Category: Uncategorized

Fiscal Year Funding Plus Legislative Support for Health Care Professionals and Physical Activity for All Americans

3 min read

S 1301, S 610, HR 4502, HR 4346, HR 2485, S 583A bill to provide for the publication by the Secretary of Health and Human Services of physical activity recommendations for Americans (S 1301) – This bill authorizes the Secretary of Health and Human Services to publish guidelines of recommended physical activity for Americans. The bill was introduced by Sen. Sherrod Brown (D-OH) on April 22, passed in the Senate on July 30 and is under consideration in the House.

Dr. Lorna Breen Health Care Provider Protection Act (S 610) – This bill was introduced by Sen. Tim Kaine (D-VA) on March 4. The purpose of this legislation is to establish grants and require activities designed to improve mental and behavioral health and prevent burnout among health care providers. Strategies include ways to improve well-being, establish or expand programs to promote mental and behavioral health among health care providers involved with COVID-19 response efforts, and train health care providers on suicide prevention. Moreover, the bill instructs the Centers for Disease Control and Prevention to conduct a campaign urging health care providers to seek support and treatment for mental and behavioral health issues. The bill passed in the Senate on Aug. 6 and is currently under consideration in the House.

Labor, Health and Human Services, Education, Agriculture, Rural Development, Energy and Water Development, Financial Services and General Government, Interior, Environment, Military Construction, Veterans Affairs, Transportation, and Housing and Urban Development Appropriations Act, 2022 (HR 4502) – This bill authorizes appropriations for the fiscal year ending Sept. 30, 2022, for the departments of Labor, Health and Human Services, Education and others.The legislation was introduced by Rep. Rosa DeLauro (D-CT) on July 19 and passed in the House on July 29. It is currently under consideration in the Senate.

Legislative Branch Appropriations Act, 2022 (HR 4346) – Introduced by Rep. Tim Ryan (D-OH) on July 1, the bill provides appropriations for the Legislative Branch for the fiscal year ending Sept. 30, 2022. Funding for the Legislative Branch includes the House of Representatives and related committees, the Office of the Attending Physician, the Capitol Police, the Congressional Budget Office, the Library of Congress and the Government Accountability Office. The legislation passed in the House on July 28 and is in the Senate for consideration.

Access to Congressionally Mandated Reports Act (HR 2485) – This legislation would require the Director of the Government Publishing Office to establish and maintain an online portal available to the public that enables access to all congressionally mandated reports. This bill was introduced by Rep. Mike Quigley (D-IL) on April 13. It is currently in the Senate after passing in the House on July 26.

PRICE Act of 2021 (S 583) – In an effort to encourage and promote innovative procurement techniques within the Department of Homeland Security (DHS), this bill directs the Management Directorate to publish an annual report on a DHS website. The report will provide details on how DHS projects met goals such as improving or encouraging better competition, reducing time to award, achieving cost savings, achieving better mission outcomes or meeting the goals for contracts awarded to small business concerns. The bill was introduced by Sen. Gary Peters (D-MI) on March 3. It was passed by the Senate on July 29 and is currently in the House.

What is a Net Zero Economy?

3 min read

Net Zero Economy

President Biden re-entered the United States in the Paris Agreement. This is an international treaty first signed in 2015 in which countries around the globe committed to mitigating climate change. Specifically, the goal of the Paris Accord is to limit global warming to no more than 1.5 degrees Celsius above pre-industrial levels.

This objective would generate what is called a net zero global economy, which means creating a balance between the amount of greenhouse gases produced and the amount of greenhouse gasses removed from the atmosphere. The main engine that places carbon back into the soil is healthy vegetation that grows all years round, these are called cover crops and reforestation. You can help by using the Ecosia search engine. 

The initial benchmark is to achieve net zero carbon dioxide emissions by 2050 and net zero emissions of all greenhouse gases by 2070. However, accomplishing these lofty goals will require a remarkable transformation of the global economy and global farming practices.

