AZ CPA July August 2018

AZ CPA July/August 2018

Fraudsters Living Among Us

Creating Our Best Selves

Secrets to Engage and Influence Jurors The Arizona Society of Certified Public Accountants y www.ascpa.com

CPEvening

Eat, Drink and Be Educated Sponsored by Enterprise Bank & Trust CPEvening programs offer lively presentations mixed with networking in a relaxed atmosphere. Make quality connections and start building sustainable and meaningful relationships.

August 29 5:30 – 8 p.m.

San Tan Brewery 8 S. San Marcos Pl. Chandler, AZ 85225

In the Pursuit of Purpose Saying Yes With Intention, Keeping FOMO in 4 This engaging and interactive presentation led by Emerging Leaders, Jessica Iennarella and James McGettigan, will guide you in evaluating priorities and aligning them with your personal mission.

November 14 5:30 – 8 p.m.

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January 30, 2019 5:30 – 8 p.m.

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Register for the events individually for $25 each or purchase the three-event series at the discounted price of $60.

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AZ CPA JULY/AUGUST 2018

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AZ CPA The Arizona Society of Certified Public Accountants President & CEO Editor

Behind the Scenes at the Arizona Lottery July 31

Advertising

Cindie Hubiak Patricia Gannon Heidi Frei

Join your fellow CPAs as the ASCPA goes behind the scenes at the Arizona Lottery! We will have an opportunity to tour the lottery office and hear interesting presentations from a few members of their team, including the Deputy Director of Operations, Biju Kamaleswaran. This an exciting and rare opportunity to visit and learn more about the inner workings of the Arizona Lottery. Lunch will be provided.

Board of Directors Chair Mike Allen Chair-Elect Jared Van Arsdale Secretary/Treasurer Ginny DeSanto Directors

Rachael Bertrandt

Tom Duensing

Paul Evans

Kristen French

Alan Gold

Aaron Grant

Tim Hansen

Vanessa Makridis

Karen McCloskey

Alice Pope Sami Raynes-Houseknecht

Nikki Vogt

Location: Arizona Lottery, 4740 E University Dr, Phoenix, AZ

Immediate Past Chair

Molly Montgomery

85034

AICPA Council Members

11:30 a.m. – 1:30 p.m.

Recommended for 1.5 hour of CPE

Register at www.ascpa.com/btsjul MAP_Survey_Flyer_180423_01.pdf

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4/23/18

11:26 AM

Chapter Presidents Southern Chapter

Rob Dubberly Greg Nelson Cathy Kinzer

Northern Chapter James Shankland Southwest Chapter Helen Greenwell North-Central Chapter Ellen Carpenter

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How Do Your Firm’s Billing Rates Compare?

Be in the know in less time with the newly redesigned and streamlined 2018 AICPA PCPS/CPA.com National MAP Survey The CPA profession’s largest benchmarking tool is now open. Closes July 16.

www.aicpapcpsmapsurvey.com 4

AZ CPA JULY/AUGUST 2018

AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed 10 times a year as a regular service to ASCPA members. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA. Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

Volume 34 Number 6

AZ CPA

July/August 2018

Features

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Creating Our Best Selves Members of the ASCPA Emerging Leaders Committee have a deep passion to deliver next-generation leadership experiences to members.

by Emerging Leaders Committee Members

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The Secret to Engage and Persuade Jurors Tips to help you hone the skills that can help you persuade any jury.

by Deborah Johnson

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Fraudsters Live Among Us Understand and identify the many forms of commercial fraud before it is too late.

by Jon A. Titus

Columns & Departments

Chair’s Message by Michael T. Allen, CPA

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Member News

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A Dash of SALT by James G. Busby, Jr., CPA

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Quick Quiz

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Six Tips for Starting an Advisory Practice

Adding credentials can help you stand out in a crowded profession.

Classifieds 22

Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 180 Phoenix, Arizona 85034-2040 www.ascpa.com

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ASCPA Chair’s Message

A Commitment to Lifelong Learning One of the hallmarks of being a CPA is a commitment to lifelong learning.

Few professions take this commitment as seriously as the CPA profession does.

by Michael T. Allen, CPA

The science behind learning has evolved and is becoming much more grounded in collaborative experiences where individuals with varied backgrounds interact to discuss ideas surrounding an important topic in which they have a shared interest.

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As we enter the summer season in Arizona, our state Society starts its conference season. Two conferences already occurred in June: the Financial Planning Conference and the Not-For-Profit Conference. Several more are scheduled throughout the summer and fall.

The science behind learning has evolved and is becoming much more grounded in collaborative experiences where individuals with varied backgrounds interact to discuss ideas surrounding an important topic in which they have a shared interest.

The ASCPA conferences foster exactly this kind of learning experience. Fellow practitioners and industry members gather to share ideas about implementing the changes required by our increasingly complex business environment.

