MSCPA - News

Financial Literacy Still Declining among High School Seniors, Jump$tart Coalition's 2008 Survey Shows

Wed, 31 Dec 1969 19:00:00 EST

WASHINGTON, DC - April 9, 2008 - While the financial literacy scores of the 2008 high school senior class rank lower than their 2006 peers measured in a national survey, financial literacy scores are higher among college students, the Jump$tart Coalition� for Personal Financial Literacy said today.

In the Jump$tart Coalition's biennial survey, funded by the Merrill Lynch Foundation, high school seniors correctly answered only 48.3 percent of the questions. This mean score is a decrease from those posted by the senior class of 2006, which correctly answered 52.4 percent of the questions.

"The survey demonstrates that graduating high school seniors continue to struggle with financial literacy basics," said Lewis Mandell, Ph.D., professor of finance and managerial economics at SUNY Buffalo School of Management. Mandell conducts the surveys for Jump$tart, and the Merrill Lynch Foundation not only funded this year's high school and college surveys but also the previous high school surveys in 2004 and 2006.

"Perceptions of current economic conditions, particularly the housing market, may have contributed to the decreases," added Mandell.

This year marked the first-ever college students' survey. Results indicated higher scores than their high school peers with 62 percent of the questions correctly answered Scores among college students increased with their rank in school. College freshman, for example, recorded a 59 percent score, while college seniors correctly answered 65 percent of the questions.

"At Merrill Lynch, we believe that an early and sustained investment in financial education lays the groundwork for individual prosperity and economic independence," said Eddy Bayardelle, president of Merrill Lynch Foundation. "It is even more critical in tough economic times, and that is why we are calling on our colleagues across the sectors to continue to invest in youth financial education. Together, we can equip our young people to be active participants in the global economy and benefit from its inherent opportunities and rewards."

Among high school students, those who scored 27 and above on their ACT college entrance exam correctly answered 59 percent of the questions, while seniors with ACT scores 20 and answered just 43 percent of the survey questions correctly.

"The data suggest that not only age, but problem-solving ability are important factors in students' abilities to grasp and apply financial information," said Laura Levine, executive director of the national coalition. "This year's survey underscores that while we must continue teaching personal finance to high school students, reinforcing and repeating financial literacy efforts at the college level yields positive results."

The 31-question survey revealed that high school seniors have a lot to learn about important financial concepts. Among the findings in the survey:

Forty eight percent correctly said that a credit card holder who only pays the minimum amount on monthly card balances will pay more in annual finance charges than a card holder who pays their balance in full;
Seventeen percent correctly answered that stocks are likely to yield higher returns than savings bonds, savings accounts and checking accounts over the next 18 years even though there has never been an 18-year period where this wasn't true; and
Forty percent correctly answered that they could lose their health insurance if their parents become unemployed.
Thirty six percent think a house financed with a fixed-rate mortgage is a good hedge against a sudden increase in inflation, compared with 45 percent in 2006.

In the high school survey, certain demographic trends continued. Caucasian students, for example, correctly answered 52.5 percent of the questions, while Hispanic students correctly answered 45 percent and African Americans correctly answered 41.3 percent of the questions.

Among the college students, Caucasian college students scored 63.3 percent while Hispanics answered 59.8 percent and African Americans answered 55.3 percent of the questions correctly. In addition to the college senior and freshman findings, juniors correctly answered 62.1 percent of the questions while sophomores trailed their upperclassman with a score of 61 percent.

The high school survey was given to 6,856 high school 12th graders in 40 states. The college survey was given to 1,030 full time students nationwide.

About Jump$tart

The Jump$tart Coalition� has grown to include more than 180 national partners and 48 affiliated state coalitions. The Jump$tart Clearinghouse, which lists more than 700 titles of financial literacy materials available for all, can be found at www.jumpstartclearinghouse.org. A map of state-by-state financial education requirements can be found at www.jumpstart.org under "Legislation." More information about Jump$tart and its biennial survey can be found at www.jumpstart.org , including a media press kit in the "News" section.

