Archives for October 2010

Former KPMG Chairman Dies, Age 84

Walter Edward Hanson, former Chairman of New York-based KPMG, passed away after a long illness at his home in Newport Beach, Calif. Hanson was 84.

During a career at KPMG that spanned more than 23 years, Hanson was widely regarded and admired for his business insight and determination by both his colleagues and clients. He became the first Chairman of Peat Marwick International in 1978.

Hanson joined KPMG in 1957 as a PIC of its transportation practice, later as PIC of the New York office, and was elected Chairman of the U.S. firm at the age of 39, serving in that role from 1965 until his retirement in 1980.

He was born on Oct. 17, 1925, in Adelphia, N.J. After serving with the U.S. Naval Air Corps, he graduated from Lafayette College in 1949. He became a CPA and joined the Minneapolis & St. Louis Railway Co., where he rose to the position of Vice President and Comptroller.

Clifton Gunderson Acquires Illinois Firm

Milwaukee-based Clifton Gunderson (FY10 net revenue of $241 million) acquired Rockville, Ill.-based Farrell & Associates (three partners and 15 staff).

The Rockford location joins CG’s Illinois practice with nine offices in Champaign, Danville, Dixon, Evanston, Joliet, Oak Brook, Peoria, Princeton and Sterling.

Steve DeBruyn, MP and Todd Etheridge, PIC will lead the new Rockford office. The merger is effective November 1. Robert Farrell, Michael Abrahams, and Michele Reagan will join CG as partners.

“Securing a presence within the Rockford market allows us to enter a new market in Northern Illinois, which is closely located to our Dixon, Princeton and Sterling offices as well as the greater Chicagoland area,” says CG CEO Kris McMasters.

This is the fifth merger announcement for CG since May. Earlier this year, the firm announced it had acquired St. Louis-based Humes & Barrington, Philadelphia-based Stockton Bates, Evanston, Ill.-based U.S. Tax Advantage and the former BKD office in Merrillville, Ind.

The Five Common Cultural Values Of The IPA Best Of The Best Firms

Highlighted in the November 2010 issue of IPA.

In the October issue of IPA, we offered an in-depth look at the IPA Best of the Best Firms. How did they do? What did they do differently? Why are the successful?

An IPA Webinar presented in October (and available at no charge to all IPA subscribers) offers a more in-depth look at the Best of the Best, including a historical view across time to see what really makes a Best of the Best firm stand out. What we gleaned from this ‘longitudinal survey’ is five cultural building blocks common to all Best of the Best firms, regardless of the economic environment in which they exist.

Here are five “commandments” for firms striving to be the very best, which, if executed flawlessly, heighten the likelihood of being among the very best.

Staff and Partner Development Are Critical: Focusing on staff and partner development is a part of who these firms are. It is not an afterthought or an add-on, but is a part of the very make up of the firm…part of their DNA. We can see in these firms a predominant use of many partner development tools such as written guidelines for becoming a partner, a partner code of conduct, partner performance standards where everyone is held accountable and ongoing partner training and development. Staff development is a critical component of the culture, with 360 degree evaluations in place, HR directors more prevalent than the average, a higher-than-required standard for CPE hours with a budget to match and partner compensation systems rewarding partners for their roles in staff training and development.

Do More With Less: The concept of doing more with less is also a culturally defining tenet of these firms, as well as a source of pride for both the partner group as well as the staff. Some of the metrics used to define this characteristic include utilizing less physical space per professional while maintaining (or exceeding) expected charge hours, leveraging administrative resources so each administrative staff is serving more professionals, gaining greater leverage of professionals to owners, reducing personnel costs as a percentage of net fees while keeping professional salaries at or above peer averages and driving utilization of firm professionals to above-average levels.

Charge What You Are Worth: Firms who become Best of the Best are ready, willing and eager to charge for the value they believe they provide to clients. Whether it is value billing, contingent fees, “extra” tips or simply higher charge rates, these firms do not compromise and maintain their price integrity. They are also more aggressive when considering billing rate increases for the future. In an economy where everyone is nervous about anything other than holding the line, Best of the Best firms boldly step ahead with expected incremental rate increases 40% higher than average firms.

Take Care of Staff: There is not a single accounting firm out there who doesn’t claim that the reason they are special or successful is because of their people. Best of the Best firms, however, reciprocate by providing above average wages (and preserving those wages through the down economy), offering an assortment of standard and unique benefits; creating a learning environment that develops the individuals both technically and personally, establishing a mentoring environment that brings partner experience to staff development and maintaining an accountability system where people are challenged to do their very best.

