eliminated in the survey? Recently, I have been having a hard time trying to get new clients from scratch, because many of them are telling me that they are paying only $125 for their tax returns with their CPAs. And I truly resent these low billing CPAs who are degrading the profession to those tax prep services inside the hair salons. But who can blame them when literally any doofus are allowed to practice tax, bookkeeping and even accounting. Auditing and attestation is the only service that requires a CPA license.
Now back to the topic, am I the only CPA out there who reads articles like this unknown survey and always feel this kind of data reporting should be left to be done by us, the CPAs??? And yet, many CPAs in America are very weak in Mathematics, logic or even basic arithmetic so many of us are totally incapable of writing even an article like that one which I consider it to be very inadequate and unprofessional. Lots and lots of us can't even write an email to begin with. In America, and particularly in California, everybody is providing accounting, tax and bookkeeping services. One of my former tax clients is actually doing it and she is telling me she is studying to become a CPA and she is now having her own bookkeeping practice serving a few law firms already. Her original degree is early childhood education but she couldn't pass the certification test to get a job at the kindergartens. Now she is taking evening accounting classes in some community college while providing book-keeping services. God bless her clients. I took a brief look on a few tax returns she did and they were full of outrageous mistakes. Her clients are unaware of these mistakes and seem to be happy with her because she charges only $30 an hour for her full charge bookkeeping service. Meanwhile, I am having a hard time trying to get anybody to switch to me when I am asking $150 per hour, even though I am a CPA with many years of hardcore tax and audit experiences.
It's really frightening and disheartening to see the billing pressure in the profession, and it actually feels much worse than the article reported.
Tuesday, February 25, 2014
Audit Failures and Pacific Hospital's Healthcare Fraud
As the executive Michael Drobot at Pacific Hospital of Long Beach pleaded guilty on paying tens of millions of dollars in kickbacks to doctors so they would steer business to his hospital, I can't help but wonder if Pacific Hospital ever had an external auditor? Many hospitals this size hire external auditing firms to conduct annual financial statements audits for state reporting compliance, licensing compliance or financing compliance, and I would assume it would be very unlikely that Pacific Hospital never engaged any external auditor for financial statements audits.
According to Wall Street Journal, Michael Drobot who built Pacific Hospital had engaged in massive health-care fraud which is also called the largest insurance-fraud case in history. Again what have been Pacific Hospital's auditors doing all these years to allow illegal kickbacks to doctors to accumulate to tens of millions of dollars, and also the excessive insurance billing fraud scheme to be carried on for so many years?
It's been over 10 years since Sarbanes Oxley overhauled the auditing standards to require auditors to perform risk assessments by considering how any illegal acts or frauds may exist that may cause material misstatements on the financial statements. Any illegal activity like massive kickbacks and bribery, engaged by the client and the client's management poses tremendous risks that the financial statements may not be reasonably presented. If you are a CPA and you are practicing auditing and you are asking me why, then I think you should stop practicing from now on.
The unrecorded contingent financial liabilities that may be caused by any legal implications of illegal acts committed in the case of Pacific Hospital would be too material a misstatement on the financial statements. The illegally earned revenue as a result of excessive fraudulent billing to insurance companies would be too much an overstatement on the company's revenue. This is why upon seeing substantial referral checks paid to doctors and upon understanding how the hospital's executive also owns a spinal-implant distributorship that distributes overly priced implants to doctors and surgeons who received referral fees to steer surgeries to the hospital; auditors would have to stop doing further work and refer such understanding of related parties and knowledge of referral charges for further investigation. It's usually during the further investigation that bribery and illegal kickbacks are found to potentially exist, along with excessive insurance billing. This will prompt the auditor to report the issue to those in charge of the hospital's governance so they can report it to the external parties specified by law or regulation. Or, if they don't, the auditor will have to report the issue directly to the external parties specified by law or regulation.
In the case of the Pacific Hospital of Long Beach, there seems to have been a chain of missing steps and reporting in the process of auditing throughout the years, if only there was ever a competent audit conducted by an external auditor.
