CPA Leadership Report Expanding Your Knowledge While Conserving Your Time Vol. 10 No.

4, April 2012 CPA Leadership Report is the monthly review of the most important management and leadership articles in the accounting press. It includes electronic links to publishers websites, where you can find the original complete articles. Our editors review more than 35 publications every month. Members of CPA Leadership Institute can access the reviews below. Nonmembers can become familiar with CPA Leadership Report by reading the articles marked with an *. Click here to learn about the comprehensive benefits of membership and the extraordinary value of our Professional program level, which allows you to attend all our webinars at no cost. Practice Management MAP Surveys: Are You Reading Them Right? Marc Rosenberg discusses the 10 biggest mistakes partners make when reading MAP surveys and computing MAP statistics. CPA Trendlines Changes Coming Fast for the Accounting Profession Bruce Marcus talks about how the profession has changed in the last 10 years. CPA Trendlines IT Professional as Firm Leader? Gary Boomer explains how IT professionals might be uniquely qualified for leadership. Accounting Today So You Want to Be a Partner? Practical steps to discover whether you have, or could have, what it takes to be a partner. CPA Practice Management Forum Approach IT Budgeting Like a Financial Planner CPA firms should align their IT strategies with their business strategies. Journal of Accountancy The Trouble With Partner Agreements Marc Rosenberg lists the top 10 partner agreement weaknesses. The Marc Rosenberg Blog How Risky is the Cloud? Issues to consider when storing your firms data in the cloud.

AICPA CPA Insider How to Be a High-Value Firm The most successful CPA firms build value for their owners, clients, and employees. RedZone, Play of the Month What to Do With Negative Employees Rita Keller encourages you to look at the effect of negative influences within your team. Solutions for CPA Firm Leaders Successful Nonmandatory Saturdays Practical tips for implementing a Saturday-optional schedule. ConvergenceCoaching, LLC Inspired Ideas Time for a Change? If your firm hasnt made any changes in the recent past, it might be time to consider making a few. Solutions for CPA Firm Leaders Management Consultants: Separating the Wheat From the Chaff Ron Baker reviews Masters of Management, an update to one of his favorite business books of all time, The Witch Doctors. VeraSage Institute Succession Planning and M&A Succession Planning Insights Allan Koltin weighs in on the state of succession planning for todays firm. CPA Practice Management Forum Making Mergers Work Twelve steps to a successful merger or acquisition. Partner Insights Marketing Get Your Firm Found on Social Media Sites Tips for getting started with LinkedIn, Facebook and Google+. AICPA CPA Insider Client Services Why You Cant Afford to Ignore Consulting For midsized accounting firms today, management consulting presents an unprecedented opportunity. Accounting Today

Management Accountants Needed . . . Urgently Management accountants will play a key role in driving the global economy forward. Journal of Accountancy Why Businesses Fail A study by the Cass Business School reveals seven common factors among businesses in crises or complete failure. AICPA CPA Insider White-Collar Criminals: Do We Need a New Profile? Results of the authors survey contradict certain accepted stereotypes about those who commit fraud. The CPA Journal Risk Management Are negligent tax preparers liable for interest paid to the IRS? When a client prevails in a lawsuit against a tax preparer for negligent tax advice, can it recover the interest charges imposed on unpaid taxes? The CPA Journal

