There are many fraud types and new ones are invented daily. Some are imaginative, some are aggressive, and some appear legitimate!
Be vigilant if you receive, either by telephone, mail, text message or email, a communication that claims to be from the Canada Revenue Agency (CRA) requesting personal information such as a social insurance number, credit card number, bank account number, or passport number.
These scams may insist that this personal information is needed so that you can receive a refund or a benefit payment. Cases of fraudulent communication could also involve threatening or coercive language attempting to scare you into paying a fictitious debt to the CRA. Other communications may urge you to visit a fake CRA website where you are then asked to verify your identity by entering personal information. These are scams and you should never respond to these fraudulent communications or click on any of the links provided.
Canada Revenue Agency will never:
- Send emails with a link and ask you to divulge personal or financial information;
- Ask for personal information of any kind by email or text message;
- Request payments by prepaid credit cards;
- Give taxpayer information to another person, unless formal authorization is provided by you;
- Leave personal information in a voice mail;
- Threaten, or use nasty language.
If you are in doubt about the validity of a communication claiming to be from the CRA, don’t panic! Ask your accountant to verify the information given, or call CRA at 1-800-959-8281 (individuals) or 1-800-959-5525 (business accounts) to verify. Don’t call the number displayed as it may be fraudulent.
If the communication is a scam, you can report it to the Canadian Anti-Fraud Centre online, or by calling 1-888-495-8501.
What are audits and reviews?
Audits and reviews are engagements intended to provide an enhanced degree of confidence in a set of financial statements within a certain accounting framework. An accounting framework is a set of rules or standards used to prepare financial statements. The framework determines how the balances and transactions in the financial statements are measured and presented, and what information needs to be disclosed in the notes to the financial statements. Depending on the type of entity (public, private, not-for-profit), different frameworks may be used to prepare the financial statements.
An audit or review engagement consist of a set of procedures to gain a degree of confidence that the financial statements were prepared in accordance with the framework (in all material respects). The area where they differ are the degree of assurance that is provided, and the procedures performed under each engagement.
Reasonable vs. limited assurance
Audits are designed to obtain reasonable assurance. Reasonable assurance is a high (but not absolute) level of assurance that the financial statements are materially in accordance with the stated framework.
Reviews are designed to obtain limited assurance. While the definition is a little vague, limited assurance is defined as being a meaningful level, but less than reasonable assurance.
What extra work is done in an audit?
A review consists of procedures primarily including inquiry and analytical procedures. This includes asking questions of people within or outside the organization and evaluating financial information through the lens of plausible relationships to determine if anything causes the reviewer to believe the statements aren’t presented according to accounting framework.
An audit is a more rigorous engagement that includes obtaining an understanding of a client’s business and industry, identifying and assessing overall and specific risks of material misstatement, and obtaining sufficient audit evidence using procedures such as inquiry, analytical procedures, confirmation, recalculation, sampling, inspection, and observation.
When is an audit or a review necessary?
The Business Corporations Act of Alberta requires all companies to appoint an auditor every year. Although, if the company is not a public company, the shareholders may waive the requirement to have an audit. If a corporation has significant financing, the bank may require an audit or a review as part of the financing agreement. Audits and reviews are usually required under the by-laws of most not-for-profit organizations.
Managing finances and planning for retirement is a vital aspect of any successful business owner's life. If you are the owner of a Canadian Controlled Private Corporation (CCPC) in Alberta, you may be exploring various retirement savings options. Two popular choices for CCPC owners are Individual Pension Plans (IPPs) and Registered Retirement Savings Plans (RRSPs). In this blog post, we will provide an in-depth comparison of IPPs and RRSPs to help you make an informed decision about which option is best suited to your financial goals and retirement needs.
What Are IPPs and RRSPs?
Individual Pension Plans (IPPs):
- IPPs are defined benefit pension plans designed specifically for business owners and incorporated professionals.
- Contributions are made by the corporation on behalf of the owner and are tax-deductible for the business.
- IPPs offer fixed retirement income based on a predetermined formula, typically taking into account years of service and income history.
- They are subject to annual contribution limits, which tend to be higher than RRSP limits.
Registered Retirement Savings Plans (RRSPs):
- RRSPs are tax-advantaged personal savings plans available to all Canadians.
