April 2024
GenAI
prompt
writing
Tips for accountants
8
ALSO
Microsoft’s huge AI rollout: What
CPAs need to know 16
Tech roundtable: There’s more to AI
than ChatGPT 22
PLUS
Onboarding clients
to reduce risk
4
Managing change
in audit technology
transformation
26
Easily manage large
Excel files
36
Journal of Accountancy
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2 | Journal of Accountancy
April 2024
April 2024
OTHER FEATURES
30 | Tax Matters
Tax Court petition is ruled untimely
26 | Managing change in audit
technology transformation
Constant change can be exhausting.
To transform their audit technology
despite change fatigue, firms can follow these tried-and-true suggestions.
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Court’s inaccessibility extends
taxpayers’ petition filing deadline
Foreign earned income and housing
exclusion denied
This month’s TOP STORIES
COLUMNS
8 | GenAI for CPAs: 10
prompt-writing tips
4 | Professional Liability
Spotlight
The emerging art of “prompt
crafting” can deliver more
powerful results from generative
AI platforms like ChatGPT
and Google Gemini.
ALSO
Help reduce risk with formal client
onboarding
Systematically onboarding clients
can help lower professional liability
risk by minimizing misunderstandings, miscommunications, and
misrepresentations.
36 | Technology Q&A
In this month’s column, find out
how to easily manage large Excel
workbooks and which features
differentiate Microsoft Edge from
other web browsers.
16 | Microsoft’s huge AI rollout:
What CPAs should know
Microsoft Copilot merges generative AI with key apps, potentially
revolutionizing how accountants
work. Here’s what early adopters say.
22 | Tech roundtable: There’s
more to AI than ChatGPT
Our panel provides perspective
on the potential, perils, and place
of GenAI in the wider context of
artificial intelligence and automation.
AICPA: Where to turn
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journalofaccountancy.com
April 2024 | 3
PROFESSIONAL LIABILITY SPOTLIGHT
Help reduce risk with formal
client onboarding
By Steven M. Platau, CPA, J.D., and J. Michael Reese, J.D., LL.M.
A powerful
retention
tool?
88%
The percentage
of customers who
say they are more
likely to remain
loyal to a business
that invests in
the onboarding
process.
Source: GuideCX.
M
any professional liability claims exhibit some
type of “miss” – a misunderstanding,
miscommunication, or misrepresentation. These
misses, or “M’s,” may be avoided with a systematic
approach to onboarding new or even existing
clients.
WHAT IS ‘ONBOARDING’?
In simplest terms, onboarding is the focused
and intentional integration of a client into
your practice. Digging deeper, onboarding
communicates the norms a client can expect
when dealing with your firm, which may differ
from what they have experienced with other
professionals. It is an opportunity to explain, from
the beginning, how you and the client will interact,
transmit information, address issues, and handle
any other item essential to the service.
CREATING AN ONBOARDING FRAMEWORK
Your approach to onboarding, how you perform
it, and what to include depends on your practice.
For example, you may choose to onboard a client
accounting or advisory services (CAS) client
during an in-person meeting with the entire
team, whereas onboarding a 1040 client may
be achieved via prerecorded videos or tutorials
provided to the client. Before you establish the
specifics, it is important to identify bedrock
principles that help you achieve your onboarding
goal. Should the unexpected arise, you can always
return to this base framework.
While each client onboarding may differ,
certain items should be consistently addressed,
including:
■ Engagement letter terms;
■ Communication protocols;
■ Client responsibilities;
■ Deadlines;
■ Protocols for additional service requests or
out-of-scope items; and
■ Anything unique to the engagement.
Developing the content to be addressed in
each onboarding topic requires forethought. Most
CPAs have a grasp of “make sure I tell them
4 | Journal of Accountancy
this, so they don’t stress me out.” Implementing
onboarding requires you to examine this before
you onboard a client. Ask yourself, “If I were a
client and knew nothing about working with
my firm, what information would I need to
save time, money, and aggravation? What are
the known bottlenecks or pitfalls?” Take those
answers and use your accumulated knowledge to
bridge process, information, and communication
gaps that go directly to the heart of, “I really
wish you would have told me that earlier.” Tailor
onboarding to the reality of your practice and
your clients to create an organized, repeatable, and
adaptable process.
ONBOARDING TO HELP AVOID A MISS
Addressing misunderstandings
Misunderstandings occur when there are
expectation gaps at critical junctures of the
engagement. For example, the client who
interprets “preparing tax returns” as including
extensive tax planning may be unpleasantly
surprised when the service the client expects to be
delivered differs from what is actually delivered.
The risks associated with that misunderstanding
may not be apparent until the services are
complete or well after.
In developing your onboarding, seek to
anticipate and address those areas where
misalignments with the client will have direct
repercussions. Clearly target the scope of
services — both included and excluded — as
well as the client’s responsibilities. Clients may
not understand deadlines and underestimate
how much time a CPA needs to complete the
work once information has been received. Be
prepared to discuss with specificity how client
responsiveness (or lack thereof ) impacts work
quality and the overall experience. Depending
on your fee structure, discuss the time you expect
to devote and how client delays may affect their
bill. If a client is not clear on scope or how you
are paid, those misunderstandings can lead to fee
disputes, which may ultimately lead to a claim.
April 2024
Misunderstandings also lead to missed
opportunities where your work is unresponsive
to the client’s true needs. Removing misunderstandings through onboarding can help your
client receive the service that is best aligned with
their requirements.
Addressing miscommunications
Miscommunications occur when accurate
information that directly affects a solution,
course of action, or scope is not timely delivered
to the necessary party. They also occur when the
information provided is not timely acted upon.
For example, a review client waits until just before
the start of fieldwork to reveal that they have not
found a replacement for their retired bookkeeper.
As a result, they are not prepared for you and may
require extra time to pull documents for you.
Miscommunications tend to lead to
unnecessary crises, increasing the potential for
error. Your onboarding should establish ground
rules for communication, addressing “who,”
“what,” “how,” and “when.” Identify permissible
and impermissible methods of communication,
what the client can expect for response time,
especially during periods of high volume, and
what is considered unacceptable for both parties.
Educate your client on what information is
necessary, including format, and how information
and expertise come together to create a
deliverable. Discuss the contextual hazards of
miscommunication. Ask your client if they have
plans that might affect engagement timing so
that you are not at a standstill when the client is
unavailable or surprised when they want it today.
Unearthing issues and communicating early
via onboarding can help keep miscommunications
from becoming service failures. It also allows
all parties to better understand the reach of the
engagement and sometimes puts you in a position
to fashion better solutions for the client.
Preempting misrepresentations
Misrepresentations are inaccurate or misleading
statements made by the client. When they are
initially made, you act upon these statements as if
they are accurate. Only later, when the inaccuracy
is revealed, do you realize your work may be wrong.
Some statements may be innocent, simply stemming from a lack of awareness. For example, a client
who needs to file international forms may answer
“no” to a question of whether they own or control
foreign assets because they never receive cash or
journalofaccountancy.com
income. Other statements may sound accurate but
are later found to be inconsistent with reality. Think
about the business owner who indicates they take
“salary,” but records show no payroll taxes being
withheld or paid.
The impact of a misrepresentation is unpredictable, and therein lies the rub. And while onboarding
cannot prevent a misrepresentation or the impact of
one, onboarding can make the client aware of their
responsibility to provide accurate information and
the ramifications of failing to do so.
BENEFITS OF ONBOARDING
When you understand how the “M’s” affect your
practice, you can design onboarding not only
to help lower your risk, but also to benefit your
firm. Formal onboarding standardizes prior
experience into an actual process. When done
consistently, onboarding results in more facilitative
communication, clearer definition of the services
the CPA will and will not provide, more timely
inbound information and better workflow, possibly
additional fees, and increased satisfaction for both
you and the client. An added bonus? Onboarding
may even uncover a problem client before services
start by spotlighting incompatibilities or facts that
may prompt you to terminate early before a “miss”
can happen.
Steven M. Platau, CPA, J.D., is a professor
of accounting in the John H. Sykes College of
Business at the University of Tampa and can be
reached at platau@ut.edu. J. Michael Reese, J.D.,
LL.M., is a risk control consulting director at CNA.
For more information about this article, contact
specialtyriskcontrol@cna.com. ■
Continental Casualty Company, one of the CNA insurance companies, is
the underwriter of the AICPA Professional Liability Insurance Program.
Aon Insurance Services, the National Program Administrator for the
AICPA Professional Liability Program, is available at 800-221-3023
or visit cpai.com.
This article provides information, rather than advice or opinion. It
is accurate to the best of the author’s knowledge as of the article date. This
article should not be viewed as a substitute for recommendations of a
retained professional. Such consultation is recommended in applying this
material in any particular factual situations.
Examples are for illustrative purposes only and not intended to
establish any standards of care, serve as legal advice, or acknowledge
any given factual situation is covered under any CNA insurance policy.
The relevant insurance policy provides actual terms, coverages, amounts,
conditions, and exclusions for an insured. All products and services may
not be available in all states and may be subject to change without notice.
April 2024 | 5
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AIC10_AD_GI115_01
GenAI for
accountants: 10
prompt-writing tips
The emerging art of ‘prompt crafting’ can deliver more powerful results
from platforms like ChatGPT and Google Gemini.
By Andrew Kenney
8 | Journal of Accountancy
April 2024
IMAGE BY ARTEMISDIANA/GETTY IMAGES
TECHNOLOGY
T
ech-savvy accountants have found myriad
uses for generative artificial intelligence
(GenAI) since ChatGPT made its debut in
November 2022. GenAI tools can draft emails,
analyze spreadsheets, summarize tax legislation,
research business plans, generate code, and even
help practice difficult conversations with clients.
But for all of GenAI’s mind-blowing
capabilities and dangers (see the sidebar
“Precautions for Using Generative AI”), the new
technology’s effectiveness hinges on one critical
factor: the “prompt,” i.e., the instructions a user
gives to the software.
The skill set for writing those prompts,
sometimes known as “prompt crafting” or “prompt
engineering,” may soon prove crucial for the
accounting profession.
“The human on the front end can ask better
questions and get better output,” said Ashley
journalofaccountancy.com
Francis, CPA, owner of The Francis Group PLLC,
who has started using GenAI to automate her tax
and estate planning practice.
About the
author
THE POWER OF PROMPT CRAFTING
Andrew Kenney is
a freelance writer
based in Colorado.
As Francis and others have learned, a poorly
composed prompt may result in underwhelming
prose, factual errors, or flawed computer code from
ChatGPT or another GenAI tool. Basic mistakes
in prompt crafting are hiding the true power
of the technology from many users, said Byron
Patrick, CPA/CITP, CGMA, the vice president of
client success at The B3 Method Institute.
Users with a bad first experience “write it off,
saying that GPT’s the problem,” he said, referring
to GPT, or generative pre-trained transformer, the
large language model that powers ChatGPT.
In contrast, a well-crafted prompt can unlock
the true capabilities of large language models
April 2024 | 9
TECHNOLOGY
— allowing finance professionals to access new
ideas and speed their work. One recent study
found dramatic improvements in the GPT model’s
performance on an unofficial practice CPA Exam.
When the researchers used prompt engineering
techniques, the GPT model went from a
failing score on the unofficial practice exam to a
passing score.
The difference is not just about technical knowhow. Writing a great prompt doesn’t require programming skills or a deep understanding of neural
networks. Instead, it’s often about the user’s clarity,
specificity, imagination, and experimentation.
So, with seemingly infinite possibilities, how do
you ensure your prompt is just right? This article
provides 10 tips for crafting effective GenAI
prompts.
■ Place the full text of each of those paragraphs into
a numbered list; and
■ Beneath each of the list entries, add links to
relevant web references from major news media,
academic sources, and large businesses.
