COCPA NewsAccount – May/June 2021

NEWSACCOUNT COLORADO SOCIETY OF CPAs • MAY/JUNE 2021

Assessing Organizational Value from a Multi-dimensional Perspective PAGE 16

SPAC Mania: What’s the Buzz Behind These ‘Blank Check’ Companies?

PAGE 22

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NewsAccount | May/June 2021

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Contents

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Features 2

Meet Your New Chair: Randy Watkins, CPA, CGMA, CCIFP If anyone were destined to become a CPA, it would be Randy Watkins. He thought he wanted to be an electrical engineer. Curiosity about accounting won the career contest.

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Together, We Can Make a Difference: A 12-Step Plan to Address Racism and Unconscious Bias It is time to use the lessons and best practices we have learned to reduce and hopefully one day eliminate racism and unconscious bias. Former AICPA Chair Kimberly Ellison-Taylor, CPA, CGMA, outlines the steps to take.

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Quick Pulse Survey 3: Work/Life Balance Challenges Continue This report is the third in a series of benchmarking collaboratives conducted

by Avenue M Group on behalf of state CPA societies since April 2020. The ability to maintain work/life balance remains the main challenge.

Assessing Organizational Value from a Multi-dimensional Perspective Considering economic value through the lenses of Environmental, Social, and Governance (ESG) results rather than solely financial performance is gaining mainstream attention.

SPAC Mania: What’s the Buzz Behind These ‘Blank Check’ Companies?

SPACs have been around for at least a decade, but they’re seeing unprecedented growth. Once you’ve heard the term, you’ll begin seeing articles everywhere.

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Going Remote: Auditing in a Virtual World The onset of the COVID-19 pandemic and the shift to remote work required a new way of approaching the audit process. Now, firms are taking flexible approaches to accomplish the tasks.

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Cybersecurity and the Cyber Secure Business Without proper planning and protection, it isn’t a matter of if your business will be compromised but when.

26 Departments 2 33

Chair Column Movers & Shakers, In Memoriam, Classified Ads

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May/June 2021 | www.cocpa.org

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CHAIR COLUMN

NEWSACCOUNT

A bimonthly publication of the Colorado Society of Certified Public Accountants Vol. 67, No. 1 May/June 2021

Officers

Randy L. Watkins, Chair Angela Roberts, Vice Chair Peter J. Derschang, Treasurer Sharon S. Lassar, Immediate Past Chair Mary E. Medley, Secretary

Directors

Diego J. Baca, James N. Brendel, Jim Gilbert, Mary-Margaret Henke, Amy King, Kelly A. Kozeliski

Editorial Board

Jack Allgood, Steve Corder, Georgia Z. Phillips, Lori Anne Reinwald, Laura J. Theiss, Barbara J. Tedesko, Steve Van Meter, Michael D. West, Charlie Wright Mary E. Medley, President/CEO, Editor Natalie G. Rooney, Contributing Writer Ariana Cassard, Blue Ocean Ideas, Design NewsAccount (ISSN #10899952) is published bimonthly by the Colorado Society of Certified Public Accountants, 7887 E. Belleview Ave., Suite 200, Englewood, CO 80111. NewsAccount is published in January, March, May, July, September, and November and reports information, news, and trends in the accounting profession. The Colorado Society of CPAs assumes no liability for readers’ business decisions in reference to advertisements or other information included in this publication.

Membership dues include a $14.00 one-year subscription to NewsAccount.

Periodical postage paid in Englewood, CO, and additional mailing offices.

POSTMASTER: Send address changes to NewsAccount, Colorado Society of Certified Public Accountants 7887 E. Belleview Ave., Suite 200 Englewood, CO 80111 Net press run = 5,794 copies; sales through dealers and carriers, street vendors, and counter sales = 0; paid or requested mail subscription = 5,736; free distribution by mail = 0; free distribution outside the mail = 20; total free distribution = 20; total distribution = 5,756; office use, leftovers, spoiled = 38; returns from news agents = 0; total sum = 5,794; percent paid and/or requested circulation = 99%.

303-773-2877 • 800-523-9082 Fax: 303-773-6344

NewsAccount is available online at www.cocpa.org.

MEET YOUR NEW COCPA CHAIR:

Randy Watkins, CPA, CGMA, CCIFP

BY NATALIE ROONEY

If anyone were destined to become a CPA, it would be Randy Watkins. His father, a CPA now retired, had his own firm in Greeley, Colo. With all of that exposure to the career opportunity, accounting would have been a natural choice. “Actually, I thought I wanted to be an electrical engineer,” Randy says.

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ut then he took Accounting I his junior year of high school, and everything changed. He did very well in the class and went to a Future Business Leaders of America state competition where he won fifth place, competing against Accounting II students. “By then I had developed a curiosity about accounting.”

