Category: Regulations

Implications of Section 404 of the Sarbanes-Oxley Act

Adequate Internal Control Over Financial Reporting The provision under Section 404 of the Sarbanes-Oxley Act is considered to be the most controversial and the most challenging part of the Act. Section 404 obliges the external auditors and their client firms to disclose the efficacy and adequacy of the company’s internal control over financial reporting. Implementing Section 404 is not all about compliance. For the most part, realizing the regulations and policies under the provision will provide significant benefits to the company. These include enhanced effectiveness and competence of internal control practices, increased investor confidence, and more thorough information for investors.…

Service Organization Control Series Part I: Basics of SOC 1

Service Organization Control practices relate to a world of privacy breaches and fraud, where service organization control have come under the scrutiny of the government to ensure the confidentiality and integrity of user entities’ sensitive data.  Security and compliance are critical and it is important for service organizations to be able to demonstrate they are in compliance as well as to show the accuracy of their systems. That is why most service organizations choose to hire an independent CPA to examine and report on the controls within the business. These reports will be made in accordance with the Statement on Standards…

Deducting Charitable Donations

America is very generous to charitable organizations. Forbes estimates that in 2013 Americans gave over $300 billion to more than one million non-profits. As you know, gifts to charities may be deductible on your income taxes. But you have to have the proper documentation, and that isn’t as straightforward as you might think. The proper documentation depends on several factors, including the size of the gift and whether it is in cash. Important Tips for Deducting Charitable Donations Here are some things to keep in mind if you want to deduct a gift to a charitable organization: The organization must qualify…

Going Concern Evaluation Period to Change

How long past the end of the year should a company’s ability to continue as a going concern be considered? Rules for Going Concern Evaluation The current rules say “for a reasonable period of time not to exceed one year beyond the date of the financial statements”. That seems fairly straightforward, but in practice there is a range of views about what that means for going concern. Some suggest that it is “one year beyond the balance sheet date”. Others extend the date out to “one year beyond the audit report date”. Others apply some vague date between the two.…

FASB Approves Private Company Exemption from VIE Model

Many private companies lease property from related parties. Under existing rules, many of the lessee entities have to consolidate the lessor. The most common example is when the owner of an operating company also owns the property in which the company operates. New Rules Avoid Consolidation of Variable Interest Entity The Financial Accounting Standards Board (FASB) has issued new rules (ASU 2014-07a), which allow private companies to avoid consolidation of the Variable Interest Entities (VIE).  Under the new rules, a private company that leases property from a related entity (thru common control) need not consolidate the lessor entity if: Substantially…