{PM Alliance Member Conference.} August 17, 18, & 19, 2015

Transcription

1 {PM Alliance Member Conference.} August 17, 18, & 19, 2015

2 {Presenter.} Strategic Planning for IT Investment Craig Zampa Senior Manager IT Consulting

3 Agenda Gartner Findings and Statistics IT Strategic Planning Overview IT Trend Drivers for Planning Outsourcing Considerations Take-Aways / Questions

4 Gartner Findings and Statistics Spending Analysis Cross Industry IT Spend Percent of Revenue Cross Industry IT Spend Percent of Operating Expense Cross Industry IT Spend per Employee Midsize Enterprise 4.1% 3.2% 5.4% 4.2% All Enterprise $11,852 $12,710

5 Gartner Findings and Statistics Spending Analysis Leading percentages were among Banking / Financial Services, Education and Software Publishing / Internet Services (6% - 7.5% of revenue) Lagging percentages were among Retail / Wholesale, Industrial Manufacturing, Industrial Electronics, Construction Materials, Chemicals and Food & Beverage (0.8% - 1.8% of revenue) Distribution of IT Spend Hardware (17%), Software (22%), Personnel (41%), Outsource (20%) IT Investment Drivers Run (67%), Grow (20%), Transform (13%)

6 Gartner Findings and Statistics Spending Analysis Statistically, about 70% of the spending is for Operational Expense and 30% as Capital Spending. Notes: Statistics do not include depreciation or amortization expenses to avoid double-counting from an accounting perspective. Mid-size Enterprise is defined as less than $1 billion in revenue or operating budget Source Gartner IT Key Metrics Data 2015: Small and Midsize Enterprise Executive Summary

7 IT Strategic Planning Overview Time and Planning Include three to five year horizon; focus on first few years Refresh and validate frequently; at least twice per year Include stakeholder needs and expectations (customers, suppliers, ownership and management) Conduct periodic (multiple times annually) review of Strategic Plan attainment

8 IT Strategic Planning Overview Media and Content Document in report or presentation form keeping it to 15 pages or 25 slides max as an overview. Details should reside elsewhere Use business language instead of techie-speak. Technical language can reside in the internal detail plan Include business focused objectives rather than simply infrastructure and staffing. Include road map for illustrating overall strategy Apply metrics with scheduled review to demonstrate attainment of metrics Source CIO Magazine Anatomy of an I Strategic Plan

9 IT Strategic Planning Overview Capital vs. Expense Much of IT spend is expense based o Internal staffing o Professional services o Low cost equipment o As A Service consumption (software, infrastructure, etc.) Much can be capitalized and depreciated o Infrastructure exceeding threshold o Major application purchase (traditional licensing)

10 IT Trend Drivers for Planning Top 3 CIO Technology Priorities between 2014 & 2016 Companies under $500M o Business Intelligence Applications Understanding corporate data to make effective and competitive decisions o Collaboration Technologies Tools to add automation to processes and help teams work more effectively together o IT Management Technologies Project management, user support / governance, change management

11 IT Trend Drivers for Planning Top 3 CIO Technology Priorities between 2014 & 2016 Companies between $500M and $1.0B o Business Intelligence Applications Understanding corporate data to make effective and competitive decisions o Legacy Applications Modernization through upgrade or replacement o Customer Relationship Management

12 IT Trend Drivers for Planning Additional Notes While tools that are technology supported, they are actually business enablers for growth and optimization. Tools like continued mobility expansion, security technology, and infrastructure enhancement may appear in the top 10 but are not in the top 3. Source - The Gartner Scenario for the Small-and-Midsize-Business Marketplace, 2014

13 Outsourcing Considerations Gartner identifies annual IT Outsourcing investment is roughly 18%-20% of total IT spend. Businesses with under $1.0B in revenue represent 49% of outsourcing revenue for service providers. Cost savings identified as a significant driver. Other drivers include: Focus on core business Agility Access to specialist skills Upgrading service quality

14 Outsourcing Considerations Decision drivers we identify. Our experience that reducing business risk (loss of key internal personnel, 24x7 support coverage and don t know what you don t know risk) Can the function be commoditized? Does the function drive unique business value (i.e. ERP Business Analyst)?