Holding Partners Accountable For Results: In Best of the Best firms, corporate mentality trumps partner parity. Owners are given performance standards, are measured against those standards, are held accountable for achieving those standards and are compensated based on their overall contributions to the firm. Partner codes of conduct are clearly defined. Reviews of partner performance tend to be solicited from their peers as well as their subordinates, using upward evaluations and 360 degree reviews.

To listen and watch the IPA Best of the Best Webinar, go to:

The 12 Priorities of Top Performers

The coming decade may well redefine the role of the internal auditor in corporate governance, according to one widely followed expert.

“Internal audit is getting more strategic,” Dan Swanson, a 26-year veteran of the profession and a former director of professional practices at the Institute of Internal Auditors, told Rick Telberg. “It’s not seen as strictly a policing function as it was 10 years and 20 years ago.”

Swanson sees accountants in internal audit becoming “more involved in the overall business and the strategic direction of the organization.” He sets out a new, expansive and challenging role for internal auditors.

This new role for internal auditors requires a new set of priorities and principles, which Swanson lays out in a new compilation of his writings, “Raising the Bar.” He calls on auditors to dig strategically into a dozen make-or-break areas for many organizations, including:

Risk management: “To my thinking, enterprise risk management (ERM) is a silver bullet for improving governance and organizational results because it identifies your key objectives.” Swanson says in his new book, “It is time for organizations to take ERM to the next level.”

The top three most significant business initiatives: Swanson has long pushed the auditing profession into examining a company’s top information technology efforts. But he’s expanding the scope of his concerns. “I now firmly believe,” he says, “in auditing the three most significant business initiatives.”

Business continuity and disaster recovery: Both, of course, are probably already on most people’s top ten worry lists. “The problem is that they always rank in the bottom half,” Swanson says. “It is now time to ensure that the efforts are truly operational.” It could be one of the best investments any organization makes.

Information security: Swanson suggests a “very simple test:” Is it on your board’s agenda?

GRC: By whatever terminology you use – organizational governance; corporate governance; performance accountability; governance, risk and compliance – “internal audit should provide an opinion regarding the overall governance regime.” And these days, it’s essential to include social responsibility and sustainable development issues.

Ethics and compliance: Both are getting “enormous attention and funding” these days, but who’s minding the spending and the effectiveness if not internal audit?

Records management: It’s not always a job for internal audit. But, Swanson says, “If your organization has not started upgrading its records-management program to reflect today’s regulatory requirements and technological capabilities, then the organization is at risk … There is nothing worse than the legal nightmare of having a policy and not following it.”

The quality of enterprise information for decision-making: “The assessment should include the quality and completeness of the information, as well as the assumptions and analysis,” he says, predicting, “Information management will become more critical every year.”

The anti-fraud program: Internal auditors must be involved in assuring top management and the board that the right efforts are in place and working properly, he says.

IT efforts: Few areas can turn into a money pit as quickly or easily as IT.

Ad hoc requests from board members and top executives: By including internal consulting and assurance projects on the list, Swanson makes the case for a customer service philosophy in the internal audit function. “It lets the board and management know that internal audit is responsive to the board’s needs.”

Process management and continuous improvement: Swanson’s last – but not least – audit priority focuses on improving organizational performance. In some companies it might be called Six Sigma or a corporate-wide quality-management effort. To Swanson, every company needs one, and every program should be subject to examination by the internal audit department.

Clearly, Swanson sees an expansive and strategic role for internal audit. “It is time,” he says in the book, “for executives to lead, managers to manage, boards to govern, and auditors to provide assurances that things are as people say they are.”

It’s not just checking expense accounts any more.

AICPA Survey: CPAs See Pivotal Time Ahead in Development of IFRS

CPAs see the U.S. at a pivotal time in the development of uniform, high-quality global accounting standards as the U.S. SEC evaluates a transition to IFRS and the U.S. FASB and the IASB work jointly to merge U.S. and global standards.

“Our latest tracking survey shows CPAs in the U.S. are increasingly aware of IFRS but significant numbers are waiting to invest more resources in international standards until they see a clear signal from the SEC about future U.S. adoption,” says Arleen Thomas, AICPA senior vice president for member competency and development. “CPAs are also watching the FASB-IASB convergence progress very closely, according to our focus groups.”