About Merrill Lynch's Philanthropy

Merrill Lynch was founded on the idea that the world is full of opportunity. Opening the door to that opportunity for underserved children and youth is the focus of the firm's global philanthropy. In 2007, Merrill Lynch giving totaled almost $44 million, with education receiving nearly half of that support. Around the world, Merrill Lynch programs are providing better access to educational opportunities for those who need them most, specifically in the areas of youth financial education, entrepreneurship and global citizenship. Through the dedication of our employee volunteers, free educational resources at http://philanthropy.ml.com, and financial support, we are leveling the playing field for millions of young people to compete and succeed in the global marketplace.

Press Note: Copies of both the 2008 high school and college survey questionnaires, showing detailed responses, are posted on the Jump$tart Web site at www.jumpstart.org in the "Downloads" section.

Corporate Tax Panel Chair Says Commission Should Press Ahead With Report

Wed, 31 Dec 1969 19:00:00 EST

By Priscilla Yeon State House News Service After hearing concerns about taking premature action in two weeks on Gov. Deval Patrick�s proposal to close corporate tax �loopholes� as a way to generate revenue for next year�s state budget, the chair of a special commission studying the governor�s proposal said a report will be issued by the June 15 deadline. Administration and Finance Secretary Leslie Kirwan, who chairs the 15-member Study Commission on Corporate Taxation, said she would like the group to meet its mandate and present a report �distilling� issues related to business tax policies by June 15. �I remain convinced the staff should and could have a report distilling our thoughts in our next meeting,� said Kirwan. The commission is scheduled to meet on June 12 to vote on a draft report. To some commission members, the deadline is too aggressive and does not afford enough time to recommend ways to streamline the current tax code and make recommendations on Patrick�s bill. Commission members have met three times and held one public hearing. House Minority Leader and commission member Rep. Bradley Jones (R-North Reading) submitted an unsolicited draft report to commission members titled �Interim Report of a Majority of Members of the Study Commission on Corporate Taxation�. The draft recommended that the commission not issue a report by the June 15 deadline. �Because of the complexity of the underlying issues and the substantial nature of the recommendations being discussed, there is absolutely no way that the Commission could undertake such an analysis in a credible and satisfactory manner in the course of a mere month-and-a-half,� the report stated. �Clearly, making favorable recommendations on legislative changes on a rushed and incomplete basis would be irresponsible. Even worse, it would threaten to impede the ultimate goals of the Commission by creating the possibility of inconsistent recommendations when the Commission issues its final report in January, 2008.� The commission, set up in late April under an agreement between Patrick and Democratic legislative leaders, is charged with reviewing the governor�s bill and delivering legislative recommendations by June 15 on ways to provide revenue in the upcoming fiscal year. Its mandate and deadlines were outlined in a press release. A final report, including recommendations on ways to promote tax fairness and equity, encourage business growth and innovation, and strengthen Massachusetts's ability to compete in global markets, is due by January 2008. After the meeting, Kirwan said the report �may� contain specific recommendations on some of the governor�s proposals. She said her staff will �distill ideas� raised during the meetings and last week�s hearing and �potentially� include some action. Alan Clayton-Matthews, a commission member and a UMass Boston professor, said �there is almost an emergency� to act on some aspects of the tax code laws due to the state�s fiscal constraints in public spending. Senate Minority Leader and commission member Richard Tisei (R-Wakefield) noted the House and the Senate have already approved their budget proposals, which exclude Patrick�s proposal to close corporate tax loopholes. �We found a way to get through this year,� said Tisei. �I don�t think there is so much of an emergency right now.� As part of long-term goals, commission members said they would like to focus on job creation measures, study business taxes as well as sales and property taxes, examine the efficacy of business tax incentives, and find out how many businesses are paying the minimum excise tax in the state. There was also some agreement amongst commission members that between two of Patrick�s major proposals � one calling for the state to adopt combined reporting to curb business practices of shifting income to out-of-state subsidiaries and a �check the box� plan to prevent corporations from claiming different status on state and federal forms - the latter seemed to be a simpler issue to tackle. Commission member Karl Fryzel, a tax lawyer for Edwards Angell Palmer & Dodge, spoke in favor of a June 15 report that contained some of the issues raised by the commission. He said he agreed that combined reporting needed more time and urged the commission to take �some� action on �check the box� rules by the June deadline. �There may be some need for transition rules, there may be some need for grandfather rules,� said Fryzel, who noted 45 states have adopted similar measures. �I don�t hear the argument that �check the box� is anti-business.� Commission member Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the recent hearing showed the commission the complexities involved in changing the current tax code system and agreed the commission needed more time. �Trying to fit the check the box by June and do it intelligently . . . is a concern,� said Widmer. After the meeting, Jones said he took the initiative to submit a draft report first so he could start a dialogue with the commission about the insufficient time to meet the June deadline. He said he wrote the report and Tisei read it. He said in the next meeting, he would likely favor a report that is �substantially similar� to his report. Tisei said the commission was not created to look at ways to raise revenues only but to examine the question of fairness in the current tax policy. �The real reason we were created is to take a thoughtful approach,� said Tisei after the meeting.

