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AICPA Warns Against Overconfidence, Updates Digital Assets Auditing Guidance

The AICPA has updated last year’s guidance on auditing digital assets.

The new material, contained in Accounting for and Auditing of Digital Assets, is based on professional literature and experience from members of the AICPA Digital Assets Working Group and AICPA staff, and is specific to U.S. generally accepted auditing standards (GAAS). Digital assets are digital records on a distributed ledger that use cryptography for verification and security.

“This non-authoritative guidance goes a long way in helping auditors consider the potential risks unique to the digital assets ecosystem and the skillsets needed to conclude whether to accept or continue an engagement,” says Susan S. Coffey, AICPA executive vice president.

The practice aid provides auditors with information to consider when accepting or continuing audit engagements that involve digital assets. CPA firms should assess:

  • The current industry expertise and understanding of digital assets.
  • Management’s competencies and capabilities to maintain the entity’s books and records and secure its assets.
  • The client’s integrity and commitment to compliance with laws and regulations and its overall business strategy and the role the entity serves or intends to serve within the digital assets ecosystem.

“Overconfidence in the digital assets ecosystem is a real risk,” says Amy Steele, chair of Digital Assets Working Group. Steele is also an audit and assurance partner at Deloitte & Touche. “This Practice Aid is a great step at highlighting some of the unique challenges and considerations for auditors seeking to perform audits in this ecosystem.”

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AICPA Offers Student Hardship Grants

Undergraduate and graduate accounting students who have suffered monetarily due to the COVID-19 pandemic can apply for education grants under a new program introduced by the AICPA. Funded by the AICPA Foundation, the grants provide $2,000 to up to 25 students experiencing extenuating circumstances, such as loss of job or internship, to cover education-related expenses.

To be eligible, students must be enrolled full time in an accredited business and/or accounting program for the 2020-2021 academic school year and have completed at least 30 semester hours (or equivalent) of college coursework, including at least six hours in accounting. Applicants must provide student copies of their college transcripts, a copy of their resume, documentation of their financial hardship and a statement about how the hardship affected their future studies and plans to obtain CPA licensure.

“The coronavirus pandemic has caused financial hardship for many Americans, including college students,” says AICPA Foundation president Ernie Almonte. “We know many students are struggling to cover the cost of their education. The Foundation is committed to supporting these students as they complete their education and enter the profession.”

Scholarship applications will be accepted from July 1 to Aug. 31.

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AICPA Lauds Latest PPP Proposal

Encouraging Congress to pass legislation that requires the Small Business Administration (SBA) to certify and provide free online access to PPP loan forgiveness calculators, the AICPA announced its support for the Calculate PPP Forgiveness Act of 2020.

The Calculate PPP Forgiveness Act states that the SBA, in coordination with the Department of the Treasury, must provide or certify a loan forgiveness calculator that is easily accessible by the public, available online and at no cost. The calculator must allow a lender or recipient of a PPP loan to estimate the amount of that loan’s forgiveness and help the lender or recipient complete an application to request forgiveness for a covered loan.

Based on existing PPP guidance and additional recommendations, the AICPA in May shared its version of a PPP loan forgiveness calculator with the Treasury Department and SBA. The association believes such a tool will help clear up questions surrounding loan forgiveness that have plagued PPP implementation among small businesses.

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AICPA Tax Members Split on Sticking with July 15 Filing Deadline

As the extended July 15 deadline for filing approaches, the AICPA recently reached out to its tax section members to find out whether they think they’ll be ready in a few weeks or whether they believe the IRS should consider delaying the deadline once again. While the majority of the more than 1,000 commenters said they would be ready and able to file returns or extensions for their clients by the July 15 due date, many wanted the IRS to move the due date to October 15 or later.

Among those advocating for a firm July 15 deadline, many expressed concern that clients would simply procrastinate if given more time, with some arguing about the inconvenience of tax returns hanging over their heads for almost the entire year if the date gets postponed again. On the other side of the divide, proponents of another extension said that many of their clients are in bad shape due to the pandemic and a later date would help them meet their obligations, while others noted that clients have been more focused on keeping themselves and their families safe, with things like work and taxes coming in a distant second place.

In the end, citing both the importance of providing certainty for clients in the context of having a target date that needs to be met and the practical concern of federal and state extensions not necessarily lining up, the AICPA’s Tax Executive Committee indicated that it will not advocate for another delay of the deadline at this time.

