KSM Template
Please provide three section names related to the KSM workpaper
any
What is the purpose for KSM reviewers creating multiple provision files after review? Why does this process differ from normal return prep?
They create multiple copies so as to provide support to the preparer to reference any mistakes or adjustments made in provision. They do this because the team does not send back the provision to the preparer to clear comments.
The income tax provision is prepared only when there is a review, audit, or compilation being conducted.
False - Some entities choose to prepare a provision to accrue for state taxes when there is no issuance of GAAP financials.
What does the PYR2P tab stand for? What is its relevance when preparing the provision?
Prior year return to provision - looks at the temporary differences between PY provision and PY return and notes any differences with an explanation. Assess why there is a difference.
Name 3 files you will find in the provision folder - looking for general ones not client specific?
Answers may vary - Provision template, return comments, deprecation reports
The first step in preparing the income tax provision, once information has been accumulated and the workpaper is ready to begin, is to prepare the rate reconciliation tab.
False - this tab acts as a summary that should tell you whether or not the return is in balance. There is no preparation involved with this tab.
What is the full valuation allowance referenced in the presentation - Looking for the definitional term given in the presentation.
The full valuation allowance is your reserve against your tax asset. It is the process of setting up a reserve against an asset that cannot be realized.
In reference to the timeline of provision preparation, what happens after the provision has been prepared & reviewed, but before the auditors include the provision findings in the financial statement disclosure?
The audit team will conduct their own review of the information. This review can range from minimal to extensive.
Once the provision has been prepared and sent to the auditors, the tax return is ready to prepared. Why?
False - the audit team must review the income tax provision and assess if changes are needed. They will then issue the financial statements and the return is ready to be prepared.
The tax account roll forward tab provides what major information to the audit team?
Provides the adjusting entry needed to record the income tax liability and deferred tax liability
What is a common change to the format of the BT rec excel file for the purpose of matching the provision?
Adding an additional "Provision" column and making sure it matches the BT rec. If it doesn't, an explanation usually need to be included as to why.
The current tax tab provides all permanent adjustments, temporary adjustments, the application of FED & State NOLs, and calculates the ending taxable income.
False - does not track the application of state NOLs
Where do we include the apportionment data relative to the income tax provision?
State Rate Tab
Name 3 audit files that are commonly used to prepare the provision.
Answers may vary - Cap table, Fixed asset roll forward, grouped TB.
The carryovers portion of the preparation involves little to no preparation and only tracks FED NOL, FED R&D, and STATE R&D carryovers.
True