AZ CPA July/August 2016
Fiduciary Responsibilities Ransomware/Cyber Risk Management Five Concepts for Effective Negotiation Building Professional Relationships
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JULY/AUGUST 2016 AZ CPA
AZ CPA The Arizona Society of Certified Public Accountants President & CEO
Board of Directors Chair Chair-Elect Secretary/Treasurer Directors
Greg Nelson Molly Montgomery Mike Allen Jared Van Arsdale Brenda Blunt Michael Chesin Virginia DeSanto Marcus Feder Teresa Finley Julia Miessner Mark Patton Jeffrey Quick Curtiss Smith Nancy Thomas Char Woodall
Immediate Past Chair Rob Dubberly AICPA Council Members
Karen Abraham Armando Roman
Chapter Presidents Southern Chapter Northern Chapter
Cathy Poore Bethany de Alva Southwest Chapter Jennifer Sullivan North-Central Chapter Ellen Carpenter AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. 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 225-B Phoenix, AZ 85034-2021 Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com
AZ CPA JULY/AUGUST 2016
AZ CPA Volume 32 Number 6
In Good Company Kathryn A. Riser, CPA, business manager for Buffalo Exchange, loves her job and collecting vintage clothes. by Patty Gannon
Building Relationships for 13 Professional Advancement
Studies show that 50 percent of your career sucess is directly attributed to how often you engage with new people. by Michael S. Seaver
Ransomware and Cyber Risk 15 Management
Columns & Departments
Learn why it is essential to be prepared and take precautions against ransomware.
Satisfying Fiduciary Responsibilities
Chairâ€™s Message by Greg Nelson, CPA
A Dash of SALT by James Busby, Jr., CPA
by Randy Werner
A few areas that every plan fiduciary should address. by Roman Leshak, Jr., CPA
Five Concepts for Effective 19 Negotiation
Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 225-B Phoenix, Arizona 85034-2021 www.ascpa.com
Negotiation is frequently intimidating. Learn how to prepare for a positive outcome. by Tracy Bullock
JULY/AUGUST 2016 AZ CPA
ASCPA Chair’s Message
Experience and Perseverance Lead the Way
by Greg Nelson, CPA When issues arise, such as the new proposed sales tax on professional tax-return services, it’s good to know that our society is working to represent our interests in front of the legislature.
AZ CPA JULY/AUGUST 2016
The Appalachian Trail stretches 2,189 miles from Georgia to Maine. Each year, about 3,000 brave hikers attempt to walk the entire trail. For the 20 percent who make the entire journey, they receive a congratulatory letter from the Appalachian Trail Conservancy. Along the way, 97 percent of the hikers have acquired one of the 10,390 nicknames listed in the Appalachian Trail Conservancy files to whom their letters are addressed: Guitarzan, Sweaty Yeti and even the Abominable Slow Man. These hikers are bound by experience and personal endeavor. Likewise, the three letter designation, CPA, binds us both professionally and personally and allows us to connect. There are a little more than 10,000 active CPAs registered in the state of Arizona. Almost 60 percent of these CPAs are also members of the Arizona Society of Certified Public Accountants (ASCPA), of which about half are in public accounting and the remainder in industry. Periodically, the ASCPA board of directors discusses how to reach those who are not yet members to encourage them to join us and enjoy the professional affiliation and benefits of belonging to a professional society. Membership is not only logical and rewarding, but connects us as professionals. When issues arise, such as the new proposed sales tax on professional tax-return services, it’s good to know that our society is working to represent our interests in front of the legislature. As a member of the ASCPA, you recognize the value you get from your professional organization. You appreciate the connections you make through the society, the educational opportunities and having a professional home. When issues arise that will affect the work we do, we can count on the ASCPA to keep us informed. As a CPA who is also the CFO for a business, I don’t routinely deal with the variety of tax and audit issues encountered by my friends and fellow members who are in the practice of public accounting. However, there is a keen expectation from my company’s board of directors and executive team that I will remain familiar with the emerging issues of our profession. As such, I appreciate my ASCPA membership for the educational opportunities and resources that are available. Likewise, I encourage my staff to enjoy the benefits of their membership, which demonstrates a commitment to the profession they have chosen. Most of us know someone in our organization who could benefit from membership in the Arizona Society of CPAs. They have “hiked through” the educational and experiential requirements to reach the CPA designation; but, they are still on the journey. I hope you will spread the word to your staff and colleagues. The ASCPA staff loves to welcome and connect with new members! Encourage your colleagues to let the ASCPA be their professional home, and join the other 5,600 CPAs who already have. n
Member News Layne R. Simmons, CPA, recently became the president of the Arizona Board of Accountancy. His term starts on July 4, 2016. ASCPA members selected by the Phoenix Business Journal as their 2016 Outstanding CFOs: • V i r g i n i a D e S a n t o , A S U Foundation for a New American University • S a m N a p o l i t a n o , H u n t e r Contracting • Shelby Scharbach, Maricopa County Special Turnaround Achievement Award: Curt Krizan, Fiesta Bowl
The Phoenix office of Eide Bailly LLP has an “Eide Bailly Gives Back” Committee which organizes a variety of projects where partners and staff and their families, give back to the community. Eide Bailly has adopted a one-mile strip of Central Avenue and had a great turnout for their recent street clean-up. Pictured: Lauren Humphrey, Melody Salamo (and her son), John Martellini (and his daughter), Daniel Johnson (and his daughter and son), Sarah Schumacher, Jodi Kimmerle (and her son), Jeff Jackson (and his son), Rob Leslie, and Todd Sorenson. (Not pictured, the photographer, Brenda Blunt, as well as Gwen Gold and Vicky Korman.)
