april 2012 cpa leadership report

7/28/2019 April 2012 CPA Leadership Report

1/23

CPA Leadership Report

Expanding Your Knowledge While Conserving Your Time

Vol. 10 No. 4, April 2012

CPA Leadership Reportis the monthly review of the most important management and leadershiparticles 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 Reportby reading the articles marked with an *.

Clickhereto 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 surveysand computing MAP statistics.

CPA Trendlines

Changes Coming Fast for the Accounting ProfessionBruce 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 PlannerCPA 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.
http://www.cpaleadership.com/public/10.cfmhttp://www.cpaleadership.com/public/10.cfmhttp://www.cpaleadership.com/public/10.cfmhttp://www.cpaleadership.com/public/10.cfm


2/23

AICPA CPA Insider

How to Be a High-Value FirmThe most successful CPA firms build value for their owners, clients, and employees.

RedZone, Play of the Month

What to Do With Negative EmployeesRita Keller encourages you to look at the effect of negative influences within your team.

Solutions for CPA Firm Leaders

Successful Nonmandatory SaturdaysPractical 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 reviewsMasters of Management, an update to one of his favorite business books ofall 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 WorkTwelve 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


3/23

Management Accountants Needed . . . UrgentlyManagement accountants will play a key role in driving the global economy forward.

Journal of Accountancy

Why Businesses FailA study by the Cass Business School reveals seven common factors among businesses in crisesor 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


4/23

Practice Management

MAP Surveys: Are You Reading Them Right?Source: CPA Trendlines

The following includes excerpts, reproduced with permission, from an article by MarcRosenberg.

I have never ceased to be amazed at the lack of understanding that partnersincluding managing

partnershave about reading a MAP survey and computing MAP statistics. Here are some ofthe biggest mistakes:

1. Being content with average. Ideally, you would like to achieve results well above theaverage in as many categories as possible.

2. Over-reliance on partner income percentage as a measure of profitability. Thismetric 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 thatis 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 aperson 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-partnerratio.

6. Average compensation for firm administrators. Some firm administrators function at apartner 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 sameas equity partners for such metrics as fees per partner and staff-to-partner usually distortsthese computations.

8. Computing income per partner. Firms often ignore the distinction between cash andaccrual accounting when computing income per partner (IPP), and that plays havoc withthe results.

9. Average fees per professional. What is a professional? At some firms, paraprofessionalsperform work very similar to that of CPAs. At other firms paraprofessionals are seen asclerical staff.

10.Computing the average charge hours for any category of personnel, such aspartners 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 tocount 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.
http://goo.gl/cuuLLhttp://goo.gl/cuuLLhttp://goo.gl/cuuLLhttp://cpatrendlines.com/http://cpatrendlines.com/http://cpatrendlines.com/http://cpatrendlines.com/http://goo.gl/cuuLL


5/23

Changes Coming Fast for the Accounting ProfessionSource: 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 anysuggestion 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 experiencethe so-called two-tier firm.

The accounting profession, recognizing the growth of globalization, is now seriouslyconsidering international accounting standards.

The changes in professional firm practices seem to be coming fast, giving rise to ProfessionalServices 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 Trendlinesemail newsletter, Professional Services Marketing 3.0,

http://cpatrendlines.com, March 23, 2012.
http://goo.gl/JeQJxhttp://goo.gl/JeQJxhttp://goo.gl/JeQJxhttp://cpatrendlines.com/http://cpatrendlines.com/http://cpatrendlines.com/http://goo.gl/JeQJx


6/23

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 becausetheir role demands itan 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 inhaving a team thats qualified to work togetherwith 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 ofhow 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 CIOAdvantage 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]

FromAccounting Today, March 1, 2012, SourceMedia Inc., One State Street Plaza, 27th Floor,New York, NY 10004, 800-221-1809.
http://goo.gl/BkEtAhttp://goo.gl/BkEtAhttp://goo.gl/BkEtAhttp://goo.gl/BkEtA