My wife and I both received second degrees later in life. I pursued my MBA in my forties, while Jonna went back to nursing school as our kids were leaving home. Jonna had previously been a CPA and appreciates the profession. Both of us acknowledged how the education experience had transitioned away from a lecture focus. Accountability was shifted, instead, to the student. Our professors expected us to learn the material and be ready to apply the concepts in an experiential learning environment.

During our annual meeting, we had the privilege of recognizing one of our young educators, Heather Altman, for her achievements in the classroom, exemplified by her innovative approaches to teaching. Heather’s techniques are founded in an interactive and collaborative approach where the focus is not on the ultimate solution, but rather on the process of how we arrive at that solution.

This collaborative process has proven to provide more supported and, hence, meaningful solutions.

Learning in our profession is evolving, and we are discussing new models that will position future leaders to have an impact on our society and its economy. These models are founded upon the idea that, to learn, we must first unlearn, and then relearn to master the new approaches and techniques that will make us successful.

While we CPAs have always maintained a commitment to education, the focus in the past has been on honing our technical and compliance skills. In the future, the profession will require expanding into different skills that will allow for meaningful, innovative and effective ways of applying our knowledge. As CPAs, we must invest in these skills if we are going to remain relevant and impactful.

Your state Society is continually enhancing the learning experience for its members through the CPE programs it provides. The ASCPA’s conferences represent an opportunity for all to sharpen their saws in the practice areas we so passionately serve. I urge you to invest in yourself and support your state Society by actively participating in these conferences.

Enjoy and continue your experience of life-long learning! n

Member News

Leadership Day 2018 — ASCPA leaders met in June to talk about the future of the Society and listen to speakers Senator Karen Fann and Boaz Rauchwerger. Left: Senator Karen Fann addresses group and goes live on Facebook. Right: (L to R) Jared Van Arsdale, Ellen Carpenter, Senator Karen Fann, Cindie Hubiak and Mike Allen.

Congratulations to Arizona candidates Amit Bansal, Deloitte & Touche LLP, and Thomas Galewski, RSM US LLP who were both eligible for this year’s Elijah Watt Sells Award. The award is given annually to candidates who have obtained a cumulative average score above 95.50 across all four sections of the Uniform CPA Exam.

Virginia G. Piper Charitable Trust named Mary Jane Rynd, CPA, as its new CEO and president.

Heinfeld, Meech & Co., P.C. promoted Sara Kirk, CPA, CFE, and Christopher W. Heinfeld, CPA, to partner and Jared J. Young, CPA, and Malia James, CPA, to senior associate.

Eric Scott Rudner, CPA, partner at Ludwig Klewer & Co. PLLC, received a special recognition award from the Jewish Federation of Southern Arizona for his contributions to the Jewish community. Rudner currently serves on the Handmaker Jewish Services for the Aging board, is a past president of the Jewish Education Tax Credit Organization board of

directors and a former member of the Arizona Blind and Deaf Children’s Foundation, Inc. and the University High School Alumni Association boards.

Dr. Kelly K. Damron, CPA, assistant professor of accounting, Grand Canyon University, has been named a regional recipient of the 2018 ACBSP Teaching Excellence Award. The Accreditation Council for Business Schools and Programs (ACBSP) recognizes individuals each year who exemplify teaching excellence in the classroom.

Dr. Donna L. DeMilia, CPA, associate professor of accounting, Grand Canyon University, received the Ursel K. Albers Campus Advocate of the Year Award from the Institute of Management Accountants.

Henry+Horne won the Marketing Achievement Award presented by the Association for Accounting Marketing (AAM) for best social media campaign.

Pamela S. Stelzer, CPA, was elected to the board of directors of the Maricopa Health Foundation.

Roman H. Kepczyk, CPA, is quoted in the June issue of the Journal of Accountancy: Accounting firms: The Next Generation. Kepczyk will join the AICPA Council as an at-large member in May 2019.

Don Farmer is Coming to The Camby on October 26 This year Don Farmer will present on all major new tax legislation, as well as other significant tax developments that affect 2018 tax return preparation and 2018 tax planning for individuals, corporations and non-corporate businesses.

Go to www.ascpa.com to register for in-person or webcast.

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Ignite the Leader in You! 2018-19 Emerging Leaders Series August 7 – Series Kickoff Luncheon — Leveraging the Entrepreneurial Mindset in Your Organization 11:30 a.m. - 1 p.m. (Recommended CPE: 1 hour) DoubleTree Suites by Hilton Hotel Phoenix 320 N. 44th Street - Phoenix, AZ 85008

Nov. 8 – Leadership Summit 8:00 a.m. - 1 p.m. (Recommended CPE: 5 hours) Topics Include: Increase Value and Sharpen Your Soft Skills, Social Media Mindfulness, and Reduce Stress and Restore Harmony Hilton Garden Suites 2120 Rio Salado Parkway - Tempe, AZ 85281

Jan. 26, 2019 “In It For the Outcome, Not the Income” Community Service Event with Free Arts (Recommended CPE: 1 hour) Giving back is a hallmark of a great leader. Share your time in support of an organization that serves local abused and homeless children.