15 Take-Aways / Questions Key Statistics On average, 59% of the IT budget is non-personnel based On average, 33% of IT investment is allocated to growing or transforming the business IT represents a significant portion of most midsize organizational budgets, strategic planning increases opportunity for efficiency

16 Take-Aways / Questions Planning Include stakeholders in creating a strategic IT plan Keep resulting media clear, concise and actionable Ensure plan allows for flexibility and acts as a living document Questions

17 Thank you for taking the time to be with us. 16

18 {PM Alliance Member Conference.} August 17, 18 & 19, 2015

19 {Presenter.} IT Security When Using the Cloud or in Other Applications Joe Oleksak CISSP, CRISC, QSA, Partner, Information Technology

20 Todays Presenter Joe Oleksak CISSP, CRISC, QSA, Partner, Information Technology Joe has more than 17 years of information systems security and information technology audit experience in healthcare and financial institutions including banks, credit unions, mortgage companies, and insurance companies. Joe s experience includes: IT strategic planning, IT risk assessments, IT audit, global/local network security projects, web application security, PCI compliance, SSAE16 & SOC reviews, incident response, business continuity, and disaster recovery management. Joe is a member of the Information Systems Audit and Control Association (ISACA) and the International Information Systems Security Certification Consortium (ISC)². He attends and presents at multiple security and industry conferences annually and is a member of both the Indiana Bankers Association Information Technology Committee and the Illinois Bankers Association Technology Committee. Joe is a Certified Information Systems Security Professional (CISSP), Certified in Risk and Information System Controls (CRISC), and a PCI Qualified Security Assessor (QSA). JOE OLEKSAK PARTNER CYBERSECURITY JOE.OLEKSAK@PLANTEMORAN.COM

21 Agenda Current Trends in Security What does a hack look like? Let s talk breaches! Where do I start? Who is responsible? How does this end? Page 2

22 Trends in Information Security Trends in Information Security Page 3

23 Trends in Information Security {Who are the victims?} Targets victims of opportunity: Some will be atarget regardless of what they do, but most become a target because of what they don t do related to security. Page 4

24 Trends in Information Security {How are they hacking us?} Most Common Attack Social: Most attacks began socially. Employees are your greatest asset, but often your weakest link to security. know Hackers this, and have developed social scams by the thousands, hoping but one will fall victim. Page 5

25 Trends in Information Security {Could this be prevented?} Breaches taking advantage: Hackers continue to party like it s 1999 because we continue to struggle with Patching. Page 6

26 Trends in Information Security {Could this be prevented?} Breaches not rocket science: Most victims weren t overpowered by unknowable and unstoppable attacks. We know them well enough and we also know how to stop them. Page 7

27 Trends in Information Security {Why can t we stop them?} Breaches in 2014 went unnoticed: Prevention is crucial, but we must accept the fact that no barrier is impenetrable.detection/response represents an extremely critical defense. Page 8

28 What does a hack look like? Page 11

29 Example Attack {The .} Page 12

30 Example Attack {The victim.} Page 13

31 Example Attack {The attacker.} Page 14

32 Let s talk breaches! Who are they? What do they want? What is it worth? How much will this cost? Can they be stopped? Page 15

33 Breaches Who are they? {Not always hackers!} Page 16

34 Breaches Who are they? { But often times hackers!} Page 17

35 Breaches What do they want? {Sony & others prove - anything and everything!} Personally identifiable information Credit Card Data Usernames & Passwords E - mail Trade Secrets Customer Lists Vendor Lists COULD BE ANYTHING! Page 18

36 Breaches What s it worth? {Black markets for hackers} Page 19

37 Breaches How much will it cost? {Invest in Cyber Insurance, or security?} Page 20

38 Breaches How much will it cost? {Don t forget the fines!} Page 21

39 97% of breaches were avoidable Most victims aren t overpowered by unknowable and unstoppable attacks. For the most part, we know them well enough and we also know how to stop them Verizon Data Breach Investigations Report User Ignorance Weak user passwords Poor judgment Social media Phishing attacks Weak infrastructure Weak design (firewalls, wireless routers) Weak user authentication (users, passwords) Encryption (VPN, secure portals) Out-dated (patch management / anti-virus) Lack of periodic testing Technology Advances Mobile devices Cloud computing / public portals Page 22

