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IRS urged to do more to protect whistleblowers despite NDA

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The Internal Revenue Service needs to do more to enable whistleblowers to report on fraud, waste and abuse, even if they’ve signed nondisclosure agreements, which should provide anti-gag provisions allowing them to speak out, according to a new report.

The report, released Thursday by the Treasury Inspector General for Tax Administration, comes in response to a congressional request to assess whether the IRS complied with the Whistleblower Protection Enhancement Act of 2012 by including the required anti-gag provision in its NDA and related documentation as required by law. It’s unclear whether the congressional request was related to the IRS whistleblowers who complained about preferential treatment of Hunter Biden’s tax evasion case.

The anti-gag provision informs employees that their rights and obligations to report wrongdoing to Congress, the Inspectors General, or the Office of Special Counsel supersedes an NDA, the TIGTA report noted. 

The IRS estimates that approximately 500 to 1,000 of its employees and 6,000 of its contractors sign an NDA each year. “Without anti-gag provisions in the NDAs, employees and contractors might be reluctant or discouraged to report on fraud, waste, and abuse activities, which would cause reputational harm for the agency,” said the report. 

TIGTA found that the IRS has guidance that references whistleblower protections and addresses prohibited practices of retaliation against whistleblowers. However, specific reference to the anti-gag provision was not included in its NDAs, policies or whistleblower protections training. 

In addition, the IRS’s guidance on prohibited personnel practices under the Whistleblower Protection Enhancement Act document states that the NDA policy, form or agreement must include the anti-gag provision before the policy, form or agreement can be enforced. Because NDAs in use by the IRS at the time of TIGTA’s review did not contain anti-gag provisions, they may not be enforceable, according to the report. 

TIGTA reviewed 22 NDAs signed from August 2018 to April 2024 and found that five contained a partial reference to the anti-gag provision, but 17 did not contain any reference to the anti-gag provision. Some of teh existing internal guidance referenced NDAs and whistleblower protections. However, TIGTA did not see evidence of a dedicated NDA policy that required the anti-gag provision be included.  

The NDA and whistleblower guidance were not easily accessible for employees to find on the IRS intranet site. Training for new hires and annual briefings for all employees, managers and contractors mentioned the Whistleblower Protection Act of 1989, and addressed the prohibited practices of retaliating against whistleblowers. Although it was not required, they did not contain the anti-gag provision. As a result of TIGTA’s evaluation, in July 2024, IRS officials updated the NDA form template for contractors with staff-like access and non-procurement employees involved in procurement activities to include the required anti-gag provision. The IRS also updated its Expert Witness NDA form template in October 2024. 

TIGTA made four recommendations in the report. It recommended the IRS should ensure that NDAs, policies, forms and other guidance documents include the required anti-gag provision. It also suggested the IRS should create a dedicated section for NDAs in its internal guidance that contains the anti-gag provision. The IRS should also include information about the anti-gag provision in training programs covering whistleblower protections (such as new employee orientation and contractor training), the report recommended, and add a link to TIGTA’s Whistleblower Protections web page on its internal web page and pertinent information to the Employee Resource page on its internal webpage to ensure employee awareness of the whistleblower protections as it relates to the anti-gag provision. 

IRS officials agreed with TIGTA’s recommendations. During the evaluation, the IRS updated its NDA template for contractors with staff-like access, non-procurement employees involved in procurement activities, and expert witnesses to include the required anti-gag provision. The IRS also developed updates to the fiscal year 2025 mandatory Prohibited Personnel Practices and Whistleblower training, and the updates are under final legal review. 

“We appreciate your recognition of our references to anti-gag provisions in our documentation and training, and we appreciate your identifying areas where we can improve our notification of whistleblower protections and whistleblower rights,” wrote IRS chief risk officer Michael Wetklow in response to the report.

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IAASB tweaks standards on working with outside experts

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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 proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • 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 IAASB website by July 24, 2025.

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.  

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Tariffs will hit low-income Americans harder than richest, report says

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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 analysis from the Institute on Taxation and Economic Policy.

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 imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

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 estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

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Accounting

At Schellman, AI reshapes a firm’s staffing needs

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Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

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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