Partner Town Meeting on Staff Retention (6/1)

Wed, 31 Dec 1969 19:00:00 EST

This meeting is designed for managing partners and key partners who'd like to learn more about retaining their talented workforce and ultimately assuring practice succession. Human Resource professionals are welcome to attend with a firm partner. MSCPA Past President Richard J. Caturano, CPA, managing partner, Vitale Caturano & Company Ltd, will discuss the PCPS whitepaper, "Best Practices in Recruiting and Retaining Talented Staff." John K. Allen, Ed.D, partner, West Falmouth Associates, will discuss turnover trends, sources of controllable turnover and interventions to keep staff from jumping ship. Managing Partner and HR panel, with proven track records, will discuss their success in professional staff retention.
Panelists include: Chris Barrett, CPA, Rucci Bardaro & Barrett PC; Mike Brown, CPA, Brown & Brown LLP; Dave Clarkson, VP of HR, Vitale Caturano & Company Ltd.; and Gary S. Lafond, Director of HR, Wolf & Company PC. Finally, a panel CPAs who've left for industry jobs will discuss why they left public accounting for what they thought were "greener pastures," and common misconceptions regarding their career in the private sector. The panel will include professionals who've left and come back, and those who've chosen to stay in private. Panelists include: James M. Downey, CPA, Downey & Company, LLP AliciaAnn R. Grasfeder, CPA, State Street Bank & Trust Company John J. Doherty, CPA, Wolf & Company PC Sean Kimball, CPA, The Mathworks Inc Session 2:30 - 5:00 ~ Cocktail Reception 5:00 - 7:00 This event is FREE of charge for partners who are members of the MSCPA, including 3 FREE CPE credits and open bar at the reception! Registration in advance is required, e-mail Giuseppe Fornaro.

This event is sponsored by: The VisionLink Advisory Group helps companies transform the way they grow their businesses and secure the financial future of shareholders and key employees. We do this through the creative application of unique processes that help organizations treat compensation as an investment rather than an expense. Its core competency is called Strategic Performance Development.

Members of the MSCPA Staffing Task Force include:
Jack Finning, CPA, Alexander Aronson Finning & Co PC
Jeff Solomon, CPA, Levine Katz Nannis & Solomon PC
Myra Sallet, CPA, Abrams Little-Gill Loberfeld PC
Mike Brown, CPA, Brown & Brown LLP
John Allen, Ed.D, West Falmouth Associates
Paul Kunin, CPA, Paul Kunin Consulting
Ted Flynn, CAE, Executive Director, MSCPA
JoAnne Sperry, Marketing Coordinator, MSCPA