7/23

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 areaself, team, clients, firmWerner provides what she calls a map that includes

specific questions to ask yourself and others to help you more clearly assess strengths and

weaknessesspecifically regarding requirements of successful firm leadership. Questions areanswered 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 helppeople 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.
http://bit.ly/HJnDFDhttp://bit.ly/HJnDFDhttp://bit.ly/HJnDFDhttp://bit.ly/HJnDFD


8/23

Approach IT Budgeting Like a Financial PlannerSource: 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 andoverall capital and operating budgets;

Consider the human element, includingthe impact of IT initiatives on employees worklives;

Treat the IT budget as an investment, rather than as a cost center, and examine multipleinvestment 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]

FromJournal of Accountancy, American Institute of Certified Public Accountants, November

2011,http://www.journalofaccountancy.com/Issues/2012/Mar.
http://goo.gl/OiwUIhttp://goo.gl/OiwUIhttp://goo.gl/OiwUIhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://goo.gl/OiwUI


9/23

The Trouble With Partner AgreementsSource: The Marc Rosenberg Blog

The following includes excerpts, reproduced with permission, from a blog post by MarcRosenberg.

Here are 10 partner agreement areas we see neglected time and time again:

1. Partner retirement provisionsparticularly notice of intent to retire and specific clienttransition proceduresare 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 theirincome 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 theirsystems so often.

10.Agreement fails to provide for non-equity partners and non-CPA principals.For the complete article, read CPA Firm Partner AgreementsTop 10 Weaknesses.

[http://goo.gl/vGP9c]

From The Marc Rosenberg Blog, February 28, 2012,http://blog.rosenbergassoc.com.
http://goo.gl/vGP9chttp://goo.gl/vGP9chttp://goo.gl/vGP9chttp://blog.rosenbergassoc.com/http://blog.rosenbergassoc.com/http://blog.rosenbergassoc.com/http://blog.rosenbergassoc.com/http://goo.gl/vGP9c


10/23

How Risky is the Cloud?Source:AICPA CPA Insider

The following includes excerpts, reproduced with permission, from an article by Jason Rosenthaland Nicholas Gowen.

While cloud computingand particularly data storagepresents many advantages and likelywill become more prevalent, there are unique risks to CPA firms and their clients. This column

analyzes some of these risks.

Confidentiality and Data Security ConcernsTo 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 yourrequest; 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 capabilitiesthat include:

A high level of tested encryption technology to ensure the shared storage spacesafeguards 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 IssuesBe aware that courts do not generally make a distinction between the content of data storedelectronically in the cloud and the data stored in paper files in your storage room.

Compelled Disclosure to Third PartiesCloud 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]

FromAICPA CPA Insider, February 12, 2012,http://www.CPA2biz.com.
http://goo.gl/730oAhttp://goo.gl/730oAhttp://goo.gl/730oAhttp://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://goo.gl/730oA


11/23

How to Be a High-Value FirmSource: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 theirowners, 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 isa need for tough decisions.

Has talented partners and staff who create delighted clients who refer new business tothe 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 managementstatistics.

Provides staff with advancement opportunities and career development programs thatguide and manage performance.

Rewards overachievers handsomely and does not tolerate underachievers, whether theyare partners, professional staff, or administrative personnel.

Possesses strong niches or industry expertise that is highly respected and branded in themarketplace.

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]

FromRedZone, Play of the Month, Accountants Advisory Group, February 2012,www.AccountantsAdvisory.com.
http://bit.ly/GZouNYhttp://bit.ly/GZouNYhttp://bit.ly/GZouNYhttp://www.accountantsadvisory.com/http://www.accountantsadvisory.com/http://www.accountantsadvisory.com/http://bit.ly/GZouNY


12/23

What to Do With Negative EmployeesSource: 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 onFast Companytitled What Good Bosses DoWith 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 civilizedplace 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-reachinginside 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 firmfinancial 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 badapples? Strive for KISS Keep it Simple and Straightforwardrelating 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/.
http://goo.gl/VCzpVhttp://goo.gl/VCzpVhttp://goo.gl/VCzpVhttp://ritakeller.com/blog/http://ritakeller.com/blog/http://ritakeller.com/blog/http://goo.gl/VCzpV


13/23

Successful Nonmandatory SaturdaysSource: ConvergenceCoaching, LLC Inspired Ideas

The following includes excerpts, reproduced with permission, from a blog entry by TameraLoerzel.

