In case you missed it: AICPA ENGAGE: Auditing accounting estimates, protecting your data, and advising grieving clients were just a few of the many topics addressed at AICPA ENGAGE 2019.
And that was just on the first day of the conference, which brought together a wide variety of experts on a vast number of subjects. The event, held June 9-13 in Las Vegas, featured speakers on technology, tax, personal financial planning, auditing and accounting, and many other topics.
Here are just a few highlights from the conference.
A REFINED APPROACH TO AUDITING ACCOUNTING ESTIMATES
By Liz Farr, CPA
Estimates in accounting aren't new, but they're having a bigger impact on earnings than ever before, thanks in part to recent updates to standards for credit losses, leases, and revenue recognition. And auditing those estimates is a challenging area, according to Tracy Harding, CPA, Quality Assurance principal at BerryDunn in Bangor, Maine.
Harding, who also sits on the AICPA Auditing Standards Board (ASB), discussed these challenges and updates to the standards for auditing estimates during a session at AICPA ENGAGE 2019. In an interview before the event, Harding described what he considers to be the three biggest challenges with auditing accounting estimates.
The first issue is determining whether the assumptions underlying those estimates are reasonable. "Management makes assumptions that we need to be auditing," he said. "This really gets to the heart of professional skepticism."
The second issue relates to internal controls. This issue comes up frequently in publicly traded companies, where the auditor also often needs to audit the company's internal controls over financial reporting, which includes the review of estimates by management. In a number of cases, the PCAOB has "indicated findings related to understanding what exactly management is doing when they do that review," said Harding. "How does the auditor gain comfort as to whether those review procedures would provide reasonable assurance of preventing or detecting material misstatements?"
The third issue that Harding sees is understanding the data used to develop the estimate, particularly when a third-party specialist is involved. "Specialists can only work with the information they're given," he pointed out. For example, if a client has a defined benefit pension obligation, and the information given to the actuary is incorrect, then the estimate is going to be incorrect. Here, it's essential that the auditor understands the process of gathering the information and any controls over that process and that the auditor also tests the accuracy and completeness of the data provided to the specialist.
In light of the challenges that estimates pose for auditors, both the PCAOB and the International Auditing and Assurance Standards Board (IAASB) recently released updates to their standards for auditing accounting estimates. With an eye on convergence where possible, the ASB provided input to the IAASB as it drafted the international standard and also seeks to avoid unnecessary differences with the PCAOB standards. The ASB has a project underway to update AU-C Section 540, Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures.
According to Harding, the updates from the PCAOB and the IAASB are not substantially changing the approach to auditing accounting estimates, but "I think what they do is better articulate the importance of a disciplined methodology." It's important for auditors to think about management bias, to understand the model used for an estimate, and to decide whether that model makes sense.
Full story: tinyurl.com/y3ayw9g2
4 WAYS TO PROTECT YOUR DATA FROM THE DARK WEB
By Drew Adamek
Password reuse remains one of the biggest cybersecurity risks on the radar of Chip Witt, head of product strategy for SpyCloud, an Austin, Texas-based company that alerts customers when employee or company assets have been compromised.
Witt gave a presentation on cybersecurity at AICPA ENGAGE 2019. He discussed the growing risks of password reuse and account takeover as well as how to keep credentials and data from being monetized on the "dark web" by cybercriminals.
"Password reuse is a really big problem," he said in an interview before ENGAGE. "Once people find a good password, they'll continue to reuse that password exactly, or variations of it. This is dangerous because the cybercriminal, once he has your password, can very easily access your accounts and the loyalty points, cash, and/or personally identifiable information within."
Witt offered several tips for how individuals and companies can protect themselves against account takeover and credential theft.
Use a password manager
Password managers like Keeper, Zoho Vault, True Key, and many others generate complex, unique, and encrypted passwords for every site you need access to. There are many types of password managers, but no matter which you choose, they go a long way toward erasing the password reuse problem, according to Witt. In combination with other security steps, such as two-factor authentication, password managers can create significant hurdles for cybercriminals trying to break in to your accounts.
Witt recommends allocating part of your budget to external-credential and identity-monitoring systems, which mitigate the risk of your data being disseminated after a breach.
Quite often, companies don't know they've been breached until after the harm is done. Criminals can sit on stolen data for 12 to 18 months before exploiting them, giving your data time to clandestinely circulate, Witt said. However, the thieves may share or sell the data on the dark web without acting on them, which gives companies an opportunity to find their stolen material before criminals use it.
"You want to constantly monitor your credentials and identity for exposure," said Witt.
Protect employees' personal accounts
Because people tend to use the same password across multiple accounts, if an employee's personal email account is hacked, cybercriminals may potentially gain access to your company's networks using that same password. Witt suggested that companies extend security protection to employees' accounts to lessen the risk of password reuse damage. He also recommends extending those protections to employees' family members to protect their larger online networks.
Automate account takeover prevention
Witt advocated taking choice out of the equation when it comes to password and account protection by automating every possible stage in the process, such as scanning the web for credentials, comparing credentials against known compromised material, and monitoring account creation for fraud warning signs. Automation using technology like SpyCloud's ATO Prevention software, Imperva's ThreatRadar, or LexisNexis's ThreatMetrix ensures that your protection activities are constant, current, and as habitual as possible.
