Searching for an audit firm can be a time consuming and stressful task. However, it can be maneuvered easier if you know what to look for, have realistic expectations and ask the right questions.
BELOW ARE 5 ITEMS TO ASK YOURSELF DURING THE SELECTION PROCESS:
We have a CPA who prepares our taxes; can they do our audit?
Perhaps, and this is often a good place to start, but, not all CPAs are auditors and not all CPA firms audit all industries. Auditors and audit firms are held to different standards for continuing education, independence and oversight. This works both ways, the CPA you find to do your audit is probably not the same CPA you want completing your taxes. If part of your goal is to have a single CPA firm complete both your audit and tax work, be sure this is clear from the start of your search.
“An audit is an audit, find the best price!” Is there a benefit to paying more?
As with most purchases, “you get what you pay for,” is true for audits. Audit standards need to be followed, but a low cost auditor could drastically change how your organization works with an auditor. A better question to ask is, “do we want our audit to be a commodity or do we want it to provide a service?” If expectations are for your auditor to assist throughout the year with questions, attend board meetings, or give internal monthly financial statements a quick review, you have to determine if these services are included in the quote or at what rate you will be charged. Countless CPA firms can do an audit, but if you are looking for more than a once a year visit, the low cost provider may not be in your best interest.
Does our industry really matter?
Different industries can make a huge difference for an audit. Within the nonprofit sector, for example, organizations who receive federal funding maybe subject to a yellow book or single audit and Generally Accepted Government Auditing Standards, while others receive their funds through donors or user fees and are subject to Generally Accepted Auditing Standards. Within for-profit organizations, manufactures with inventory, equipment and cost of goods sold have different risks, accounting needs and audit approach than a service based organization. Accordingly, requesting references within your industry is an important part of your search. Inquiries of references should include questions related to the auditor’s industry knowledge and expertise.
Will I be able to work alongside the auditor we select?
There needs to be a comfort level between you and the audit team so you can go to them with concerns and feel confident in the guidance they are providing. Reviewing their background and qualifications is an important first step. However, this trust can start being established during the interview process. The interview is an opportunity to discuss the audit process, what will happen if problems occur and who will actually be on site during the audit. If answers are too technical or vague, it may be a sign you will not be able to work successfully with this particular auditor.
We have checked references and interviewed our prospective auditor, what additional information should we look for?
Audit firms are required to have a peer review at least once every three years, conducted by an independent CPA firm reviews their policies and audit procedures. The peer review’s conclusions, which are provided in a letter, should be reviewed and discussed with a potential auditor.
Every situation is different, if you have questions or are interested in more information on our audit practice, please contact your Smith Schafer professional by clicking here.
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It is estimated, across the globe, cybercrimes cost businesses $450 billion in 2016. Yet companies of all sizes continue to ignore these threats. Many business owners feel they are too small for a cybercriminal to waste their time. However, the opposite is often true. Small companies are assumed to not have the proper safeguards in place to protect themselves or even recognize an attack.
3 COMMON TYPES OF CYBERCRIMES
- Ransomware. A type of malware (a broad term for software, aiming to inflict damage or breach an IT system). Ransomware requires a company to pay a ransom to regain access to their files or server.
- Corporate Account Takeover. Another type of malware, which hijacks a user’s computer in order to trace anything from keystrokes to websites accessed. Malware is often invited into a network through an e-mail link or attachment. Unsuspecting employees click and download the program without knowing it.
- Identity Theft via Data Breach. Many companies have sensitive customer information that needs to be safeguarded. Companies known to have this sensitive data often are active targets of cybercrimes.
3 Things Companies can do to Protect Themselves from Cybercrime
- Conduct a Security Audit. Determine how easily a cybercriminal can assess a company’s server or files and find issues before they become larger problems.
- Test Employees. When it comes to cybersecurity, the number one threat is also the number one defender; company employees. Sending test phishing emails to employees to track how many click on the link or open an attachment.