Practice Management MAP Surveys: Are You Reading Them Right? Source: CPA Trendlines The following includes excerpts, reproduced with permission, from an article by Marc Rosenberg. I have never ceased to be amazed at the lack of understanding that partners including managing partners have about reading a MAP survey and computing MAP statistics. Here are some of the biggest mistakes: 1. Being content with average. Ideally, you would like to achieve results well above the average in as many categories as possible. 2. Over-reliance on partner income percentage as a measure of profitability. This metric is affected as much by the firms staff-to-partner ratio as by innate profitability. 3. Average salary data. Compensation data is only relevant if it is taken from a market that is comparable to your own, which is something that most MAP surveys cannot possibly do. 4. Utilization percentage. Utilization percentage is easily manipulated by the total hours a person works and the extent to which people record all of their billable time. 5. Net firm billing rate. This rate is dramatically affected by the firms staff-to-partner ratio. 6. Average compensation for firm administrators. Some firm administrators function at a partner level and are very handsomely paid; others dont function at a partner level, and their compensation is much less. As a result, this metric is often misleading. 7. Treating non-equity partners like partners. Treating non-equity partners the same as equity partners for such metrics as fees per partner and staff-to-partner usually distorts these computations. 8. Computing income per partner. Firms often ignore the distinction between cash and accrual accounting when computing income per partner (IPP), and that plays havoc with the results. 9. Average fees per professional. What is a professional? At some firms, paraprofessionals perform work very similar to that of CPAs. At other firms paraprofessionals are seen as clerical staff. 10. Computing the average charge hours for any category of personnel, such as partners and professional staff. Most firms make the mistake of computing the number of FTEs by adding up their total work hours and dividing by 2,080. This causes firms to count people with more than 2,080 hours as more than one FTE, which understates the average. For the complete article, read The 10 Biggest Mistakes in Reading MAP Statistics. [http://goo.gl/cuuLL] From CPA Trendlines, http://cpatrendlines.com, March 7, 2012.

Changes Coming Fast for the Accounting Profession Source: CPA Trendlines The following includes excerpts, reproduced with permission, from an article by Bruce W. Marcus. The accounting profession is so bound by traditions, rules, regulations, and laws, that any suggestion of serious structural change is seen as a virtual assault on the profession. But now, there are cracks appearing in the wall. The potential for conflict between the ethical rules and their protection of integrity, and the need for successful competitive marketing, can be intense. Still, some things in the profession are different now than they were about a decade ago: We now have an increasing number of firms replacing hourly billing with value billing. We now have social media and bounding changes in technology. Firm governance is beginning to resemble corporate structure. There is talk of firms going public. Where once associates who seemed not to be partner material were let go, now they are being kept for their specific talents and experience the so-called two-tier firm. The accounting profession, recognizing the growth of globalization, is now seriously considering international accounting standards.

The changes in professional firm practices seem to be coming fast, giving rise to Professional Services Marketing 3.0. For the complete article, read Six Quick Reasons Why CPA Firms Will Never Be The Same. [http://goo.gl/JeQJx] From CPA Trendlines email newsletter, Professional Services Marketing 3.0, http://cpatrendlines.com, March 23, 2012.

IT Professional as Firm Leader? Source: Accounting Today In this article, L. Gary Boomer discusses the trend of IT professionals becoming firm leaders because their technology savvy is increasingly relevant to a firms future success. Boomer points out that IT professionals tend to have knowledge of each department within the firm because their role demands it an obvious benefit to firm leadership. Successful leadership, Boomer explains, requires an ability to communicate, as well as an understanding of business, firm promotion and sales, human resources, project oversight, finances, and strategy. Successful leaders, he says, can communicate and listen well, and they manage in a way that gets the most from a firms people, resources, and ideas. Boomer points out that quality leadership requires many skills, so theres additional value in having a team thats qualified to work together with all individuals bringing their expertise to the team. Boomer recommends using the Kolbe Index to help potential leaders, current leaders and team members identify their strengths and weaknesses, resulting in a better understanding of how the team can work together and utilize each persons strengths. The Kolbe results can also reveal how an IT-type might need to be developed if he or she is on track to become CEO. Boomers team has successfully used a program called The CIO Advantage to help develop and mentor IT professionals who want to advance into greater leadership roles. Program participants have been able to expand their skill sets and have gone on to significantly increase their leadership responsibilities, including several becoming COOs. For the complete article, read From CIO to CEO. [http://goo.gl/BkEtA] From Accounting Today, March 1, 2012, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.

