CFOs Mixed on Allowing Workers to Earn CPE Credits During Business Hours

Employers want financial employees who are well informed on the latest regulations, business trends and best practices. but they are not always willing to let their teams pursue continuing professional education (CPE) opportunities on company time, according to a new survey from recruitment firm Robert Half Finance & Accounting.

The survey reports that only 26% of CFOs allow all employees to fulfill CPE requirements, which come from NASBA, while at work; another 24% say it depends on the employee. Half of firms rarely or never let any staff take classes during business hours.

“Businesses do themselves a disservice by prohibiting employees from taking CPE courses during company time,” says Robert Half senior executive director Paul McDonald. “Webinars, seminars and online courses, some as short as 10 minutes, allow professionals to earn the needed credits and help their employers by staying on the cutting edge of industry trends.”

McDonald added investing time in staff members’ ongoing education offers lasting benefits. “The better informed your employees are, the fewer technical, compliance and ethical mistakes they’re likely to make,” he says. “Moreover, a generous training program that includes allowing staff to obtain continuing education during work hours shows support for professional development and is a powerful recruitment and retention tool.”

Robert Half Finance & Accounting offers four tips for requesting to earn CPE credits during the workday:

  1. Be your own best advocate. Build a business case for how the company will benefit from the skills you acquire.
  2. Start small. If your boss frowns on continuing education during work hours, choose sessions that can be scheduled during your lunch hour.
  3. Emphasize the big picture. Let your boss know how CPE classes will enable you to bridge a gap in your department’s knowledge base.
  4. Evaluate different options. While some CPE courses are online and others in-person, offerings from providers, including professional organizations, are evolving.

Nearly 300 CEOs Pledge to Increase Diversity and Inclusion

Only one month after 175 CEOs came together to launch the CEO Action for Diversity & Inclusion™, nearly 100 additional CEOs have taken the pledge, committing themselves – and the organizations they lead – to advance diversity and inclusion in the workplace.

Business, non-profit and academic leaders are coming together to learn how best to cultivate welcoming, collaborative and thriving environments for their employees. The collective of more than 270 signatories have shared almost 250 actions across a variety of categories – from supplier diversity and succession planning to mentorship and recruitment – exchanging learning opportunities and creating collaborative conversations through the initiative’s unified hub,

Organizations joining the pledge are taking a step toward a more diverse and inclusive workforce, which drives innovation and creativity. A recent study found that 85% of those surveyed reported that diversity is a key component to fostering innovation.

“This collaboration expands our reach and brings in unique values, actions and perspectives to continue to raise the bar for the entire business community,” says Tim Ryan, U.S. chairman and senior partner of PwC and chair of the steering committee for the CEO Action for Diversity & Inclusion™.

The CEO Action for Diversity & Inclusion™ welcomes many different voices and perspectives to foster knowledge sharing and greater collective contributions. And, as the initiative continues to expand the impact and reach of companies, workforces and communities grow as well. The coalition now represents 70 industries, all 50 U.S. States and millions of employees globally.

“With each new signatory that joins the coalition, our group is able to reach a new community, workforce and industry. Adding nearly 100 companies to our group shows that CEOs are looking at advancing diversity and inclusion not from a competitive standpoint, but rather, a collaborative effort to tackle this for all organizations,” says Joe Davis, senior partner and managing director at BCG.

“The rapid growth of the CEO Action for Diversity & Inclusion™ underscores the importance of our collective focus on truly diversifying today’s workforce. This is just the beginning of our work with other businesses and leaders who are also committed to creating inclusive workplace cultures. We at EY are honored to be a part of this growing movement,” says Steve Howe, U.S. chairman and Americas MP at Ernst & Young.

“Creating an inclusive culture and building a diverse workforce is a strategic driver for our business,” says Jim Powers, CEO at Crowe Horwath. “Leveraging the diversity of experiences, backgrounds and perspectives leads us to make better decisions, fuels innovation and creates an environment where our people feel a sense of belonging. We know that the tone from the top of the organization matters when trying to drive change. I am personally committed to the pledge of the coalition and believe we can achieve greater results by working together with other leaders and organizations in making an impact in the workplace.”