According to Wall Street Journal, Michael Drobot who built Pacific Hospital had engaged in massive health-care fraud which is also called the largest insurance-fraud case in history. Again what have been Pacific Hospital's auditors doing all these years to allow illegal kickbacks to doctors to accumulate to tens of millions of dollars, and also the excessive insurance billing fraud scheme to be carried on for so many years?
It's been over 10 years since Sarbanes Oxley overhauled the auditing standards to require auditors to perform risk assessments by considering how any illegal acts or frauds may exist that may cause material misstatements on the financial statements. Any illegal activity like massive kickbacks and bribery, engaged by the client and the client's management poses tremendous risks that the financial statements may not be reasonably presented. If you are a CPA and you are practicing auditing and you are asking me why, then I think you should stop practicing from now on.
The unrecorded contingent financial liabilities that may be caused by any legal implications of illegal acts committed in the case of Pacific Hospital would be too material a misstatement on the financial statements. The illegally earned revenue as a result of excessive fraudulent billing to insurance companies would be too much an overstatement on the company's revenue. This is why upon seeing substantial referral checks paid to doctors and upon understanding how the hospital's executive also owns a spinal-implant distributorship that distributes overly priced implants to doctors and surgeons who received referral fees to steer surgeries to the hospital; auditors would have to stop doing further work and refer such understanding of related parties and knowledge of referral charges for further investigation. It's usually during the further investigation that bribery and illegal kickbacks are found to potentially exist, along with excessive insurance billing. This will prompt the auditor to report the issue to those in charge of the hospital's governance so they can report it to the external parties specified by law or regulation. Or, if they don't, the auditor will have to report the issue directly to the external parties specified by law or regulation.
In the case of the Pacific Hospital of Long Beach, there seems to have been a chain of missing steps and reporting in the process of auditing throughout the years, if only there was ever a competent audit conducted by an external auditor.
Friday, January 24, 2014
Have Public Companies Reinstated The Public Trust?
It's been more than a decade since the Sarbanes-Oxley Act (SOX) was enacted. For those of you who hold stocks in publicly traded companies, do you find the financial statements of the companies you invest in more reliable and truthful now than when the SOX was first enforced?
As for those of you CPAs out there who work in or serve the publicly traded companies, do you feel that SOX has effectively established clear accounting and reporting practices for both the boards of publicly traded companies and the public accounting firms?
As for those of you CPAs out there who work in or serve the publicly traded companies, do you feel that SOX has effectively established clear accounting and reporting practices for both the boards of publicly traded companies and the public accounting firms?
Saturday, November 30, 2013
How IRS' New Rules to Restrict Political Lobbying Through 504(c)(4) Organization Impact CPAs?
Recently, the Treasury Department and the IRS has proposed to spell out specific activities for the 504(c)(4) organizations that are considered to be political. The intention of this proposal is to reduce the financial influence that political lobbyists can exert on political campaigns by hiding behind the tax-exempted non-profit organizations.
As a CPA, I am surprised it takes the IRS this long to make such a proposal. As most taxpayers know, any expenses spent on political lobbying is not tax deductible. But contributions to civic leagues or other section 501(c)(4) organizations, while generally are not deductible as charitable contributions for federal income tax purposes, they may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer’s business. (This is where it gives a lot of flexibilities to the political lobbyists to fund their politicians buddies.)
Under the current rule, companies and wealthy individuals can donate lots of money to these 504(c)(4) organizations and receive huge tax deduction while financially supporting certain political candidates they affiliate with. On their books, it's usually under the "advertising and corporate sponsorships" or "marketing" expenses to promote their products or services" to the communities blah blah.
In my opinion, this practice allowed under the current law is unjust. The more tax deduction the companies and wealthy individuals pay, the more the IRS need to either cut my future social security benefits or increased my current income tax, which it already did. The more financial influence big money can exert on politicians, the more the system is going to be skewed to benefit the big money at the expense of little me.
As a CPA, I welcome this new proposal from the IRS. But even if this proposed new rule is passed, it will only be effective if only CPAs and auditors who are advising these heavily politically involved 501(c)(4) organizations and their donors, are competent and ethical enough to advise their clients against misclassifying and misallocating political donations as non political expenses on social causes. In my career as an auditor, I had seen CPAs liberally classify a lot of non-deductible expenses as deductible; many are so outrageously misclassified that I can't believe my own eyes . Making sure that donations are classified properly are much more difficult than just proposing a new law.