A way to measure global warming is through “temperature alignment” – a forward-looking benchmark that compares the level of emissions today against the potential for reducing them by a certain date in the future. The measure can be applied to a specific business, government, or investment portfolio.

For investors, global greening provides an opportunity to invest in companies positioning for a future net zero economy. After all, it’s important to recognize that climate risk represents substantial investment risk. Companies that prepare for the transition to sustainable energy sources will be able to deliver long-term returns, while those that do not could become obsolete.

If Net Zero is your path consider the following steps to align your investment allocation with the goals of a net zero economy. For example:

  • Reduce your exposure to high-carbon emitters and companies not making forward-looking commitments to transform to the net zero economy.
  • Prioritize investment decisions based on companies actively reducing reliance on fossil fuels and meeting science-based targets.
  • Target specific sustainable sectors (e.g., clean energy, green bonds) based on your asset allocation strategy – and diversify investments among those holdings.
  • Monitor ongoing research and available data to measure temperature alignment to ensure your issuers and investments are meeting published transition plans. This benchmark should be reviewed with the same rigor as traditional financial data.

The United States and the entire world have a choice to reduce the global. However, the effort also offers an opportunity to invest in climate innovation. The future will bring the survival of the fittest, is your portfolio ready.

5 Tips for Job Seekers Over 50

4 min read

Job Seekers Over 50You’ve got loads of experience in your field. You know things that only time can teach you. However, all of your experience and knowledge can sometimes work against you. And even though age discrimination is illegal, it doesn’t mean it isn’t prevalent. You can’t turn back the clock, but you can reshape how you present yourself. Here are a few good ways to get started.

Learn New Skills

If you see a job posting in your industry that requires knowledge of the software you don’t know, hop on YouTube or enroll in an online class. Certifications help, too, and are available in some of the most in-demand programs, such as Amazon Web Services (AWS), Systems Applications and Products (SAP), Hootsuite (used for social media), and Salesforce. This way, you’re demonstrating to employers that you have the necessary qualifications for the job – you’re a viable candidate – and you haven’t fallen behind over the years.

Rethink Your Resume

First of all, limit your experience to the past 15 years, unless there’s a job that reflects a title or skill that’s relevant to the position. You don’t want to appear, upon first glance, overqualified. Second, make sure your CV includes the right keywords. The days of HR managers poring over resumes is mostly gone; they often use applicant tracking systems (ATS) to weed out the candidates that are filling up their inbox at warp speed. Finally, if you’re using AOL or Hotmail, get a new account; this is a red flag that screams too old. Sign up for Gmail instead.

Widen Your Net

Think outside your industry’s box. For instance, you might be attracted to a big-name corporation or a hot startup, but it might not be the right environment for you, especially if there’s a chance you’d report to a much younger manager. You might find a better fit by going outside your comfort zone. Colleges and universities might be good options; you can leverage your experience by teaching. Smaller companies or startups that aren’t as well known might also be good places to look; you could take on multiple roles. Being open to contract or freelance jobs is another good idea. Getting your foot in the door is half the battle.

Use Personal Connections

While job sites like Zip Recruiter and LinkedIn, leads on social media and head hunters are places you might have found opportunities before, reach out to friends and former coworkers. It creates immediate familiarity and, when faced with a sea of resumes, helps move your name closer to the top. When you do get introduced to someone who has an opening, ask about their industry, role in the company, as well as what tools they’ve used, podcasts they listen to, or online classes they’ve taken to keep current. This not only shows your business savvy but also could help keep you top-of-mind if they hear of anything.

Own Your Experience

Your age doesn’t have to be the elephant in the room. Demonstrate why the invaluable skills you’ve accumulated over the years differentiate you from others. Craft an elevator pitch and jump right in. Talk about how, for instance, your breadth and depth of knowledge can help junior executives learn and grow. Busy employers generally want to know how quickly you meet the job requirements and if you can make their life easier, or help them shine.