40 Breaches Can they be stopped? {Don t count on Regulation or Standards!} HIPAA FERPA Sarbanes Oxley 95/46/E U DPD FISMA GLBA PCI State Privacy NIST Canada - PIPEDA 21 CRF Part 11 ISO 2700x Page 23

41 Breaches Can they be stopped? {But don t ignore them either!!!} Page 24

42 Where do I start??? Page 25

43 Where do I start? {Start with a realization!} First realize that Information Security is NOT an IT issue: it is a Business issue. Every aspect of your organization is responsible for the protection of data. A failure in one area is a failure for the entire organization. Page 26

44 Who is ultimately responsible? {you are!} You don t have to be a security professional to think critically! Strong passphrases that expire more frequently Don t give away any personal information over the phone, unless you initiated the call Nigeria is not for you, so hit delete and don t read that ! STOP CLICKING RANDOM LINKS!!!!!!!!!!!!!!! Page 27

45 How does this end? {It doesn t!} Realize that Information Security does not end. It can only be maintained through constant vigilance, training, and reassessment. Think critically before you act, ask yourself WWJD? (J=joe the security guy) Page 28

46 THANK YOU J O E O L E K S A K PA R T N E R C Y B E R S E C U R I T Y JOE.OLEKSAK@PLANTEMORAN.COM

47 {PM Alliance Member Conference.} August 17, 18 & 19, 2015

48 {Presenters.} Tax Planning Strategies for Small Business and Flow Thru Entities Jane Smith MBA, CPA, CFP, CFE Lead Audit Partner Jane Laura John Brett John Smith Miller, Smith CPA Filush, Smith CPA MBA, CPA, MBA, CPA, MBA, CPA, State & International CFP, CFE CFP, CFE CFP, CFE Local Tax Tax Lead Audit Lead Audit Lead Audit Partner Associate Partner Associate Partner

49 {Federal Tax Ideas} Domestic Production Activities Deduction Tangible Property Regulations ERP Software Implementation Transaction Planning Cash Method 2

50 Domestic Production Activities Deduction under IRC Section 199 Eligible for a tax deduction equal to 9% on a company s qualified net income associated with qualified activities Unique qualified activities could include: metal processing, plastics, food processing, agriculture, software development, film production, construction, and services performed by engineering & architectural firms Key terms/concepts: Substantially manufactured Item-by-item documentation De minimis safe harbor Nonqualifying revenue IRC 861 method, SBSO method, Simplified method

51 Tangible Property Regulations Regulations clarify expenditures that are capital improvements vs. repairs Effective January 1, 2014 Terminology Unit of Property Component Longevity, utility, or worth of property Written capitalization policy Applicable financial statement Small business exception

52 ERP Software Implementation Focused on specialized software written to suit the needs of a particular business largely based on existing models (i.e. Oracle or SAP) Costs incurred include: Hardware costs (computers) 5 yrs. MACRS Software licensing 3 yrs. SL Consulting costs it depends (can be eligible for an immediate expense as an IRC Section 174 cost) Training costs expensed as a period cost Relevant authority can be found in PLR and RP

53 Transaction Planning Buying or Selling a Business Structure of business Asset vs. Stock purchase Allocation of purchase price Financing Installment Sales Future Contingent Payments Advice: BE PREPARED and start TAX PLANNING EARLY

54 Cash Method Generally, ideal for: Service providers Companies with little to no inventory Slow collections of accounts receivable Not available to: C Corporations Partnerships with a C Corp partner Tax Shelters- Any enterprise in which more than 35% of the losses are allocable to limited partners (investors that do not actively participate in management)

55 Cash Method- Exceptions IRC Section 448(b) Farming businesses Qualified personal service corporations Gross receipts not more than $5 million- partnerships or corporation with average annual gross receipts over the three immediately preceding taxable years that do not exceed $5 million

56 {State & Local Tax Ideas} Nexus Service Sales Apportionment Throw out and Throwback Rules 9

57 Nexus- Intro Certain minimum connection to a state A certain level of business activity conducted within a taxing jurisdiction allowing that jurisdiction the legal right to impose a tax. Different standards for sales tax and income tax Economic Nexus Exists if taxpayer avails itself to the state s market and receives benefit, but has no physical presence Bright-line presence standard Trend is moving towards economic nexus

58 Nexus- Public Law Federal law that prohibits states from imposing a net income tax on companies whose activity in a state is limited to solicitation of sales of tangible personal property (TPP) Certain protected and unprotected activities Only applies to income tax (not sales, property, etc.) Does not apply to service companies

