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Berdon Blogs Milestone, Management Letters Can Reveal Problems

Kayte Steinert-Threlkeld 09.13.2016 | Evisor

Berdon Blogs Reach One-Year Milestone

Since launching three blogs in September 2015, Berdon LLP has published more than 150 blog posts on general tax issues, state and local tax issues, and trust and estate (T&E)  issues.  At an average of 350-450 words per blog, that's more than 55,000 words, enough information for a book.

These short pieces on hot topics are designed to stimulate thought among our readers or to trigger a concern, should an issue hit particularly close to home. Brief as they are, they are not intended to provide complete answers or tax advice.

The blogs and their dedicated authors include: Tax Talk by Hal Zemel, CPA, J.D., LL.M.; SALT Talk by Wayne Berkowitz, CPA, J.D., LL.M.; and T&E Talk by Scott Ditman, CPA/ PFS.  Contact information for each of these partners is provided at the end of each blog post should you have an immediate question or concern to address with them.

Though readership between the blogs is fairly consistent, the single most popular blog post over the past year was a December 2015 post from Ditman entitled Charitable IRA Rollovers Extended Permanently.  Other popular T&E posts address issues of updating wills (May 2016) and naming a minor as beneficiary (February 2016).

For subscribers as well as non-subscribers, below is a list of some of the most popular blog posts from the past year.  The blogs are posted every Monday and can be found on Berdon's home page at www.berdonllp.com.

There is no cost to subscribe to Berdon Blogs. Subscribers automatically receive each blog in their in-box on Monday.

"We are delighted to share this valuable information," said Berdon managing partner Mark Bosswick, CPA, J.D., LL.M., "and are grateful to our partners who champion this effort. The blog program is just one more way that Berdon provides a valuable stream of information to our clients, friends, and other executives in the industries we serve." 

Tax Talk

SALT Talk

T&E Talk


 

Management Letters Can Reveal Problems and Help Find Solutions

The management letter can provide innovative ideas, based on industry best practices, about ways to improve internal control systems, streamline operations, and cut back on expenses.  Auditors want to help their clients succeed, and the management letter should be viewed as a value-added "bonus" to the audited financial statement.

Beyond Compliance

Throughout the audit process, auditors typically compile a list of internal control weaknesses and operating inefficiencies that may warrant management's attention. AICPA standards specifically require auditors to communicate two types of deficiencies to management in writing:

  • Material weaknesses. These are defined as "a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the organization's financial statements will not be prevented or detected and corrected on a timely basis."
  • Significant deficiencies. These are "less severe than a material weakness, yet important enough to merit attention by those charged with governance."

Operating inefficiencies and other deficiencies in internal control systems aren't necessarily required to be communicated in writing. However, most auditors include these less significant items in their management letters to inform their clients about risks and opportunities to improve operations.

Key Elements

A management letter may cover a broad range of topics, including segregation of duties, account reconciliations, physical asset security, credit policies, employee performance, safety, Internet use, and expense reduction. In general, the write-up for each deficiency includes three elements:

  1. Observation. The auditor describes the condition, identifies the cause (if possible), and explains why it needs improvement.
  2. Impact. This section quantifies the problem's potential monetary effects and identifies any qualitative effects, such as decreased employee morale or delayed financial reporting.
  3. Recommendation. Here, the auditor suggests a solution or lists alternative approaches if the appropriate course of action is unclear.

Some letters present deficiencies in order of significance or potential for cost reduction. Others organize comments based on functional area or location.

Continuous Improvement

When your CPA delivers your audited financial statements, pay close attention to the management letter - and compare it to the previous year's letter. Too often, the same items recur year after year, indicating that there are improvements to be made within your organization.  Commit to making some targeted improvements and use the write-ups in the management letter to help track the results

Questions? Contact your Berdon advisor or Matthew Jahrsdoerfer, CPA. Berdon LLP, New York Accountants 

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