- Contributions to RRSPs are made with after-tax dollars, and contributions can be deducted from taxable income.
- RRSPs provide flexibility in investment choices, allowing individuals to invest in a wide range of assets.
- Withdrawals from RRSPs are taxed as income when funds are taken out during retirement.
1. Contribution Limits:
- IPPs typically offer higher contribution limits than RRSPs, making them an attractive option for those looking to maximize retirement savings quickly.
- RRSP contribution limits are based on a percentage of your earned income, with annual limits set by the government. In contrast, IPP contribution limits are determined by actuarial calculations.
2. Tax Efficiency:
- Contributions to an IPP are tax-deductible for the corporation, reducing the overall tax liability of the business.
- RRSP contributions provide a tax deduction for individuals, helping reduce personal income tax payable.
3. Retirement Income Guarantee:
- IPPs offer a defined benefit pension plan, which means that the retirement income is predetermined, providing financial security during retirement.
- RRSPs do not guarantee a specific retirement income; the amount available during retirement depends on the performance of the investments.
4. Creditor Protection:
- IPPs may offer some level of creditor protection, depending on provincial legislation.
- RRSPs generally provide a high degree of protection from creditors.
5. Administrative Requirements:
- IPPs come with more administrative responsibilities and costs due to actuarial calculations and ongoing compliance requirements.
- RRSPs are relatively simpler to manage and require less administrative overhead.
When deciding between an Individual Pension Plan (IPP) and a Registered Retirement Savings Plan (RRSP) as an Alberta-based CCPC owner, it's essential to consider your financial goals, risk tolerance, and long-term retirement needs. IPPs offer a secure and tax-efficient way to build retirement income, particularly for those with higher income levels and a desire for guaranteed retirement income. On the other hand, RRSPs offer flexibility and lower administrative burdens, making them a suitable choice for individuals who prefer more control over their investments.
Ultimately, the best choice for you will depend on your individual circumstances and objectives. Consulting with a financial advisor or tax professional experienced in retirement planning for CCPC owners is crucial to making an informed decision that aligns with your unique financial situation. Both IPPs and RRSPs have their merits, and the right choice will help you secure a comfortable retirement and make the most of your hard-earned money.
Are you a controller or accountant of a company and fear the dreaded list of adjusting entries you receive at the end of the audit that you are required to make? Here are five adjusting entries you can avoid and how to avoid them.
1. Balancing retained earnings
This entry generally comes about when entries are made after your back up is sent to your accountant.
Key ways to avoid:
- Do not record any more entries to your accounting software once you’ve sent the records to the accountant. If you need something recorded contact your accountant.
- Never post to the retained earnings account unless requested by your accountant.
2. Entries to adjust accounts receivable/payable
This entry generally comes about when the balance in your GL does not agree to your accounts receivable/payable listings generated from your accounting software.
Key ways to avoid:
- Run listings of your A/R or A/P monthly to ensure they match the balance on the GL. The sooner you catch any discrepancies, the easier it is to correct them. At a minimum, run the listings prior to sending your accountant the back up at year end.
- Never post directly to these accounts. Always use the receivables or payables modules. General journal entries can cause discrepancies in these accounts if the modules are not used.
3. Prepaids adjustments
This entry occurs when an organization pays for an expense that benefits them for a period that extends beyond their year end date. Most common is your insurance or major memberships or dues. Your accountant will most likely have a prepaid expenses schedule that indicates which expenses they adjust. You can request this at any time and record the entries yourself, either monthly or at year end.
Key ways to avoid:
- Request the schedule from your accountant and record monthly entries.
- Always review at year end and reconcile to what is showing in your GL.
4. Capitalizing expenditures
This entry occurs when the auditor identifies an item that was recorded as an expense by the client, but that meets the definition of an asset. An organization’s capitalization policy helps determine when an expenditure is capitalized instead of being expensed.
Key ways to avoid:
- Talk with your accountant to determine the capitalization policy of the organization (typically larger value items that have a useful life greater than 1 year).
- At year end, review the major expenses incurred to determine if any of them should have been recorded as capital assets instead of expenses.
- If you are ever unsure just give your accountant a quick phone call and ask their advice.
