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AZICPA January 2026

Happy New Year! From building a culture of resilience to leveraging AI and IT compliance for better business practices — we’ve got you covered.

The Arizona Society of Certified Public Accountants y www.ascpa.com

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AZICPA The Arizona Society of Certified Public Accountants President & CEO Editor

Oliver Yandle Rosa Hernandez

Advertising

Jodi Corrales

Board of Directors Eugene Park Joe Heidleburg Lisa Parke Tahir Alhassan Daliah Bui Nate Eggman Jay Ganesan Marissa Graves Jessica Iennarella Malia James Sarah Lauzon-Jones Donnie Neves Coulson Painter Anne Rogers Helen Stewart Immediate Past Chair Lauren Murro AICPA Council Members Kelly Damron Tom Duensing Chair Chair-Elect Secretary/Treasurer Directors

AZ CPA Editorial Committee

Alli Byrne, Andrea Levy, Ashlea Perron Becky Pusch, Jennifer Greening Mike Nyman, Ted Bartlett

Connect With Your Community Login to ASCPA Connect and tap into the collective knowledge of your fellow CPAs. Whether you need quick guidance, best practices or a fresh perspective, your peers are ready to help. Stay supported all season long by joining the conversation on Connect. www.ascpa.com/connect 4

AZ CPA JANUARY 2026

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 six times a year as a benefit 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 410 N. 44th St. Ste 205 Phoenix, AZ 85008 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

AZICPA Volume 42 Number 1

Beyond the Buzz: Practical AI Applications for Arizona CPAs

January 2026

Features The Hidden Asset on Your Balance 9 Sheet: Stress Resilience for CPAs By Kaitlin Elizabeth Borncamp, CPA (CO), NTP

t’s Affordable Care Act Filing 13 ISeason — What Employers Should Know By Allisyn Keyser Byrne, CPA

Columns & Departments Chair’s Message by Eugene Park, CPA

Member News

Quick Quiz

the Buzz: Practical AI 17 Beyond Applications for Arizona CPAs By Barry S. Graham, CPA, CMA

eep Your Best Leaders: Four 21 KKeys to Build a Flourishing Leadership Pipeline By Jonathan R Lokhorst, CSP, CPA (MN), PCC

rom Whisper to WISP-er: How 24 FCPAs Can Use AI to Quietly Crush Compliance By Fady Salama

Business Valuations – 28 DTheivorce Discounts Dilemma By Donald Ray Bays, CPA, ABV, CVA, CFF

410 N. 44th St. Ste 205 Phoenix, AZ 85008 www.ascpa.com

31 ASCPA Happenings: Student Edition the Future Together: 32 Shaping Thank You to our Student Sponsors 34 The ASCPA Happenings: A Recap JANUARY 2026 AZ CPA

ASCPA Chair’s Message Falling to the Level of Your Systems: Rethinking Success Beyond the Goal

Eugene Park, CPA Chair, Arizona Society of CPAs Consulting Partner Heinfeld, Meech & Co., P.C.

“You do not rise to the level of your goals. You fall to the level of your systems.” That line from James Clear’s Atomic Habits stopped me mid–single (left) leg Romanian deadlift one morning. I was listening to Brené Brown’s podcast, where she was discussing her new book “Strong Ground”, and when she shared that quote, it hit me harder than the workout itself. I’ve always admired Brené’s ability to connect big ideas about vulnerability and purpose to everyday life. But this particular quote made me pause and reflect — not just on my fitness routine, but on my work, my habits and how I approach success in general. Like many professionals, I’m a natural goal-setter. Each year, I map out personal and professional ambitions: new milestones, new habits, new ways to grow. Years ago, one of those big goals was to become a partner at my accounting firm — a goal I eventually achieved. But once I got there, I found myself asking a surprising question: What now? I had an overarching theme that I thought I was living, “make an impact regardless of my title,” but I didn’t really establish the systems to show what that really looks like. That’s when I realized something important. Goals set direction, but systems build momentum. Goals are the destination; systems are the path. Without the right systems, even the best goals can lose their meaning once achieved. Over time, some of my own systems had become a little too routine. I was checking boxes. Listening to Brené that morning reminded me that it’s not enough to set goals — we need systems that challenge us, motivate us and keep us moving forward. So, I started making small but intentional changes. Personally, that meant rethinking my mornings. I began waking up at 3:30 a.m. a few days a week to work out before the day begins. It’s not about chasing a specific fitness goal — it’s about starting my day with focus and energy, with the idea of feeling healthy. It also meant being more intentional about family time. My kids are still young, and I want to make sure I’m truly present — not distracted by the constant pull of work or screens. Professionally, I have been paying closer attention to the systems shaping how we work. Accounting — like many fields, often relies on long-standing structures that may not serve us as well as they used to. Whether it’s how we measure value, manage time or collaborate across teams, every system can either help us grow or quietly hold us back. As I’ve reflected on this, I’ve realized that adjusting systems doesn’t always mean tearing everything down and starting over. Sometimes it’s about small, thoughtful shifts — the kind that bring renewed energy, clarity and connection to what we do. This year, I’m approaching things differently. Instead of focusing solely on end goals, I’m focusing on designing the systems that make progress sustainable — systems that make each day more purposeful, both personally and professionally. So, as you look ahead, take a moment to ask yourself: What’s one system I can improve to make tomorrow just a little bit better than today? Because in the end, it’s not just our goals that define us — it’s the systems that keep us growing long after we’ve achieved them. l

Warm Regards, Eugene Park

AZ CPA JANUARY 2026

Staff & Member News Gil Blumenthal retired from teaching ethics with the ASCPA in October. He will continue to develop content for the next generation of ethics learning in partnership with the ASCPA. Gil’s impact on the profession is invaluable. Thank you for your commitment to ethical practices. Jodi Corrales joined the ASCPA in October as the new Member Engagement & Development Manager. Ted Bartlett was appointed as Chief Financial Officer for Ascent Lifting. Ascent is a portfolio company of Shorehill Capital, a Chicago-based Private Equity group. Brendan J. Higgins, CPA, and Jakob I. Klein, CPA, were promoted to Senior Tax Manager at Wallace Plese + Dreher as of January 1. Emily L. Mead, CPA, and Nathan S. Nicholes, CPA, were promoted to Tax Supervisor at Wallace Plese + Dreher as of January 1.