Global Corporate Ethical Behavior Improves, Challenges Remain

More than half (52.4%) of C-suite and other executives say global corporate ethical behavior has improved since the enactment of the Sarbanes-Oxley Act in July 2002, according to a recent Deloitte poll. Yet only 41.3% of executives say their organizations’ global ethics cultures are strong.

“As we’ve seen for decades, no organization is immune to unethical behavior,” says Don Fancher, partner at New York-based Deloitte. “But, the field of ethics compliance is evolving, as professionals’ skillsets, technologies to help hone and monitor programs, and multi-jurisdictional regulator coordination all improve. Now is a great time for global organizations to take a hard look at modernizing their ethical compliance programs – particularly for those relying heavily on employees to report misconduct.”

Less than one-third (32.5%) of executives polled are highly confident their organizations’ employees will report unethical behavior. Executives say the biggest challenges to employees complying with global ethics programs include inconsistency of clear, concise and frequent ethics program communications and training for all employees (28.5%); lacking incentives and repercussions around ethical and unethical behavior, respectively (16%); varied ethical postures of third parties with whom employees regularly interact (14.8%); and, differing ethical standards for various employee groups (12.5%).

“Whether they need to monitor internal, external or both aspects of culture risk, we see leading companies leverage technology to modernize their compliance programs,” says Carey Oven, Deloitte partner. “Some use cognitive solutions to identify anomalous employee behaviors. Others use advanced analytics to identify third-party patterns. The learnings from culture risk detection systems can help enhance the information leadership teams use to make decisions around ethics compliance policies and procedures.”

Questions to ask of your global ethics program include:

  • Do all leaders support the program? Strong ethics programs are organization-wide with ongoing, full C-suite and board attention, as opposed to being managed by the general counsel or chief compliance officer alone.
  • Is the whistleblower hotline or speak-up line evolving? The level, frequency and type of reports via whistleblower communication channels can be telling. Testing can help discern reasonable levels of reporting and false positives, so that uncharacteristic reports are quickly identified and investigated.
  • Are employees surveyed to gauge ethics culture? By surveying employees about ethical standards and behaviors on an annual basis – as well as in exit interviews – organizations can make better informed updates to standards language, employee training and communications.
  • Is third-party due diligence conducted annually at minimum? Personnel changes, financial strain and other factors can change cultures quickly.

Six Risk Management Mistakes CPA Firms Make

Managing CPA liability risk exposures is a complex process, and it’s easy to underestimate the potential for risk along the way.

The following six mistakes can be avoided by being aware and taking the right steps, says Tim Huggins, who is manager of underwriting operations of CAMICO.

  1. Not discussing questions about the insurance application with your underwriter or agent. Whether it’s for a new or renewal policy, the better the job you do with the application, the better your chances for avoiding mistakes and problems. Take time to review the questions and determine what information and data you will need for it. State information accurately. Applications are not opportunities to market or embellish your firm’s profile. Misstatements may result in a higher premium or even the rescission of a policy based on wrong information.
  2. Not having appropriate policy limits for your firm profile. Excessively high limits of insurance offered at bargain prices are red flags. High limits will often put a bigger bulls eye on your firm and potentially lengthen the claims process. However, you also need to carry enough limit to be able to protect yourself in the event of a bad claim, or to fight a frivolous claim. A specialized underwriter, agent or account executive can discuss your firm’s specific risk exposures, policy limits and coverage options.
  3. Admitting liability, assuming damages, voluntarily making any payments or incurring claims expenses. These are all actions a CPA firm must avoid without the prior written consent of the insurance company. Such actions will likely violate policy conditions, which may result in a denial of coverage. Policyholders should not take action without first receiving guidance from a risk adviser with the insurance company. Avoid agreements that include “hold harmless” or indemnification provisions that are one sided and not in the firm’s favor.
  4. Not reporting a potential claim as early as possible. The sooner claims and potential claims are reported, an insurer can more effectively achieve an early resolution. Early reporting will also help assure coverage for the potential claim. Some insurers encourage early reporting by reducing the deductible for any potential claim reported before a claim is made. Further, if it is determined that it is appropriate to retain legal counsel to assist with a pre-claim situation, some insurers will absorb the legal expenses, help policyholders achieve a resolution with the client, prepare a tax penalty abatement request, draft talking points for communicating the facts of the situation with the client, and provide subpoena and other services if the need arises. CPAs are often so busy they don’t recognize or acknowledge a potential claim as it is developing. This can be particularly devastating when the damages claimed are significant and are not covered because of late reporting.
  5. Not utilizing the insurance program’s advisory, loss prevention and risk management services. The best way to avoid a claim is to manage risks that lead to claims. Some basic risk management tools – such as client screening, engagement letters and follow-up documentation – are crucial in managing potentially major problems into minor problems. The more tools and resources an insurance program provides for policyholders, the better those policyholders will be at avoiding or minimizing problems and disputes. A good insurance program will also advise you on how to utilize its resources to help your firm improve its practices.
  6. “Dabbling” in high-risk work without doing enough to stay proficient at it. Claims data show high loss ratios for services that comprise less than 15% of a firm’s work. By the same token, loss ratios are low for services that comprise 65% or more of a firm’s work. Also, part of the client screening process includes making sure an engagement is a good fit for the firm’s expertise.