There will also be an opportunity to learn more about the inner workings of Free Arts.

Apr. 24 – Networking in Collaboration With GET Phoenix Young Professionals 5:30 - 7:30 p.m. (location TBD)

Ignite the fire and register today at www.ascpa.com/lead 8

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Creating Our Best Selves As a committee, members of the ASCPA Emerging Leaders have a passion to plan and produce material with a key intention to deliver next-generation leadership experiences to members of the ASCPA. Over the years, the committee has evolved, encouraged involvement in other conference planning committees by emerging professionals and is currently producing a quarterly series in an effort to develop deeper connections among CPAs, non-CPAs, nonprofits and professional affiliations. We align our professional growth series with the needs of the community. Stewardship is top of mind in our discussions with an opportunistic futurist focus.

We recently held a roundtable breakfast in Old Town Scottsdale to analyze this passion, trends impacting emerging professionals, share best practices, and ask “what,” “why” and “how” in four key areas of: • Volunteer Service — Board Work • Networking — Business Development • Mentorship — Feedback • Talent — Staying Relevant

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Several key themes emerged:

Business Valuation Conference September 7, 2018

ASCPA Learning Center 8 a.m. to 4 p.m.

Also Offered as a Webcast The process of business valuation employs a variety of methods to estimate the economic value of an owner’s interest in a business. This conference will keep you up to speed on considerations, methodologies and rulings related to this practice.

Tax Reform – Impact on Decision-Making The Impact of the Tax Cuts and Jobs Act on Business Valuation Address for Success: The 10 Arizona BV Cases You Must Know Brave New World: Valuation in Arizona’s Start-Up Community Calculating Cost of Capital The Secret to Engage and Persuade Jurors Perspectives From the Bench

Learn more at www.ascpa.com/bv2018 10

AZ CPA JULY/AUGUST 2018

• We are a voice for younger professionals and trusted advisors to our clients and key stakeholders • Through volunteerism, we get a safe place to acquire and challenge management and leadership skillsets outside of our professional homes • We feel and manage stress differently, overall identifying leading indicators to help us proactively manage it • Aligning our passion and values with our firm and professional goals is paramount •We are generally introverts and it must be a meaningful activity for us to use our extroverted skillsets • Ownership of our career is our responsibility, it is important to listen to feedback, communicate and evolve our goals and objectives • Technical innovation will continue to challenge our practice; do we know enough?

• It is a priority to read professional subscriptions/journals, attend networking events and dedicate time for mentorship • Foster a personal board of directors with trusted relationships We encourage connection and relationship building. We challenge ourselves to share, mentor and connect with fellow professionals, engage in community and philanthropic initiatives, live well and grow into our best selves.

The Emerging Leaders Series is where we got our start. Join the conversations; kickoff begins on August 7, 2018. Let’s thrive!

Committee Members: James McGettigan, Chair Jessica Iennarella Kate Franklin Marissa Graves Aaron Grant Samantha Mahlen Scott Bohmke Laura Robichaud Ziulyn Chan

A Dash of SALT

More Taxpayers May Soon Appeal Directly to the Arizona Tax Court In this month’s state and local tax (SALT) column, Busby describes how and why some taxpayers may soon opt to bypass all or part of the administrative appeals process in Arizona to challenge some audit assessments and refund denials at the Board of Tax Appeals or in the Arizona Tax Court instead.

The author helped draft Senate Bill 1385.

Many years ago, the Arizona legislature granted property owners the option to bypass all or part of the administrative appeals process to appeal property valuation and property classification determinations directly to court instead. Now that Gov. Doug Ducey signed SB 1385, taxpayers may soon choose to bypass part or all of the administrative appeals process for disputes involving some audit assessments and refund denials.

Applicable Tax Types Senate Bill 1385 allows taxpayers to bypass the administrative hearing process before the Office of Administrative Hearings (OAH) for disputes involving audit assessments and refund denials issued by DOR, except cases involving individual income taxes.

The OAH is authorized to adjudicate all disputes involving audit assessments and refund denials issued by DOR, except disputes involving income and withholding taxes, which are adjudicated by the Department’s internal hearing office due to strict confidentiality provisions in the information sharing agreement between DOR and the Internal Revenue Service. Accordingly, SB 1385 will not permit taxpayers to bypass the administrative hearing process for disputes involving corporate income taxes or withholding issues.

Thus, SB 1385 typically will apply to cases involving state and local tax assessments and refund denials involving sales and use tax issues. Also, the bill could apply to disputes involving severance tax, telecommunication services excise tax, and other taxes administered by DOR, including luxury tax, the taxes on water use, and the jet fuel excise and use tax, as well as to disputes involving seizures and forfeitures of tobacco products caused by luxury tax stamp issues.

by James G. Busby, Jr., CPA

James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue.

If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.

Why SB 1385 is Important Before SB 1385 took effect, taxpayers that challenged Arizona audit assessments or refund denials could not proceed to court to resolve their dispute until an administrative hearing officer issued a written decision. The administrative hearing process slowed and increased the cost of resolving important, complex issues and large-stakes controversies that generally get resolved at the Arizona Court of Appeals.