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Heinfeld, Meech & Co., P.C. promoted Kristen M. Conway, CPA, Casey R. Good, CPA, Kara M. Jungbluth, CPA, and James Shankland, CPA, to audit manager; Katlin M. Gelber, CPA, Kenneth McGovern, Matthew H. Miller, CPA, and Aaron Vix, CPA, to senior associate; and Mirah Rangaswami, CPA, Christopher Rogers, Cynthia Rojo, and Jared Young to staff associate II. Tina Leadbetter has joined The Accountant’s Office, LLC as president. Kevin Stephens, CPA, a partner at HintonBurdick CPAs & Advisors, has been named to the Intuit Inc. Accountant and Advisor Customer Council. Henry & Horne admitted Phillip R. McCollum, Jr., CPA, Melinda Nelson, CPA, and Jonathan Poppel, CPA, to the partnership. More than 20 Henry & Horne team members helped beautify the Children’s Museum of Phoenix. The firm has also been awarded the 2016 When Work Works Award. Pamela Eggert, CPA, and Todd Sorenson, CPA, were promoted to partner at Eide Bailly LLP. Lynne Bouvea, CPA, ABV, ASA, CFE, CFF, has joined Kotzin Valuation Partners.
JULY/AUGUST 2016 AZ CPA
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A Dash of SALT
Be Wary of Arizona’s New Sales Tax Exemption Certificates This month’s state and local tax (SALT) column explains the onerous new restriction the Arizona Department of Revenue (Department) recently imposed on taxpayers who must obtain exemption certificates from their customers, and it introduces a few new and revised Arizona exemption certificates. The Arizona Department of Revenue recently introduced three new transaction privilege (sales) tax exemption certificates and revised three others.
by James G. Busby, Jr., CPA
A New, Burdensome Restriction As usual, most of the certificates allow customers to specify whether the certificate is valid for a single transaction or for a period of time. But now, for the first time and apparently without statutory or other legal support for its position, the Department specified that four of the six certificates cannot cover a period exceeding 12 months. If this requirement is upheld, taxpayers will have to request new exemption certificates from their customers at least once per year. Many taxpayers are unhappy about the burden imposed by this new requirement, disappointed that the Department made this change without first consulting with taxpayer advocacy groups, and hope that the Department will reconsider this onerous requirement. The new, 12-month limitation was included in the October 2015 versions of Arizona forms 5000, 5000A, 5000HC, and 5000M. Like the rest of the certificates identified below, these new and revised certificates are available on the Department’s website.
Revisions to Arizona Form 5000 Arizona Form 5000 allows Arizona taxpayers to document a wide variety of exemptions. The Department made several changes to this form besides suggesting it may only be issued for periods of up to 12 months. For instance, the Department specified that taxpayers should begin documenting sale for resale exemptions on Arizona Form 5000A instead of on Form 5000. Likewise, it indicated that contractors who do not have Arizona sales tax licenses should use Arizona Form 5000M (addressed in more detail below) instead of Form 5000. The Department also removed some of the boxes on Form 5000 that were used to claim uncommon exemptions and some exemptions for transactions with nonprofit health care institutions (which, as discussed below, were moved to Arizona Form 5000HC). The Department also added space for taxpayers to claim municipal exemptions now that it will soon begin collecting municipal sales taxes for all Arizona municipalities.
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.
JULY/AUGUST 2016 AZ CPA
Revisions to Arizona Form 5000A Arizona Form 5000A is used to document sales for resale. It is one of the certificates that, the Department claims, may not be issued for a period to exceed 12 months. The Department added some language on this form to explain that some customers, like agencies of the U.S. government and unlicensed Arizona school districts, may purchase items for resale without providing a sales tax license number. The Department indicated that those nonprofit organizations that qualify to purchase items for resale in Arizona should attach a copy of their IRS determination letter to this exemption certificate.
New Certificate for Health Care Organizations New Arizona Form 5000HC is used to document exemptions for transactions with nonprofit health care institutions, including qualifying hospitals, qualifying health care
organizations, qualifying rehabilitation centers for mentally or physically disabled persons, and qualifying community health centers. These organizations must obtain an annual exemption letter from the Department, and Arizona Form 500HC is only valid for the period covered by their exemption letter.