Update Your Profile Take a few minutes to update your contact details and areas of interest. A complete profile ensures you receive the content and information you prefer while maximizing the value of your membership. You can also update your ‘Find a CPA’ listing and specialty areas to ensure clients can easily find you on our ‘Find a CPA’ webpage. www.ascpa.com/login JANUARY 2026 AZ CPA

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The Hidden Asset on Your Balance Sheet: Stress Resilience for CPAs By Kaitlin Elizabeth Borncamp, CPA (CO), NTP

In the world of accounting, we’re relied on to deliver with high accuracy while maintaining strong productivity and utilization. One thing is for certain: whether you’re in public accounting or part of an internal accounting team, the constant stream of internal and external deadlines can take its toll. Continued on next page...

JANUARY 2026 AZ CPA

As deadlines tighten and regulations change, our industry continues to feel the toll of burnout and fatigue. But there’s one asset that rarely gets a line on the balance sheet — stress resilience. Firms that prioritize wellbeing and stress regulation are finding an edge — not just in retention, but in performance. To stay sharp in this rapidly changing environment, CPAs need more than technical skills. They need the capacity to recharge and recover in real time. It’s time to reframe resilience not as a soft skill, but as a strategic advantage for CPA firms and practitioners. Here are three critical areas where building stress resilience leads to a stronger team culture, sharper thinking and better business outcomes.

One — Build a Culture of Resilience Firm leaders have the opportunity to find new ways of working that promote resilience and wellbeing. It’s not simply for the sake of appealing to the younger generations that are entering into the accounting industry; there are significant business benefits to be had. Afterall, an organization is only as strong as the people in it. As my dad — a retired CPA and CFA, used to say: “After all my years of doing taxes, I’ve never seen a corporation walk through the door.” Stress resilience is no longer something we can delegate to wellness apps or once-a-year HR initiatives. It needs to be woven into the fabric of the firm’s culture — and that starts with leadership. Resilient cultures are built intentionally with regular practices that support disconnecting, professional boundaries and setting realistic expectations. This means: • Encouraging PTO and recovery time after busy seasons. • Establishing clear expectations on the team’s working hours and response times.

AZ CPA JANUARY 2026

• Acknowledging stressful periods and providing regular appreciation for the effort of team members. • Hosting team wellness events and making them part of the calendar — not just a suggestion. When team members see leaders modeling healthy boundaries and performance habits, it normalizes the behavior across all levels. This cultural shift leads to more resilient teams with increased productivity, and fewer personal and sick days. In the long run, it leads to lower turnover and better client service for both internal and external stakeholders.

Two — Amplify Performance with Personal Habits While leadership sets the tone, it’s important for each practitioner to take responsibility and feel empowered to manage their own wellbeing. It’s helpful to point out that stress resilience isn’t just about meditation or bubble baths — it’s also about how we fuel, move and regulate our bodies so we can meet the demands of the job. Many CPAs I work with fall into one of three camps — perfectionist, people pleaser or all-or-nothing thinker.

All lead to significant levels of selfinduced stress. If that’s you, you’re not alone. These patterns often lead to inconsistent habits, guilt when we “slip,” and the classic line: “I’ll get back on track when things slow down.” The good news is healthy habits for CPAs don’t require perfection! But it does mean having non-negotiables in place that support focus, energy and long-term health. As a baseline, I teach three nutrition non-negotiables that can deliver consistent energy, focus and resilience — even during your busiest weeks: • Prioritize Protein: Aim for eating 30g+ of protein and a source of high-quality fat in your first meal of the day. This helps stabilize blood sugar, supports brain function and minimizes midday crashes. • Balance Blood Sugar: Use the D.I.P. formula when building meals — Double the veggies, Increase protein, Pull back on carbs — and go for a short walk after meals when possible. • Engineer Your Environment: You don’t need more willpower; you need to make it easier to succeed. Keep a full water bottle at your desk, pre-order healthy meals

during busy weeks and don’t keep high-sugar snacks in arm’s reach. Stress resilience doesn’t require hours of free time. It requires a plan. And that shift can transform how CPAs perform during high-stakes projects or long workweeks.

Three — Leverage Existing Firm Benefits One surprising truth? Most CPA firms already provide excellent health and wellness benefits, but they’re often underutilized. Whether it’s mental health sessions, nutrition coaching stipends, gym reimbursements or health challenges, most firms have a menu of really great tools available to support the wellbeing of its people. What’s missing is awareness and adoption. Firms can change this by: • Highlighting available benefits in regular team communications and seasonal refreshers.

• Avoid pointing to company benefits as a ‘list of links’. Rather, have leaders share how they utilize the firm benefits and the impact they’ve experienced. • Hosting engaging wellness sessions on new topics periodically with wellness partners. • Sponsoring coaching programs for promising high performers or those recently promoted. Don’t let your firm’s wellness strategy go underutilized. Create a culture of wellbeing with strategic communications and events.

as a core priority, not a luxury, they unlock better focus, higher retention and sustainable success in the accounting field. l Kaitlin Borncamp is a CPA turned Nutritional Therapist and High-Achiever Coach & Speaker. As founder of Feel Great with Kait, she has helped over 4,000 client-serving professionals improve their energy, performance, and stress resilience through team workshops and coaching programs. Check out her website https://www. feelgreatwithkait.com/ for more information.