Major Changes to Auditing Standards are Now in Effect

Wed, 31 Dec 1969 19:00:00 EST

November 20, 2006 Dear Peer Review Firms, Major changes to auditing standards are occurring, with some having effective dates as early as audits with years ending December 31, 2006. The California Peer Review Committee decided to write this letter to alert you to these major changes. Audits with periods ending on or after December 15, 2006 SAS No. 112, Communicating Internal Control Related Matters Identified in an Audit, supersedes SAS 60 to now require written communication to management and those charged with governance of identified control deficiencies that are significant deficiencies or material weaknesses in internal control. These definitions will most likely result in more control deficiencies being reported as at least significant deficiencies than were previously communicated as reportable conditions. Of course, one of the most common deficiencies noted will be the lack of segregation of duties. The AICPA Peer Review Board will be determining how significant a failure to provide this written communication to those charged with governance would be for peer review purposes. To read this standard, which includes sample letters, go to aicpa.org and under search options choose professional resources, accounting and auditing, audit and attest standards, authoritative standards for non-issuers, statements on auditing standards. In the appendix to this standard it states that there would be a deficiency in the design of controls if �the person responsible for the accounting and reporting function lacks the skills and knowledge to apply generally accepted accounting principles in recording the entity�s financial transactions or preparing its financial statements.� There has been confusion about the ramifications of this statement. Whether the auditor does or does not assist in drafting the financial statements and notes for the client is irrelevant to whether there is an internal control deficiency. It does not matter who drafts the financial statements. What matters is the client�s system of internal control over financial reporting and whether the client has controls to prevent or detect material misstatements, from the recording of a transaction through the preparation of the notes to the financial statements. It is also important to note that not all controls have to exist throughout the year but only when that control is needed. For example, a client may prepare interim financial statements without disclosures and without all normal accruals adjusted. This would not represent a control deficiency because it was not the client�s intent to prepare GAAP financial statements. What is important is whether there are effective controls when financial statements subject to audit are being prepared. If a client has appropriate controls over a cash basis general ledger but the financial statements are prepared on the accrual basis, there may be control deficiencies if the client has no controls over the conversion. To further illustrate, a client may have a knowledgeable person who has the accounting expertise to maintain an accrual general ledger and who has sufficient expertise to draft the financial statements and the notes but for various business reasons still asks the auditor to assist in that function. As long as the client has the controls in place to be able to prevent and detect misstatements in the financial statements and notes and those controls are effective, there would not be a control deficiency. Alternatively, some clients may choose to outsource this function. Outsourcing is certainly a way for a company to strengthen its controls when they do not have the expertise in house. However, the client does not have to outsource this process and this standard was in no way suggesting that the auditor could not or should not assist the client in drafting their financial statements. There will be some clients that decide the cost of having sufficient controls is not worth the benefit and they will accept having a deficiency noted in their written communication. It is important that the client understands their risks and that they make an informed decision on how best to respond to those risks. Again, the major points to remember are:

The auditor can not be part of the client�s system of internal control because it would impair the auditor�s independence

What the auditor does (or does not do) is irrelevant to and independent of the client�s system of internal control over financial reporting. What the auditor does is not a mitigating or compensating control.

Internal control over financial reporting encompasses controls over the preparation of the financials statements and notes. An effective system of internal control over financial reporting does not stop with the general ledger.

Having the client designate an individual who possesses suitable skill, knowledge, and/or experience as set forth under 101-3 is not a control. The control is the person�s review of the work and whether that review would prevent or detect a misstatement.

No two clients or situations will be exactly alike since every client�s system of internal control over financial reporting will be different. Professional judgment is paramount, especially in evaluating compensating controls. There are no �automatics.�

The standard does not require the auditor to detect control deficiencies but it does require the auditor to evaluate a control deficiency if he or she identifies one as a result of their audit. The AICPA has issued a risk alert that has a number of case studies dealing with typical small business situations. To obtain a copy, visit cpa2biz.com and enter product number 022536 in the search field. SAS No. 103, Audit Documentation, supersedes SAS No. 96 and changes and expands current documentation requirements. Included in this SAS is a minimum file retention period of five years from the report release date (since California�s rules require a seven year retention period, California rule takes precedent over this standard). In addition, the final assembly of the audit file should be within 60 days following the report release date unless other statutes or regulations specify a shorter time frame. There is also a major change in the date of the auditor�s report. Currently, auditor�s reports are dated as of the last day of fieldwork. The new standard states that �The auditor�s report should not be dated earlier than the date on which the auditor has obtained sufficient appropriate audit evidence to support the opinion. Among other things, sufficient appropriate audit evidence includes evidence that the audit documentation has been reviewed and that the entity�s financial statements, including disclosures, have been prepared and that management has asserted that it has taken responsibility for them.� This may extend testing for events occurring after field work and will require careful dating of and receipt of the management representation letter prior to issuing the final audit report. Firms should only issue draft audited financial statements to clients until they get the signed representation letter. SAS No. 102, Defining Professional Requirements, was effective upon issuance. Unconditional requirements are indicated by the words �must� or �is required� and presumptively mandatory requirements are indicated by the word �should�. New standards and eventually all audit standards will use these words. Audits of financial statements for periods beginning on or after December 15, 2006 SAS No. 104 � No. 111, Risk Assessment Standards, may result in significant changes to a firm�s audit methodology and must be carefully studied. Currently there is an audit risk alert, Understanding the New Auditing Standards Related to Risk Assessment, available at cpa2biz (No. 022526 for $29). Expected to be published December 2006 is an Audit Guide on risk assessment and internal control which every firm performing audits should acquire. Sincerely, California Peer Review Committee

Americans 25-34 Face Uncertain Future Due to Poor Financial Habits, AICPA Study Shows

Wed, 31 Dec 1969 19:00:00 EST

Americans 25 � 34 face a potentially troubling future as a consequence of their current spending and saving habits, according to a study commissioned by the American Institute of Certified Public Accountants. The number of people in this demographic maintaining an interest-bearing account or other savings instrument is declining, from 65 percent in 1985 to 55 percent in 2004. Notably, the ownership of the most accessible of these instruments, a simple savings account with a bank, fell from 61 percent to 47 percent between 1985 and 2004. Their median net worth has fallen dramatically, the study found. In 1985, it was $6,788; by 2004 it had plummeted to $3,746. The study was conducted by Dr. Christopher Thornberg and Dr. Jon Haveman, economists with Beacon Economics in Los Angeles, on behalf of Feed the Pig� (FeedthePig.org), a national public-service campaigns ponsored by the AICPA and the Ad Council that educates 25 � 34 year olds on the need to take better control of their personal finances. The study also found: -- There is an increased willingness among Americans in this age group to acquire unsecured debt: The average level of debt in 1985 was $3,118, whereas by 2004, it had climbed to $4,733; -- On average, net worth for 25 � 34 year-olds was 99 percent of income in 1985; by 2004, it was 92 percent; -- The East South Central region of the United States (comprising Kentucky, Tennessee, Alabama and Mississippi) ranks lowest in ownership of savings instruments and net worth. The complete report is available at http://www.aicpa.org/mediacenter. Feed the Pig is a trademark of the American Institute of Certified Public Accountants.

Feed The Pig� Podcasts Offer Money Saving Tips For Young Americans

Wed, 31 Dec 1969 19:00:00 EST

Feed the Pig, the award-winning national public service campaign of the AICPA and state CPA societies in partnership with the Ad Council, is launching a free podcast series to help 25�34 year olds take control of their finances. In each episode, a young CPA provides basic tips to help a career builder struggling with a financial issue. To listen to the first episode, �Managing Your Student Loans,� and to subscribe to future episodes visit www.feedthepig.podomatic.com. Future podcasts cover �Buying Your First Home,� �Paying down Debt vs. Saving for the Future,� �Filing Your Taxes,� and �Compulsive Spending.� Financial illiteracy is a national crisis. Americans spend $1.22 for every $1.00 they earn, according to the U.S. Commerce Department. The statistics for young Americans are just as staggering. An AICPA-commissioned study found:

The median net worth of Americans 25-34 years of age is significantly lower than it was 20 years ago, despite increases in income. In 1985, it was $6,788; in 2004, it was $3,746.