Using lists, bullets, headers, and labels may aid the
AI in processing lengthier instructions.
However, due to computing constraints, GenAI
tools often will struggle to output long chunks of
text or deal with large files, resulting in frustrating
error messages or incomplete responses, even if the
prompts are well written.
In those cases, focus your requests on smaller
tasks, such as analyzing a portion of a document or
producing only the introduction of a document draft.
The GenAI tool can also be asked to “continue” its
work on an incomplete response.
ADD STRUCTURE AND SPECIFICITY
PROVIDE CONTEXT
GenAI’s ability to parse human language is impressive. Even a simple, vague sentence — “summarize
this new tax legislation for me” — with a link to a PDF
can deliver serviceable results from some models.
But more detailed instructions can deliver more
useful outcomes.
The key is “defining expectations,” said Jason
Staats, CPA, a former accounting firm head who
runs the accounting technology community Realize.
“Ultimately, it’s about instructing it to do something
for you, the same way you would have a junior
researcher do it.”
That means being specific: “Look for specific
instances where this memo mentions nonprofits” might
deliver more actionable results for an accountant
focused on nonprofits.
GenAI tools can achieve even more if they’re
given longer and well-structured prompts.
For example, you could ask the latest version of
ChatGPT, powered by the GPT-4 model, to do
the following:
■ Search the attached memo for all paragraphs
mentioning nonprofits, including 501(c)(4)s and
other similar entities;
Prompts don’t just include direct instructions. They
also can give contextual information about the user’s
larger objective and the role of the GenAI.
“The most general framework you can use is, ‘I
am, you are, I need,’” Francis said.
She gave the following example:
I am: “a CPA”
You are: “a CPA business advisory bot”
I need: “a list of considerations for choosing
a niche”
Also popular is the “role-task-format” prompt,
which defines the bot’s role (“an administrative
assistant”), its task (“summarize the contents of this
email”), and the format of the output (“a bulleted
list”).
Regardless of the exact framework used for the
prompt, those extra details can focus the GenAI
tool’s answer and encourage it to tap into specific
knowledge domains.
ASK FOR MULTIPLE VARIATIONS
Heather Smith, the director of ANISE
Consulting in Australia, uses GenAI tools
frequently for tasks including drafting emails. She
IN BRIEF
■ Better “prompt crafting” returns better
results, reducing poor output such as
bad prose, factual errors, or code errors.
■ Use various techniques to improve
prompts: add structure and specificity,
add context, input multiple variations,
request multiple responses, ask the
GenAI to do more.
■ Explore alternative and advanced uses.
■ Keep experimenting to find what works
and improve your GenAI use.
To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.
10 | Journal of Accountancy
April 2024
often will ask for multiple responses to the same
prompt so that she can choose among them.
“Ask it for three versions of the email,” she
explained, “because every response is different.”
And there’s no need to stop at just three or
four versions. A GenAI model can easily provide
dozens of responses, which is especially useful for
ideation and research tasks.
For example, when asked for “50 punny names
for a new accounting firm in Florida,” ChatGPT
delivered instantly, with results including the
reasonably clever suggestion of “Keys to Success
CPAs.” Similarly, a request for “12 examples
of controversial tax laws throughout history”
turned up more than a few interesting (and
accurate) anecdotes.
TRY MULTIPLE REVISIONS
Besides asking for multiple responses, it also helps
to submit multiple versions of the same prompt.
“It’s not one and done. You can just try and try
and try,” Patrick said.
Once the GenAI tool has returned an initial
response, the user can add instructions to shape
the output, with no need to rewrite the entire
prompt. For example, you might ask the AI to
“make that shorter” or “be more specific.” You could
tell it to produce five variations with different
levels of complexity or “information density.”
If you’re using a GenAI tool on a
programming project, and the code the tool
produced isn’t executing, you could write a prompt
that includes the exact text of the error message
and a request for revisions. The technology also
tends to respond well to requests such as “elaborate
on that point,” “use a metaphor,” or simply “that
didn’t work.” The key is to keep trying different
approaches, adding structure and specificity along
the way, Smith said.
If the output doesn’t look right, “pick away at
it, unpack it,” she said. “Is the way I’m asking the
question wrong?”
The GenAI tools also can help write prompts
for themselves. In a technique known as
meta-prompting, the user explains the goal and
asks for the GenAI tool’s help writing a prompt
to achieve that goal. (“Could you help me write a
prompt that will apply data transformations to an
Excel spreadsheet?”)
The GenAI tool may then respond with
questions to clarify the goal, or it may
directly generate a prompt that uses prompt
engineering strategies.
journalofaccountancy.com
Writing a great
prompt doesn’t require
programming skills or a
deep understanding of
neural networks.
ASK FOR EXPLANATIONS
AND CITATIONS
GenAI tools can serve as powerful research assistants, able to interpret and combine vast troves of
knowledge to answer a question and provide relevant
research material. But they also are notoriously
prone, especially in earlier versions, to “hallucinations” that inject false facts into their answers.
To reduce the risk, users can ask GenAI tools like
ChatGPT to explain themselves. That means telling
the tool to “provide direct citations to sources” that
back up its claims, and then checking those citations
yourself to ensure they’re correct. Or it could mean
asking the tool to explain its chain of thinking so the
user can check its logic.
“Nobody wants a black box answer from AI,”
Staats said. “It’s just the same as if I have an intern
bring me an answer. When they say, ‘This is the
answer,’ I’m going to say, ‘Prove it.’”
Having the AI explain itself isn’t just a factchecking tactic; it also can be educational for the
user. If GenAI has coded an Excel macro, ask it to
explain how the programming works and why it
made certain decisions.
USE GenAI AS AN EDITOR
GenAI tools can be prompted to critique and expand
upon written content.
For example, try asking a GenAI tool to explore
potential omissions in a memo or to explain contradictory viewpoints and counterfactuals. The response
may yield new lines of questioning or topics of
interest. The model can be asked to identify unclear
language and even home in on paragraphs that need
additional factual support.
Those editing techniques can be applied to
content provided by the user, or the GenAI tool can
be asked to edit its previous work.
Still, watch for the GenAI tool’s omissions and
oversights. Even when it is factually correct, the
April 2024 | 11
TECHNOLOGY
Precautions for using generative AI
Be aware of the following risks and issues when using GenAI tools.
■ Mistakes and omissions: GenAI may
misinterpret facts, omit important
details, or even introduce outright
falsehoods. It can even overstate its own
capabilities. For example, GPT-4 recently
told the author of this article that it
could read a melody from a piece of
sheet music, only to produce completely
incorrect results and eventually admit
that it had no such ability.
■ Reinforcing bias: Large language
models “learn” about the world by
studying existing content. They can
inherit and reproduce human biases
and prejudices.
■ Open legal questions: In the United
States, there is an open question
about whether and when works
generated by GPT and other models
can be copyrighted. Using the
platforms could lead to intellectual
property challenges, among other
legal issues.
■ Data privacy and customer concerns:
Inputting sensitive data into a GenAI
tool could incur the risk that it is shared
GenAI may exclude critical information when
summarizing a document. Certain GenAI tools
may also lack access to up-to-date information,
instead relying on outdated knowledge from when
they were trained. As always, human supervision
is necessary.
USE ALTERNATIVE INPUT FORMATS
Typing into a chat box is the most obvious way
to interact with GenAI tools, but it’s not the
only option.
Some GenAI models can also read and
manipulate files. For example, the version of
ChatGPT using GPT-4 can ingest a PDF and
“extract the numbers on page 9 into a table.” It
also can dive into spreadsheets to look for data
trends and return with visualizations.
Another GenAI tool, Google Gemini, can
connect to other Google services, including Docs
and Maps.
This opens a range of new uses. Patrick has
uploaded his rough, hand-drawn sketches as fodder for ChatGPT’s DALL-E image-generating
engine. He also uses the ChatGPT mobile app’s
voice functionality to have conversations with the
platform while he’s out walking his dogs.
Brian Clare, CPA, the CEO of Blueprint
Accounting in Ottawa, Canada, makes similar
use of voice interactions. He has his employees
record themselves while they’re narrating business
processes. Then, they have transcripts made by an
automated service and ask ChatGPT to summarize the transcripts and export them for use as
12 | Journal of Accountancy
with other users or otherwise leaks.
Even if a platform has strong data
protections in place, the use of AI could
pose a reputational risk due to clients’
and customers’ concerns.
■ Moral and ethical issues: The
rise of GenAI has come with fears
of job displacement and deep
questions about the meaning of
this new technology for humanity.
Any leader embracing it should be
prepared to think and talk about the
consequences of the change.
business process documentation.
GenAI models also can directly export some file
types, including image files and Excel sheets.
And in instances where the platform can’t
directly export a file type — such as a SQL-based
database file — the GenAI may still be able to
generate computer code that will create or manipulate those file types when executed by the user. This
approach allows more advanced users to extend
the GenAI tool’s capabilities but requires more
knowledge of programming and development.
SAVE WHAT WORKS
At present, some GenAI tools have strict limits.
For example, ChatGPT can have a long,
detailed chat in which it “remembers” and
expounds upon running themes and questions in
conversation with the user. A single thread can
stretch on for hundreds of messages, layering on
more knowledge and context for the GenAI tool.
But that ChatGPT conversation is
self-contained. If the user switches to a new
chat thread, ChatGPT will be unable to access
any of the information that the user provided in
previous, separate threads. With each new thread,
ChatGPT returns to its generic knowledge base,
rather than “learning” about the user over time.
(Other emerging GenAI tools may operate
differently.)
However, there are ways to save the results
of those conversations. For example, ChatGPT
allows users to label individual threads and reopen
them later.
April 2024
LEARNING RESOURCES
And, more generally, users can simply ask the
GenAI tool to summarize the conversation. That
summary can then be used as a prompt to kick-start
a similar conversation later. (In fact, the tool can
be asked to write the summary in the form of a
prompt.)
Some services also allow for more permanent
tweaks. The paid version of ChatGPT allows users
to create “custom” GPT bots that can remember
certain preferences, such as the desired writing style
for outputted content, or even the user’s profession
and objectives.
ChatGPT also has a “Custom Instructions”
interface where users can add freeform information
about themselves and their preferences — where
they live, their schedule, their personality, or
anything else they desire — that will shape the
platform’s behavior.
EXPERIMENT WITH ADVANCED TECHNIQUES
It’s possible to turn the tables and have the GenAI
tool ask questions of the users — for example, “ask
me questions that will help me understand risks to my
supply chain,” or even something more philosophical,
like “ask me some questions to help me define and
improve my working style.”
“It’s a little bit mind bending,” Clare said of
those conversations.
Francis stumbled upon a similar way to use the
bots’ conversational skills. She told ChatGPT to
act like a client so that she could practice having
difficult conversations with it, and then she had it
analyze her performance.
And an informal network of academic
researchers, entrepreneurs, and enthusiasts is
constantly trying to eke more performance out of
more complex and esoteric prompts.
“It’s like Excel macros,” Staats said. “We’re going
to have people who are really excited by that stuff
and can squeeze the ever-living heck out of it to get
it as far as possible. Oftentimes, it is a worthwhile
investment.”
An approach introduced by researchers, the
“Chain of Density,” has the AI summarize an
article and then revise the summary several times,
following a detailed set of instructions meant to
produce increasingly “information dense” results.
Similarly, the researchers who were testing
GPT-4’s performance on the unofficial practice
CPA Exam found that having the GenAI explain
its “chain of thought,” among other tactics, was
particularly effective. They used the following
prompt to achieve improved results:
journalofaccountancy.com
Ethics in the World of AI: A CPA’s Guide to
Managing the Risks
This webcast will discuss the current uses of AI in
business, nine risk areas, and provide practical suggestions to address these risks effectively. Attendees
can earn 2 CPE credits.