Final Thoughts Just like a financial statement, our health tells a story. The inputs we choose — food, movement, sleep, mindset — are like journal entries. Over time, they compound into a trend. When firms and practitioners treat stress resilience

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It’s Affordable Care Act Filing Season — What Employers Should Know By Allisyn Keyser Byrne, CPA

This time of year, many CPAs are focused on helping their clients execute useful tax strategies while completing or extending all relevant tax filings for the calendar year. However, some employer-related tax forms that might get overlooked are the Form 1094 and 1095 series. Continued on next page...

JANUARY 2026 AZ CPA

Enacted as part of the Affordable Care Act (ACA), the annual requirements to furnish the IRS and employees with the 1094/1095 forms can fluctuate for an employer based on its headcount in a given calendar year. Applicable large employers (ALE) as well as certain self-insured plans are subject to Form 1094/1095 filing requirements. An ALE is an employer with an average of at least 50 fulltime equivalent (FTE) employees during the preceding calendar year. In addition to conventional arrangements, other plans subject to filing requirements may include Individual Coverage Health Reimbursement Arrangement plans and level-funded plans.

How can a business accurately determine its FTE headcount? “Full time” means an employee works an average of at least 30 hours per week, or 130 hours per calendar month. In general, to determine the number of FTE employees in your organization: 1. Add up the hours of all part-time employees for each month of the prior year 2. Divide the Step 1 total by 120 to convert part-time hours into FTE count 3. Add the number of full-time employees to Step 2 total 4. Divide by 12 to average across all 12 months 5. If the Step 4 average is greater than 50, the employer is an ALE for the current year As an example, if the 2024 payroll hours result in a headcount of at least 50 FTEs, then an employer would be considered an ALE for 2025, with ACA filings due in early 2026.

How do seasonal employees affect headcount? With many employers operating seasonally based on geographic circumstances or operational fluxes, determining ALE status is not always straightforward.

AZ CPA JANUARY 2026

There is an exception to ALE status if both of the following conditions are met: (1) headcount exceeds 50 for 120 days or fewer during the year, and (2) the employees in excess of 50 during such 120-day period are seasonal workers. The IRS defines seasonal workers for this purpose as employees who perform labor or services on a seasonal basis and lists retail employees employed exclusively during the holidays as an example of seasonal employees.

What type of coverage must an ALE provide? Under the employer shared responsibility provisions, ALEs must offer what’s referred to as minimum essential coverage to at least 95% of full-time employees. This means the coverage is both “affordable” and provides “minimum value.” Failure to offer minimum essential coverage can result in IRS penalties. Individuals aren’t required to have minimum essential coverage when filing their individual 1040s. How affordability is determined Employer-provided coverage is considered affordable if the employee’s required contribution is no more than 9.5% (as adjusted, referred to as the applicable percentage) of that employee’s household income. Because employers are not likely to know the household income of their employees, there are three safe harbor methodologies an employer may use to determine affordability: • The federal poverty line methodology is based on the employee’s required monthly contribution for self-only coverage, compared to applicable percentage of the federal poverty line for a single individual for that year, divided by 12. • The W-2 wages methodology is based on an employee’s W-2, Box 1 wages from an employer, which is multiplied by the affordability percentage. The resulting calculation is compared

to the employee’s cost for the least expensive self-only plan offered by the employer. • The rate of pay safe harbor generally is based on the employee’s rate of pay at the beginning of the coverage period, with adjustments permitted, for an hourly employee, if the rate of pay is decreased (but not if the rate of pay is increased). What is minimum value? In general, an employer-sponsored plan provides minimum value if it covers at least 60% of the total allowed cost of benefits expected to be incurred under the plan. Employers generally must use a minimum value calculator developed by U.S. Department of Health and Human Services (HHS) to determine if a plan with standard features provides minimum value. Plans with nonstandard features are required to obtain an actuarial certification for the nonstandard features.

What are the ACA filing requirements? ALEs and other providers of minimum essential coverage are required to annually report information for each covered individual to the IRS and provide statements showing proof of minimum essential coverage to individuals. ALEs generally use Forms 1094-C and 1095-C to meet these requirements. These forms provide the information the IRS needs to administer employer shared responsibility penalties and eligibility for premium tax credits. Form 1094-C is used to report summary information and to transmit Forms 1095-C to the IRS. Form 1095-C is used to report employee-level coverage information to both the IRS and the employee. Generally, other providers of minimum essential coverage such as health insurance companies, small employers, and governmental employers file and furnish B series forms in order to meet their information requirements. Form

1094-B is used to report summary information and to transmit Forms 1095-B to the IRS (similar to the 1094-C). Form 1095-B is used to report coverage information to covered individuals and the IRS (B-series forms are not required for those who received an offer of minimum essential coverage but did not enroll).

Special considerations for ACA reporting One special consideration related to ACA reporting is whether employers offer self-insured coverage or fully insured coverage. Selfinsured health plans may require additional information related to dependents who were enrolled or declined offers of coverage. There can also be implications for ACA reporting if an ALE has multiple entities operating under different EINs, assuming the entity exceeds

the 50 full-time employee threshold. If a full-time employee moves to a different entity during the year, it’s important to track offers of coverage to the employee for each entity.

Working with payroll providers Many payroll processing companies include the preparation and filing of the 1094 and 1095 series as part of their service offerings; however, there is typically no guarantee related to the accuracy or completeness of the information. As such, CPAs working with clients that might be considered an ALE for 2025 should ask about the required 1094 and 1095 filings — and what their clients’ plans are to comply with those requirements. l

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com. CLA exists to create opportunities for our clients, our people, and our communities through our industry-focused wealth advisory, digital, audit, tax, consulting, and outsourcing services. CLA (CliftonLarsonAllen LLP) is an independent network member of CLA Global. See CLAglobal. com/disclaimer. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.

For more information on filing taxes in Arizona, contact Allisyn Byrne at allisyn.byrne@ CLAconnect.com or 602-604-3636.