Research: Women Underrepresented in Top Accounting Jobs

Accounting firms often rank highly for their gender equality efforts but new research suggests that women are substantially underrepresented in higher positions.

Women make up just 17% of audit partners of U.S. audit clients, according to the new report, and in major U.S. metropolitan areas like San Jose, Calif., and Washington, D.C., the number is closer to 10%.

The analysis, from researchers at Bentley University, University of Colorado Denver and Northeastern University, was enabled by a rule from the PCAOB that requires accounting firms to disclose the name of the partner in charge of each public company audit.

The Big 4 firms all report having more than 40% female employees but the new data reveals that in these firms only 19% of audit partners are women. PwC has the highest representation of women audit partners (22%) and KPMG the lowest among the Big 4 (15.3%). At non-Big 4 audit firms, the representation of women as partners is even lower, at 15%, the new research found.

The research also found:

  • In states that voted for Republican presidential candidates in the last four elections, a mere 14% of audit partners are female.
  • In states that voted for Democratic candidates in the last four presidential elections, more than 20% of audit partners are female.
  • Within major metropolitan areas, female audit partners are most common in Minneapolis (32%), Los Angeles (24.1%), Boston (22.5%) and New York (21.7%).
  • Female audit partners are least common in San Jose, Calif., (9.7%), Washington, D.C. (10.9%), Atlanta (11.6%) and Philadelphia (12.2%).

While the current representation of women at the partner level is underwhelming, some accounting firms have made noticeable progress in promoting qualified female talent, the study said. In 2015, Deloitte named its first female CEO, Cathy Engelbert, and in 2016, PwC’s newly inducted audit partner class was 30% female.

Forbes: AI, Machine Learning Will Complement Accountants, Not Replace Them

Robots are not going to replace all human accountants or bookkeepers – at least not anytime soon.

So says Bernard Marr, an author, consultant and specialist in Big Data, who writes for Forbes magazine.

Marr contends that many professionals are starting to fear that technology will make their jobs obsolete, but fear not. “The profession is going to become more interesting as repetitive tasks shift to machines. There will be changes, but those changes won’t completely eliminate the need for human accountants, they will just alter their contributions,” Marr wrote in a July 7 article.

He describes machine learning as the leading edge of artificial intelligence (AI). Machines can learn by using algorithms to interpret data to predict outcomes and learn from successes and failures. As machines take over the more mundane, repetitive and time-consuming accounting tasks, accountants and bookkeepers will be able to devote more time to analyze and interpret the data and help clients by making recommendations.

Some of the possibilities for accountants, working with machines as their new colleagues:

  • Auditing of expense submissions – Machines can learn a company’s expense policy, read receipts and audit expense claims to ensure compliance and only identify and forward questionable claims to humans.
  • Risk assessment – Machine learning can pull data from every project a company had ever completed to compare it to a proposed project.
  • Analytics calculation – Machines can learn to provide information on revenue for a certain product in a certain quarter, or growth in a particular division of the company over a period of years.
  • Siri-type interface for business finance – A conversational app called Pegg, which works with Slack, a messaging app, can create invoices and respond to questions about revenues and expenses.
  • Automated invoice categorization – Accounting software firm Xero is deploying a machine learning automation system that will be able to learn over time how to categorize invoices.
  • Bank reconciliation – Machines can learn how to completely automate bank reconciliations.