So You Want to Be a Partner? Source: CPA Practice Management Forum Mary C. Werner offers guidance for those interested in becoming a partner. Werner has drawn on her experience as a former partner and as a current consultant to develop a self-assessment system that helps aspiring partners reach their destination. Werner recommends that team members with an eye toward partnership consider their strengths and weaknesses in four areas, starting with self-awareness. Werner recommends tests such as Myers-Briggs Type Indicator, or a DISC assessment. She also suggests a 360 assessment, which allows other people help you understand how you are perceived. The goals of these assessments are to gain a better understanding of yourself and to create a roadmap for your journey toward partner. The other three areas are your ability to effectively lead a team, your ability to develop relationships and create business opportunities with clients, and your ability to lead the firm with the necessary vision and planning. In each area self, team, clients, firm Werner provides what she calls a map that includes specific questions to ask yourself and others to help you more clearly assess strengths and weaknesses specifically regarding requirements of successful firm leadership. Questions are answered using a scale of 1 to 6. For example, a 1 is a clear strength, a 3 is a weakness, and a 6 is I dont know. The goal of Werners program is to help people work proactively toward partnership by knowing their own strengths, weaknesses, and areas that need development. For the complete article, read Your Path to Partner. [ http://bit.ly/HJnDFD ] From CPA Practice Management Forum, CCH Incorporated, 800-449-8114, March 2012, p. 14.

Approach IT Budgeting Like a Financial Planner Source: Journal of Accountancy Author Donny Shimamoto suggests that CPA firms should approach the IT budgeting process much like financial planners would, aligning their IT strategies with their business strategies. Among other things, Shimamoto advises firms to: Understand their short- and long-term goals, as well as constraints, such as cash flow and overall capital and operating budgets; Consider the human element, including the impact of IT initiatives on employees work lives; Treat the IT budget as an investment, rather than as a cost center, and examine multiple investment options; Ask whether IT initiatives support the firms strategic objectives; Break down the IT budget into its run, grow, and transform components; Assess the budgets impact on key performance indicators, financial statements, and cash flow; Use a reserve approach to accumulate cash reserves for high-spending years.

For the complete article, read A strategic approach to IT budgeting. [http://goo.gl/OiwUI] From Journal of Accountancy, American Institute of Certified Public Accountants, November 2011, http://www.journalofaccountancy.com/Issues/2012/Mar.

The Trouble With Partner Agreements Source: The Marc Rosenberg Blog The following includes excerpts, reproduced with permission, from a blog post by Marc Rosenberg. Here are 10 partner agreement areas we see neglected time and time again: 1. Partner retirement provisions particularly notice of intent to retire and specific client transition procedures are hopelessly behind the times or simply ignored. 2. New-partner buy-in amounts are too high. 3. Ownership percentage plays a huge role in income allocation, retirement benefits, and voting. 4. Agreement fails to restrict partners from drawing compensation that is higher than their income allocation percentage. 5. Voting is driven by ownership percentage, disenfranchising new partners. 6. Grounds for expulsion are not detailed enough. 7. Agreement lacks nonsolicitation provisions. 8. Agreement fails to specify compensation for a nonworking, disabled partner. 9. Agreement goes into too much detail about the system used to allocate partner income. The best agreements are almost completely silent on this issue because firms change their systems so often. 10. Agreement fails to provide for non-equity partners and non-CPA principals. For the complete article, read CPA Firm Partner Agreements Top 10 Weaknesses. [http://goo.gl/vGP9c] From The Marc Rosenberg Blog, February 28, 2012, http://blog.rosenbergassoc.com.