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AICPA CEO: Helping Businesses Recover Involves Taking Some Risks

Just as health care professionals work on the front lines of the COVID-19 pandemic, CPA firms are the financial first responders, helping their clients recover economically.

More than any other profession, accountants are best positioned to serve as trusted advisors to the 6 million small “Main Street” businesses battered by the economic downturn caused by the COVID-19 shutdowns, says AICPA CEO Barry Melancon.

Melancon, speaking May 20 at the virtual AICPA Spring Council meeting, says accountants will play a critical role in bringing back an economy that in April saw consumer confidence plummet by one of the largest one-month drops ever. GDP dropped 4.8% in the first quarter and more than 40 million are unemployed.

As passionate debates flare on the fairness, or unfairness, of reopening plans, Melancon says, “It’s our job as a profession to not be bogged down by that.” Focus on helping clients take some risks in developing new business models and avoid being “ultra-conservative.” He adds that accounting is a profession that “strives to get it right,” but it’s also a profession that “gravitates to the technical” and can become paralyzed by the details.

“Our real value and our real message going forward is that trusted advisor role,” he says. “I think we will see that the most valuable employees in firms, and the most valuable people in finance, are going to be the ones that can focus at that level.”

He adds, “How well we do that, I believe more than anything else, will drive how well we help the economy to recover.”

Melancon discussed the numerous ways accounting professionals can succeed in an uncertain economic environment. One way is by retaining staff, and he says that in his many discussions with firm leaders, he has seen a passion for maintaining the workforce, keeping commitments to hire in the fall and to continue internship programs, even if they’re virtual.

Keeping talented professionals will be key to helping small business clients, who are being hit disproportionately in this crisis, as are small CPA firms. The reverse was true in the 2008 recession, which heavily impacted large companies and large firms. Firms with diverse client bases will fare better than others, he says.

Business opportunities for firms include helping clients with Payroll Protection Program (PPP) forgiveness, tax deductibility of PPP spending, business valuations, forensics, tax planning, new state regulations and extended tax deadlines. Additionally, firms can consider business continuity (“not a traditional sweet spot”), business transformation, forecasting and scenario planning, supply chain management and workforce planning. Consulting skills will be at a premium.

The “new normal” will certainly be different and will offer opportunities. For example, Melancon says, members of Congress are talking about legislation requiring annual audit of or assurance over of emergency stockpiles.

“We are on the front lines – not just for the next day, not for the next month, but for a series of months into the next year – as to how this economy is going to recover. Never before have our skill sets been more needed, has our attitude been more appreciated and our outcomes more expected than they are today.” – Barry Melancon.

AICPA Survey Sees Bleak Profit and Sales Outlook Ahead

As the full scope of the economic swath cut by the COVID-19 pandemic begins to emerge, a new survey of CEOs, CFOs, controllers and other CPAs in U.S. companies paints an ugly picture of the road ahead.

Only 20% of respondents in the second-quarter AICPA Economic Outlook Survey expressed optimism about the overall outlook for the U.S. economy over the coming year, down from 61% in the first quarter and now at its lowest level since late 2011. Meanwhile, as companies have cut their profit and sales outlooks in response to pandemic-related impacts, executives now expect revenue to contract by 5% over the next 12 months (down from an anticipated 4.3% growth rate last quarter) and profit to drop by 5.5% (down from an anticipated 3.3% growth rate). In addition, while less than 8% of business executives said their companies had made downward adjustments to their forecasts in light of the pandemic in the first-quarter survey, 81% had done so this time.

Adding to the parade of dire news, the percentage of U.S. executives expressing optimism about their own company’s prospects over the next 12 months fell from 66% to 30%, quarter over quarter, while respondents who said they expect their organizations to expand in the coming year dropped from 64% last quarter to 24%. In terms of top pandemic-specific concerns, respondents cited customer demand/ability to pay, the safety of employees and cash, financing and capital challenges.

“Not surprisingly, this quarter’s survey documents the severe impact the pandemic has had on the outlook for U.S. businesses,” says Ash Noah, AICPA managing director of CGMA learning, education and development. “Moving forward, the reopening or ramping up phases in different states will be critical but the rise of liquidity concerns and the uncertain social and economic environment, including potential second-wave infections and prospects of additional layoffs, continue to present an extremely challenging environment for businesses.”

