AICPA News is a round-up of recent announcements from the American Institute of CPAs.
AICPA Seeks Comment on Proposed Update to Auditors’ Responsibilities Related to Fraud
The American Institute of CPAs’ Auditing Standards Board (ASB) is currently seeking public comment on a proposed standard updating auditors’ responsibilities related to fraud.
The proposed Statement on Auditing Standards (SAS), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, contains a number of changes, including the establishment of required procedures for when an auditor has identified fraud or suspected fraud. The proposed SAS also reminds auditors to maintain professional skepticism throughout the audit.
Comments on the draft are due by Oct. 3, 2025. If issued as final, the proposed SAS would supersede SAS No. 122, Statements on Auditing Standards: Clarification and Recodification,as amended, section 240, Consideration of Fraud in a Financial Statement Audit (AU-C Section 240), and amend several other standards.
Proposed changes in the exposure draft include:
- New requirements to clarify the auditor’s response when fraud or suspected fraud is identified in an audit of financial statements.
- Additional guidance to explain the relationship of fraud with corruption, bribery, and money laundering, as well as fraud committed against an entity by third parties.
- A new requirement that emphasizes the importance of remaining alert throughout the audit for information that is indicative of fraud or suspected fraud.
- A new requirement for the engagement partner, when addressing engagement resources, to determine that members of the engagement team collectively have the appropriate competence and capabilities.
- A broadening of the requirement for an auditor to perform a retrospective review of management judgments and assumptions related to accounting estimates reflected in the financial statements of the prior year.
- A new requirement for the auditor to treat the risk of management override of controls as a risk of material misstatement due to fraud at the financial statement level and to determine whether such risk affects the assessment of risks at the assertion level.
- An enhanced requirement for an auditor to take into account related fraud risk factors when determining which types of revenue, revenue transactions, or relevant assertions give rise to risks of material misstatement due to fraud.
- The proposed standard clarifies that even when an identified misstatement due to fraud is not “quantitatively material,” it may nevertheless be “qualitatively material” depending on who instigated or perpetrated the fraud (such as management) and why the fraud was perpetrated.
- Updated communication requirements for management and the governing body throughout the audit engagement.
If issued as final, the proposed SAS would be effective for audits of financial statements for periods ending on or after December 15, 2028, with early implementation permitted.
AICPA Makes Recommendations as Treasury and IRS Transition to Electronic Payment and Disbursement System
In a letter sent to the Department of the Treasury, the American Institute of CPAs (AICPA) offered feedback and recommendations for comments pertaining to the implementation of Executive Order 14247, Modernizing Payments To and From America’s Bank Accounts. The order requires the Secretary of the Treasury to cease issuing paper checks for all federal disbursements, and requires all payments made by the federal government to be electronically processed. Additionally, the order requires that issuing paper checks for federal disbursements must cease by September 30, 2025, and that all federal receipts should be processed electronically as soon as practicable to the extent permitted by law.
The adoption of an electronic system for federal disbursements and receipts would increase efficiency, reduce costs and significantly diminish the occurrence of lost or stolen checks. The AICPA has supported the transition to electronic payments for federal disbursements and receipts; however, there are challenges with implementing a system that imposes a mandate on taxpayers to have a U.S. bank account in order to participate. Mandating a U.S. bank account for electronic tax payments could exclude vulnerable taxpayers like seniors and the “unbanked” population, while international banking rules currently limit automated clearing house (ACH) transfers with non-U.S. financial institutions.
The AICPA requests that Treasury consider the following recommendations:
- Implement exceptions to the order for individuals and business entities not physically present in the U.S. that do not have a U.S. bank account.
- Exempt temporary non-U.S. individuals – such as short-term business visitors – from electronic payment mandates, allowing them to receive tax refunds by paper check. AICPA also recommends permitting individuals without a Social Security Number or individual taxpayer identification number to make tax payments by check until their taxpayer identification is issued, helping them meet their obligations and avoid penalties.
- Expand Electronic Federal Tax Payment System (EFTPS) capabilities, which would enable business accounts to submit payments on behalf of individuals for Form 1040 and 1040-NR, including estimated tax payments, extension payments and balances due. There should be no cap on the number of individual transactions a business account can process.
