Fraud? Ò Employees Overstate Business Expenses to Generate Inflated Reimbursements Ò Very Common Type of Fraud Ò Difficult to Detect
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West Florida Chapter Brochure 2011_Layout 1 3/23/11 2:07 PM Page 1 PAID STANDARD PRESORTED Permit No. 144 Tallahassee, FL Tallahassee, U.S. POSTAGE Interact and Learn at West Florida Chapter Accounting Conference This daylong conference not only covers important accounting topics such as accounting and auditing, retirement and benefits and internal controls, but offers an economic update specific to your region. In addition, Mark Whitacre will talk about when leaders lose their way and provide a real-life lesson about business ethics. Be sure to join fellow CPAs in your area for a unique, local and affordable FICPA CPE opportunity. June 17, 2011 • Pensacola 2011 June 17, CPE Credit ACCOUNTING CONFERENCE West Florida Chapter Florida West This conference qualifies for 4 hours of Accounting & Auditing and 4 hours of Technical Business CPE credit and is subject to approval by the Florida Department of Business and Professional Regulation. Follow the FICPA on @ficpa and use #WFCC11 to tweet about this conference. Post Post Office Box 5437 Tallahassee, Florida 32314 2011 West Florida Chapter Accounting Conference Friday, June 17, 2011 8:10am-9:00am Managing Risk..........................................................................................1 Phillip S. Howell, J.D., CPA Director/Galloway Johnson Tompkins Burr and Smith 9:00am-10:55am Accounting & Auditing Update ................................................................22 Robert T. Fahnestock, Ph. D., CPA Chair and Professor/University of West Florida 10:55am-11:45am Retirement & Benefits Update .................................................................24 Gene B. Gaines, CPA Senior Manager/Saltmarsh, Cleaveland & Gund, CPAs 12:45pm-1:35pm Regional Economic Update: Is 2011 The Year for Recovery?..............36 Rick Harper, Ph.D. Executive Director/ University of West Florida, Office of Economic Devlopment 1:35pm-2:25pm "When Good Leaders Lose Their Way" ..................................................48 Mark Whitacre, Ph. D COO & President/Cypress Systems, Inc 2:40pm-3:30pm Internal Controls and Expense Reimbursement Schemes...................77 Betsy Bowers, CIA, CFE, CGFM, CIG Associate VP /University of West Florida, Internal Auditing & Management Consulting 3:30pm-4:20pm Migrating from SAS 70 to SSAE 16, Overview and New Reporting Requirements ...........................................................................................98 Mary E. Wiggins, CISA, MCTS Senior Manager/O'Sullivan Creel, LLP Managing Risk Phillip S. Howell, J.D., CPA 1 Phillip S. Howell Director Galloway Johnson Tompkins Burr and Smith Phillip S. Howell (Director) practices in the area of commercial litigation with an emphasis on professional negligence defense, business and real estate disputes, construction liens and defects, and first-party insurance in federal and state courts. Phillip has represented diverse businesses to resolve their disputes through the most efficient means possible, from informal negotiations, mediation and arbitration, to litigation and trial. Phillip also handles appellate matters and has successfully argued before the Florida Supreme Court. Phillip has represented attorneys, certified public accountants and other professionals in professional negligence litigation, and developers, design professionals, contractors, and materials manufacturers and suppliers in construction litigation in state and federal courts. He has presented seminars on Florida construction law and professional liability. Although Phillip’s litigation practice has consisted primarily of commercial matters, he has defended personal injury and wrongful death claims in maritime, products liability and general negligence claims. In addition to litigation matters, Phillip has handled a broad range of transactional matters, including business and commercial real property sales and purchases, re- financing, defeasance and foreclosures. He is well-versed in corporate formation, governance and tax matters. Before practicing law, Phillip practiced public accounting and continues to maintain his license as a Florida Certified Public Accountant, a designation he has held since 1991. Phillip also is admitted to the United States Tax Court. 