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The Brophy Community Foundation has NEVER accepted donor designated contributions. Arizona law now requires all school tuition organizations to print the following notice on all printed material and websites: A school tuition organization cannot award, restrict or reserve scholarships solely on the basis of donor recommendation. A taxpayer may not claim a tax credit if the taxpayer agrees to swap donations with another taxpayer to benefit either taxpayer’s own dependent.

Beyond the Buzz: Practical AI Applications for Arizona CPAs By Barry S. Graham, CPA, CMA Senior Audit Manager, Wallace, Plese + Dreher, LLP

Artificial Intelligence (AI) is everywhere — dominating headlines, boardroom discussions and even staff meetings. From “Jobocalypse Now” to “The AI Grim Reaper,” there may be a growing temptation to believe this technology is poised to take over accounting. But in the real world – especially for Arizona CPAs working with private companies, the story is far more nuanced. Continued on next page...

JANUARY 2026 AZ CPA

After presenting Practical AI for CPAs at the ASCPA’s 2025 Converge Conference and Arizona Tax Workshop, I’ve continued speaking with peers and clients about how AI tools can be both powerful and problematic. The key takeaway? AI isn’t coming for your job, but CPAs who embrace it thoughtfully may outpace those who don’t.

What AI Gets Wrong — and Why It Matters Large language models like ChatGPT, Gemini and Grok can generate fast responses — but not always accurate ones. In fact, AI often prioritizes delivering an answer — right or wrong — over admitting uncertainty. That alone should raise concerns for professionals who rely on precision. At Wallace, Plese + Dreher (WP+D), we’ve encountered this firsthand. Our tax partner, Hannah Oglesby asked an AI tool about suspended passive activity losses under IRC §469. The model initially got it wrong until Hannah presented the relevant code section. It then corrected course and acknowledged that, under §469(f), suspended PALs can offset nonpassive income from the same self-rental. Similarly, managing partner, Randy Brammer, queried a GPT model about whether gross margin analysis met SSARS 21 requirements. The tool said yes, until Randy showed it the AR-C 90 text, at which point it admitted that gross margin alone doesn’t fully satisfy the disaggregated revenue analysis requirement. Why do these tools miss the mark? Despite rapid development, we continue to see common issues: • Outdated data. • Confusion between federal, state and international rules. • Hallucinated citations or misread code sections. • Lack of access to real-time IRS or FASB updates. • Struggles with exceptions and edge cases.

AZ CPA JANUARY 2026

In short, they still lack what we as CPAs are trained to apply: professional judgment.

Where AI Is Already Saving Time Despite these limitations, AI delivers measurable value. At WP+D, we’re already using it to reduce hours spent on routine tasks and to improve consistency, especially during busy season. Here are some of the basic ways you can start using AI: • Converting PDFs into usable formats. • Drafting internal control documentation for audits. • Drafting footnote disclosures or policy memos. • Generating email templates to clients and other contacts. • Performing initial research (with source verification). • Drafting IRS elections, amendment explanations or penalty abatement letters. • Creating Excel formulas or financial schedules. For accountants in private industry, AI can assist with drafting capitalization, PTO or other corporate policies, as well as related party agreements — under appropriate legal review. These are areas where GPT tools, when prompted well and professionally reviewed, provide real productivity gains.

A Real-World Case: Busy Season Engagement Cleanup Consider a recent financial review engagement for a C corporation client with $30 million in annual revenue. After fieldwork wrapped, management submitted six late-stage journal entries — including material adjustments to inventory and accrued payroll. Rather than starting from scratch, we used GPT to assist in multiple ways. It helped us draft a memo that clearly documented the entries and the related procedures, summarized the review steps and conclusions,

and supported revisions to the client’s tax provision. We also had it generate a checklist to track all potentially impacted workpapers. Once the AI had context on these out-of-scope tasks, we even asked it to draft a billing summary for the additional work. This hybrid approach significantly accelerated our process, but every output was carefully reviewed through the lens of professional standards and CPA judgment. That’s where the profession is headed — AI as a force multiplier, not a replacement.

Know the Limits: Ethics, Privacy and Skepticism As AI becomes embedded in firm workflows, we must remain cautious and ethical in its application. At WP+D, we adhere to several guiding principles to ensure responsible use. First, we emphasize the importance of professional verification — AI outputs should always be validated against authoritative sources such as the FASB Codification, AR-C guidance or the Internal Revenue Code. We also maintain strict confidentiality protocols and never input client-sensitive data into public AI platforms. Another key practice is avoiding any implication that AI is an authoritative source. It should be viewed as an assistant — helpful, but not definitive. Above all, we apply professional skepticism to every AIgenerated response, treating it with the same scrutiny we would apply to other third-party evidence. To support consistency and compliance, firms should also develop internal guidelines governing how AI is used in tax, audit and consulting services.

The Real Advantage Is Still Human Judgment AI tools can enhance what we do, but they can’t replace our professional reasoning, ethics or industry context. Just like Excel

didn’t eliminate accountants but empowered them, AI has the potential to improve efficiency and free up time for higher-level tasks. Think of it this way: search engines show you where to look; AI attempts to give you the answer. Your job is to make sure that answer is correct. Whether you work in audit, tax, CAS or industry, AI is quickly becoming a standard tool — just like spreadsheets or engagement software. The question isn’t whether to use it, but how to use it well.

Final Thoughts The real disruption isn’t that AI will take our jobs — it’s that CPAs who are slow to adopt it may fall behind. The future of our profession isn’t human versus machine — it’s human with machine. And in that future, CPAs who lead with ethics, judgment and adaptability will thrive. l

Barry S. Graham, CPA, CMA, is a senior audit manager at Wallace, Plese + Dreher (WP+D) in Scottsdale, Arizona. WP+D is the largest Phoenixarea-based CPA firm, offering audit, tax, CAS and consulting services to private and nonprofit organizations. Barry presented Practical AI for CPAs at the ASCPA’s 2025 Converge Conference and ASCPA’s Arizona Tax Workshop. In February 2026, he will speak on AI in accounting at the IMA’s Reno Education Seminar & Training (REST) Conference. Connect with Barry on LinkedIn: linkedin.com/in/BSGraham

New Year. New Job? If you’re looking for a new career opportunity, check out the ASCPA Career Center. Find a wide range of openings tailored to accounting professionals. Visit the Career Center anytime to browse current listings and take the next step in your professional journey. www.ascpa.com/ careercenter

Volunteer. Inspire. Change. Your experience as a CPA can spark curiosity, confidence and career pathways for future accounting professionals. Volunteer with the ASCPA as a speaker for future student events. Sign up today and change tomorrow.