April 2, 2–4 p.m. ET
WEBCAST
AICPA & CIMA ENGAGE Conference
Technology is one of more than a half-dozen tracks
delivering up to 42 CPE hours at the biggest accounting event of the year, held at the ARIA in Las Vegas.
June 3–6
CONFERENCE
For more information or to make a purchase, go to aicpa-cima.com/cpe-learning
or call 888-777-7077.
“Answer the following question. Before you
answer, explain your thoughts. If you don’t know
where to begin, use the search tool to get help.
You are encouraged to use the tools when you are
unsure about the correct answer. Use calculator
ONLY when you have numbers for input.
You have access only to the following tools:
{tools}
Always use the following format:
Question: the input question you must answer
Thought: you should always think about what
to do
Action: the action to take, should be one of
[{tool_names}]
Action Input: the input to the action
Observation: the result of the action (this Thought/
Action/Action Input/Observation can repeat N times)
Thought: I am ready to answer
My answer is:”
Begin! Remember: Always follow the
above format
Question: {input}
{agent_scratchpad}”
JUST KEEP EXPLORING
There is no instruction manual for GenAI tools
like ChatGPT — no all-encompassing list of
their capabilities, no single right way to use them.
In many ways, humans are still learning just what
the technology can do.
“It’s just like we’re all doing these
April 2024 | 13
TECHNOLOGY
[experiments] in silos right now,” Francis said.
That’s why the experts interviewed for
this article offered a common message: Keep
experimenting. See where and how the programs
can contribute to your life and try new things.
For Clare, the key is to think about GenAI
as more than just a shortcut or a content creator.
He looks to it as a source of inspiration with
undiscovered limits.
“And if you’re having a conversation with
ChatGPT, it may say something that triggers
an idea for you that is completely outside the
scope of what you’re considering,” Clare said.
“Be open-minded about it.” ■
AICPA & CIMA RESOURCES
Articles
JofA AI coverage page
“Tech Q&A: A First Look at Using Microsoft’s New AI
Tool, Copilot,” JofA, March 1, 2024
“CPAs at a Crossroads: Real Approaches to Artificial
Intelligence,” JofA, Jan. 8, 2024
“Navigating the Landscape of Generative AI,”
AICPA & CIMA, Dec. 4, 2023
“Writing Advanced Excel Macros With GPT-4,”
JofA, July 7, 2023
Podcast episode
“Why Should CPAs Understand ChatGPT?”
JofA, Oct. 5, 2023
Website
Demystifying AI for the Accounting and
Finance Profession
“Generative AI and Risks to CPA Firms,” JofA, Oct. 1, 2023
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the age of
specialization.
When you become a member of an AICPA® specialized section,
you’re joining an elite community of like-minded peers. You’re also giving
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© 2021 Association of International Certified Professional Accountants. All rights reserved. 2103-62839
14 | Journal
of Accountancy 2
2103-62839
Section Ads_CMYK.indd
April 9:40
2024AM
4/29/21
TECHNOLOGY
Microsoft’s huge AI
rollout: What CPAs
should know
Microsoft Copilot merges generative AI with key apps,
potentially revolutionizing how accountants work.
Here’s what early adopters say.
IMAGE BY SOPA IMAGES/CONTRIBUTOR/GETTY IMAGES
By Andrew Kenney
I
n the early days of the generative artificial
intelligence (GenAI) revolution, users had only
a couple of ways to use new services such as
ChatGPT. Most often, they had to log on to a
specific website or open a dedicated mobile app.
Now, that model is changing. Instead of offering AI as a stand-alone service, tech companies are
weaving the new technology into existing applications and services. And the company making some
of the biggest changes is the biggest provider of
software for finance professionals: Microsoft.
Microsoft is investing heavily in Copilot, a
suite of AI-powered features for applications
across its portfolio. The upgrades are already
rolling out to business users of productivity apps
including Excel, Office, and Outlook, as well as for
business tools like Power Platform. Early reviews
indicate Copilot could be a powerful new force for
accountants and other knowledge workers.
“Is it hype or reality? It’s definitely reality. It’s
such a game-changer,” said Virginia-based Cherie
Gartner, KPMG’s global lead partner for Microsoft, who has helped activate Copilot features for
her firm and some of its clients.
The scope and scale of Microsoft’s Copilot
effort is a “shocking signal” of the potential the
company sees in large language models, the
machine-learning technology that underpins
GenAI, said Jason Staats, CPA, a former
accounting firm head in Portland, Ore., who
founded and runs the accounting technology
community Realize.
“Long term, there is no aspect of our work that
I don’t see being impacted by this, in the very best
way,” he said.
About
the author
Andrew Kenney is
a freelance writer
based in Colorado.
NEW AI FLIGHT PATH FOR MICROSOFT
Copilot generally appears as a chat interface
within existing apps. But behind that simple
interface is the power of a large language model.
Here’s how it works:
■ The user inputs a question or a request in plain
language.
■ The Copilot feature analyzes the user’s input
based on its general knowledge base and
Microsoft cloud data from the user or the user’s
organization.
■ Copilot responds with information or instructions for the user, or it can execute actions
within Microsoft apps to achieve the desired
outcome.
Microsoft has built other forms of AI
into its apps for years, but Copilot differs
journalofaccountancy.com
April 2024 | 17
TECHNOLOGY
because it is based on the same technology that
powers ChatGPT, greatly improving its ability
to understand natural language and respond
appropriately.
Microsoft and its users have described an impressive array of use cases that are already available
through Copilot:
■ Summarizing transcripts of Teams meetings and
other sources. “It can very quickly summarize
what we discussed and provide lead-in questions
as to what we need to do next,” Gartner said.
■ Rearranging the contents of a Word document,
such as by building a table that summarizes
information from the text.
■ Creating new content, including first drafts of
emails, presentations, and memos, while drawing
on the user’s own data from Microsoft’s cloud
for some of the details.
■ Stylizing presentations in PowerPoint.
■ Looking for trends and analyzing data in Excel.
Business users of Microsoft 365 now have access
to Copilot services at an additional cost of $30 per
user per month. For a base Microsoft 365 enterprise
license, that’s an 83% increase, raising the price
from $36 to $66 per user per month.
Microsoft expanded Copilot for Microsoft 365
to businesses of all sizes on Jan. 15. Before that,
access was limited to organizations with at least
300 individual users. Among those was KPMG,
which started with a few hundred licenses before
expanding to a larger deployment of undisclosed
scope, Gartner said.
The general public can sample the new features
with Windows Copilot, a version of the technology
built into Windows 11.
The new AI features could be worth some
$10 billion per year for the company by 2026,
analysts estimated.
A WORK IN PROGRESS, WITH PROMISE
Microsoft is releasing a steady stream of updates
as it fine-tunes Copilot for particular apps, with a
long-term goal of allowing the technology to work
seamlessly across the company’s ecosystem.
“The functions and the power that Copilot has is
really at its infancy. You can see that it can do much
more,” said Daniel Rey, chief learning officer for
Smarter Consulting, which specializes in business and technology solutions, including training
organizations on Microsoft apps.
He’s recently used Copilot features to:
■ Create PowerPoint presentations based on the
AI’s analysis of his Word documents;
■ Condense lengthy training manuals into succinct
agendas; and
■ Generate a customized template for a
computer-assets audit document based on the
AI’s contextual knowledge of the topic. In other
words, he gave Copilot very basic instructions
and conditions, and Copilot built out a custom
audit document template.
While some of those abilities are already
available through ChatGPT and other freestanding
services, Copilot “puts it into the applications I use
every day,” Rey said.
The version of the software he has been testing
still has some warts — for example, it can’t always
directly execute actions within apps. Instead, users
sometimes must manually execute the actions
suggested by Copilot.
But Rey and early adopters in the financial
world say the early results are promising and that
organizations large and small should be thinking
about whether, when, and how to embrace Microsoft’s AI investment.
TURNING PRACTITIONERS INTO
PROBLEM-SOLVERS
“There’s a lot of hunger for this technology because
it promises, and it delivers, if you know how to use
it,” said Ashley Francis, CPA, who has used Copilot
to start automating aspects of her Washington
state-based firm, The Francis Group.
Francis is a sole practitioner in tax consulting
IN BRIEF
■ Microsoft Copilot is a suite of AI-powered features woven
■ Sole practitioners with the assistance of Copilot can
into applications across the Microsoft portfolio.
■ Copilot is based on the same technology that powers
ChatGPT, greatly improving its ability to understand
natural language and respond appropriately.
accomplish projects, such as using complex software to
automate the creation of draft engagement letters, instead
of relying on programmers to set up a system.
■ Microsoft’s rivals are also developing AI applications.
To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.
18 | Journal of Accountancy
April 2024
and planning for ultra-high-net-worth individuals
— a niche that isn’t very technologically advanced,
she said.
“We’re using technology that was created
probably 20 years ago and has only been minimally
updated,” she said. “Basically, the planning software
that I use now looks exactly the same as it did when
I started in the profession.”
In recent years, she had grown interested in the
potential for automation to speed up her work. But
when she attended a meetup on the topic, she was
intimidated by the seeming level of complexity.
“Usually, I feel like I can hold my own in conversations,” she said. “And I was so overwhelmed by
how advanced everybody was that I decided that I
would never ever, ever attend that session again.”
Still, she decided to try once more with Microsoft Power Automate, a powerful, complex
piece of software that had recently gained Copilot functionality.
For her first project, she wanted to use
Power Automate to take details from Excel forms,
determine the template to use for the engagement
letter, populate the template with the appropriate
information, adjust parts of the text as necessary,
and export a PDF into a project folder — a process
that would normally take her about an hour.
It was an “incredibly difficult” project because
she could find little information on the web about
how to use Power Automate with Word templates.
But she was able to ask Copilot a steady stream of
questions that were answered with helpful suggestions about how to order the flows.
“It was like having a tool there that would never
judge me,” Francis said.
Francis completed her project after about a
month, allowing her to complete engagement
letter drafts in mere moments. Then, her social
media posts about her success caught Microsoft’s
attention, leading the company to feature her in a
blog post and to even invite her to Las Vegas, where
she spoke on a panel alongside representatives of
national brands, including AT&T.
That contrast — a solo practitioner among huge
corporations — speaks to the potential of GenAI,
she said.
“What it said to me is that this technology
is meant for everybody,” said Francis, who was
recently nominated for Microsoft’s prestigious
MVP designation based on her automation work
and who has also launched Kitchen Table Automations, which offers classes and other content on AI
and automation for busy professionals new to AI.
journalofaccountancy.com
Rather than relying on developers and programmers for automation upgrades, she said, generative
AI “brings this technology down to a level where
it’s hitting all of the needs that a group or a
company has.”
WEIGHING THE COSTS AND POTENTIAL OF AI
UPGRADES
The race to incorporate large language models into
business tools is just beginning, and Microsoft’s
rivals are hoping to match its advances.
Google has introduced Duet AI, an assistant
feature for Gmail, Drive, Slides, and other Workspace apps. Duet shares some of Copilot’s features,
such as generating and revising text, creating
slideshows, and working with spreadsheets.
Google’s version, like Copilot, will reportedly
cost $30 per month per user for large organizations.
The competitive landscape between the two titans
will become clearer as they introduce and iterate
features in the months ahead.
But organizations of all sizes can still start
planning for whether — and how — they might
use the tools as they become more prevalent. Here
are some things to consider when evaluating GenAI
applications, including Copilot:
Financial costs and productivity returns
Especially for large organizations, $30 per user
per month can add up quickly, but it also can be
seen as a token investment for access to cuttingedge technology.