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Worse, many Arizona taxpayers and tax practitioners have long felt that the administrative hearing process at the OAH is stacked against them because the OAH hearing officer decisions almost always uphold the DOR’s assessments and refund denials. Accordingly, many taxpayers view OAH hearings as a waste of time and money even for smaller cases.

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Options and Procedure Under SB 1385, after a taxpayer has protested a qualifying audit assessment or refund denial and conferred with a “designated appeals officer” at the DOR to clarify any fact or legal issue in dispute and to discuss the availability of additional documentation that may assist in resolving any outstanding issues, the taxpayer may choose to

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bypass the hearing process before the OAH and appeal either to the Board of Tax Appeals (BOTA) or directly to the Arizona Tax Court.

If the DOR fails to schedule a meeting within 45 days of a taxpayer filing a written request to confer with a designated appeals officer about bypassing the hearing process before the OAH, the taxpayer may bypass the meeting and appeal directly to the BOTA or to the Arizona Tax Court.

Retroactivity Clause Once the provisions in SB 1385 that permit taxpayers to bypass all or part of the administrative appeals process go into effect on August 3, 2018, they will apply retroactively to all applicable tax disputes pending on or arising from and after December 31, 2016. n

So You Want to Buy or Sell an Accounting Practice?

Here are the Keys!

If your 2018-19 goals include selling your practice to begin to enjoy your well-deserved retirement plans or you’re confident that now is the time for you to grow and prosper by acquisition. Now is the time to talk!

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Visit our web site at www.ableta.com Gary W. Hankins, CPA* hankins@ableta.com (817) 738-3287 *Licensed in Texas

Visit our web site at www.ableta.com for further discussion of the process of buying and selling accounting and tax practices plus review our success story, principles of operation and how our customers appreciated our services. THIS IS ONE OF THE MOST IMPORTANT DECISIONS OF YOUR CAREER! We can answer all your questions.

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Pre-empting Catastrophe I see it happen more than you think.

So, how can you ensure this doesn’t happen to you as an expert? This article will give you an insider’s look at how to be the kind of expert attorneys clamor for.

Hard Skills vs. Soft Skills

The Secret to Engage and Persuade Jurors

by Deborah Johnson

When It Goes Wrong The wrongful termination case should have been a slam dunk. The plaintiff, a top-producing executive in the financial industry was fired for a ridiculous list of petty problems. It was clear that her colleagues were jealous of her success and wanted to scavenge her lucrative accounts. At trial, her industry expert had sterling credentials, decades of experience inside of the industry, and deep knowledge of hiring and firing practices. He provided an air-tight analysis and report. A multi-million-dollar award was a given.

Then the expert imploded during fierce examination by defense counsel. He stumbled over simple answers. He looked confused. His shoulders slumped.

His voice got quieter and quieter. Every piece of his report was rock-solid, every word of his testimony was true. But suddenly, the expert’s behavior made his once-credible testimony suspect in the minds of the jurors. The cost: millions of dollars.

You may have stunning credentials, specialized knowledge and experience, be able to prepare pristine analyses, and speak astutely about that analysis.

However, like the case just illustrated, that alone will not get you the results you need.

Your hard skills – what you know – are only the first step. To be successful with jurors, you must have finely tuned soft skills.

Soft skills are the ability to engage with jurors, to relate to them, to communicate complex ideas in an easyto-absorb manner, to handle the most challenging questions with aplomb, to defend a position without being defensive. Mastery of these soft skills determine whether you are only an expert on paper, or an expert who can help win cases.

What Jurors Want Time and again, in juror debriefs, I hear them talk about who they liked, who they trusted and who they believed. If they talk about data or facts at all, it’s most likely through the filter of how they felt about the expert who presented it. I’ve heard jurors express their feelings toward experts like, “I didn’t believe a thing (that expert) said, he was too pompous,” or “I didn’t trust that accountant, so I don’t believe her numbers.”

These jurors are naively admitting what science can prove: emotions or feelings about people are powerful determinants in decision-making. In the consumer world, experts know that we buy on emotion and then justify with facts. In the courtroom, the same is true. Jurors are going to buy – or not buy – your testimony based on emotion and then justify with facts. It’s never the other way around. Never.

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Developing Your Soft Skills So, how is the jury assessing you? #1 Body Language. R e s e a rc h shows that more than 90 percent of communication is non-verbal. That means everything from the top of your head to the tip of your toes is “communicating.” Is your posture open and welcoming? Do you make eye contact easily? Do you have nervous gestures like blinking, twiddling your fingers, wiggling, or clearing your throat? Under stress does your body language give away your discomfort? #2 Language. Do you actively engage the jury or are you lecturing? Is your tone conversational or austere? Do your words invite the jury into the conversation or push them back at arms-length? Do you use comfortable, colloquial terms or insider language?