The key message from the AICPA’s October 2010 IFRS Readiness Survey is that movement within the U.S. accounting profession toward IFRS has been on hold since May 2010. Basic familiarity with IFRS has remained stable since May 2010 at 45% and the number of companies and firms actively preparing for adoption or ready for adoption has remained about the same at 13.5%. Thirty-eight percent of respondents indicated they are delaying implementation while waiting for SEC action.

The largest proportion of respondents, 40%, support adoption of IFRS, although only after more convergence between U.S. and global standards through the IASB-FASB convergence process. An additional 14% support adoption of IFRS without qualification signifying a combined 54% majority supports IFRS adoption.

A majority of members, 63% according to the survey, believe a 2015-2016 adoption target would allow enough time for implementation, if the SEC decides in 2011 to require IFRS at a future time.

The IFRS tracking survey results were announced at the AICPA’s fall meeting of its governing Council.

The AICPA survey tested members’ knowledge and views of the FASB and IASB plan to complete major convergence projects outlined in their Memorandum of Understanding and issue several new accounting standards codification updates and IFRS amendments by the end of 2011.

Members are split about pace of change for FASB-IASB convergence; 37% said it’s too fast, 33% said about right, and 25% were are unsure. Less than 5% said they think it is too slow.

The AICPA recently conducted two focus group sessions with members to assist us in preparing an Oct. 14 comment letter to the SEC on IFRS adoption. A key theme that emerged was that the success of FASB and IASB in eliminating differences between U.S. GAAP and IFRS will be a critical factor in determining the amount of time and level of challenge in converting to IFRS.

Does Your Organization “GET IT”? How To Make Your Company “Cool”!

All we seem to hear in the news is the doom and gloom of unemployment and the continuation of the economic downturn in housing, industrial expansion and job growth. On the other hand, there are still good news stories out there of companies that are expanding, hiring and growing. And, even better news, some of these growing companies also seem to “get it” that the focus needs to be on both financial growth as well as people growth.

In our book, Keeping The Millennials: Why Companies Are Losing Billions In Turnover To This Generation And What To Do About It we identify 10 Cool Factors, the workplace enhancers that attract and retain top talent – especially young talent.

They are:
– Fun work environment with social networking
– Creative communications
– Feedback and recognition
– State-of-the-art technology
– Creative perks
– Corporate values
– Redesigned cubicle workspace
– Workspace flexibility
– Compensation and benefits
– Career development

One growing company that embodies a cool workplace while building market share and revenues is the Heartland Restaurant Group, a Dunkin Donuts brand specialty restaurant, headquartered in Pittsburgh PA.

First and foremost Heartland provides it workers with a fun and pleasing work environment. From the first day of training conducted with restaurant staff before the store is opened Heartland stresses guidelines very thoroughly and instills corporate values in its employees. “Yes is the answer, now what is your question” is the mantra for treating “guests,” not customers, with the utmost respect. Such service is only fitting to a company that practices open communication and strives for a high level of employee satisfaction.

One of the biggest things that separates a Heartland restaurant from its competition is its great customer service. To get prepared for their opening day, the employees at the new Dunkin Donuts simulated a typical day complete with people ordering in the dining area and the drive through. The fast-paced practice was trial run designed to give workers their first taste of a busy day. No matter how many gallons of coffee had to be brewed for the exercise, the employees would agree that the experience was invaluable and will go a long way now that they’re open for business.

Heartland Restaurant Group is more than just a chain of restaurants. It is a unique company where career development and a focus on employee retention inspire an employee’s best effort. If you take care of your employees then they take care of the rest. Heartland offers the opportunity for people to work their way up the ranks in the restaurant and in the corporate headquarters group. Close to 350 jobs were created by Heartland in the Pittsburgh region just this past year alone.

The driving force behind this fun and enjoyable work experience is the Fun Squad. With its origins stemming from the Employee of the Month award, the Fun Squad enlists one representative at each restaurant to oversee fun, enjoyment, and open communications at each location. No matter which generation of worker, the Fun Squad makes sure all employees are encouraged to participate and reap the benefits of working for Heartland Restaurant Group.

Who then becomes a member of the Fun Squad? The representative at each restaurant is nominated by coworkers based on a positive, upbeat attitude and demonstration of leadership qualities that help make the restaurant a pleasant place to work and a guest-fanatic focus.

