Connect with us

Accounting

Quality management standards: Time is running out!

Published

on

Has your firm started work on implementing the new quality management standards? If you haven’t already started, it may be challenging getting it done by the Dec. 15, 2025, deadline for having a quality management system in place. 

That may seem like a long way off, with plenty of time to update your existing quality control document. Many firms are underestimating the level of effort required, and seem to think that simply changing the wording from “document” to “system” will be sufficient. However, that just isn’t the case. 

What’s the difference between a QCD and a QMS?

The biggest — and most obvious — difference is that the QCD was a document while the QMS is a system. The defining point of QMS is the “S” for system. Your firm needs to develop a system to ensure that the output meets the standards of quality. 

The reality is that the quality control document often sat on a shelf to be dusted off every three years for peer review. When working with firms on their QMS, we start by talking through their QCD with leaders who are often surprised by the differences between what the document says the firm does versus what is actually happening at the firm. Trying to comply by switching the name from QCD to QMS and folding in a few things, like adding snippets about technology and IP resources to the human resources section of the QCD, simply won’t work. Your firm’s QMS must also include accountabilities and tracking measures that are lacking in a QCD.

Quality objectives in a QMS

The new standards require firms to establish quality objectives around each of eight components, which you can read about in the standard. Because every firm is different, this isn’t just a boilerplate document that can be slightly edited. Each firm’s objectives and the path to achieving those objectives will be different. 

At AccountAbility Plus, we recommend using the long-standing SMART approach to establishing quality objectives for each of the eight components.

  • Specific: Objectives are stated in clear and specific terms to ensure that every team member is on the same page. For example, “As a firm we will not do PCAOB A&A work.” 
  • Measurable: Objectives must be measurable. Has this objective been completed? How will feedback be assessed? What will be the standard for acceptable feedback?
  • Attainable: These objectives must also be attainable within the firm’s capacity, with adequate resources, competencies, and methodologies to ensure they can be achieved.
  • Relevant: Quality objectives must be relevant to the firm’s strategic goals. They must align with the quality standards of the profession and the firm and ensure that regulatory requirements are met.
  • Time-oriented: Each objective must also be time-oriented with a clear and unambiguous date for achievement. Firms must also determine the timing of responses to risks depending on the severity.

A firm risk assessment process in a QMS

In the old QCD standards, it wasn’t clear how you were supposed to respond when you had a quality issue. QCDs could also be vague about the timeframes for evaluating and responding to risks, using words such as “periodically” and “timely,” which are left up to interpretation of each person in the firm. 

In contrast, your firm’s QMS must be actionable and must include a risk assessment process to be implemented by your firm. This process is used to identify risk events that could occur based on the firm’s quality objectives, and must include a process for tracking and documenting when you have risk events. You also need to determine the specific timing of your response to risk events by carrying out a root cause analysis to determine the remediation plan.

For a minor risk event, like issuing financials with a typo, or a staff member being short of CPE, but they don’t do Yellow Book audits, you can likely bundle these risks and respond to them once or twice a year. 

However, if this staff person does governmental audits for which Yellow Book CPE is required, the response needs to be much quicker. You need to determine what went wrong in your system and fix it to ensure that team members don’t miss their Yellow Book CPE in the future. 

Severe risk events — like issuing the wrong opinion or finding out the firm is not independent after the report has been issued — will require immediate attention to gather facts, determine the impact, and develop a response. 

Root cause analysis and the ‘Five Whys’ approach

When a risk event occurs, you need to determine why it happened by doing a root cause analysis, then you need to remediate the problem. 

For example, let’s say you have to reissue a financial statement. Sometimes the reason for reissuance isn’t a big deal, such as a typo that doesn’t affect the numbers or the opinion or anything significant, but you still need to reissue the financials to correct the minor error. Since this is a minor risk, you would track how many times it happened and at least once a year perform a root cause analysis. 

To perform a root cause analysis, we teach firms to use the ‘Five Whys’ approach. You start by asking what happened, and then repeatedly ask why that happened. By the time you get to the fifth why, you should find the root cause for the problem. Using our example of the typo, you start by asking what happened. Why did this typo happen? Then you keep asking why until you get to the root cause. 