There is an increased willingness among Americans in this age group to acquire unsecured debt: The average level of debt in 1985 was $3,118, whereas in 2004, it climbed to $4,733.

On average, net worth for 25-34 year olds was 99 percent of income in 1985; by 2004 it was 92 percent. Feed the Pig offers free financial information to help 25-34 year olds work toward long-term financial security. The target audience can find free resources to make positive changes at FeedThePig.org.

Annual Meeting, Recognition Reception and Career Fair Kick Off 2005-2006 Membership Year

Wed, 31 Dec 1969 19:00:00 EST

Our congratulations to Richard J. Caturano, CPA, managing partner at the firm of Vitale Caturano & Company Ltd, who was inducted as MSCPA's President at the Annual Meeting held on May 19th at the Hyatt Regency Boston. Rich graciously accepted his new position and directed his comments to the important role that mentors have played in his life. He challenged MSCPA members to serve as mentors to the students and young professionals embarking on their career and urged accounting firms to implement formal mentoring programs. Capitalizing on the mentoring theme, the audience viewed a special evening edition of the “MSCPA Today Show” hosted by our own Matt Lauer and Katie Couric, i.e., John Micalizzi, CPA, of PricewaterhouseCoopers, and Kathryn Polak, CPA, of Intergen. Guests included Dennis Hanno, Associate Dean at UMass Amherst, who discussed how a mentee contributes to a successful relationship with a mentor, and David Clarkson, HR Director at Vitale Caturano, who described the key benefits of the formal mentoring program he oversees. After the studio session, “Matt” went “on location” to ask members of the audience to share their own mentoring stories. Among those he encountered was CPA exam Gold Medalist Beth Powell who credited her parents and a favorite college professor as positive influencers. He also introduced Nancy Baldiga, CPA, author of the of the AICPA publication Promoting Your Talent: A Guidebook for Women and Their Firms. She addressed how mentors can facilitate the advancement of women in the profession and the importance of striking a balance between your work and personal life. Additional anecdotes were shared by Ken Powell, Beth’s proud dad; Margery Piercey, CPA, Wolf and Company; and Tony Jordan of the Securities and Exchange Commission. The Today Show segment concluded with the announcement of the Society’s soon-to-be-initiated mentoring program, MSCPA Mentor Connection that will pair new professionals and students with seasoned CPAs. The evening opened with a welcome by former President Margery L. Piercey, CPA who then introduced Barry C. Melancon, CPA, President and CEO of the AICPA. After his brief comments, Executive Director Theodore J. Flynn, CAE, moderated the election of the 2005-2006 board of directors, its officers and the nominating committee. Following the distribution of the Educational Foundation awards and the Today Show production, Flynn presented Representative Salvatore F. DiMasi with the Outstanding Legislator Award for his continued support of the legislation affecting CPAs in the Commonwealth. Attendees then enjoyed a reception with fellow MSCPA members, colleagues, exam passers and award winners. Congratulations to all of the award winners: STUDENT MANUSCRIPT AWARDS First Place KPMG William Holmes Award Jeanne E. Pagnozzi Bridgewater State College Recognizing the True Expense of Employee Stock Options Second Place Laura Tavares Bridgewater State College Can't We All Just Get Along…An International Affair Third Place Richard P. Russo, Jr. Bridgewater State College Should Companies Opt for Options? F. Grant Waite, CPA, Memorial Scholarship Jennifer Cesarotti, UMass Amherst David J. Aronson Scholarship Michael A. Krause-Grosman, Northeastern University Kathleen Peabody Memorial Scholarship Suzanne Yu, Suffolk University Masters Degree Grant Program Felicia Awosan, UMass Amherst Paychex, Inc. Entrepreneur Scholarship Julie A. Robinson, Assumption College Howard F. Greene Memorial Scholarship Kathryn Skrzypczak, Bentley College 2004 Uniform CPA Exam Medal Winners Mary Elizabeth Powell – Gold Kelly Elizabeth Clerkin – Silver Robert Josiah Bartlett - Bronze 2004 UNIFORM CPA EXAM MEDAL WINNERS Gold Mary Elizabeth Powell Silver Kelly Elizabeth Clerkin Bronze Robert Josiah Bartlett Exam passers, award winners and students had the opportunity to meet representatives of small and regional public accounting firms at a Career Fair that immediately preceded the annual meeting. Attendees had the following to say about the first-time event: "Thank you for providing us, students, with the possibility to learn more about the profession and meet great people. The mentoring show was outstanding. Thank you for focusing on such an important topic for our professional and personal growth and development. The job fair was a great chance to introduce ourselves to a number of Boston firms and to learn about their criteria for entry-level hires." -- Ainash Carpenter, Graduate of Salem State College "The Career Fair was the most productive hour and a half that I have experienced relative to other fairs I have attended. The intern and entry level people were bright and focused, it was a pleasure discussing our opportunities with them. We also chatted with others on a more experienced level, so the fair brought experience levels beyond entry candidates. Please let me know if you intend to hold future fairs, I would love to attend them." -- Sue Ann Mcdermott, American Express Tax and Business Services The Society would like to thank the following sponsors: Bertholon Rowland Corp and Fidelity Investments, and a special thank you to our other donors: Alexander, Aronson, Finning & Co PC; American Express Tax and Business Services; Brown & Brown LLP; Caras & Shulman PC; Ernst & Young LLP; Feeley & Driscoll PC; Huron Consulting Group; Kirkland, Albrecht & Fredrickson PC; KPMG LLP; PricewaterhouseCoopers LLP; Tofias PC; Vitale Caturano & Company CPAs PC; and Wolf & Company PC. To express your interest in becoming a mentor or mentee in the CPA Connect, or to receive a complimentary copy of mentoring resource materials, including Nancy Baldiga’s book, contact Barbara Iannoni at Biannoni@MSCPAonline.org.