New and Revised Certificates for Contractors and MRRA Projects As I explained in this column last year, Arizona implemented extensive changes to its sales tax laws regarding the taxation of contractors that went into effect on January 1, 2015. For instance, subcontractors working for a prime contractor on a job that is subject to Arizona’s prime contracting tax may now purchase building materials taxfree using Arizona Form 5009L, even if they do not have a sales tax license. More recently, the Department introduced new Arizona Form 5000M, which allows contractors lacking a sales tax license to purchase tangible
YOU’VE GOT THE SMARTS. NOW GET THE SAVVY.
personal property tax-free if it will be used on a qualifying, nontaxable, maintenance, repair, replacement, or alteration (“MRRA”) project. Finally, the Department revised Arizona Form 5005 to accommodate both MRRA projects and projects subject to prime the contracting tax. Form 5005 may be provided to subcontractors by prime contractors, or those taking responsibility for the taxes due on materials for MRRA projects, as proof that the subcontractors are not responsible for such taxes on the project(s) covered by the certificate. Practice Tip! –Taxpayers subject to Arizona sales tax generally should collect tax from their customers unless the customer provides a valid, complete exemption certificate. If the Department’s allegation that some exemption certificates may not cover periods exceeding 12 months is upheld, many Arizona taxpayers may have to collect exemption certificates more often than they had to previously. n
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In Good Company
Love of Vintage Clothes Leads to Dream Job for CPA They say clothing makes the man (or woman), but in Kathryn Riser’s case, her love of vintage clothing actually helped land her the job of her dreams! Kathryn A. Riser, CPA, is currently the business manager for Buffalo Exchange Ltd., a national resale clothing company headquartered in Tucson. Riser was working as CFO for the Arizona-Sonora Desert Museum and met her current boss, Kerstin Block, who was on the board of the museum.“It is funny because she can actually remember what I wore to my first interview,” says Riser. After working with Riser on the board for awhile, Block asked if she would be interested in working for Buffalo Exchange and Riser jumped at the chance. “I love my job,” smiles Riser. “It combines my professional skills with my love of fashion, so I couldn’t ask for anything better.” Riser has been collecting vintage clothing for 25 years. “I first went to a vintage clothing sale in Oakland in 1984, and I was amazed that I could buy these things — some of which were museum quality. I was hooked from that point forward.” Her favorite pieces include Mexican tourist jackets from the 40s (she owns 63 of them) and she collects primarily vintage western items. “I like the flashy stuff like Dale Evans would have worn.” Riser says she appreciates the leadership she’s received from Block. “I’ve found
her to be a calm and solid leader,” explains Riser. “She emulates reasonableness and practicality in her business decisions. Quite frankly, she is a true visionary. She and her late husband, Spencer, conceived this concept of buy, sell and trade at a time when it really wasn’t cool to wear used clothes or shop at Goodwill. Kerstin started the store in 1974 with a little 450 square foot store near the University of Arizona campus. It has blossomed into 48 stores in 17 states. We are going to open two more stores this year in Nashville and Hollywood, Florida to bring it up to 50. We are still headquartered here in Tucson, which is pretty amazing. Most people don’t even know that we have all these stores. They think we are just a small local company.” Riser’s responsibilities as business manager include the supervision and project management of the accounting and IT departments, as well as front office administrative services, and she is a member of the board of directors. One of her main goals is to streamline operations for the stores, so the managers can spend more time with the customers, and in turn, generate more revenue for company. She attends a lot of meetings, and one of her biggest challenges is when they upgrade their point of sale software. “It has to be fully tested to include all of our custom modifications for the buy-sell-trade operations and then it must work perfectly with all of our peripherals before we can even begin to deploy it to the stores,” says Riser. “IT is a big part of the business here at Buffalo Exchange, and this is the most sophisticated IT department I’ve ever worked with.” One of the best parts of her job is when she attends the semi-annual store managers meetings where she gets to interact with the managers. “It is always so inspiring to see the fashions that store managers wear,” says Riser. Riser also had a very unique background before working at Buffalo Exchange. She joined the Air Force right out of high school so she could take advantage of the GI Bill. “I was the 10th woman on a base with 3,000 men,” ex-
JULY/AUGUST 2016 AZ CPA
Riser in a Seminole Indian skirt in her refurbished Airfloat trailer from 1957.
Riser in a fiesta skirt in her second home in New Mexico — a renovated schoolhouse from 1936.