Remember, you have so much to bring to the table. That’s why serving up your accolades in the right way can make all the difference in the world.

Sources

https://www.themuse.com/advice/jobhunting-after-50-the-new-rules

Technology Driven Accounting: How to Prepare Staff for a New Age in Accounting

4 min read

How to Prepare Staff for a New Age in AccountingTechnology has no doubt changed the traditional way of doing things. Businesses and professionals are left with no choice but to adopt new technology to remain relevant in a changing environment.

However, the successful adoption of this new age in accounting can happen only if you prepare your staff in advance.

Why it’s Necessary to Prepare for the New Age Accounting

Technology offers many benefits; however, the constant rapid changes in technology create a major challenge to organizations and even to the professionals/employees. Some decide to stick with systems with which they are already proficient. Unfortunately, such a decision is not an option if you want to remain relevant in a changing accounting landscape.

Technological changes that have affected the accounting field can be attributed to technologies such as 5G, data analytics, robotic process automation (RPA), computer-assisted auditing technologies (CAATS), blockchain, and cloud computing, among others.

These technologies are literally creating new roles in the accounting field. For instance, automation will take away some accounting jobs, such as data entry, payroll, tax handling and bank reconciliations – thanks to Enterprise Resource Planning (ERP) systems and more advanced systems like Robotic Process Automation (RPA).

The effect of technology in the accounting field has made such an impact that the AICPA and NASBA are supporting a CPA evolution. This is aimed at incorporating changing skills and competencies in the accounting field. As a result, this will include a new curriculum and new CPA exams expected to be launched in 2024.

Despite the disruption in the accounting field by technology, it has introduced many new opportunities. Consider this: while automation takes care of repetitive tasks, the accountant can devote more time to planning, organizing, and advising. This enables the accountant to add more value to an organization as they focus on major tasks.

However, this advantage will benefit only those who are well prepared in advance and ready for the new form that accounting is taking.

How to Prepare Your Staff for a New Age in Accounting

Change is not always welcome, but preparing your staff in advance will help ensure a smooth transition. Here is how to prepare your staff:

  • Communicate
    Let your employees know the intended changes in roles as well as new technologies that you plan to implement. Employees also can play a role in selecting technologies best suited to your business operations.
  • Mindset Shift
    Help employees accept the technological changes. They need to shift their mindset and accept the changing digital landscape. This will help with expediency and the ability to take advantage of its benefits.
  • Upskilling and Reskilling
    Give employees a chance to enhance their abilities. They also should learn new things to ensure they have relevant skills to continue working in advanced areas of accounting that require innovation, critical thinking, decision making, etc. Where necessary, they could learn basic programming and even basic automation for more advanced roles like data analysis. Gaining new skills will help your business transition from old systems to new ones, without necessarily hiring new staff.
  • Soft Skills
    Accountants now more than ever need to learn non-technical skills so that they can easily interact with people. If they are expected to take up advisory roles, they should be good at problem-solving, communication, relationship skills, business acumen, etc.
  • Emerging Business Models
    Let your staff be aware of new business models, such as microservices, marketplace platforms, and do-it-yourself models. This especially affects accounting firms whose employees need to be creative on how to leverage these models.
  • Positive Culture
    Develop a culture that enables staff to compete at a new level to keep their morale up so they are not worried about losing their jobs.
  • Stay Updated
    Keep everyone up-to-date with trends even when you don’t intend to implement every new technology that comes up. It helps to stay in the loop of what’s happening in the accounting field.

Keeping up with evolving accounting trends and changes will save you from losing clients. Preparing your staff for the new age of accounting will help your business provide value beyond traditional accounting to your clients. This is because you will be serving as business consultants and strategic partners as opposed to simply accounting experts.

