Weinberg & Company

       Certified Public Accountants

SIMPLY STATED

NOVEMBER  2014

REGULATIONS DROVE AUDIT FEES HIGHER
Regulatory oversight and inflation have played significant roles in the rise in fees U.S. companies paid in 2013 to external auditors, according to new research by Financial Executives International and reported in the Journal of Accountancy.The 87 public companies participating in the survey reported an average rise in audit fees of 4.5% over the previous year, and paid an average of $7.1 million in audit fees. The 104 private company respondents said their audit fees increased an average of 3.7% over the previous year and reported spending an average of $174,858 for their audits.Public company respondents said their increase in audit fees was primarily the result of the review of manual controls resulting from PCAOB inspections, as well as other PCAOB issues.Many clients of the larger audit firms are experiencing an increase in audit fees as these firms try to comply with increased PCAOB scrutiny during the inspection process, according to Weinberg & Company Managing Partner Corey Fischer. “This is particularly true for the 404 audits being performed in accordance with the Sarbanes-Oxley Act of 2002, as well as in key audit areas such as revenue testing,” he said. “The cost of compliance for public companies continues to rise each year as regulators and the PCAOB continue to emphasize increased testing through the results of their inspection process.”The survey found the cost of complying with Section 404 of the Sarbanes-Oxley Act increased within the past three years for 57% of the public company respondents.

SEC ENFORCEMENTS SET RECORD

The SEC announced that it filed a record 755 enforcement actions totaling $4.16 billion in disgorgement and penalties in fiscal year 2014. The agency filed 686 enforcement actions totaling $3.4 billion in fiscal year 2013, and 734 enforcement actions totaling $3.1 billion in fiscal year 2012.

Most (135 actions) were for violations relating to reporting and disclosure. Other actions involved violations to the market access rule and the “pay-to-play” rule for investment advisers; an emergency action to halt a municipal bond fund offering; and an action for whistleblower retaliation.SEC Chair Mary Jo White attributed the record enforcement actions to her agency’s “enhanced use of data and quantitative analysis.” In 2013, the SEC began using data analysis through its Accounting Quality Model tool to identify anomalies in companies’ financial reporting that merit closer inspection.

WHISTLEBLOWER TO GET $30 MILLION

If, as expected, the SEC pays $30 million to a whistleblower, it will set a new record – more than double the previous payout. The informant who lives abroad apparently provided valuable information that helped the SEC successfully prosecute an enforcement action. The SEC will not disclose the whistleblower’s name.

The whistleblower program allows the SEC to pay for “high-quality, original information” that results in SEC enforcement actions with sanctions over $1 million. The reward money is financed through sanctions paid to the SEC by securities law violators. Whistleblowers can receive 10% to 30% of the money collected in a case.

TAX REFUND ID THEFT 
Stealing tax refunds through identity theft is “no longer exploding,” according to Internal Revenue Service Commissioner John Koskinen.The Treasury Inspector General reported that the IRS issued $3.6 billion in potentially fraudulent tax refunds for tax year 2011, down from $5.2 billion in 2010.Bloomberg News reported that Mr. Koskinen credited the reduction in crime to aggressive prosecutions, actions by Congress to remove some information from the public domain, and coordination with prison officials to stop inmates’ schemes. “The government’s work,” he said, “has stopped most “amateurs.”"It appears the IRS is finally making progress in stopping this rapidly escalating crime,” says Weinberg’s Director of Tax, Jeffrey Engler. “The easiest way for taxpayers to protect themselves is to file their tax returns early. The IRS is going to issue only one refund, so you want to be first to file,” he added.

IRS FINALIZES RULES ON LOCAL LODGING EXPENSES 
Expenses paid or incurred for lodging of an individual who is not traveling away from home (local lodging) generally are nondeductible by the individual under section 262(a). Under certain circumstances, however, local lodging expenses may be deductible under section 162(a) as ordinary and necessary expenses paid or incurred in connection with carrying on a taxpayer’s trade or business, including a trade or business as an employee.The IRS has finalized rules originally put into effect in 2012 allowing employees to deduct certain expenses paid or incurred for local lodging as business expenses.To be deductible, local lodging expenses must meet a facts-and-circumstances test under Regs. Sec. 1.162-32(a) or qualify for a safe harbor under Regs. Sec. 1.162-32(b). Local lodging expenses paid by an employer on behalf of an employee may be deductible under Sec. 132 as a working condition fringe benefit if they meet the new tests.Under the safe harbor, local lodging expenses will be treated as an ordinary and necessary business expense if:

  •   The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function;
  •    The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter;
  •    If the individual is an employee, the employer requires the employee to remain at the activity or function overnight; and
  •    The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

WEINBERG & COMPANY NEWS 
Weinberg & Company announced that it will again be sponsoring the LD Micro Conference scheduled for December 2-4, 2014 at the Luxe Hotel in Los Angeles. The 3-day event will feature 240 presenting companies.
WEINBERG & COMPANY

Simply the right choice

Weinberg & Company is a leading, international, full service, multi-office CPA firm serving clients throughout the United States and the Pacific Rim. Founded over two decades ago, the practice groups include: Assurance and Audit, Tax and Accounting, and Advisory Services. Weinberg has a depth of knowledge and experience to meet the needs of both public and privately held companies, high net worth individuals, entrepreneurs, family offices, and can provide customized business management services. www.weinbergla.com

1925 Century Park East, Suite 1120  

Los Angeles, CA 90067

(310) 601-2200

6100 Glades Road, Suite 205

Boca Raton, FL 33434

(561) 487-5765  

Room 2109, 21/F, Shui On Centre

6-8 Harbour Road, Wanchai, Hong Kong P.R.C.

DISCLAIMER:
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
Quick Links

Corey Fischer
Firm Managing Partner

310-601-2200

CoreyF@weinbergla.com

Bruce Weinberg
Florida Managing Partner

561-487-5765
BruceW@cpaweinberg.com

Jeffrey B. Engler

Director of Tax,
Los Angeles 

310-601-2200
JeffreyE@weinbergla.com

________________________

SERVICES

Assurance & Audit
Tax & Accounting
Consulting
Private Client
Business Management

INDUSTRY EXPERTISE 

Consumer Goods
Apparel
Distribution
Leisure Time Industries
Life Sciences
Media & Entertainment
Manufacturing
Real Estate
Technology
______________________

To show sotck chart