"Whatever technologies you leverage, build them in to your environment and automate the process. Anything that relies on a human doing something is going to get set aside or pushed back to the back burner," Witt said. "Automate your security measures wherever possible."
Full story: tinyurl.com/y5msqt4n
WHAT TO SAY TO GRIEVING CLIENTS
By Samiha Khanna
Some of the skills most valuable for every accountant aren't financial skills at all. They're people skills, such as helping clients navigate life and the big milestones and losses that will inevitably come their way, said Amy Florian, a grief expert and CEO of consulting company Corgenius.
Whether it's a death, a divorce, or a career dream that didn't come true for your client, grief comes in many forms, Florian said during her AICPA ENGAGE 2019 presentation, "Advising Clients Through Life's Toughest Times."
Florian, who has worked with more than 2,000 grieving people in her career as a thanatologist, or expert in death and grief, offered several tangible tips on how CPAs can offer genuine support for clients enduring a loss, fortify that relationship with trust, and continue to earn their business.
Be cognizant of the many types of grief
Death may be the most obvious cause of grief, but it's only one of dozens of events that can leave a client at a loss and looking for support and guidance.
"Any time you leave something behind, whether it's leaving behind a dream or your plans for the future or a role, it triggers grief," Florian said in an interview before her presentation.
In these difficult times, clients need a trusted adviser who, beyond knowing about finances, knows how to provide thoughtful and useful support, she said.
Don't just say, 'I'm so sorry'
When clients face a major life shift, such as a death, job loss, or serious medical diagnosis, one of the phrases they will hear over and over is, "I'm so sorry," or, "I'm so sorry for your loss," she said.
"People don't know what to say, what to do, or how to help," Florian said. "It's awkward and uncomfortable. Anything you can say or do that's different from what everyone else is doing--that is wiser, more compassionate--is going to make a difference with your clients."
After a death, for example, rather than saying you're sorry, offer a nice memory or anecdote about the person who has died, she suggested.
Understand how grief affects the brain
When people are grieving, they go into survival mode, Florian said.
"They don't think the same way, and this is normal," she said. "Their brain gets flooded with Cortisol, a stress hormone. The upper-level thinking, rational thinking, analytical thinking gets pushed to the side, at least temporarily."
This is a crucial time for an adviser to step up, Florian said.
Keep calling just to check in
Some advisers might want to give their clients space while they are grieving, but they should do the opposite, Florian said. "If you say, 'Call me when you're ready,' you may never hear from them again," she said.
Instead, keep reaching out. Full story: tinyurl.com/yyhnm56v
HOW TO MOTIVATE AND RETAIN YOUR TALENT
By Dawn Wotapka
When it comes time to grow their business and bolster their reputation, accounting firms often turn to recruiters to attract dazzling--and, likely, expensive--new talent. Perhaps a better strategy is to develop existing employees, according to Philip Palaveev, the founder and CEO of The Ensemble Practice LLC, a business management consulting firm based in Seattle.
"A lot of businesses recognize they need good people. They want to have talented professionals, but they don't want to train them or develop them," Palaveev said at AICPA ENGAGE 2019.
That, he said, can be a mistake: "The best talent is the talent inside your own organization. Those are the people who are most loyal, who understand the culture, and can relate best to your clients."
Palaveev, a speaker and author of The Ensemble Practice and G2: Building the Next Generation, recommended these ways to nurture existing talent:
Invest time: It takes between seven and 10 years to fully develop a new adviser's capabilities to the point where he or she is capable of both servicing existing clients and attracting new ones, Palaveev said, though that doesn't mean you won't see results along the way.
Develop people: Once you've identified employees to nurture, take the time to coach and mentor them with both short-term and long-term guidance and advice that can encompass both day-to-day issues and career planning.
Focus on soft skills: Most employees know how to get the technical knowledge they need, so focus on strengthening the skills that will help them become a complete professional, such as client-relationship management.
Teach business development: Palaveev labeled business development a "sore subject" for the profession because it is a skill that isn't innate or easily taught, but it is essential to business growth. "Every firm wishes they had more of it, but they don't spend enough time sharing best practices for how business development is actually done," he said.
Mold career paths: Many employees leave organizations because they feel stagnant and think better opportunities exist elsewhere. You can help prevent this by working with employees to develop a detailed, step-by-step career path that can help manage expectations and keep everyone on the same page.
Offer equity: Palaveev is a big fan of the equity model, which he said gives employees incentive to work hard because they own a piece of the business.
Full story: tinyurl.com/yy55e628
Liz Farr; CPA, is a freelance writer based in New Mexico; Drew Adamek is a JofA senior editor; Samiha Khanna is a freelance writer based in North Carolina; and Dawn Wotapka is a freelance writer based in Georgia. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofAi editorial director, at Ken neth. Tysiac@aicpa-cima. com.
Articles from ENGAGE
"Develop a Coaching Culture in Your Organization," JofA, June 13, 2019, tinyurl.com/y6da2en5
"What Tax Firms Need to Know Now About Technology," JofA, June 12,2019, tinyurl.com/ y5q84fno
"When Choosing Technology, Put Clients First," JofA, June 11, 2019, tinyurl.com/y4n77apt
"Tips for a Smooth CECL Implementation," JofA, June 10, 2019, tinyurl.com/y5ce3cn4
Podcast from ENGAGE
"How to Keep Fear From ShortCircuiting Your Career," JofA, June 12,2019, tinyurl.com/yxw4q4x7