McGowanPRO Professional Liability Blog / Resources / Articles

Many accounting firms have been receiving emails that reference their possible involvement in unlawful income tax activity and include the AICPA logo.  The AICPA has confirmed these emails are not from their office.  They further confirmed that after an extensive check, they are confident their systems have not been compromised.

These emails may be received by CPA’s, non-CPA’s, and members of the general public.

If you receive one of these emails do not open the attachments as they may contain viruses.  For more information, visit the AICPA website

Concern about how long engagement files should be retained is a common issue among Accounting firms.  There is frequently a conflict between the desire to discard older files to free up storage space, and the inherent reluctance to discard documents which contain a detailed record of the work which you have performed. 

There are very few rules established in law for file retention by accountants.  However, this information is intended to help provide some guidance in developing internal record retention standards for your firm.

Read More - Including Sample File Retention Policy and Receipt for Client Records

File Retention - FAQ's

The IRS has introduced new rules for taxation of business and personal use of employer-provided cell phones.  Under the new rules, effective retroactive to January 1, 2010, the cell phone must be provided for non-compensatory business reasons.  The personal use of the cell phone is then nontaxable as a working-condition fringe benefit.

In addition, if an employer requires employees to maintain and use personal cell phones for business purposes, reimbursement of their monthly charges is also tax free.

Example:  Employee pays $39.99/month for an unlimited usage cell phone plan.  Employer requires employees to use their cell phone to contact clients outside of normal office hours.  The employer can reimburse the full $39.99/month and not include this amount in the employee’s income because it is tax free.

The IRS defines non-compensatory business purposes as those that have a substantial business-related reason including, but not limited to:

• The need to contact the employee at all times for work-related emergencies;
• A requirement that an employee be available to speak with clients when the employee is away from the office; and
• The need to speak with clients located in other time zones at times outside of the employee’s normal work day.

Examples of usage that would not be tax free would include excessive charges for international calls when the company has only US based clients.

According to a recent report by the Georgia Tech Information Security Center, Emerging Cyber Threats Report 2012, Cyber threats against personal information [data] continues to evolve.  We will see advances in the sophistication and implementation of attacks in the near future.

As a professional who maintains personally identifiable information (PII) of your clients it is essential to be aware of these new and emerging threats, and take possible steps to safeguard your data.

Some of the areas cited in the report include:

• Mobile Phones / browsers. 

There are currently four billion mobile phones in use around the world and mobile Internet is expected to outpace desktop Internet usage by 2014 (http://www.digitalbuzzblog.com/2011-mobile-statistics-stats-facts-marketing-infographic/ ).  Characteristics of mobile browsers create a new platform to introduce threats to data, as well as, potentially bypass existing firewalls and other security measures.

•  Botnets

Botnets have been around for a long time but they continue to evolve.  PII is big business and this means increasingly sophisticated processes to access information.  Botnets have gone from targeting small pieces of data to creating complex demographic models that can potentially be sold into legitimate markets.

• Online Information

We live in the digital world and more business and personal interaction is transacted online than ever before.  Marketers continue to expand the way our personal information is utilized to “control” our online experiences.  In addition, attackers are now capitalizing on search engine optimization (SEO) to increase rankings and, therefore, credibility.

• Technology Advances

Advances in technology that enhance the way we conduct business also increase our potential exposure.  Cloud computing creates new exposures that were previously addressed through physical servers.  However, human error, education, and weak passwords continue to create the most vulnerability.

You can read the whole report here.  It is not necessarily possible to understand all of the exposures created through enhancements in technology.  However, broader education creates awareness to avoid potential disasters.

If you have not already, download NAPLIA’s recent White Paper on Information Security: Essential Steps to Protecting your Practice.

NAPLIA is pleased to introduce our newest White Paper:

Responding to Subpoenas and Summonses: An Accountants Guide for Understanding & Response

A claim of malpractice is not the only exposure faced by accounting firms.  The nature of accounting services creates several scenarios where accounting firms are consistently engaged with the judicial system because of the lawsuits and investigations that confront their clients.