How Risky is the Cloud? Source: AICPA CPA Insider The following includes excerpts, reproduced with permission, from an article by Jason Rosenthal and Nicholas Gowen. While cloud computing and particularly data storage presents many advantages and likely will become more prevalent, there are unique risks to CPA firms and their clients. This column analyzes some of these risks. Confidentiality and Data Security Concerns To protect data confidentiality, negotiate specific contractual terms before uploading data into a cloud storage system. CPA firms should consider factors such as: Whether the provider will segregate your data; Whether the provider will access, use, or copy data for its own purposes; Whether the provider will delete or return your firms data at your request; How the provider will purge data to ensure that confidential information is not compromised; and What the cloud providers obligations are to notify your firm of a potential data breach.

Establish preventative and back-up measures to protect the integrity of your firms data and that of your clients. Ensure that your service provider offers advanced security capabilities that include: A high level of tested encryption technology to ensure the shared storage space safeguards all data; Stringent access controls to prevent unauthorized access to the data; Scheduled data backup and safe storage of the backup media; and Business continuity and disaster recovery solutions.

Intellectual Property Issues Be aware that courts do not generally make a distinction between the content of data stored electronically in the cloud and the data stored in paper files in your storage room. Compelled Disclosure to Third Parties Cloud providers may be compelled to disclose their firms data and their clients data if the provider is served with a civil or criminal subpoena or search warrant. For the complete article, read Warning: Cloud Could Bring Storm. [http://goo.gl/730oA] From AICPA CPA Insider, February 12, 2012, http://www.CPA2biz.com.

How to Be a High-Value Firm Source: RedZone, Play of the Month The following includes excerpts, reproduced with permission, from an article by Accountants Advisory Group. The most successful CPA firms understand that their goal is to continuously build value for their owners, clients, and employees. There is a direct correlation between high-value firms and their competitive edge for quality clients and staff. A high-value firm: Has strong leadership with effective management that doesnt procrastinate when there is a need for tough decisions. Has talented partners and staff who create delighted clients who refer new business to the firm. Fosters a marketing and practice development culture. Treats succession planning as a daily process not as an annual event. Continuously upgrades the client base and carefully manages client practice management statistics. Provides staff with advancement opportunities and career development programs that guide and manage performance. Rewards overachievers handsomely and does not tolerate underachievers, whether they are partners, professional staff, or administrative personnel. Possesses strong niches or industry expertise that is highly respected and branded in the marketplace. Researches and monitors the competition, and adapts services to clients wants and needs. Embraces leading-edge technology and trains its professionals to use it. Has an infrastructure that provides partners and staff with opportunities to succeed and to eventually take the firm to higher levels of success.

For the complete article, read Building Value in Your Firm. [ http://bit.ly/GZouNY ] From RedZone, Play of the Month, Accountants Advisory Group, February 2012, www.AccountantsAdvisory.com.

What to Do With Negative Employees Source: Solutions for CPA Firm Leaders The following includes excerpts, reproduced with permission, from a blog post by Rita Keller. There is an excellent post by Robert Sutton on Fast Company titled What Good Bosses Do With Bad Apples. Sutton talks about great bosses having a subtraction mindset. They are always looking to remove bad or unnecessary things. Think about these subtraction themes that could be explored inside your accounting firm: Getting rid of bad people is probably even more crucial than bringing in great people. At Baird, for example, they have a no asshole rule, and they have removed many selfish jerks. If you removed some people from your firm, would it be a more enjoyable and civilized place to work? If you absolutely cant spare a jerk because of extremely unique skills rent an office on another floor or in another building and isolate him or her there.

A bad apple might not spoil the entire barrel, but its negative influence is really very far-reaching inside your firm. I would guess that inside your firm there are more unnecessary things than people. How about eliminating some rules, policies and/or procedures? Are there a few outdated checklists that you could eliminate? Are there several monthly firm financial reports that no one even looks at? How about your employee handbook? I reviewed one recently that still talked about using telephones in terms that have long been obsolete. Take a few moments during this busy time to observe what is going on inside your firm. Do it with somewhat of a subtraction mindset. Are there any people you could classify as bad apples? Strive for KISS Keep it Simple and Straightforward relating to policies, rules and procedures. For the complete blog entry, read Accountants Are Known For Thinking About Addition, Subtraction, Multiplication and Division. [http://goo.gl/VCzpV] From Solutions for CPA Firm Leaders, the blog of Rita Keller, March 2, 2012. Visit http://ritakeller.com/blog/.