How to Turn a Summer Job into a Tax-Free Retirement Nest Egg and More

4 min read

Summer Job into a Tax-Free RetirementTis the season for summer jobs for high school and college kids. These seasonal jobs are more than just an opportunity for teens and college students to earn some money and gain experience. They also provide the opportunity for seeding a significant retirement nest egg and even a down payment on a home through a Roth IRA.

Seems too good to be true? Well, it’s not – but as always, the devil’s in the details, and it is not exactly a free lunch. So, let’s walk through exactly how this all works.

Step 1 – Earned Income

First, teen or college students must get a job that pays – and the more the better. This is because the gateway to opening and contributing to a Roth IRA is earned income. The magic number for earned income to max out a Roth IRA in 2021 is $6,000, as this is the contribution limit. This is because contributions are limited to the lesser of the $6,000 limit or 100 percent of earned income.

Step 2 – Make the Roth IRA Contributions

The next step is to make the contributions to the working child’s Roth IRA. Let’s be honest here. It is a rare case where a kid is going to take all or nearly all their summer job earnings and stash them away in a Roth IRA for 50+ years down the road. There is a way around this, however.

A parent or grandparent can contribute to the Roth IRA in the child’s[h1]  name, with two nuances. First, this contribution is still governed by the earned income limits discussed above. Second, these amounts count toward the $15,000 per year gift tax exclusion ($30,000 if married) so it will eat into that. Lastly, do not forget the deadline to make 2021 Roth IRA contributions of any type is April 18, 2022.

How Much is This Worth?

While $6,000 or so may not seem like a lot, it can make a significant difference over time due to the power of compounding returns from such a young age – coupled with the tax advantages of a Roth IRA.

To illustrate the power of this tax and investment move, let us take a scenario where a high school kid makes the $6,000 per year over three summers from age 16-18 before heading off to college, and the Roth IRA contribution is maxed out.

With contributions at just $18,000 and NEVER putting in another dime again, this will turn into the following amounts under different assumed investment returns by the time they are 66 (40 years of compounding).

  • 6 percent return = $313,000
  • 8 percent return = $783,000
  • 10 percent return = $1.93 million

Now, before you get too excited, you must understand that 40 years from now $300,000 will not be what it used to be if inflation continues at historical rates – but the point remains. This simple move made over just a few years can create significant tax-free wealth.

Side Benefit

Due to the characteristic of a Roth IRA, the other beneficial options relate to withdrawal. First, the contributions can be accessed any time before age 59 ½ without penalties or taxes. Second, even after all the initial contributions are removed, a first-time homebuyer can take up to $10,000 without the 10 percent early withdrawal penalty to help fund the purchase, although they will owe income tax on the withdrawal if it has been less than five years since the initial contribution.

Be VERY careful here though, because any withdrawals will dramatically lower the investment returns noted above.

Conclusion

Funding a Roth IRA for a high school or college child or grandchild can give them a tremendous head start in life. A few years of relatively small contributions early on can create substantial wealth over time due to compounding of returns and the tax advantages of the accounts.

How Businesses Can Harness Demand Forecasting

4 min read

How Businesses Can Harness Demand ForecastingAccording to the Bureau of Economic Analysis, consumer spending has seen some interesting trends over the first half of 2021. May was flat, April was at 0.9 percent, March was 5.0 percent, and February was at 1.0 percent. With varied consumer spending statistics as the nation comes out of the pandemic, it’s important for businesses to get demand forecasting as accurate as possible.

According to The University of Tennessee, Knoxville, demand forecasting is “a method for predicting future demand for a product.” It’s a calculated method to plan for inventory and helps prepare the supply chain for the future.

Demand forecasting helps businesses forecast their future sales, which is based primarily on historical data. However, relying exclusively on historical data is not generally recommended.

Historical data provides an incomplete picture because it does not factor in economic trends, seasonal ordering, or consumer behaviors. Multiple analyses are also recommended because young companies don’t have enough of their own data to perform such analyses.

It’s recommended to run through more than one method to forecast sales. It’s important to ensure that data is as accurate as possible and to consider factors beyond inventory. Such factors include how external players – shippers, material suppliers, etc. – will work with the company’s internal functioning.