The philosophy is simple for Heartland, make work glamorous. Have enjoyment filter down from the top management to frontline workers so that every employee will put the company’s best face forward to guests in the restaurants. Employ those who love to serve and the company will set itself apart with a pleasing environment and great customer service.

Peterson Sullivan Acquires Anderson ZurMuehlen Seattle Office

Peterson Sullivan (FY09 net revenue of $14 million), Seattle, acquired the Seattle office of Helena, Mont.-based Anderson ZurMuehlen & Co. (FY09 net revenue of $21.7 million). The two Seattle firms will operate as Peterson Sullivan LLP effective Nov. 1. (13 partners, 100 staff).

This marks the first significant expansion of PS, whose services and client mix are closely aligned with AZ’s Seattle office practice.

“This joining of practices is an exciting step for our firm, and we found an ideal fit in Anderson ZurMuehlen,” says Chris Russell, partner at PS.

“We’re looking forward to beginning this new chapter as PS,” said Joe Wilcynski, VP of AZ’s Seattle office.

AZ partners Joe Wilcynski and Rob Keasal will become partners at PS, and are two of the 10 AZ staff joining PS.

Grant Thornton South Africa & BDO Cape Town Merge

Grant Thornton South Africa (GT SA) and BDO Cape (Cape Town and Port Elizabeth) merged under the Grant Thornton name, on November 1.

The offices will have joint MPs, Ian Scott and Neil Miller. Other BDO offices in South Africa are not involved in the merger.

Ed Nusbaum, CEO of GT International, says, “This merger is a major accomplishment for our South African firm and we are committed to building a strong local firm in this key strategic market.” The merger creates the largest accounting firm in SA’s mid-tier market, followed by Mazars.

The deal positions GT to obtain more work, particularly from privately held businesses and listed companies. Previously the two firms obtained most of their work from privately held businesses. The firm will be led by GT national chairman Leonard Brehm, with a staff of 900 and 97 partners and directors.

“We took a decision 10 years ago to develop an international strategy, which included building an infrastructure and investing in intellectual property,” said Brehm.

The new Companies Act, which will come into effect on April 1, removes the requirement for privately held companies to have their results audited. Unlisted private companies and small firms will now have a choice to either be audited or have a review process carried out. This means medium to larger auditing firms will have an advantage over smaller practices, as they will have a bigger share of audit work because they already do the lion’s share of it, particularly for listed companies.

Recent mergers in the audit profession include the tie-up between BDO SA and Moore Stephens MWM, September 1. BDO SA recently merged with Cape Town-based Cameron & Prentice. MGI Bass Gordon and Gross Hendler & Frank disclosed plans to merge their Cape Town offices in October.

Does Your Current Backup System Meet Federal Regulations?

The Health Insurance Portability and Accountability Act of 1996 (HIPAA), Public Law 104-191, mandates that all covered entities fulfill certain requirements for data backup, storage, and recovery; the Sarbanes-Oxley Act (SOX) holds many publicly held companies and all Registered Public Accounting Firms to a rigorous set of standards.

These rules set guidelines for how data should be stored, accessed, and retrieved.

In response to an explosion of major corporate benefits and accounting scandals in recent years, Congress passed two laws regulating the storage and reporting of internal data. The first impact was felt in corporate America by the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996.

The Administrative Simplification (AS) provisions of HIPAA mandated national standards for electronic health care transactions and identifiers for providers, health insurance plans, and employers.

Under HIPAA, an IT audit most often is performed in conjunction with a financial statement audit or an internal audit. Evidence is collected and evaluated concerning an organization’s information systems, practices, and operations to determine whether those systems record and maintain accurate, reliable data.

An IT audit doesn’t focus on internal controls in the way a financial audit does. Rather, it seeks to determine risks relevant to information assets, and to assess whatever controls are in place to eliminate or reduce those risks. The focus of an IT audit is on evaluating a system’s availability, confidentiality and integrity.

The Sarbanes-Oxley Act of 2002 created (among other oversight regulations) the Public Company Accounting Oversight Board (PCAOB), which addresses the role IT plays in a company’s internal controls. The PCAOB’s “Auditing Standard 2″ states: “The nature and characteristics of a company’s use of information technology in its information system affect the company’s internal control over financial reporting,” and its provisions are targeted toward seeing that those controls and reporting are legitimate and accurate.

