s CPAs it is important to understand both the methods and motivations at play when otherwise ethical executives participate in fraudulent financial statement schemes. According to a 1999 study by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), in three-quarters of fraud cases the chief executive officer is
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Forensic services
Government Accounting And Auditing
GASB issues exposure draft to clarify Statement no. 34 ( www.rutgers.edu/Accounting/raw/gasb/news/nr010801.html ). Comments due by March 16. FASAB seeks comments on plan to omit stewardship category from federal reports ( www.financenet.gov/financenet/fed/fasab/dec_00_jan_01.html ). Comments due by March 15.
International
IASC releases study on accounting by mining, petroleum industries ( www.iasc.org.uk/docs/extr/ip/iss_sum.pdf ). Comments due by June 30. Outgoing IASC board recommends future rule-making priorities ( www.iasc.org.uk/docs/bd_stmt.pdf ).
A Nice Niche—If You Minimize Liability Risk
EXECUTIVE SUMMARY INCREASED ACTIVITY IN ESTATE and succession planning and mergers or acquisitions involving small to midsize businesses has fueled demand for business valuation (BV) services. BV malpractice claims arise most often from a tax planning or consulting engagement that—at the client’s request—morphs into a BV in mid-transaction. THE PREDOMINANT
Why Employees Commit Fraud
t is important for CPAs to understand what motivates people to commit fraud so they can better assess risk and assist employers or clients in implementing appropriate preventive and detective measures. One element common to most occupational fraud offenders, from the CEO to the rank-and-file employee, is that almost none
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Black Tie Not An Option: Appeals Are Informal The 1998 IRS Restructuring and Reform Act contained a taxpayers bill of rights. one provision expanded taxpayers’ due-process protections when dealing with collection matters: IRC section 6330 gives taxpayers the right to a “collection due-process” hearing in the IRS appeals office before
Tip Compliance Programs Widened
TAX NEWS The IRS expanded its voluntary tip compliance programs from the food and beverage, gaming and hairstyling industries to all those in which tipping is customary (announcements 2000-19 and 2000-23; notice 2000-21). In exchange for an employer’s or employee’s participation, the IRS agrees to refrain from tip examination. Employers
Expensing Corporate Activities
TAX CASE One of the most difficult questions a company faces is whether it must capitalize an expenditure or whether it can deduct it. Minor variations in the facts can greatly affect the answer to the question. American Stores Co., a corporation that filed consolidated tax returns, owned and operated
The Downside of Good Times
EXECUTIVE SUMMARY A PRACTITIONER FOUND ONE RISK OF A STRONG economy is that small business clients may loosen their internal controls, discovering fraud or theft only long after it has happened. THE MOST VULNERABLE ARE PRIVATE COMPANIES in the $10 million to $30 million range because they are large
Last Known Address Program Delayed
TAX NEWS Last year the IRS announced that, effective May 1, 2000, a new program would allow it to update taxpayers’ addresses using the U.S. Postal Service’s national change of address (NCOA) database. Previously a taxpayer’s “last known address,” although not defined by statute or regulation, had been determined by
Donating Excess Inventory to Charity
TAX NEWS CPAs may want to remind clients with excess inventory that they can earn a federal tax deduction when the product is donated to charity. Corporations with a fiscal year ending December 31 should be urged to check their inventory levels now. Clients that have difficulty finding an organization
So That’s Why It’s Called a Pyramid Scheme.
EXECUTIVE SUMMARY CPAs ARE UNDER ATTACK for not doing enough in the war against fraud, and they are, at the same time, being asked to play an increasingly important role in the detection of fraud. Because CPAs are becoming more educated about the subject, success stories about their helping
Taking Account: Key Dates for the Profession
he accounting profession has made remarkable progress since its early days, when practitioners struggled to establish credibility. An examination of some of the most important events during the first nine decades of the 20th century offers a glimpse into what has made the profession what it is today. Although
Earnings Management and the Abuse of Materiality
EXECUTIVE SUMMARY EARNINGS MANAGEMENT HAS RECEIVED wide publicity by the press and scrutiny from the SEC. It is one type of fraudulent financial reporting scheme where management’s desire to meet Wall Street’s earning projections can become a substitute for accurate disclosure. MATERIALITY PLAYS A VITAL ROLE in the financial reporting
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Too Late to Transfer A married couple owned assets in excess of twice the unified credit “exemption equivalent.” The husband had a terminal illness. Through his will he wanted to establish a unified credit shelter trust, but he owned insufficient assets to fund the trust. However, he jointly owned with
IRS States Position on Hybrid Plan Arrangement
The IRS released a coordinated issue paper for all industries on the use of pension plan distributions to pay for certain benefits. The paper says the portion of pension plan distributions former employees use to purchase benefits in their employer’s cafeteria plan under a tax-free salary reduction does not reduce
Self-Rental Income Considered Active
IRC section 469 states that a taxpayer can use losses from a passive activity only to offset passive activity income. In other words, passive losses cannot shelter active income such as salaries, commissions, wages or portfolio income such as interest, dividend or annuity income. Under IRC sections 469(c)(2) and (c)(4),
Determination of a Profit Motive
Tax Matters TAX NEWS IRS States Position on Hybrid Plan Arrangements T he IRS released a coordinated issue paper for all industries on the use of pension plan distributions to pay for certain benefits. The paper says the portion of pension plan distributions former employees use to
Mortgage Interest and Bankruptcy
Individual taxpayers often engage in more than one business venture. However, when a business also involves personal pleasure or recreation, the IRS may take notice. If the operation generates large losses that offset income from other sources, a taxpayer should consider all facts and circumstances before deciding to deduct the
Automatic Consent to Change Accounting Method Available
Under IRC section 446, taxpayers generally can choose any method of accounting to compute taxable income as long as that method clearly reflects income. However, many small business taxpayers who wish to use the cash method are prevented from doing so because of Treasury regulations section 1.446-1(c)(2)(i), which states a
Features
FROM THIS MONTH'S ISSUE
What small firm CPAs need to know
In a new JofA column, the AICPA’s small firm advocate answers questions about making A&A services and peer review more manageable, dealing with frequent tax law changes, and planning for retirement.
From The Tax Adviser
July 31, 2026
Current developments in S corporations
July 31, 2026
