LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC's Guide to Managing an Accounting Practice. Twenty first Edition (February 2015)

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1 Route To: Partners Managers Staff File LIST OF SUBSTANTIVE CHANGES AND ADDITIONS PPC's Guide to Managing an Accounting Practice Twenty first Edition (February 2015) The following items highlight some of the important new benefits of the 2015 update of PPC's Guide to Managing an Accounting Practice: Managing Technology. With the constant rapid change in technology, it is often difficult for a firm to stay abreast of the changes and how its accounting practice and its systems may be affected. Technology discussions throughout the Guide have been updated and revised. We ve also added discussions on the emergence of cyber liability and the use of virtual assistants. Once again, our guidance on managing technology has been updated by a nationally recognized expert to save you the time of researching current trends and standard system configurations. Evaluating Your Firm's Performance. The Guide has been updated to include the results of the 2014 Rosenberg National MAP Survey of CPA Firm Statistics. The Rosenberg MAP Survey is compiled annually and the 2014 Survey provides valuable financial data and trends from 382 firms. We ve also identified key statistics and financial information to measure firm performance, derived that information from the Survey for profile firms of each size category, and provided side by side worksheets you can fill in to help you compare your firm s performance against firms of similar size or elite firms. Legal Liability. Damage control is the name frequently given to those procedures that a firm follows when a liability claim has been asserted or there is a possibility that one will be asserted. During the damage control phase and the later phases of the litigation process, the firm may evaluate a liability claim to determine its estimated liability exposure. Once again, our guidance on avoiding legal liability has been updated by an attorney who specializes in defending accountants against professional liability claims. This practical, easy to follow guidance is specifically designed to reduce a CPA firm s litigation risk regardless of the size of the firm or the type of its practice. New Authoritative Literature. Since the last update of this Guide, the AICPA adopted a revised Code of Professional Conduct, effective December 15, These revisions include changes and additions to the Ethics Definitions, Interpretations, and Rulings. All pertinent discussions, as well as ethics compliance practice aids, have been revised to address the new guidance. This effective date excludes two broad Conceptual Framework sections (one for members in public practice and one for members in business), as they have a delayed effective date of December 15, Billing and Collections. Collecting on service billings is key to maintaining a profitable accounting firm. The number of payment options has increased over the years, but the collection platform used is still highly dependent on firm characteristics, such as firm size, number of clients, and technology literacy. The new discussion in this Guide focuses on the implications of using mobile payment options as a collection platform. Partner Compensation. One of the most critical and sensitive aspects of firm practice management is the allocation of partner income. Although there are numerous ways to allocate partner income, most partners would agree that the firm s methodology should align with the desires and needs of the owners and the size of the firm and number of partners. For this reason, the discussion of partner compensation systems in this Guide has been expanded to provide guidance on classifying partners as employees as an additional partner compensation methodology. gpmp15sub.pdf 1

2 General 1 Overview of PPC's Guide to Managing an Accounting Practice 2 Planning for a Successful Practice 3 Firm Administration 1. Updated the references and guidance throughout for the revised AICPA Code of Professional Conduct. 1. Updated the chapter to reflect changes throughout the Guide. 2. Updated the practice aid with a new practical consideration to include new peer review requirements related to both individual and firm licensing compliance. 1. Updated the practice aid with a new planning consideration related to post planning retreat leadership communication. 2. Updated the practice aid with a new recruiting and hiring Possible Benefit. 1. Updated the listing of accounting, payroll, and other system software and related product and vendor information. 2. Added a discussion on the use of virtual assistants to the telephone etiquette discussion. Throughout 1 Appendix 1A Appendix 2A Appendix 2B 1 Exhibit Updated the listing of disaster recovery planning assistance. Exhibit Billing, Collecting, and Managing Cash Flows 4. Updated the practice aid with a flexible spending account option for other deductions. 5. Updated the practice aid with a question regarding obtaining the payroll provider s service organization control report. 6. Updated the practice aid to consider including a response to a security or data breach in the disaster recovery plan. Appendix 3C Appendix 3D Appendix 3L 1. Updated the checklist for credit card processors. Exhibit Added a discussion of mobile payment processing to the evaluating credit card processors discussion. 3. Added a listing of selected mobile payment processing product sites to the evaluating credit card processors discussion Exhibit Updated the listing of cost savings opportunities in the stationery, forms, and supplies discussion. 5. Updated the listing of cost savings opportunities in the travel discussion. 6. Updated the listing of travel related internet sites. Exhibit Updated the listing of cost savings opportunities in the longdistance telephone discussion