- Exempt all trust and estate income tax return filings from the requirements of the order until Form 1041 has been updated with the appropriate information and that implementation of the order be delayed for trusts and estates until Treasury and the IRS can address certain issues concerning the administration of an estate or trust. Additionally, the AICPA recommends that Treasury and the IRS allow trusts and estates to pay via IRS Direct Pay, rather than have to set up an EFTPS account.
- Provide specific guidance regarding how exceptions will be applied for and granted to qualified taxpayers to whom this order would present an undue burden, including individuals over the age of 65 and taxpayers who are unable or unwilling to obtain U.S. bank accounts. The AICPA also recommends that taxpayers granted an exception have the option to receive tax refunds as a paper check or through a direct express card.
- Extend the timeframe for implementation of the order or that, at a minimum, the Secretary offer meaningful transitional rules when facilitating the transition of the federal disbursement and receipt system to being exclusively electronic.
- Consider seeking statutory authority for the mandates outlined in the executive order, which would provide a solid foundation for this transition to electronic payments.
- Convene a group of stakeholders, including the AICPA, to assist with the establishment of rules and processes for implementing the order.
AICPA Requests Guidance on SECURE 2.0 Roth Mandated Catch-Up Contributions
In a letter submitted to the Department of the Treasury and Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) requested additional guidance related to catch-up contributions designated as Roth contributions within Section 603 of the SECURE 2.0 Act of 2022, which was signed into law as part of the Consolidated Appropriations Act of 2023. In January 2025, Treasury and the IRS issued REG-101268-24, which included guidance reflecting the statutory changes made by section 603 of SECURE 2.0. Those changes include the requirement that catch-up contributions made by certain catch-up eligible participants must be designated as Roth contributions, otherwise referred to as the Roth mandate.
The Roth mandate affects certain employees participating in employer-sponsored retirement plans who are eligible to make catch-up contributions and whose wages meet a specific income threshold.
Safe harbor for Form W-2 reliance
The AICPA recommends that Treasury and the IRS create a safe harbor that allows plan administrators to rely on W-2 wage information when determining if employees exceed the catch-up wage threshold for the purposes of the Roth mandate. If such a safe harbor is unable to be adopted, clear guidance is suggested related to scenarios involving predecessor employers and other third-party arrangements, including relief for non-compliance that may result and otherwise be unavoidable in reasonable administration of plans using Form W-2 information for purposes of determining which employees are subject to the Roth mandate.
AICPA Survey: One-Third of Americans Have Taken No Financial Steps to Prepare for a Natural Disaster
A recent survey conducted by The Harris Poll on behalf of the American Institute of CPAs (AICPA) found that nearly one-third (32%) of Americans have taken no financial steps to prepare for a natural disaster. Meanwhile, two-thirds (66%) of Americans say that being impacted by a natural disaster would have a major (29%) or moderate (37%) impact on their financial situation.
The most popular actions Americans have taken to prepare financially for a natural disaster are evaluating insurance needs to assure adequate coverage (31%) and taking an inventory of assets and possessions for insurance purposes (30%). At the bottom of the list was creating or updating an estate plan and/or will (19%).
Business Owner Concerns
When business owners were asked what their top three biggest worries were for their business when it comes to recovering from a natural disaster, they were most concerned with:
- Loss of revenue due to business closure or disruption (33%)
- Loss of customers or contracts (29%)
- Damage to property, equipment, or inventory (26%)
Advice for Natural Disaster Financial Preparation – Individuals
- Create an Emergency Fund
- Review Your Insurance Policies
- Protect Important Financial Documents
- Make an Estate Plan
Advice for Natural Disaster Financial Preparation – Business Owners
- Consider communication channels
- Plan for remote work
- Protect your data
- Prepare for physical workspace disruption
AICPA and CIMA Launch Business Resilience Toolkit to Help Finance Leaders Navigate Risk and Uncertainty
The AICPA and CIMA have launched its Business Resilience Toolkit to support finance professionals and business leaders in building resilience amid economic uncertainty and
To support this shift, AICPA and CIMA have developed the Business Resilience Toolkit, tailored for finance professionals and business leaders. This resource offers practical tools, strategic frameworks, and thought-provoking prompts to help organizations:
- Scan the external environment with clarity
- Evaluate how economic shifts impact operations
- Adapt strategies to weather uncertainty and seize new opportunities
The Business Resilience Toolkit equips accounting and finance professionals to act as strategic advisors and critical business partners. Hood continued, “resilience is not a fixed state, it’s a capability. And with the right tools, finance can build it.”