Successful Nonmandatory Saturdays Source: ConvergenceCoaching, LLC Inspired Ideas The following includes excerpts, reproduced with permission, from a blog entry by Tamera Loerzel. Success in implementing nonmandatory Saturdays requires the consistent application of best practices to engage your people and have them win and ultimately you and your firm win. Consider following these employee engagement best practices and identify which to focus on first: Communicate a key change management strategy is to share with your team: What your commitment is What will be different because of this change What will remain the same What it will take to get there Set and manage expectations at least weekly! It is imperative when you are shifting from a culture that values face-time to a results-based culture that you identify and communicate the results that you expect and report the status weekly. Have a process for resetting expectations when conflicting priorities arise or circumstances occur that will not allow for the original commitment to be met. Keep your commitments employ a do as I do approach and ensure that all team members especially your leadership team are meeting commitments related to turnaround times, bywhen dates, resetting expectations, firm processes, and client communications. Acknowledge and reward results take the time to celebrate successes, even small ones at the very beginning of any change that youre implementing. It could be as simple as acknowledging everyone for having their time in weekly or for keeping commitments in agreed upon timelines. Collaborate seek input from your team about how it is going from their perspective and what ideas they have to make improvements or address challenges that are sure to arise. Include team members in your client scheduling and be up front about those client engagements that may require Saturday time. For the complete blog entry, read Making Saturdays Optional: An Idea Revisited. [http://goo.gl/fKZ16] From Convergence Coaching, LLC Inspired Ideas, February 22, 2012, http://blog.convergencecoaching.com.

Time for a Change? Source: Solutions for CPA Firm Leaders The following includes excerpts, reproduced with permission, from a blog post by Rita Keller. How are you evaluating your accounting firm team members? How is your partner group evaluating each other? How are your team members evaluating you?

People inside your accounting firm are working hard right now. After all, it is March, one of the busiest months for most public accounting firms. Take a deep breath and ask yourself some questions. Are you and your employees doing the same thing that you did in 2011? An even more interesting question is: Are you and your employees doing the same thing you were doing in 1999? Reflect on the old saying, If you do what youve always done, youll get what you have always gotten. When you are evaluating performance this spring, try asking three questions. What should I keep doing? What should I start doing? What should I stop doing? Then ask the big question: What are you doing this year that you were not able to do last year? This involves reflecting back on what you are reading, what continuing education classes you attended, what educational conferences you attended, what articles you have written. When it is feedback time, your team members are thinking about their pay increases. Usually, they earn them because they are still in the learning-and-building-their-skills mode. They are actually doing things this year they were not able to do last year. Does this apply to your managers and partners? With all of the rapid change, if you and your team do what you have always done, youll actually get less done than you have always gotten done. For the complete blog entry, read Is Your Accounting Firm Suffering From the Same Old Thing? [http://bit.ly/HsdXMo] From Solutions for CPA Firm Leaders, the blog of Rita Keller, March 1, 2012. Visit http://ritakeller.com/blog/.

Management Consultants: Separating the Wheat From the Chaff Source: VeraSage Institute The following includes excerpts, reproduced with permission, from a blog entry by Ron Baker. Masters of Management is the update to one of my favorite business books of all time, The Witch Doctors (TWD), first published in 1996, by Adrian Wooldridge and John Micklethwait, two editors from The Economist. What has happened between TWD and this work? Enron and the 2008-09 financial crisis, which was partly fueled by MBAs risk models and financial innovations in packaging up faulty mortgages. The industry has essentially stayed the same, though the ideas have changed. In TWD, the authors laid out four charges against the industry, which I believe are as true today as they were then: 1. 2. 3. 4. The discipline is constitutionally incapable of self-criticism; It favors terminology that confuses rather than educates; It rarely rises above the level of basic common sense; It is faddish, fickle, and bedeviled by contradictions that would not be allowed in more rigorous disciplines.