You also need to consider how pervasive each risk event is. If it only occurred once or twice during the year, you’ll want to make sure your proofing system is robust enough to minimize the risk of typos. However, it’s not worth spending a significant amount of time and money to absolutely eliminate all risk of typos. However, if you’re reissuing financials to fix typos dozens of times a year, then there’s clearly something wrong with your proofing process. Using the Five Whys method, you should be able to determine the root cause and figure out how to mitigate this from happening as often. 

On the other hand, if you need to reissue financials due to a material misstatement, this is clearly a more severe risk event. You’ll need to immediately perform the root cause analysis as to why it happened and determine next steps to remediate the issue.

This standard was designed to be scalable, and firms should take advantage of this to right-size their response to risk events.

Don’t delay — start now

Ideally, you have already started this time-consuming and mandatory process. Your firm needs to consider each of the eight components and determine quality objectives that are both SMART and reflective of your firm’s characteristics. 

Several of the firms that we’ve been working with over the last year will be ready to start piloting their new QMS early in 2025. They’ll have the chance to see what’s working and what’s not working so they can make any necessary adjustments before the effective date. 

For firms that are truly committed to quality, this is more of a cost burden than a value add, although it’s never a bad idea to make enhancements that will improve quality. You may find some process improvements along the way that improve more than just quality. 

Dec. 15, 2025, will be here sooner than you think — start today, not tomorrow. 

Continue Reading

Accounting

IRS employee union requests emergency relief

Published

on

The National Treasury Employees Union, which represents workers at the Internal Revenue Service among 37 federal agencies and offices, has asked a federal judge for emergency relief to preserve the union rights of federal employees while NTEU’s legal challenge to President Trump’s executive order stripping unions of collective bargaining rights can be heard in court.

Trump signed an executive order last Thursday removing the requirements from employees at agencies including the Treasury Department that he deemed to have national security missions. On Monday, the NTEU filed a lawsuit to stop the move arguing that Trump’s rationale for protecting national security was just a way to end union protections for federal workers. The administration also wants to prevent the unions from collecting dues automatically withheld from employee paychecks.

NTEU’s request for a preliminary injunction was filed Friday with U.S. District Judge Paul Friedman.

 “NTEU seeks emergency relief to protect itself and the workers it represents from this unlawful attempt to eliminate collective bargaining for some two-thirds of the federal workforce,” the request stated.

The NTEU contended that the Trump administration’s executive order claims that allowing workers to join a union was a threat to national security were absurd.

“We all know this has nothing to do with national security and that the true goal here is to make it easier to fire federal employees across government,” said NTEU national president Doreen Greenwald in a statement Friday. “Just five days after declaring the administration would no longer honor our contract with Health and Human Services, thousands of brilliant civil servants who work tirelessly to improve public health were let go for spurious reasons and little recourse to fight back.”

The union pointed out that Congress declared 47 years ago that collective bargaining in the federal sector was in the public’s interest by giving employees a voice in the workplace and allowing labor and management to work together. It acknowledged there is a narrow exemption in the law for groups of employees whose work directly impacts national security, but argued that Trump’s executive order is blatant retaliation against federal sector unions and ignores the laws passed by Congress creating the agencies.

In agencies where a reduction-in-force has been announced, NTEU’s contracts provide time for employees to respond to a RIF notice and explore alternatives to mitigate the impact of the layoffs.

Earlier this week, after two court rulings in California and Maryland, the IRS’s acting commissioner, Melanie Krause, announced the IRS would be bringing back approximately 7,000 probationary employees who had been fired and then put on paid administrative leave.

A bipartisan bill has been introduced in Congress to preserve collective bargaining rights for federal employees. The Protect America’s Workforce Act (H.R. 2550), sponsored by Rep. Jared Golden, D-Maine, and Brian Fitzpatrick, R-Pennsylvania, would overturn Trump’s executive order stripping collective bargaining rights from hundreds of thousands of federal workers at multiple agencies.  Separately, eight House Republicans and every House and Senate Democrat have sent letters to the White House condemning the executive order.

Continue Reading

Accounting

Estate planning for the Tax Cuts and Jobs Act expiration

Published

on

The political calculus involved with the details of estate planning next year and beyond may be distracting financial advisors and clients from a larger, simpler conversation, one expert says.