Are your sentences short and clear or do you drone on? Is your tone warm and friendly or dry and flat? #3 Attitude. This may seem a little obtuse. But remember, people pick up all your unconscious signals. Are you open and honest? Are you comfortable?

Do you feel superior to others? Are you there to help the jury understand a complex issue or parade your expertise?

Jurors notice it all.

A Polished Preparation It’s clear from research and real life that it’s not only what you say, but how you say it. It takes time and dedication to be able to deliver calm, comfortable, clear, concise answers with unflappable confidence.

When I work with experts, we focus on two keys areas that help experts telegraph trust to jurors: #1 Practice. You might not know exactly what opposing counsel will ask, but by working on potential questions, you can work through any potential ambushes.

What will be the biggest challenges to your expertise? An insurance expert I worked with knew opposing counsel would hammer him on his use of the term “industry standard” in his report.

Where was it written down? What authority set it up? His initial wishy-

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It takes time and dedication to be able to deliver calm, comfortable, clear, concise answers with unflappable confidence. washy answer of, “that’s how it’s always been,” would only invite a further assault. To give him ammunition and confidence, we counted how many files he had handled in his years in the industry. There were over 15,700. Now he confidently faced the challenges with, “I’ve handled more than 15,700 files and this IS the industry standard.”

The jurors had no doubt that he was an expert on the matter.

What will be the most treacherous questions from opposing counsel?

For example, hypotheticals can be quicksand. If you pause too long, break eye contact, or duck your head, the jurors might think you are being evasive. But a firm, clear “I don’t speculate” or “That’s outside of the scope of the work I was hired for” tells the jury there’s nothing to hide. #2 Video feedback. Record yourself and take an unblinking look at how the jury will judge you. Researchers are clear that at least 50 percent of people have no idea how they come across.

I’ve had many witnesses look at their video with shock, saying they had no idea they leaned away when they were nervous or did a funny thing with their mouth or said “um” or “ah” so many times. One minute of video is more instructive than one hour of coaching.

Conclusion Much as you might want to think that the facts speak for themselves, it’s really how you speak about those facts that influences jurors. Take the time to assess your soft skills and then diligently hone the skills that help you engage and persuade jurors. n Deborah Johnson, MC, is the president of High-Stakes Communication. She is an industry expert in effective communication and a six-time EMMY Award-winning writer/producer. She has consulted on a wide variety of high-stakes civil, criminal and family law cases, including a $5.3 million civil rights case and multi-milliondollar divorce cases.

Fraudsters Live Among Us Understand and Indentify the Many Forms of Commercial Fraud Before it is Too Late

by Jon A. Titus He may be your neighbor or someone at your church. She may be your office manager or trust attorney. Perhaps you are a physician and all your colleagues are bragging about the person with whom they are investing and tempting you to get with the “can’t miss” investment program. He may be a member of your golf club or social club who seems so successful, always driving new cars and dressed impeccably.

There are indeed fraudsters among us who prey upon the trusting and uncareful. The purpose of this article is not to promote hysteria or paranoia. Rather, it is to remind the reader that when it comes to money, there is good reason to be careful and skeptical. As President Reagan once said, “Trust but verify.”

The CPAs in the audience for this article are critical in detecting and identifying a questionable investment, possible fraud or scam. CPAs prepare tax returns and review financial statements for clients and in many ways are the first line of defense to protect clients from fraudsters.

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Embezzlement Employee theft costs U.S. businesses trillions in dollars each year, and the number is growing. Put in another perspective, some authorities estimate fraud and error losses to average between three to six percent of an organization’s expenses.

Some signs of a possible embezzler engaging in employee theft are apparent. It could be a person who extensively visits casinos and gambles. It may be someone rumored to be having an affair, or a drug or alcohol problem. Perhaps, the person’s lifestyle is incompatible with his income. Maybe, this person has an unusually close relationship with a key vendor for the business.

Other warning signs of a fraudster in an office may not be particularly intuitive. For example, one of the warning signs could be the office manager who never takes a vacation and who never delegates tasks to subordinates. An employer may view that as a dedicated employee. However, these qualities may be pretext for a nefarious reason,

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to possibly cover something up and ensure no one finds out. The author’s experience in handling employee theft cases is that the embezzler usually steals to gain wants not needs.

As mentioned before, one does not want to promote distrust within an organization. But, a healthy dose of skepticism is appropriate, and thorough internal controls are critical. Internal controls may be as simple as making certain that the person who prepares checks is different than the person signing the check. Finally, every business should have an indemnity bond or employee defalcation insurance to cover losses attributable to dishonest employees.

Ponzi Schemes Ponzi schemes may be named after Charles Ponzi, but the first known schemer was William “520 Percent” Miller who in or around 1899 defrauded thousands through the Frankin Syndicate in Brooklyn, New York.

Bernie Madoff is the most recent notori-

ous Ponzi schemer who created a false empire based on a Ponzi scheme.

A Ponzi scheme is an artifice which pays returns to investors from such investor’s own principal investments and from new investors. It is a house of cards which ultimately must fail because a Ponzi scheme is not based on any legitimate business enterprise.