JANUARY 2026 AZ CPA

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Keep Your Best Leaders: Four Keys to Build a Flourishing Leadership Pipeline By Jonathan R Lokhorst, CSP, CPA (MN), PCC Your Best Leadership LLC

Although some reports have declared “The Great Resignation is Over,” now is not the time to take your eye off the ball of employee retention. Turnover rates are still high in comparison to pre-pandemic levels. Attracting and retaining top talent continues to be a major concern in most industries, with no end in sight. A recent Gallup study highlights an even greater concern among those serving in managerial roles. Continued on next page...

JANUARY 2026 AZ CPA

Gallup research found managers more likely than non-managers to be disengaged at work, burned out, looking for a new job and feeling like their organization doesn’t care about their well-being. Among managers surveyed, 55 percent indicated they were watching for or actively seeking a new job, a significant uptick from 44 percent who said that in 2019. Amid these intense challenges, what can you do to keep your best leaders? You simply can’t afford to lose them. Here are four keys to building a flourishing leadership pipeline that produces future leaders from within the organization: identify them, engage them, develop them and empower them.

Identify Them Identifying your best leaders can be as simple as answering the question, “which leaders are you most afraid of losing?” Seek input throughout the organization, focusing on individuals currently serving in leadership roles as well as potential future leaders. Take note of those with the strongest influence and rapport among their coworkers. Watch for signs of initiative, one of the first indicators of leadership potential. At the same time, ensure these individuals are aligned with your organization’s mission and values. For a more structured assessment, create a leadership competency model that outlines expectations for leaders at each level in your organization. Include core technical skills, but don’t stop there. Address crucial nontechnical skills, such as strategic thinking, emotional intelligence, stakeholder management and the ability to develop others. One of my public accounting clients created a grid with a column for each leadership level, showing the progression required for leaders to advance from one level to the next. Conduct a pipeline analysis to identify leadership succession needs over the next several years. Look at each position, anticipating when significant transitions in leadership will occur. Identify the next

AZ CPA JANUARY 2026

individual or potential individuals in line for each role. These individuals are likely to be your best leaders.

Engage Them After noticeable improvements in the early stages of the pandemic, employee engagement has been on the decline over the past three years. The top two causes identified in Gallup’s report are unclear expectations at work and feeling disconnected from the mission and purpose of the organization. If these factors are problematic for the workforce as a whole, they are doubly problematic when experienced by your best leaders. Assign leaders meaningful work that enables them to see how they contribute to your organization’s mission, purpose and strategic plan. Seek their input on opportunities to make an even greater impact. Recognize their contributions to ensure they feel appreciated. Cultivate a positive, healthy culture that reminds them why they enjoy working in your organization.

Develop Them According to Gallup’s research, a lack of opportunities for development ranked third among causes for the drop-off in employee engagement. In addition, only 48 percent of managers surveyed said they strongly agree that they have the skills needed to be exceptional in their current jobs. Imbedding leadership development in your culture will provide a competitive advantage in your retention efforts. Engage your best leaders regularly in career path conversations with a realistic view of what it takes to get promoted in your organization. When appropriate, include them in discussions about the pipeline analysis described above. Highlight their current readiness for promotion and identify gaps that need attention. Work with them to create an individual development plan, offering a variety of growth opportunities — both formal and informal.

Provide stretch assignments with exposure to complex business challenges, giving regular feedback on their performance. Invite them to shadow senior leaders to expand their understanding of leadership at higher levels within the organization. At the same time, protect them from being overwhelmed with a too-heavy workload as your best leaders are also the go-to person when others assign work.

Empower Them Let your best leaders lead. Entrust them with ownership of important projects and the decision-making that is required. Encourage them to innovate, experiment and even fail at times. Allow increasing levels of autonomy, providing the resources they need to succeed. Reward their success by including them in bigger decisions affecting the team or organization, as appropriate. Challenge your best leaders to develop their leadership outside of the workplace, too, through charitable or community involvement.

A Proactive Approach to Keep Your Best Leaders In today’s rapidly changing business environment, keeping your best leaders requires a proactive, intentional approach. By identifying, engaging, developing, and empowering your best leaders, your leadership pipeline will flourish, producing the leadership you need for long-term success and viability as an organization. l Jonathan R. Lokhorst, CSP, CPA (MN), PCC, is a leadership speaker, trainer, coach, and author of “Mission-Critical Leadership: How Smart Managers Lead Well in All Directions”. He works with organizations to develop leaders everyone wants to follow, build teams no one wants to leave and deliver exceptional results. Jon is a frequent speaker for CPA firms and association events and facilitates leadership programs. You can reach him at jon@yourbestleadership.com. An earlier version of this article was published in the Minnesota Society of CPAs Footnote magazine.

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From Whisper to WISP-er: How CPAs Can Use AI to Quietly Crush Compliance By Fady Salama, Founder & CEO, SimplifyIT A-Z

When most CPAs hear the phrase Written Information Security Program, or WISP, the first reaction is usually a mix of confusion and dread. I get it. Between the FTC Safeguards Rule, IRS Publication 4557, and ever-evolving state privacy laws, it can feel like you need both a law degree and an IT certification just to stay compliant. 24

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Here’s the truth: creating a WISP doesn’t have to be overwhelming. In fact, with the right mindset and a little help from artificial intelligence, you can build a WISP that not only meets regulatory requirements but also strengthens your firm’s reputation for trust and professionalism. That’s what I set out to share at the ASCPA 2025 Converge Conference by showing how CPAs can use AI to simplify compliance, personalize their security programs and quietly crush the standards that once felt out of reach.

