Accounting
DOJ takes CTA beneficial ownership information fight to Supreme Court
The Justice Department filed an emergency request with the U.S. Supreme Court, asking it to lift the injunction on the beneficial ownership information reporting requirement under the Corporate Transparency Act after a
The 2021 law requires businesses to report on their true ownership to the Treasury Department’s Financial Crimes Enforcement Network starting Jan. 1, 2025 as a way to deter illicit activity by shell companies, but given the legal back and forth, the requirement has been delayed by FinCEN. In the Justice Department’s
In the application, the DOJ explains the rationale for the beneficial ownership requirement. “Congress found that malign actors often conceal their ownership of corporations and other entities to facilitate illicit activities such as money laundering, tax fraud, human and drug trafficking, and the financing of terrorism,” said the filing. “Congress determined that requiring companies to report information about their owners would enable the government to detect and prosecute financial crimes, discourage the use of shell companies to conduct illicit activity, and facilitate the government’s national-security and intelligence efforts.”
The application comes from Attorney General Merrick Garland, Treasury Secretary Janet Yellen, the Financial Crimes Enforcement Network and FinCEN director Andrea Gacki.
The CTA requires organizations to report to the federal government information about their beneficial owners, that is, individuals who exercise substantial control over the entity or own or control 25% of its ownership interests. The covered entities have to report their beneficial owners’ names, dates of birth, addresses, and unique identifying numbers (e.g., driver’s license or passport numbers).
The DOJ pointed to several reasons why the Supreme Court should lift the injunction, noting that the injunction was too broad and went beyond the original plaintiffs who filed the lawsuit. “Respondents—four entities subject to the Act, an individual affiliated with one of those entities, and a membership organization—brought this suit to challenge the Act’s constitutionality,” said the DOJ. “The district court granted respondents a preliminary injunction, holding that they were likely to succeed on the merits of their claim that the Act, on its face, exceeds Congress’s enumerated powers. Although respondents had sought relief only on their own behalf, the court entered a universal injunction purporting to enjoin the Act itself and prohibiting the enforcement of the Act even against nonparties. A motions panel of the Fifth Circuit stayed that injunction, but days later a merits panel vacated the stay and reinstated the universal injunction without any analysis of the government’s likelihood of success on the merits or the relative harms to the parties. This Court should stay the district court’s injunction.”
The plaintiffs in the case are Texas Top Cop Shop, Inc.; Data Comm for Business, Inc.; Libertarian Party of Mississippi; Mustardseed Livestock, L.L.C.; National Federation of Independent Business, Inc.; and Russell Straayer.
The DOJ argued that the government is likely to succeed on the merits of the claim. “The Act’s reporting requirements are important to the government in preventing, detecting, and prosecuting crimes such as money laundering, tax fraud, and the financing of terrorism,” said the DOJ. “The requirements therefore fall comfortably within Congress’s authority under the Commerce Clause to regulate economic activities (here, the anonymous operation of business entities) that substantially affect interstate commerce. The requirements are also necessary and proper to effectuate several of Congress’s enumerated powers, including the power to regulate interstate and foreign commerce and to collect taxes, as well as Congress’s powers with respect to foreign affairs. Even if there might be outlier circumstances in which the Act could be thought to exceed Congress’s powers, the Act complies with the Constitution in most of its applications, which suffices to defeat respondents’ facial challenge.”
The DOJ argued that the district court issued its universal injunction after two other district courts held that the CTA is likely constitutional and had denied preliminary-injunction motions raising substantially similar constitutional claims. A third district court denied a preliminary-injunction motion because the plaintiffs had failed to show irreparable harm. The DOJ acknowledged that one district court held that the CTA violates the Constitution, but issued an injunction covering only the plaintiffs in that case, specifically the members of the National Small Business Association.
The DOJ provided further reasons why the Supreme Court should issue a stay on the district court’s universal injunction, saying it “irreparably harms the federal government in multiple ways.”
“It prevents the government from executing a duly enacted Act of Congress, impedes efforts to prevent financial crime and protect national security, undermines the United States’ ability to press other countries to improve their own anti-money laundering 4 regimes, and severely disrupts the ongoing implementation of the Act,” said the DOJ. “By contrast, the Act imposes only minimal burdens on respondents. At a minimum, this Court should narrow the district court’s vastly overbroad injunction. A court of equity may grant relief only to the parties before it. The district court violated that principle by issuing a universal injunction purporting to enjoin the Act itself and forbidding the enforcement of the Act even against non-parties.”
The DOJ believes the case will need to be decided by the Supreme Court eventually and said the application for a stay could be treated as a petition for a writ of certiorari. “”Several Members of this Court have recognized that such universal relief contradicts Article III and established equitable principles and have urged clarification of these principles in an appropriate case—but the Court’s antecedent determination on a threshold procedural issue or the merits in prior cases has obviated the need to resolve the remedial question,” said the DOJ. “Because the lower courts need guidance on the propriety of universal injunctions, this Court may additionally wish to treat this application as a petition for a writ of certiorari before judgment presenting the question whether the district court erred in entering preliminary relief on a universal basis.”
“The DOJ argues that this case would provide an ideal vehicle for addressing the lawfulness of universal relief,” wrote Ed Zollars, owner of Thomas, Zollars & Lynch, in Kaplan Financial Education’s
The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.
The
- ISA 620, Using the Work of an Auditor’s Expert;
- ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
- ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
- ISRS 4400 (Revised), Agreed-upon Procedures Engagements.
The IAASB is asking for comments via a digital response template that can be found on the
In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.
President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an
The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings.
Trump has
Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.
Food prices could rise by 2.6% in the short run due to tariffs, according to an
The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.
Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist
Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time.
“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said.
One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load.
“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai.
Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies.
“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.
However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area.
“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai.
As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales.
“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai.
While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves.
“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”
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