Archives for 2020

Law Firms Mull Canceling Partner Payments to Boost Liquidity Amid COVID-19 Concerns

As the COVID-19 pandemic has already caused one U.K. law firm to cancel partner payments, a U.S. legal consultant is advocating a similar move for other firms.

Leaders at Gateley, one of six publicly listed law firms in the U.K., announced via the London Stock Exchange that shareholders would not receive their March 31 dividend of 2.9 pence per share, The American Lawyer reported. The move is designed to “maximize the group’s short-term liquidity,” the firm said. Gateley’s share price dropped from 222 pence per share to 122 pence per share in two weeks.

The statement continues that activity has reduced since March 1 as a result of the disruption “caused by the COVID-19 pandemic to our clients and to our staff.”

In the same publication, a legal consultant encouraged law firm leaders to consider deferring payments to partners to ensure financial solvency.

Hugh Simons writes that the move will instill confidence in partners that management’s top priority is the financial viability of the firm. “How am I so confident about this? Because I was directly involved in deferring partner payments in the wake of the dotcom crash; we never regretted the move.” Simons formerly served as a senior partner at The Boston Consulting Group and COO and policy committee member at Ropes & Gray.

His suggestion: “If, thanks to the timing of your financial year, you’ve not paid partners their most recent profit share, then it behooves you to withhold it.” He also suggests telling partners through a series of conference calls rather than in a group email since the intention is to assure partners and answer all questions thoroughly.

“On balance, mid-July, with appropriate wording about flexibility to possibly defer further in a mechanism yet to be determined, is probably the way to go,” Simons explains, noting that payments deferred until July 15 will coincide with the new tax filing deadline. “Disasters only happen when you run out of options; preserving cash preserves options.”

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AICPA Appeals to IRS, Treasury for ‘Extensive Relief’ for Taxpayers

In light of the ongoing uncertainty and challenges caused by the spread of the coronavirus pandemic, the AICPA called for the U.S. Department of the Treasury and IRS to provide more extensive relief to all taxpayers.

Noting its appreciation for the agencies’ efforts to extend the tax filing and payment deadlines announced in the recent Notice 2020-18, the AICPA is nevertheless stressing the importance of providing additional relief. The AICPA recommends:

Postponing all deadlines and providing additional time to make payments. The AICPA believes taxpayers who do not have an April 15 payment or filing date are inherently disadvantaged and would similarly benefit from a deferral. The group argues that these individuals and their advisors need additional time for filings, tax payments, estimated taxes and gathering pertinent information to include in those filings or payment calculations.

Providing appropriate filing and payment relief for all filers and taxpayers (including tax-exempt organizations and fiscal year corporations) for tax returns, information returns, elections, claims for refund and other correspondence. The AICPA says relief should also apply broadly to all types of taxes (including payroll, excise tax, estate, gift and generations-skipping transfer tax, etc.), noting that deferment of other taxes that are not income taxes is necessary to aid both businesses and their employees.

“With shelter-in-place orders issued throughout the country and a spreading pandemic, there is a significant list of filing and payment challenges left unresolved,” says AICPA Vice President of Taxation Edward Karl. “We urge the Treasury Department and IRS to grant additional relief in these uncertain times and offer our assistance in identifying specific areas in need of FAQs or formal authoritative guidance.”

More news from the AICPA

RotenbergMeril Expands Headquarters

Looking for a larger and more modern headquarters, Saddle Brook, N.J.-based RotenbergMeril (FY18 net revenue of $12.2 million) has announced a move to a new 22,000-square-foot space within its current Park 80 West office plaza.

Focused on creating a more energizing and efficient work environment for employees, firm leaders chose an open floor plan with more natural light, improved technology to encourage collaboration and mobility, and new amenities such as a café-style lunchroom and wellness room.

“It’s important for our new office space to align with how our accounting firm and our clients are innovating, and to foster a collaborative environment for our growing workforce,” says MP Neal Rotenberg.

Alexander Thompson Arnold Names CIO

Alan Watson

Alan Watson has been appointed to the newly created role of chief information officer at Union City, Tenn.-based Alexander Thompson Arnold (FY18 net revenue of $26.6 million).

