Viewing posts categorised under: Audit
Changes in Partnership Audit Rules

old cash register buttonsIf your business files a Partnership Form 1065 return or you have an interest in a partnership, you need to be aware of changes in the IRS audit rules which will have a significant impact on partnerships. These changes also affect LLCs filing partnership returns.

Some small partnerships/LLCs may be able to elect out of the new rules. The election requires the partnership/LLC to have no more than 100 partners/members. The owners must generally be: Individuals, C or S corporations, or the Estate of a deceased partner/member. It is unclear whether a Single-Member LLC is a qualified owner. An annual election is required for this option in addition to other disclosure requirements.

Read More
Put your audit in reverse to save sales and use tax


It’s a safe bet that state tax authorities will let you know if you haven’t paid enough sales and use taxes, but what are the odds that you’ll be notified if you’ve paid too much? The chances are slim — so slim that many businesses use reverse audits to find overpayments so they can seek reimbursements.

Take all of your exemptions

In most states, businesses are exempt from sales tax on equipment used in manufacturing or recycling, and many states don’t require them to pay taxes on the utilities and chemicals used in these processes, either. In some states, custom software, computers and peripherals are exempt if they’re used for research and development projects.

This is just a sampling of sales and use tax exemptions that might be available. Unless you’re diligent about claiming exemptions, you may be missing out on some to which you’re entitled.

Read More
Ready for the new not-for-profit accounting standard?


A new accounting standard goes into effect starting in 2018 for churches, charities and other not-for-profit entities. Here’s a summary of the major changes.

Net asset classifications

The existing rules require nonprofit organizations to classify their net assets as either unrestricted, temporarily restricted or permanently restricted. But under Accounting Standards Update (ASU) No. 2016-14, Not-for Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, there will be only two classes: net assets with donor restrictions and net assets without donor restrictions.

Read More
Cooking the books


What’s the most costly type of white collar crime? On average, a company is likely to lose more money from a scheme in which the financial statements are falsified or manipulated than from any other type of occupational fraud incident. The costs frequently include more than just the loss of assets — victimized companies also may suffer lost shareholder value, lower employee morale, premature tax liabilities and reputational damage. Let’s take a closer look at what’s at stake when employees “cook the books.”

Read More
Use qualified auditors for your employee benefit plans


Employee benefit plans with 100 or more participants must generally provide an audit report when filing IRS Form 5500 each year. Plan administrators have fiduciary responsibilities to hire independent qualified public accountants to perform quality audits.

Read More
What to do if your nonprofit receives an IRS audit letter


In recent years, the IRS has increased its scrutiny — including actual audits — of not-for-profits. Do you know what to do if your organization receives an audit letter?

What is an audit?

An audit begins with the initial contact from the IRS and continues until a closing letter is issued. Before closing an audit, an officer of your nonprofit, your CPA and the IRS agent will discuss the agent’s conclusions at a closing conference. Both the conference and letter will explain your appeal rights.

Read More
Financial analytics provide the foundation for your audit … and beyond


An auditor does significant legwork before starting field work. During the audit planning phase, he or she reviews the preliminary financials and compares the current year’s results to last year and industry benchmarks. Here’s a closer look at what happens behind the scenes — and why you might want to implement a similar approach internally.

Horizontal comparisons

Preliminary analytics start with a horizontal comparison. That is, auditors compare internally prepared financial statements for the current year to last year’s audited results. Usually, changes are shown as a dollar amount and percentage.

The amount of change that warrants additional attention depends on the “materiality” threshold the auditor sets. For example, an auditor of a small business may decide to inquire about any line item that changes by, say, $10,000 or 10% and then possibly incorporate additional testing for questionable line items. A higher dollar amount threshold may apply for a larger company.

Read More
Beware of accounts deceivable


More than half of financial statement frauds involve sales and accounts receivable, according to the Committee of Sponsoring Organizations of the Treadway Commission. (COSO is a joint initiative of five private sector organizations that develops frameworks and guidance on enterprise risk management, internal control and fraud deterrence.) But why do fraudsters tend to target accounts receivable?

Read More
Nonprofit fraud isn’t worse — but it’s different


It’s a myth that not-for-profits as a group suffer disproportionately high losses due to occupational fraud. According to the Association of Certified Fraud Examiners’ (ACFE’s) 2016 Report to the Nations on Occupational Fraud and Abuse, surveyed nonprofits lost a median amount of $100,000, compared with $150,000 for all organizations.

Yet nonprofits have special vulnerabilities to fraud. Knowing such weaknesses can help you take action to prevent crooked employees from exploiting them.

Read More
How to minimize surprises during physical inventory counts


Counting inventories of raw materials, work in progress, finished goods, and parts and supplies is necessary for accurate recordkeeping, but it can be tedious. There’s almost always a variance between what’s on the shelves and what’s in your perpetual inventory system or general ledger. A relatively small difference shouldn’t give rise to panic. But a variance that exceeds 3% to 5% is a cause for concern. Here are some ideas for minimizing discrepancies.

Read More
Our Monthly Newsletter

Contact Us

Hancock & Dana, PC
Certified Public Accountants and Business Consultants
12829 West Dodge Road, Suite 100
Omaha, NE 68154

Phone: 402.391.1065
Fax: 402.334.9498