Monday, May 25, 2009

My Final Practical Accountant “Editor’s Note”

As of the February/March issue of Practical Accountant, my position as editor-in-chief was eliminated. I had worked on the magazine since it was acquired in the early nineties by Faulkner & Gray, a predecessor of the current owner (Source Media), and for well over a decade, I have been lucky enough to be its editor-in-chief.

It was a long and happy run, but I didn’t get a chance to say thank you to the many people who made Practical Accountant into a magazine that I was extremely proud of leading. These individuals include the many CPAs, marketers, vendors, consultants, profession leaders, firm administrators, and technologists who willingly contributed and shared their expertise and insight. It also, of course, includes those at SourceMedia (and the prior owners of Practical Accountant) whether in production, circulation, operations, and sales that helped put out the magazine. Most of all, I want to thank all the editors and reporters who worked with me, and in particular, Jeff Stimpson. In the last few years Jeff and I did most of the articles and departments, and Jeff did an absolutely marvelous job.

As editor-chief, I saw the magazine championing small to medium size firms, acting as an information filter, and identifying and analyzing trends that would help firms grow and prosper. Jeff and I often used regional firms as role models and highlighted innovations wherever we saw them. There was a particular emphasis on business development, and in that regard we owe a tremendous debt to the members of the Association for Accounting Marketing and firm associations like the Leading Edge Alliance for their support and assistance. During my tenure as editor-in-chief and with my WebCPA columns, I attempted to be a positive force, and other than government leaders, the AICPA leadership, and those who I considered unethical, limit my criticism.

I wrote this last “editor’s note” primarily to thank those who contributed to Practical Accountant and created a substantial body of work that I think will stand the test of time. I am also writing it so I can have closure, on my terms, of that chapter in my life.

G-d Bless!

Tuesday, May 19, 2009

Auditors: Doing the Right Thing?

Recently, I was surprised to see an older man walking in the street wearing a baseball-type cap that said, as I remember, “Special Forces.” I stopped him and thanked him for his service and pointed to the cap. He quickly said he hadn’t served with the Special Forces, but was recently honored by them for his service with the OSS in World War II.

Gus explained he had volunteered for the OSS after six months of service in the Army. He told me about his parachute training by the RAF, who took him and his colleagues up in an airplane, and when their number was called, each would move to the action station. Gus was No. 3. As he watched No. 1 and 2 each step up and be quickly sucked out of the airplane, Gus said that he found comfort in a quote from Mark Twain that “Courage is resistance to fear, mastery of fear--not absence of fear.” He explained the training was necessary so they could parachute behind enemy lines. I thanked him again for his service, and told him of my son’s gallant service in the Navy. He asked me to extend his gratitude to my son.

A couple of days later, as I was shopping in a fruit and vegetable store, I came across another individual walking with a cane and wearing a hat indicating he was a Korean War veteran. I asked if I could shake his hand to thank him for his service.

He was appreciative in a very kind and gentle way, and then told me he survived Pork Chop Hill, a battle of which I was probably aware because of the movie of the same name. He then said sadly that 2,000 of his colleagues were lost in that battle and he added that he survived a later battle on an unnamed hill in which another 2,000 lives were lost. I became even more upset when the veteran mentioned that second hill. But then he told me he had saved 161 lives in Korea for which he received the Silver Star.

We parted to get our fruits and vegetables. When I went to the cashier to pay, I saw the Korean War veteran again and asked him if he needed any help. He said no and indicated that he wasn’t in a rush as all he had to do later today was go to a meeting of Korean War veterans. I asked that he extend my thanks to each of them for their service.

These two individuals and many others--scarred, injured and, may they rest in peace, those who have passed on--did the right thing in the most difficult of times. The times in which we live are also difficult, although in a much different way. Like these two fine human beings did, we should all step forward and do the right thing.