“If I were able to pay $30 a month for an
assistant that never slept, was getting smarter all the
time, and never asked for a raise, that feels like a
bargain,” Rey said. Francis similarly said that, based
on her experience with Copilot and Copilot for
Microsoft 365, the Outlook tools alone are worth
$30 a month.
Calculating the return on that investment
may prove difficult, especially as the features are
constantly evolving. But it’s worth asking which
specific features might be most useful, how much
time saved or gain in productivity would be needed
to offset the cost, and how the cost of the AI
features might increase in the future.
Several recent studies point to the potential
upsides. Researchers at MIT found that GPT-3.5,
an older version of the GPT model, helped people
significantly speed up writing tasks while improving
quality. The Nielsen Norman Group found productivity increases for customer support, writing, and
programming roles. And a study by the Harvard
April 2024 | 19
LEARNING RESOURCE
TECHNOLOGY
AICPA & CIMA ENGAGE Conference
Technology is one of nine tracks delivering up to
42 CPE hours at the biggest accounting event of
the year, held at the ARIA in Las Vegas.
stressed, with growing individual and networked
capabilities. To her, the investment seems like an
“easy win” for firms.
June 3–6
Data security
CONFERENCE
For more information or to make a purchase, go to aicpa-cima.com/cpe-learning
or call at 888-777-7077.
AICPA & CIMA RESOURCES
Articles
JofA AI coverage page
“Tech Q&A: A First Look at Using Microsoft’s New AI Tool, Copilot,”
JofA, March 1, 2024
“CPAs at a Crossroads: Real Approaches to Artificial Intelligence,”
JofA, Jan. 8, 2024
“Navigating the Landscape of Generative AI,” AICPA & CIMA,
Dec. 4, 2023
“Generative AI and Risks to CPA Firms,” JofA, Oct. 1, 2023
“Writing Advanced Excel Macros With GPT-4,” JofA, July 7, 2023
Podcast episode
“Why Should CPAs Understand ChatGPT?” JofA, Oct. 5, 2023
Website
Demystifying AI for the Accounting and Finance Profession
Business School pointed to improved productivity
and quality from consultants working on “realistic
consulting tasks.”
On the other hand, it remains to be seen how
Microsoft Copilot performs in practice for many
users, Staats said. In terms of usefulness and
adaptability, the Windows Copilot variant was
toward “the back of the pack” of mainstream chat
assistants that he had tried, he said in early January.
However, Windows Copilot is one of many
implementations across the Microsoft ecosystem.
They are in a constant state of improvement, Francis
20 | Journal of Accountancy
Microsoft and Google both insist that they’ve built
data and privacy protections into their products. The
companies say that they are not using data from the
services to train their general AI services — only to
power the organization-specific features.
That’s meant to answer common concerns that
data provided to AI applications could be leaked
to other users, but any emergent technology comes
with the risk of data leaks and breaches. A thorough
legal and cybersecurity review may help to mitigate
the risk, as could guidelines for how employees are
to use the new features.
Risk of errors
Despite their promise, large language models
are notorious for making factual errors and
mathematical mistakes and for ignoring the
parameters of a request. If organizations make these
tools more accessible through Copilot and Duet,
they may increase the risk of AI errors slipping into
work products.
Beyond the cost considerations and technical
questions, the deployment of technologies such as
Copilot and Duet are a sign that GenAI is here to
stay. Large language models are gaining a foothold
in the most mainstream tools of digital work,
and companies need to prepare their workforces,
Staats said.
“People are already really overwhelmed at the
rate of change and the rate of software change,”
he said. “We’re throwing a lot at our staff all at the
same time. It’s a big opportunity, but probably the
biggest problem, as it has been for a while, is change
management.”
For those companies ready to make the leap
with Microsoft’s Copilot or with a competitor, the
key is to encourage employees to experiment, learn,
and share their findings — and to stress that the
tools are meant to support them, not replace them.
“You need to encourage a culture of curiosity.
That probably means creating some new
feedback loops where people are sharing their
positive experiences. That’s going to multiply
everyone’s learning, just by encouraging a level of
transparency,” Staats said. “There absolutely will
be new, really weird stuff to navigate, but it’s why
you have to keep learning and keep engaging with
it.” ■
April 2024
TECHNOLOGY
Tech roundtable:
There’s more to
AI than ChatGPT
Our panel provides perspective on
the potential, perils, and place of
GenAI in the wider context of
artificial intelligence and automation.
Editor’s note: Blockchain, digital assets, and cybersecurity will be
covered in more depth in the May JofA.
By Jeff Drew
22 | Journal of Accountancy
JofA, explores topics that include “people tech,”
blockchain, digital assets, and cybersecurity.
What is GenAI and how does it differ from
other types of AI?
Wesley Hartman: The way I describe it, generative
AI is really just a fantastic computer algorithm that
functions like an auto-complete with data from
the internet. Obviously, there’s a lot more to it,
but generative AI generates its responses based on
information it finds on the internet, which is still
data generated by people. So, it’s a low-level AI that
can find answers but can’t really think for itself. The
next level is artificial general intelligence, which can
create new ideas. The final level is advanced artificial
intelligence or super artificial intelligence, which in
some ways might become a little scary and not as
distinguishable from a human. But those last two
levels are theoretical. Generative AI is what we have
right now.
April 2024
IMAGE BY TIM BIRD/GETTY IMAGES
A
year after likening generative artificial
intelligence (GenAI) to Wikipedia and
labeling ChatGPT as immature, the
participants in the JofA Accounting Technology
Roundtable gathered to offer their assessment of
the class of chatbots that has captivated the public,
accountants included, over the past 18 months.
The 2024 roundtable, recorded in January,
featured the same three experts (see the sidebar,
“About the Panelists”) who participated in the 2023
edition of a JofA annual tradition dating back to
2011. Besides discussing generative and other types
of AI, the participants explored numerous other
topics. The conversation covered so much ground
that it was split into two episodes of the JofA
Podcast. The full conversation is available here.
The transcript has been edited for length and clarity
and will also be presented in two parts. Topics
featured in part 1 include AI, automation, and Web
3.0. Part 2, which will be published in the May
The biggest brand name in GenAI is ChatGPT.
When we talked about ChatGPT last year, it
was only a few months old. And Amanda, you
compared it to Wikipedia. A year later, what is
your assessment?
Amanda Wilkie: I think we have to provide
a little context. I did equate it to something
like Wikipedia but in the sense that I wouldn’t
recommend that you take anything that comes
out of it as authoritative. Because ChatGPT was
trained on public information, there are a lot of
errors in its responses. Sometimes, it makes things
up, which is referred to as a hallucination. So, you
still can’t say ChatGPT is authoritative.
In the last 12 months, people have put time,
effort, and a lot of capital into generative AI.
We’re starting to see a lot of different uses
for it. OpenAI, the owner of ChatGPT, has
partnered with Microsoft to create tools where
private companies can create their own GPT
technologies. They have recently announced that
they are creating a ChatGPT store — think
the Apple App Store or Google Play — where
individuals or companies that have created their
own applications can make them available to
consumers. What if a firm or one of the vendors in
this space creates a ChatGPT to train and educate
on how to do a tax return or how to properly look
at financial statements?
Donny Shimamoto: I don’t know if a lot of firms
realize that we’ve been using AI for years. QuickBooks has had it in its account reconciliation
feature for like 10 years. Botkeeper [a company
that uses AI to automate bookkeeping work] has
About the panelists
■ Donny Shimamoto, CPA/CITP, CGMA, is founder and
managing director of IntrapriseTechKnowlogies and
inspiration architect of the Center for Accounting
Transformation.
■ Wesley Hartman is founder of robotic process
automation developer Automata Practice
Development, former director of technology at a
midsize public accounting firm, and co-author of
the JofA’s Technology Q&A column.
■ Amanda Wilkie is a consultant with Boomer
Consulting and former chief information officer at
one of the 25 largest public accounting firms in the
United States.
journalofaccountancy.com
‘In the last 12 months, people
have put time, effort, and a
lot of capital into generative
AI. We’re starting to see a lot
of different uses for it.’
Amanda Wilkie, a consultant with Boomer Consulting
been around for eight years. I was talking with
their CEO, Enrico Palmerino, and he said they
finally feel like they have maturity in their models.
And here’s one of the risks with these models,
especially if you’re doing it from scratch: Enrico
was saying that one of the things that they were
worried about is that if you have data come in
that’s not clean or accurate, it breaks the model,
causes it to predict the wrong thing. This is tied
back to that concept mentioned earlier of how
much do we trust the things from the internet
to be correct? Somebody has to police that. So,
Enrico was telling me that it took them eight
years to get to the point where they feel like, OK,
even if some bad data comes in, it’s not going to
change the model.
About
the author
Jeff Drew is the
JofA’s editor-inchief. To comment
on this article or
to suggest an idea
for another article,
contact him at
Jeff.Drew@aicpacima.com.
Wilkie: I think it is a huge point that firms really
need to pay attention to their data. I fear that
firms are going to say, “Let’s build some sort
of generative AI and then we can use it for our
clients, or we can resell it.” And if they are not
paying attention to the data they are training the
AI on, it’s going to be a mess.
Hartman: There was a case where they fed an art
generative AI model pictures of a cat, but said it
was a dog. I think they fed it like 10 or 15 photos,
and it basically messed up the entire model like it
could no longer identify cats versus dogs.
What skills or knowledge do accountants
need to develop to assess AI models or figure
out the data?
Shimamoto: This is where people like Wes
and Amanda come into play. It’s not about the
accounting itself. I’m trained on both sides, but I
rely upon my technologists — and you need to
April 2024 | 23
TECHNOLOGY
‘The way I describe it,
generative AI is really
just a fantastic computer
algorithm that functions
like an auto-complete with
data from the internet.’
Wesley Hartman, founder of robotic process automation developer
Automata Practice Development
find the right one. It’s not just any IT person who’s
going to be able to do this. It needs to be someone
trained in this.
As accountants, we need to understand the
bigger picture of the risks. We need to understand
how we do policy. A lot of this comes back to data
governance, which is tied to corporate governance.
When we get into data governance and the risks,
cybersecurity gets tied into it as well. We need to
partner with IT to really make this stuff happen.
Wilkie: We’re going to see even more of a focus
on that partnership between the CPA and the
technologists. It’s going to be very, very important.
There’s also going to be opportunity in this
space for auditing and reassuring people that the
technology is doing what it is supposed to be
doing, what it says it’s going to be doing.
Some of those AI models, the foundational
models, you’re not going to be able to pull back
the layers of that, that’s proprietary. It’s going
IN BRIEF
to be hard to get in there. It’s going to be hard
to understand it. So, we’re going to have to use
the tools and techniques that the profession has
been using for a long time. Like you said, Donny,
governance, IT controls, and understanding and
auditing the data that’s going in and the data
and information that’s coming out. These aren’t
new concepts, but we’re going to be applying
them in new ways when it comes to auditing and
trusting AI.
AI gets tied in with automation, but not
all automation is AI. What are the best
automation opportunities for CPAs and firms?
Hartman: I tend to divide automation into three
tiers. The first tier is, let’s look at your existing
technology because you’d be amazed at how
many automation tools firms just don’t use — like
setting up templates for workflows or invoicing
or automatic notifications, things like that. So,
let’s take a first look at what technology you’re
utilizing and see if there are built-in automation
tools that you can leverage to automate parts of
your firm, because even something small that
takes one minute can add up if you’re doing it on
every single return or every single step of your
audit process.
The second tier is where you’re looking at
Zapier or Make.com or Pipedream — where
you can build your own automations between
different systems or even within systems. You can
create workflows. For example, I built one myself
because it was getting frustrating to take Calendly
information and put it into my CRM system.