While not exhaustive, the toolkit aims to encourage fresh thinking about how uncertainty and volatility interact with the different parts of an organization. By combining insight with proactive planning, finance leaders can build a more resilient business, ready to respond, recover, and even thrive in times of change.
More than One-Third of Americans Have Experienced Fraudulent Activities After Being Affected by a Disaster Says AICPA Survey
Thirty-seven percent of Americans have experienced fraudulent activities after being personally and/or professionally impacted by a natural disaster, according to a recent survey conducted by The Harris Poll on behalf of the American Institute of CPAs (AICPA).
When asked what types of fraud they had experienced, they reported:
Identity theft – 14%
Government assistance fraud – 11%
Loan scams – 11%
Vendor fraud – 10%
Utility scams – 10%
Charity fraud – 10%
Insurance fraud – 10%
Contractor fraud – 8%
The survey also found that those in the Northeast (40%) and South (40%) were more likely to have experienced fraudulent activities as a result of being personally or professionally affected by a natural disaster than those in the Midwest (31%).
Insurance Coverage for Fraud
The survey found that 48% of Americans said their personal insurance coverage doesn’t include protection against fraud-related losses during disaster recovery. Thirty-nine percent said their personal insurance coverage includes protection against fraud-related losses during disaster recovery and 13% weren’t sure.
Meanwhile, 64% of business owners say they have insurance coverage that includes protection against fraud-related losses during disaster recovery, 32% don’t have insurance coverage that includes protection against fraud-related losses during disaster recovery and 4% were not sure.
AICPA Expresses Strong Support for Tax Fairness for Disaster Victims Act
In a letter to Representative Timothy Kennedy (D-NY), the American Institute of CPAs (AICPA) expressed support for H.R. 3975, the Tax Fairness for Disaster Victims Act, introduced by Kennedy. The legislation would allow individuals impacted by federally declared disasters to elect the prior year’s earned income for purposes of the Earned Income Tax Credit (EITC). The bill contains a lookback rule, which has been incorporated into multiple legislative packages in recent years but has not been made a permanent form of disaster relief. The Tax Fairness for Disaster Victims Act would make this relief permanent, which the AICPA has long advocated for.
The EITC is a refundable tax credit that requires taxpayers to have earned income below a certain threshold, which will depend on their filing status and the number of children they have. Federally declared disasters can disrupt work and reduces earned income, preventing taxpayers from claiming the EITC.
AICPA Provides Comments on Two Proposed Regulations Aimed at Corporate Reorganizations and Separations
In a letter sent to Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) provided comments on two proposed regulations: REG-112261-24 (nonrecognition of gain or loss in corporate separations, incorporations, and reorganizations) and REG-116085-23 (multi-year reporting requirements for corporate separations and related transactions).
Under the current proposed regulations, taxpayers are required to document and report to the IRS a detailed plan of distribution or reorganization. The plan must be adopted before the first step is undertaken and must be carried out expeditiously.
The AICPA provides the following recommendations regarding divisive reorganization, acquisitive reorganization, and reporting requirements:
Relax the plan requirement to recognize administrative and commercial practicalities in carrying out non-recognition transactions.
Extend the timing of the plan documentation requirement from the date the first step of the plan takes place to the date the transactions included in the plan must be reported on the parties’ relevant federal tax filings.
Revise the defective plan resolution language from an approach in which action from the Commissioner is necessary to confirm qualification to one in which the taxpayers can report qualification in all instances in which the requirements for non-recognition appear to be met, reserving discretion for the Commissioner to recharacterize transactions where appropriate.
“The AICPA recommends relaxing the proposed regulations’ reorganization or distribution plan requirement to make it more administrable and practical for taxpayers and practitioners,” said Ning Yim, Senior Manager for Tax Policy & Advocacy with the AICPA.
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