KEY ACCOUNTING INDUSTRY INSIGHTS AND UPDATES – JULY 2023

1. PwC Sold a Part of Its Australian Business for $1 Because of Tax Leak Scandal

PwC is selling its scandal-ridden Australian government services business for next to nothing. The consulting firm June 25 announced the sale to Sydney-based private equity firm Allegro Funds for the price of just $1 Australian dollar ($0.67). The deal, which is expected to conclude at the end of July, will give rise to two different businesses, with PwC Australia exiting from all government advisory work, at both the state and federal levels. The tax scandal involved PwC tax expert Peter John Collins, who leaked confidential government plans to other Australia staff to advise global companies on new tax laws. The Australian treasury has now batted Collins from the profession and is weighing a criminal case against him. Read More

2. IRS offers guidance on stock repurchase tax

The Internal Revenue Service provided transitional guidance Thursday on the new 1% excise tax on the value of corporate share repurchases that was included as part of last year's Inflation Reduction Act. In Announcement 2023-18, the IRS said taxpayers will not be required to report the new excise tax imposed by section 4501 of the Tax Code on repurchases of corporate stock during a covered corporation's taxable year on any returns filed with the IRS, or to make any payments of such tax, before the time specified in forthcoming regulations. Read More

3. Lawmakers must keep the IRS in the loop: ETAAC

Members of Congress need to let the IRS know what they're thinking before making tax laws, according to the first recommendation of the latest IRS Electronic Tax Administration Advisory Committee annual report. The latest ETAAC annual report advises Congress to provide timely tax legislation and consistent multiyear funding while urging the IRS to prioritize IRS.gov modernization and search engine optimization. Read More

4. Taxpayer advocate: 2023 tax season better at IRS; IT upgrades imperative

The IRS reduced its backlog of unprocessed original tax returns by 80% from the 2022 to the 2023 tax filing season and improved its phone service, but real and permanent change requires significant IT upgrades, the national taxpayer advocate said Wednesday in her midyear report to Congress. "In submitting this report, I'm finally able to deliver some good news: The taxpayer experience vastly improved during the 2023 filing season," Erin Collins wrote in her introduction to the report. Read more

5. 1 in 5 Boomers Are Putting Retirement Off Because of Recession Concerns

Amid uncertain economic conditions, baby boomers aren’t feeling confident in their retirement plans. In fact, 70% of baby boomers expressed uncertainty over whether their retirement savings were healthy enough to carry them through retirement, according to a study from Retirement Living. The study, which surveyed 758 American baby boomers aged 59 and older about their financial plans, found that the average retirement savings of respondents came out to a little over $680,000. However, the majority said they’d feel more secure about retiring comfortably if they had around $1.2 million in the bank. Read More

6. Fast Track Compliance with the IRS Pub 4557 and the FTC Safeguards Rule – a No-nonsense Guide for Firm Owners

By now, most tax preparers are aware they need to comply with the FTC Safeguards Rule and IRS Publication 4557.  Failure to do so could result in stiff penalties, yet many firms have not been able to make this a priority. And what if you don’t provide tax? The first step is to figure out if you are subject to the FTC Safeguards Rule.  The FTC provides an exemption for non-tax firms that have less than 5000 “targets” in their combined data stores and software. Think of a target as being a person or entity. Read More

7. Latest GOP Tax Package Includes a Bonus ‘Guaranteed’ Standard Deduction

Not long after Congress averted the debt limit crisis through bipartisan legislation signed by President Biden, Republicans in the U.S. House of Representatives have proposed $237 billion in tax cuts. As Kiplinger reported, the House GOP tax cut package is a trio of bills covering a broad range of potential tax changes, including a temporary, bonus standard deduction called the “guaranteed deduction.” “This bonus will help ease the burden of inflation and allow families to spend their hard-earned wages the way they see fit,” Rep. Michelle Steel (R-CA) said in a statement regarding the bill. Steel, a member of the House Ways and Means Committee, introduced the proposal earlier this month alongside fellow Ways and Means member Rep. Nicole Malliotakis (R-NY). Read More

8. The Technology Lab Podcast – Review of Audit Technology Trends – July 2023

Technologists Randy Johnston and Brian Tankersley, CPA, discuss technology trends for audits. Read More

