September/October 2007 Current Accounts |
President's Message
Women in the Accounting Profession
Creating Value from Document Management
Uniform CPA Examination Modernization
2007 Annual Convention
Thank you Junior Achievement Volunteers
FAQ on Providing FIN 48 Services to an Attest Client
Real World Accounting for Students
New AICPA Valuation Standard Unveiled
When Client Funds Disappear from CPA Firms
ROI on XBRL
Internet Resources - Part 2
Member and Chapter News
President's Message
Passion For the Profession - Pass It On
In June I had the opportunity to speak at the Young CPA Section Business Breakfast. I was very impressed with the dynamic group of energetic young society members who welcomed me at such an early hour! In retrospect, rather than giving a presentation, I should have held a question and answer session. I ended up spending more than an hour with them after the meeting answering questions and listening to them talk excitedly about their future hopes and plans. You know, I often hear negative comments about the new generation of professionals not being willing to labor and put in the long hours “required” in our line of work. That morning I encountered a group of young people eager to make their mark on our profession.
In 1996, a man with exceptional vision and a strong devotion to our profession created the Young CPA Task Force to address the special focus and needs of the large number of members under the age of 35. Through the years, that task force flourished, became a committee, and this year evolved into the newest section offered by the Society. That man was Howard Herman, who served as president of the Society in 1996-97.
In July, I was saddened at the news of the untimely death of my long-time friend, Howard. He was one of the first people I met upon getting involved with the GSCPA at the state level. I met him at a council meeting, (then called a board of directors meeting) and he immediately made me feel like family, always greeting me with a kiss on the cheek from that point forward. Howard sought out the new folks, made them feel welcome, and then made sure they got involved. At his funeral, many of his friends and colleagues commented on his love and passion for our profession and the Georgia Society of CPAs in particular; most of them had a story of how he had impacted them and made a difference in their lives.
For those of you who did not know Howard, he was an active member of the GSCPA. He served on numerous committees: Budget, Bylaws, Professional Ethics, Taxation, Nominating, Audit, Strategic Planning, Annual Convention, and Personnel. He also served on the Management Committee (now the Board of Directors), as president of the Society, and president of the Educational Foundation, where through his leadership the annual giving fund program was developed, and more recently, the establishment of the Golden Anniversary Endowment Campaign. In 2006, Howard received the Meritorious Service Award, which is the highest award presented by the Georgia Society of CPAs.
Howard had the type of passion that was contagious. He would not take “no” for an answer, and for that matter, you never wanted to tell him “no.” During his work with the Foundation, he would personally call members to “remind” them to make contributions to the Annual Giving Fund, to go beyond the dues check off, and to encourage others to do likewise. If there are phones in heaven, I am sure he is already putting together his calling list. Howard, I will save you the long distance call….I have already pledged!
A scholarship has been established in Howard’s memory to honor his dedication and work. The goal is to raise $35,000 for the scholarship to be given in perpetuity. If Howard was an influence in your life, I hope that you support this worthy cause.
Howard was a testament to the fact that one individual can make a difference. In closing, let me encourage you to develop a fervent passion for our profession and look for ways to pass your passion on to others. As I said in the last issue, if we all work together, there is nothing that the Georgia Society of CPAs cannot achieve. So whether you are a young CPA or a seasoned professional, find your place of service and make your mark on our profession. We will all be the better for it.
Paula Y. Mooney
President, 2007-2008
Women in the Accounting Profession: Status and Trends
Cheryl Leitschuh, Ed.D., RCC
Chair, AICPA, Work/Life and Women’s Initiative Executive Committee
In 1952, there were 750 female CPAs.
In 1972, there were 2000 female CPAs.
Today, there are 108,000 female CPAs.
AICPA 2005 research report
There was a time when women only wore skirts, clients did not want to work with female accountants, partners were reluctant to share business development activities with female accounting staff and pregnancy was treated as a disease which required secrecy and had adverse impact on career advancement (Helping Women Professionals Succeed, AICPA WLWIEC, 2007). Thankfully, the times have changed.
The AICPA research (A Decade of Changes in the Accounting Profession: Workforce Trends and Human Capital Practices, AICPA 2006) indicates more than 50 percent of the new accounting graduates are women. The percentage of both male and female associates who leave the profession is similar at the entry level through mid-level positions. Women are an overwhelming majority of non-partner track (i.e. career senior/manager/senior manager) and non-equity partners (i.e. directors or principles). Alternative partnership and non-partnership career tracks are used twice as often by women as by men. While women in partner positions have increased from 12 percent in 1993 to 19 percent in 2005, this is a small increase compared to the increase in the number of accounting graduates to over 50 percent.
Trends and Needs for Women’s Advancement
The AICPA Work Life and Women’s Initiative Executive Committee (WLWIEC) conducted six focus groups in the fall of 2005 to better understand issues related to women’s career advancement in the profession. Specifically, the committee was interested in what changes had occurred and why, what issues still exist and what is needed for the future.
As one participant stated “The glass ceiling is cracked but not shattered.” She want on to explain that some cultures provide opportunities for women who work hard and put in the time that is required and meet the expectations, she can continue to rise in the organization. However, if there is flexibility needed to this model, barriers continue to exist.
The issues fell into four areas: the organization, the profession, client expectations and the individual.
The organization
• There are senior leaders who do not yet understand the issue of women’s retention and advancement. This mindset becomes prevalent in the culture of their organizations at all levels, causing the glass ceiling to be encountered earlier in a woman’s career.
• The individual requesting flexibility or work-life balance can be interpreted as a “second-class employee.” The mindset seems to be, “If you won’t sacrifice all for the organization, are you a useful employee worthy of advancement?”