Success in implementing nonmandatory Saturdays requires the consistent application of bestpractices to engage your people and have them winand ultimately you and your firm win.

Consider following these employee engagement best practices and identify which to focus onfirst:

Communicatea 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 expectationsat least weekly! It is imperative when you are shifting from aculture 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 originalcommitment to be met.

Keep your commitmentsemploy a do as I do approach and ensure that all team members

especially your leadership teamare meeting commitments related to turnaround times, by-

when dates, resetting expectations, firm processes, and client communications.

Acknowledge and reward resultstake the time to celebrate successes, even small ones at the

very beginning of any change that youre implementing. It could be as simple as acknowledgingeveryone for having their time in weekly or for keeping commitments in agreed upon timelines.

Collaborateseek input from your team about how it is going from their perspective and whatideas 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.
http://goo.gl/fKZ16http://goo.gl/fKZ16http://goo.gl/fKZ16http://blog.convergencecoaching.com/http://blog.convergencecoaching.com/http://blog.convergencecoaching.com/http://goo.gl/fKZ16


14/23

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 yourmanagers and partners?

With all of the rapid change, if you and your team do what you have always done, youll actuallyget less done than you have always gotten done.

For the complete blog entry, read Is Your Accounting Firm Suffering From the Same OldThing?[http://bit.ly/HsdXMo]

From Solutions for CPA Firm Leaders, the blog of Rita Keller, March 1, 2012. Visithttp://ritakeller.com/blog/.
http://bit.ly/HsdXMohttp://bit.ly/HsdXMohttp://bit.ly/HsdXMohttp://ritakeller.com/blog/http://ritakeller.com/blog/http://ritakeller.com/blog/http://bit.ly/HsdXMo


15/23

Management Consultants: Separating the Wheat From the ChaffSource: VeraSage Institute

The following includes excerpts, reproduced with permission, from a blog entry by Ron Baker.

Masters of Managementis the update to one of my favorite business books of all time, The WitchDoctors (TWD), first published in 1996, by Adrian Wooldridge and John Micklethwait, twoeditors from The Economist.

What has happened between TWD and this work? Enron and the 2008-09 financial crisis, whichwas 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 todayas they were then:

1.

The discipline is constitutionally incapable of self-criticism;2. It favors terminology that confuses rather than educates;3. It rarely rises above the level of basic common sense;4. 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 twopercent 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 theirmention: 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 lowbarrier to entry also means there is an enormous number of crackpots.Masters of Managementis

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.
http://goo.gl/105rKhttp://goo.gl/105rKhttp://goo.gl/105rKhttp://www.verasage.com/index.php/communityhttp://www.verasage.com/index.php/communityhttp://www.verasage.com/index.php/communityhttp://www.verasage.com/index.php/communityhttp://goo.gl/105rK


16/23

Succession Planning and M&A

Succession Planning InsightsSource: CPA Practice Management Forum

Allan Koltin presents questions and answers on succession planning best practices. Highlights ofKoltins answers include:

Only 35 percent of firms have a succession plan in place, though more than 60 percenthave owners over 55 years of age.

During the 1990s, the percentage of college students graduating with accounting degreesdropped 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 findthemselves poorly positioned for succession.

For firms to grow and have a healthy future, they must be willing to invest now in theirteams (by providing CPE opportunities and teaching leadership skills) and in firmresources (technology, marketing, product development).

One of the biggest challenges in developing a succession plan is choosing a requiredretirement date for partners. But without choosing a specific, mandatory date, olderpartners 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 partnersreaching retirement age.

Major challenges to successfully implementing a succession plan include: 1) lack ofaccountability 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.
http://bit.ly/Ha7gzEhttp://bit.ly/Ha7gzEhttp://bit.ly/Ha7gzEhttp://bit.ly/Ha7gzE


17/23

Making Mergers WorkSource: Partner Insights

The following includes excerpts, reproduced with permission, from an article by AugustAquila

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, youneed 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 leaderand 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 certainissues that are nonnegotiable.

5.