59 Service Sales Apportionment Determine which state should be assigned sales and the amount included in the numerator of a particular state s sales factor Sales include all gross receipts from transactions and activities conducted in the regular course of business Apportionment Methods Market Based Cost of Performance (COP)

60 Service Sales Apportionment- Market Based Sourcing This method assigned sales to the state if the market for the sale is located in the state States define market differently Where benefit of the services is received by customer Where service is performed Where the intangibles are used Where the customers are located Illinois adopted market based sourcing for years ending on or after 12/31/2008, specifically if the services are received in IL

61 Service Sales Apportionment- Market Based Sourcing Many states have specific ordering rules to help source the sale Other questions to consider: What are the services being provided? Where is the benefit of the service incurred? Where is the service delivered? Practically, focus on records: Billing address Place of order Physical location or commercial domicile of customer

62 Service Sales Apportionment- Cost of Performance Sourcing Definition MTC (Multi State Tax Commission) defines it as direct costs determined in a manner consistent with generally accepted accounting principles and in accordance with the accepted conditions or practices in the trade or business of the taxpayer. MTC Audit Manual elaborates on direct costs stating that they are wages, taxes, interest, depreciation and other costs involved with real and personal property.

63 Service Sales Apportionment- Cost of Performance Sourcing Per UDITPA Section 17, sales other than the sales of tangible personal property, are in this state if: The income producing activity is performed in this state; or The income producing activity is performed both in and outside this state and a greater proportion of the income producing activity is performed in this state than in any other state, based on cost of performance

64 Service Sales Apportionment- Cost of Performance Sourcing Preponderance method All or nothing Majority of costs Greater than 50% of costs in the state Plurality (largest percentage) Proportionate

65 Service Sales Apportionment- Cost of Performance Four key questions to address: What are the items of income? What are income producing activities associated with those items of income? What are the direct costs incurred in providing the income producing activity? Where are the costs incurred?

66 Throw out and Throwback Rules Throw out Applies only to service providers If the taxpayer is not taxable in the state in which the services are received, the sale must be excluded from both the numerator and the denominator of the sales factor Throwback Applies only to sellers of TPP If the sale is not taxed in the destination state (i.e., state of delivery) or the purchaser is the U.S. government, it is thrown back and assigned to the origination state.

67 Throw out and Throwback Rules Under UDITPA Sec 3, taxable in another state means subject to: Net income tax Franchise tax measured by net income Franchise tax for the privilege of doing business Corporate stock tax or The state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.

68 Throw out and Throwback Rules- Illinois Illinois Throwback Rule Illinois Regulation Section (a)(2) provides that in order to avoid throwback, the taxpayer must be subject to tax in the other state and must pay tax to the other state. If the other state does not impose a tax, the taxpayer can avoid throwback to Illinois by documenting that the taxpayer s activities are sufficient enough to allow the other state to impose a tax. Illinois further provides that a corporation which pays a minimum franchise tax in order to qualify for the privilege of doing business in a state is not subject to tax by that state if the amount of such minimum tax bears no relation to the corporation's activities within such state.

69 {International Tax Ideas} IC-DISC Planning Foreign tax compliance 22

70 IC-DISC Interest Charge-Domestic International Sales Corporation A favorite tax planning structure since 1971 Benefit for exporters Maximization of benefit Coordination of computation with DPAD 23

71 IC-DISC Interest Charge-Domestic International Sales Corporation 24

72 IC-DISC Interest Charge-Domestic International Sales Corporation 25

73 Foreign Tax Compliance - Risks Forms 5471s, 5472s, 8858s, 8865s, etc. Late, incorrect, or incomplete forms trigger LARGE penalties International boycott forms Foreign bank account reporting FATCA, W8-BENE, Form 1042 Compliance requirements in foreign jurisdictions Transfer pricing 26

74 {IRS Risks} Liabilities & Economic Performance Accrued Bonuses Related Party Loans Backup Withholding 27

75 Liabilities & Economic Performance- All Events Test Accrual method- take deduction when All Events Test is satisfied 28