• The partnership or senior leadership position does not appear an attractive position. The workload requirements, risk involvement and added leadership requirements may be seen as an additional challenge for flexibility or work/life balance. This may de-motivate women or the younger generation to seek these positions.
The profession
Sarbanes Oxley was identified as a change in the profession that has significantly increased the number of hours for everyone. This has created additional stress as the demands increase for travel, documentation and billable hours. This has created breaking points for both males and females in the profession, causing some employees to look for other employment options with less stress and greater work/life balance.
Women and young families are re-prioritizing their values with quality of life and family on the top of the list. As these priorities have changed, the profession is faced with an old business model that does not support the needs of these professionals. Unfortunately, we do not have a ready made replacement model to follow, leaving the profession to grapple with what this model might look like.
Risk issues and PCAOB regulations were identified as professional barriers that cause greater scrutiny in investing in a firm. Several women acknowledged that they may be less willing to risk family security than their male counterparts.
There is a high demand for good employees not just in the CPA area but in all business areas. This competition can present opportunities to employees for less stressful, more flexible work environment away from the accounting profession. As baby boomers prepare to retire, there will be a huge gap in senior leadership in the profession with the need to retain and develop younger employees. The issue of work/life balance is no longer just a female issue. The younger generation is asking for the same degree of work/life balance and flexibility. Succession planning, retention and development are all issues identified by the focus group participants that will play a strong role in shifting the profession and creating more opportunities for women.
Client expectations
In this world of strong competition and high client expectations, the need to know who will answer the client if the primary client contact is on a flexible work schedule is a concern. The current model of a primary client contact may need to shift to a team model to facilitate both the needs of the client and the employee. It was also mentioned that clients are also struggling with work/life balance and flexibility issues with their employees, creating a perfect time to re-educate our clients and set new expectations.
The individual
Regardless of how many external considerations change, the participants agreed that in order for women to succeed and advance there were individual factors that needed to be recognized and developed. The list includes:
• Confidence in their abilities. Women need to recognize and express their unique talents which add value to the firm. These often include being a team player, developing others and multi-tasking.
• Guilt. Making choices between family and work will generally cause some level of trade-offs. Guilt can cause the women to doubt themselves and undermine their own self-confidence.
• Assertiveness. Because women are often collaborative, they may not always ask for what they need. Assertiveness is an important ingredient in achieving the goals they set.
• Setting realistic expectations for family and work.
• Find role models and have the courage to ask for mentoring and guidance–both inside and outside the profession and the organization.
• Have a support network including your significant other, friends, co-workers, family, nannies, and caregivers. There is no need to do it alone.
What initiatives have worked
Several formal and informal programs were identified as significant initiatives that have supported women’s career advancement.
• Flexible work arrangements: Individually based plans, not one size fits all. This may be a part-time/prime-time schedule or simply flexibility with hours and location for full time staff.
• Partnership options: Part-time, flexible work arrangements are included as a positive path to partnership. This requires adjustments to billable hours and compensation.
• Women’s initiatives as a strategic direction of the organization’s strategic business plan, not just a “token task force.”
• Training on diversity, team development, leadership styles and executive development programs
• Project teams versus a primary client contact. This allows for client responsiveness while still respecting the employee needs for flexibility and work/life balance.
• “Off Ramp” considerations. Keeping employees connected to the organization while they are on family leave. This includes CPE training and access to email and inter-office communications.
• Technology investments (blackberries, laptops, cell phones) to support flexible work options like telecommuting.
• Mentoring program – both formal and informal. The organization supports and encourages mentoring relationships for all members of the organization – from new associates to senior partners.
Summary
“I think there are great things that are going to create great opportunities for women. Women are smarter, more demanding and they won’t take the status quo, but they’ll do it in responsible ways and really make change and not be so constrained like we were in trying to follow all the rules.”
Female Senior Partner, Public Accounting, Focus Group Participant
The focus groups expressed positive comments about the changes that have been made and felt optimistic about the future. Clearly, the change process needs to be continued – and these changes will be more complex as the paradigms of the profession shift. The initiatives already taken have shown progress with benefits not only for females, but also for the needs of the younger generation, clients, the organization and the profession. There was a mandate from the participants that the profession continue its commitment to the challenging work ahead.
Cheryl Leitschuh can be contacted at Cheryl@career-future.com. To request materials referenced in this article, email Missean Reed at mreed@aicpa.org.
Supporting Women’s Retention and Advancement: 12 Key Questions Your Organization Needs to Ask
During the fall of 2005, the AICPA Work Life and Women’s Initiative Executive Committee conducted focus groups to explore what works in the retention and advancement of women. Following are key questions any organization should consider in supporting women’s retention and advancement.
1. Do you track the percentage of women entering your organization and the percentage of women in leadership positions?
2. Is women’s retention and development a component of your strategic initiatives?
3. Are women on key committees and task forces in your organization?
4. Do you have policies that support work life balance?
5. Do you offer individualized flexible work arrangements to your employees?
6. Do you offer opportunities for advancement for individuals using flexible work schedules?
7. Do you provide leadership and management skill development to all levels of employees in your organization?
8. Do you provide training on gender differences?
9. Do you provide alternative work options for employees on family leave (e.g. laptops to receive company emails, continued opportunities to participant in training and CPE activities)?
10. Do your employees have adequate technology support (e.g. blackberries, laptops, cell phones) to allow for flexibility?
11. Do you encourage and support internal mentoring – whether formal or informal?
12. What options do employees have in creating alternative career choices at various stages of their family and life development?
Creating Value from Document Management
Ryan Posener, E.C.M. Business Analyst
Document Management (DM) is quite the buzz today. Many articles discuss the benefits of compliance, sharing, and organization. These are great objectives for a DM project, and may provide enough reason to start your DM project; however, there is much more to gain from developing a long-term content strategy.