2 MANAGING RISK Using Engagement Letters to Minimize the Risk of Professional Liability Phillip S. Howell, J.D., CPA Galloway, Johnson, Tompkins Burr & Smith, PLC 20 E. Twiggs Street Suite 303 Tampa, FL 33 02 Telephone: (813) ,77.1200 Cell Phone: (850) 2,1.1271 Facsimile : (813) ,77.1288 phowell1 g2tbs.com 2010 Claims By Practice Area Investment Advisory 4% Compilation / Review 5% Attest / Accounting & Other 9% Consulting 9% Audit 10% Tax 63% 0% 10% 20% 30% 40% 50% 60% 70% % of Claims Source: AICPA Professional Liability Insurance Program Underwritten by CNA Insurance Companies 3 2010 Ta4 Causes of Loss Failure to Detect Theft or Fraud 5% Other 6% Math & Clerical Errors 7% Filing Errors 15% Improper Tax Treatment/Advice 67% 0% 10% 20% 30% 40% 50% 60% 70% 80% % of Claims Source: AICPA Professional Liability Insurance Program Underwritten by CNA Insurance Companies 2010 Audit Causes of Loss Other 5% Errors in Report Issuance 5% Failure to Detect Over/Understatement of Assets 11% or Revenue Failure to Detect Over/Understatement of 14% Liabilities or Expenses Failure to Detect Fraud 24% Failure to Detect Theft 41% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% % of Claims Source: AICPA Professional Liability Insurance Program Underwritten by CNA Insurance Companies 4 2010 Consulting Causes of Loss Transaction Services: Business Valuation 15% Transaction Services: All Other 25% Litigation Support/Services 27% Short Term Advice on Specific Issue 33% 0% 5% 10% 15% 20% 25% 30% 35% % of Claims Source: AICPA Professional Liability Insurance Program Underwritten by CNA Insurance Companies Professional Standards Rule 2 1 of AICPA Code of Professional Conduct (1) Professional Competence (2) Exercise Due Care Professional Negligence - failure to comply is a breach of the standard care http://www.aicpa.org/Research/Stan ar s/Co eofCon uct/Pages/ efault.aspx 5 Engagement Letters The purpose is to establish an understanding 7 hat should be included in an Engagement Letter8 V The parties to the engagement V Services to be performed V Responsibilities of the parties V Termination of the engagement V Limitations on liability and damages V Fee arrangements 6 Parties to the Engagement Liability may hinge on a proper recitation of who is and who is not a party CPAs hired by attorneys Attorney-client privilege prohibits disclosure of the CP ,s wor- prematurely Scope of Services Too much information Too little information Excessive detail may .ay result in open CPA to charges misunderstandings and that engagement was not disputes with clients and completed in its entirety third parties regarding or that the conclusions the specific tas-s to be are not properly performed supported 7 Responsibilities of the Parties .any CPAs have encountered a client who failed to disclose relevant information and documentation These failures could materially alter CPA’s conclusions Affirmative Duties on Client Prevents frustration and mista-en presumptions Client has duty to provide CPA with appropriate information Client is ultimately responsible for the submissions of the generated information or report 8 Identify the AICPA Professional Standards Applicable to the Engagement These define and limit a CP ,s responsibilities in different types of engagements A boo--eeping services engagement which will not include the compilation or review of a client,s financial statements is governed only by the Code of Professional Conduct A consulting services engagement is governed by the Statements on Standards for Consulting Services A valuation engagement is governed by the Statements on Standards for /aluation Services. Identify the AICPA Professional Standards Applicable to the Engagement A compilation or review engagement is governed by the Statements on Standards for Accounting and Review Services An audit engagement is governed by Statements on Auditing Standards 9 Best Practices – Ta4 IRS Circular 230, Section 10.33 a. Best practices. Tax advisors should provide clients with the highest 1uality representation concerning Federal tax issues by adhering to best practices in providing advice and in preparing or assisting in the preparation of a submission to the Internal Revenue Service. In addition to compliance with the standards of practice provided elsewhere in this part2 best practices include the following: Best Practices – Ta4 IRS Circular 230, Section 10.33 (Cont’d) 1.Communicating clearly with the client regarding the terms of the engagement. For example2 the advisor should determine the client’s expected purpose for and use of the tax advice and should have a clear understanding with the client of the form and scope of the advice or assistance to be rendered. 10 Best Practices – Ta4 IRS Circular 230, Section 10.33 (Cont’d) 2.Establishing the facts2 determining which facts are relevant2 evaluating the reasonableness of any assumptions or representations2 relating the applicable law (including potential applicable 3udicial doctrines) to the relevant facts2 and arriving at a conclusion supported by the law and the facts. Best Practices – Ta4 IRS Circular 230, Section 10.33 (Cont’d) 3.Advising the client regarding the import of the conclusions reached2 including2 for example2 whether a taxpayer may avoid accuracy related penalties under the Internal Revenue Code if a taxpayer acts in