Forensic Accounting Today

Non-Traditional Services in Smaller CPA Firms

"My company ought to have more cash in the bank. When I asked my Controller about it, he didn't have a good response. In fact, he turned red-faced and seemed super-anxious about my query. I'm beginning to think he's stealing from me."

"Our CFO just got bad news from her doctor and she must go on medical leave for two months. Do you have anyone on your staff who can fill in for her while she's out?"

"We've recently been having discussions with an out-of-state company that we're considering acquiring. Could we get your firm to perform due-diligence procedures on our behalf...to help us know how to proceed?"

"I'm representing a client who suspects his brother, who has served for eight years as sole trustee of their deceased Dad's multi-million dollar estate, may have misappropriated over $500,000 of the funds under his control. We need to have a complete forensic accounting of the trust to help us litigate the case. Can your firm handle this for us?"

These are just a few examples of the types of calls partners in CPA firms sometimes receive from their clients or referral sources. Larger accounting firms, those with many in-house professionals having a wide-variety of specialized experience and skills, will generally be able to quickly answer "Yes" to these and other requests for non-routine accounting services. That's not the case, however, in the majority of small and mid-sized firms.

Most CPA firms across America focus on two broad practice areas: Income tax planning and return preparation, and financial statement audits, reviews, and compilations. One of two things generally occurs when their current or prospective clients need assistance with "non-traditional" assignments: 1) They will refer the work to someone else, or simply say, "No, we can't help you," or 2) the firm will attempt to take on certain of these projects, knowing that they are not best-equipped to complete the assignments in a quality fashion. Either way, the firm is faced with turning-down potentially lucrative client assignments, or struggling through inefficient and unprofitable jobs which might well lead to upset clients, and in turn, a malpractice lawsuit.

If you have experience with this dilemma, whether from the CPA firm's perspective, or from that of the client or referral source, I'd like to hear from you, and I'm sure this blog's audience would as well. Please tell us about situations you've experienced and their outcomes. Also, what creative ways have you experienced or observed, or what ideas do you have, as to how small and mid-sized CPA firms might best equip themselves to capture and profitably handle "non-traditional" engagements?"

Note: Visit my newest blog, "Niche+ for CPA Firms"

 

The Solo Accountant Reporter: A Top-70 Favorite

The Solo Accountant Reporter is now included as one of Rick Telberg's top-70 favorite blogs/websites. The full list is included on the main page of his CPA Trendlines blog. Telberg is a highly-respected CPA industry trend-watcher and blogger/writer. Among the other respected sites making the Telberg "favorites" list are AICPA's CPA Insider, Francine McKenna's re: The Auditors, Tracy Coenen's FraudFiles, Michael Ramos' The EyeShade, Larry Bodine's Law Marketing Blog and PWC's CFOdirect Network. To have this blog included in such a strong industry listing is an honor...and it reminds me of the need to be more active in making regular posts.

The Solo Accountant Reporter Selected for Top 100 List

I'm ashamed to admit it, but it has taken an award (of sorts) to get me re-focused on making updates to this blog. I just learned that The Solo Accountant Reporter has been included in the"Top 100 Freelancer Blogs" post in an information-packed blog entitled Bootstrapper. The post opens with this commentary: "Freelancing is often a difficult profession: it can be lonely and nerve wracking at the same time. But you can make it easier on yourself by learning from and bonding with other freelancers out there who’ve blazed the trail ahead of you. Here are 100 blogs, in no particular order, that can help you find advice and guidance for your freelancing career."

No Limits: Give it Your Best!

We can all take a few lessons from this powerful video. It illustrates the value of leadership and encouragement, regardless of the setting. More importantly, it shows that by disregarding artificial performance limitations we or others place on ourselves, and then simply (or not so simply!) doing our very best, we can shatter prior levels of performance. Not only will giving it our best help us achieve new personal bests, it positions us to be better leaders.

Note: I found this on The Organic Leadership Blog.

Freelancer or Go-It-Alone Business?