What is a content strategy? To figure this out, ask yourself, “What you are hoping to gain by implementing a DM system?” Document Management as a term insinuates that we are managing files, either electronic or paper. Managing files is a growing concern, including records management, destruction policies, and archiving processes.
If your firm does not already have established policies along these lines, what good is a system to manage files based upon your policies going to do? The more important question is, “How much value exists in an archiving system?”
Spending thousands of dollars for a better system to store and move files fails to add value to your firm. Instead, I intend to present to you an approach that I have used, based in the idea of adopting a content strategy to create value for your employees and clients. If you can effectively manage the content in your documents, opportunities to create value are abundant.
Managing content means that you can use the information in the document, as opposed to just work with the file properties of a document—hoping that the name, location, and a key field or two are capable of delivering valuable information. Let me explain the nature of this problem from a staff perspective. Pretend you are a staff member with limited prior knowledge of your firm’s work and have been charged with creating a proposal for a client with a unique tax situation related to natural resources. Let’s consider a few approaches.
Are you interested in finding all documents for your tax clients? Perhaps you may turn to your engagement management system to find a list of engagements for clients in that industry. Maybe from that list you can search a few network folders for key words. Will you be successful working autonomously? Probably not. Most likely you will need the expert knowledge from those who were involved in the prior engagements. And what specifically can they provide? Just what you need—a specific paragraph in a document that contains the advice.
Even when users were successful, finding such content previously required a keyword search on a network drive that took hours to execute. And if you use a product such as CaseWare, the documents are stored in a compressed format which is not even searchable. Once you find a list of documents, then you may spend hours of reviewing documents to find relevant sections.
Instead, let’s consider another method that will work better. Information sources such as Westlaw and Lexis-Nexis include advanced search terms to allow attorneys to search for documents referencing specific statutes, and common law, either upholding or overturning statutes and regulations. Further, it shows the relevant sections immediately for review, no opening and closing of files one at a time.
Google works in a similar method. The results show a section of the document with the most search terms on a given web page. This provides great power to the searcher by leveraging the content within an information source. Now, imagine that we can perform a similar search for accounting. Is there value if you can find other companies that have been through an IRS audit, received a no change decision and includes a classification that the IRS is trying to disallow? There are many examples like this—this is called knowledge management.
Consider your needs for knowledge management —the ability to leverage key knowledge within your firm is more important than ever, as firms strive to gain a better understanding of their clients.
Where does knowledge in your firm exist? Knowledge management studies report that knowledge exists in three places: people, processes or in relationships. Process knowledge is inherent in the way your firm operates or executes work, and while critical for the service delivery of your firm, it provides little value to understanding your clients.
People and relationships are the greatest sources of knowledge to improve your understanding of your clients and their needs. How do we capture this information? People document their knowledge all the time, as they produce content in emails and documents. The key to finding this knowledge in millions of emails and documents is to understand your people. Who are the knowledge experts within each topic that you can think of? What are the topics?
Likely you would have a list for each topic (who is the billing principal for a client, the manager for the engagement, expert in a specific industry, etc.) It is important that these people can filter and audit the content where they are experts. A good content management system allows knowledge experts to identify content, which is flagged and searchable by your entire firm.
Leveraging relationship knowledge from a content management system is somewhat elusive, yet it provides the quickest and highest ROI in many instances. In law firms, it is common to find not only a DM system, but also a CRM solution and an employee portal that integrates both systems into different views. This portal overcomes a key issue that email, CRM, DM, practice management, and most systems in accounting suffer from—the inability to cross-reference content between systems.
What do I mean by this? Referencing three systems by client number alone is ineffective for discovering knowledge or delivering value. Understanding the deeper content links is difficult for systems built in a vacuum.
One way that EKSH leveraged Interwoven Worksite was to share key communications to and from clients, and to share key documents between service areas, in a chronological fashion. In this way, we grant the ability for a tax staff member to understand the nature of any items of concern expressed by the client during our audit of the same client. More importantly, the information includes the full context of the conversation and discovery process.
Likewise, the relationship that a principal has with a client can explain to a new manager the context of a specific client relationship, helping the manager to build his or her own relationship with the CFO or Controller. Relationship knowledge is the least natural to use, as it requires a change in process for people to review and leverage this information, before and during an engagement. In firms with more than 100 people, this can also provide the greatest value, creating consistency in delivery to your client.
How can you accomplish some of these goals with a document management project? First, start by creating a goal beyond managing documents. Incorporate a vision of sharing and value creation that your firm can receive from the document management project.
Implementing any system in a manner to accomplish this requires creativity, dedication to the end-result, a lot of patience, support, and training. The primary challenge to delivering value from any document management project is setting these goals, and never losing sight of them.
These may sound like lofty goals; however, they only require a change in mindset, and approach to accomplish them. Once your product selection committee agrees on the goals and strategy, consider these things in your product selection process. This does not need to be a core function of the product; however, the functions should support your vision.
This will not dramatically increase the size or complexity of the technology implementation project. Instead, a content management strategy challenges you to execute a business change project in concert with your new technical capabilities. A year of detailed planning is common, and its common to be revising, reviewing processes, and updating the system design for a couple of years after the technology implementation is complete to find harmony with your firm processes.
Fast-growing firms need consistent and effective processes in their engagement execution to ensure profitable growth. A content management strategy requires a firm to evaluate how it executes engagements, and to create value in terms of knowledge management, customer relationship, and productivity. If your firm has experienced organic growth, this also offers a natural opportunity to revise processes in ways that create value both inside and outside of the organization.