Why WISP Matters for Every CPA Firm As accountants, you manage the crown jewels of your clients’ personal and financial lives with tax returns, bank statements, Social Security numbers and payroll data. You are not just custodians of information; you are guardians of trust. That’s why regulators expect us to have a documented WISP. IRS Publication 4557 spells out data security obligations for tax professionals and the FTC Safeguards Rule extends to any firm offering financial services — CPAs included. Noncompliance can bring fines, audits and reputational harm, but I see it differently. Doing WISP right is more than a defensive move; it’s a competitive advantage. When your

clients know you’re proactive about data protection, it reinforces the trust they already place in you. I like to say compliance isn’t a burden, it’s a business differentiator.

Breaking Down the WISP: Five Practical Steps When I help firms build or update their WISP, I break it into five clear steps. Think of it as a continuous cycle rather than a one-time project. 1. Identify Your Risks Every WISP starts with a risk assessment. Start by understanding what sensitive data you handle, where it’s stored and what could threaten it. Here’s where AI can help. During my live demo at Converge, I asked ChatGPT to “generate a risk assessment template for a small CPA firm.” In seconds, it produced a structured table ranking risks by likelihood and impact. That doesn’t replace your judgment, but it jump-starts the process, saving hours of research and formatting. 2. Write the Rules Once you understand your risks, document the policies and procedures that govern how your firm protects information. These include access control, vendor management, data retention and incident response. AI tools are surprisingly good at drafting policy language in plain English. You can prompt ChatGPT with, “Write an acceptable use policy for a remote CPA firm using cloud accounting

tools,” and instantly get a professionalsounding first draft. Of course, you’ll need to customize it for your firm, but starting from something instead of nothing makes a huge difference. 3. Put Safeguards into Action Policies only work when paired with safeguards. These are the actions and technologies that make your plan real. I encourage firms to look at three categories: • Administrative safeguards: staff training, a designated security officer and clear disciplinary measures. • Technical safeguards: multi-factor authentication, encryption, regular patching and data backups. • Physical safeguards: secured offices, locked workstations and shred bins for paper documents. The most overlooked of these? People. Employees are the first line of defense. AI can help create phishing awareness quizzes or microtrainings that keep security top-ofmind without adding workload, but technology can’t fix what people don’t understand. 4. Be Ready for “When,” Not “If” Data incidents aren’t hypothetical anymore; they’re inevitable. That’s why every WISP must include an incident response plan outlining how you detect, contain, notify and recover from a breach. During my presentation, I demonstrated how to ask ChatGPT for a “CPA firm incident response playbook.” The AI produced a detailed outline including roles, timelines and escalation paths. From there, it’s easy to adapt it to your firm’s structure and contacts. The key is documentation. If something goes wrong, you don’t want to start from a blank page; you want a roadmap. 5. Keep It Alive Finally, a WISP is not a binder you file away. It’s a living program. Schedule an annual review — ideally every busy off-season, to reassess risks, update vendor information and Continued on next page...

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confirm staff training. Even 30 minutes of review a year can keep your plan compliant and relevant. AI can even remind you to do it. Set a recurring task or have it summarize any regulatory updates that might affect your WISP.

When you show clients that protecting their data is part of your firm’s DNA, you elevate your role from service provider to trusted advisor. The future of accounting belongs to firms that combine compliance, technology and trust.

How AI Fits In

SimplifyIT A-Z’s S.O.S. Framework

AI isn’t magic. While AI can dramatically simplify drafting and documentation, it’s not perfect. You still need to apply your professional judgment and understanding of your firm’s unique risks to ensure the final WISP truly reflects your operations and compliance needs. Remember that AI is a tool and not a substitute for your understanding of your firm’s risks and responsibilities. Here are a few practical ways to use it: 1. Draft policies and templates: Create first drafts for acceptable use, vendor management or risk assessments. 2. Summarize regulations: Ask AI to condense complex rules like IRS Pub 4557 into bullet points you can share with partners. 3. Generate checklists: Quickly produce a list of where client PII is stored and who has access. 4. Brainstorm safeguards: Use AI to surface overlooked security ractices for small firms. 5. Create staff training content: From cybersecurity newsletters to phishing scenarios, AI can help you communicate effectively. The key is oversight. Treat AI like a capable junior associate who can accelerate your work, but it still needs review, judgment and accountability.

Compliance as a Trust Builder A well-structured WISP does more than protect you from fines. It builds resilience, enhances client confidence and strengthens your brand. I’ve seen firms transform how they talk about security and move from fear to pride. They no longer view compliance as an obligation but as a reflection of their professionalism.

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At SimplifyIT A-Z, we use what we call the S.O.S. Framework: Secure, Optimize, Support. It’s the same foundation I apply to WISP design: • Secure: Protect sensitive data through layered defenses and proactive monitoring. • Optimize: Use smart tools, like AI, to make compliance efficient and repeatable. • Support: Educate your team so security becomes part of your culture, not just your checklist. That’s how you turn compliance from a burden into a competitive edge.

Don’t Wait for a Regulation Change or Security Incident If you haven’t reviewed your WISP lately, now’s the time. Don’t wait for a regulation change or a security incident. Start small. Draft with AI. Validate with experts. Review annually. Each step you take strengthens your firm’s defenses and reputation. Remember, compliance done right doesn’t have to be loud. Sometimes the best firms are the ones quietly crushing it, one smart safeguard at a time. l Fady Salama is the Founder and CEO of SimplifyIT A-Z, an ASCPA Preferred Provider and Phoenix-based managed IT and cybersecurity firm serving accounting, nonprofit, and professional services organizations. He helps CPA firms strengthen compliance and cybersecurity through practical technology strategies built on trust, clarity and continuous improvement. Learn more at www.simplifyita-z.com.