The intent of this White Paper is to:

• Distinguish between "simple" and "complex" subpoenas.
• Provide a framework to understand the subpoena process and create an appropriate internal process for response.
• Identify "Complicating Factors" that may impact the response process.
• Understand when to retain counsel, and when a subpoena is likely to evolve into a claim.

Download NAPLIA's White Paper on Responding to Subpoenas and Summonses Now.

Congratulations to long-time NAPLIA friend, Rita Keller, for being named to Accounting Today's 100 Most Influential People.

Rita Keller and NAPLIA Partner, Stephen Vono

Rita is a Social Media maven who brings her high energy and fresh ideas to CPA Firm Management.  She is a well respected speaker across industry conferences and we recommend keeping up with her through her blog and/or facebook page.

We commend Rita on her ideas of challenging the status-quo and bringing fresh insight to CPA Firm Management.

More from Rita:

Do your professionals know what to do when a client is unhappy?

We hate to take space to blow our own horn, but we at NAPLIA are extremely proud to be recognized for the fourth consecutive year as one of the fastest growing private companies in America.

http://www.naplia.com/Naplia/inc500.html

What does this mean for you?

You can be confident that you are working with a nationally recognized company that has been successful through our dedication and service to our clients.  We like to think we are changing the way professionals buy insurance.

NAPLIA is committed to providing you with a better buying experience for your Professional Insurance by:

• Providing Choice
• Providing Education & Resources
• Providing Experience & Expertise
• Providing Quality Service

Backed by a track record of success and national recognition.  We can confidently say that "no national agent can match our personal service, and no local agent can match our national recognition".

Contact us today for more information about your professional liability insurance, errors & omissions, or other professional insurance needs!

As a provider to professional service firms, we continue to see an alarming increase in employee related fraud claims.

Although these claims are not limited to a particular size of firm, small companies can be especially effected by theft and embezzlement because they can’t afford extensive safeguards and aren’t large enough to absorb losses. Consider too, your Office Package policy (BOP) likely does not provide coverage if the theft is of your client funds, or if the theft is by a third party (non employee). 

The increasing trend in workplace fraud and the relatively low cost of these policies, makes Employee Dishonesty Insurance a coverage that we recommend highly to each of our clients.  Here are more compelling reasons to consider this coverage:

Fraud & Embezzlement is on the rise

According to the Association of Certified Fraud Examiners (ACFE), business losses from fraud and embezzlement exceed $400 billion per year.

It can happen to you

Most employers have a hard time imagining their employees stealing from them, but the reality is many businesses suffer significant financial loss at the hands of long-time trusted employees.

Coverage for your client’s funds

For most (accounting & financial) firms, your exposure is not your own assets, but those funds which you have control of for your clients.

Employee dishonesty policies can provide coverage for theft (by your employees) of client funds in your control.

Crime Coverage

In addition, Employee Dishonesty offers optional crime coverage for theft of your property by non-employees such as forgery, burglary, robbery, and computer fraud.

Automatic ERISA Bond Coverage

Many of the Employee Dishonesty policies that we offer include ERISA Bond coverage.  This eliminates your need to maintain a stand-alone ERISA bond.

Employee Dishonesty Insurance protects the employer (you) from financial loss due to the fraudulent activities of your employees.

More Employee Dishonesty FAQ's

More Information

CPAs cannot practice in any area that falls under the purview of “the law.” It is prohibited. Therefore, it is important for CPAs to identify the boundaries established for the practice of law in those areas where CPAs might find themselves working, whether on their own or in collaboration with counsel. A clear understanding of this boundary can keep a practitioner away from a particularly nasty form of trouble, the unauthorized practice of law. A clear understanding of the demarcation can help facilitate collaboration and strategic alliances between attorneys and CPAs that best serve their clients.

Read the full article by Jonathan S. Ziss, JD, partner with Goldberg Segalla LLP in Philadelphia