All Posts by Charles Hall

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About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.

Solo Accountant or Partnership
Mar 07

Solo Accountant or a Partnership: Which is Best?

By Charles Hall | Accounting and Auditing

Solo accountant or partnership. Which is best? Today we tackle this question.

We all live with fear, but accountants have their own variety. I think back on my college years and the wondering about how my life and career would unfold. And I wanted—really wanted—to see the future, but could not. 

At twenty-one, I would have given a prince’s sum for a crystal ball. But even if the seer’s tool existed, I had no money. So I ventured out, hands extended in darkness, hoping things would go well. And why did I desire to know the future? To avoid mistakes. To lessen my fear. But mistakes—not crystal balls—are how you learn.

Through the years, my career evolved blandly, though with a few jerks and screams (I had a brain tumor; shortly after that, my son has born with cystic fibrosis). But, overall, my work life has unfolded—like most—day by day.

My First Job

In the early days of my first job, I realized how little I knew, though I had a masters degree in accounting. Like a new golfer, I felt—and looked—awkward. My college professors trained me well, but I was still a duffer. I muddled my way through the first year, little realizing how much I was learning—and not understanding my firm was doing me a favor. They were paying me to learn. (You only get this perspective—later—when you are an employer.)

Solo Accountant or Partnership
One year into public accounting, the lights came on.
I finally hit shots like a real accountant. I finally felt normal. I finally moved more naturally. But after three years in my junior role, another firm came calling, asking me to move. They offered more money and more opportunity, so I ventured out.

My Second Job

My second job was more of an apprenticeship. My boss mentored and trained me. He allowed me to assume responsibility. I think you could say this is where I came into my own. But even though I liked my boss, we had disagreements. He promised one thing but delivered another. I found myself doing most of the work with no movement to the promised position. My boss was a good man, but at age 68, it was obvious, he had no desire to retire (though that was the agreement).

So, I left with no job. (I know. Not smart, huh?) This was quite scary, especially when you have two children and a wife at home—in other words, no other income. What did I do? I hung my shingle. 

Solo Accountant

In those years, I had my greatest joys and fears. To go from nothing to something was like climbing a mountain. And I am not the adventuresome type. In the early days, there was no cash flow—and I mean none. I recall, like a scene from a Charles Dickens’ story, nights of soup and bread. And much of the time, I had this deep sense of fear. Nevertheless, I survived and—at times—even thrived.  

The joy of owning my own firm came in the freedom to come and go as I pleased, to do what I wanted—and when I wanted. But freedom comes with baggage. Namely, overhead, unsteady cash flows, and legal exposure. Even so, the freedom to make my own decisions was a breath of fresh air. If I wanted to pursue a new strategy, I did so. If I wanted to leave work early, I left. If I wanted to buy a new computer, I bought it. No committees. No boss. No one was telling me what I could or could not do. It was nice.

But in working alone, I learned a few things about myself. I love freedom, but I hate fear. I also found that I am more productive in a group environment. Why? Accountability. Additionally, I discovered I need more wisdom than I (alone) possess. As much as I hate to admit it (call it pride), I need a group of people. 

Partnership

So, for most of my career, partnerships have been my work environment of choice. I like steady paychecks. I enjoy having answers to my questions just down the hallway.

The wisdom of partnerships is a beautiful thing. The Bible provides this word: 

Plans fail for lack of counsel, but with any advisors, they succeed. Proverbs 15:22

I can’t count the times I have seen problems surface—seemingly—with no answer, but then, in a partnership meeting, ideas, disagreements, thoughts are tossed around. And in the end, there is an answer. Creative, wise, sound.

Multiple perspectives meld together to provide insight, a wisdom much greater than my own. But submission is necessary to be a part of a partnership. And I think that’s hard for most people, including me. And while I desire to do as I please, the power of the group is real. People working together often achieve what individuals cannot.   

Solo Accountant or Partnership – Which Do You Prefer?

So, which is best? Solo Accountant or partnership?

In the end, the decision to work alone or in a group is a personal decision based on our own bents. Some people work better by themselves and want freedom more than anything. I get that. Others find success in a partnership. So which are you? One who likes to work alone or one who loves a group? What makes you the way you are?

For additional insights, check out my post: What I Wish I had Known About Public Accounting.

Debt issuance cost
Mar 05

Debt Issuance Costs: New Parking Place

By Charles Hall | Accounting

Debt issuance costs have a new parking place. For some time now, such costs were booked as a deferred charge (an asset). Now, these cost will be netted with the related debt

This change is required by Accounting Standards Update No. 2015-03, Interest – Imputation of Interest, Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30).

If you have not already done so, you need to adopt this standard for years ending December 31, 2016. This is a change in accounting principle.

Debt issuance cost

Accounting for Debt Issuance Costs

ASU 2015-03 (ASC 835-30) states the following (bold emphasis mine):

To simplify the presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts.