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Divorce Business Valuations – The Discounts Dilemma By Donald Ray Bays, CPA, ABV, CVA, CFF

In high-asset divorces, few issues spark as much contention as the valuation of a closely held business. At the center of this financial tug-of-war lies a critical question: should discounts for lack of control and marketability — standard in business appraisals, apply when dividing marital property? With potentially tens or even hundreds of thousands of dollars at stake, judges, attorneys and appraisers often find themselves navigating murky legal and financial waters to determine what a business is truly worth in the eyes of the court. 28

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For most married couples, going through a divorce is not a fun process. This can be especially true if child custody, child support, spousal maintenance or property settlement issues are involved. One property settlement issue that can cause a great deal of acrimony between a divorcing husband and wife is determining the value of a business owned by the couple. This usually involves a business operated by one of the spouses and usually the spouse operating the business wants to keep it. If the couple resides in a state where any property acquired during the marriage is considered owned by the marital community, then the operating spouse will most likely have to pay the non-operating spouse fifty percent of the value of the business.

Business Appraisers in Divorce Cases Frequently, the married couple will hire a business appraiser to value the business close to the date one of the divorcing parties serves notice to the other party that they are filing for dissolution of the marriage. Sometimes the appraiser will be jointly retained by the husband and wife. However, one spouse may believe that the valuation of the company by the jointly retained appraiser is unfair and will contest the appraised value in the courtroom. They may even hire their own business appraiser to support their position. Qualified business appraisers may treat the same factors that affect the value of the targeted business differently. Such differences might be in the determination of an appropriate earnings, cash flow amount or capitalization rate to be used under an income approach to valuation. Different appraisers may also treat the amount of discounts to be taken from the calculated value differently. These discounts are typically called “discount for lack of marketability (DLOM),” and “discount for lack of control (DLOC).”

DLOM and DLOC in Business Valuations

Why DLOM and DLOC Matter in Divorce Cases

The American Institute of CPAs (AICPA) defines the DLOC as “an amount or percentage deducted from the pro rata share of value of 100% of an equity interest in a business to reflect the absence of some or all of the powers of control;” and DLOM as, “an amount or percentage deducted from the value of an ownership interest to reflect the relative absence of marketability.”1 And yes, two qualified appraisers can have different amounts for the DLOC and DLOM used in their valuation of the marital community’s business. Under the “fair market value” standard used to value business interests for buy-sell purposes, the DLOC and DLOM are usually considered. Fair Market Value is defined as, “the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”2 Under the standard of fair market value a DLOM is usually considered, and under the standard of fair market value a DLOC is usually considered if an ownership interest of less than 50% is being valued, such as the valuation of a 49% or less, business ownership interest in a divorce.

Where am I going with this writing of DLOC’s, DLOM’s and fair market value? Let me explain. Judges in some of the family law courts in which I’ve testified regarding divorce business valuations believe the DLOM and DLOC are appropriate. Others believe that the valued interest should be treated like many states treat the value in oppressed shareholder valuation cases – no discounts are to be considered. A judge who does not allow the discounts may be awarding the nonoperating spouse a value that is as much as 10% to 40% higher than what the value would be under the standard of fair market value. This of course would be to the benefit of the non-operating spouse whose 50% interest is being purchased by the soon-to-be ex-spouse. The paying spouse, however, is likely going to cry “foul.” The paying spouse will argue that he/she will have to consider at least a DLOM when they sell 100% of the company in the future — that they will take the hit for the discount at that time. As noted above however, the judge may consider the valuation similar to an oppressed shareholder case valuation and not allow any discounts to be taken. The judge may also consider that the operating spouse will continue to run the business as usual the next day after the marriage is dissolved and that no discounts are warranted. Continued on next page...

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Conclusion For business appraisers who value business interests in divorce cases, it is important to know whether the attorney retained by the appraiser’s client will argue to have the discounts eliminated from the targeted business’ value — or to keep them intact, depending on whether the attorney’s client is going to be the buyer or the seller in a divorce. Many business appraisers who value businesses in marital dissolutions will show the final value of a 50% interest both ways — with and without the discounts. They leave it to the trier-of-fact to make the determination of which value is the fairest to both parties. l Donald Ray Bays CPA, ABV, CVA, CFF is a Senior Director in the Financial Forensics and Valuation Services group of BeachFleischman, PLLP at the firm’s Phoenix office. He can be reached at dbays@ beachfleischman.com or 602-265-7011

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Earn one hour of CPE credit in specialized knowledge by completing the AZ CPA Quick Quiz, available online. Receive a score of 70 percent or more about this issue’s articles for credit. It’s that easy! Fees: Members: $25 Nonmembers: $40 Online Access Go to www.ascpa.com/quickquiz to access links to all active quizzes. Once a quiz is purchased, a link and password will be emailed to you. Your results will be sent immediately after completion, and certificates are emailed within five business days.

1 Statement on Standards for Valuation Services No. 1, June 2007, issued by the AICPA Consulting Services Executive Committee. 2 Ibid.

Arizona Society CPA Community Advocacy The 2026 Arizona legislative session officially began on January 12, and the Arizona Society of CPAs is already hard at work representing the profession at the state Capitol. As always, we’re focused on advancing policies that strengthen the CPA community and support a healthy business environment. Key advocacy priorities include: • Passing income tax conformity legislation as soon as possible. • Creating alternative pathways to licensure. • Maintaining and protecting the gold standard of CPA licensure. If you’re aware of an issue affecting CPAs or the business community, we want to hear from you. Please reach out to advocacy@ascpa.com to share concerns or suggest additional topics for us to advocate on this session. 30

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ASCPA Happenings: Student Edition ASU-Beta Alpha Psi Audit Panel: We were pleased to take part in Arizona State University’s Beta Alpha Psi audit panel, where we joined other audit professionals to share insights and experiences in accounting. A special thank you to Brice Sperl, senior audit associate at Walker & Armstrong and ASCPA member, for representing the ASCPA at this event and inspiring future CPAs.

