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Wednesday, April 29, 2015

Making a Sound Decision in the Selection of an External Auditor

Planning to procure a quality
audit requires time and attention.
Regardless of the type or size of business you are affiliated with—from a small local shop to a large corporation, from a neighborhood health clinic to a major hospital, from a grade school to a university—

an effective audit can improve your operations and possibly yield significant dollar savings.

Selecting a qualified auditor will help you achieve the benefits of an effective audit and help you avoid wasting resources on auditors that aren’t likely to produce a quality audit. If your responsibilities include hiring an independent auditor, do some research first that can help you make a sound decision and get the most for your money.

Companies and public entities should select auditors only after considering the following five basic steps for an effective audit procurement process:

  1. Planning—determining what needs to be done and when
  2. Communicating Audit Requirements and Soliciting Proposals—writing a clear and direct solicitation document and disseminating it widely
  3. Selecting a Qualified Auditor—authorizing a committee of knowledgeable persons to evaluate the ability of prospective auditors to effectively carry out the audit
  4. Writing the Agreement: Documenting Expectations—documenting the expectations of both the entity and the auditor
  5. Monitoring the Audit: Ensuring a Quality Audit—periodically reviewing the progress of the audit.
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Wednesday, April 22, 2015

Why Should I Get an External Audit?

Quality external auditors will take
the time you don't have to go
through your records with a fine-
tooth comb. Protect your company.
Question: What IS an external audit?

External audits are independent, unbiased reviews of your business’s financial records. You usually can contract an accounting or auditing firm to conduct this review. It can be an expensive exercise, but it has its benefits. While you may consider your organization’s controls and records to be flawless, an external third-party review can assure you if that is actually the case.

Three main advantages are outlined as follows:
  1. Identification of Errors: As a business owner, even if you have the expertise to conduct your own audits, the responsibilities of running a business may prevent you from dedicating the time required to seek out errors and omissions in your financial records. An external audit will identify these mistakes and rectify them over the historical data. This, in turn, will provide you with clearer business records and data.
  2. Internal Control Effectiveness: External auditors perform walk-throughs of each of your business processes and verify that approvals and authority checks are in place and working before a transaction lands in your financial records. They also determine that your computer systems perform correctly. This doesn't cover IT functions, but entails a check for controls in your systems to ensure that only authorized personnel perform certain tasks. The external auditor will advise you on how to address any issues they uncover.
  3. Acceptance of Audited Statements: You may require a loan for your small business or a letter of credit to obtain merchandise. Banks and lending companies typically will require that you provide audited and reliable financial statements. Your company's net assets adjusted for goodwill can help you anticipate its current value, which can help you set a price for it, if you are willing to sell it. Similarly, tax authorities may be more willing to place reliance on your calculations for income or sales taxes if you present audited financial statements.
Audited financial statements indicate that you are a responsible business owner who practices transparency in your activities.

These acts of transparency contribute to the goodwill of your business. This can all be used easily to settle accounts, diffuse disputes among partners, and to prevent employees from committing fraud. 

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READ MORE>> yourbusiness.azcentral.com: "What Are the Advantages of An External Audit?

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Wednesday, April 15, 2015

Purchasing an External Audit for Your Non-Profit Organization

Here is how to get the right help
for your nonprofit's finances.
Have you started a nonprofit organization recently? The paperwork can be complicated and lengthy sometimes. The solution to much of this is to hire an external auditor.

With the increasing need for accountability, more and more nonprofits are turning to audit services. 

The accepted method of soliciting bids for auditing services is through a Request for Proposals (RFP). When designing one, keep the following ideas in mind:

  • Describe the organization thoroughly. What is your mission? When were you founded? Are you a 501(c)(3) or some other type of nonprofit? What are your services? Are there special circumstances the auditors should know about (e.g., this is the first financial audit after a merger)? It is not necessary to include a copy of audited financial statements at this stage - you can make them available during pre-proposal interviews - but do include summary financial information such as revenues and their sources and balance sheet data.
  • State what you need. State explicitly what you need the auditing firm to do. Some nonprofits want their auditors to audit the financial statements, complete the tax return(s), and file various financial reports, while others want only the audited financials.
  • Request qualifications. Request that the auditors describe their qualifications to audit your organization. Explicitly link your needs with their qualifications, such as "Must have experience performing OMB A-133 audits."
  • Describe your timetable, decision process, and selection criteria. Detail how you will make your decision, when, and on what basis. A formula with points for various criteria is bureaucratic but probably harmless. Best to be straightforward here. Note: By all rights, the auditors report to the board, so they should be the ultimate decision makers even if staff does most of the work.
  • Select the firms you will send the RFP to. As much as possible, send the RFP to practitioners and firms you know to be skilled in your industry and appropriate providers of service. Be prepared to meet with each candidate in person (if they don't request a personal visit, ask yourself why).
  • Provide enough time for the audit firms to respond. Give plenty of time for all parties concerned to do their jobs - four to eight weeks should work - and plan to put in at least as much time managing the process as any single candidate will in responding to you. Use the process as a management tool.
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Wednesday, April 8, 2015

Help Your Business: Educate Yourself by Learning Tax Law Details for Your State

Get the knowledge you need to
run your business successfully.
Having knowledge of your state tax requirement can help you avoid problems and help your business save money.

The most common types of tax requirements for small business are income taxes and employment taxes.

Income Taxes - Nearly every state levies a business or corporate income tax. Your tax requirement depends on the legal structure of your business. For example, if your business is a Limited Liability Company (LLC), the LLC gets taxed separately from the owners, while sole proprietors report their personal and business income taxes using the same form.

Employment Taxes - In addition to federal employment taxes, business owners with employees are also responsible for paying certain taxes required by the state. All states require payment of state workers' compensation insurance and unemployment insurance taxes. The following states/territories also require a business to pay for temporary disability insurance:
  • California
  • Hawaii
  • New Jersey
  • New York
  • Rhode Island
  • Puerto Rico
        
Follow the link below for state and territory tax resources and to find out more about what you have to do to register and be open for business in your state:
READ MORE >> www.sba.gov (U.S. Small Business Administration): Learn About Your State and Local Tax Obligations

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READ MORE GBC Tax Services Website
For All Your Accounting Needs Call GBC 678-366-9232



Wednesday, March 25, 2015

Small Business Owners View Tax Laws as More Important than Actual Tax Paid

Hiring a Tax Professional will save
your business both time and money.
While most small business owners accept the amount of tax they pay, the paperwork accompanying those taxes and other regulatory requirements can cloud their view of the local business environment. Aside from economic conditions, small business owners' perception of the ease of compliance with licensing, regulatory, and tax regulations is the most important predictor of whether or not they considered a state or city friendly to their firms.

A recent survey asked over 12,000 small business owners to rate the degree to which their state or city was small-business friendly. Then it asked a series of questions about the specific business environment in their state or city. By comparing the answers, it found:

  • The respondents' view of the performance of their state economy relative to the national economy was the most important factor in their rating of small-business friendliness.
  • Those who were aware of training or networking programs offered by their state or local government were significantly more likely to say that their state or city was small-business friendly than those who were not aware such programs existed.
  • While the ability to easily file taxes was an important consideration, the amount of taxes paid was not for the majority of small business owners.

The results are consistent with other research, which finds that policies that assist businesses with licensing, permitting, and tax filing; provide technical assistance to help firms grow; and provide well-targeted job training and education, are much more effective than tax incentives in promoting business development and economic growth.

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Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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Wednesday, March 18, 2015

Determine Whether Your Small Business is A Business or a Hobby for Further Legitimate Deductions

Maximize your deductions during
the next tax season and just watch
as your small business flourishes.
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business.

Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:
  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Does the taxpayer depend on income from the activity?
  • If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
  • Has the taxpayer changed methods of operation to improve profitability?
  • Does the taxpayer or his/her advisers have the knowledge needed to carry on the activity as a successful business?
  • Has the taxpayer made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

If an activity is not for profit, losses from that activity may not be used to offset other income.

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READ MORE >> www.sba.gov (U.S. Small Business Admin): Is It a Business or a Hobby?
Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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