There are some new fads that come in for a skewering. One is Corporate Social Responsibility (CSR), which is the tribute that capitalism everywhere pays to virtue. Approximately two percent of all investment in the USA are in CSR funds, and less than one percent in Europe. So much for putting your money where your mouth is. There is a chapter devoted to Peter Drucker and Tom Peters, and other prominent gurus get their mention: Michael Porter, Clayton Christensen, and Henry Mintzberg, among others. The new wave of academic and journalist gurus comes in for some criticism (and praise) as well: Howard Gardner, Robert Reich, Richard Florida, Thomas Friedman, and Malcolm Gladwell. Theres also a chapter on frugal innovation, which is definitely changing the pricing, supply chain dynamics, and value proposition in developing countries. A few quibbles aside, this is an incredibly worthwhile book. The management consultancy industry is still immature, and allows in all sorts of self-proclaimed gurus and thought leaders, but it could be argued that this is a sign of its vitality and openness to new ideas. But this low barrier to entry also means there is an enormous number of crackpots. Masters of Management is a useful guide in separating the wheat from the chaff. For the complete blog entry, read Book Review: Masters of Management. [http://goo.gl/105rK] From VeraSage Institute, http://www.verasage.com/index.php/community, February 21, 2012.

Succession Planning and M&A Succession Planning Insights Source: CPA Practice Management Forum Allan Koltin presents questions and answers on succession planning best practices. Highlights of Koltins answers include: Only 35 percent of firms have a succession plan in place, though more than 60 percent have owners over 55 years of age. During the 1990s, the percentage of college students graduating with accounting degrees dropped from two to only one, resulting in fewer potential candidates to take over firm leadership. Firms that fail to provide non-partner team members with growth opportunities will find themselves poorly positioned for succession. For firms to grow and have a healthy future, they must be willing to invest now in their teams (by providing CPE opportunities and teaching leadership skills) and in firm resources (technology, marketing, product development). One of the biggest challenges in developing a succession plan is choosing a required retirement date for partners. But without choosing a specific, mandatory date, older partners will likely attempt to continue working and holding on to clients indefinitely. Firms should have a succession document that clearly states the process for all partners reaching retirement age. Major challenges to successfully implementing a succession plan include: 1) lack of accountability on the part of retiring partners to carry out the leadership transition plan; 2) retiring partners who want to work beyond the set retirement date; 3) inability of firms to handle retiring partners workloads or to meet the terms of their payout agreements.

For the complete article, read Industry Trends: Best Practices on Succession Planning. [http://bit.ly/Ha7gzE ] From CPA Practice Management Forum, March 2012, p. 20, CCH Incorporated, 800-449-8114.

Making Mergers Work Source: Partner Insights The following includes excerpts, reproduced with permission, from an article by August Aquila The following steps are proven aids in helping your merger or acquisition go smoothly: 1. Define your reasons. Before you start down the merger or acquisition path, you need to define how it will help the firm fulfill its strategic vision. 2. Name a leader and/or a team. Usually, the managing partner is the team leader and coordinates the effort. 3. Describe your ideal candidate. Unless your goal is to change your existing culture, your ideal candidate will have a firm culture that is similar to yours. 4. Outline the deal breakers. Whether you are a buyer or a seller, there are certain issues that are nonnegotiable. 5. Begin the search. In my experience, it takes nine to 12 months from the beginning of the search to the time the transaction closes. 6. Plan the initial meetings. Usually, the initial meeting is between the two managing partners. Before that, however, it is critical to make sure that both you and the other party have signed a mutual nondisclosure agreement (NDA). If the other party wont sign it, dont hold any meetings. 7. Obtain information about the firm as much as possible. 8. Sign a letter of intent. After several meetings, it is time to begin the financial discussion. 9. Negotiate. The negotiation should be conducted so the deal becomes a win-win rather than a win-lose. 10. Conduct due diligence. Once the letter of intent is signed, you are ready to conduct due diligence. 11. Get the lawyers involved. Make it clear that you dont want the transaction to be renegotiated. 12. Make the transition. A good communication plan is the key to a smooth transition. For the complete article, read Foolproof Mergers and Acquisitions: Good Planning is Key. [http://goo.gl/RGDEQ] From Partner Insights, Aquila Global Advisors, LLC, March 2012, http://www.aquilaadvisors.com.

