What constitutes good supervision in a CPA firm? What are the characteristics of a good supervisor? Is supervision necessary on small audits? How much is necessary? When and how should it occur? In this and some blogs that follow, we’ll explore the what, when, where and how’s of effective supervision and review.

In some CPA firms, the most common method of assigning people to accounting and auditing engagements is, out of necessity, to use whoever is available. This may or may not satisfy the requirements of professional standards and it usually doesn’t maximize engagement profitability. Here are two applicable professional standards:
• SQCS No. 7, Human Resources Section—Assign personnel based on the knowledge, skills, and abilities required in the circumstances and the nature and extent of supervision needed.

ASU 2009-06 – Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities (ASU 2009-06) was issued to address three issues concerning uncertainty in income taxes and nonpublic entities.

I think the most important clarification from this ASU is that tax-exempt not-for-profit entities need to disclose:

1.The total amount of interest and penalties recognized in the income statement and the balance sheet.
2.The details of any tax position that will significantly increase or decrease within twelve months of the reporting date.

As I noted in my last post, it's difficult to argue that there should be any material differences in the portrayal of the same economic situation among reporting entities in different countries. Consequently, for general-purpose financial reporting, it makes sense for similar reporting entities throughout the world to use the same set of high-quality standards. But having researched this situation for years, one thing is clear to me: neither U.S. GAAP nor International Financial Reporting Standards (IFRS) are feasible candidates for the single, global set of standards that would most benefit individuals, companies, and countries.

You probably know that whether we get a loan or credit card, and the interest rate that debt carries, is largely determined by our credit score. What you may not know is that recent actions by banks may have reduced your credit score even if you carry a reasonable amount of debt and always pay on time.

Jeff was assigned at the last minute to be my assistant on a large audit. He was new, lacked some basic skills and had no orientation training. Most importantly, he couldn’t operate a ten-key adder by touch! I learned this about Jeff when I observed him adding several columns on hard-copy documents, one key at a time! Since I couldn’t get a replacement, Jeff’s on-the-job training (OJT) to correct his lack of basic skills became my budget overrun!

Arriving for my first day of work on my first job in public accounting a partner took me to a client’s office to begin an audit. After seating me in the conference room, he stacked several large journals and ledgers and many bank statements on the table in front of me. As he left for another appointment he told me to prepare a “proof of cash” while he was gone. Not remembering that term from college Audit 101, I began to search the client records trying to find a proof of cash! When the partner returned several hours later I was still searching!

I love to go to conferences. I don’t particularly enjoying sitting in an uncomfortable chair for eight hours with limited breaks, but I do enjoy the excitement of going places.

I try to plan my flights, so that I arrive in the early afternoon on the day before the conference. This gives me time to sight-see and shop.

Accounting Standard Update 2009-05 – Measuring Liabilities at Fair Value (ASU 2009-05) is an update of FASC 820 – Fair Value Measurements (FASC 820). This ASU was issued in response to the credit crisis and will reduce potential differences in measuring liabilities at fair value and thus promote comparability of companies’ financial statements. This update is effective for fiscal periods (including interim periods) beginning after its issuance. For calendar year companies, it would be effective for the 4th quarter of 2009. Just in time for the annual 10K filing.

A CPA firm’s staff training goal should be to improve the performance of its personnel to increase engagement and firm profitability. Someone said it this way, “We’ve got to spend money to make money.” I like to say it my way, “We’ve got to spend money THE RIGHT WAY to make money.” Here are four of those right ways:

• Practically-designed orientation training.
• Regular in-firm group training.
• Out-of-house CPE.
• On-the-job training.