It sustains itself solely though new investor money.

The Madoff case is also a classic example of affinity fraud. Given Madoff’s celebrity and apparent success, investors from his synagogue, the charities with which he was involved and the socialites in Manhattan were drawn to Madoff’s apparent golden touch on investments.

Pyramid Schemes Generally, multi-level marketing programs are lawful; pyramid schemes are not lawful. The distinction comes down to whether the program is about selling product (lawful) or recruiting sales people for downstream profits (not

lawful). Both are based on the principal of the distribution of products (such as vitamins and essential oils) through a network whereby the originator of a distribution chain gets profits from sales of product from those he recruits to sell product.

Many MLM promoters claim their program is not a pyramid scheme; rather, it is “Just like Amway.” This statement has merit. The Federal Trade Commission brought a case against Amway in the 1970s which lasted several years in which Amway prevailed. In a 1979 decision, the Administrative Law Judge found Amway to be a legitimate business opportunity and came up with the three features making it legitimate: 1. Amway representatives had to make at least 10 sales to retail customers as a qualification to get down line profit participation; 2. Amway representatives are required to sell a minimum of 70% of previously purchased product before placing a new order; and 3. Amway had an official “buy back”

policy for unsold, unopened inventory.

Most MLM promoters can satisfy these rules. Nevertheless, the Federal Trade Commission fined Herbalife for $200 million in 2016, and a European Court in 2012 held that Herbalife was a pyramid scheme, and China bans Avon.

Thus, the domestic and international law continues to develop on MLMs/ Pyramid Schemes.

Cryptocurrency Government regulators often have a difficult time keeping up with creative promoters. The latest example is the proliferation of cryptocurrencies.

Promoters of cryptocurrencies claim to reduce the expense of raising money in capital markets by making “Initial Coin Offerings” or “ICOs.” The strategy involves the presale of rights to receive tokens aka cryptocurrency to wealthy/accredited investors.

The arrangement is sometimes referred to as a “Simple Agreement for Future Tokens” or “SAFT.” When a company has a viable product, the token can be

used to buy the product. The coin itself is distributed to the investors who can sell the token.

The tokens do not provide any stockholder rights in the company, thus all the typical initial public offering disclosure is claimed to be unnecessary. The argument is that the tokens are not an investment because they have utility as a consumer use.

The Securities Exchange Commission is hot on the trail of promoters of cyptocurrencies. The SEC has within the last several months issued subpoenas to many promoters of cyptocurrencies.

The SEC has warned that investors should only trade in digital assets that are securities that use regulated exchanges, alternative trade systems or broken deals. n Jon Titus practices law in the areas of investment fraud litigation and real estate development. He may be reached at jtitus@tbl-law.com or (480) 483-9600. He will present this topic at the Forensic and Litigation Services Conference on Sept. 6.

War Stories: Tales From a Judge, a Commissioner and an Attorney to Help You Survive the Front Lines Writing Persuasive Reports for Testifying in Federal Court Digital Forensics: Getting the Data You Want Tracing: Explicitly Ambiguous

Forensic and Litigation Services Conference September 6, 2018 ASCPA Learning Center 8 a.m. to 3:25 p.m.

Also Offered as a Webcast

Lunch Presentation: Stress – Work/Life Balance Secrets The Dust Tsunami; Lost Profits, Lost Value or Both?

Fraudsters Live Among Us: Understanding the Many Forms of Commercial Fraud and to Identifying It Before It’s Too Late

The Forensic Accountant’s Role in Alternative Dispute Resolution

Learn more at www.ascpa.com/flc2018 JULY/AUGUST 2018 AZ CPA

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Do you have adequate internal controls to help prevent and detect cyberfraud? Are your employees trained on how to spot phishing and vishing attacks?

Bob Minniti will provide you with the knowledge you need to protect your company from cyberfraud in his keynote presentation.

Corporate Finance Conference — Aug. 22 Desert Willow Conference Center Now Also Offered as a Webcast Special Thanks to Platinum Sponsor:

Conference Topics: • Creative Financing Options for Businesses • Top 10 Things You Need to Know — CliffNotes Vesion • Demonstrating Leadership in the Corporate Setting • Why, How, What of Succession Planning • Data: Analyzing Your Past; Planning Your Future • The Greater Phoenix Economy; Despite Potential Headwinds, the Outlook is Positive

Learn more and register at www.ascpa.com/corp2018 18

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Six Tips for Starting an Advisory Practice In order to stand out in a crowded profession, many financial professionals are leveraging the escalating trend toward advisory services. The ability to offer specialized knowledge allows you to differentiate yourself from competitors and position yourself more favorably within the marketplace.

One of the best ways for you to demonstrate your knowledge and expertise in particular areas is through the addition of credentials. The AICPA offers the only credentials built on the foundation of competency, objectivity and integrity. They are: Certified in Financial Forensics (CFF®), Personal Financial Specialist (PFS™), Accredited in Business Valuation (ABV®) and Certified Information Technology Professional (CITP®).