76 Liabilities & Economic Performance Services or property provided TO the taxpayer Occurs at the time services or property are actually performed or provided Services or property provided BY the taxpayer Occurs as the taxpayer actually incurs costs to discharge the liability (to perform services/provide property) Example: A manufacturer sends a customer an invoice near year end for widgets already delivered Even though this bill has not be paid yet, economic performance has occurred because the product has already been delivered. 29

77 Liabilities & Economic Performance Use of property provided to the taxpayer (i.e., rent) Economic performance occurs ratably over the period of time the taxpayer is entitled to the use of the property Payment liabilities Occurs when payment is made to the person the liability is owed Taxes- generally as payment is made (state and local taxes) Foreign income taxes- deductible when the liability becomes fixed and determinable Property taxes- ratable accrual election may apply 30

78 Accrued Bonuses- Deductibility Establishing the Fact of the Liability Typically satisfied when employees had completed the service necessary to earn the bonus Terms stated in agreement are met Reasonable Accuracy Requires amount determined before year-end either by designating an amount or setting an objective formula Economic Performance Requires the related services are provided during the tax year Paid within 2 ½ months of year-end 31

79 Accrued Bonuses- Unique Issues Requirement that employees remained employed until bonus is paid Bonus pools Performance bonuses on a sliding scale Related party bonuses Short tax years Documentation 32

80 Related Party Loans Loans between businesses and family members are common Bona fide debt Adequate interest S-Corporation considerations 33

81 Back-up Withholding Form 1099-MISC FATCA Form 1099-K from credit card companies Essential to have FEINs and SSNs on file through W-9s or W-8s 34

82 Thank you for taking the time to be with us. 35

83 {PM Alliance Member Conference.} August 17, 18 & 19, 2015

84 {Presenter.} Assurance Update Bob Denninger, CPA, Senior Audit Manager

85 Topics Accounting and Assurance Update Private Company Council Revenue recognition Updated independence requirements

86 Private Company Council 3

87 Role of PCC in Standard Setting Activities PCC Has Two Primary Responsibilities This is level one paragraph text. 1. Work with FASB to decide whether and when alternatives within US GAAP are warranted for private companies ( look-back ) 2. Advise FASB on appropriate treatment for private companies for items on current technical agenda. 4

88 Public Business Entity vs. Private Company Public Business Entity Meets any one of the following: 1. Files or furnishes financial statements with the SEC (or is included in a filing) 2. Is required under Exchange Act of 1934 to file or furnish financial statements with a regulatory agency, other than the SEC 3. Required to file financial statements with a foreign or domestic regulatory agency for the sale of securities that are not subject to contractual restrictions on transfer 5

89 Public Business Entity vs. Private Company Public Business Entity Meets any one of the following (continued): 4. Has issued, or is a conduit obligor for, securities that are traded, quoted, or listed on an exchange or over-the-counter market 5. Has one or more securities that are not subject to contractual restrictions on transfer, and it is required to prepare US GAAP financial statements and make them publicly available on a periodic basis Employee Benefit Plans and Not-for-Profit Entities are Not Business Entities 6

90 Accounting for Goodwill Current US GAAP Do not amortize goodwill Test for impairment at least annually or more frequently Reporting unit level Two-step impairment test Optional qualitative assessment Accounting Alternative Amortize over 10 years or less Test for impairment upon occurrence of triggering event Entity or reporting unit level One-step impairment test Optional qualitative assessment 7

91 Interest Rate Swaps ASU Impact of Interest Rate Swap Income Statement Balance Sheet No Hedge Accounting Volatility in interest expense as a result of changes in FV Asset or liability at fair value Current GAAP Hedge Accounting Interest expense approximates fixed rate debt Asset or liability at fair value Accounting Alternative Interest expense approximates fixed rate debt Asset or liability at settlement value (or FV) Other Comprehensive Income No impact Includes changes Includes changes in fair value of in settlement value swap (or FV) of swap Source: FASB

92 Interest Rate Swaps ASU Impact of Interest Rate Swap Income Statement Balance Sheet No Hedge Accounting Volatility in interest expense as a result of changes in FV Asset or liability at fair value Current GAAP Hedge Accounting Interest expense approximates fixed rate debt Asset or liability at fair value Accounting Alternative Interest expense approximates fixed rate debt Asset or liability at settlement value (or FV) Other Comprehensive Income No impact Includes changes Includes changes in fair value of in settlement value swap (or FV) of swap Source: FASB

93 Common Control Leasing Arrangement Common Control Leasing Arrangements That Qualify For the Accounting Alternative 1. Lessor entity and private company are under common control. 2. The private company lessee has a lease arrangement with the lessor entity. 3. Substantially all activities between the lessor entity and private company are related to leasing activities (and supporting leasing activities). 4. If the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the assets leased by the private company, the principal amount of the obligation at inception does not exceed the value of the asset leased by the private company.