Marketing Get Your Firm Found on Social Media Sites Source: AICPA CPA Insider The following includes excerpts, reproduced with permission, from an article by Barrie MacQuarrie. Lets look at the ways in which you can get your firm found using LinkedIn, Facebook and Google+. LinkedIn Company Page Click on the Search Companies option from the Companies menu. Type in your companys name and click search. Does your company appear on the list? If not, simply click the Add a Company link in the top right. This will allow you to add a LinkedIn page for your company. Any company page administrator can share status updates with the companys followers. These updates might include announcements, promotions, news and videos. Followers can then like, share or comment on these updates. This will expose your company to your followers entire networks. LinkedIn company pages can also be used to post job openings and broadcast information about your companys products and services. Facebook Page The information posted on a Facebook page is public and available to anyone on Facebook. People who like your page will receive your updates in their news feed. The Facebook page administrator can use the Manage Permissions feature to control the visibility of your page, set country and age restrictions, and control the information posted to the page. Facebook has a great feature that allows a page administrator to use Facebook as a page. The administrator can use his or her pages identity to view notifications, and as with other pages, the administrator can post status updates, share links and comment on status updates. Google+ Page Google+ pages launched in November. Your Google+ page can include posts, pictures, videos and basic information about your company. Much like youd use Facebook, you can use Google+ as your page so that your posts and comments appear from your page. For the complete article, read Having a Hard Time Getting Clients to Notice Your Firm? [http://goo.gl/tGuix] From AICPA CPA Insider, March 5, 2012, http://www.CPA2biz.com.

Client Services Why You Cant Afford to Ignore Consulting Source: Accounting Today For midsized accounting firms today, management consulting presents an unprecedented opportunity. Many middle-market businesses lack the skills they need to grow, operate more efficiently, control costs, and otherwise improve their performance. Typically, these businesses cant afford the big name consultants that serve Fortune 1000 clients, but they may be wary of smaller, lesser-known firms. As the most trusted advisors, accountants are in an ideal position to fill this need. Consulting provides accounting firms with several significant benefits. In addition to enhancing profitability, it provides a way for a firm to differentiate itself from the competition, to better utilize staff during the off-season, and to recruit and retain employees. There are many ways to obtain the skills you need to offer consulting services, including training existing staff, hiring qualified consultants, acquiring or merging with a consulting firm, or forming an alliance with a consulting firm. For the complete article, read Midsized firms need to be in consulting. [http://goo.gl/biUt3] From Accounting Today, March 1, 2012, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.

Management Accountants Needed . . . Urgently Source: Journal of Accountancy Author Charles Tilley, chief executive of the Chartered Institute of Management Accountants (CIMA), believes that management accountants will play a key role in driving the global economy forward. Management accountants particularly those with the joint AICPA-CIMA Chartered Global Management Accountant (CGMA) designation will be indispensable in helping businesses move beyond financial statements to identify the human element and other nonfinancial factors that create value. According to a recent AICPA-CIMA survey, 80 percent of CEOs said that candidates with the CGMA designation would be more desirable, and 75 percent said they would like existing finance employees to obtain the designation. For the complete article, read Helping CEOs connect the dots. [http://goo.gl/jSFqj] From Journal of Accountancy, American Institute of Certified Public Accountants, November 2011, http://www.journalofaccountancy.com/Issues/2012/Mar.