If you're not sure whether you should operate as a free-agent practitioner or a "go-it-alone" business, Bruce Judson's free 204-page online book, Go It Alone!, does a good job of laying out the differences between the two. Here's a brief excerpt.

"Go-it-alone business is not simply a fancy term for a free agent or a freelancer. These businesses provide their founders with far more stability than freelance work and more personal rewards than franchising. These entrepreneurs are building a substantial asset. They have control of their own destiny. In difficult economic times, free agents or freelancers are typically in the extraordinarily frustrating position of waiting for the phone to ring. In contrast, go-it-alone entrepreneurs always have a focus for their energies and an asset that will provide them with an income stream.

Moreover, freelancers, free agents, and many small-business owners typically work on an hourly or daily rate, or they charge by the job. In all of these cases, they depend entirely on what they can produce as individuals, and their earnings are tied to the clock. They have not established a business system that allows them to magnify or leverage their skills. As a consequence, their earnings are inherently limited. Go-it-alone businesses don’t suffer from this income constraint."

Table of Contents...

Maister: The Managing Partner's Speech

I just read the latest entry in David Maister's "Professional Business, Professional Life" blog. It's packed with practice management material which applies to the largest of CPA firms...as well as to you and me, the solo practitioners of the world. Here are a few excerpts:

In this profession, the need for personal development is life-long. The minute you begin to cruise, to rely on skills learned last year, that’s the moment you begin your decline. All of us, from the 30-year-old’s to the 60-year old’s must constantly be asking “What new skills can I acquire?”. And the firm has the right to ask that same question of you.

My experience has taught me that success comes not to those who swing for the fences every time at bat, but those who commit themselves to a continuous program of constant improvement, base-hit by base-hit.

There are many ways to make yourself more valuable on the market: intellectual leadership, better client counseling skills, greater ability to run large projects, and so on. But one stands above all else: specialized industry knowledge. Regardless of your discipline, and your command of it, I believe that each and every partner should have one or more industries that they know in depth, to the level that the clients perceive you as up-to-date in their industry as they are. There is no better way, in my view, for each of us to succeed than for every one of us to declare a specific industry specialization.

Read more...

Industry Specialization: Give it Some Thought

In my previous post, "The Basics of Building a Solo Practice," I emphasized the importance of developing niche-oriented capabilities. Relating to this, a post in Michelle Golden's Golden Practices blog included these comments:

"When an accounting firm establishes any formal niche, thoughtfully measuring your foothold in various industries and considering the reception you'll have within them can mean the difference between success or failure."

"Before deciding which niche to pursue, consider the perils of each vertical market before jumping in. Don't start with the toughest markets to penetrate. There's probably some lower-hanging fruit that is more ripe for the picking...and tastier, too."

Ms. Golden provides other advice under the headings, "Taking an Inventory" and "Choosing the Right Industry." Read the entire "Choosing an Industry Niche" post.

The Basics of Building A Solo Practice

Since starting my practice over 20 years ago, I've consistently followed a very basic business development strategy. In the hopes that you may benefit from what has worked well for me, here are some suggestions to consider:

• First, select service offerings based on your personal skill-set strengths and weaknesses. Begin with services needed by all companies (such as basic bookkeeping, cash-flow forecasting, tax planning and compliance, etc.), then develop niche-oriented capabilities (such as litigation support, industry specialization, business plan writing, etc.).
• Once you've identified the types of work you want to pursue, concisely summarize these service capabilities in a one-page "Menu of Services." Use this, along with a well-written biography and a professionally-designed website, to keep yourself and your market aware of who you are and what you have to offer.
• Consistently market your services primarily to those who can refer business to you. Most of my assignments stem directly from referrals from other CPA firms. Depending on your particular practice, you may target other persons of influence, such as lawyers, bankers, consulting firms, and industry leaders.
• Commit yourself to excellence and quality in all you do. Deliver top-quality professional service on each assignment. As you develop a strong reputation for providing cost-effective and client-centered assistance, your referral-base will widen.
• Be persistent, and think long-term. Stick to the above basics, continually refining your firm identity and improving your marketing pieces and referral sources. Adopt a continuous-learning mindset, and use each client assignment along with self-study courses, research, seminars, and other means of developing your knowledge, talents, and skills.