It’s important to be mindful of the time frame of the different analyses. Short-term refers to the next quarter to four quarters (3 to 12 months) and helps businesses adapt to changes in consumer demand and market variations. Real-time sales data is used to manage just enough inventory. Long-term refers to at least 12 to 24 months, but sometimes 36-48 months, and is used for things related to the long-term business vision. Examples include creating a more reliable supply chain, capital expenditures, advertising campaigns, etc.

Similarly, demand forecasts run by a business can be done regarding intrinsic or extrinsic factors. External forecasts evaluate how the broader economy and systemic changes in commerce shifts future demand. Recommended indicators include exploring how many retail consumers spend, what they are interested in, and whether the economy is expanding or contracting. Internal demand forecasts look at the organization’s employee makeup and where and how the business can divert resources to help deal with additional capacity, if necessary.

Passive demand forecasting relies exclusively on historical data and is usually geared toward established companies with generally reliable sales histories.

Active demand forecasting is geared more toward startup businesses looking to scale and diversify their portfolio. It can be variable because it factors in changing trends of the fluid economy and how companies, especially startups, plan to accelerate growth. However, active demand forecasting also may be useful in order for businesses to work around fluid inventory and logistic network overview. Startup businesses are better geared for real-time demand planning, mainly due to a lack of historical data. 

With the quantitative approach focusing on crunching data, oftentimes with complex “big data” processes, the qualitative method takes a more balanced approach with some data, but also cognitive-based analyses, including some of the following tactics:

  1.  The salesforce approach gleans data from the sales staff to predict demand. Those doing sales are in direct contact with the company’s customer base; therefore, they can get info on customer needs and behavior and even report back on what the competition is doing.
  2. Market research looks at present market trends and sees where businesses can meet newly created consumer demand. Startups benefit because they have little or no historical data.
  3. The Delphi Method works by hiring an outside group of experts and asking them a series of relevant questions. From there, each expert creates a demand forecast based on their market knowledge. Then, the individual forecasts are shared among the experts anonymously. From there, experts are asked again to come up with a forecast; this is repeated until there is far greater consensus among all the experts.

While demand forecasting is individual to each company and each industry, the more businesses that understand the approach to demand forecasting, the more able they’ll be to react to any type of consumer trend.

Sources

https://www.bea.gov/data/consumer-spending/main

https://supplychainmanagement.utk.edu/blog/guide-to-forecasting-demand/

Blocking Voter Expansion, Proposing Greater Scrutiny of Inspectors General, and Paving the Way for Climate Change Measures

3 min read

hr 12, s65, s1251, hr3684, hr2662For the People Act of 2021 (HR 12) – This bill is designed to improve voter access to the ballot box by expanding automatic and same-day voter registration, vote-by-mail and early voting. The legislation also contains provisions that limit removing voters from voter rolls, strengthens ethics rules for public servants, reduces the influence of big money in politics and addresses other anti-corruption measures. The bill was introduced by Sen. John Sarbanes (D-MD) on Jan. 4 and passed in the House on March 3. In early July, the bill was blocked by Republicans in the Senate and its status is pending further action that may be taken by Senate Democrats.

Uyghur Forced Labor Prevention Act (S 65) – This bipartisan bill is designed to prevent goods from entering the U.S. market that are made via forced labor in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China. It would also enhance existing asset- and visa-blocking sanctions of foreign individuals and entities responsible for human rights abuses connected to forced labor in Xinjiang. The bill was introduced by Sen. Marco Rubio (R-FL) on Jan. 27. It was passed by the Senate on July 14 and is currently in the House.