Why Businesses Fail Source: AICPA CPA Insider In this article from CGMA Magazine, Paul Hopkin summarizes findings of a Cass Business School study that revealed common factors among businesses that faced significant failures and financial losses. The report examines 18 case studies involving 23 businesses, including AIG, Arthur Andersen, BP, Maclaren, and EADS. The researchers found seven common factors among companies that experienced major crises: 1. Ineffective boards, in terms of competence or ability to oversee senior management. 2. Risk blindness that is, failure to engage with significant risks, such as reputational risk. 3. Poor leadership on ethics and culture. 4. Ineffective communication. For example, some companies communicated poorly with subcontractors; others experienced excessive delays in reporting problems to senior management. 5. Excessive complexity, in terms of project or management structure. 6. Inappropriate incentives, such as bonus programs that fail to reward employees for achieving health or safety standards. 7. Information glass ceiling that is, risk management or internal audit teams could not effectively report on risks originating from high levels within the company. For the complete article, read Seven Reasons Businesses Fail. [http://goo.gl/2IhMH] From AICPA CPA Insider, January 31, 2012, http://www.CPA2biz.com.

White-Collar Criminals: Do We Need a New Profile? Source: The CPA Journal Auditors and others investigating fraud often rely on a well-established profile of the whitecollar criminal: Fraudsters tend to be middle-aged, well-educated first-time offenders driven to crime by the fraud triangle of incentive, opportunity, and rationalization. Theyre thought to be trusted employees in positions of responsibility who are good citizens both at work and in the community. The authors surveyed 106 male federal prison inmates convicted of white-collar crimes. (Statistics show that although women are nearly as likely to commit fraud, the costliest frauds are committed by perpetrators at the owner/executive level, who are predominantly male). The survey results supported much of the traditional profile, but called into question certain elements. For example, a surprising number of convicts (23 percent) were repeat offenders, and the authors believe that figure may be understated because fraud is difficult to prosecute. Also, the characterization of fraudsters as good citizens may not be accurate. Although further research is needed, the survey results contradict certain accepted stereotypes about those who commit fraud. For the complete article, read Interviewing the Fraudsters. [http://goo.gl/MR6Ps] From The CPA Journal, A Publication of the New York State Society of CPAs, February 2012, www.cpajournal.com.

Risk Management Are negligent tax preparers liable for interest paid to the IRS? Source: The CPA Journal When a client prevails in a lawsuit against a tax preparer for negligent tax advice, can it recover the interest charges imposed on unpaid taxes? As this article explains, the majority of courts say yes, reasoning that a plaintiff should be able to recover costs that flow directly from the tax preparers negligence and that would not otherwise have been owed. The minority view as expressed by the U.S District Court for the Eastern District of California in Eckert Cold Storage, Inc. v. Behl denies recovery of interest under the theory that it represents a payment for the plaintiffs use of the tax money during the period after the taxes came due and before they were paid . . . . A few states have adopted a hybrid approach: They generally permit plaintiffs to recover interest in tax preparer malpractice cases. But to avoid a windfall to the plaintiff, they allow the defendant to introduce evidence that the plaintiff subjectively benefited from use of the money. The authors encourage attorneys representing tax preparers to advocate for wider acceptance of the minority view and to consider engaging expert witnesses to quantify the benefits enjoyed by plaintiffs from use of unpaid taxes. They also admonish tax preparers to avoid making any representations to clients regarding their responsibility for interest assessed in an IRS audit. For the complete article, read Tax Preparers Liability for Incurred Interest Charges. [http://goo.gl/9ZOJv] From The CPA Journal, A Publication of the New York State Society of CPAs, February 2012, www.cpajournal.com.