Technology Tools for the Solo Practitioner

Take a look at Terry Brock's blog for news straight from the CES show

There's a lot of exciting news coming from this week's Consumer Electronics Show in Vegas. Terry Brock, a professional speaker and writer, is providing written and video posts to his Achieve Your Success blog. Here's an example:

"...If you do a lot of presentations with PowerPoint you know how boring they can become. “Death by PowerPoint” has become a mantra in today’s corporate world and you need something to help you stand out. One tool that is now on the market from Serious Magic is called Ovation. This product works directly with PowerPoint (you have to have PowerPoint for Ovation to work) by taking your existing PowerPoint presentations and animating them, and making them look like graphics you’d see on television. The system is incredibly easy as you just click on a PowerPoint presentation and drag it into Ovation. Once there you can click on several pre-designed templates for animated backgrounds, moving objects and more. The retail price is $99.00 and it can help your presentations stand out in a crowded world. You can avoid “Death by PowerPoint” and help to bring your presentations alive with a program like Ovation."

I first met Terry Brock about ten years ago at one of the Year-End Technology Update sessions he presented for the Georgia Society of CPAs. A dynamic, entertaining, and brilliant speaker, Terry helped me and hundreds of other Georgia CPAs stay current with our annual CPE requirements...and informed about the latest technology tools and tips for accountants and consultants. Since attending several of these interesting and informative sessions, I've become a regular visitor to Terry's website and blog, both of which offer a great deal of material useful for my practice.

Help Your Clients Fight Fraud

Too many small and mid-sized organizations are prime candidates for being victimized by employee fraud.

Here's a typical scenario:  The company has delegated all its accounting and reporting duties to its internal CFO, controller, or chief accountant. No oversight is placed over this individual. That's all it takes. The trusted and capable manager now has the opportunity to steal from the company and then cover-up things via "creative" accounting.

I've seen it way too many times, usually when the victim company or its attorney calls me in to help quantify the damage and to assist with the criminal or civil litigation. I imagine you've observed the same in your practice.

How can we, as solo accountants, help clients protect themselves from embezzlement by their opportunistic, dishonest financial managers. Here's an idea: Propose an ongoing monthly or quarterly engagement in which you're retained to perform various antifraud-oriented services such as the following:

• Obtain and read the current and prior period financial statements and information submitted to your client by the financial manager. Compare this with the reports you receive directly from the financial manager, then ask for the underlying general ledger, subsidiary ledgers, account reconciliations, bank statements, cancelled checks, payroll tax returns, and support for all general journal entries.
• Scan the the summary and detailed information, looking for anything unusual. Make a list of these items as well as various questions, that when asked of the financial manager, let them know that a trained professional is looking at their work. An example of such a question might be, "Why is the balance in accounts receivable on your month-end financial statement so much larger than the figure shown on the detail aging report?"
• Hold periodic Q&A sessions with the financial manager, sometimes on a surprise basis. Ask them about the items on the listing you prepared in the previous step. Be extra alert for any responses that don't appear reasonable and/or body language which might indicate deception. Follow-up these observations as agreed-to by you and your client. Report all significant findings to the client.

If nothing else, these procedures should send a loud, clear message to the potential fraudster that should he or she embezzle from their employee, there's now a higher chance their misdeeds might be detected. This alone will tend to deter them from stepping over the bounds of right behavior.

How such an engagement is communicated to the financial manager, and how you interact with the individual as the work is conducted will impact the attitude and level of cooperation of the manager. Depending on the situation, the business owners might simply tell the manager, "To help us strengthen our internal controls, we've retained an outside expert to provide another set of eyes and ears over various aspects of the business, including the accounting area." Tactfulness is important, so as to not convey a lack of trust or confidence in the finance manager.

Don't forget to spell out all aspects of the assignment in a well-written engagement letter to be signed by you and the client. There's no way you can prevent or detect all fraud that might exist in your client's operation, so be sure to include adequate disclaimers in the letter.