3 5 Facilities Management 1. Added a discussion of shared workspaces, co working, business accelerators, and incubators to the leasing alternatives discussion. s Practice Development 2. Revised the selecting office copiers discussion to include duplicators. 3. Added hosted fax solutions to the selecting fax machines discussion. 4. Updated the list of fax machine dealers. Exhibit Updated the list of major long distance service providers. Exhibit Updated the list of other VoIP service providers. Exhibit Updated the discussion of considerations when choosing new monitors for the firm. 8. Revised the discussion to include laptops instead of notebooks. s Updated the suggested computer configurations. Exhibit Updated the list of mail order dealers. Exhibit Updated the list of mail order services. Exhibit Revised the discussion of operating system software for the latest developments Updated the exhibit on practice management software. Exhibit Revised the discussion of buying bundled software for the latest developments. 15. Updated the list of tax return preparation software and the companies that sell them. 16. Updated the list of trial balance and write up software and the companies that sell them Exhibit 5 14 Exhibit Updated the list of electronic engagement software. Exhibit Updated the list of data extraction software and the Exhibit 5 17 companies that sell them. 19. Revised the footnote to update the proposed Accounting Standards Update, Leases (Topic 842): a revision of the 2010 proposed Accounting Standards Update, Leases (Topic 840), that proposes changes in the way leases are accounted for and disclosed in GAAP financial statements. Exhibit 5 18 and paragraphs and Updated the list of phone system vendors. Appendix 5B 1. Updated the name of the referenced guide in the footnote Updated the list of selected webinar service providers. Exhibit Updated the discussion of sending firm announcement to include ing as an alternative delivery option Updated contact information for a newsletter publisher Updated the list of ready made newsletter publishers for Exhibit 6 3 CPA firms. 3

4 7 Personnel Management 6. Updated social media discussion to include an administrative application used for managing social media accounts. 7. Updated the list of selected contact management software products Exhibit Updated the list of desktop publishing software. Exhibit Updated the list of associations of CPA firms. Appendix 6B 10. Updated the example proposal letter for formatting Appendix 6G changes. 11. Updated the diagnostic review by including workers Appendix 6H compensation insurance and cyber security insurance to the insurance discussion. 12. Updated the seminar planning checklist by adding the varied use of social media hashtags as activities 1. Revised the footnote to include a discussion of the Notice of Proposed Rulemaking to amend the FMLA definition of a spouse. 2. Updated the illegal questions discussion to include questions on domestic partnership and pregnancy. 3. Updated the discussion with new EEOC compliance standard the Enforcement Guidance on Pregnancy Discrimination and Related Issues for pregnant workers. 4. Updated the discussion with the number of states operating state based health insurance marketplaces (exchanges). 5. Updated the discussion with revised mandate effective dates. 6. Updated and expanded the discussion of group health insurance for the changes brought about by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively the Health Care Reform Acts), which combine to dramatically change how health care is delivered in the United States. 7. Added a footnote discussing the effective dates for the minimum essential health insurance coverage mandate. 8. Revised the major provisions of the health care reform legislation exhibit for changes in effective dates and the percentage of employees that must be offered minimum essential insurance coverage. 9. Updated the discussion for new AICPA requirements for accessing the AICPA Competency Self Assessment Tool (CAT). 10. Updated the appendix for changes made throughout the chapter. Appendix 6I Exhibit Exhibit Appendix 7A 11. Updated the list of recruiting websites. Appendix 7B 12. Revised employee handbook checklist to include questions Appendix 7D 1 related to life insurance plans, disability insurance, group health insurance, and other fringe benefits. 4

5 8 Scheduling Professional Staff 9 Ownership Issues 13. Revised the assessment to include a question in regards to identifying successor candidates for retiring partners. 14. Revised the receptionist sample job description to include updating the firm s social media accounts as an essential job function. Appendix 7E Appendix 7G Added instructions to the candidate screening form. Appendix 7H 16. Added a Relation to You column in the personal references chart. Appendix 7I 17. Revised the employee contract drafting form to ensure its Appendix 7M compliance with current laws and regulations regarding employee contracts. 18. Changed the title of the practice aid to Independence Questionnaire and significantly updated the content for changes resulting from the AICPA revised Code of Professional Conduct. Appendix 7O 19. Changed the title of the practice aid to Independence Appendix 7P Representation. 20. Changed the title of the practice aid to Independence Appendix 7Q Representation Control Log. 21. Changed the title of the practice aid to Independence Appendix 7R Resolution Form. 22. Added a Location column to the CPE plan worksheet. Appendix 7U Revised the instructions for clarity and added a Sponsor Appendix 7U 2 ID column to the individual CPE plan worksheet. 1. Updated the example PPC Trackker reports. Exhibits 8 1, 8 2, and Updated to include a question regarding the firm s utilizing staff rotation to aid in professional development. 3. Updated the schedule request form to include an area to explain the reason for the request. 1. Updated the advantages and disadvantages of proprietorships regarding hiring minor children and transferability of interests. 2. Updated discussion of partnerships by expanding guidance on partnership agreements and operating as a partnership. Additionally, a discussion on limited liability partnerships was added as an option for organizational structures. 3. Updated the discussion of paying the capital contribution to include an additional payment alternative. 4. Expanded the discussion of owners salaries by considering the tax implications treating the owner as an employee. 5. Updated the best strategy discussion regarding mergers and acquisitions to expand the discussion on reasons for selling and the guidance on selling the entire practice. Appendix 8A Appendix 8F s s s s

