by Jean Miller | Accounting News, News, Resources, Retail & Distribution, Tax Consulting, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
On September 19, the Center for Audit Quality (CAQ) released its sixth annual “Main Street Investor Survey,” which shows that investor confidence in capital markets has increased 4 percentage points since 2011, with 65 percent saying they have “a great deal of confidence, quite a bit of confidence, some confidence, very little confidence, or at least some confidence.” The survey defines “investors” as those with $10,000 or more in such investments as mutual funds, stocks, IRAs, 401(k)s.
By way of comparison, confidence in capital markets outside the United States fell 8 percentage points, to 35 percent.
Confidence in investing in US publicly traded companies leveled off at 71 percent this year, a 1-point drop from 2011, and a 5-point drop from years 2008 through 2010.
CAQ Executive Director Cindy Fornelli said, “Individual investors, as a group, have confidence in audited financial information released by public companies and believe that auditors are effective in looking out for investors’ interests.”
Other findings:
- 69 percent of those surveyed say they have confidence in audited financial information released by public companies.
- 70 percent believe the American economy will either stay the same or improve over the next year; 20 percent believe it will get worse.
- 25 percent expect their personal financial situation to improve; 64 percent expect it to stay the same over the next year.
- The top four economic concerns are: (1) not having enough money for retirement, (2) not being able to afford health care in case of serious illness or injury, (3) not being able to maintain their current standard of living, and (4) fear of losing their jobs
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The survey was conducted after some disappointing news that was expected to dampen consumer confidence but didn’t: the lackluster initial public offering of Facebook and news that JPMorgan Chase and Co. lost more than $4 billion in derivatives trading. But, according to an InvestmentNews.com report, Fornelli said, “I don’t know that the average investor is that attuned to individual companies and individual stocks.”
The CAQ conducted just one of a flurry of consumer confidence surveys. The National Association of Home Builders says the “builder confidence index” is at its highest point since 2006, and new-home construction is up nearly 30 percent from a year ago, New York magazine reports.
In his New York magazine article, “The Confidence Game: The Economy Is Recovering, Most of Us Think,” Kevin Roose says, “So, with a pile of imperfect polls and statistics mostly pointing in the same direction, it’s relatively safe to say that four years after the near-collapse of the financial system, we’re seeing the light at the end of the tunnel – or at least we think we are.”
Yet another survey indicates that perceptions don’t always match the facts. BusinessWeek reported on a survey by Franklin Templeton that asked individual investors about their perception of markets since the previous year. In 2011, 48 percent of investors said the markets were down over the course of 2010, when the Standard & Poor (S&P) 500-stock index rose more than 15 percent. Data released September 18 shows that 53 percent thought the S&P had dropped 2011, but it actually rose 2 percent.
Full article: http://www.accountingweb.com/article/investor-confidence-us-companies-inching-upward/219889
by Brenda Eoff | Accounting News, Business Consulting, CPA, News, Professional Services, Resources, Tax
Two committees of the American Institute of CPAs (AICPA) – the Professional Ethics Executive Committee (PEEC) and the Accounting and Review Services Committee (ARSC) – have extended deadlines on exposure drafts of proposed revisions of existing requirements for nonattest services and of requirements for compilation services.
Requirements of Nonattest Services
The PEEC has agreed to extend the deadline from August 30, 2012, to November 30, 2012, for comments on an exposure draft dated June 29, 2012, of proposed revisions to Interpretation 101-3, “Nonattest Services.”
The committee is proposing that financial statement preparation and cash-to-accrual conversions performed by a CPA member for a client should be considered nonattest services and subject to the revised requirements.
Under the proposed revisions, the preparer is no longer required to perform a compilation with respect to those statements unless engaged to do so.
The exposure draft also considers the cumulative effect that providing multiple nonattest services can have on independence.
“We have extended the deadline because we want to give people additional time to understand the impact of these changes,” said Ellen Goria, senior technical manager of AICPA’s Professional Ethics Division. “We expect the major impact to be experienced by individuals who are preparing financial statements for attest clients. Their systems and processes may need to be modified so that they can be in compliance. We will be providing additional documents to explain this further,” she said.
Requirements for Compilation Services
The ARSC has extended its deadline for comment on proposed revisions to Statements on Standards for Accounting and Review Services (SSARS) to November 30, 2012. The proposed revised SSARS are AR section 70, Association with Unaudited Financial Statements, and AR section 80, Compilation of Financial Statements (Revised).
Existing SSARS require the accountant to perform a compilation engagement whenever the accountant prepares and presents financial statements to a client or third parties. Proposed revisions to SSARS would remove the preparation of financial statements from the attest function, the exposure draft says.
The AICPA stated in its announcement that the proposed SSARS would also “revise the objective of the compilation engagement and provide requirements and guidance when an accountant is associated with financial statements that were not subjected to a compilation, review, or audit engagement.”