Succession Planning: Grooming Future Leaders

Wed, 31 Dec 1969 19:00:00 EST

Read part one of the series of succession planning articles. When you retire as a firm leader, who will take over your responsibilities in running the practice? Many owners and partners assume all business development functions and most client interaction, employing staff mainly for technical work while providing them little opportunity for client contact. As a result, when senior management members retire, the younger professionals are unprepared to take charge. The outcome is a shrinking base of current clients, a fall-off in new business and, ultimately, the end of these firms, not to mention perhaps their retirement fund. The point of nurturing future leaders, then, is not only to extend the life of your practice once you retire, pass away or possibly become disabled, but also to increase its value, thereby protecting you and your family’s finances, as well as your estate. With fewer people, smaller firms that lose an owner may find it more difficult to fill his or her position than larger practices. This becomes a problem when smaller practices fail to prepare prospective leaders in advance, by passing on client responsibility as part of an ongoing succession plan. How far in advance should you prepare for succession? Experts recommend five years as the minimum period needed to mentor a potential senior management member. In other words, it’s never too early for firms to begin the grooming process. Many, however, have not encouraged their own in-house talent nor benefited fully from it, as PCPS (Private Companies Practice Section), the AICPA’s alliance for firms, found in a recent succession planning study of nearly 500 practices. Firms’ written responses to an open-ended question on developing new owners and other management reflected everything from solid plans to none at all. A number of practices did allow higher-level staff to participate in management decision making or receive training in such areas as leadership, communications and marketing. Other firms brought in consultants to smooth the process or hired more experienced people to take on management responsibilities. And many other responses could be summed up by one firm’s plan: “Keeping our fingers crossed and praying.” To avoid such uncertainty, here are some practical guidelines for nurturing future leaders:

Give people throughout the organization the power and responsibility to do their jobs autonomously. This doesn’t mean that each functional area should set up its own rules and regulations. In fact, that is not recommended. Instead, give your staff – and particularly potential leaders – the time, guidance and encouragement to develop the kind of initiative and independence that will serve them well as they advance within the firm.

Identify managers or other staff with potential. Once you have staff members working independently and you understand what kind of talent you have, the firm should develop formal or informal processes for judging how well younger employees manage people and situations. Depending on budget and size of staff, you may also consider providing training for the most promising candidates.