Remember, document management is not magic; it’s a better filing system. Rely on your IT staff to understand and deal with the data-integration challenges such as master-data management. Make sure that you do not short-change your training efforts; this change is pervasive through the organization and poor user processes are magnified quickly. Most importantly, remember that technology success alone never creates value. Improving your firm’s service execution is the key to creating value.
Mr. Posener holds a B.S. in Information Technology from University of Phoenix, and is currently working on his M.B.A. with a focus in Technology Management. Mr. Posener currently serves as Enterprise Content Management Business Analyst for EKS&H, a 320-person business advisory firm in Denver, Colo.
Uniform CPA Examination Modernization
“Prometric has once again proven it is the industry leader. Their execution, partnering and subject matter expertise ensured the successful and on-schedule conversion of the Uniform CPA Examination.”
- Joe Cote, NASBA Chief Operating Officer
Since 1917, the American Institute of Certified Public Accountants (AICPA), the National Association of State Boards of Accountancy (NASBA) and the individual state jurisdictions have collaborated to serve the needs of the Accountancy profession. As the national professional organization for CPAs, the AICPA has established that the mission of the CPA examination is to demonstrate that CPA candidates have the knowledge and skills required to fulfill their ultimate responsibility – protecting the public’s financial interest through their independent reports on business.
Annually, more than 110,000 candidates take the exam, which is required for licensure from all state boards of accountancy. The CPA credential ensures the competence of practitioners and is one of the world’s most respected credentials.
Comprised of more than 330,000 members, the AICPA sets U.S. private auditing standards and the ethical standards for the profession. NASBA serves as a forum for its 54 member boards of accountancy in the U.S., District of Columbia, Guam, Puerto Rico and the Virgin Islands. As the ‘gatekeepers’ of the public accountancy profession, the boards have certified or licensed more than a half-million CPAs.
In its paper-based format, the CPA exam was only available twice a year in limited locations and was administered in large auditoriums to accommodate thousands of candidates simultaneously. In addition, first-time candidates were only permitted to take the four-section exam in its entirety over a two-day testing period – creating a stressful environment for candidates and test administrators alike. Moreover, the exam was limited in its ability to simulate real-world skills and experiences, including assessment, research and analysis.
The AICPA and NASBA needed to be able to measure real-world candidate skills accurately and effectively. The organizations also sought a more flexible and seamless candidate experience to help attract new talent. In short, the CPA exam needed to be more applicable to 21st century practices and demands.
Modernizing the CPA exam would also demonstrate a commitment to protecting the public through more effective measurement of accounting competencies. This proved to be particularly important to the accounting industry, which faced increased scrutiny due to a number of highly publicized accounting scandals. In order to maintain its status and success, the program required a partner experienced in computer-based testing and the conversion and marketing of large credential programs.
In 1998, the AICPA and NASBA chose Prometric to be their test partner. The organizations formed an exam conversion steering committee and several targeted work groups with representation from each stakeholder. The cross-organizational teams met semi-monthly to guarantee the effective transition to a computer-based format.
Prometric, the AICPA and NASBA completed the large-scale transition on budget and on schedule. They integrated more than 54 geographically dispersed systems and related personnel - and managed a simultaneous, on-schedule launch with a success rate of over 99.9 percent. In addition, candidate satisfaction is higher than anticipated, test scheduling reflects candidates are taking advantage of their new flexibility, and the volumes are projected to continue to grow. In doing so, they successfully balanced the needs of all stakeholders.
Test sponsors are assured, through simulations, modernized test items and the stringent security of Prometric Testing Centers, that CPA candidates are competent and ethical practitioners. The computer-based test format also enables test sponsors to review and enhance the exam as necessary.
Candidates enjoy the flexibility of taking the entire test or individual sections nearly year-round at more than 300 labs in the U.S., Virgin Islands and Guam. Flexibility and convenience also apply to the streamlined test scheduling process, with 85 percent of all candidates scheduling their exams online; Prometric customer service staff are certified in their knowledge of CPA exam policies, yielding high levels of customer service; and the testing environment is secure, spacious and temperature-controlled - all of which amounts to a superior testing experience.
The American public can assume even greater confidence in the competency and ethical proficiency of accountants holding the already highly respected CPA credential.
The CPA program is expected to expand to well above 250,000 testing events annually.
Annual Convention 2007
The 78th Annual Convention brought 150 members and guests to Grand Bahama Island for three days of educational programs and entertainment.
The Annual Convention Task Force, chaired by Brandon Verner, planned a full schedule beginning with the Grand Opening Reception and Dinner. Other highlights included a sunset cruise, a glass bottom boat excursion, and an ice cream and cordials social. For the second year, the convention held a Texas Hold 'Em Tournament. Two thousand dollars was raised for the Educational Foundation of the GSCPA.Congratulations to Michael Blalock, the first place winner. Runners-up were 2nd place – Kate Verner, and 3rd place – Cynthia Register.
CPE session speakers included Jim Martin, Martin & Orr; Colin Blalock, Jones and Kolb, CPAs; Ron Clark, Auburn University; and Geroge Willie, AICPA Board Liaison.
As always, the President's Banquet was the highlight of the week. President Bill Schneider took this opportunity to recognize several members for outstanding achievement: David Homrich received the Public Service Award; Walt Bryde as Distinguished Committee Chair for his work with the Financial Literacy Committe; and Brad Dickson as Distinguished Section Chair for his work with the Taxation Section. K. Scott Collins was recognized with the Distinguished Member Award.
J. Sam Johnson was honored with the Meritorious Service Award in recognition of his years of service and dedication to the profession and the GSCPA.