9. Marcum Fined $10M by SEC and $3M by PCAOB for Shoddy Quality Controls in SPAC Audits

Top 20 accounting firm Marcum was fined $13 million on June 21—$10 million from the Securities and Exchange Commission (SEC) and $3 million from the Public Company Accounting Oversight Board (PCAOB)—for several years’ worth of quality control failures and violations of auditing standards during its audits of special-purpose acquisition companies (SPACs). The SEC’s order said Marcum’s quality control failures were not limited to SPAC clients. “[T]he nature of these professional standard violations—including their volume and range—reflects deficiencies relevant to and impacting Marcum’s entire public company audit practice,” the SEC stated. Read More

10. PCAOB Turns Up the Heat on Auditors to Find Fraud

The PCAOB on Tuesday introduced a proposal amending current PCAOB auditing standards related to the auditor’s responsibility to detect noncompliance with laws and regulations, including fraud, in the audit of a public company. If the proposed changes are approved, they would strengthen auditor requirements to identify, evaluate, and communicate to management and the audit committee possible or actual noncompliance with laws and regulations, thereby enhancing investor protection, the PCAOB said. Read More

11. Congress introduces AICPA-backed bill to ease tax extensions

A pair of lawmakers proposed bipartisan legislation to streamline the tax filing extension process. Rep. Judy Chu, D-California, and Mike Carey, R-Ohio, introduced H.R. 3566, the Simplify Automatic Filing Extensions (SAFE) Act of 2023. Instead of relying on the current rule of calculating a percentage of the current year tax liability, the SAFE Act would allow taxpayers to automatically qualify for a filing extension without worrying about being subject to a penalty by paying an easily calculated amount based on 125% of their prior year's tax liability. Read More

12. PCAOB proposes new rules for tech-driven analysis by auditors

The Public Company Accounting Oversight Board issued a proposed set of amendments Monday to its auditing standards to address the greater use of technology by auditors, especially when it comes to analyzing information in electronic format. The proposal includes changes to update aspects of AS 1105, Audit Evidence, and AS 2301, The Auditor's Responses to the Risks of Material Misstatement. Read More

13. FASB proposes improvements to accounting for purchased financial assets

FASB is seeking comments on a proposed Accounting Standards Update (ASU) that is intended to improve the accounting for purchased financial assets, requiring that all the assets — with certain limited exceptions — follow an existing gross-up approach. The ASU proposes changes to Topic 326, Financial Instruments — Credit Losses, which provides criteria for identifying purchased financial assets with credit deterioration (PCD or PCD assets). Read More

14. SEC increases transparency requirements for private, public securities

The SEC adopted amendments to two rules Wednesday, changes designed to increase transparency in reporting required of large hedge fund advisers, private-equity fund advisers, and public company issuers. Large hedge fund advisers and private-equity fund advisers will be affected by the first amendments to Form PF reporting since its initial adoption in 2011. Among other things, advisers now must report, before regular reporting periods, certain events of "significant stress" that could pose systemic risk. Read More

15. New PCAOB report reviews SPAC-related audits

A new PCAOB staff report analyzes audits of special-purpose acquisition companies (SPACs), an area in which its inspectors have observed relatively high rates of audit deficiencies. The report offers a view into inspection observations and staff insights to investors and other stakeholders. Read More

16. Supreme Court to Rule on Legality of Wealth Tax

The Supreme Court announced Monday it will weigh in on the constitutionality of wealth taxes by deciding whether Congress may require taxpayers to pay their share of earnings from a foreign company, even if they received no dividends or income. The case of Charles and Kathleen Moore, and their $14,729 tax bill, has garnered much attention on the right because of what it could mean if progressive Democrats take control of Congress. Read More

17. AI in accounting: Promises and reality on the new frontier

Artificial intelligence has dominated the spotlight for the past several months with its headline-grabbing abilities to generate text and images — and disrupt markets. While it's difficult to separate hype from fact, there's little question that, for forward-thinking small and medium-sized businesses, AI and AI-driven automation can unlock game-changing breakthroughs in productivity, cost savings, and competitive advantage. Read More

18. AICPA updates principles for AI and ESG

The Association of International Certified Professional Accountants released an updated set of global guidelines for management accountants to address new topical areas including AI, automation and ESG. The association, which includes the American Institute of CPAs and the U.K.'s Chartered Institute of Management Accountants, released a new edition Wednesday of their Global Management Accounting Principles, a guide to help management accountants work with business decision makers to create and preserve value creation within their organization's business model. Read More

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