Under this law, auditors audit key and general controls, with “key” controls being those that are key to ensuring that numbers shown on the company’s balance sheet are authentic. (For instance, there might be a trigger on a database table to ensure that adding any entry into the accounts receivable table automatically creates an entry into the general ledger.) The person held accountable for seeing that these regulations are met is the company’s Chief Information Officer (CIO).Given the breadth and complexity of current federal law governing storage and maintenance of IT data, prudent business owners will take whatever steps necessary to assure their IT systems and controls meet or exceed regulations. Taking the time today to ascertain that your online offsite backup system complies with federal regulations will save you countless intrusive and costly auditing headaches, down the road.

Before And After The Fact: How To Boost Accountability At Your Organization

Got an accountability problem at your organization? There are two main ways to tackle it. First, you need to forestall excuse-generating problems upfront by creating conditions that make it more likely people will follow through. Second, you need to help and encourage people to take responsibility after mistakes have already been made – without making them feel worse than they already do.

Here, excerpted from Rick Lepsinger’s Closing the Execution Gap, are a few before and after accountability boosting suggestions to help keep you, your team, and your projects on track:  

Before-the-Fact Accountability Booster: Set People Up for Success 

The best way to manage accountability is to ensure that people follow through in the first place. Three techniques can help you dramatically increase the chances that people will follow through and keep their commitments: 1) clarifying actions and expectations, 2) agreeing on due dates for deliverables, and 3) establishing checkpoints. The acronym ATC can help you remember the techniques. 

Action. This is the starting point for both setting people up for success and being able to hold them accountable after the fact, so it is critical to get it right. This is where you clarify expectations (what “good looks like”) and identify who is accountable for which parts of the work. Regardless of how good an idea someone has or how sincere his intentions, nothing happens until someone commits to taking some action to produce a specific deliverable.  

Timetable. Just as important as clarifying actions and expectations, establishing an agreed upon due date is critical to ensuring everyone is on the same page. Due dates like “as soon as possible” and “by next week” lay the foundation for misunderstandings, because your “as soon as possible” may not be anywhere near theirs. (Does “by next week” mean before next week? Does it mean Monday of next week or Friday of next week?) In addition, commitments that don’t have a time frame frequently do not get attention and usually fall by the wayside.  

Checkpoints. One of the biggest mistakes people make is waiting to check in until the action or deliverable is due. Although the pitfall seems obvious—waiting until the due date to check in does not leave time for problem solving—it is surprising how many people stumble into it. One explanation leaders offer for this self-defeating behavior is that they’re afraid of communicating a lack of trust in the other person’s ability—or of being labeled a micro-manager.  

The simple, yet powerful, solution is to establish periodic progress checkpoints before the due date. The frequency of the checkpoints will depend on the difficulty of the task and the experience of the person. This technique simultaneously solves both problems: the implied lack of trust and the micro-managing.  

Agreeing on checkpoints with the other person makes follow-up and progress checks a shared and mutually endorsed activity. The check-ins are now part of project management, and they also provide opportunities for you to coach if there is a problem and recognize and reinforce behavior when things are going well.  

In addition, because you’ve outlined the milestones you are comfortable with and built in time to get things back on track if you discover there is a problem, you don’t have to give in to the temptation to make spontaneous or surprise visits or to call when you get nervous about whether the project is on track.  

After-the-Fact Accountability Booster: Three Accountability Questions 

Sure, prevention is better than an after-the-fact remedy. But in the real world, people will drop the ball from time to time. Rather than berating a person for her failure to deliver results, reinforce her accountability and focus on problem solving. 

Three questions will encourage the person to think about how she contributed to the current situation, what she can do to get things back on track, and what she can do to prevent it from happening again. In addition to asking these questions directly yourself (which might come across as accusatory), you should coach the person to pose them to herself as a way to manage her own accountability. The three questions are: 

  1. Present: “What can I do now to get on track?”
  2. Future: “What can I do to prevent this problem from happening again in the future? ”
  3. Past: “What could I have done to prevent the problem? What, if anything, did I do that might have possibly contributed to the problem? ”

The first two questions are less likely to evoke a defensive response, but the third one might very well push that button. Be prepared to deal with defensive behaviors. One way to do so is to show empathy. Try something like: “I know you’re as concerned as I am about this and I realize it’s not the way you wanted things to turn out. This conversation is not about assigning blame. It’s about solving the problem and ensuring that we keep it from happening again”

 Excerpted from ‘Closing the Execution Gap: How Great Leaders and Their Companies Get Results”