The convention came to a close with Bill passing the gavel to Paula Mooney as she became the 86th president of the Georgia Society of CPAs.
Thank You Junior Achievement Volunteers
The Georgia Society of CPAs would like to express its deepest thanks to the following volunteers who have given their time and dedication to bring financial education to students across the state of Georgia through the Junior Achievement iniative. Without you, we would not be able to extend the reach of our financial literacy efforts as far as we have.
Peter Coblentz
CTX Mortgage Company
Molly Gregware
ACSYS Inc.
April Hightower
Time Warner, Inc.
Heather Jennings
Affiliated Computer Services
Lisa Loften
Halpern Enterprises, Inc.
Alicyn McLeod
Bennett Thrasher, PC
Carla McMullan
Siegfried Reources. LLP
Robin Muretisch
Georgia System
Operations Corporation
Jenny Peek
ACSYS Inc.
Janice Ramirez
Consumer Credit Counseling Services
Lisa Robinson
IDI
Jennifer Rose
UPS Inc.
Jerry Wu
Diversified Energy Services, Inc.
FAQ on Providing FIN 48 Services to an Attest Client
Recently, the Professional Ethics Division's staff was asked whether under Interpretation 101-3—Performance of Nonattest Services, members could assist an attest client in applying FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, without impairing independence, given the potential complexity of the judgments that the client must make or approve in connection with such services.
The Professional Ethics Executive Committee (PEEC) considered this question at its July 2007 meeting, and agreed with the staff that a member could assist an attest client with its application of FIN 48 provided the member is satisfied that the client understands the reasons why a specific tax position does or does not meet the more-likely than not (MLTN) threshold and the basis for the determination of the amount of related unrecognized tax benefits. Although the degree of complexity involved in the subject matter of any service would be a factor to consider in determining whether a client can meet the requirements of Interpretation 101-3, the PEEC did not believe that the complexities involved in applying FIN 48 would automatically preclude members from assisting clients with its implementation. The PEEC believes that in most cases a member should be able to advise the client about whether a tax position meets the MLTN threshold and the likelihood that portions of the related tax benefit will not be realized, and adequately inform them of the factors upon which the member’s advice was based such that the client would be in a position to make an informed judgment on the results of the member’s services and take responsibility for the work. In those instances, the PEEC believes that assisting the client in applying FIN 48 would not impair the member’s independence.
In reaching this conclusion, the PEEC referred to its longstanding position documented in its “Guidance in Understanding General Requirement no. 2: Client Responsibilities, ” of Interpretation 101-3. Specifically, the PEEC noted that the requirement for the client’s designated individual to possess suitable skill, knowledge and/or experience to oversee the services does not require that the individual possess the technical expertise that the member possesses or the ability to perform or re-perform the services.
Accordingly, the Professional Ethics Division is adding the following FAQ to the non-authoritative listing of Bookkeeping FAQs that appear on the division’s web site.
Question - Would assisting a client in applying FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, such as identifying potential uncertain tax positions, advising the client whether those tax positions meet the more-likely than not (MLNT) threshold, and calculating the related unrecognized tax benefits impair independence?
Answer - The provision of such services would not impair independence provided the client can make an informed judgment on the results of the member’s services and the other requirements of Interpretation 101-3 are met. In meeting the requirements of Interpretation 101-3, the member may assist the client in understanding why the tax positions do or do not meet the MLTN threshold and the basis for any unrecognized tax benefit so that the client can accept responsibility for the amounts reported and disclosed in the financial statements.
1. See http://www.aicpa.org/Professional+Resources/Professional+Ethics+Code+of+Professional+Conduct/Professional+Ethics/Resources+and+Tools/
2. http://www.aicpa.org/download/ethics/nonattest_q_a.pdf
Real World Accounting For Students
The Georgia Society of CPAs (GSCPA) recently hosted 71 high school students at the Ninth Annual High School Residency Program (HSRP) at Georgia Southern University in Statesboro, and the University of Georgia in Athens. The HSRP is a three and one-half day residential learning experience that provides Georgia high school students with the opportunity to learn about accounting as a major in college and a career after graduation. This year's programs were organized by the GSCPA's High School Residency Program Task Force, co-chaired by Dr. Mark Dawkins, associate professor of accounting at the University of Georgia, and Kay Proctor of Thigpen, Lanier, Westerfield & Deal, CPAs in Statesboro.
GSCPA members served as chaperones and speakers. The sessions guided students through the many different aspects of accounting, and provided an outstanding overview of the profession. New sessions this year included a tour
of the Gulfstream Plant. Both programs held an etiquette dinner hosted by Deborah Lassiter of Perfectly Polished.
The students, as well as the chaperones, got a taste of college life by staying in the dorms and eating their meals on campus.
In addition to the educational sessions, at night the students enjoyed movies, pizza, and game night.
The GSCPA thanks the sponsors, speakers, and volunteers who gave their time and effort to make this year's High School Residency Programs a success.
New AICPA Valuation Standard Unveiled
Over the past 20 years, the demand for valuation services has increased significantly among businesses, attorneys, bankers and other stakeholders, and CPAs have responded by offering services. To enhance the consistency and practice quality of CPAs who perform engagements that estimate values, the AICPA has issued Statement on Standards for Valuation Services No. 1 (SSVS No. 1), “Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset.”
The new standard provides CPAs with professional guidance that encourages consistency, transparency, communication, structured service levels, and well-defined reporting options. By establishing consistency and best practices, the new standard also benefits those who rely on valuation services, such as CPA clients, courts, government agencies, and regulators.