Think Through Your Game Plan Let’s face it. Many qualified financial professionals are entrepreneurs at heart, so branching out into an advisory service often feels like the natural evolution of their business. Of course, adding an advisory service to an established practice takes dedication and diligence. But it can be an immensely rewarding pursuit, both professionally and financially.

Before deciding to offer an advisory service, you must be willing to: 1. Commit to spending the time it takes to develop an advisory service practice. As Susan Pierce, CPA/CITP, CGMA, and senior technical manager of the Information Management and Technology Assurance Division at the AICPA said, “You can’t just hang a sign up and be successful; you need to have a plan.” For many established firms, that means writing an entirely new business plan. Consider such things as the market for the services you are considering providing and what competition you might face.

2. Identify your target audience. Adding an advisory service offers the potential to tap into a new client base, which requires careful thought and planning.

In some instances, the end-user may not be the person who makes the hiring decision. A lawyer or other accounting firm may be the one to select the valuation, forensics or technology specialists.

Keep this in mind when marketing your advisory service.

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Sometimes, however, adding an advisory service does not necessarily mean speaking to a new audience. Instead, you could focus on strengthening and deepening your relationships with existing clients. Such is often the case when engaging in personal financial planning services.

3. Reassess your fee structure. With the addition of an advisory service comes the responsibility to your firm for knowing how and what to charge clients for your new offering. You want to remain both competitive and profitable. If you don’t adequately understand all the costs associated with the new service and factor them into every proposal, you may lose money.

4. Consider the technological investment that advisory services require.

Research and talking with practitioners will help you assess what you’ll need in your new practice area. The upfront costs of purchasing software or systems and ongoing expenses, such as training and updates, should be factored into your business plan. This investment will more than pay for itself as your practice grows.

5. Follow any applicable standards and regulatory and compliance requirements of your advisory service area. In addition to issuing standards for the audit and attest functions, the AICPA issues standards for business valuation, personal financial planning and consulting services to provide consistency in these areas of practice and to protect the public and the reputation of CPAs. Information technology advisers need to understand the requirements associated with the software products they implement or assess.

And most importantly …

6. Obtain a credential in your advisory area. Here are two ways to look at it: First, you can use an AICPA credential as the pathway to gaining in-depth knowledge as you move toward offering new services. Or, if you already have in-depth knowledge, experience

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and education in an advisory area, you can use a credential to help market your services and differentiate yourself, your firm or your role within an organization.

It’s worth noting that, even if you have the financial and personnel resources to start an advisory practice, the AICPA Code of Professional Conduct states that you cannot take on a professional engagement without the requisite set of knowledge, skills and competencies. A credential is an official way of demonstrating that you have met these requirements.

What Can Each Credential Do for You? Most financial professionals are drawn to the credential that naturally complements their professional interests, knowledge and skills. Here is how each credential serves its holder: The CFF credential encompasses fundamental and specialized forensic accounting skills that you can apply in a variety of service areas, including bankruptcy and insolvency; computer forensic analysis; family law; valuations; economic damages calculations; and fraud prevention, detection and response. This credential also sets you apart as an expert witness in the courtroom.

The PFS credential showcases expertise in personal financial planning.

Many financial professionals use this credential to expand or diversify a taxfocused practice by demonstrating a comprehensive knowledge in financial planning and tax, thereby offering a holistic approach to their clients’ financial needs across retirement, estate, tax, risk management and investment planning.

The ABV credential is ideal for financial professionals who want to enter an in-demand area by positioning themselves as an expert business valuation service provider who not only reaches a conclusion of value but also creates value for clients through the strategic application of their analysis.

The CITP credential recognizes financial professionals who have the

unique ability to provide technologyrelated assurance and business insight by demonstrating their knowledge of information, data relationships and supporting technologies. Focus areas include IT risk and IT assurance, security and privacy, business solutions, data analytics and emerging IT trends.

CITP credential holders are helping their clients or organization improve operations, ensure financial data integrity, determine risks associated with financial reporting and prevent and detect fraud.

Remember, these credentials are available only to qualified financial professionals who meet the criteria for professional experience and minimum education requirements as outlined by the AICPA, and who pass the required exam.

Additional Resources for Advisory Services Before obtaining a credential, consider joining an AICPA section. Section membership provides you with access to technical content, advisory practice resources and discounts on credential education materials and exams. Once you hold a credential, the credential fee includes all of the section benefits, including webcasts, practice guides, guidance on hot topics, tools to practice competently and profitably, discounts on conferences and more, plus additional resources developed for you as a credential holder. And you’ll connect with other financial professionals who can offer advice, which can kick-start your advisory practice.

If you decide to pursue a credential as one the first steps to starting an advisory practice, the AICPA will support you every step of the way by providing the resources and tools you need to maintain the highest level of competency in your specialty. When you’re ready to set yourself apart with an AICPA credential and explore starting an advisory service practice, visit aicpa.org/aicpacredentials. n

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz online or submit this hard copy on AZ CPA content.