ASCPA Hosts FirstEver Firm Crawl for Students: We introduced an exciting new student event — the ASCPA Firm Crawl! Traveling by shuttle, accounting students visited three of our student sponsor firms in Phoenix: Walker & Armstrong, Price Kong CPAs, and Eide Bailly. Thank you to our sponsors for making this event possible.

2025 DECA Bootcamp at CGCC: The ASCPA participated in the 2025 DECA Bootcamp at Chandler-Gilbert Community College as part of their career panel. The event saw more than 200 students from 14 high schools across the Valley. Special thanks to Crystal Turner of Eide Bailly — an ASCPA member, for representing the ASCPA as a guest speaker. She shared her expertise and highlighted the many career opportunities in accounting.

Road to the CPA at Grand Canyon University: The ASCPA partnered with GCU to host “The Road to the CPA,” an interactive event for accounting students. Students learned about the CPA exam, certification process, and ASCPA resources. They also had an opportunity to engage with a panel of CPAs who shared valuable career advice and answered questions. Thank you to Helen Stewart, Duncan Torrance and Gavin Mooney who served as CPA panelists.

Support student initiatives like these by becoming a sponsor: www.ascpa.com/sponsorstudents JANUARY 2026 AZ CPA

Shaping the Future Together: Thank You to our Student Sponsors The ASCPA extends a heartfelt thank you to our Gold Sponsors - Eide Bailly, Insight, Price Kong CPAs, and Walker & Armstrong for their generous support of our student programming. Their commitment has been instrumental in helping us deliver high-quality events, creating opportunities for students to connect with accounting professionals and providing valuable career resources while ensuring ASCPA student membership remains free for accounting students across Arizona. Thank you for making a lasting difference!

www.eidebailly.com

www.insight.com

www.pricekong.com

www.wa-cpas.com

AZ CPA JANUARY 2026

“I really like the initiative that the ASCPA is putting into students. There are so many different things to do, get involved with, ask questions about and opportunities to talk to professionals. I love the effort they put into their communications and engagement.” – Conner Nicola, Recent MBA grad with an emphasis in accounting at NAU

Eide Bailly LLP

“It’s really cool that the ASCPA is forming the bridge between students and current CPAs.” – Darrin Ellison, Student at ASU pursuing a Master’s in Tax and Data Analysis

Insight Enterprises, Inc.

Walker and Armstrong Strengthening the CPA talent pipeline begins with you. Investing in students means investing in the future of accounting. Learn more about becoming a sponsor at www.ascpa.com/ sponsorstudents

Price Kong & Co., CPAs PA JANUARY 2026 AZ CPA

The ASCPA Happenings: A Recap Converge Conference Two days. 12 CPE credits. Good food and good people. Converge 2025 was a hit for all who attended. We had session after session with high engagement and high quality. The weather was beautiful for our evening of networking. Thank you to all who came and to our sponsors who made it possible: McGuire Sponsel | AZ TAX CREDIT FUNDS | Bell Bank | BMO Bank N.A. | Institute for Better Education | Jewish Tuition Organization | Paychex | Robert Half | SimplifyIT A-Z | TriNet USA Inc | WestPac Wealth Partners

AICPA & CPA/SEA Leadership Conference ASCPA CEO & President Oliver Yandle, Chair Eugene Park and Vice Chair Joe Heidleburg attended a leadership conference for state societies and associations. As the leading organization for Arizona CPAs – we take continuing education seriously not only for members, but also for those who will lead us into the next generation of accounting. Oliver, Eugene and Joe met up with AICPA Council Members Kelly Damron and Tom Duensing, and gained valuable insight on how to effectively lead organizations dedicated to the CPAs of today and tomorrow.

Women’s Collective Kick-Off Event “If I were you, I’d want to be me too.” – Meghan Trainor If you were unable to attend the Women’s Collective kick-off event in October, we sincerely hope you’ll join us for the next event this coming spring. The day unfolded with inspiring discussions and meaningful connections, as we gave back to the community and uplifted our attendees with free massages. We thank every each member who helped launch this movement with us along with our wonderful speakers Kacee Johnson, NACD.DC and Kim A. Thompson, and our amazing panel members - Brenda Ann Blunt, CPA, Brittney Williams, CPA, CGFM and Tiffany Bisconer, CPA, MS, MAFM. Shout out to Beacon Pointe as our event sponsor!

AZ CPA JANUARY 2026

Member Appreciation: Free CPE Days Over 500 attendees joined us for two days of free CPE! Thank you to everyone who attended. We appreciate your membership and hope you found value in the sessions. And thank you to our sponsors: Brown & Brown Insurance • Bayntree Wealth Advisors • 8am CPA Charge • Institute for Better Education • McGuire Sponsel • Paychex • SimplifyIT A-Z

Fierce Conversations Workshop We held our first-ever open-enrollment class for Fierce Conversations. Our very own trained and certified Fierce facilitator, Mary Pemberton (Learning Manager, ASCPA), led a Fierce foundations and coaching session for a tightknit group of CPAs interested in developing professionally and personally. If you’d like to bring Fierce to your workplace, contact Mary at mpemberton@ascpa.com.

ABC Networking Event 200 attorneys, bankers and CPAs braved a thunderstorm and a chilly November night for the biggest networking event of the year. The ASCPA co-hosted the event along with Risk Management Association – Arizona Chapter and the State Bar of Arizona. Together, we created an opportunity for our members to connect and grow their circle. Thank you to our sponsors: McGuire Sponsel | Paychex | MDD Forensic Accountants | Arizona Escrow & Financial Corporation | TMC Financing | The Gale Team/ Nova Home Loans

JANUARY 2026 AZ CPA

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