AZ CPA JULY/AUGUST 2016
plains Riser. “It was an interesting time. We were really protected and treated like we were sisters. I never saw any sexual harassment. We were segregated and women had a separate Air Force then. I was called a WAF. My basic training was a lot different from today’s training – it was more like a beauty school. They had consultants come in to show us how to put on make-up, how to wear our hair and how to walk with our purse on our arm. We never did an obstacle course, and I never fired a weapon.” Riser was in the Air Force during the Vietnam War serving in Misawa, Japan in the Electronic Intelligence Security Service and later worked for the National Security Association where she analyzed Russian and Chinese communications. “The Air Force opened so many doors for me,” says Riser. “I got a job at Touché Ross before I was even out of college, and I didn’t have to go through the interviewing process because they were so impressed that I was in the Air Force.” She received her accounting degree from the University of Akron. Riser says she went into accounting because she knew she could always be employed, and there were a variety of fields that she could pursue within the profession. “Getting the CPA designation was just icing on the cake,” said Riser. Riser’s accounting career began in the audit and tax departments of Touché Ross & Co., in Ohio. When she moved to Tucson in 1981, she continued her public accounting career with Coopers & Lybrand, focusing on healthcare and nonprofit audits. She went on to work as a CFO in a variety of industries including healthcare, construction, international music recording and distribution, and nonprofit organizations. She served as the CFO and chief administrative officer for the Arizona-Sonora Desert Museum for 10 years. In her spare time, Riser and her architect husband collect and renovate vintage Airstream and Airfloat travel trailers. They are also in the process of renovating and converting a New Mexico 1936 WPA (Works Project Administration) stone schoolhouse into their second home. n – Patty Gannon
Building Relationships for Professional Advancement by Michael S. Seaver In 1995, Steve Jobs said, “Life can be much broader once you discover one simple fact: everything around you that you call life was made up by people that were no smarter than you ... shake off this erroneous notion that life is there and you’re just going to live in it, versus embrace it ... make your mark upon it.” To me, this is a remarkable reminder about the power of taking action daily, making mistakes and finding unique ways to share your personal brand. Many executives I coach think they only need to build relationships when they’re transitioning between careers. This erroneous notion ignores just how interconnected our world has become from advances in technology, globalization and the power of conducting business with people we trust. A January 2015 Forbes article provided valuable insight into how important relationships are to one’s career. Author Michael Simmons’ research uncovered that, “According to multiple, peer-reviewed studies, simply being in an open network instead of a closed one is the best predictor of career success. In fact, the studies show that half of the predicted difference in career success (i.e., promotion, compensation, industry recognition) is due to this one variable.” In other words, more than 50 percent of your career success is directly attributed to how often you meet and engage people you’ve not met before. By only engaging a small, closed, well-known group of colleagues, you’re severely limiting your professional opportunities.
JULY/AUGUST 2016 AZ CPA
Executives often make one, or more, of the following mistakes when networking and building relationships.
higher levels of success not only when he or she is in transition, but also when employed.
W Networking only when they need a job.
W Avoiding building relationships because it is uncomfortable.
In a society driven by 24/7 access to email and work-related tasks, it is difficult for gainfully employed professionals to make time for relationship building. Not only does it take time away from your family or a favorite hobby, but building meaningful relationships often doesn’t drive immediate results. Because there is rarely a tangible outcome or benefit from the conversation, you avoid doing it. After all, we live in an immediate gratification culture. To overcome this, it is important to mentally accept that networking will not yield immediate results, but the payoff will occur in the future. It is also very helpful to diversify the channels through which you engage your stakeholders. I often encourage professionals to become active in as many as possible of the following seven arenas: a full-time job, a part-time job, being an entrepreneur, professional associations, alumni groups, philanthropic organizations and faith-based groups. An executive who finds unique ways to spend time in and filter his or her personal brand throughout these channels will drive
If you’re like me, you’re an introvert. You prefer to recharge your batteries at the end of a stressful day by being alone or spending time with loved ones. Reading a good book, going for a hike, or playing with the dog help to bring you back to center. When we look at our extroverted colleagues, we may feel a bit envious at how simply they seem to be able to work a room, meet new people or have free time on their schedule for multiple coffee meetings daily. Although uncomfortable, it is important for executives to remember that relationship building is a process. I’ve found that successful executives understand the power of their subject matter expertise. They use it to their advantage by continually finding new groups of people to share their knowledge with. As a coach, I can walk into a group of finance professionals and immediately be of value because my area of expertise is different from and valuable to them. Take a few moments to consider what groups your subject matter expertise might be of value. Then, establish a process for connecting with new individuals in those groups. After a
Like this topic? Hear executive coach Michael Seaver speak more on the importance of building professional relationships at the Corporate Finance
Conference on Aug. 24. 14
AZ CPA JULY/AUGUST 2016
Learn more at www.ascpa.com
few meaningful conversations, you’ll overcome your fears and feel much more comfortable with sharing your expertise.
W Continually extracting value, not generating it. I’ve seen my fair share of ego-centric executives. I’m guessing you have as well. These people are only willing to spend their time with people who they think can do something for them. Instead of trying to find ways to generate value for their new connections, they extract as much value as possible out of the person and move onto the next. Shift your mindset to be a “go-giver” and consider that people remember a small percentage of what you say or do, that relationship building takes time and that it is a multi-step process that can be tracked. I’ve seen clients make the networking process a game where they meet with a colleague multiple times and each meeting try to find ways to do something nice for the person three times before they ask for anything in return. Instead of fearing what might come from the relationship, treat it as a game where you get to learn wonderful things and find unique ways to generate value for the person. In the 21st century, trust is a new and valuable currency. Trust is built not only when you’re in between jobs. Trust is built when people see you overcoming your own fears and sharing your subject matter expertise in areas you haven’t before. Trust is built when you generate value for people three times before ever extracting it. Remember, everything around you was made up by people no smarter than you. You can readily advance professionally and make your mark upon life by taking small, disciplined actions each and every day. These topics and more will be discussed in my presentation at the August 24, 2016 ASCPA Corporate Finance Conference. n Michael S. Seaver is an executive coach, leadership consultant and speaker. He can be reached at michael@michaelsseaver. com, (480) 540-9399.