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AICPA Votes to Advance New CPA Licensure Model

Targeting the need for a fresh approach to CPA licensing that better recognizes the rapidly changing skills and competencies of the profession, the AICPA governing board voted in its May 20 virtual meeting to advance the new CPA Evolution initiative.

Developed jointly with NASBA based on feedback from more than 3,000 stakeholders in the profession, the proposed CPA Evolution model requires candidates to complete a core in accounting, auditing, tax and technology, to be supplemented by a chosen discipline consisting of deeper skills and knowledge. Regardless of the chosen discipline, the model would lead to a single CPA license, with no requirement that the licensee be limited to his or her chosen practice area.

In putting forth the CPA Evolution model, both AICPA and NASBA have noted that this combination of a common core and specialized disciplines will provide a deeper knowledge base, while better reflecting the realities of practice and remaining open to adaptation as the profession changes over time.

For its part, the NASBA board of directors will consider a vote to support the initiative in July. If approved, the organizations will work together to implement a new uniform CPA exam by January 2024.

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Tracey Golden Takes Over as AICPA Chair, Bill Pirolli as Vice Chair

The governing council of the AICPA has elected Tracey Golden as the organization’s new chairperson. Golden, an audit partner at Deloitte, succeeds outgoing chair Bill Reeb in the volunteer post, having served for the past year as vice chair.

“We are truly living disruption – not incremental change but a radical break from the familiar,” says Golden. “Our profession has a crucial role to play in helping navigate this disruption. We are here to help businesses and individuals get through these tough times, learn from them and grow. In an uncertain world, CPAs are needed now more than ever as trusted advisors who can lead a path forward.”

At the same virtual meeting, Bill Pirolli, a partner at Warwick, R.I.-based DiSanto Priest & Co., was elected vice chair of the organization.

“I am looking forward to working with the leadership of the AICPA and CIMA, and all of our members and students, as we reimagine what our profession, businesses and lives will look like in the near future and beyond,” Pirolli says. “Never have our roles as trusted advisors been more critical.”

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AICPA Requests Guidance on CARES Act Provisions

As CPAs and their clients continue to parse the details of the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act, the AICPA is requesting guidance on several aspects of the bill’s employee retention credit provisions.

In a letter dated April 17 to David Kautter at the U.S. Department of the Treasury and Charles Rettig at the IRS, AICPA tax executive committee chair Christopher Hesse lays out seven key areas where the group believes more information is needed:

  • Guidance related to an employer’s deduction for payroll taxes reduced by the employee retention credit
  • Clarification that Section 2302 of the Act allows employers to defer payments of Social Security taxes originally due on or after March 27, 2020, regardless of when the compensation was earned (as well as similar clarification for self-employed individuals)
  • Clarification on situations when an employee works a reduced schedule but continues to be paid their regular wage – if a portion of the employee’s wages and qualified health care costs can be claimed as a credit
  • Additional guidance regarding the definition of a “partial” suspension of operations for purposes of Section 2301 of the Act
  • Definition of the term “trade or business” for purposes of Section 2301 of the Act
  • Clarification as to whether an employer aggregated under the aggregation rules under Section 2301 of the Act is barred from utilizing the retention credit if another related entity receives an SBA loan
  • Clarification as to whether a not-for-profit organization that has not been fully or partially suspended can use the gross receipts test to qualify for payment of retention pay

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AICPA Pushes for Additional PPP Funding

With reports that the government’s initial $349 billion for the Paycheck Protection Program (PPP) will soon be exhausted, the AICPA called on Congress to take immediate action to approve additional funding of this CARES Act program to help small businesses and their employees.

The AICPA acknowledged the work of the U.S. Department of the Treasury and Small Business Administration to provide more detailed information about the rapidly deployed program’s requirements and rules. However, the group noted that the initial pool of funds set aside for the program will clearly not be enough to meet the relief requirements of small businesses during this unprecedented crisis.

Beyond additional funding, the AICPA is also suggesting greater flexibility on timing of the PPP’s eight-week payroll support cycle, indicating that it may make more sense to delay the start of this cycle until restrictions are lifted and businesses can operate again.

“This program was rolled out with remarkable speed and while there have been some bumps along the way, small businesses view the Paycheck Protection Program as a critical lifeline,” says AICPA President and CEO Barry Melancon. “We need to extend that support so we can protect workers and ensure our economy can rebound quickly once restrictions are lifted.”

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