In recent months, the world has changed dramatically. At the beginning of the year 2020, the CPAs were excited about easy buy sessions after dealing with job act and tax cuts last year. The financial markets appeared to be very smooth and at an all-time high. But, after COVID-19, the hospitality and travel industries were faced with a lot of difficulties. Also, the commerce has declined, most of the Americans are under the employees and owners of the CPA firms, to work from home. The existing practice areas may be affected to navigate the challenging times. While most of the companies focused on the direct pandemic challenges to overcome, there are many more indirect impacts such services of the CPA firms or state of the economy have potential long-term liabilities. One can overcome the challenges by having good knowledge of the
CPA course in India.
Attest and Audit Services:
Before COVID-19, the risk assessment and complete planning procedures didn't address the risk in general. Also, the new circumstances arose for the reassessment of modifications to the firm's approach. The CPA firms should consider how the pandemic impact on the business of clients, especially on the financial statement that requires estimation and judgments like revenue recognition and asset valuations. Besides, the disclosures like modifications to the firms, risk, uncertainties. Suppose, if the business of the client falls, then investors and lenders may blame the CPA firms, especially for the investment of the loss to detect the financial misstatements.
For the coming years, accommodations may be required for the clients; then it may be considered as safe for the physical inventories to be performed virtually. If the team and client are working remotely, then you might get a question, how the evidence gathered? The assess engagement plans determine the professional standards. Enquire the modifications with clients as the realization to impact more.
While estimating the tax payments, the deadlines may be extended for many tax returns; also, they have not spread much in a complicated filing that is in constant flux. Be careful of due dates that have been changed with the clients to return the files on time. If that process is not considered, then there's a chance of blaming the Certified Public Accountants for late penalties. Concerning the AICPA, the federal due dates are updated for the pandemic relief. Besides, the AICPA has summarized all the state filing deadlines. Perhaps now, a docker system is the best tool to keep track of the deadlines not to be missed. One must have to update it before payment relief date and have to file it and continue to make the same pattern before the additional changes are announced.
Most of the firms, including tax consulting and consulting projects modified to enable the clients for the cash flow to conserve. We have to address the consulting status engagements with the client detailing modifications to more scope. This often happens, if in case the services are postponed or temporarily halted with the client.
Revisit existing engagement letters:
By reviewing the existing letters, there will be an accurate agreement between the client and the firm. One should plan the work products and due dates to be updated. Doubting the service scope requires clarification and modification to ensure CPA firm's limits and responsibilities to outline in the letter. For example, when the services of tax compliance are delivered, then the engagement letters include limited tax planning which may be interpreted about relief opportunities. It's essential to have clarity among the firm and client.
Collection activity and monitor billing:
In this pandemic time, many clients are struggling to continue in paying the invoices, which includes CPA firms. Identify the cash flow problem in the client list. Besides, discuss the requirements and payment alternatives to continue the services. Monitor and emphasize timely billing. Often, the invoices are likely to collect the client's memory services, and those must be fresh. If a client falls, then the agreement cannot be reached.
Respond to the lenders' request:
As we know the economic stability is becoming very less, the lenders may become aggressive in requiring certain information of the CPAs like the impact of Coronavirus on the business of a client, when the credit is extended. In general, it's not recommended or appropriate to respond to the requests.
New service requests:
The business environment changes, expansion of existing business have been shifted. Confusing the choices and clients face complex may have both long-term and short term consequences. To add chaos clarity, most of the CPAs grappled with navigating incentives, for creating new opportunities for CPA firms which will introduce the corresponding risk.
Various activities are taken by the state and federal governments, especially under the act of Economic security and relief cares.
- Evaluating the loan programs which were governed by the small business administration of the U.S to provide more benefits to the clients.
- Amending the tax returns for the reflection of changes and to operate net loss.
- As per the usage of funds, the protection of the Paycheck program was created by the act.
Considerations of Risk Management:
Fortunately, when the specific services were requested there are certain methods in migrating the tasks which include Engagement letters, Client acceptance, Engagement objectives, CPA firm responsibilities, Client responsibilities, Risk allocation provisions.
Let's discuss each migrating tasks:
CPAs can leverage consulting engagement or existing tax to modify for the specific meetings.
Clients may understand the responsibilities to implement recommendations and to make management decisions which were made by the CPA. One thing must be in consideration is the client should be able to pay the services and have to expertise competently. But, the CARES act is in infancy and unclear untimely.
One should be specific in services providing which are not in scope. What are amended tax forms and so on? The CPA firm should advise concerning the loan programs for a specific application.
CPA firm responsibilities:
Often, the new services are related to inspired activities which are of consulting service form. Make sure to understand the role of the CPA firm, which is limited to recommendations and advice to the CPAs.
Risk allocation provisions:
The CPAs must consider the risk allocations like indemnification, hold-harmless, or provisions of loss-limitation for migrating the risk of the CPA firm. All the provisions are essential to the present environment.
It's an uncertain time for all the CPA firms; at this time, the CPAs need to be informed and vigilant, to be adaptable and flexible in the time changing response. One must have to take precautions to rise as a healthy economic recovery. I hope the above article helps you.
Anji Velagana is the Content Strategist at Simandhar Education and has 2 years of experience in content writing and blogging. He loves pursuing excellence through writing and has a passion for technology & educational content. Contact him on LinkedIn.