As a CPA, I am surprised it takes the IRS this long to make such a proposal. As most taxpayers know, any expenses spent on political lobbying is not tax deductible. But contributions to civic leagues or other section 501(c)(4) organizations, while generally are not deductible as charitable contributions for federal income tax purposes, they may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer’s business. (This is where it gives a lot of flexibilities to the political lobbyists to fund their politicians buddies.)
Under the current rule, companies and wealthy individuals can donate lots of money to these 504(c)(4) organizations and receive huge tax deduction while financially supporting certain political candidates they affiliate with. On their books, it's usually under the "advertising and corporate sponsorships" or "marketing" expenses to promote their products or services" to the communities blah blah.
In my opinion, this practice allowed under the current law is unjust. The more tax deduction the companies and wealthy individuals pay, the more the IRS need to either cut my future social security benefits or increased my current income tax, which it already did. The more financial influence big money can exert on politicians, the more the system is going to be skewed to benefit the big money at the expense of little me.
As a CPA, I welcome this new proposal from the IRS. But even if this proposed new rule is passed, it will only be effective if only CPAs and auditors who are advising these heavily politically involved 501(c)(4) organizations and their donors, are competent and ethical enough to advise their clients against misclassifying and misallocating political donations as non political expenses on social causes. In my career as an auditor, I had seen CPAs liberally classify a lot of non-deductible expenses as deductible; many are so outrageously misclassified that I can't believe my own eyes . Making sure that donations are classified properly are much more difficult than just proposing a new law.
Monday, October 21, 2013
Gimmicks in Government Economic Statistics and Gimmicks in Accounting
I always wonder why the Government keeps reporting GDP growth and low inflation and yet, I keep having a hard time getting jobs and I am seeing everything cost a higher % of my paycheck than ever. ( Okay, former paycheck. Now I don't even have a paycheck anymore.)
Now that I had quit my job I have a lot more time watching old TV shows and reading up on the internet, I am not surprised to read on the internet that the Government has been manipulating the formulas of all economic statistics to understate inflation and to overstate economic growth. According to the following chart published by Shadowstats.com, inflation would have been a few percentages higher if the government hadn't eliminated, since 1990, certain costs of goods from the formula.
A second chart below pubished by Shadowstats.com shows that economic growth would have been a miserable negative if only the government hadn't tempered with the statistical formula of GDP.
It seems to me that, to keep the music going, and to keep certain people's pockets funded either by their jobs, their clients, their banks, their investors, their voters, gimmicks are frequently used by the government and also certain accountants to fudge the numbers to their advantage. With all these misleading overstatements and understatements everywhere, I can't help wondering if any economists or accountants out there knows how to correctly measure or account for anything anymore? Why are there always so many gimmicks involved, be it inventory valuation, intangible assets impairment, revenue recognition, and economic data of all sorts. I hope I am just being over cynical due to the fact that I haven't had a new job offer yet. Otherwise, the world is just too disheartening.
Now that I had quit my job I have a lot more time watching old TV shows and reading up on the internet, I am not surprised to read on the internet that the Government has been manipulating the formulas of all economic statistics to understate inflation and to overstate economic growth. According to the following chart published by Shadowstats.com, inflation would have been a few percentages higher if the government hadn't eliminated, since 1990, certain costs of goods from the formula.
A second chart below pubished by Shadowstats.com shows that economic growth would have been a miserable negative if only the government hadn't tempered with the statistical formula of GDP.
It seems to me that, to keep the music going, and to keep certain people's pockets funded either by their jobs, their clients, their banks, their investors, their voters, gimmicks are frequently used by the government and also certain accountants to fudge the numbers to their advantage. With all these misleading overstatements and understatements everywhere, I can't help wondering if any economists or accountants out there knows how to correctly measure or account for anything anymore? Why are there always so many gimmicks involved, be it inventory valuation, intangible assets impairment, revenue recognition, and economic data of all sorts. I hope I am just being over cynical due to the fact that I haven't had a new job offer yet. Otherwise, the world is just too disheartening.
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