I was manually doing it because I wasn’t really
getting a huge number of calls. But then I got to
the point where I felt like I was wasting a bunch
of time, so I built a Zapier and now it’s automated.
The last tier of automation really is more of a
custom software development situation where the
that are wrong, so somebody has to police the data feed.
■ Accountants and firms need to know about data and corporate
■ Microsoft and OpenAI, the owner of ChatGPT, plan to establish a
store for ChatGPT applications.
■ Generative AI (GenAI) generates its responses based on
information it finds or is given. Firms that are creating or using
GenAI tools need to pay attention to the data they are training
the AI on. Data that is unclean or incorrect can lead to predictions
governance and risk management to work with GenAI. And
they need to focus on their partnership with technologists.
■ Web 3.0 is the next iteration of the internet. Immersive,
Web 3.0 technology such as virtual reality promises to
become more popular for training and meetings, but it
isn’t taking off like GenAI.
To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.
24 | Journal of Accountancy
April 2024
LEARNING RESOURCES
Unleash the Power of AI: A CPA’s Guide to
ChatGPT
process that you’re trying to automate is maybe too
complex, has too many different systems, or doesn’t
have connections on Zapier or Make.com. So, you
have to do an RPA where you log in through the
front end because that still has to happen.
Most of the time, accounting firms, start with
your software stack. After that, look at Zapier
and then after that, if you want something more
customized, then you look at a developer.
Wilkie: In its purest form, automation is a
computer doing something that a human would
normally do. When I talk to firms, I tell them,
“If you’re entering the same information in more
than one system, you are creating an opportunity
for someone to forget to enter it or to key it in
incorrectly, making your data get out of sync.”
A simple automation is just creating that data
integration so that you have one source of truth.
And then that system sends that information and
makes those updates to all your other systems.
Again, when I talk to firms, especially small firms,
that say they are frustrated because none of their
systems talk to each other, that’s a great place to
start for some simple automations.
Where are we on Web 3.0?
Wilkie: This time last year I was very excited
about Web 3.0, and I still am, but I feel like when
generative AI just kind of exploded around this
time last year, a lot of people started focusing
on that.
Even large companies like Apple, Meta,
Google — they refocused their energy and their
capital on generative AI. But there’s still some
things that are happening. Apple’s actually
releasing their new VR [virtual reality] headset,
the Apple Vision Pro.
I don’t know if this is like the first iPhone or
first iWatch, or if we’re going to need a couple of
iterations for it to really take off. But with it being
in the Apple ecosystem and being a smaller, more
powerful headset opposed to the Oculus, I think
we’re right on the edge of VR becoming more
mainstream and not just for like playing games
and things like that.
We talked last year about using VR for things
like training and doing some meetings. We’re
seeing a little bit of that, but it’s definitely not
taken off like I had hoped that it would. But I
think we’ll still see it.
Just to recap, Web 3.0 is that next iteration of
the internet. It is much more immersive through
journalofaccountancy.com
In this seminar, you’ll learn how to use ChatGPT
to streamline your workload, save time, and
boost overall efficiency.
April 19, 1 p.m. ET
WEBCAST
AICPA & CIMA ENGAGE
Technology is one of more than a half-dozen
tracks delivering up to 42 CPE hours at the
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technologies such as VR, but that means that
we have to figure out things like an economy in
that world. It brings in crypto or digital assets.
It brings in blockchain. We’re going to have to
figure out privacy and identity. That’s going to
bring in identity on the blockchain. That’s going
to bring in cybersecurity. ■
AICPA & CIMA RESOURCES
Articles
JofA AI coverage page
“What AI Can Do for Auditors,” JofA, Feb. 1, 2024
“CPAs at a Crossroads: Real Approaches to Artificial
Intelligence,” JofA, Jan. 8, 2024
“Gen AI, Business Model Transformation, and More
With AICPA & CIMA CEO,” JofA, Jan. 4, 2024
“Getting Started With Generative AI/ChatGPT,”
Professional Insights, Sept. 30, 2023
“The Promise and Peril of ChatGPT,” JofA, May 1,
2023
Podcast episode
“Why Should CPAs Understand ChatGPT?” JofA,
Oct. 5, 2023
April 2024 | 25
AUDIT & ASSURANCE / TECHNOLOGY
Managing change
in audit technology
transformation
Constant change can be exhausting. To transform their audit
technology despite change fatigue, firms can follow these
tried-and-true suggestions.
Editor’s note: This is the fourth article in a four-part series that is part of a larger initiative the AICPA Auditing Standards
Board (ASB) has undertaken to understand and support technology use in the audit.
By Anita Dennis
A
number of impediments can stand in the
way of audit technology transformation,
including issues with innate complexity;
training and infrastructure; uncertainty about
usefulness; and finding the capital necessary to
run and maintain a firm’s “tech stack.” Those are
some of the findings of a survey that is part of
a larger project the AICPA Auditing Standards
Board (ASB) undertook to understand and support
technology use in the audit.
Transformation means change, and change
can be unsettling. After several years of disruption
in their work lives, many employees seem to be
suffering from change fatigue. When Gartner
surveyed workers in 2016, 74% were willing to
support organizational change. By late 2022, that
number had plummeted to 38%.
Firms need to carefully plan and execute
changes in their audit technology if they want
to effectively implement transformational
change. Here’s what to pay attention to in
change management.
CREATE AND COMMUNICATE A CLEAR VISION
About
the author
Anita Dennis is a
New Jersey-based
freelance writer.
HIGHLIGHT THE BENEFITS THAT CHANGE OFFERS
Communication is important before, during, and
after any change process, according to Sara Watson,
CPA, director, A&A Professional Standards Group,
FORVIS LLP, which has about 5,500 employees
nationwide. That’s especially true because both staff
and firm leaders may drag their feet on implementing change if they don’t fully understand how it will
benefit them or their work.
As a result, in introducing the idea of audit technology transformation, it’s important to articulate
“what’s in it for me,” Watson said. For example, while
firm leaders may worry about upfront costs, they may
be more accepting if they understand technology can
offer advantages that include:
■ Higher audit quality and effectiveness.
■ The ability to take on clients seeking an auditor
that uses advanced technologies. Prospective
clients are now asking about the technologies
auditors use, Watson said.
■ Efficiencies that can reduce the time it takes staff
to get work done.
Staff members may be excited about the chance
to gain skills in cutting-edge technology, win new
clients, and spend time on more complex areas while
avoiding repetitive manual tasks. “If it provides better
quality or makes the engagement more profitable,
people will want to be involved,” said Doug DeBoer, CPA, principal at 90-employee Grimbleby
IMAGE BY ANDRIY ONUFRIYENKO/GETTY IMAGES
Audit technology transformation is about making
a significant difference not only in what software
a firm uses but also in how audits are performed.
Creating and communicating a clear vision for such
a significant transformation is critical to success.
This vision will inform the firm’s strategic plans and
clarify what change will mean to all firm members.
“There is a lot to consider when implementing
new technology, and change needs to be a big part
of that,” said Ericka Racca, CPA, director of Audit
Professional Services at CPA.com, the business
and technology subsidiary of the AICPA, who
works with firms of all sizes to guide them through
their audit transformation initiatives. According to
Racca, to lead successful change, firms must answer
five key questions to help individuals understand
why change is needed, not just that it is happening:
What is changing?
What is not changing?
Why are we changing?
Why is the way we do things today no longer
good enough?
■ What is the risk of not changing?
Keep in mind that a firm may have to revisit its
vision based on its experiences during the change
process. Setting a clear plan and revising it as needed
is crucial. (See the chart “Keys to Developing the
Firm Vision.”)
■
■
■
■
Source: CPA.com.
journalofaccountancy.com
April 2024 | 27
AUDIT & ASSURANCE / TECHNOLOGY
Technology and audit transformation
Articles in the four-part series:
■ “Using Technology to Boost Audit Quality,” JofA, Jan. 1, 2024
■ “What AI Can Do for Auditors,” JofA, Feb. 1, 2024
■ “Data Analytics and Visualization in the Audit,” JofA, March 1, 2024
■ “Managing Change in Audit Technology Transformation,” JofA,
April 1, 2024
Coleman. These benefits for staff will also be a great
advantage for firms in their recruiting and retention
efforts.
DETERMINE WHICH TECHNOLOGY SUITS THE
FIRM BEST
CPAs can gain some perspective by reaching out to
fellow practitioners whom they know through their
state societies or networking groups for insights on
the tools they use and their experiences with them.
Software vendors can also provide information,
answer questions, and offer demonstrations of their
products, which can help firms quickly narrow the
field. “A vendor should allow you to test a platform
on a client before you buy it,” said Samantha Bowling, CPA, CGMA, managing partner at 20-employee
GW CPA LLP. “If they stand by their product and
it is going to be transformational, they should let you
use it.”
She recommended that firms do a dry run with a
client whose system is already in the cloud to see how
it integrates with the platform the firm is considering.
If that works well, consider whether adoption will
work well for most other clients. The firm’s assessment of the vendor must also include understanding
how the software protects client data, through a
review of their security or their SOC audit, Bowling
said, as well as quality management considerations.
The process should certainly include a realistic
consideration of the firm’s existing technology
infrastructure and expertise and what level of initial
transformation it can support. That assessment will
affect the initial steps and the project time frame.
“Don’t run before you can walk,” DeBoer said.
Any platform should be able to integrate well with
the firm’s existing technology, whether the firm will
be using an add-on service or tool from an existing
provider or a new tool that plugs into that technology, Watson said. Her firm uses Caseware Working
Papers as its audit platform and has implemented a
standardized taxonomy structure for mapping of trial
balances. When the firm added MindBridge AI for
risk assessment, journal entry testing, and data analytics, “we created a mapping structure in MindBridge
AI that mirrored what was done in Caseware,”
Watson said. “Audit teams map accounts once, and
that carries over to the other platforms we use.”
GIVE EMPLOYEES A SAY IN CHANGE
MANAGEMENT
Two of the most important choices firms can make
in the change management process are appointing
a champion for the project and giving employees a
say in key decisions related to the project. Important
issues to consider are:
Inclusion
Involving employees in decision-making during a
change management process can improve the chance
of success by 15%, according to Gartner.
Remember, too, to include input from the firm’s
technology team or outside technology consultant
because of the expertise and perspective they can add.
IN BRIEF
■ Audit technology transformation is
about making a significant difference
not only in what software a firm uses
but also in how audits are performed.
Creating and communicating a clear
vision is critical to success.
■ Allow everybody in the firm to
grasp “what’s in it for me,” when
introducing the idea of audit
technology transformation. Highlight
the benefits and give employees a
voice in key decisions.
■ Gain perspective by reaching out
to fellow practitioners for insights
on the tools they use and their
experiences with them.
■ Ask software vendors to
provide information, and offer
demonstrations of their products.
Then do a dry run with a client whose
system is already in the cloud to see
how it integrates with the platform
you’re considering.
■ Recognize and leverage your existing
strong expertise in dealing with the
unknown, given the uncertainty
firms regularly face when there
are last-minute tax code changes
or a significant new standard or
regulation takes effect.
To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.
28 | Journal of Accountancy
April 2024
Accountability going forward
The technology road map should include a reasonable
timeline that sets goals and assigns responsibility
for achieving them, and determines key milestones,
project phases, and outcomes for each phase. If a firm
has appointed champions for the new technology
early in the process, it might ask these champions
to play a part in helping to maintain success after a
system is implemented, Watson said.
Looking ahead, firms will have to monitor software updates and keep an eye out for the next best
product, as well as provide training for new features
or new programs and maintain scheduled evaluations around data security and quality management
standards. (See the sidebar “Technology and Quality
Management Standards”).