Watson previously served as principal consultant at Digital Simplicity and EVP-CIO of ChanceLight Behavioral Health, Therapy & Education. He was also awarded a Citrix Innovation Award for excellence in collaborating, networking and virtualization for his work creating customized learning resources in a secure, highly regulated environment.

“As ATA continues to grow and evolve, we saw a need to position ourselves as an innovative accounting firm that uses technology to create a strategic advantage for our firm and our clients,” MP John Whybrew notes on the creation of the CIO position.

More news from Alexander Thompson Arnold

Cotton & Company Names New MP, Structural Changes

Steve Koons

Steve Koons has been elected MP at Cotton & Company of Alexandria, Va. (FY18 net revenue of $30 million), succeeding Matthew Johnson, who had held the post since 2006.

Koons joined the firm in 2010 after working for the U.S. Government Accountability Office and the Office of Inspector General at the Board of Governors of the Federal Reserve System, and was elected partner in 2014.

The firm also announced that it has restructured its legacy Financial and Information Assurance (IA) practices into new assurance and advisory practices in a realignment that is expected to be largely completed by April. With the aim of enhancing its collaborative, multi-disciplinary service offerings, the assurance practice will focus on federal financial statement audits and related performance audits, while the advisory practice will focus on consulting engagements.

More news from Cotton & Company

Maryland CPAs Seek ‘Essential Business’ Designation During Shutdown

Maryland Gov. Lawrence Hogan this morning ordered all non-essential businesses in the state to close, but the Maryland Association of CPAs (MACPA) is asking Hogan to make an exception for CPAs.

Anticipating the shutdown, a March 21 letter to Hogan asked that the CPA profession be included on the list of essential critical infrastructure workforce exceptions.

Tom Hood

MACPA president and CEO Tom Hood requested the designation, which would allow public accountants to go to their physical offices as needed, while maintaining appropriate social distancing by staffing at less than 50% of office capacity. Hood’s argument notes that while many CPAs have implemented remote work, there are some critical functions that are required to be done in the office, including payroll and banking in secure systems, as well as processing mail with checks, invoices and other financial correspondence.

He further argues that CPAs are essential to the U.S. economy due to their work on compliance with federal and state tax and financial reporting requirements, the preparation of taxes, audits and financial reports for business financing and loans, and projections and contingency planning for businesses. And, since the financial services sector has been designated as one of 16 essential critical infrastructure areas by the U.S. Department of Homeland Security, MACPA believes CPAs should surely be included in that designation.

This is a fluid situation, so please check with your state societies for any updates.

It’s Official: IRS Delays April 15 Filing Deadline to July 15

As COVID-19 continues to weigh down the U.S. and global economies, the IRS has updated and enhanced its relief efforts for taxpayers, announcing Friday that the filing deadline for tax returns will be pushed from April 15 to July 15, 2020.

Edward Karl, the AICPA’s vice president of tax policy and advocacy, thanked everyone involved in the bipartisan effort. “We know that having a chorus of voices from Congress urging the Treasury Department to formally extend the deadline until July 15 was instrumental to the final decision made by the administration.”

The postponement laid out in Notice 2020-18 applies automatically to any “individual, trust, estate, partnership, association, company or corporation” with a federal income tax return or income tax payment due on April 15. Taxpayers do not need to seek an extension. In addition, no interest, penalty or addition to tax for failure to file a federal income tax return or to pay federal income taxes will accrue between April 15 and July 15, 2020.

The new notice applies only to federal income tax returns and payments (including self-employment tax payments) due April 15, 2020, for 2019, and to estimated income tax payments due April 15, 2020, for 2020. The notice does not apply to any other type of federal tax or to any federal information returns.

Notice 2020-18 supersedes the agency’s previous guidance (Notice 2020-17) regarding interest, penalty, or additional tax for failure to file a federal income tax return or to pay federal income taxes, which had included limits to the amount of tax that could be postponed.

Carr Riggs & Ingram Merges In Barraclough & Associates

Enterprise, Ala.-based Carr Riggs & Ingram (FY18 net revenue of $306 million) has acquired Barraclough & Associates of Santa Fe, N.M.

Barraclough & Associates provides accounting, bookkeeping and tax services to individuals and businesses, including financial statements, budgets, cash flow management, audits, tax planning and new business consulting.