6 6. Updated the discussion of technology and niche practice creation for upstream mergers. Added a listing of reasons for a lateral merger. 7. Revised current steps and added new steps to the merger process. 8. Updated the setting merger objectives discussion to include a suggestion of self evaluation for the acquiring firm. 9. Updated the issues to be addressed in formulating a merger policy. 10. Updated and added to the types of information an acquiring firm should request from a prospect firm. 11. Updated and added to the topics the firms should discuss during the initial meeting. 12. Updated the discussion of evaluating prospect firm clients by adding additional prospect firm requests and guidance on analyzing the requests. s s s Updated the discussion of de merger provisions. s Added quality control and licenses and registrations questions to the other issues to be agreed upon prior to the merger discussion. 15. Updated the discussion of negotiating, revising, and signing the merger agreement. 16. Updated the post merger and transition considerations discussion s Updated discussion of liability insurance considerations Revised the discussion of developing a retirement/succession plan before the merger Revised the discussion of naming a firm. s Revised the discussion of equity ownership Updated the discussion of pre merger accounts receivable to suggest that the parties address who has responsibility for collections. 22. Updated the discussion of work in process to suggest that the parties address the invoice and the collection process for work in process. 23. Updated the practice aid with questions related to the compensation committee. 24. Revised the table comparing tax and nontax issues related to various types of business entities Appendix 9A Appendix 9B 6

7 10 Avoiding Legal Liability 1. Expanded the changing profession discussion. s Updated the discussion to include other costs of defending malpractice claims 3. Expanded the discussion of engagement documentation to include PCAOB attest engagement lock down requirement. 4. Added text communications to the electronic communication discussion. 5. Updated the discussion of system reviews and engagement reviews. 6. Updated the discussion of firms with adequate quality control systems still getting sued. 7. Updated the reasons why firms are vulnerable to malpractice claims. 8. Updated the discussion of protecting owner assets with California LLC prohibition for accounting firms. s s s Expanded the definition of insured discussion. s Expanded the discussion of exclusions in professional liability policies. 11. Updated the discussion of factors that should be considered when completing applications for insurance coverage. 12. Updated the loss prevention discussion with specific measures to avoid or minimize the risk of liability claims. 13. Updated the discussion of how family office service engagements may lead to malpractice claims. 14. Updated the new client acceptance discussion for changes related to the AICPA revised Code of Conduct. s s Updated the sources of background information listing. Exhibit Updated the discussion of staff evaluations Added a footnote to discuss engagement letter requirements of SSARS Updated the discussion to include a recommendation to amend the engagement letter for a change in services. 19. Added an example clause for engagement letters regarding report reproduction. 20. Updated the discussion of a formal document retention policy to recommend including annual destruction of outdated records. 21. Added a footnote discussing the new inquiry requirements for engagements performed under SSARS No Updated the discussion with additional reasons for why a firm should rarely sue for fees s

8 11 Managing Technology 23. Added the termination of the firm by a client as a warning sign of a potential claim. 24. Updated discussion of what to do when a client threatens a claim and Updated the discussion of reviewing the firm s workpapers Expanded the discussion of what to do when a client is assessed by taxing authorities. 27. Expanded the discussion to include questions a firm should ask of itself when a client elects termination of an engagement. 28. Updated the listing of malpractice liability insurance companies. 29. Updated the practice aid by adding additional conflict of interest example language and the firm s responsibility regarding the offering of business advice. 30. Updated the listing of mediation and arbitration organizations. 1. Updated the technology costs discussion for new industry averages Appendix 10B Appendix 10D Appendix 10I Updated the workstations discussion Updated the discussion of internet connections Updated the discussion of internet uses Updated the discussion of personnel with technology expertise Added a discussion of cyber liability insurance Updated the discussion of the intranet Changed the name of the integrator to the administrator Updated the software and licenses discussion Updated the start with the plan and budget discussion Updated the practice aid for changes made throughout the Appendix 11A chapter. 12. Updated the practice aid for changes in technology. Appendixes 11C, 11F, 11G, and 11H 13. Updated the typical annual continuing educations requirements in the example job description. Appendixes 11D 1 and 11D Updated technology questions. Appendix 11E 1 8

9 12 Performance Measurement 13 Firm Statistics 14 Profile Firms 1. Updated PricewaterhouseCoopers values Updated recommendations to improve employee satisfaction. 3. Updated the footnote to reference Appendix 2B 2 as alternative illustrative client survey. 4. Updated the appendix for changes made throughout the chapter. 5. Added an additional delivery question to the client satisfaction appendix. 6. Added an additional issue to the employee satisfaction appendix Appendix 12C Appendixes 12E 1 and 12E 2 Appendixes 12F 1 and 12F 2 1. Added the 2014 Rosenberg Survey of CPA Firm Statistics. Section 1300 and Appendix 13A 1. Added profile firm ratio and statistical information for the 2014 Rosenberg Survey. Section 1400 and Appendix 14A 9