- Have a Plan. An attack could happen, having a plan to resolve and react will save time and money.
- Assess Insurance Needs. Insurance can cover payments on ransomware or for downtime recovering from an attack. Determining the overall risk of these attacks will assist in determining the level of coverage, if any, needed.
How Smith Schafer can Help
- Review technology and security polices
- Technology planning and budgeting
- Technology coaching and executive education
- Work with IT vendors to implement a stronger security framework
Keeping up with technology is a requirement for the success of a company. Click here to contact Smith Schafer’s Technology Services Group and learn how we can help. We look forward to speaking with you soon.
It’s Tax Day! Today we are celebrating all those who filed with us this season. We would like to take this opportunity to say THANK YOU for choosing Smith Schafer for your professional service needs. We are truly grateful for your business.
Also, THANK YOU to our great employees, whose dedication and hard work have brought us through another successful busy season!
We appreciate our staff’s hard work and dedication YEAR-ROUND. Outside of tax season, we conduct audits, prepare financial statements, assist with bookkeeping tasks, prepare payroll returns, conduct business valuations and assist with strategic planning and budgeting.
Oftentimes, business owners do not think about taxes until the end of year. It is not a surprise given the time demands and attention needed to run the business, manage issues and maintain strong client relationships. While all of these are important, it is essential to invest time in addressing strategic consulting and tax planning. This exercise may help your company reduce income tax liabilities and make tax saving moves throughout the year. Remember, not only can a tax planning strategy reduce taxes in the current year, but it can also help with tax reduction in future years as well.
Tax planning is best implemented on a year-round basis. For this reason, it is essential to consult with a qualified advisor who can optimize your position NOW. Interested in assessing your tax planning opportunities? Smith Schafer is here to help you.
Learn How to Prevent Theft in Your Business
Not all crooks roam the streets at night. Some might be roaming your company hallways, stealing cash, forging or altering checks and pilfering your inventory and property. Even worse, they may be stealing intellectual property, such as confidential documents or trade secrets. What can you do to prevent employee theft?
Here are 18 crime busters:
1. Talk openly
with your employees about theft and dishonesty. Set an example for ethical
suspicious of any employee with a sudden financial change. (Has someone started
buying expensive clothes, gifts, or cars?)
offenders. It helps deter further crime. Articulate a zero tolerance policy in
your employee handbook.
4. Have the
bank send all canceled checks and bank correspondence to a different address
(for example, a post office box or your home).
employees to sign out and sign in equipment. When a staff member leaves the
company, make sure laptop computers, cell phones and other equipment are
change locks on doors and file cabinets. And change computer passwords
regularly, particularly after someone leaves the company on bad terms.
7. Keep a close
eye on petty cash. Be skeptical about excessive voids, credits or damage
claims. Investigate all missing documents. Do not let employees think no one
notices when something is missing.
frequently and unannounced your warehouse or storage areas. Look for suspicious
patterns. For example, do certain employees always park near the door?
check deliveries to your business and your customers. There may be hidden
stolen goods in them.
accept photocopies of documents like invoices and delivery tickets.
11. Look into
unexplained employee absences. At the same time, be suspicious if a staff
member never takes a day off. That could mean an employee is afraid that theft
will be detected if he or she is not around to cover it up.
phone bills for calls to unrecognized business numbers.
unscheduled audits. Pull
purchase records from the company files and ask the person in charge if they
compared prices. If not, why?
full documentation. Ask for receipts, delivery times and notes on the condition
of goods when they arrived.
15. Pay only
for what you receive. Remind staff members that the company does not pay for
items not ordered, even if an invoice is submitted.
16. Get professional help. Ask your insurance agent to visit your business and check it out before buying a substantial theft insurance policy. Smith Schafer can perform an internal control study and make recommendations to segregate employee duties in a way that minimizes illegal activities and reduces theft.
17. Hire a
bonding company to bond your employees, if possible.
an anonymous tip program that allows employees to report questionable behavior.
These are only
some of the steps your company can take to help prevent internal fraud.