For example, although many already do, all CPAs and non-CPAs at firms should step forward and help one another, their clients, and their fellow human beings in need. Just as importantly, they should examine closely what part, if any, they, as professionals, played in causing this economic crisis, the worst since the depression. In particular, CPAs should closely review and critically evaluate the way in which auditing of public companies is currently performed, beginning with the illusion of independence, rather than its actuality, that exists.

One commentator (at suggests that, rather than having public companies select their auditor, regulators instead should make the selection. Ethan S. Burger, adjunct professor at the Georgetown University Law Center, states:
“Imagine if the SEC or federal Public Company Accounting Oversight Board (PCAOB) assigned accounting firms to companies. Do you think that the auditors might have shown some skepticism when individuals were being approved for mortgages for amounts greatly exceeding three times their income?‌ Would questions have been raised about “no doc” loans?‌”

I believe that this change is possible, and might even involve the regulator supplying a list of three to five auditing firms to the public company from which to pick based on industry expertise and the size of the company being audited. The auditing firm might serve for a stated term, say five years. There also could be a limitation of the damages that can be imposed in the event that an auditing firm is sued as a result of an audit of a public company.

Interestingly, I have heard about a bank that told a company which auditor it should use for audited financial statements, which needed to be submitted to obtain a loan. Adoption of this new auditing regime would allow auditors to be more aggressive, independent, and not to be fearful of losing an engagement because of its findings and statements.

In order to promote discussion, debate, and evaluation, I sent an e-mail to six individuals working at the AICPA, requesting the following:
“Because of these times in particular, I respectfully request the AICPA to consider doing the following two things:
1. Alert the appropriate AICPA members to the article.
2. Promote open discussion of this idea, with the AICPA not taking a position until the public discussion and debate has progressed significantly.
Thanks for the consideration of my request.”

As of this writing, almost a month after I sent the e-mail, there has been no response from the AICPA. I do hope, however, that I will receive a response from the AICPA in the near future.

Call to possible action: I further hope that AICPA members consider asking the organization to honor (or at least acknowledge) my request, and to push for open discussion and debate in order to evaluate whether a seismic change in the performance of audits is desired, necessary, and will help limit the severity of this and any future economic crisis.

Monday, May 18, 2009

Online/Brick–and-Mortar Business Development Acumen

“An Educated Consumer Is Our Best Customer®” is how an off-price clothing retailer positions itself. Although not similarly copyrighted, as of late, I have come across a number of other businesses that live by that slogan with a single word change, “An Educated Consumer Is Our Worst Customer.” Unlike that off-price clothier, they don’t publicize the slogan that they actually live by, and, in fact, do their best to hide that fact. Here are two of them:
1. A vitamin chain offers a particular supplement for 10 dollars more than its online price. A clerk at their store refuses to match the price for a regular customer. The manager insists that the customer must go home and print out the proof even though the store has Internet access.
2. A bank automatically renews you two-year CD unless you come in. The rate is one percent, while if you came in, you could obtain a higher rate by renewing the CD for only seven months. Additionally the bank is offering those that open a two-year online CD a much higher rate of 2.85 percent.

Contrast those two examples with a national department store chain advertising that customers can check on computer terminals in their stores for cheaper prices available from competitors on the brand appliances its sells, and that it will match the competitor’s cheaper price.

Clients will be needing help adjusting and prospering in this brave new world where technological advances are overhauling and significantly transforming the rules of the game. Is your firm ready to help? And more importantly, how deep is the firm’s understanding and knowledge of the virtual and brick-and-mortar worlds and the possible interactions.

To find out, how about giving a 12–question test to firm members from every level of the firm--the managing partner, partners, staff accountants, marketers, technologists, and administrative support (if applicable)? One key aspect of this test is that it is an “open-book” test, in which you can use any technological aid and ask anyone outside the firm. There should be a time limit, e.g., three hours or overnight. The typed answer sheets are anonymously submitted and assembled for review by whomever the management of the firm determines is appropriate. There is no marking of individual exams.

The 12 questions are designed to focus on testing knowledge of the use of technology, the ability to obtain competitive intelligence, and business development acumen.