5. Interest on long term debt
This entry generally comes about when the full amount of loan payments are recorded to the loan account without separating out the interest portion. Most loan statements will indicate the interest portion and if not, your accountant will have a loan amortization schedule you can follow.
Key ways to avoid:
- Using monthly statements to record loan payments and reconcile monthly.
- Or at minimum obtain a loan statement as at the end of the fiscal year and agree the loan balance on the statement to the loan balance on your general ledger before sending in your back up.
Following these key steps will allow you to shorten that dreaded long list of adjustments that comes at the end of your audit. Key thing to remember if you are ever unsure, ask your accountant, they are here to help.
Do you dread your year end audit? Does having the auditors in your office stress you out and make for a long week? Here are few steps to ensure your year end audit goes smoothly and quickly and gets the auditors out of your office ASAP!
1. Be prepared and plan ahead.
Communicate with your auditors before the audit and let them know about any big events, major changes, or large expenditures during the past year.
Typically, your auditor sends out a letter prior to the audit with a listing of items and documents they will want to see and review. Ensure these items are printed out or that electronic copies are available. We can provide a link so these documents can be easily sent to us using our share file web portal. This will result in fewer questions from the auditors and less time spent in your office!
Another way to ensure everything is ready, is to go through your balance sheet and ensure there is documentation or a reconciliation for all the balance sheet accounts. Your auditor will be asking for this, I guarantee!
Providing anything you can prior to audit will allow for the auditors to do pre-work before coming out, if possible.
2. Offer to prepare items or documents for them.
If there are documents normally prepared by the auditor that you think you can prepare, having these completed and reconciled will allow them to just review the work of reconciliation done instead of having to do the reconciliation themselves.
3. Do a pre-review of the trial balance before sending the records.
Doing a quick review of your trial balance and ensuring accounts reconcile to supporting documentation you are providing, will allow for a much more efficient audit and fewer questions. This includes reviewing income statement accounts and having knowledge of any major changes from prior year.
4. Be available.
Audits are typically scheduled well ahead of time. Ensure your schedule is clear during that time so you are available to answer questions when the auditors are on-site.
Just following these few steps will have those auditors in and out of your office in no time. See your year end audit doesn’t sound so bad now, right? 😊
We are excited to announce that our firm is actively seeking a Senior Accountant to join our team in our Red Deer office. For further details, and to apply for this position if you are qualified, please see the detailed information at this link: https://pivotalcpa.bamboohr.com/careers/59
The term “audit” is often intimidating, especially when you are going through the process for the first time. However, if you work closely with your auditor and plan ahead, the process can be smooth and non-intrusive.
Steps to prepare for your audit:
1. Set out a realistic schedule
When you are preparing for your first audit you need to set out a realistic schedule. The process does require a time commitment, especially in the first year. You will need to set aside time for pre-work, which will include the preparation of the documents that the auditor has requested. Next, you will need to be available for the auditor’s questions during their field work. Finally, there will be additional follow-up questions and meetings. Being aware of the time commitment and setting up a schedule will help with making the process run smoothly.
2. Have a pre-audit meeting with the auditor
Pre-audit meetings are crucial to allow the auditor to fully understand the business, including the policies and procedures that are in place. This meeting is also a great time to sit down and go over the required documents to ensure that you are aware of what the auditor is looking for. Finally, this meeting provides an opportunity to outline everyone’s expectations to ensure that all parties are on the same page.
3. During the field work
In order to have your fieldwork over with quickly, it is best to have the requested documents prepared in advance, and available prior to the auditor’s arrival. This avoids any inefficiencies of having to wait for requested documents. During the fieldwork you will also need to be available for any questions that the auditor may have. Assuming that the documents are prepared this shouldn’t be too time consuming.
4. Ask questions
As auditors we are aware that this is your first time being audited and available to answer any questions. If you have questions be sure to ask, we are here to help.
A first-time audit can be very frightening, however if you are aware of process and expectation it can be non-intrusive and over before you know it!
Our firm is seeking candidates to join our team starting in September 2024 as a CPA Articling Student. If you will be entering the CPA Professional Education Program (PEP) and would like to be considered for this opportunity, please see all the details at the following link: https://pivotalcpa.bamboohr.com/careers/56