If you discover
suspicious activity and do not have concrete proof, get legal advice before
confronting an employee. A false accusation could irreparably harm employee
morale and could result in a lawsuit against your company.
For more information on this topic, contact your Smith Schafer professional or check out our Audit Service Page.
Buying another construction company can be an attractive way to grow your revenue base.
A merger or an acquisition allows you to:
- Add a new subcontracting specialty,
- Acquire an experienced labor force to reach new markets, and
- Deepen your penetration into the market your firm already serves.
But there is more to mergers and acquisitions than agreeing on a purchase price and signing the paperwork. For example, which employees should be made privy to the transaction? And how do you account for the purchase of your new division or subsidiary? Your legal, tax and accounting advisors can help you navigate the M&A process and employ the latest “best practices.”
Buying another construction company can be an exciting proposition. It may be tempting to spread the news that your firm is “in the market” for a merger or an acquisition. You might even think this will boost morale within your firm, because your employees will share in your sense of impending conquest and enthusiasm.
However, best practices in the M&A process caution against discussing your purchase intentions or any of the details of a pending buyout. This is true whether an offer has been made or accepted — or if the purchase is only in the planning stage.
Employees see mergers and acquisitions in a completely different light than owners and key executives. Employees might become afraid, spread rumors and gossip, and speculate about “what-if” scenarios. Even the slightest leak in the acquisition process can snowball into a huge time-waster for your employees and can cause a public relations nightmare. It might also cause unrest among suppliers, customers, lenders and bonding companies.
Accounting for the Purchase
While you might not share your acquisition plans with employees and other stakeholders, never leave your accounting and legal professionals in the dark. They can be invaluable resources throughout the acquisition process. After all, would you ask your accountant to design a second story addition to your home? Of course not! Accounting for a business combination is a specialized function that should involve your accounting and tax professionals. Do not be fooled into oversimplifying M&A decisions. An accountant who specializes in business valuations is uniquely suited to help with buy (and sell) transactions. Below are some examples of key accounting considerations in business combinations.
The closing date for a business acquisition is pretty obvious. It is the date the papers are signed and control transfers from the acquired firm to your firm. However, from an accounting standpoint, the closing process may not be “over” for another year. Additional accounting evidence may unfold in the months following a merger or an acquisition. Hindsight could impact how you report the transaction.
It is important that at the first year-end after the business acquisition you consult with your accounting and tax professionals, who will make provisional entries that represent estimates of the remaining assets, liabilities, revenues and expenses that will be recognized in the coming year as a result of the M&A transaction. This proactive step may prevent you from having to restate your tax returns (or your financial statements) in a later year, which could be costly.
- Consolidated Financial Statements Required
When one construction company buys another, separate locations may continue to be maintained and the newly acquired company continue to operate as a separate and distinct business unit. In fact, there may be significant liability, morale-boosting and administrative advantages to letting the newly acquired company continue to account for its own sales and expense transactions using the existing accounting systems and personnel.
However, from a tax perspective and to be compliant with standard practices for financial reporting for banks and bonding companies, it is often necessary to create and maintain a set of consolidated business and accounting records.
Some refiguring of the values of the assets and liabilities held by the target firm on the date of acquisition may be necessary. Once these new values are calculated for the consolidated financial records, any leftover intangible value may be booked to “goodwill.”
The goodwill account is a fixed asset that appears on your consolidated financial statements after a merger or an acquisition. It generally will not be questioned as long as your accounting, finance and tax professionals document the transaction thoroughly, completely and accurately.
Do It Right
Mergers and acquisitions provide exciting opportunities for growth. But these transactions can also be daunting, especially for construction firms who decide to handle legal and financial matters in-house. To bring you innovative solutions, our Construction and Real Estate Group stays on top of industry issues, trends, tools and technologies to ensure we give you the best possible advice. Smith Schafer professionals have serviced the construction and real estate industry since 1971. To learn more about how we can help, please contact a Smith Schafer professional.