Ransomware and Cyber Risk Management by Randy R. Werner
Ransomware and cyber extortion represent one of todayâ€™s more malicious types of hacker attacks. It sneaks into computer systems, encrypts files, and demands a ransom before decrypting the files. A major problem is that ransomware does not always decrypt files even after the ransom is paid. Being prepared and taking precautions against cyber risk exposures such as ransomware is therefore essential. Otherwise, youâ€™re at the mercy of criminals who prey on unprepared and unsuspecting businesses and individuals. JULY/AUGUST 2016 AZ CPA
Ransom demands range from a few hundred dollars to several thousand, depending on the size of the victim. Not all ransomware attacks are reported to authorities, so estimates of the total amount paid over the past few years vary widely, ranging up to $300 million. The more notorious names among ransomware are CryptoLocker, CryptoWall, TorrentLocker and Locky, among others. Some attacks rely on software that now has known fixes, so a solution might be found online. However, other ransomware is technically advanced and has no known fix, except for the victim to rely on current backup files. The primary defense is to institute frequent backups of the files you do not want to lose. Some ransomware even seeks out backup copies of files, so best practices include creating multiple backups in different locations. Cloud services, or remote backup services, and external or USB hard drives are options to consider for multiple backups. Even with backup files in place, a firm may still spend many hours gathering, re-entering and reconstructing data. Rebuilding work, such as tax returns based on the backups, also takes time. If personally identifiable information is involved, such as Social Security numbers, the firm might also need a professional risk assessment to determine its legal responsibilities. Such losses can sometimes be avoided by creating user awareness and training everyone in your firm to be extremely cautious about unsolicited or questionable attachments or hyperlinks in email messages. Training can broaden your firm’s prevention IQ. It also never hurts to call or contact senders to ask if they sent you a document before you open it. Sometimes ransomware enters a computer system via innocuous-looking Word or Excel documents. There’s a reason why people say, “An ounce of prevention is worth a pound of cure.”
Loss Prevention Tips Create backup copies of all important data and information on a regular basis. The frequency of backup depends on how often your data changes, and the
AZ CPA JULY/AUGUST 2016
With more devices becoming connected to the Internet, it is important to take steps toward avoiding cyber threats such as ransomware. impact on your business if you lose the data between the last backup and the time of loss. Store and secure backup copies away from your office location and use encryption to protect any sensitive information about your firm and clients. Regular backups better ensure that critical data is not lost in the event of a cyber-attack or physical incident such as a fire or flood. Do not open attachments or hyperlinks if you did not request them or if the e-mail is suspicious or questionable. Do not follow instructions to “enable macros” or “enable content.” Many attacks appear to come from a trusted source or someone you know, as part of a social engineering scheme. A scheduled event, travel plans, or user interests can be used to create what looks like a legitimate document, employing logos and brands to deceive users into performing an action such as opening a document, clicking a link, or changing a password. The action then enables a hacker to commandeer accounts and launch attacks. By hovering your mouse over a link, without clicking it, you can check the address for the website. If the address is for a different website, that’s a big red flag, as is a misspelled link. Strictly define user permissions and restrictions so that users don’t have any more rights or access to a program or system than they need, also known as the “least privilege” concept. The same applies to administrators, who should not stay logged in as an administrator any longer than is strictly necessary. Excessive rights and activities can allow
malware to do extra harm and lead to large losses of data. Apply all software security updates to your computer. Once a software vulnerability is identified, most software companies automatically issue software updates. If the software you are using does not have an automatic update feature, develop a business practice to check for latest updates. Antivirus software is a must. Antivirus companies constantly update virus definitions to defend computers against new threats, and for the most part these software updates are seamless to the user. Most antivirus software includes spyware, adware and e-mail attachment protection. If not, they should be deployed along with antivirus software. Consider cyber insurance. Coverage for extortion expenses incurred as a result of a credible cyber extortion threat is a good feature, but remember that paying a ransom does not always decrypt files. With more devices becoming connected to the internet, it is important to take steps toward avoiding cyber threats such as ransomware. Have a plan in place for mitigating threats and risks. If and when you are hit by a threat, you’ll at least be in line with the Boy Scout motto, “Be prepared.” n Randy R. Werner, J.D., LL.M./Tax, CPA (in California) is a loss prevention executive with CAMICO (www.camico.com). She responds to CAMICO loss prevention hotline inquiries and speaks to CPA groups on various topics.
Fiduciary Responsibilities by Roman Leshak, Jr., CPA Retirement plan fiduciaries are not exclusive to one specific role or title in an organization. They can include the owner, CFO, retirement committee, or human resource professionals. In fact, plan administrators may not even know they qualify as a plan fiduciary and may believe they are protected if they hire service providers to be third-party administrators (TPA). That is not the case. While plan administrators may delegate responsibility, they cannot abdicate total fiduciary responsibility for their plan and must act with the same care, skill, and diligence under prevailing circumstances that a prudent person acting in a similar capacity would exercise. Here are a few areas that every plan fiduciary should address to fulfill his or her fiduciary responsibilities.