PREPARE FOR OBSTACLES
There are typically inefficiencies involved in adopting
new software, so firms should prepare their people
for the inevitable bumps in the road. Firms will be
positioned to gain support for change (and overcome opposition to it) if they start with committed
management buy-in, clear communication on the
timeline and goals, and a solid case for change based
on the benefits for all involved.
Part of the conversation should include the risk of
not changing, so that firm members fully understand
that there are consequences of sticking with the
“same as last year.”
“As firms transition to a new way to doing things,
it’s understandable that many employees will experience a lot of uncertainty around whether the new
way will be too difficult or time-consuming, whether
they’ll be able to adapt quickly enough, and how
challenging it will be to learn something new,” Racca
said. “The leading cause of change failure is employee
resistance and ineffective management on the people
side. Leaders often focus more on the technical
implementation or process redesign because it’s more
straightforward, but shifting mindsets and cultures
is critical for success.” She recommended beginning
with a group of people who are eager to move the
process forward.
For the next stage, Watson suggested that, as
part of the attempt to be inclusive, the firm should
include in the planning those who are least likely to
appreciate the change. “If you get those naysayers
involved, they will feel they have a stake in the plan,”
she said, and the firm can identify and address pain
points early.
In some cases, what seems like resistance may
happen simply because employees don’t fully
journalofaccountancy.com
understand how to put the new technology to work.
Training on how to use the technology and on the
value it can add for the people using it are critical.
Firms may also want to be proactive and add
change agility to their list of desired attributes in
prospective new hires to ensure that their people can
adapt well to new developments, as Watson said her
firm is doing. “The pace of change is not going to
slow down,” she said.
FIRMS ALREADY KNOW THE DRILL
Technology change may sound daunting, but firms
have a great deal of experience in adapting to new
approaches, noted Danielle Supkis Cheek, CPA, vice
president and head of Analytics & AI for Caseware.
They should recognize and leverage their existing
strong expertise in dealing with the unknown, given
the uncertainty they regularly face when there are
last-minute tax code changes or a significant new
standard or regulation takes effect.
She recommended doing a postmortem of the
firm’s past planning strengths and weaknesses in
adjusting to new laws and regulations, then applying
the lessons learned to the firm’s approach to technology transformation. “They’re the same conversations
with different subject matter,” Cheek said. ■
Technology and Quality Management
Standards
Firms should be aware that AICPA Statement on Quality Management
Standards No. 1, A Firm’s System of Quality Management, and related guidance
in AICPA Statement on Auditing Standards No. 146, Quality Management for
an Engagement Conducted in Accordance With Generally Accepted Auditing
Standards, and AICPA Statement on Standards for Accounting and Review
Services No. 26, Quality Management for an Engagement Conducted in
Accordance With Statements on Standards for Accounting and Review Services,
cover the use of software tools and technologies in assurance engagements.
Although the standards are not effective until Dec. 15, 2025, firms are urged
to begin planning ahead by contacting vendors now to understand how
they address information security considerations or by discussing the issue
with prospective vendors.
AICPA & CIMA RESOURCE
Article
“Harnessing Collaboration for Workplace Transformation,”
JofA, Oct. 5, 2023
April 2024 | 29
Tax Court petition is
ruled untimely
When a private delivery service
is used, it must be one the IRS
has specifically identified to
satisfy Sec. 7502, the Tax Court
holds.
By John McKinley, CPA, CGMA,
J.D., LL.M., and Marquise Riley,
CPA
A married couple’s Tax Court petition
was held untimely because the delivery
service by which they mailed it was
not designated as a qualifying private
delivery service for purposes of the Sec.
7502 “timely mailing, timely filing” rule.
Facts: The IRS issued the taxpayers, Dzuy Nguyen and Jessica Thai, a
notice of deficiency on Oct. 13, 2022,
for their 2017 and 2018 individual
income tax returns. The deficiencies
for the two years totaled $2,685,942
of income taxes and $1,980,683 in
civil fraud penalties. The notice of
deficiency correctly stated that the
last day to file a petition with the Tax
Court in response to the notice was
Jan. 11, 2023, a Wednesday.
The taxpayers prepared a Tax
Court petition seeking redetermination of the deficiencies. They sent the
30 | Journal of Accountancy
petition to the court using the FedEx
Ground delivery service, depositing
the envelope containing the petition
with FedEx on Jan. 10, 2023. The
court received the petition two days
later on Jan. 12, 2023, and the court’s
clerk filed it the same day. Since Jan.
11, the due date for the petition, did
not fall on a Saturday, Sunday, or a
legal holiday, the petition was filed 91
days after the notice of deficiency was
mailed to taxpayers, making it one day
late under Sec. 6213(a).
The IRS filed a motion to dismiss
for lack of jurisdiction, asserting the
taxpayers’ petition was not timely filed
since it was filed after the 90-day
statutory period had expired. The
taxpayers objected to the IRS’s motion, claiming that they met the timely
mailed, timely filed rule when they
deposited their petition using FedEx
Ground on Jan. 10.
Issues: The Tax Court may
exercise jurisdiction over a case “only
to the extent expressly authorized
by Congress” (Sec. 7442; Hallmark
Research Collective, 159 T.C. 126
(2022)). Taxpayers therefore have the
burden of “affirmatively” proving that
the court has jurisdiction (see David
Dung Le, M.D., Inc., 114 T.C. 268
(2000), aff ’d, 22 F. App’x 837 (9th
Cir. 2001)). The taxpayers’ case was
appealable to the Tenth Circuit, which
the Tax Court observed in a footnote
“has long agreed” with its holdings
that the petition filing deadline is
jurisdictional. In a deficiency case, the
court’s jurisdiction is “predicated on a
valid notice of deficiency and a timely
filed petition” (Secs. 6213 and 7442;
see also Armstrong, 15 F.3d 970, 973 n.
2 (10th Cir. 1994), aff ’g T.C. Memo.
1992-328).
For taxpayers in the United States,
under Sec. 6213(a), a petition must
be filed within 90 days of the mailing
of a notice of deficiency by the IRS,
unless the filing deadline falls on a
Saturday, Sunday, or a legal holiday in
the District of Columbia.
The taxpayers contended that even
though the court received and filed
their petition on Jan. 12, they had sent
it on Jan. 10, which made it timely
filed under the Sec. 7502 timely
mailed, timely filed rule. This rule is
set forth in Sec. 7502(a)(1), which
provides that if a document is “delivered by United States mail,” then the
postmark stamped on the cover shall
be deemed to be the date of delivery.
Sec. 7502(f ) states that a reference
to the United States mail in Sec. 7502
includes any “designated delivery
service.” Sec. 7502(f )(2) defines a
“designated delivery service” as a
private delivery service designated by
the IRS for purposes of Sec. 7502.
Thus, the timely mailed, timely filed
rule applies to documents delivered by
a designated delivery service.
Notice 2016-30 lists all the qualifying private delivery services that have
been designated by the IRS. While
this list includes certain forms of
delivery by FedEx, FedEx Ground is
not one of them. Moreover, the notice
specifically states that “FedEx ... [is]
not designated with respect to any
type of delivery service not enumerated in this list.” In prior cases, the Tax
Court has held that the timely mailed,
timely filed rule did not apply to
FedEx First Overnight or UPS
Ground since they were not specifically listed as a designated private
delivery service in Notice 2016-30
(Guralnik, 146 T.C. 230 (2016);
Raczkowski, T.C. Memo. 2007-72).
The taxpayers did not dispute
that their petition was filed after the
90-day filing deadline or that they did
not use an IRS-prescribed delivery
service. They argued, though, that
FedEx Ground is “substantially identical” to FedEx 2-Day, a private delivery
service designated by the IRS in
Notice 2016-30. Because the delivery
April 2024
IMAGE BY ILLUSTRATOR FOREST_STRIDER/GETTY IMAGES
TAX MATTERS
IMAGE BY ILLUSTRATOR ILLUSTRATOR DE LA MONDE/GETTY IMAGES
services are substantially identical, the
timely mailed, timely filed rule should
apply in their case, they argued.
The court disagreed, holding that
even though these methods of delivery
may be substantially similar, the court
may not rely on “general equitable
principles to expand the statutorily
prescribed time for filing a petition”
(Eichelburg, T.C. Memo. 2013-269).
Congress has given the IRS the power
to designate which delivery services
meet the timely mailed, timely filed
rule. The court stated that it would
not make a designation that Congress
has “explicitly committed to the
[IRS’s] discretion.” Therefore, since
FedEx Ground was not specifically
listed in Notice 2016-30, it did not
qualify as a private delivery service.
Holding: Because FedEx Ground
was not deemed a designated private
delivery service under Notice 2016-30,
the taxpayers’ petition was not timely
filed, since it was received and filed
by the court on Jan. 12, 2023, one day
after the filing deadline. Thus, the
court dismissed the petition for lack
of jurisdiction.
The court recommended to the
taxpayers other ways to pursue their
claim. First, they may pursue an
administrative resolution with the
IRS for their 2017 and 2018 tax
liabilities. Alternatively, they could pay
the additional taxes and file a claim
for refund. If the claim is denied or
not acted upon for six months, then
a suit for refund could be filed in the
appropriate district court or the Court
of Federal Claims.
■ Nguyen, T.C. Memo. 2023-151
— John McKinley, CPA, CGMA,
J.D., LL.M., is a professor of the practice
in accounting and taxation, and Marquise Riley, CPA, is a visiting lecturer
in accounting, both in the SC Johnson
College of Business at Cornell University
in Ithaca, N.Y.
journalofaccountancy.com
Top 10 countries for
dispositions of US real
property interests
By aggregate sales price realized
by foreign-resident individuals and
corporations.
Canada
South Korea
United Kingdom
Court’s inaccessibility
extends taxpayers’
petition filing deadline
Although mailed after the 90day deadline had expired, the
petition was timely because
it was filed within a 14-day
extension provided under Sec.
7451(b)(1).
By John McKinley, CPA, CGMA,
J.D., LL.M., and Thomas Godwin,
CPA, CGMA, Ph.D.
The Tax Court’s inaccessibility by
closure tolled a taxpayer couple’s filing
deadline by the period of inaccessibility plus 14 days, the Tax Court
held in applying Sec. 7451(b) for the
first time.
Facts: The IRS issued Madiodio
Sall and Ramatoulaye Fall a notice
of deficiency dated Aug. 25, 2022,
for their 2017 and 2018 individual
income tax returns. The notice was
sent by certified mail to the taxpayers
on Aug. 26, 2022. The deficiency
notice stated that Nov. 25, 2022, was
the last day to file a petition with the
Tax Court challenging the notice.
The court was administratively closed
that day, although its electronic filing
system was accessible and operating.
Sall mailed a petition to the Tax
Court on Nov. 28, 2022, which the
court received and filed on Dec.
1, 2022. The IRS filed a motion
China
Cayman Islands
$3.54 billion
$1.7 billion
$1.44 billion
$857.7 million
$760 million
Japan
$469.5 million
Germany
$457.7 million
Hong Kong
$370 million
Australia
$287.4 million
British Virgin Islands
$202.7 million
Reported on Form 8288-A, Statement of
Withholding on Certain Dispositions by
Foreign Persons, tax year 2020. Of $14.88
billion for all countries, including $1.67
billion for which the country was unknown
or unspecified.
Source: IRS Tax Statistics, Withholding Tax on Dispositions of U.S. Real Property Interests by Foreign
Persons, Table 1.
to dismiss the petition, claiming
that the court lacked jurisdiction
to hear the case, since the deadline
for filing the petition had passed
when Sall mailed it and therefore it
was untimely.
Issues: Since the Tax Court is a
court of limited jurisdiction, it may
exercise jurisdiction only as “expressly
provided by statute” (Naftel, 85 T.C.