Mentor promising staff. Though employees need the technical skills, they also must understand what it means to handle clients and run a business if they are to take over one day. Give them responsibility, and if they run into problems, help them understand how to resolve them. Introduce them to clients and to the kinds of challenges that come up in the field.

Include junior staff in decision making. Top management still must make key decisions, but consider how the firm can include younger staff in selected decisions and perhaps delegate some choices to them.

Set up a timetable for new leadership. Will the new managing partner, for instance, take over when all the senior partners have retired, or will the reins be passed sooner? Many consultants recommend that a new managing partner be put in place while older partners are still on the job. These partners should offer advice and support without trying to interfere with the new leader’s authority. For more information on succession planning, check out the following:

Preparing for Transition: The State of Succession Planning and How to Handle the Process in Your Firm, a free PCPS white paper (pcps.aicpa.org/Resources/Succession+Planning).

Securing the Future: Building a Succession Plan for Your Firm, a book written by Bill Reeb, CPA, and issued by PCPS (pcps.aicpa.org/Products; press the “Member Discounts” button, and scroll toward the bottom of the first table).

Other free resources at the PCPS Firm Practice Center (pcps.aicpa.org/Resources/Succession+Planning).

AICPA Issues Statement on Standards for Valuation Services No. 1

Wed, 31 Dec 1969 19:00:00 EST

The Consulting Services Executive Committee of the American Institute of Certified Public Accountants (AICPA) announced today the release of a new professional standard on valuation services, Statement on Standards for Valuation Services No. 1 (SSVS No. 1) “Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset.” The standard provides guidelines to CPAs for developing estimates of value and reporting on the results. It applies to AICPA members who perform an engagement that estimates the value of a business, business interest, security or intangible asset for numerous purposes, including sales transactions, financing, taxation, financial reporting, mergers and acquisitions, management and financial planning and litigation. SSVS No. 1 is effective for engagements accepted on or after January 1, 2008. A copy of the standard has been posted to the AICPA Web site at http://bvfls.aicpa.org/Resources/Laws+Rules+Standards+and+Other+Related+Guidance/AICPA+Valuation+Standard+and+Implementation+Toolkit.htm.

“The AICPA developed the valuation standard to improve the consistency and quality of practice among its members who perform engagements that estimate values for various reasons,” said Barry Melancon, CPA, AICPA President and CEO. “Congress, government agencies and accounting regulators have recently focused their attention on appraisal issues – such activity shows the importance of valuation to the business community and individuals. In addition, an increasing number of CPAs offer valuation services. The standard promotes greater transparency and provides our members with a set of guidelines in the unique context of a CPA practice.”

“The demand for valuation services has significantly increased over the past 20 years. The standard should benefit the public because it promotes consistent practice among CPAs performing valuation services and adequate disclosures for users of these services,” said Michael Crain, CPA/ABV, Chair of the AICPA Business Valuation Committee.

SSVS No. 1 specifies two types of engagements: valuation engagements and calculation engagements. For valuation engagements, two types of written reports are permitted – detailed reports and summary reports. For calculation engagements, one type of written report is permitted – calculation reports. Oral reports are allowed for all engagements under the standard.

"SSVS No. 1 is the product of a thoughtful and open standard-setting process that constantly seeks to improve the quality of valuation services offered by CPAs," said Edward J. Dupke, CPA/ABV, Chair of the BV Standards Task Force of the AICPA Business Valuation Committee. “Although the effective date is not until January 1, 2008, we are urging firms and CPAs to begin earlier implementation.”

The AICPA estimates that more than 25,000 CPAs currently provide Business Valuation and Forensic & Litigation Services (BVFLS). More than 2,500 CPAs hold the AICPA’s Accredited in Business Valuation (ABV) credential which signifies their expertise as preferred valuation professionals. To locate an ABV credential holder, please visit http:// www.aicpa.org/BVFLS and select “Find an ABV.” For more information about the ABV credential or the BVFLS Membership Section, please select the Membership tab.