The Public Company Accounting Oversight Board announced today it settled a disciplinary order sanctioning Yusufali & Associates and Yusufali Musaji, the firm’s owner and partner for multiple violations of PCAOB rules and standards.

The PCAOB imposed a $50,000 fine, revoked the firm’s registration and barred its partner.

The sanction is the latest in a long line of increased enforcement efforts by the PCAOB, most recently including sanctions against four firms in September for failing to make required communications with audit committees, as well as one firm for violating reporting requirements. The Board previously sanctioned Baker Tilly, Grant Thornton Bharat, Mazars and SW Audit in February, as well as three firms in November 2023 and five firms in July 2023.

The violations committed by the Yusufali & Associates and/or Musaji include:

• Failing to obtain engagement quality reviews;
• Failing to obtain sufficient appropriate audit evidence and to perform sufficient audit procedures for multiple significant accounts;
• Failing to determine whether there are critical audit matters;
• Failing to make certain required audit committee communications;
• Failing to comply with audit documentation requirements and failing to cooperate with a Board inspection; and,
• Failing to file Form APs.

The Board also found that the firm’s quality control system failed to provide reasonable assurance that the firm:

1. Would comply with standards, including requirements regarding audit documentation, engagement quality reviews and Form APs filings, and, 
2. Only undertook engagements that it could reasonably expect to perform with professional competence.

“To protect investors, the PCAOB will not hesitate to hold accountable auditors who fail to perform audits in accordance with PCAOB rules and standards,” PCAOB Chair Erica Williams said in a statement.

Without admitting or denying the finding, Musaji and the firm consented to the PCAOB’s order, which:
 

• Censures both respondents and imposes a $50,000 civil money penalty, jointly and severally, against them; 
• Revokes the firm’s registration with the right to reapply after three years; 
• Bars Musaji with a right to petition to terminate his bar after three years; 
• Requires the firm to undertake remedial efforts to improve its system of quality control before reapplying to registration; and, 
• Requires Musaji to complete 50 additional hours of continued professional education before seeking to terminate his bar.

The 2024 elections are nearly upon us, with the fate of the tax world hanging in the balance. Of course, other important issues loom as well, including open borders, crime, inflation, and conflicts in Europe and the Middle East, as well as the style and personality of the candidates themselves. But for tax nerds, these are eclipsed by the positions offered by the candidates on taxation.

The tax landscape is highly dependent on the fate of the election, according to Marc Gerson, a member at Miller & Chevalier and former majority counsel at the House Ways and Means Committee.

“Obviously the fate of the 2017 tax cuts is at stake,” he explained. “But also what happens during the lame duck session is critical. The focal point will be to extend the 2017 provisions which were enacted on a temporary basis. Some have expired, while others will expire at the end of 2025, so it’s safe to say that regardless of the election results, we will see some tax legislation next year. Neither party wants to see higher taxes on all Americans. What is to be determined is the length and scope of any extension and how it will be paid for.”

They also have to pass a budget, he observed: “And regardless of formal requirements, there will be incredible pressure on Congress and the White House to pay for legislation so there will be no increase in the deficit. Some Republicans assert that the tax cuts ‘paid for themselves,’ since revenue increased after enactment of the Tax Cuts and Jobs Act.”

“There are Republicans that take the position that the extension of the TCJA should not have to be paid for because under dynamic scoring they will lead to greater revenue,” Gerson observed. “But some Republicans prefer deficit reduction to tax relief, and some Democrats believe that tax cuts will add to an already overburdened deficit.”

Dynamic scoring assesses the effect of tax legislation not only in terms of its direct effect on the budget, but also the indirect effects of tax on economic growth. It projects a positive or negative effect on jobs, wages, investment, gross domestic product and revenue. 

The reconciliation process allows the passage of the budget without the impediment of a filibuster by the minority party. The post-election “lame duck” Congress will return to Washington November 12. 

“So much depends on the election. If either party has a sweep, they will try to do tax through reconciliation. Then the extreme policies of either party will get tempered down,” said Gerson. “The other thing to keep in mind is that Congress and the White House next year will have immediate ‘must pass’ legislation so they will have to deal with the deficit, government funding and tax law. They really have a full agenda of ‘must pass’ legislation from the beginning of the year. It will be very challenging right from the start.”

Perhaps foremost among that must-pass legislation will be some kind of solution for funding the government (the current arrangement ends December. 20).

“The productivity of the new Congress is dependent on the election results, which may result in a change in control of both the House and the Senate,” said Gerson. “This may result in the delay of any real consideration in the lame duck session. The new Congress will have to deal with the debt limit, government funding, a farm bill and the TCJA tax cuts. Meanwhile, the current continuing resolution expires December 20. There could be disaster-related legislation in the lame duck session, which could involve targeted disaster tax relief and may start the discussion of a 2024 tax bill. And they may pass either an omnibus appropriations bill if they can agree on it, or another continuing resolution bill into the new year.”

Global confidence among accountants and finance professionals globally declined moderately in the third quarter of this year and is now at its lowest level since Q4 2023, although confidence increased in North America, according to the quarterly Global Economic Conditions Survey from the Association of Chartered Certified Accountants and the Institute of Management Accountants.

The survey, released Tuesday, found CFOs’ confidence also declined globally amid a sharp deterioration in their assessment of new orders. Even though confidence improved in North America, it recovered less than half of its previous decline. In contrast, there was a significant decrease in confidence in the Asia Pacific region. Concerns about the continued weakness of the Chinese economy probably weighed on sentiment, with the survey being completed before the authorities announced a pivot to a more aggressive policy stimulus. Confidence also fell significantly in Western Europe, driven by a decline in U.K. confidence, amid concerns about tax hikes in the upcoming budget.

The survey also asked accountants to rank their top three risk priorities and for the second consecutive quarter, regulatory change ranked at the top for respondents in financial services, while the economy remained in first place for those in the corporate sector. Both public sector entities and small and medium-sized practices cited cybersecurity as their largest concern. But for the first time, climate change claimed a spot in the top three, with the public sector placing it third. Another first-ever was by region, with Western Europe ranking talent scarcity and retention first.

“The global economy has been quite resilient so far in 2024, but the latest survey of accountants points to some easing in growth at the current juncture,” said ACCA chief economist Jonathan Ashworth in a statement. 

The proportion of respondents reporting increased operating costs remains elevated by historical standards in most parts of the world, although the share of global respondents reporting problems accessing finance moved lower again amid policy easing by central banks. 

“While the increase in confidence in North America is welcome, the key indicators are consistent with some slowing in the U.S. economy and significant caution on behalf of businesses,” said 

Alain Mulder, senior director of Europe operations and global special projects at the IMA, in a statement. “But with the job market showing resilience and the Federal Reserve beginning its rate-cutting cycle, the most likely scenario for the U.S. economy still looks to be a soft landing. 

In North America, confidence improved somewhat in Q3, but recovered less than half of Q2’s decline, and remained below its historical average. The New Orders, Capital Expenditure and Employment indices all declined in different degrees and are well below their historical averages. The proportion of respondents reporting increased operating costs eased to its lowest since Q1 2021, while remaining high by historical standards. 

“All in all, while the increase in confidence is welcome, the key indicators are consistent with some slowing in the U.S. economy and significant caution on behalf of businesses,” said the report. “But with the job market showing resilience and the Federal Reserve beginning its rate-cutting cycle, the most likely scenario for the U.S. economy still looks to be a soft landing. Nevertheless, given the uncertainty faced by firms amid the election, and sharply heightened geopolitical tensions, one cannot rule out a sharper-than-expected slowdown.”