527 (1985); Breman, 66 T.C. 61
(1976)). The court does, however,
have “jurisdiction to determine
whether [it has] jurisdiction over
a particular case” (Kluger, 83 T.C.
309 (1984)). Jurisdiction “must be
affirmatively shown” by the party invoking the court’s jurisdiction (David
Dung Le, M.D., Inc., 114 T.C. 268
(2000), aff’d, 22 F. App’x 837 (9th
Cir. 2001)).
April 2024 | 31
To invoke the Tax Court’s jurisdiction, a taxpayer generally has 90 days
(150 days “if addressed to a person
outside the United States”) from the
mailing date of a notice of deficiency
to file a petition with the court (Sec.
6213(a)). Prior cases have held that
the filing deadline is “jurisdictional,
and equitable tolling does not apply”
(Hallmark Research Collective, 159 T.C.
126, 166–67 (2022)). An extension may
be granted if the filing deadline falls
on a Saturday, Sunday, or legal
holiday in the District of Columbia
(Sec. 7503), or if a later date is prescribed by the IRS in the notice of
deficiency (Sec. 6213(a)).
Under either of these rules, the
deadline for filing the taxpayers’
petition would have fallen on Nov. 25,
a Friday.
Sec. 7451(b) provides a further extension if the filing location is inaccessible
(added to the Code by the Infrastructure
Investment and Jobs Act, P.L. 117-58,
in 2021). This rule extends the filing
deadline if the “filing location is inaccessible or otherwise unavailable to the
general public on the date a petition is
due” (Sec. 7451(b)(1)).
If so, the deadline is tolled by the
number of days the court was inaccessible plus an additional 14 days. A
filing location includes the office of the
clerk of the Tax Court or any online
portal made available by the Tax Court
for electronic filing of petitions (Sec.
7451(b)(2)).
Holding: The court concluded that
Sec. 7451(b) applied since the Tax
Court in Washington, D.C., which
houses the court’s clerk’s office, was
administratively closed on Nov. 25,
making it inaccessible to the public,
even though the electronic filing system
was operational and accessible.
Therefore, this extended the filing
deadline by the period the court was
inaccessible, i.e., one day, plus the
14-day tolling period mandated by Sec.
7451(b)(1), meaning that the taxpayers’
32 | Journal of Accountancy
petition was not due until Dec. 10,
2022. However, since Dec. 10 fell on a
Saturday, Sec. 7503 extended the filing
deadline to the next day that was not
a Saturday, Sunday, or legal holiday,
which was Monday, Dec. 12, 2022.
As a result, since the taxpayers
mailed their petition to the Tax Court
on Nov. 28 and it was received and
filed by the court clerk on Dec. 1, the
court held that the petition was timely
filed, giving the court jurisdiction to
hear the case.
■ Sall, 161 T.C. No. 13 (2023)
— John McKinley, CPA, CGMA,
J.D., LL.M., and Thomas Godwin,
CPA, CGMA, Ph.D., are both professors of the practice in accounting and
taxation in the SC Johnson College of
Business at Cornell University.
Foreign earned income
and housing exclusion
denied
Another worker at a
U.S.–Australia joint defense
facility fails to nullify a closing
agreement waiver.
By Thomas Godwin, CPA, CGMA,
Ph.D., and John McKinley, CPA,
CGMA, J.D., LL.M.
The Tax Court ruled against a taxpayer’s petition for the foreign earned
income exclusion and foreign housing
exclusion, holding that she had waived
the right to each in a closing agreement with the IRS.
Facts: Nicole Henaire, a U.S.
citizen, lived and worked in Australia
during 2017 and 2018. During this
time, she was employed by defense
contractor Northrop Grumman at
the Joint Defense Facility Pine Gap
( JDFPG), a satellite surveillance
base in rural Australia. Henaire
began working in this role on Jan.
6, 2017, two days after moving to
Australia. She was in Australia for
almost all of 2017 and 2018 except
for three trips back to the United
States on April 17–30, 2017; March
12–28, 2018; and Oct. 18–28, 2018.
While Henaire was in Australia,
she lived in housing provided at no
cost by the U.S. government approximately 10 miles from JDFPG
in Alice Springs. When she filed her
petition with the court, she was a
U.S. (Arizona) resident.
Before moving to Australia, Henaire completed a closing agreement
in which she agreed to “irrevocably
waive[] and [forgo]” rights to foreign
earned income and foreign housing
exclusions under Sec. 911(a) for
the 2016, 2017, and 2018 tax years.
The agreement also referred to the
United States–Australia tax treaty
as it relates to joint defense stations,
which states that income derived as a
contractor at sites like JDFPG “shall
be deemed not to have been derived
in Australia, provided it is not exempt and is brought to tax, under the
taxation laws of the United States.”
Henaire signed the agreement,
which was mailed by Northrop
Grumman and signed by the IRS
Director for Treaty Administration,
Deborah Palacheck, on May 12,
2017. In late 2018, Henaire also
consented to the disclosure of certain
tax return information that pertained
to this closing agreement.
With respect to her housing in Australia, Henaire had an
April 2024
IMAGE BY ILLUSTRATOR ILLUSTRATOR DE LA MONDE/GETTY IMAGES
TAX MATTERS
Individual and estate
and trust income tax
civil penalties
Average amount per type of penalty
assessed, fiscal 2022
Fraud
Delinquency
$235,787
$10,529
Accuracy
$2,927
Other*
$2,038
Federal tax deposits
$1,000
Failure to pay
$653
Bad check
$168
Estimated tax
$149
* Penalties related to federal tax deposits,
failure to supply a taxpayer identification
number, and failure to report tip income.
Source: IRS Data Book, 2022, Table 26.
International Assignment Agreement with Northrop Grumman that
provided “Government furnished
housing in accordance with Site
policy.” If she chose to not accept that
option, Northrop Grumman offered
an $11,000 annual housing allowance.
Henaire chose the governmentfurnished housing at no cost to her
and lived in Alice Springs, where she
did all of her training work at home.
Henaire timely filed her 2017
and 2018 Forms 1040, U.S. Individual Income Tax Return. On
her 2017 tax return, she reported
wages of $121,865, which consisted
of $107,981 in wages for services
she performed for Northrop Grumman at JDFPG and $13,884 from
the Secretary of the Air Force. She
received a Form 1099-MISC, Miscellaneous Income, from the Air Force for
the latter amount. The return resulted
in a tax liability of $25,519.
Henaire amended her 2017 tax
return in October 2018, in which she
reported wages of $107,981 and other
income of -$102,100, described as
an adjustment for a foreign earned
journalofaccountancy.com
income exclusion on Form 2555,
Foreign Earned Income. The amended
return also included a Schedule C,
Prof it or Loss From Business, that included the $13,884 housing allowance
and a deduction in the same amount
as “employee benefit programs.”
These amendments resulted in a
$25,170 refund.
Her 2018 tax return showed similar treatment of income as the 2017
return, excluding $103,900 of wages
as foreign earned income and $9,666
of nonemployee compensation. This
return indicated a tax liability of $195.
The IRS adjusted the 2017 and
2018 returns, disallowing both the
foreign earned income exclusion
and the deduction for the housing
allowance on Schedule C. Since the
Schedule C adjustment resulted in
self-employment income, the IRS
added a deduction for one-half of
self-employment tax to each return.
After these adjustments, the corrected
tax liability for 2017 and 2018 was
$26,407 and $22,943, respectively.
Henaire challenged the IRS’s
determinations for 2017 and 2018 in
Tax Court.
Issues: The main issue was
whether Henaire was entitled to a
foreign earned income exclusion and
foreign housing exclusion despite
waiving these exclusions in a closing agreement. Under Sec. 911(a), a
“qualified individual” as defined in
Sec. 911(d)(1) may elect to exclude
their foreign earned income (up to the
annual exclusion amount allowed in
Sec. 911(b)(2)(D)). To do so, Henaire
needed to prove that the closing
agreement in which she waived her
right to make a Sec. 911(a) election
was invalid and that she was a qualified individual.
First, the court considered the
validity of Henaire’s closing agreement.
Although under Sec. 7121(b)(1), a closing agreement approved by the IRS is
“final and conclusive … except upon
a showing of fraud or malfeasance, or
misrepresentation of a material fact,”
Henaire made three arguments to
support her position that her closing
agreement was invalid.
Henaire first contended that
Palacheck lacked the authority to
have signed the agreement on the
IRS’s behalf. Regarding Palacheck’s
authority, the court had previously
held that she was authorized to sign
another closing agreement in Smith,
159 T.C. 33 (2022). The Smith case
pertained to an agreement Palacheck
signed on the same day as Henaire’s,
and the taxpayer in that case, Cory
Smith, was also employed at the
JDFPG site (see “Engineer Cannot
Escape Closing Agreement,” The Tax
Adviser, November 2022). The court
held that Smith was the controlling
authority on Palacheck’s authority to
sign and that its holding in that case
applied to Henaire. In Smith, the court
found that Internal Revenue Manual
Sections 1.2.43.12(14) and (15) (Sept.
7, 2016), gave Palachek the authority
to have signed the closing agreement.
Henaire also argued that the IRS
committed malfeasance when it procured the closing agreement through a
third party, her employer, and thereby
disclosed confidential information.
She alleged the Service thus violated
the Sec. 6103 requirement that tax
returns remain confidential.
She further contended that the
IRS was not permitted to request the
closing agreement from her employer,
obtain the closing agreement from
her employer, or use her employer
to return the closing agreement to
her. Henaire claimed that the three
“consent to disclosure” forms she
signed after she executed the closing
agreements were proof of the IRS’s
malfeasance because the IRS thereby
attempted “to remedy their [sic] illegal
acts.”
The court, however, found that the
IRS had not requested a closing
April 2024 | 33
TAX MATTERS
Under Sec. 911(a), a ‘qualified
individual’ as defined in Sec. 911(d)
(1) may elect to exclude their
foreign earned income (up to the
annual exclusion amount allowed
in Sec. 911(b)(2)(d)).
agreement from Henaire, and, as it
had held in Smith, using an employer as an intermediary between
the taxpayer and the IRS does not
constitute IRS malfeasance. Furthermore, the court found that even if it
accepted that the IRS’s requests for
her to sign the consent for disclosure
forms were admissions of its malfeasance, as Henaire suggested, they
would not be grounds for setting
aside the closing agreements because
the only possible violation of Sec.
6103 through the requests for the
forms occurred after the closing
agreements were finalized.
Finally, Henaire argued that a
provision of the Pine Gap agreements contained a material misrepresentation, but the Tax Court
concluded that she had not advanced
a valid argument for setting aside her
closing agreement on these grounds.
The court interpreted her argument as asserting that “the waiver
of her right to elect either or both
of the section 911(a) exclusions was
unnecessary for her Pine Gap wages
to be treated as ‘not exempt’ and
‘brought to tax’ in the United States.”
This, the court stated, was a question
of law, not of fact. As the court had
held in Smith, under Sec. 7121(b),
while a misrepresentation of fact
provides grounds for invalidating a
34 | Journal of Accountancy
closing agreement, misrepresentations
of law do not.
Moreover, the court found that
even if Henaire had prevailed with
any of her three arguments regarding
the agreement, to exclude her wages
under Sec. 911(a)(1), she would also
need to prove that she was a qualified
individual under Sec. 911(d)(1), i.e.:
an individual whose tax home is in
a foreign country and who is:
(A) a citizen of the United States and
establishes to the satisfaction of
the [IRS] that he has been a bona
fide resident of a foreign country
or countries for an uninterrupted
period which includes an entire
taxable year, or
(B) a citizen or resident of the United
States and who, during any period
of 12 consecutive months, is
present in a foreign country or
countries during at least 330 full
days in such period.