“As accounting firms and departments begin to rely more heavily on machines to do the heavy lifting of calculating, reconciliations and responding to inquiries from other team members and clients about balances and verifying info, accountants and bookkeepers will be able to deliver more value to their clients and handle more clients than ever before,” Marr writes. “It is high time for every accountant to reflect on their job, identify the opportunities machine learning could offer to them, and focus less on the tasks that can be automated and more on those inherently human aspects of their jobs.”

CFOs Advised to Fire Auditors Early

A study says firing an auditor “doubles the odds of a restatement and more than quadruple[s] the odds of a material weakness over the next two years,” CFO magazine recently reported.

CFOs considering firing their company’s independent auditors should do so before the end of their fiscal second quarter, an author of a new study of auditor dismissals advises.

If a company announces the dismissal of its auditor after the second quarter, it risks being “lumped in with the bad apples,” that want to end the relationship to cover up “nefarious” doings, Jeff Burks told the magazine. Burks is an associate professor of accountancy at Notre Dame’s Mendoza College of Business.

“Investors have a good idea that firms tend to sign up their auditors early in the year,” he says. “So if you’re changing auditors later in the year, that’s a pretty good sign you’ve changed your mind.” That message often results in questions such as, “What prompted you to change your mind? You knew what the auditors fee was going to be, so what’s likely is that you were prompted by some kind of conflict with the auditor,” Burks adds.

Auditors, who must maintain confidentiality, don’t talk about clients or even former clients, so an assumption may be made that the problem lies with the company’s financial reporting.

“Firms that dismiss auditors after the second fiscal quarter have markedly higher rates of future restatements, material weaknesses, and delistings compared with firms that dismiss auditors shortly after filing the prior year’s 10-K,” according to the unpublished paper, “Auditor Dismissals: Opaque Disclosures and the Light of Timing.”

For the study, the authors culled data from Audit Analytics, a research firm, to identify 16,096 auditor dismissals announced between 2000 and 2013. They studied dismissals falling within fiscal years 2001-2012 that matched data from Compustat, the Center for Research in Security Prices, and the Securities and Exchange Commission’s Edgar database, leaving 3,976 dismissals.

Citing earlier studies by other researchers, the paper says that when it’s the auditors who quit, it’s a clear sign of accounting woes or elevated audit risk at the company. The reason? Auditors “typically have little incentive to drop healthy, low-risk clients.”

Four Myths About Millennial Business Owners

A study by shows that accounting firm leaders often hold misguided beliefs about Millennial business executives or owners, who are starting to make the final decisions about accounting firm hiring and firing.

The 2017 Millennial Business Owner-Accounting Firm Survey polled more than 1,000 business owners to determine what these young professionals require from their accounting firms. Each of the respondents is responsible for the accounting firm relationship.

With the data from this survey, explodes common myths:

Myth No. 1: Millennials are too young and don’t generate enough business revenue to be accounting clients.

Millennials are generally considered to be born from the mid-1980s to the mid-2000s. However, some researchers place the birth year at 1977. This means the oldest Millennials can be 40, old enough to serve as business leaders.

Almost one-third of the millennial business owners polled lead companies with $1.1 million to more than $25 million in revenue each year (compared to 38% of respondents of all ages). “These numbers represent two advantages for accounting firms,” reports. “First, there are Millennial-led businesses that need and can afford accounting services. Second, the figures illustrate the potential for long-term impacts via partnerships, referrals, and future ventures.”

Myth No. 2: There’s no need to diversify beyond tax services.

While Millennials select taxes as the No. 1 accounting firm service, they want a different blend of services than previous generations.

The survey says, for example, that 54% seek bookkeeping services, compared with 34% of those aged 40 to 55 and 30% for those 56 and older. Nearly a quarter want technology training and recommendations, 20% want invoicing and 22% use bill payment services. Also, 52% say they want strategic insight and guidance from their accountants.

Myth No. 3: Clients want hourly billing.

Rethink about hourly billing if your firm wants Millennial clients since they believe that non-hourly arrangements are familiar, the study says. They rate monthly flat rates (44%) and fixed fees per project (35%) over hourly billing (21%).

Myth No. 4: Technology is a “nice to have,” not a “need to have.”

