Journal of Accountancy

A monthly publication of the American Institute of Certified Public Accountants focusing on the latest news and developments related to the field of accounting, and written for CPAs and other accounting professionals.

Articles from Vol. 190, No. 3, September

ABA Gives Thumbs Down to Lawyers' Fee-Sharing
After two years of research and debate, the American Bar Association (ABA) voted in July to reject a proposal that lawyers be allowed to form multidisciplinary practices (MDPs). This continued the group's long-standing ban on lawyers' sharing of fees...
Accounting for LLC Conversions
Revenue rulings 99-5 and 99-6 offer insight into these complex transactions. Today, limited liability companies can be found everywhere. With their flexible management structure, LLCs have become a common way to own and operate a business. Professionals...
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...
Best Practices for Audit Efficiency
Firms cited for their excellent quality controls share practice tips on how to improve audits while saving time and enhancing profits. When it comes to audit efficiency, sometimes less is more. Many CPA firms have found it's possible to slash the...
Big Five Review Their Independence Compliance
The Big Five accoun-ting firms agreed to participate in an SEC-sponsored retrospective review program. Under the agreement, the firms will report certain instances, during a specific period, in which they did not adhere to the new proposed independence...
Determination of a Profit Motive
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...
Disclosing Disaggregated Information
How companies and auditors have met the challenge. For many years, analysts and other users of external financial reports have expressed concern about the form and usefulness of the segment reporting companies include in these statements. Analysts...
Earnings Management and the Abuse of Materiality
Help for auditors in evaluating financial statement misstatements. Take your pick of fraudulent financial reporting schemes. One of these gimmicks, manipulating reported income through "earnings management" techniques, draws its share of attention...
Expanding into Cyberspace
A booming market in transition. Get ready, tax accountants, practically every aspect of the tax preparation field is changing. In fact, it's evolving into a totally new market and business. First of all, the number of tax software brands is shrinking,...
Exposure Drafts Outstanding
(This list was compiled as of August 1, 2000. For exposure drafts issued after that date, consult The CPA Letter. Note: The policy for updating the list of exposure drafts is that a document should remain on the list until a final document has been...
Facing a Hobson's Choice
When planning for IRA and qualified plan distributions, clients sometimes have few real alternatives. It's a situation almost every CPA will find familiar. Harry and Betty have combined taxable estates of $1,350,000, including a jointly owned residence...
Golden Business Ideas
Marketing by Database Most businesses have a powerful marketing guru at their disposal--and they probably aren't even aware of it. The guru is any staff person who is savvy about the use of databases. Most businesses have some of their customer...
Inherent Risk and Control Risk Assessments
Pervasive and specific risk factors share the floor. The AICPA's audit risk model serves as the major framework for conducting audits of financial statements. Researchers and practitioners are critical of the model because its multiplicative form...
Inside AICPA
www.aicpa.org Three admitted to Hall of Fame ... Elijah Watt Sells award winners announced ... CPA exam graders needed ... Directory of member services CPAs Hailed for Enlightened Leadership The Institute's Business and Industry Hall of Fame...
IRS States Position on Hybrid Plan Arrangements
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...
Letters
Critical of Special Report The JofA's report--"SEC Renews Push for More Oversight of Auditors" (Jul.00, page 16)--is either a careless misrepresentation of the facts or a deliberate slur. While we in no way condone the independence infractions...
Line Items
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...
Making It - as a Consultant
The key is preparing your strategic plan. Consulting--especially for the complex and fast-changing information technology (IT) field--is a burgeoning and potentially lucrative business. Yet, if truth were told, not every CPA firm that tries its...
Mortgage Interest and Bankruptcy
Taxpayers often are forced to file for bankruptcy as the result of business reversals. In such cases, their assets are sold to pay off creditors. When one of the assets is a taxpayer's personal residence, issues arise concerning the deductibility of...
Official Releases
FASB No. 138 ... FASB No. 139 ... Code and Bylaw Revisions ... Council Resolutions Space considerations prevent publishing here the appendices to FASB Statement nos. 138 and 139. Since the appendices often are important to understanding FASB statements,...
Panel Finds Audits Are Sound, but Need Improvement
In May, after 18 months of study, a panel appointed by the Public Oversight Board to examine the effectiveness of independent audits released a draft statement of its findings. Representatives of the SEC, the AICPA and several audit firms testified...
Ranking the Products
Tax preparation software is getting better--faster, more comprehensive and more stable. Those are the conclusions of a just-completed survey the National Association of Tax Practitioners (NATP) conducted and shared with the Journal of Accountancy....
SEC Implements EDGAR II, Stage 2
The SEC issued amendments to rules for its electronic data-gathering, analysis and retrieval system (EDGAR) that were effective May 30. The amendments reflect changes to filing requirements tied to EDGAR release 7.0--part of the SEC's ongoing modernization...
Selecting the Right Charity
Donating money to charity not only allows the giver to do a good deed but also rewards him or her with a tax deduction. These days, in the estate settlement process, more money is being given to charity than to family members. As a result, some experts...
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,...
Smart Stops on the Web
TAX SOFTWARE SITES Find ISPs and ASPs ASAP www.webharbor.com For users interested in finding an application service provider (ASP)--for Web-based, pay-per-use programs--this portal is a good starting point. It offers recent ASP industry news,...
State Voluntary Disclosure Programs
Satisfying unmet state tax obligations. Given the growing number of states seeking to increase revenues by taxing out-of-state businesses, a company located in one state may find it has had a taxable presence in another for several years, but has...
Technology Q&A
Handling "widows" and "orphans" ... Those underlined letters in the toolbar ... A fast way to bookmark ... Getting to your favorites quickly ... Inserting or deleting Excel cells Q. When I prepare a text presentation for clients, I want it to look...
The Audit Risk Model
The interdependence of component risks. Are the risks assessed for the audit risk model judged independently or are they conditional on values of the other risks? Auditing standards indicate that inherent, control and analytical procedures risks...
The Public Oversight Board
Leave it a self-regulatory body free of statutory controls and requirements. There is a lot of talk these days about a new regulatory and self-regulatory structure for the accounting profession. SEC Chairman Arthur Levitt recently gave a speech...
The SEC's Proposed Auditor Rule Threatens Our Profession and the Public
THE SEC's PROPOSED AUDITOR RULE THREATENS OUR PROFESSION AND THE PUBLIC As you probably are aware, a current flurry of activity at the SEC could force sudden and major changes in the fundamental relationship between accountants and their clients....
Valuing Closely Held Stock for Estate and Gift Tax Purposes
The courts and IRS agree: Potential capital gains reduce stock value. CPAs who work with estates know that, if a decedent owned stock of a closely held business at his or her death, the value of the stock generally must be determined if an estate...
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