Growing Climate Solutions Act of 2021 (S 1251) – This bill was introduced by Sen. Mike Braun (R-IN) on April 2. The purpose of this legislation is to reduce barriers to entry for farmers, ranchers and private forest landowners in certain voluntary credit markets. In order to participate in the program, providers must offer technical assistance to help landowners utilize sustainable land use management practices that prevent, reduce or mitigate greenhouse gas emissions, or sequester carbon; or be a third-party charged with verifying the process for voluntary environmental credit markets. The bill passed in the Senate on June 24 and is currently under consideration in the House.

INVEST in America Act (HR 3684) – This bill authorizes federal funds for highways, highway safety and transit programs. It includes strategies to reduce climate change impacts of the surface transportation system; revises Buy America procurement requirements for highways, mass transit and rail; establishes a rebuild rural bridges program to improve the safety and state of good repair of bridges in rural communities; and other purposes. The legislation was introduced by Rep. Peter DeFazio (D-OR) on April 19 and passed in the House on June 29. It is currently under consideration in the Senate.

IG Independence and Empowerment Act (HR 2662) – Introduced by Rep. Carolyn Maloney (D-NY) on April 19, the bill amends the Inspector General Act of 1978. Some of the provisions include: allowing an Inspector General to be removed only for cause; requiring that Congress be notified before an IG is placed on nonduty status; requiring the president to explain any failure to nominate an IG; adding provisions regarding acting IGs when an IG position is vacant; notifying Congress when an allegation of wrongdoing made by a member of Congress is closed without referral for investigation. The legislation passed in the House on June 29 and is in the Senate for consideration.

HSA: Save it for Retirement

4 min read

HSA: Save it for Retirement, Health Saving AccountAccording to Fidelity Investments, the average 65-year-old couple retiring today will need about $300,000 for out-of-pocket healthcare expenses during retirement. And that doesn’t even include long-term care. One way to help pay for this enormous cost is to open a health savings account (HSA), which is a savings and investment vehicle designed to help people pay for medical-related expenses on a tax-free basis.

To open one of these accounts, you must be enrolled in an HSA-eligible, high-deductible health insurance plan (HDHP). These are offered by many employers and also are available on the individual insurance market. One of the little-known advantages of the HSA is that if you delay withdrawing from it until retirement, you’ll have money ready to tap for those out-of-pocket expenses on as-needed basis.

An HDHP works exactly as it is named; comprehensive coverage does not kick in until the plan member reaches an annual deductible that is typically higher than other healthcare plans. The trade-off for the higher deductible is that monthly premiums are lower. Therefore, this type of plan is generally suited for healthy individuals or families that do not have a lot of ongoing medical expenses.

In 2021, the annual HSA contribution limit is $3,600 for individuals and $7,200 for family coverage.  In 2022, these limits increase to $3,650 for individuals and $7,300 for families. Account owners age 55 and older may add another $1,000 “catch-up” contribution. With a work-sponsored HDHP, both the employee and the employer may contribute to the savings account, but their combined contributions may not exceed the annual limit. As long as you are enrolled in an HDHP, you may contribute to the HSA. Even when you no longer contribute, the account belongs to you and maybe invested for growth and tapped as needed.

Investment Advantage

An HSA is maintained at a financial institution, such as a bank. Once saved assets have reached a certain threshold, that custodian will allow the owner to invest a portion of the balance. While the HSA rules technically allow you to invest starting with your first dollar, many custodians have their own minimums required in the HSA (usually $1,000 to $2,500) to be available for medical expenses. Beyond that the balance, the savings can be invested for growth. Also, the owner can transfer money to and from the bank and the investment account as needed.

The invested portion of an HSA is transferred to a brokerage account. There, the owner has a variety of options to invest in, including mutual funds and individual securities. According to Morningstar, more than 80 percent of HSA investment funds have earned gold, silver, or bronze analyst ratings, and the lower end of investment fees range from 0.02 percent to 0.68 percent a year. Note that some investment management fees run higher, so it’s important to compare fees just as you would with any other type of investment.