Begin the search. In my experience, it takes nine to 12 months from the beginningof the search to the time the transaction closes.

6. Plan the initial meetings. Usually, the initial meeting is between the two managingpartners. 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 otherparty wont sign it, dont hold any meetings.

7. Obtain information about the firmas 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-winrather than a win-lose.

10.Conduct due diligence. Once the letter of intent is signed, you are ready toconduct due diligence.

11.Get the lawyers involved. Make it clear that you dont want the transaction to berenegotiated.

12.Make the transition. A good communication plan is the key to a smoothtransition.

For the complete article, read Foolproof Mergers and Acquisitions: Good Planning is Key.

[http://goo.gl/RGDEQ]

FromPartner Insights, Aquila Global Advisors, LLC, March 2012,http://www.aquilaadvisors.com.
http://goo.gl/RGDEQhttp://goo.gl/RGDEQhttp://goo.gl/RGDEQhttp://www.aquilaadvisors.com/http://www.aquilaadvisors.com/http://www.aquilaadvisors.com/http://goo.gl/RGDEQ


18/23

Marketing

Get Your Firm Found on Social Media SitesSource:AICPA CPA Insider

The following includes excerpts, reproduced with permission, from an article by BarrieMacQuarrie.

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 aCompany 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. Theseupdates 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 PageThe 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+ PageGoogle+ 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]

FromAICPA CPA Insider, March 5, 2012,http://www.CPA2biz.com.
http://goo.gl/tGuixhttp://goo.gl/tGuixhttp://goo.gl/tGuixhttp://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://goo.gl/tGuix


19/23

Client Services

Why You Cant Afford to Ignore ConsultingSource: 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 moreefficiently, control costs, and otherwise improve their performance. Typically, these businessescant 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 staffduring 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]

FromAccounting Today, March 1, 2012, SourceMedia Inc., One State Street Plaza, 27th Floor,

New York, NY 10004, 800-221-1809.
http://goo.gl/biUt3http://goo.gl/biUt3http://goo.gl/biUt3http://goo.gl/biUt3


20/23

Management Accountants Needed . . . UrgentlySource: 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 accountantsparticularly those with the joint AICPA-CIMAChartered Global Management Accountant (CGMA) designationwill be indispensable inhelping 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]

FromJournal of Accountancy, American Institute of Certified Public Accountants, November2011,http://www.journalofaccountancy.com/Issues/2012/Mar.
http://goo.gl/jSFqjhttp://goo.gl/jSFqjhttp://goo.gl/jSFqjhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://www.journalofaccountancy.com/Issues/2012/Marhttp://goo.gl/jSFqj


21/23

Why Businesses FailSource: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 factorsamong 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 forachieving health or safety standards.

7. Information glass ceilingthat is, risk management or internal audit teams could noteffectively report on risks originating from high levels within the company.

For the complete article, read Seven Reasons Businesses Fail.[http://goo.gl/2IhMH]

FromAICPA CPA Insider, January 31, 2012,http://www.CPA2biz.com.
http://goo.gl/2IhMHhttp://goo.gl/2IhMHhttp://goo.gl/2IhMHhttp://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://www.cpa2biz.com/http://goo.gl/2IhMH


22/23

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 white-

collar 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 betrusted employees in positions of responsibility who are good citizens both at work and in thecommunity.

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 authorsbelieve 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.
http://goo.gl/MR6Pshttp://goo.gl/MR6Pshttp://goo.gl/MR6Pshttp://www.cpajournal.com/http://www.cpajournal.com/http://www.cpajournal.com/http://goo.gl/MR6Ps


23/23

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 recoverthe interest charges imposed on unpaid taxes? As this article explains, the majority of courts sayyes, 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 viewas expressed by the U.S District Court for the Eastern District of California

inEckert Cold Storage, Inc. v. Behldenies 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 thedefendant 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 byplaintiffs 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.
http://goo.gl/9ZOJvhttp://goo.gl/9ZOJvhttp://goo.gl/9ZOJvhttp://www.cpajournal.com/http://www.cpajournal.com/http://www.cpajournal.com/http://goo.gl/9ZOJv

april 2012 cpa leadership report

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