The Exposure Draft, Association with Unaudited Financial Statements, includes the following requirements if an accountant is requested to be associated with unaudited financial statements.
The accountant should:
- Read the unaudited financial statements.
- Consider whether the unaudited financial statements appear free from material inconsistencies with other knowledge or information of which the accountant may be aware.
- If after performing the procedures in paragraphs 6a and 6b, the accountant decides to permit the use of the accountant’s name in a report, document, or written communication containing the statements, the accountant should request that the entity clearly indicate that the financial statements were not compiled, reviewed, or audited.
The proposed SSARS also addresses the accountant’s responsibilities when engaged to compile financial statements. The proposed revisions state that the objectives of a compilation engagement provide definitions and enumerate specific requirements that apply to compilation engagements.
The ARSC stated in its exposure draft that it “is supportive of proposed revisions of Interpretation 101-3 because it is in harmony with how the 2011 edition of Government Auditing Standards (the Yellow Book) treats the preparation of financial statements. The proposed clarification would also be consistent with the views of many practitioners who believe that the preparation of financial statements is a responsibility of management and an essential part of an entity’s system of internal control.”
by Stephen Reed | Accounting News, Audit and Accounting, Business Consulting, IRS, News, Professional Services
An Invitation to Comment: Improving the Auditor’s Report (ITC) was released June 22 by the International Auditing and Assurance Standards Board (IAASB), seeking input on potential changes to improve the information provided in the auditor’s report on financial statements.
In response, the AICPA’s Auditing Standards Board (ASB) is asking members to complete a survey – AICPA Auditing Standards Board – Improving the Auditor’s Report – to help inform the ASB’s response to the ITC. The survey will be open through September 10, 2012, and can be accessed on the ASB website.
The ASB has stated it “recognizes that the clarified standards will become effective within the next few months, including the revised standards for auditor reporting. However, in view of the ASB’s commitment to converge its standards with those of the IAASB, the ASB is very interested in the direction the IAASB is moving related to this topic and the likelihood of changes to the standard audit opinion that the IAASB may propose.”
The proposed improvements to the auditor’s report that are included in the ITC would be “required for all entities, except for the proposed inclusion of auditor commentary which would only be required to be included by public interest entities (PIEs),” according to the ASB.
The IAASB’s ITC suggests the following changes to auditor reporting:
Additional information in the auditor’s report to highlight matters that, in the auditor’s judgment, are likely to be most important to users’ understanding of the audited financial statements or the audit, referred to as “Auditor Commentary.” This information would be required for PIEs – which includes, at a minimum, listed entities – and could be provided at the discretion of the auditor for other entities.
Auditor conclusion on the appropriateness of management’s use of the going concern assumption in preparing the financial statements and an explicit statement as to whether material uncertainties in relation to going concern have been identified.
Auditor statement as to whether any material inconsistencies between the audited financial statements and other information have been identified based on the auditor’s reading of other information, and specific identification of the information considered by the auditor.
Prominent placement of the auditor’s opinion and other entity-specific information in the auditor’s report.
Through the survey, the ASB is seeking feedback on the ITC’s questions for respondents on pages thirteen through fifteen. The survey also includes questions regarding the topics covered in the ITC to solicit US-specific feedback.
Depending on the amount of detail survey participants wish to share with the ASB, the survey should take ten to forty minutes. Before completing the survey, the ASB recommends that participants review the ITC.
Full Article: http://www.accountingweb.com/article/abs-seeks-feedback-specific-auditors-reports/219773
by Tiffany Evans | Accounting News, Audit and Accounting, Business Consulting, Financial Statement Reporting, IRS, News, QuickBooks, Resources, Retail & Distribution, Tax Consulting, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
The Financial Accounting Standards Board (FASB) has issued for public comment a proposed Accounting Standards Update (ASU) that is intended to improve the presentation of reclassifications out of accumulated other comprehensive income. The proposed amendments balance the benefits to users of financial statements without imposing significant additional costs to preparers, according to FASB’s In Focus documents. The proposed update would apply to all public and private organizations that issue financial statements in conformity with US GAAP and that report other comprehensive income.
The ASU Comprehensive Income (Topic 220), Presentation of Items Reclassified Out of Accumulated Other Comprehensive Income, would require a tabular disclosure of the effect of items reclassified, which presents, in one place, information about the amounts reclassified and a road map to related financial disclosures. This information is currently presented throughout the financial statements under US GAAP.
Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income.
Some items of other comprehensive income that are reclassified after a reporting period, and which FASB uses in its presentation examples, include cash flow hedges, unrealized gains and losses on available-for-sale securities, and foreign currency translation adjustments. US GAAP disclosure requirements already require this information to be disclosed, the Exposure Draft (ED) of the amendments states.