1. Where on the site is a database of firms which is searchable by state, city, and size of professional staff, number of branches, AICPA practice monitoring sections, and AICPA centers?
2. Is it possible in New York and a limited number of other states to buy a long-term care insurance policy that will allow the insured to qualify for Medicaid without spending down their assets? If so, what is the policy commonly called?
3. Webcams are being used more and more by churches, funeral homes, and day care providers as a service? Briefly explain how.
4. Give three examples where enhanced cell phones and other handheld devices are being used to enhance a brick-and-mortar business. Hint: Might involve calling a number with recordings or entering a zip code where there is Internet access.
5. Name a Web site for a company that will give you 250 free business cards or more (except for minimal shipping costs) and lets you pick from over 40 different, distinct designs.
6. Name the tax service that allows the user to search for federal and state and local tax incentives by the address of the business.
7. Give three novel networking techniques used by other firms? Example: One firm offers a day at a spa.
8. How many members are there in the Young CPA Network group on Linkedin, and what are the names of four specific accounting firm alumni groups on Linkedin? (If possible, pick firms in your firm’s region.)
9. Name a well-known site for helping you create and maintain a free blog.
10. How might search engine optimization come into play when a potential employee submits his or her resume electronically?
11. Name five specific strategies being used by businesses and other firms in response to the economic crisis. (Don’t include any strategies you firm is using or advising clients to utilize?)
12. How did you obtain the above answers? Please indicate all methods that you used.
Personal knowledge
Internet search
Text messaging
Discussion group inquiry
Telephoned someone
Directly talked to someone
Other, please describe

I’m not providing an answer key as the test’s purpose isn’t to determine who scored what or even how well research can be performed; but rather, the purpose is for the firm, as a whole, to focus quickly and in a fun way on their knowledge, the tools available to broaden knowledge, and developing a deeper understanding of changing business trends that will significantly impact clients.

Final thought: I recommend that as soon as the answers are assembled and prior to management reviews, sets of the answers be distributed, as is, to each individual who took the test (better yet, all the firm members). The idea is by that doing this the community aspect of the virtual world is being further explored, instilled, and encouraged in a primarily brick-and-mortar firm.

Sunday, May 17, 2009

Are Ethics and Profits Mutually Exclusive?

“The Darwinian concept of the survival of the fittest has been substituted by a philosophy of the survival of the slickest.”

This Martin Luther King, Jr. quote still rings true.
It is particularly evident when you look at the alleged Ponzi schemes that we read about every day. Many of these individuals show a remarkable knowledge of how the financial marketplace works and are skilled at gaining prestige, obtaining political influence, and escaping regulators’ wrath. They also seemingly have an innate and sharply developed ability to manipulate individuals and entities to their advantage.

The marketing of adjustable rates and balloon mortgages with little down and no real credit checks coupled with the packaging of these mortgages into investments promising high return is the best illustration of where this philosophy of the survival of the slickest is taking us.

Martin Luther King was ahead of his time as now many are seeing the truth of that quote. This awareness, the developing community concept derived from the Internet, and the fact that the Internet ensures the uncensored widespread and quick dissemination of information, discussion, and debate, signifies change is coming.

Many in all levels of society including a few CEOs, consultants, and professionals are sensing a new business model is imminent in which ethics and profits aren’t mutually exclusive and in fact, compatible and necessary for a changing marketplace. To get buy-in from all the necessary stakeholders, businesses, not-for-profits, groups, and communities on the Internet, codes of conduct and responsibilities will have to be developed. There will also have to be actual transparency and demonstrated delivery of win-win to all the stakeholders.

CPAs, often identified as the most trusted advisor of businesses and individuals, can be one of the prime catalysts for this seismic change. Many firms are perfectly positioned, especially these very successful regional firms that have been “walking the walk” for a number of years. They created infrastructures, procedures, and safeguards to maintain quality and still experience sustained growth. Their focus is long-term, and most importantly, there is understanding that trust is constantly earned, and although profits might be the result, ethical means can always be utilized and makes business sense.