While the IRS conceded that
Henaire met the Sec. 911(d)(1)(B)
physical-presence test, the court
agreed with the IRS that she had not
established her tax home in Australia.
Sec. 911(d)(3) defines a “tax home” as
a taxpayer’s “home for purposes of section 162(a)(2).” Sec. 162(a) indicates
that the tax home is often near a
taxpayer’s place of employment rather
than personal residence (Wentworth,
T.C. Memo. 2018-194; Mitchell,
74 T.C. 578 (1980)). However, Sec.
911(d)(3) goes on to say that an “individual shall not be treated as having a
tax home in a foreign country for any
period for which his abode is within
the United States.”
The concept of “abode” versus
“home” means that a taxpayer’s
“familial, economic, and personal ties”
should be considered (Wentworth;
Bujol, T.C. Memo. 1987-230). The fact
that Henaire visited the United States
several times and the lack of evidence
in the record regarding such signs of
an abode in Australia as her address
there on a driver’s license or bank accounts or involvement with Australian
civic or religious organizations led the
court to conclude she had not met her
burden of proof establishing that her
domestic home and abode were not in
the United States.
Regarding the value of the housing
she was provided, Henaire argued in
Tax Court that she was entitled to
the Sec. 911(a)(2) foreign housing
exclusion for that amount. The court
rejected this argument for three
reasons. The court first found that the
exclusion was available only to qualified individuals who elect the exclusion and, as it had already determined
with respect to the foreign earned
income exclusion, she was not a qualified individual. Also, as the court had
previously determined, she had signed
a valid closing agreement in which
she agreed not to elect the foreign
housing exclusion, which precluded
her from electing the exclusion. In
addition, even if she otherwise could
elect the exclusion, under the formula
for calculating the exclusion amount,
her excludible housing cost amount
for 2017 and 2018 was zero.
Henaire argued in the alternative
that she could exclude it from her
April 2024
IMAGE BY ILLUSTRATOR ILLUSTRATOR DE LA MONDE/GETTY IMAGES
gross income under Sec. 119(a) as the
value of lodging furnished to her for
her employer’s convenience. However,
she did not establish that the housing was for the convenience of her
employer, that she was required to accept it as a condition of employment,
or that the housing qualified as part
of her employer’s business premises,
as required by Sec. 119(a), so the Tax
Court concluded she was not eligible
for any Sec. 119(a) housing exclusion
as well.
Holding: The Tax Court held that
Henaire was not entitled to the Sec.
911(a)(1) foreign earned income exclusion for her income from her work
in Australia with Northrop Grumman
at JDFPG in 2017 and 2018 and she
was also not entitled to either the Sec.
911(a)(2) foreign housing exclusion
or the Sec. 119(a)(2) exclusion for the
value of housing that she was provided
while working at JDFPG during those
years. The court determined that her
closing agreement waiving the Sec.
911 exclusions for those years was
valid and could not be set aside and
that, even if it could be, Henaire was
not a qualified individual under Sec.
911(d) eligible to take the exclusion.
Also, because the housing was
not provided during those years for
the convenience of her employer, as
a condition of employment, or that
the housing was on her employer’s
premises, she was not entitled to an
exclusion from income under Sec.
119(a)(2).
■ Henaire, T.C. Memo. 2023-131
— Thomas Godwin, CPA, CGMA,
Ph.D., and John McKinley, CPA,
CGMA, J.D., LL.M., are both professors of the practice in accounting and
taxation in the SC Johnson College of
Business at Cornell University.
To comment on this column, contact Paul
Bonner, the JofA’s tax editor. ■
journalofaccountancy.com
LINE
ITEMS
For these full stories plus the latest tax news, visit
journalofaccountancy.com and thetaxadviser.com.
Simpler IRS notices are coming
The IRS’s new Simple Notice Initiative follows a pilot that
demonstrated how redesigned notices can improve taxpayers’
experience while reducing call volume.
Reporting of digital assets as cash delayed
until IRS issues regs.
Businesses do not have to include the receipt of digital
assets as cash in determining whether cash received in a
single transaction is over the $10,000 threshold for purposes of reporting under Sec. 6050I until the IRS issues
final regulations.
IRS enforcement efforts collect $520 million from
wealthy taxpayers
Commissioner Danny Werfel reported the IRS had collected
$520 million from wealthy individual taxpayers as part of
new IRS efforts to collect taxes from high-income individuals, complex partnerships, and large corporations and gave an
update on IRS modernization progress.
Taxpayer advocate: IRS again fails tax pros with PPS
call answer rate
In an annual report to Congress, the national
taxpayer advocate says the IRS should prioritize improving service on the Practitioner
Priority Service line, which had a 29% call
answer rate.
IRS collects record-setting $4.9 trillion
in tax revenue in FY 2022
The Treasury Inspector General for Tax Administration said
in its annual report that the total tax revenue collected from
return filings was about $790 billion more than in fiscal
year 2021.
ERC voluntary disclosure program requiring
80% claim payback launched
The IRS inaugurated a program allowing businesses to repay
money from questionable employee retention credit claims
and avoid penalties and interest.
April 2024 | 35
TECHNOLOGY Q&A
MICROSOFT EXCEL
Move quickly with Excel’s Navigation Pane
Q: Could you tell
me more about
the Navigation
Pane in Excel?
A: The Navigation Pane in Excel is a useful tool that allows users to easily move around and manage large
workbooks. It provides a way to quickly navigate to specific sheets, cells, tables, charts, or other objects
within a workbook. The pane can also be used to search for specific content within a workbook, making it
an efficient way to find and edit large amounts of data. You can click on a tab or even specific information
within that tab from the Navigation Pane and be taken directly to it.
To open the Navigation Pane, go to the View tab and click on Navigation. The first time you do, a
dialog box may appear asking if you want to try the Navigation Pane. See the screenshot below.
Submit a
question
Do you have
technology
questions for this
column? Or, after
reading an answer,
do you have a
better solution?
Send them to
jofatech@aicpa.
org. We regret
being unable to
individually answer
all submitted
questions.
So, how does the Navigation Pane work? Let’s look at a workbook. To follow along, download this
Excel workbook. A video demonstration is also available at the bottom of this article on the JofA website.
Note that the walkthrough and video were made using Microsoft Excel 365 for PCs. Other versions of
Excel may work differently.
The Navigation Pane is similar to a Table of Contents and is especially useful in a large workbook that
contains a lot of data. Let’s look at the first tab in our workbook: the Dashboard (see the screenshot below).
Go to View on the Ribbon and select Navigation from the Show group.
36 | Journal of Accountancy
April 2024
Note that the Navigation Pane lists all of the tabs in the workbook and also the data within those tabs
down the right side of the screen.
You may not be satisfied with the names of your tabs or data, and you can rename them. I do not want the
chart in my Dashboard tab to be called Chart 1, so I rename it. There are a couple of ways to do this. Rightclick on “Chart 1” and click Rename. Enter the name you would like. Another way to rename the chart is
to click on the chart, enter the name you would like in the Name box, which is to the left of the formula bar,
and click Enter. Either way, the Navigation Pane should now show the chart name, which is “Employee Data
Chart”. See the screenshot below.
I would also like to clean up the title for my sales table. Because it has not been given a name, it is called
the name of the tab plus the cells it populates. You can see it is called Sales!A1:A8. I use the name box to
change it to “EmployeeSalesData”. Note that the name cannot have any spaces. See the screenshot below.
journalofaccountancy.com
April 2024 | 37
TECHNOLOGY Q&A
Finally, in our workbook, I would like to rename the number of approved loans appropriately on the last
tab. Currently, it is just called “Loans!J14:J15”. I use the Name box to call this “NumberofApprovedLoans”.
See the screenshot below.
When you right-click on an item in the Navigation Pane, you get the options shown in the screenshot
below. This includes the name of the tab and the content of the tabs.
You can rename an item, you can delete an item or tab, and you can also opt to hide a tab. Note that if a
tab had already been hidden, that tab would have shown as light gray, and you would have had the option
to Unhide.
— By Kelly L. Williams, CPA, Ph.D.
38 | Journal of Accountancy
April 2024
WEB BROWSERS
Vertical Tabs give one browser the Edge
Q: I use Google
Chrome as
my main web
browser, but I’ve
heard Microsoft
Edge might be
worth a try. Does
it have any cool
features that
make it stand
out versus other
browsers?
A: Google’s Chrome has long been the dominant web browser and ended 2023 with 65% global market
share, according to Statcounter. Edge finished the year in third place at 5%, behind Chrome and Apple’s
Safari at 18.5%. Though Edge has a relatively small market share, I have been using it exclusively for the
past year. Why? It has some features I really like, but let’s cover a couple of technical notes first.
Edge and Chrome are both built using the framework developed by the open-source Chromium
browser project. Because of this, the two browsers share many features. Both also run fast, though Chrome
is known to use a large amount of computer memory while Microsoft has optimized Edge to run using
less resources.
Now to the features. My favorite by far is Vertical Tabs, which is the first reason I switched. There are
three ways to turn on Vertical Tabs.
■ Right click on a tab and select Turn on vertical tabs. See the first screenshot below.
■ Press Ctrl Shift + , or
■ Click on the Vertical Tabs icon in the top left corner and select Turn on vertical tabs. See the second
screenshot below.
About the
authors
Kelly L. Williams,
CPA, Ph.D., MBA,
is an associate
professor of
accounting at the
Jones College
of Business at
Middle Tennessee
State University.
Wesley Hartman
is the founder of
Automata Practice
Development.
journalofaccountancy.com
April 2024 | 39
TECHNOLOGY Q&A
Vertical Tabs shifts all tabs to the left side of the window. Doing so makes the type on the tabs larger
than when they are lined up across the top. This makes it much easier for me to read the title of each
website I have open. The screenshot below shows what my tabs look like after the change.
40 | Journal of Accountancy
April 2024
I also like to group my tabs together based on the function of the website. I feel like I am more organized with all the sites I go to for managing my business.
Another feature I like is Immersive Reader, which removes most of the elements on a website that can
be over stimulating when trying to focus on the content. The goal is to create a better reading experience.
With that in mind, Edge changes the background to a light beige like the pages of a book and adjusts the
font. To switch to Immersive Reader, press F9 or click this icon on the address bar.
Here is a screenshot of an IRS article before and after.
It is subtle in this case, but I feel the second screenshot is more readable than the first screenshot. I
especially like this on Wikipedia. The constant black text on bright white can be tiring for the eyes. This
is not a method for browsing the internet, but if I have a wall of text I need to read, I can switch over to
Immersive Reader with the press of a button. Google Chrome offers this functionality as well. It’s called
Reading Mode.
journalofaccountancy.com
April 2024 | 41
TECHNOLOGY Q&A
The next Edge feature I like is the ability to screenshot a whole page. There have been times I wanted
to send a co-worker part of a website. I tried printing to a PDF, but the formatting did not come across
correctly and it was impossible to read. The next idea might be to use the Windows Snipping Tool to take
snips of sections of the page and then paste the snip images into an email or Word document to share.
Edge offers a better solution called Web Capture, which is accessible by either pressing Ctrl + Shift + S or
clicking the menu in the top right and selecting Web Capture, as shown in the screenshot below.
Web Capture makes it possible to draw a box around the content you want for the screenshot. Clicking
and dragging the cursor to the bottom of the site scrolls the webpage to capture more of the website. Upon
releasing the mouse button, Edge provides the options shown in the screenshot below. Markup capture
allows the user to highlight specific sections, which I do when I want to draw my co-workers’ attention
to something.
— By Wesley Hartman ■
42 | Journal of Accountancy
April 2024