CRI has expertise ranging from basic accounting services, to tax review, compilation, preparation and general business consulting. They also offer tax services to corporate entities, individuals, and trusts with particular industry expertise delivered to health care, legal services, and the oil and gas industries. More than 1,800 CRI professionals serve clients across the South.

More news from Carr Riggs & Ingram

Scandals Force KPMG, PwC to Repair Reputations

Two Big 4 firms are updating audit practices, adding technology and taking other steps to boost their reputations in light of major scandals last year.

KPMG and PwC have taken similar steps to address ethics lapses that resulted in millions of dollars in SEC fines, Bloomberg reported.

The changes are seen by some as improved assurance that financial reports are reliable, but critics believe a fundamental conflict still exists – the need to keep valuable audit clients while consolidation reduces the number of those clients.

KPMG, reeling from a so-called “steal the exam” scandal in which senior staff conspired with the PCAOB, made changes detailed in its most recent audit quality report. The scandal resulted in prison time for former staffers and a record $50 million settlement for extensive misconduct, as determined by the SEC. KPMG worked to find out which of its clients would be reviewed by PCAOB.

The reforms include:

  • Overhauling the audit leadership team
  • Moving internal inspections out of the audit practice
  • Revising performance evaluations and compensation
  • Updating audit methods
  • Introducing a cloud-based audit system that can examine a far larger amount of data
  • Increasing partner supervision and support
  • Improving methods of assessing risk, internal controls and estimates

KPMG is also exploring partner tenure, staffing levels and even the order in which the work is handled, Bloomberg reported.

“We know there’s really no silver bullet here,” says Jackie Daylor, KPMG’s national MP for audit quality and professional practice. She says she hopes the firm can be more proactive in providing extra resources or oversight.

At the same time, competitor PwC is addressing problems with following its conflict of interest rules. The firm agreed to a $7.9 million SEC settlement last year after providing services to audit clients that were not allowed, and for failing to inform the clients’ audit committees about the work.

The reforms include:

  • Requiring independence training for staff and partners
  • Adding reviews of contracts or proposals
  • Improving communications with audit committees and adding independence coaching before or during an audit
  • Adding an independent director to the firm’s governance board
  • Forming an advisory group on culture, risk management and other areas that impact audit quality.

KMPG followed suit on some of the changes, Bloomberg reported, adding independent directors to its board, hiring a chief culture officer and re-evaluating its corporate values.

Barbara Roper, director of investor protection for the Consumer Federation of America, says auditors must stand up to management of the companies they are auditing. The risk is losing that client, but it’s a risk firms must take.

Roper said they should be transparent about how they measure audit quality – from inspection deficiencies to independence to skepticism – and use those metrics when promoting and compensating senior leaders.

“It’s got to be more than lip service.”

More news from KPMG

More news from PwC

Best Practices for COVID-19 from ConvergenceCoaching

The Rush to Remote: Advice From ConvergenceCoaching

With the COVID-19 crisis, firms are implementing social distancing, organizations around the country are scrambling to shift their employees to work remotely.

Your building management may force you to close your office. Public transportation services could be interrupted and disrupted.

We recommend that you create a plan for what it would look like to have all employees work offsite. To help you get there, we have specific steps you can take to smooth the transition, ensure business continuity, and remain more productive.

View the full article

Strategies for Managing COVID-19

These are unprecedented times. One of the most important responsibilities of a leader is to guide their team through crisis and tough times with calm determination and thoughtful execution In the face of a lot of messaging, here are a few items to help you manage this crisis.

View the COVID-19 Strategies

Complimentary Remote-Work Toolkit

You may access 17 documents, articles and best practices for managing a remote workforce.

Access the toolkit

Webinar – Remote Work: Today’s Answer to Staying Healthy and Serving Clients Amidst COVID-19

There has never been a more appropriate time to fully embrace and utilize remote work options than today. Firms know that flexibility and remote work is at the top of the list of motivators of high-potential young CPAs, and now the country’s health imperative is driving CPA firm leaders to give up their attachment to their traditional work norms of “face time” and mandated office hours to move to a remote work model. Attend this session to explore best practices to manage, communicate and serve clients and team members in a remote environment.

Sign up for the March 26 Webinar