Standard Applies to Many Disciplines
SSVS No. 1 applies to AICPA members who perform engagements that estimate the value of a business, business interest, security or intangible asset for numerous purposes such as sales transactions, financing, taxation, financial reporting, mergers and acquisitions, management and financial planning, and litigation. Although the standard is effective for engagements accepted on or after January 1, 2008, the AICPA encourages earlier adoption.
The standard also benefits CPAs by providing a set of guidelines in the unique context of a CPA practice. By offering professional guidance on generally accepted “best practices” within the valuation and business communities, the standard promotes consistent practice among CPAs performing valuation services as well as adequate disclosures for users of the services. It also reduces uncertainty as to what type of analyses and/or content of reports are appropriate.
Unless a specified exemption applies, CPAs, regardless of discipline, should follow SSVS No. 1 whenever they perform an engagement or any part of an engagement that estimates a value resulting in an expression of either a conclusion of value or a calculated value.
Additional Benefits of SSVS No. 1
In addition to providing guidance, the standard will help CPAs in other ways. For example:
• If called to defend valuation work during a challenge, CPAs will have the assurance that their analysis and report are prepared in accordance with SSVS No. 1.
• CPAs and clients benefit from a common vocabulary. The standard adopts a glossary and a set of valuation terminology that allows CPAs to more effectively and efficiently communicate with each other, with non-CPA valuation analysts, with clients and with other parties who rely on valuation reports.
• CPAs may rely on SSVS No. 1 for professional guidance regarding what are considered generally accepted valuation approaches.
• SSVS also provides guidance on the type of financial and non-financial documents and documentation that CPAs should consider in the valuation process.
CPAs can access a copy of SSVS No. 1, as well as several implementation tools, on the AICPA BVFLS web site at www.aicpa.org/bvstandard. In addition, CPAs may send questions about the standard to the AICPA at SSVS@aicpa.org.
When Client Funds Disappear from CPA Firms
Ric Rosario, CPA, CFE
The story of the cobbler’s shoeless children has served as a cautionary tale over the years about being so caught up in your work that the needs of the home front go unattended. When those needs happen to coincide with your line of work, the damage to your reputation and business can exact a steep toll.
Claims have increased recently from CPA firms whose own internal controls are so weak that they do not prevent CPAs or firm staff from abusing signatory authority to misappropriate or misuse the client funds entrusted to the firm.
If your firm is controlling client funds and writing checks to pay client bills, such disasters could happen to you, too, if you have not taken appropriate steps to safeguard those funds. The engagements affected can range from basic bookkeeping and bill-paying on behalf to clients, to “business management” engagements in which the CPA firms have broad control over the client’s financial affairs. Executor/trustee engagements are also prone to misuse of client funds. (See “Executor/Trustee Engagements” following.)
The public perceives CPAs as experts in tracking financial activity and setting up internal controls that are effective in preventing and detecting fraud. If a CPA firm has neglected to set up adequate controls within its own firm and client funds are lost, the client will be much more inclined to litigate the matter, knowing that a jury will have high expectations of the CPA’s responsibilities to prevent fraud.
Steps to Take
You cannot rely on the client, on whose behalf the CPA firm is writing checks, to monitor these check-writing activities. Here are some steps to take to avoid a difficult situation:
1. Find our whether your firm has any engagements in which the firm is controlling client funds. Do any of the firm’s CPAs or their staff have signatory or check-writing authority
over client funds? Who is signing the checks? For what purpose are the checks being signed?
2. Find out whether there are any procedures in place for accepting new engagements in which the firm’s CPAs or their staff have signatory authority over client funds. Who can accept those types of engagements? There should be very clear, centralized control over the acceptance process.
3. Gain a detailed understanding of those engagements and establish a combination of controls that will prevent the misuse of client funds. The following are additional examples of good controls:
• Perform a background check on employees working in check preparation and signing.
• Segregate duties. Ideally, check preparation, check signing and bank reconciliation are performed by different individuals.
• Have someone other than the check preparer open bank statements and review them.
• Require people in cash disbursement services to take time off.
• On a surprise basis, have a partner review and/or perform check preparation and signing.
• Have a two-signature requirement for all checks in excess of a certain amount (pre-agreed with client).
• Require written authorization for all disbursements.
• Require the client to review and sign a list of recurring expenditures on a quarterly basis.
• Present a list of checks disbursed for the client’s review and written approval.
• Provide a second set of eyes, partner on staff, partner on partner.
• Cross train employees to review each other’s work.
• Restrict access to check register and statements.
4. Utilize screening processes and background checks for employees and partners with signatory authority over significant client funds.
5. An engagement letter describing the services being provided and their limitations should be signed.
Executor/Trustee Engagements
CPAs who act as executors or trustees may have signatory authority over client or trust funds. While executor engagements are generally for a short period of time, trust engagements can last for an indefinite period, depending on the trust agreement. The agreement will appoint the CPA as trustee and list his or her power and authority.
Again, the firm should find out whether any of its CPAs are serving as executor or trustee and whether there are any procedures in place for accepting and monitoring such engagements. Generally, trust engagements are performed by senior members of a firm with little or no oversight from others.
Claims from trusteeships have been rising in frequency and severity over the years, especially claims involving the misuse of client funds. The most significant internal control over CPA executor/trustee activities is oversight by the partner group, managing partner, or senior member of the firm.
Additional controls might include:
• If a co-Trustee/Executor exists, require two signatures.
• Quarterly or annually reporting to all interested parties (grantor if living, other trustees, beneficiaries, attorneys, etc.).
• Engagement letter in place.
• File maintained in a normal file system.
• Annual review of engagement.
• Does the other Trustee have any controls in place?
• Does the other Trustee have E&O coverage?
• Is the area of responsibility clear to each Trustee and in writing?
Reprinted with permission from CAMICO. © All rights are reserved.
