Plain Paper Revisited

To Compile or Not to Compile
I am concerned about the implications of some of Wanda Lorenz’s comments (“Plain Paper: Gone But Not Forgotten,” JofA, Jan.98, page 17). I deliver services to clients by e-mail based on e-mail queries such as the following:

• “I made a mistake; please find it and fix it.”
• “I’ve sent you my bank and credit card statements by ‘snail mail.’ Let me know when the package arrives and I’ll e-mail you my file so you can reconcile them.”
• “Please prepare my payroll reports for the last quarter.”
• “Please prepare my tax return.”

I maintain that none of the above constitutes a compilation even though clients could print or observe financial statements from the returned accounting file. If they were compilations, how should the report be issued:

• Include compilation language in the return e-mail?
• Prepare a word-processed report and attach that file to the e-mail along with the accounting file?
• Print out and separately mail a compilation report?

What happens to the validity of the report once the client has the files back and enters new transactions? Most of my clients do not use locks to prevent anyone from entering transactions in prior periods. In order to meet OCBOA, which is the usual basis of accounting my clients use, would I need to “memorize” the proper reporting format in the client’s file, including references to the compilation report and correcting the standard “profit and loss” and “balance sheet” titles that most basic accounting programs have? How would a peer review—especially an off-site review—address these files?

I think the plain-paper issue needs more clarification.

Thomas E. Healy, CPA
Boulder, Colorado

Truth in Options
Every time I see another news report about a corporate executive’s having received $100 million from exercising stock options, I wonder when the standard setters will finally require that companies reflect these large amounts of compensation in the financial statements—that is, as a charge against income. (However, I do not mean to imply that stock options are an inappropriate form of compensation or to raise the issue of their tax-favored status.)

I have not seen any discussion of this matter, which requires rethinking the principle that a company does not recognize income or loss on transactions in its own stock.

Stanley A. Sandberg, CPA (retired)
Palm Springs, California

Other Explosive Growth Issues
“Surviving Explosive Growth” (JofA, Dec.97, page 67) clearly discussed many obstacles small businesses face as they grow. Unfortunately, the article did not address the importance of setting priorities and of monitoring key growth relationships among sales, profit and expense as well as the need to strike a healthy balance without alienating staff, vendors and clients.

The article also failed to note that personnel with decision-making authority must remain continually aware of cash effects. I am constantly reeducating personnel to avoid the problems that can occur when different departments interpret the company’s financial status in different ways.

Cathleen Guerriero, CPA, Controller,
Big Apple Technologies, Inc.
New York City

©1998 AICPA