On the off chance that the federal estate-tax exemption levels of $13.99 million for individuals (and double for couples) revert to half those amounts when Tax Cuts and Jobs Act provisions expire in 2026, only 0.2% of households would face potential duties upon transfer of assets, according to Ben Rizzuto, a wealth strategist with Janus Henderson Investors‘ Specialist Consulting Group. He predicted that most financial advisors and high net worth clients, such as those he works with and others across the industry, will see no changes. 

With few other revenue-raising provisions available to President Donald Trump and Republican lawmakers, they’re not likely to shield all estates from payments to Uncle Sam — as much as they might like to play undertaker to the “Death of the Death Tax,” Rizzuto said, using the label for estate taxes adopted by critics favoring bills like the “Death Tax Repeal Act.” Lawmakers’ decisions on future exemptions from the taxes (and when they make those decisions) remain out of advisors’ control. Meanwhile, they must remind clients that estate planning is much more than having a will and avoiding taxes, Rizzuto said.

“For financial advisors and clients, I would expect for many of them not to have to worry about federal estate taxes next year,” he said in an interview. “Even though they may not have to worry about it, there are still a lot of good conversations to be had.”

READ MORE: Tax Cuts and Jobs Act expiration: A guide for financial advisors

The 1%

Trust tools that reduce the value of the assets that will transfer to spouses or other beneficiaries upon a client’s death, combined with the available statistics about the shrinking share of estates subject to taxes, could bring some peace of mind to clients. The 2017 tax law itself pushed down estate tax liability as a percentage of gross domestic product to a quarter of its 2001 level, according to an analysis by the “Budget Model” of the University of Pennsylvania’s Wharton School. Just two years after the law’s passage, the number of taxable estates had plummeted to 1,275 — or 1% of the number at the beginning of the century.

At the same time, advisors could raise any number of questions with clients about their estates that involve varying degrees of expertise and collaboration with outside professionals. And many surveys have found that clients are expecting them to do so. For example, at least 70% out of a group of 10,000 adults contacted in January by WeAreTalker (formerly OnePoll) on behalf of online legal information service Trust & Will said advisors should offer estate planning. In addition, 40% of the group said they would switch to an advisor who provided that service.

“We’re seeing a fundamental shift in client expectations,” Trust & Will CEO Cody Barbo said in a statement. “The findings are clear. Advisors who fail to integrate estate planning into their practice aren’t just missing an opportunity; they are facing a threat to their client base as wealth transfers to younger generations over the next two decades.”

READ MORE: Ethical wills can be a crucial tool for estate planning

chart visualization

Get back to the planning basics

In that context, advisors and their clients should steer clear of trying to make sense of a complicated, ever-changing flow of news from Capitol Hill as Trump and the GOP pursue major tax legislation with a year-end deadline, Rizzuto said. If clients truly could be on the hook for estate taxes, a grantor retained annuity trust, a spousal lifetime access trust or gifting strategies may eliminate the possibility. One method involved with the latter could set them up in the future to receive stock that is “highly appreciated with lower basis,” Rizzuto noted, citing the example of equities that have gained a lot of value that a client could give to their parents.

“Why not gift them upstream?” Rizzuto said. “My father holds it. I tell him, ‘Dad, you have to do these things: Live for another 12 months, make sure you don’t sell, make sure that you update your will or your instructions to gift it back to me when you die.’ That’s another idea that we’ve been talking about with advisors.”

From another perspective, these possible paths forward may beckon to clients this year, if they are tuning into Beltway news about the progress of the tax legislation, he said. To bypass the risk of client perceptions that their advisor isn’t doing any tax planning at all, Washington’s complex maneuvering around the future rules is, “if nothing else,” a “great opportunity for advisors to bring this up at a very high level,” Rizzuto said.

“Advisors will really need to go back to basics and have some foundational conversations with clients,” he said, suggesting their goals with taxes as one key point of discussion. “‘What is it that we actually control within your financial and tax plan?’ When it comes right down to it, it’s really just incomes and deductions.”

Continue Reading

Accounting

Developing future leaders in accounting: the new imperative in an AI and automation driven era

Published

on

As technology continues to automate routine tasks, the role of finance professionals is evolving, demanding deeper capabilities in critical thinking, communication and business acumen. 