Ric Rosario, CPA, CFE, is executive vice president - risk management with CAMICO Mutual Insurance Company (www.camico.com). A Certified Fraud Examiner with experience in public accounting and private industry, he advises CAMICO’s member-owners and other CPAs on loss prevention principles and techniques.
ROI on XBRL
To SEC Chairman Christopher Cox, XBRL is the next revolution in financial reporting. The technology’s proponents assert that it will significantly reduce manual effort, strengthen internal controls, enhance financial statement comparability and level the playing field for all investors. Data that is trapped and lacking context, such as those in PDF or HTML files, can now be electronically accessed and manipulated in seconds from your desktop. Sold? Apparently not. Despite its benefits, fewer than 100 of the 10,000 public registrants have submitted an XBRL filing under the SEC’s voluntary filing (VFP) or test pilot programs. Why the disconnect?
John Stantial, director of financial reporting for United Technologies Corporation, an earlier adopter of XBRL, believes companies have been slow to embrace the technology for three principal reasons:
• A lack of knowledge or understanding of XBRL.
• Misconceptions regarding resources required, including cost and technical proficiency.
• The perception that there is little benefit to participating in the process.
What is XBRL?
XBRL has been likened to a bar code for financial statements. An electronically readable tag (bar code) is put on each financial statement element, which provides additional context. Staying with the analogy, if you looked at the bar code on an item in the grocery store, the code would contain a series of bars with little relevance to you. However, with the proper tool to read the code, it would tell you the product, the size, the cost, the vendor and the expiration date. XBRL operates in a similar fashion. The electronic tag assigned to each financial statement element contains information or context regarding that element.
The benefit to users of financial statement information is that they can now electronically retrieve data in a matter of seconds with the additional context that is provided by the tags and with greater assurance of accuracy given the standardized context of the tags. Although standardized, the expandability of the taxonomies allows company-specific and unique information to be captured and reported accurately. Because XBRL uses standardized XML technology, it can be read by multiple software systems.
Common Misconceptions on Cost
Not surprisingly, resistance to the adoption of XBRL often takes the form of cost or resource concerns; however, neither need be a valid obstacle. The only required out-of-pocket cost is for the tagging software, of which there are several options available, and which cost as little as $1,000 (see the XBRL Web site at www.xbrl.org/us for a listing and links to the various tools available). Each of these tools is designed with the layperson in mind, takes very little time to learn and does not require a technical knowledge of XBRL (or XML—the language of which XBRL is a dialect).
Why Participate Now?
With the never-ending demand placed upon finance organizations, the need to prioritize and focus resources invariably arises. While individual circumstances will dictate how this is done at each company, there are several reasons to consider XBRL among these priorities.
Although the SEC has deferred responding to inquiries on whether XBRL will be mandated as a filing requirement, the agency has nonetheless taken significant actions that would suggest it is a strong likelihood, including the recent $48 million upgrade of EDGAR to accept interactive filings, and the $5.5 million project with XBRL US to fund the development of U.S. GAAP taxonomies. Given this potential, it would seem advantageous to set up processes and work through the learning curves now, in the open and relatively unconstrained environment provided by the VFP, rather than at some future point when the filings are subject to the content and timing requirements of current documents.
Future Benefits
So, there isn’t a cost barrier, the tools are available, technical knowledge of XML is not required, the resource commitment need not be extensive, and there are a number of reasons to begin participating now. But this is all reactive information. The benefits to XBRL come in the future when tagged information is readily available from all companies and can be accessed electronically for analysis, benchmarking, reporting uses and financial modeling. Not only can XBRL enhance external financial reporting, but it can also be applied internally for cost accounting, performance measurement, analysis and decision-making purposes.
Analysts and investors will be able to dramatically increase their breadth of knowledge with data readily available that does not require hours of manual manipulation. The data will be much more accurate and comparable; and context to the numbers will be accessible, ensuring they are used correctly. While these attributes will benefit preparers, the integration of the technology into companies’ accounting and reporting systems will produce the real benefits, especially through significant reduction in current manual efforts.
Looking Even Further Ahead
But the benefit needn’t stop there. If other users of financial information, such as the IRS, the Bureau of Economic Affairs and the Department of Labor, were to accept XBRL files, comparable benefits could be realized as the necessary filing documents could be generated and transmitted from the same tagged database—in our case HFM.
XBRL is not a fad; it is here to stay. It is already mandated by the FDIC for the filing of all U.S. bank call reports and is in use in other countries around the world. The tools are available, the resources are there to assist, and the potential benefits are tremendous. With the flexibility and generally open-ended nature of the SEC’s VFP, now is the ideal time to begin.
To read this article in its entirety, go to http://www.aicpa.org/pubs/jofa/jun2007/stantial.htm.
Internet Resources for CPAs - Part 2
CAREER RESOURCES
http://www.gscpa.org/Content ProfessionalResources/ClassifiedAds.aspx
GSCPA's classified ad listings provide an effective media to assist in your career decisions.
www.roberthalffinance.com/Free Resources
Robert Half includes career advice, articles, and how to request the 2007 Salary Guide.
www.careerbank.com
Career Bank provides job listings for the accounting field. You can also post your resume for firms to search.
CPA PORTALS
www.accountingweb.com
AccountingWeb provides news and information about the CPA profession, as well as career, practice, and other resources.
www.smartpros.com
SmartPros has resources for all areas of the accounting field - audit, personal finance, tax, technology and more. Daily news from around
the world is available.
www.webcpa.com
WebCPA offers daily news and inline editions of Accounting Today, Accounting Technology, and Practical Accountant.