Establish an Oversight Committee The makeup of your oversight committee will be based on your planâ€™s size and complexity. But, at a minimum, it should include named plan trustees and those responsible for making plan decisions. The committeeâ€™s focus should be on determining whether the plan is operating effectively and in the best interest of plan participants. Meetings should be held on a regular basis to review investment
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ASCPA Upcoming Conferences
Forensic & Litigation Services Conference Sept. 8 8 a.m. to 4:30 p.m. ASCPA Learning Center, Phoenix Also offered as a webcast •
Litigation Rules for CPA Expert Witnesses
How to Bulletproof Your Expert Report Against Opposing Counsel Attack
Treasonable Compensation? The Continuing Misapplication of the Excess Earnings Method
Some Rules Should Not Be Broken. Experts, You Better Know Which Ones!
Avoiding Accounting Malpractice
Exposing Fraudsters Using Profiling and Forensic Data
Business Valuation Conference Sept. 9 12:15-4:00 p.m. ASCPA Learning Center, Phoenix Also offered as a webcast •
It’s in There: What’s Baked Into the Conventional Cost of Capital Data?
Panel: Fast Five Valuation Headaches
Pratt Stats: What You Need to Know
Go to www.ascpa.com, click on CPE, then Conferences for more information and to register.
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performance, strategy and design, and industry trends that may affect the plan. In addition to committee members, TPAs should be invited to meetings to share ideas and answer questions. Meeting minutes should note those in attendance, topics discussed, and all decisions made, including the rationale for those decisions.
Maintain a Fiduciary File Every plan should maintain a complete fiduciary file. The file should include the following: • The plan document • Adoption agreement (if a prototype) • Summary plan description • IRS determination letter • Investment policy statement • Copies of all meeting minutes • TPA agreements or contracts • Copies of any insurance contracts held by the plan • The most recent fidelity bond policy coverage Maintaining a complete file will benefit the plan should there be an IRS or Department of Labor audit, and it provides a complete document trail in the case of turnover.
Monitor Investment Performance Acting as a fiduciary for a retirement plan is likely not someone’s sole job responsibility. In fact, the fiduciary may not be an investment professional, yet is still responsible for the oversight of millions of dollars of participants’ money. Engaging a qualified investment adviser to assist with this task is extremely important to benefit plan participants and the person with fiduciary responsibility.
Monitor Plan Fees The number of excessive participant fee cases has been rising, and this is an area where an adviser can add value and protection. Expense allocations to participants, record-keeping charges, revenue sharing, and overall participant fee equitableness are all items that should be reviewed and discussed annually. Annual 408(b)(2) fee disclosures should
also be reviewed with a qualified adviser to determine where your plan ranks in relation to others of similar size.
Manage Relationships with TPAs Plan fiduciaries are responsible for hiring qualified plan service providers, monitoring their services, and understanding the fees they charge. Conversations with your TPAs should focus on the strategies and long-term goals for the plan as well as for the overall organization. Consider holding annual meetings or conference calls with all of your service providers to review goals and strategies, discuss industry trends, establish timelines and assign responsibilities. Plan decisions should not take place in a vacuum. Involving all of your service providers can help facilitate decisions.
Address Pension Plan Liabilities Defined benefit plans have their own set of risks and challenges. Management is at the mercy of market volatility and interest rate changes. It is imperative to coordinate with your plan’s actuary to develop a successful long-term solution. As companies look to reduce pension liabilities, they are turning to term-vested cash-outs, partial plan annuities, and full plan termination. Proper plan oversight by an informed fiduciary can prevent many common deficiencies and help reduce your plan exposure to major issues. Make the items outlined above a priority. They are a good starting point when fulfilling your fiduciary responsibility. Some additional resources that may be helpful include the Department of Labor’s guide to meeting fiduciary responsibility and the AICPA Employee Benefit Plan Audit Quality Center’s Effective Monitoring of Outsourced Plan Recordkeeping and Reporting Functions. n Roman Leshak Jr., CPA (CPA in Pennsylvania), is director of audit and accounting with Kreischer Miller in Horsham. He can be reached at firstname.lastname@example.org. Reprinted from the Pennsylvania CPA Journal.
Five Concepts for Effective Negotiation by Tracy L. Bullock Negotiation is inevitable, whether we like it or not. Often seen as a win/lose situation versus a give/take proposition, the entire process of negotiation is frequently intimidating. Fears of failure and risks of being taken advantage of frequently overshadow the possibility of gains and visions of success. The fundamental consideration in any negotiation is why you want to do business in the first place. There is no “right” for the wrong product, even if the price is low.1
Five Concepts for Effective Negotiation 1. Planning & Preparation — The single biggest payoff in any negotiation is the time devoted to your planning and preparation. It’s not enough to research the other product, company or individual, you must also understand the objective of the negotiation itself. Devise a plan: • What knowledge do you have? • What value do you have that is intrinsically yours? • Is this a short- or long-term relationship commitment? • What sources of power do you have?: 3Competition 3Brands/Experience 3Clientele 3Centers of Influence 3Money 3Knowledge 3Personal Presence
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What power sits on the other side of the table? What skills do you bring? What skills do you need? Is time a factor? Is this a leverage point in your favor or in theirs? 2. Set a Goal — Start with the end in mind and continue as if you mean to finish successfully. Too often a goal of “Do your best,” is the only target we set for our success. What is our best? By what measure and did our “best” deliver business results worth the effort? Without a goal, we sound like Alice, in Alice in Wonderland: Would you tell me, please, which way I ought to go from here? That depends a good deal on where you want to get to. I don’t much care where – Then it doesn’t matter which way you go.