Many of PrimeGlobal’s North American firms are focused on cultivating these skills in their future leaders. Carla McCall, managing partner at AAFCPAs, Randy Nail, CEO of HoganTaylor, and Grassi managing partner Louis Grassi shared their views with PrimeGlobal CEO Steve Heathcote on the need for future leaders to balance technological proficiency with human-centered skills to thrive.

AI is transforming the sector by streamlining workflows, automating data analysis and reducing manual processes. However, rather than replacing accountants, AI is reshaping their roles, enabling them to focus on higher-value tasks. In the words of Louis Grassi, AI can be seen as a strategic partner, freeing accountants from routine tasks, enabling deeper engagement with clients, more thoughtful analysis, and ultimately better decision-making. 

Nail emphasized the importance of embracing AI, warning that those who fail to adapt risk being replaced by professionals who leverage the technology more effectively. HoganTaylor’s “innovation sprint” generated over 100 ideas for AI integration, underscoring why a proactive approach to adopting new technologies is so necessary and valuable.

McCall advocates for an educational shift that equips professionals with the skills to interpret AI-generated insights. She stressed that accounting curricula of the future must evolve to incorporate advanced technology training, ensuring future accountants are well-versed in AI tools and data analytics. Moreover, simulation-based learning is becoming increasingly crucial as traditional methods of education become obsolete in the face of automation.

Talent development and leadership growth

As AI reshapes the profession, firms must rethink how they develop and nurture their future leaders. To attract and retain top talent, firms need to prioritize personalized development plans that align with individual career goals. 

HoganTaylor’s approach to talent development integrates technical expertise with leadership and communication training. These initiatives ensure professionals are not only proficient in accounting principles but also equipped to lead teams and navigate complex client interactions.

Nail underscored the growing importance of writing and presentation skills, as AI will handle routine tasks, leaving professionals to focus on higher-level analytical and decision-making responsibilities.

Soft skills are the success skills

While technical proficiency remains vital, future leaders must also cultivate critical thinking, communication and adaptability — skills McCall refers to as the “success skills.” McCall highlights the necessity of business acumen and analytical communication, essential for interpreting data, advising clients and making strategic decisions. 

Recognizing teamwork and collaboration remain crucial in the hybrid work environment, McCall explained in detail how AAFCPA fosters collaboration through structured remote engagement strategies such as “intentional office time,” alcove sessions and stand-up meetings. Similarly, HoganTaylor supports remote teams by offering training for career advisors to ensure effective mentorship and engagement in a dispersed workforce.

McCall emphasized why global experience can be valuable in leadership development. Exposure to diverse markets and accounting practices enhances professionals’ adaptability and broadens their perspectives, preparing them for leadership roles in an increasingly interconnected world.

Grassi reminded us that an often-overlooked leadership skill is curiosity. In his view the most effective leaders of tomorrow will be inherently curious — not just about emerging technologies but about clients, market shifts and global trends. Encouraging curiosity and continuous learning within our firms will distinguish the true industry leaders from those simply reacting to change.

A balanced future

What’s clear from speaking to our leaders is PrimeGlobal’s role in fostering trust, community and knowledge sharing. McCall recommended member-driven panels to discuss AI implementation and automation strategies and share best practice. Nail, on the other hand, valued PrimeGlobal’s focus on addressing critical industry issues and encouraged continuous evolution to meet professionals’ changing needs.

The future of leadership in the accountancy profession hinges on a balanced approach, leveraging AI to enhance efficiency while cultivating essential human skills that technology cannot replicate, which Grassi highlights skills including leadership and building client trust.

As McCall and Nail advocate, the next generation of accountants must be agile thinkers, skilled communicators and strategic decision-makers. Firms that invest in these competencies will not only stay competitive but will also shape the future of the industry by developing well-rounded leaders prepared for the challenges ahead.

By investing in both AI capabilities and essential human skills, firms can not only future proof their leadership but also shape a resilient and forward-thinking profession ready to meet the challenges of the future.

As Grassi concluded, while technical skills provide the foundation, leadership in accounting increasingly demands emotional intelligence, empathy and adaptability. AI will change how we perform our work, but human connection, trust and nuanced judgment are irreplaceable. Investing in these human-centric skills today is critical for firms aiming to build resilient leaders of tomorrow. To remain relevant and thrive, professionals must prioritize developing strong success skills that will define the leaders of tomorrow.

Continue Reading

Trending