FINANCIAL PLANNING
www.financial-planning.com
Financial Planning Interactive offers industry news, practice management tips, surveys, software forums, and educational opportunities.
finance.yahoo.com
Yahoo Finance offers customizable features to keep track of of business and finance, and is a great resource for market news and information.
www.estateplanninglinks.com
Numerous of estate planning resources including an estate tax calculator, basic guides, and advanced planning techniques.
www.savingforcollege.com
Information on Sec. 529 college savings plans. There is a special section for professionals that provides information on tax resources and a newseltter.
www.fool.com
The Motley Fool gives information on personal finance in an easily digested format.
INDUSTRY
www.camico.com
CAMICO provides professional liability insurance to CPAs. Policyholders get access to risk management tools, a loss prevention hotline, and tax advice.
www.shrm.org
The Society of Human Resource Management is a clearinghouse of information on workforce studies, regulations, management ideas, HR tools, and sample forms.
www.adp.com
Automatic Data Processing Inc.'s site has online payroll tools that provide state and federal tax calculations and forms; penalty and insurance rates; and resources on state wage, and tax profiles.
REGULATORY
www.dol.gov
The U.S. Department of Labor site offers compliance assistance and resources on worker's compensation, workplace health and safety, retirement, health benefits, and disability training.
www.sec.gov
The SEC web site has recent notices, order, bulletins, and other information on accounting and auditing.
TAX
www.irs.gov
The IRS web site has breaking news and information for tax professionals in addition to downloadable forms.
www.taxsites.com
This web site gives links to just about everything from academia to software.
TECH SITES
www.xbrl.org
The Extensible Business Reporting Language looks to increase the transparency and ease of-of-use of financial data to those internal and external to the reporting process.
www.cnet.com
CNet offers product reviews and comparisons and technology news and advice.
Member and Chapter News
Johnson & Garrison, LLC is pleased to announce the addition of Jane M. Walley as a tax director and Tracy L. Lord as a tax manager.
Moore Colson recently announced the hiring of Michael Gilbert as senior tax associate.
Michael G. Verner, Brandon S. Verner, Sam M. Bromberg and Jeff Cohen are pleased to announce the formation of Verner, Bromberg & Cohen located at 8300 Dunwoody Place, Ste 200, Atlanta, GA 30350.
Simmons Bedding Company, has named Deborah S. (Debbie) Hall as its tax controller.
Moore Colson announces the following promotions: Scott Miller, CPA to business assurance manager; Russell Seney tax senior associate; and Mary Alice Parker to business assurance senior associate.
Gifford, Hillegass & Ingwersen, LLP recently hired Steven R. Baldwin as the company’s first chief executive officer.
Verner, Bromberg & Cohen is pleased to announce that Henry Spil, CPA has joined the team as senior tax manager and Alison Garrett, CPA as manager.
Porter Keadle Moore, LLP (PKM) announces the following promotions to principal: Jane Elliott, Timothy Messman, and Robert Schwarzmann.
Clay Pilgrim, an audit professional with Rushton & Company, has achieved designation as a “Certified Fraud Examiner” (CFE).
In Memoriam
Howard Herman, 1937-2007
The Georgia Society of CPAs mourns the loss of Howard Herman who passed away on July 7, 2007. Howard was an active leader in the GSCPA, havng served as its president (1996-97), and president of the Educational Foundation (2003-04).
Those who knew Howard are aware of his devotion to the GSCPA, which he consided his second family. Through his involvement with the organization, he expanded his circle of friends to include people throughout the state. He will be remembered for his warmth, sincerity, and kindness towards those who work for him and with him in his professional community.
A native of New York, Howard joined the United States Air Force in 1955 and served until 1959. He then migrated to Georgia and received his degree in business administration from Georgia State University in 1963 where he was a member of Beta Alpha Psi. He received his CPA certificate in 1965. In 1961, he joined the firm of Young, Garber & Company, CPAs, which later merged into Deloitte & Touche. In 1962, he joined Sol Spielberg, CPA and they formed the partnership of Spielberg & Herman in 1966. After several mergers and relocations, he became a senior partner at Herman, Silver & Associates, CPAs, LLC in Atlanta.
During his professional career, Howard was been active on various levels. He has been a member of the Georgia Society of CPAs since 1965. His involvement with the Society, which began on statewide committees, included a wide range of accomplishments. Over the years, he has served on various committees including Budget, Bylaws, Annual Convention, Professional Ethics, Nominating, Audit, Strategic Planning, and Personnel. In 1980-81, Howard chaired the Taxation Committee, for which he received the Society’s Distinguished Chairman Award.
During his term as president, Howard established two committees that are an important part of the Society today. The Minority Issues Committee was created to assist minority students to become CPAs and to encourage their advancement and retention within the profession. The Young CPAs Task Force addressed the special focus and needs of the large number of members under age 35.
The Educational Foundation of the Georgia Society of CPAs has benefited from Howard’s devotion to the profession and his desire to help students complete their accounting education. He chaired both the Student Loans and the Scholarship and Support Committees. He served as president of the Foundation in 2003. He has been a strong supporter of the Endowment Fund and chaired the task force that examined the possibility of such a program. Today, the Endowment Fund continues to grow and is making a difference in the lives of students pursuing a career in accounting.
Howard is survived by three sons, three grandsons and a granddaughter.
The Georgia Society of CPAs, and its staff, extends its deepest sympathy to his family, friends, and all who had the privilege of working with him.
We sincerely regret the loss of the following members and extend deepest sympathy to their families and friends.
Joseph Bost, Ponte Vedra Beach, Fla.
Ron Davis, Stone Mountain, Ga.
Robert D. Heslep, Roswell, Ga.
John Robertson, Dalton, Ga.
George R. Vrana, Smyrna, Ga.