94 Common Control Leasing Arrangements Additional guidance points 1.If significant non-lease-related activities are present, that precludes the entity from adopting the standard. 2.Apply standard to all applicable arrangements 3.Review criteria when agreement entered into 4.Resulting deconsolidation 5.Review ATU for disclosure requirements

95 Identifiable Intangible Assets Current US GAAP Recognize all identifiable intangible assets in a business combination. Accounting Alternative Recognize all identifiable intangible assets in a business combination, except Customer-related intangibles (except those that are capable of being sold or licensed) Non-competition agreements

96 Accounting for Identifiable Intangible Assets in a Business Combination Impact if elected: Entities will recognize fewer intangible assets and more goodwill in business combination transactions Applied prospectively to business combinations after the date of adoption If this standard is adopted, the goodwill standard would be required to be adopted, too

97 Goodwill Items to consider before adopting goodwill (or any PCC standard): Does the company fall under the definition of a public business entity? If not now, is it likely to in the future? Is there an exit strategy? How important is comparability to users? Will regulators allow regulated companies to adopt standards? 14

98 Revenue Recognition 15

99 Implementation Dates Public Entities Annual reporting periods beginning after December 15, 2017, including interim periods within that year Early application is not permitted Nonpublic Entities Annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 Early application is permitted, but no earlier than the public entity effective date

100 5 Step Revenue Recognition Model Step 1 Step 2 Step 3 Step 4 Identify the contract with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price Step 5 Recognize revenue when or as the entity satisfies performance obligations

101 Sample Contract Analysis Services Firm Step 1 How should change orders be accounted for? Should they be combined with the original contract or treated as separate contracts? Step 2 Step 3 Is each project treated as a separate performance obligation or are there multiple performance obligations for each project? What makes a performance obligation distinct within the context of the contract? How should direct costs be accounted for? Amounts are not fixed does this result in variable pricing in the contract?

102 Sample Contract Analysis Services Firm Step 4 How should the contract price and direct costs be allocated to each project? Square footage, estimated fair value, or some other factor? Step 5 When is control transferred to the customer? How should the progress towards completion be determined? Should an output or input based method be used? How should project inefficiencies be accounted for? Other What costs are eligible to be capitalized as contract acquisition costs? What contract assets and liabilities should be presented on the balance sheet?

103 Updated Independence Requirements 20

104 Application of the AICPA Independence Rules to Affiliates Requires auditors to be independent of affiliates of financial statement clients (FS CLIENTS) Standard defines 10 types of entities that are considered affiliates The requirement to be independent of an affiliate applies ONLY for our FS CLIENTS Rules would apply to all affiliates 21

105 Application of the AICPA Independence Rules to Affiliates Does not apply to governmental entities covered by Ethics Interpretation Affiliates will include: o Entities that are your clients o Entities that are not your clients o Entities that you many not be aware of Effective for reporting periods beginning on or after

106 What Are Our Responsibilities? Firm\Engagement team must expend best efforts to identify FS CLIENT affiliates If we identify a potential affiliate but we can t obtain the necessary information to conclude as to whether they are an affiliate: o Document the efforts to identify o Discuss the matter and independence impact with TCWG and document discussion o Obtain FS CLIENT representation that they are unable to provide information needed to identify affiliates 23

107 What Entities Are Considered Affiliates Under Interpretation ? 24

108 Affiliates Controlled/Influenced by FS CLIENT 1. Any entity that the FS CLIENT can control 2. Any entity that in which the FS CLIENT has a direct financial interest that gives the FS CLIENT significant influence over the entity and the entity is material to the FS CLIENT 25

109 Affiliates that Control\Influence the FS CLIENT 3. Any entity that controls the FS CLIENT IF the FS CLIENT is material to the controlling entity 4. Any entity that has a direct financial interest that gives the entity significant influence over the FS CLIENT IF the FS CLIENT is material to that entity 5. A trustee that controls a trust FS CLIENT that is not an investment company 6. An investment adviser, general partner, or trustee of an investment company (fund) FS CLIENT IF: o Fund is material to adviser, AND o The advisor has either control or significant influence over the fund. 26

