Monthly Archives: May 2018

Deadline Coming Soon

Category : Blog , sccm


An important deadline for not-for-profit organizations is coming. The IRS is reminding tax-exempt organizations to file their annual information returns (Form 990, “Return of Organization Exempt from Income Tax”) by May 15, or risk having their federal tax-exempt status revoked. The IRS also cautions tax-exempts to exclude unneeded personal information, such as Social Security numbers, where possible. The exact form that’s required to be filed depends on the gross receipts, total assets, and type of organization. For more details, see https://bit.ly/2Ica8AQ.


Effectively communicating with the audit committee

Category : Blog , sccm

CFOs and other executives occasionally present information about the company’s operations, strategies and risks to the audit committee. Your presentation will generally be most effective if you fully understand the committee’s role, you’ve already established relationships with committee members and you focus on the most relevant information. Here’s how.

The audit committee’s role

Audit committees act as gatekeepers over financial reporting. This means overseeing the accounting and financial reporting process.

In addition, the audit committee pays close attention to how a company manages risk and ensures compliance with relevant laws and regulations. The committee also evaluates whether the company’s control environment — including its internal and external audit processes — are effective.

Bridge building

With so much on their plate, the audit committee needs clear and concise reports and presentations that provide insight over raw data. To ensure your presentation resonates with committee members, ask for pointers from other executives who have experience presenting to the committee.

It’s also a good idea to learn about the background of each committee member by reviewing their employment history, board appointments, and previous speeches or articles. Try to schedule time with the committee chair to establish a relationship and learn what matters the most to the committee. Time permitting, and with the approval of the chair, you can meet with each member of the committee to learn and address their concerns during your presentation.

Focused attention

Throughout your presentation, focus on the critical issues that require input from audit committee members. Save the details for the written materials submitted to members prior to the meeting.

The goal of written or verbal communication is to help committee members improve their understanding of the issues that fall within the scope of the committee’s responsibilities. To achieve this goal, provide sufficient detail to educate them, but avoid minutiae. Anticipate the type of questions committee members might ask — and, if you receive a question you can’t answer with confidence, follow up later with a timely, relevant response.

Immediately after your presentation, document what you learned, including individual committee member reactions and areas of interest. Doing so can help you prepare for the next presentation.

Team effort

An educated audit committee is an effective audit committee. Our team of external auditors is experienced in communicating with audit committee members about financial reporting matters and internal controls. If you’re unsure how to connect with members of your audit committee, we can help you tailor your communications.

© 2018


Tax Cuts and Jobs Act

Category : Blog , sccm





As you know, the Tax Cuts and Jobs Act (TCJA) made many changes to the federal income tax law. Personal income tax rates are now lower. Personal exemptions have been eliminated. The standard deduction has nearly doubled. The law also affected state payroll taxes in several ways. Many states are currently addressing TCJA changes in their budgets. So far, states that revised their withholding tables in response to the TCJA include Colorado, Idaho, Louisiana, Missouri, North Dakota, Oregon and Utah. Contact us if you have questions about these changes.


Profits: How low can you go?

Category : Blog , sccm

If your profits are falling compared to revenue and assets, your financial statements may provide insight into what’s happening and how to improve your performance.

Watch for red flags

As you sell more and invest in additional assets, profits should, in theory, increase by a proportionate amount. However, that’s not always the case. Ratios to watch for a decline include:

  • Gross profit [(revenue – cost of sales) / revenue],
  • Net profit margin (net income / revenue), and
  • Return on assets (earnings before tax / total assets).

For all three profitability ratios, look at two key elements: changes between accounting periods and differences from industry averages.

Identify possible causes

If these ratios are declining, it’s important to find the cause. If the whole industry is suffering, the decline is likely part of an external trend. If the industry is healthy, yet a company’s margins are falling, perhaps management has lost its control of costs ? or maybe vendor or receivables fraud is to blame. To find the root cause, it’s often helpful to study the main components of the income statement.

Revenue. If the top line (gross sales or revenue) has declined, your overall profit margin will fall because there is less revenue to spread fixed costs over. To determine if this trend is company-specific or industrywide, look at revenue trends of public companies in the same industry. Also, monitor trade publications, trade associations and relevant online sources for information.

Cost of goods sold. This category of expenses is a function of raw materials, labor and overhead elements. Direct materials and labor should be controllable and historically represent a consistent percentage of revenue.

Overhead is mostly fixed and shouldn’t significantly increase unless the company has made changes (for example, purchased new equipment, changed its depreciation policy, or relocated its production facility). Examine those elements to determine whether overhead is increasing or decreasing and how the ebb and flow applies to the gross margin, which is simply revenue minus cost of goods sold.

Selling and administrative costs. Check whether selling and administrative cost items increased significantly. This section of the income statement can also be revealing if you’re trying to determine whether a profit margin decline arose from deteriorating industry conditions or weak management.

Find clues in your financials

Need help solving the mystery of your disappearing profits? Our auditors can use your financial statements to help compute financial statement ratios, identify problem areas and find solutions to get your performance back on track.

© 2018


Profits: How low can you go?

Category : Blog , sccm

If your profits are falling compared to revenue and assets, your financial statements may provide insight into what’s happening and how to improve your performance.

Watch for red flags

As you sell more and invest in additional assets, profits should, in theory, increase by a proportionate amount. However, that’s not always the case. Ratios to watch for a decline include:

  • Gross profit [(revenue – cost of sales) / revenue],
  • Net profit margin (net income / revenue), and
  • Return on assets (earnings before tax / total assets).

For all three profitability ratios, look at two key elements: changes between accounting periods and differences from industry averages.

Identify possible causes

If these ratios are declining, it’s important to find the cause. If the whole industry is suffering, the decline is likely part of an external trend. If the industry is healthy, yet a company’s margins are falling, perhaps management has lost its control of costs ? or maybe vendor or receivables fraud is to blame. To find the root cause, it’s often helpful to study the main components of the income statement.

Revenue. If the top line (gross sales or revenue) has declined, your overall profit margin will fall because there is less revenue to spread fixed costs over. To determine if this trend is company-specific or industrywide, look at revenue trends of public companies in the same industry. Also, monitor trade publications, trade associations and relevant online sources for information.

Cost of goods sold. This category of expenses is a function of raw materials, labor and overhead elements. Direct materials and labor should be controllable and historically represent a consistent percentage of revenue.

Overhead is mostly fixed and shouldn’t significantly increase unless the company has made changes (for example, purchased new equipment, changed its depreciation policy, or relocated its production facility). Examine those elements to determine whether overhead is increasing or decreasing and how the ebb and flow applies to the gross margin, which is simply revenue minus cost of goods sold.

Selling and administrative costs. Check whether selling and administrative cost items increased significantly. This section of the income statement can also be revealing if you’re trying to determine whether a profit margin decline arose from deteriorating industry conditions or weak management.

Find clues in your financials

Need help solving the mystery of your disappearing profits? Our auditors can use your financial statements to help compute financial statement ratios, identify problem areas and find solutions to get your performance back on track.

© 2018