Well-defined behaviors in negotiation are driven by clear strategy. If you can’t state your desired outcome in a sentence or two, you can’t sell it. A strategy without clearly defined long- and short-term goals is only a vision with
no hope of success. The actions needed by everyone on your negotiation team to deliver those plans requires guts, as well as a willingness, to “show up.” This is where personal presence is key. You must show up to play. Sales coach David Sandler states that, “It’s not how you feel that determines how you act, but how you act that determines how you feel.” 3. Raise your Aspirations to Raise your Expectations — Research shows that people raise their expectations following success and lower them after failure. Great success leads to greatly raised aspirations, and great failure results in a severe drop of confidence. Those who attribute success or failure to their own doing are more apt to respond in this manner. Without a goal for business success, as well as personal achievement, you’ll never get to that ever-moving horizon. Does your planned approach lead you to challenging targets to achieve greater goals, or easy-to-reach targets that deliver more of the same? Neither success nor failure is experienced if
Learn more about this topic and more at the ...
Corporate Finance Conference Aug. 24
• Gaining and Sustaining Competitive Advantage in a Time of Change – Dr. Amy Hillman, Dean, W. P. Carey School of Business
• Negotiation Skills: Building Relationships and Importance of Concessions – Tracy Bullock, Bullock Training & Development
• Don’t Wait Too Late to Build Relationships for Professional Advancement – Michael Seaver, Executive Coach
• Cybercrime Targeted Toward Financial Departments – Rodney Joffe, Senior VP, Senior Technologist, and Fellow, Neustar, Inc.
• Being Powerfully Productive: Enhancing Your Effectiveness – Margo Brown, Wave Productivity • Value of a Professional Employer Organization (PEO) – Dana Noone, ADP
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targets are too easy or too difficult to reach. 4. Don’t Assume — You know the old saying, but in negotiation, things are not what they appear to be. Don’t sell your idea the way you’d like to buy one – be confident and focus on how the other side of the table wants to buy. Active listening and clarifying not only WHAT you heard, but WHY they asked, will make all the difference in appropriate responses … and will help control the shift in power. The power of 3+1 works here: reverse the questions 2-3 times to understand the reason behind “the ask,” and you’ll get to the one true motive and have a more educated way to respond. 5. Plan your Concessions — One man’s trash is another man’s treasure. It’s a saying that truly demonstrates that value is in the eye of the beholder. The key to giving and getting concessions is as much in how you deliver the concession as in what you’re willing to give to get. Remember, you don’t have to give something up for every concession they make. “No” is an acceptable answer ... if you’re willing to say it. Too many people are afraid of saying no. (“It’s impolite.” “I’ll shut them down.” “I’ll lose the relationship.”) Actually, knowing your “walk-away” point is as important to any negotiation as knowing your product/services, having great skills, and a solid plan. No one ever said negotiation is easy, and you may think that those who enjoy it are crazy, but planning, preparation and clarifying your purpose and responses will accelerate business gains through effective communication. n 1. Effective Negotiating by Dr. Chester L. Karrass.
Tracy L. Bullock is president of Bullock Training & Development, Sandler Training. She will be a speaker at the Corporate Finance Conference on Aug. 24. Contact her at (602) 524-3950, tracy.bullock@ sandler.com or www.tbullock.sandler.com.
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% or more and earn one hour of CPE credit in specialized knowledge. It’s that easy! Fees
Members $25 Nonmembers $40
Online Access Login to www.ascpa.com and go to CPE/OnDemand CPE Quick Quiz 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 July, 2017. Please note that users have three attempts to pass the quiz with at least a 70% score.