110 Benefit Plan FS CLIENT Affiliates 7. The sponsor of a single employer employee benefit plan FS CLIENT 8. A union or participating employer that has significant influence over a multiple or multiemployer benefit plan FS CLIENT FS CLIENT Other Related Entities 9. An employee benefit plan sponsored by the FS CLIENT or an entity controlled by the FS CLIENT 10. A sister entity of the FS CLIENT when BOTH the FS CLIENT and the sister entity are material to the controlling entity 27

111 Key Definitions Control Commercial Entity (ASC 810) Majority voting interest or the power to control through other means (leases, agreements, court degree) Not for Profit Entity (ASC 958) Direct or indirect ability to determine management direction or policies Significant Influence (ASC ) Ability to influence operating and financial policies 20% Interest Rule to be considered Auditor Judgment 28

112 Audit Firm Must be Independent of Affiliates of FS CLIENTS Have to follow full slate of AICPA independence rules including: Financial interests Loan relationships (with exclusions) Employee\employer relationships Former PM employee (with exclusions) Provision of non attest services (with exclusions) Immediate\close family member in key positions of affiliates (with exclusion) Commissions or contingent fees 29

113 Exceptions to Independence Rules Loan relationship between covered member and officer, director, 10% or > owner of FS CLIENT affiliate IF covered member is unaware of entity relationship with FS CLIENT, loan will not impair independence IF covered member is aware of relationship with FS CLIENT, then can potentially mitigate independence threat with safeguards 30

114 Exceptions to Independence Rules Affiliates NOT controlled\influenced by FS CLIENT: Can provide prohibited non attest services IF it doesn t create a self review threat in the FS Client engagement Management participation threat from non attest services provided to affiliate can potentially be mitigated by safeguards Former employees of audit firm employed by affiliate will not impair independence if their position is not key to the FS CLIENT engagement Immediate\close family members may be employed at affiliate if their position is not key to the FS CLIENT engagement. 31

115 Thank you for taking the time to be with us. 32

116 {PM Alliance Member Conference.} August 17-19, 2015

117 {Presenter.} Tax Controversy Options in Resolving IRS Audit Actions Chuck Marchand JD, Senior Manager

118 IRS AUDITS No one ever dreams of becoming an IRS agent when they are a kid! Receiving an IRS letter in the mail announcing that you ve been selected for an audit is the worst lottery anyone wins. Now what?

119 The GOAL of Tax Controversy Working with an experienced expert will: 1. Optimize the financial result of the IRS audit 2. Greatly diminish the stress of an IRS audit 3. and ensure the audit defense approach is tailored to your specific needs. 3

120 The GOAL of Tax Controversy Optimize the Audit Result oit is about saving money! 1) Additional taxes due 2) Penalties 3) Interest 4

121 The AUDIT ROADMAP! 5

122 Tax Controversy Tailored audit defense: Every audit is unique every client is unique Coverage from the first IDR to the closing meeting Limited to the negotiations meeting Writing an appeal or taking the issue to court 6

123 Tax Controversy Become an Expert Diminish the Stress: the IRS policies and procedures so you don t have too! agents and supervisors in many offices how to efficiently and effectively move within the IRS bureaucracy the internal motivations of the agents and their supervisors 7

124 Tax Controversy often is an opportunity! Diminish the Stress: Typical tax controversy engagement eliminates much of the extra work forced onto the taxpayers by the IRS. Recent client that I worked was under the belief that the IRS could get them fired, take away their home, and review every single tax return they filed. 8

125 Tax Controversy often is an opportunity! Tailor audit defense: - Every audit is unique - Every client is unique 9

126 The AUDIT ROADMAP! 10

127 Bites at the Apple! Opportunities for resolution - Agent - Agent and Supervisor - Specialist - Fast track arbitration - IRS Appeals - Courts 11

128 The VALUE of great Tax Controversy Closing Remarks 1. Optimize the financial result of the IRS audit 2. Greatly diminish the stress of an IRS audit 3. Ensure the audit defense approach is tailored to your specific needs 12

129 Thank you for taking the time to meet with us. 13