The ED provides examples of tabular formats and addresses the needs of life insurers. It also refers to US GAAP requirements for defined benefit pension costs.
“Stakeholders raised concerns that certain requirements about the reclassification of items out of accumulated other comprehensive income would be costly for preparers and add unnecessary complexity to financial statements,” said FASB Chairman Leslie F. Seidman. “Based on this new feedback, the Board is proposing a revised approach that will present information about other comprehensive information in a useful way that is more cost-effective.”
No decision has been made regarding an effective date. Stakeholders are asked to provide their written comments on the proposed ASU by October 15, 2012.
Full article: http://www.accountingweb.com/article/fasb-proposes-changes-presentation-reclassified-income/219733
by Amanda O'Brien | Accounting News, Bookkeeping, CPA, Tax Consulting, Tax Planning, Tax Planning - Individual
Many American families are struggling to make ends meet and save for their future needs, according to a report from the Consumer Federation of America (CFA) and Certified Financial Planner Board of Standards, Inc. (CFP Board), but those with a financial plan do better and are more confident about meeting their goals.
But only 36 percent of the 1,508 household financial decision makers who participated in the CFA/CFP Board 2012 Household Financial Planning Survey have ever prepared a comprehensive financial plan. Respondents with higher annual incomes and older respondents were more likely than middle-income families to have a financial plan.
Survey responses reflected the effects of the recession that began in 2008. Nearly 38 percent of households said they live paycheck to paycheck. Less than 30 percent indicated they felt comfortable financially, and only 34 percent think they can afford to retire by age 65. The survey was conducted by Princeton Survey Research Associates International (PSRAI).
Regardless of income, decision makers with a financial plan, whether it is one they have prepared on their own or with a professional, are more likely to feel they are on pace to meet all of their financial goals by a margin of 50 percent to 32 percent. By an even larger margin (52 percent to 30 percent), and across all income brackets, families with a financial plan are more likely to feel “very confident” about managing money, savings and investments.
What Is a Comprehensive Financial Plan?
The survey assumes that a comprehensive financial plan will identify a family’s financial goals, and a plan for savings and investments that will help them meet those goals. For most families, those goals will be income in retirement, college education for children, insurance needs, emergencies, and other expenses (e.g., assisting parents). The plan should include paying off credit card debt.
Most Americans have spending plans, the report says, but few have savings plans except for employer-sponsored retirement plans. Many respondents say that they do not earn enough money to save. “Advances in technology have made accessing and analyzing financial information much easier, but a lack of understanding about savings and investment options and how to best manage household finances remains a serious obstacle to Americans’ financial preparedness,” the survey reported.
Comparison with 1997 Survey
The CFA/CFP Board survey utilized a number of questions asked by a 1997 CFA-NationsBank survey, also developed with and administered by PSRAI. This made possible a comparison of consumer attitudes and habits in the more optimistic, low unemployment year of 1997, with attitudes and habits in 2012, in the aftermath of the recent severe recession.
The number of Americans who reported living paycheck to paycheck rose from 31 percent to 38 percent from 1997 to 2012, and the percentage who indicated they felt comfortable financially fell from 38 percent in 1997 to 30 percent in 2012.
Other comparisons include:
- In 1997, only 38 percent felt [they were] behind in saving for retirement compared to 51 percent this year.
- In 1997, half (50 percent) said they thought they could retire by age 65 compared to only 34 percent this year.
- In 1997, more families with college-bound children were saving for higher education (56 percent) compared to this year (48 percent).
- However, the proportion of those who say they have a retirement investment plan in place is about the same (51 percent in 1997 and 49 percent this year).
Getting Help When Preparing a Financial Plan
The 2012 survey revealed that slightly more than half of respondents said “it’s hard for me to know who to trust for financial advice” (55 percent); “to me, investing seems complicated” (52 percent); and “I’m worried about losing my money if I invest it” (55 percent), a significant increase from the 45 percent who expressed this worry in 1997.
Kevin R. Keller, CEO of CFP Board said, “Consumers understandably are more nervous about investing their money given recent revelations about financial fraud, manipulation, and abuse of clients. This doesn’t mean that people shouldn’t create a financial plan and be prepared. We encourage consumers to do their homework and find a financial professional who always puts the clients’ best interests first and abides by a fiduciary standard of care.”
Both the CFA and CFP Board recommend that consumers begin by assessing their own financial condition and develop a plan. One useful tool is the website LetsMakeaPlan.org, where interested consumers can learn more about preparing a financial plan. The site also lists questions an individual might ask of a financial planner and some red flags.
CFA executive director Stephen Brobeck said that financial planning is an important component of financial literacy. Financial planners need to get the message out.
Full Article: http://www.accountingweb.com/article/personal-financial-plans-saving-future/219569