Triple Tax Advantage

The health savings account features more tax benefits than any other type of investment, including a 401(k), a traditional IRA, or a Roth IRA. That’s because all contributions are tax-free (either through payroll deductions at work, which also avoid FICA taxes or as a tax deduction when health insurance is purchased independently). Moreover, HSA investments grow tax-free. If eventual withdrawals are used to pay for qualified medical expenses, they are not taxed either. So essentially, savings, investments, and gains from an HSA account that are used to pay for healthcare expenses are never subject to taxes. If you do use this money for nonqualified expenses, you’ll have to pay income taxes and, if taken before age 65, a penalty fee as well.

However, consider when most people encounter their highest medical bills: during retirement. If you pay for all out-of-pocket expenses with current income throughout your career, your HSA has the opportunity to grow into a substantial nest egg by (and during) retirement. The most effective use of these funds is to pay for health-related expenses, such as Medicare premiums, dental, and vision care, long-term care insurance premiums, and nursing home costs.

An additional advantage is that health savings accounts are not subject to required minimum distributions. However, be aware that when an HSA is left to a non-spouse heir, it converts to a taxable account – so it’s best to use up these assets while you’re still alive.

Audits in Accounting: Improving Audit Quality with Data Analytics

4 min read

Audits in Accounting: Improving Audit Quality with Data AnalyticsAuditing is crucial to ensure the accuracy and fairness of financial information. However, one of the biggest threats to audit reputation today is data quality. This is because of the large volumes of data that businesses produce today. To deal with so much data, auditors are now turning to data analytics.

Data Analytics and Audits

Technology has played a major role in business growth as it aids in reducing operational costs and improving customer service. As such, many businesses have adopted enterprise resource planning (ERP) systems. These systems result in huge volumes of data, making it nearly impossible to analyze using the traditional audit process.

Auditors are left with no choice but to also use IT-based solutions; and this led to the development of audit software to support the auditors in data extraction and analysis.

To further enhance the workings of audit software, it’s now being integrated with data analytics. Given that data analytics works with structured data, the systems incorporate machine learning (deep learning) to extract useful data from a host of unstructured data.

Although these developments in the audit profession have not changed the primary role of auditors, they have changed how an audit is done by helping produce high quality audit evidence.

How Data Analytics Improves Audit Quality

Traditional audits involve combing through piles of data, which is time consuming. As a result, auditors prefer workarounds like data sampling, which does not give a true outcome.

With data analytics, an auditor does not have to restrict data to financial reporting systems only. Instead, they can use data from multiple complete data sets, such as sales statistical data and employee and customer master data. This enables an auditor to go beyond traditional audits that target limited data and include different audit relevant data.

Using data analytics tools, auditors look for predefined patterns that help reveal ambiguous relationships between variables that a manual system might not identify. This helps facilitate a more comprehensive decision that includes all data sets.

By integrating data analytics, auditors have access to a powerful tool that helps them better understand a business. As a result, they can easily identify key audit risks, provide deeper insights into a business’ systems and controls, detect fraud, and provide value in a less costly manner.

Apart from simplifying and speeding up the audit process, data analytics also enables auditors to focus on key risks.

The capabilities of data analytics continue to evolve to the point of automating the auditing process through advanced data analytics (ADA). This enables the automation of routine audit processes, allowing the auditors more time for matters that require professional judgment.

Challenges of Audit Data Analytics

Audit data analytics isn’t without a few challenges, one of which is data exchange between a business and an auditor, whether internal or external. This is in relation to different systems used in data collection. To handle this challenge, the AICPA introduced data standards to be used for data requests and to ensure production of standard reports from the ERP systems.

Another challenge is the integrity of data fed into the analytics systems, as this determines the quality of the end results. Systems used should be designed around collecting meaningful data. Auditors must also ensure that the conclusions fed into the systems are accurate and correct.  

Although data analytics reduces the sampling risk, it introduces the challenge of getting numerous exceptions, mostly referred to as outliers, that produce results outside audit expectations. This calls for auditors to investigate the exceptions/outliers to determine if they are errors or misstatements.

