Question

March 13th - 1st extra credit report due - 700 -1000 Words

Articles:        “We have to be bold” November 2017 issue - Journal of Accountancy

                        And

“How to prepare for the annual review of your employee retirement plans” November 2017 issue - Journal of Accountancy

Answer 1

“How to prepare for the annual review of your employee retirement plans” November 2017 issue - Journal of Accountancy -

Many employers are unaware of the fact that they as individuals are a fiduciary of their retirement plan and, therefore, are exposed to liability. A 2014 AB Global survey of about 1,000 defined contribution plan sponsors found this was the case for more than one-third of the respondents. The confusion was worse among the sponsors of very small plans (those with less than $1 million in assets), with nearly 50% of the respondents saying they were unaware of their fiduciary role.

The survey highlights the need for business owners, especially small business owners, to take the time to understand their role in the retirement plan hierarchy. They should also review their plans to make sure they are aware of plan features, offerings, fees, and performance, as well as ensuring that all administrators and advisers they hire are providing the agreed-upon services.

CLARIFY COMPENSATION DEFINITIONS

The IRS defines compensation as "any payment made by an employer to an employee for services rendered in the course of the employer's business." But in retirement planning, different definitions of compensation are used for different purposes. For example, the compensation definition used to calculate contributions might be different from the one used to ensure compliance with nondiscrimination requirements. Also, no standard formula exists outside of basic earned income to identify which payroll items must be included as compensation for the purpose of calculating retirement benefits. The employer has the option of including or excluding items such as bonuses, commissions, overtime pay, and stock options for certain plan purposes, such as when calculating deferrals or employer matching contributions. Therefore, the IRS recommends that contributions be made based on the correct definition of compensation.

Employers should encourage employees to also review their plans annually. Employees should review their investment choices and performance, contact information, birthdate, hire date, selected plan options, marital status, and beneficiaries. Since it is common for plan participants to change employers, current contact information is necessary to enable employers to provide former employees with the benefits they are entitled to. ERISA requires all fiduciaries to take reasonable actions to locate former plan participants, but employees can facilitate this process by providing necessaryupdates.

“We have to be bold” November 2017 issue - Journal of Accountancy

Days started early for Eric Hansen growing up on his family's farm on the outskirts of Independence, Mo. His duties included milking the family cow, cleaning the barns, feeding and caring for livestock, and performing all kinds of "inside" chores. The work helped instill in him the values of discipline and accountability, which have served him well in his career as a CPA.

His day often included time with his Scout troop as he worked toward becoming an Eagle Scout, an achievement that later opened doors for him at the accounting firm where he would spend his career.

And many days, on his way to his grandmother's house for piano lessons, he would ride past the home of former U.S. President Harry Truman, whose remark that "The buck stops here" still is hailed as one of the great declarations of accountability in American politics.

During his time as AICPA chair, Hansen is focusing his energy on three issues that pose significant opportunities for the accounting profession. He wants to help:

• Prepare the profession to capitalize on improvements in technology;
• Solidify the profession's position in the global marketplace; and
• Ensure that employers are investing in all members of the profession to evolve skills and competencies and cultivate future leaders as members of the Baby Boom generation retire.

With respect to technology, he anticipates a significant disruption over the next five years in the audit services that CPA firms offer. Firms are developing technology that is capable of tracking inventory and performing confirmations; testing complete data sets rather than samples; and identifying anomalies in data that can be investigated to potentially provide significant value to audit clients.

"I think our profession will be delivering those [audit] services, and I think it will be a strong core component of our profession, but not the way it's always been done," Hansen said. "So you've got to be willing to change with the times, to be able to reinvent, reeducate, retool yourself. But if you're stuck in the way things have been done in the past, you're going to be riding out a business model that will come to be of less and less relevance."

INVESTING IN PEOPLE

Hansen believes technological disruption will cause a shift in the fundamental structure of CPA firms as they take advantage of new tools in audit. Traditionally, newly minted CPAs have performed confirmations, inventory counts, and other basic tasks that helped them learn the audit process and develop professional judgment. The staff accountants learn from seniors, who learn from managers, who learn from partners in a pyramid-shaped organizational chart that has served audit firms well for many years.

But the bottom level of the pyramid is changing, as the work traditionally done by staff accountants increasingly is handled by technology. Hansen anticipates that when that bottom level is removed from firms' organizational charts, they will evolve into more of a pear-shaped model with more people clustered in the middle of the org charts. He expects this change to be implemented over time but says firms already are in the early stages of transformation. He also expects data scientists and engineers to be integrated into the audit process as audit teams take advantage of the newest technology to provide more insight to clients.