July/August 2016 Issue of AZ CPA* 1. In the Chair’s message, Greg Nelson mentions that there are approximately how many CPAs licensed in Arizona? m 35,000 m 16,000 m 10,000
5. According to multiple, peerreviewed studies, what one thing is the best predictor of career success? m Being in an open network m Having a high IQ m Being an extrovert
2. The ADOR specified that taxpayers should begin documenting sale for resale exemptions on: m Arizona Form 5000A m Arizona Form 5000 for 12 months only m Arizona Form 5111
6. Executives make which common mistake when networking?: m Not asking for a business card m Networking only when they need a job
3. The new Arizona Form 5000HC is used to document exemptions for transactions with: m Schools and educational Institutions m Nonprofit health care institutions m Contractors 4. Kathryn Riser, CFO of Buffalo Exchange Ltd., previously worked: m As a firefighter m In the National Security Agency where she analyzed foreign communications m As a baker
m Not following up 7. Ransomware is: m Software used to hold your passwords hostage m Used to hack into a cloud network to shut it down m A program that sneaks into a computer system, encrypts files and demands ransom to decrypt the files 8. The primary defense against ransomware is to: m Have complicated passwords over 12 characters long m Frequently back up your files and store on remote devices or external drives m Have an outside company review your security systems 9. Maintaining a fiduciary file helps in the event of: m Data loss m Dept. of Labor audit or turnover m Sale of business 10. The single biggest payoff in any negotiation is: m The time devoted to your planning and preparation m Getting to know your adversary m Going into a negotiation with an established price
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Classifieds Business Opportunities/ Practices for Sale TWO PARTNER CPA FIRM SEEKS SUCCESSION PLAN — Located in north central Phoenix, the firm serves a wide variety of clients with writeup, compilation, review, audit and consulting in addition to trust, estate, corporate, partnership, fiduciary and individual income tax services. The firm has a 25+ year history with annual revenues of $450K+. The partners wish to explore merger/buyout possibilities. Principals only, please respond to: email@example.com. SELL YOUR PRACTICE FOR CASH — Let our 33 years of experience work for you. Confidential, prompt, professional. No upfront fees. Cancel anytime. We finance buyers so you can cash out at closing! Contact Professional Accounting Sales at (800) 729-9031. http://www.cpasales.com. Selling or Purchasing CPA Practices? Gary W. Hankins has over 13 years of proven success advising and selling CPA practices in Arizona. Success is dependent on carefully planned and negotiated values and terms. Our reputation is centered on personal, no obligation, discussions with new buyers and sellers. We are selling relationships that require understanding and compassion, not just advertising. Contact us today for a personal discussion about your opportunity to grow an existing practice or guarantee a fair value for your valuable retirement asset. The buying and selling season for 2016 has begun. Contact: Hankins@ableta.com ; www.ableta.com; Phone (817) 738-3287.
Employment FINANCE AND BUDGET MANAGER - CITY OF MARICOPA -—This position requires a Bachelor’s degree in Accounting, Finance or related field. At least five (5) years of progressively responsible accounting experience preferably in public accounting. Considerable
AZ CPA JULY/AUGUST 2016
experience, including a minimum of three (3) years supervisory experience, in responsible, governmental accounting or auditing position is required. Strong written and verbal communication skills and the ability to make comprehensive reports and keep accurate records, along with demonstrated competence in computer applications. CPA is required. Please see the City of Maricopa website for full recruitment and application details at https://www.governmentjobs.com/ careers/cityofmaricopaaz/jobs/1436024/ finance-budget-manager. Applications will only be accepted via the City of Maricopa website. TAX MANAGER — Cambridge Tax Advisory LLC — Individual with significant recent tax experience focusing on individual tax needed to support investment firm. Interested party will enjoy seeking tax avoidance strategies for high income taxpayers, coordinating with financial and investment planning, and some business tax as well. Medium-term equity position possible. Successful candidate will enjoy client contact with high-income clients from various backgrounds and industries. Charitable gift planning will also be a growing part of practice. Our firm is a close-knit boutique firm
of six. Send resume and cover letter to firstname.lastname@example.org. TAX SUPERVISOR — LOCAL 10 PERSON TUCSON CPA FIRM — A minimum of five+ years of recent tax experience in public accounting and a CPA license are required. Strong technical, communication, customer service and practice development skills are highly desirable. You will review and prepare individual, partnership, trust and corporate tax returns, research tax issues and provide tax consulting services for small- to medium-sized businesses and wealthy individuals. We offer a competitive salary, flexible work schedule and comprehensive benefits package with partnership potential. Please apply by sending your resume and cover letter to email@example.com.
Misc. Residential lot for sale— Attractive wooded residential lot for sale in Pinetop. On cul-de-sac, easy access main road, near two country clubs. Architect’s prelim schematics for two car garage, 3-5 bdrm, 2,495-2,567 sq. ft. available. 0.31AC, price reduced. Jan Mullins, Spill Realty (928) 369-4300.
Coming to a computer or mobile device near you — the new ASCPA website! Watch for the new ASCPA website featuring streamlized organizational features, optimized search options and easier viewing on mobile phones and tablets.
Trending at Your Society... Office Space 16TH STREET & GLENDALE AREA — SPACE FOR LEASE — Professional building — Suite 108 is 2600 rsf, good for a 4-8 person team. Space is ready for instant move in, can be built out to suit your needs.. Call or email Jason (602) 850-5110 or firstname.lastname@example.org.
Connect Facebook The ASCPA Leadership Day was a success! We had 40 participants (leadership and staff) talking about the future of the Society.
SHARED OFFICE SPACE AVAILABLE —16TH Street & Glendale. Large executive office space available immediately in our professional suite. Share space with other CPAs, with access to all of the typical office amenities —conference room, copy room, file room — and possible shared services. A staff cubicle is also available. Call or email Ira Feldman (602) 850-5101 or email@example.com.
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Trending on Connect Subject: Did the recent AZ budget bill include an increase in the charity tax credit?
Phoenix Tax Workshop Live or by webcast Sign up online at
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I read that near the end of the legislative session the increase in the Charitable Tax credit increase was still set for approval. I haven’t read that it passed and when it would go into effect. It was slated to go to $800 for married filing jointly and $400 for single filers.This would be a great change in my opinion. Of course I work for a nonprofit! Thomas Avery, CPA Arizona Burn Foundation Phoenix, Arizona Find out the answer to the above question and join the conversation by logging on to Connect today!
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