Conclusion

Integrating data analytics into the audit process greatly improves audit quality and credibility. With rapid advancements in technology, the capabilities of data analytics will continue to evolve, making auditing work even more efficient while maintaining high quality.

Although the adoption of data analytics is dependent on the size of a business, availability of skilled staff is also crucial. To remain relevant in a fast-changing environment, auditors need to advance their skills to effectively use the data analytics tools.

Restricted Stock & RSUs: 3 Planning Tips

4 min read

Restricted Stock & RSUs: 3 Planning TipsEquity compensation is becoming more mainstream and is not just for executives anymore. Grants of restricted stock or restricted stock units (RSUs) are getting to be more common than stock options – and the rules are different, as is the tax planning. Below we will look at some of the particulars of how restricted stock and RSUs operate, how to understand a grant, planning for the tax consequences, and what to do after the shares vest.

How Restricted Stock and RSUs Work

At their core, restricted stock and RSU company shares that vest according to a schedule can be awarded as compensation. The vesting schedule can be tied to length of employment, meeting certain performance criteria, or a combination of both. Upon vesting, the employee owns the shares themselves and can do what they wish with them – from holding, selling, gifting, etc. While this might sound simple, the devil is in the details.

Understanding Your Grant

First, it is important to understand that restricted stock or RSUs are similar to stock options but have important tax and financial planning differences.

There are important facts you need to determine. First, how does the vesting schedule work; what amount of shares vest and when? Is the vesting simply tied to length of service or are there performance or even liquidity event triggers? Second, what are your tax-withholding choices?

From there, you can determine or at least estimate key factors such as how much the award will be worth both pre-tax and post-tax.

Tax Planning – Section 83(b) Election

Taxation can be tricky with restricted stock and RSUs. One strategy is to use a Section 83(b) election for restricted stock.

Typically, a person is taxed when the restricted stock vests regardless of whether the shares are sold. The Section 83(b) election allows the taxpayer to be taxed on the share value at the grant date instead. This election can be made within 30 days from the grant date of the restricted stock and is not an option for RSUs.

Why would you want to consider a Section 83(b) election? Remember that regardless of the election or not, you are taxed as ordinary income for the share value regardless of whether you hold or sell the shares. The advantages are that if you think the stock price will rise between the grant and vesting, then you will pay less ordinary income tax and have lower cash outflows. Second, after the initial taxation of the grant, the change in value after this point is capital gains.

Tax Planning – Withholding

The other issue to consider is not withholding enough taxes. The IRS rules say that your company is required to withhold 22 percent for restricted stock and RSUs (37 percent for income over $1 million during the same year).

The problem is that there is a good chance your margin tax bracket is higher than 22 percent if you are receiving these kinds of equity compensation awards. As a result, you will need to make some estimated payments to cover the difference. Unless you have enough cash from other sources, you may need to consider liquidating some of your shares to cover the tax bill.

The conundrum here is that if you do not see the shares immediately and the price falls, then you will be selling shares at a lower value than what you are being taxed on. It is best to consider your holistic tax scenario and work with your tax advisor to come up with a plan.

Game Plan for After Vesting

Aside from the tax consequences, you need to consider the impact on your overall financial planning. One of the biggest risks taxpayers can face is that they become heavily concentrated in the company stock. You will need to look at your overall portfolio and consider if you need to diversify depending on how much of your net worth is tied up in a single stock now.

Some financial planners recommend looking at the situation this way in an example with your shares worth $150,000 at vesting. If you had $150,000 in cash to invest, pay down debt, etc., would you use all of that to buy the company stock? If the answer is no, then why would you hold it? In other words, do not let tax implications lead your financial planning decisions.

Conclusion

More and more companies are issuing compensation in equity forms such as restricted stock grants or RSUs. Make sure you understand your vesting schedule and conditions so you can plan for the tax implications as well as your overall financial picture.