Receive a score of 70 percent or more and earn one hour of CPE credit in specialized knowledge. It’s that easy!

Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/QuickQuiz to access links to all active quizzes. Purchase quiz and the quiz link and password will be emailed to you. Your results will be sent immediately after completing, and certificates are emailed within two business days.

Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until Aug. 2019. Please note that users have three attempts to pass the quiz with at least a 70 percent score.

July/August 2018 Issue of AZ CPA* 1. According to ASCPA Chair Mike Allen, education has become: m Obsolete m Interactive and Collaborative m Too Expensive

5. Jurors are going to buy – or not buy – testimony based on what? m Mainly the facts m Emotion first, then facts m What the judge tells them

2. Who spoke to ASCPA leaders at Leadership Day 2018? m Senator Karen Fann m Senator Jeff Flake m Senator Jefferson Smith

6. Deborah Johnson recommends doing these two things to improve your expert testimony. m Practice and Videotape Yourself

3. Under SB 1385, the taxpayer may choose to bypass the hearing process before the OAH and appeal either to the Board of Tax Appeals (BOTA) or directly to the: m Arizona Tax Court m Department of Economic Security m Arizona Supreme Court 4. The provisions in SB 1385 go into effect on: m January 1, 2019 m August 3, 2018 m August 31, 2018

m Hire a Coach and Practice m Memorize Your Presentation and Practice Speech Exercises 7. A warning sign of fraud may be: m An office manager who never takes a vacation m An office manager who never delegates tasks m All of the above 8. Within the last several months, the SEC has issued subpoenas to many promoters of: m MLMs m Cyptocurrencies m Amway 9. How many credentials does the AICPA offer? m Four m Six m Seven 10. The credential that recognizes financial professionals who have the unique ability to provide technology-related assurance is: m CFF m PFS m CITP

Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________

Payment

m Member: $25 m Nonmember: $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:

m Visa m MasterCard m American Express

Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 180, Phoenix, AZ 85034-2040; fax to (602) 324-6045 scan and send to ASCPACPE@ascpa.com.

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Classifieds Business Opportunities CPA PRACTICE FOR SALE — The firm provides primarily business tax preparation. Also, 1040s and quarterly payroll. Minor bookkeeping is performed by using Quickbooks. Gross Revenue for 2017 was $300K. It is required that the buyer be a Arizona CPA. The firm is financially successful and has a stable client base. Please email to cpatpfs@gmail.com and include full name and telephone number. All emails and communications will be treated as highly confidential. Thank you and congrats for completing tax season!

CPA firm this summer. Email contact information to cpafirmsale18@gmail.com.

Employment SENIOR TAX ACCOUNTANT — CPA firm seeking experienced Senior Tax Accountant to prepare higher end business and personal returns. Requires min. 4-year degree, emphasizing in Tax/ Accounting. Preference for EA/CPA. Must have 5+ recent years preparing taxes $70,000- 95,000 (plus overtime) larry@partridgecpas.com.

For more information about advertising Go to our website at www.ascpa.com.

For display advertising, contact Heidi at (602) 324-4743 or advertise@ascpa.com.

FIRM FOR SALE — Phoenix Firm with two CPA’s in north central Phoenix with long term clients and revenue of $ 280,000 wants to sell or merge with

YOU HAVE THE DRIVE. NOW GET THE DISTINCTION. Introducing the CGMA® Program: Learning Pathway bundle. It’s the one-click solution that includes all the learning resources you need to progress through the program, plus the cost of one exam sitting. It’s an end-to-end experience that not only fulfills your yearly CPE requirements, but also moves you along the pathway toward earning the CGMA designation.

Marie M. Hibbert, CPA/CITP, CGMA

GET EVERYTHING YOU NEED TO ATTAIN THE CGMA DESIGNATION + YOUR YEARLY CPE AND MORE THAN $450 IN SAVINGS

AICPAStore.com/CGMAProgram

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To learn more, visit AICPAStore.com/CGMAProgram

ASCPA Preferred Providers The ASCPA collaborates with the following providers to bring you high quality products and services.

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CAMICO The nation’s largest CPA-directed program of insurance and risk management for CPAs, CAMICO features Professional Liability insurance, Employment Practices Liability insurance, deductible reductions for early reporting of potential claims, and “continuity of coverage for potential claims” to eliminate coverage gaps for potential claims known to an insured and not timely reported by the insured while coverage is consecutively renewed with CAMICO. Cyber coverage is provided with cyber security breach expertise. Unlimited access to inhouse experts on tax and A&A issues, subpoenas, sample CPA letter templates, tools and resources.

Visit www.camico.com or call (800) 652-1772 to speak with your CAMICO representative.

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Arizona Society of CPAs 4801 E. Washington St., Suite 180 Phoenix, AZ 85034-2040

PRSRT STD U.S. Postage PAID Phoenix, Arizona Permit No. 952 ADDRESS SERVICE REQUESTED

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