(This article addresses accounting for nongovernmental entities. Debt issuance costs for governments are expensed as incurred.)

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Ten Technology Tips for Accountants
Mar 02

Top 10 Technology Tips for Accountants

By Charles Hall | Technology

Are you looking for technology tips for accountants? Here are ten tips that will make you more productive.

Ten Technology Tips for Accountants

Ten Technology Tips for Accountants

Here are my top ten technology tips in no certain order (with links to prior blog posts).

  1. Use Notability to take notes.
  2. Use Office 365 to jointly create Word or Excel documents with others.
  3. Use Basecamp to manage projects (such as audits).
  4. Use Scanbot as your phone scanner.
  5. Use a Livescribe pen to take notes with audio.
  6. Use Evernote as your personal digital library.
  7. Travel light as a minimalist auditor.
  8. Use your cell phone in creative ways as an accountant.
  9. Use technology to save your life.
  10. Use technology to make your office work life more efficient.

Those are my ideas. What are yours?

Also, here are Eight Ways to Increase Your Efficiency and Productivity as a CPA.

Accounting problem
Feb 28

How to Solve Accounting Problems Quickly

By Charles Hall | Accounting

Do you ever need to solve accounting problems quickly?

I often hear the words, “Hey Charles, I’ve got a quick question,” and they launch into their issue, hopeful I can look into my crystal ball and give them an answer. As it turns out, I do have one. I keep it on my desktop. You probably have one too.

Most CPAs, when confronted with an accounting Gordian Knot, begin their quest to cut through the problem with their mighty sword–the GAAP Guide. Ah, an excellent choice for sure, but is it the best place to start? Or how about the granddaddy of them all? The FASB Codification. Another fine choice, but it’s an 800-pound gorilla. So where’s the best place to start? The crystal ball.

Accounting problem

And what is the crystal ball? It’s your disclosure checklist.

You say, “but it’s just a laundry list of accounting requirements.” Yes, but it’s a great pointer (to answers).

To solve accounting problems quickly, do a word search in your disclosure checklist. My checklist is in Word, so I use the find feature (click control, find) to locate a keyword. Try to use a unique word where possible–such as noninterest or contingent. You may have to click next a few times to locate the relevant text. Once you find the relevant text, the pathway to your solution lies before you: the checklist provides you with the applicable FASB Codification ASC section (e.g., 850-10-50-5). You can key the number in the FASB Codification or your research library to find your answer.

Now you can provide a quick answer to that difficult question (and look like a genius). When your peers ask, “How did you find the answer so quickly?” Tell them, “My crystal ball.”

Confirmation of receivables
Feb 08

Confirmation of Receivables: Is It Required?

By Charles Hall | Auditing

When is the confirmation of receivables required?

Confirmation of receivablesConfirmation of Receivables is Usually Required

AU-C 330 paragraph 20 states the following:

The auditor should use external confirmation procedures for accounts receivable, except when one or more of the following is applicable:

  1. The overall account balance is immaterial.
  2. External confirmation procedures for accounts receivable would be ineffective.
  3. The auditor’s assessed level of risk of material misstatement at the relevant assertion level is low, and the other planned substantive procedures address the assessed risk. In many situations, the use of external confirmation procedures for accounts receivable and the performance of other substantive procedures are necessary to reduce the assessed risk of material misstatement to an acceptably low level.

If receivables are material and confirmation procedures will be effective, then confirmations must be sent. (Normally, the existence assertion related to receivables is moderate to high. So, 3. above is not in play.)

When are Confirmations Ineffective?

AU-C 330.A56 states:

External confirmation procedures may be ineffective when based on prior years’ audit experience or experience with similar entities:

  • response rates to properly designed confirmation requests will be inadequate; or
  • responses are known or expected to be unreliable.

If the auditor has experienced poor response rates to properly designed confirmation requests in prior audits, the auditor may instead consider changing the manner in which the confirmation process is performed, with the objective of increasing the response rates or may consider obtaining audit evidence from other sources.

Alternative Procedures When Confirmations are not Sent

What audit procedure should be performed if confirmations are not sent? Usually, the auditor will examine cash collections after the period-end. Care must be taken to ensure that the subsequent collections examined relate to receivables that existed at period-end and not to sales occurring after period-end.

Required Documentation When Confirmations are not Sent

AU-C 330.31 states that “the auditor should include in the audit documentation the basis for any determination not to use external confirmation procedures for accounts receivable when the account balance is material.” So, it is not sufficient to simply state that the use of confirmations is ineffective. We should state that we tried to confirm receivables in a prior year without effective results or that we tried to confirm receivables for clients in a similar industry, but without effective results.

The auditor should include a memo to the file or add comments on the receivables work paper explaining why confirmations were not sent.

See my post: Auditing Receivables and Revenues.

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