The right accounting technology – “in the cloud and on the go,” according to – makes a big difference to Millennials selecting an accounting firm.

The survey says 82% require paperless accounting services, 56% want firms with cloud-based accounting technologies and 33% opt for digital payments. Also, 64% chose email as their primary communications tool for accountants, reflecting acceptance for working with virtual accounting firms.

“Accommodating Millennial business owners and decision-makers can future-proof your firm. After all, the demand for these preferences will only increase as more Millennials enter the workforce. By anticipating and creating practices that suit their preferences, an accounting firm can create the ideal set of services and benefits to generate a competitive edge and long-term, profitable results,” says.

IPA INSIDER: June 2017 News

Listed below are the Top 10 most-read stories on the INSIDE Public Accounting blog for the month of June.

  1. Settlement Reached in Andersen Tax Trademark Dispute in California
  2. Kucera Named AAM’s 2017 Marketer of the Year
  3. CLA Merges in Southern California Firm
  4. IPA Vendor Spotlight On … Chandra Bhansali, AccountantsWorld
  5. Sikich Names Murphy PIC of Manufacturing and Distribution Practice
  6. Dempsey and Team Join CLA in Idaho
  7. Platt’s Perspective: Classifying Clients – It’s Good For The Top And Bottom Line (And Everything In Between)
  8. Canada’s MNP Announces Two Mergers
  9. AAFCPAs Hires New CFO
  10. Weiner Named Chair and CEO of Marcum, Bukzin Named Vice Chair

Survey: Businesses Say SOX Beneficial but Challenging

The annual Sarbanes-Oxley (SOX) Compliance Survey released by global consulting firm Protiviti reveals a new set of challenges facing public companies amid their compliance efforts.

PCAOB audit requirements, new revenue recognition standards and cybersecurity concerns were cited by survey respondents as factors that will influence SOX compliance efforts in 2017. However, companies are seeing the benefits of their SOX compliance work, with 70% reporting that their internal control over financial reporting structure has improved and 50% realizing continued improvement of business processes.

The survey report, Fine-Tuning SOX Costs, Hours and Controls, is based on a survey completed by 468 chief audit executives, and internal audit and finance leaders and professionals in U.S.-based public companies in a wide range of industries in the first quarter of 2017.

Of the respondents’ companies, 72% have annual revenues of $1 billion or more and 78% are beyond their second year of SOX compliance. Respondents looked back on their organizations’ SOX compliance efforts for the prior fiscal year – with attention to the factors potentially influencing observed changes in resources spent. The in-depth Protiviti report maps out the dynamic and evolving compliance landscape, 15 years after SOX was signed into legislation.

“SOX requirements and practices have changed with the times, and we’re pleased to see that many companies are reaping the benefits of their compliance efforts, which is also good news for investors,” says Brian Christensen, executive vice president, global internal audit and financial advisory at Protiviti. “By creating streamlined and lean processes, companies can respond to new and emerging business or regulatory challenges with agility. Conversely, those who aren’t following this model and are instead always playing catch-up may struggle to remain competitive over time.”

The Protiviti 2017 survey report identifies three emerging factors affecting SOX compliance:

  • PCAOB Requirements: Increasing inspection report requirements placed on external auditors by the PCAOB have resulted in stricter compliance activities for many organizations.
  • Revenue Recognition: A narrow majority (56%) of public companies started the process of updating controls documentation in 2016, ahead of the new revenue recognition accounting standard going into effect for most companies in the next fiscal year. Those who completed the antecedent work to meet the new standard have already identified gaps and updated critical accounting policies; 26% noted extensive or substantial increases in testing of controls over application of revenue recognition policies.
  • Cybersecurity: With the growing prevalence of cyberattacks and breaches during the last year came increasing scrutiny from external auditors, management and boards of directors. As cybersecurity grows beyond an IT concern into a fundamental business issue across the enterprise, it’s not surprising that survey respondents showed significant growth in the number of cybersecurity disclosures made in 2016. Of those who issued disclosures, 15% (compared to just 5% in 2015) increased their hours spent on SOX compliance by more than 20%. Overall, of those companies that had to issue a cybersecurity disclosure, nearly one out of three experienced an increase of at least 16% in SOX compliance hours.