It turns out that growing up, Randy wasn’t entirely sure what his father did for a living.

“I just knew he was really busy four months of the year and golfed the rest of the year,” he chuckles. “My dad never pressured me, but he was excited when I began to show an interest.”

The nature of accounting is what first clicked. “I’ve always excelled at math and science, so things that make sense and are logical are easy for me to grasp,” he explains. “But accounting is also challenging. It’s exciting to work with all types of companies, in a variety of industries and of all sizes. As I learned more about the types of things you’re exposed to as a CPA, and the opportunities, my interest in the profession grew.”

When Randy began his freshman year at the University of Northern Colorado, he officially declared himself an accounting major.

After graduation, Randy joined BDO (for the first time). It wasn’t until 2008, when his father was planning for retirement, that he took over the family firm, moving back to

“It wasn’t as easy as I thought, but once I met the right people, the growth began to happen.”

Greeley from Denver with his wife, Nicole, also a CPA. SETTLING DOWN BUT NOT SETTLING Once he was back in his hometown and heading up his own firm, Randy was interested in growing the business which employed two partners, a full-time receptionist, and his aunt who provided part-time administrative support. “At first I thought it would be no problem to grow the practice and bring in new clients. Then I realized how little I knew about Greeley, even though I grew up there,” he says. “It wasn’t as easy as I thought, but once I met the right people, the growth began to happen.”

Over the next two years, Randy grew the firm by 50 percent. “It was exciting,” he says.

“I was opening a lot of doors and creating opportunities, but as a small firm, you’re limited by resources. There were things we just couldn’t do. We needed a bigger knowledge base and more technical skills.”

When clients needed help beyond what his firm could provide, Randy referred them to Greg Anton at ACM. That referral process became the catalyst for potential merger conversations. In 2010, Randy merged his firm with ACM, and then on August 1, 2020, ACM joined BDO USA, LLP, bringing him full circle - back with his original employer.

Today, Randy is an assurance partner in BDO’s Northern Colorado office. He focuses on auditing and financial reporting services for exempt organizations, construction, manufacturing and distribution, and software and technology companies.

THE YEAR AHEAD Randy traces his involvement with the COCPA to the early days of his career when he lived in Denver and joined the COCPA Young Professionals Committee. When he returned to Greeley, he was an active member in the COCPA Northern Chapter, eventually becoming chapter chair. After participating on some of the AICPA’s national level committees, Randy was selected to attend the AICPA’s first Leadership Academy.

He previously served on the COCPA Board of Directors before becoming vice chair in 2020 and chair this year.

Randy plans to continue building on the work immediate past chair Sharon Lassar began during a very challenging year. “She really shone a light on member engagement and created a pool of individuals we can bring into committee and leadership roles,” he says. “I want to further her efforts in that area and continue to be deliberate in how we engage with our volunteers.”

As he looks ahead, Randy talks about the importance of CPAs maintaining relevance when technology is changing things so quickly. “How do we connect and maintain our relevance as assurance providers?” he asks.

“As CPAs, we’ve done a great job on things like supply chain assurance, but change is happening so quickly, and adapting can be a challenge. As a profession, we’re up for it.”

RV LIFE This summer, and really whenever they can find the time, you’ll find the Watkins family hitting the road in their 5th wheel RV. Nicole grew up traveling the country and has seen 46 of the mainland U.S. states. Now, Randy and Nicole are sharing that adventure with their daughters, Lennon (11) and McCartney (8). (You can guess the name of Randy’s favorite band.) Every other year, they choose a loop and spend two or three weeks on the road. One of their biggest adventures so far was spending three weeks traveling to and from Upstate New York. “It’s a fun way to see the country and spend time together,” Randy says. “You go to places you might never have seen if you had flown to your destination.”

There’s a lot to look forward to this year, whether it’s traveling with his family or stepping into the COCPA chair role where Randy says he especially looks forward to meeting and connecting with members.

Both Randy and Nicole enjoy golf, and he loves watching sports of all kinds. They have a home on Jackson Lake in Orchard, Colo. for watersports, but Randy says his favorite spot in the world is Bear Lake, Idaho, a freshwater lake that spans the borders of Idaho and Utah. It’s known as the “Caribbean of the Rockies” for its crystal blue water and white, sandy beaches.

There’s a lot to look forward to this year, whether it’s traveling with his family or stepping into the COCPA chair role where Randy says he especially looks forward to meeting and connecting with members. We all hope he’ll be able to hit the road literally, not just virtually this year, to see COCPA members and some Colorado places he hasn’t seen.

Email Randy Watkins at rwatkins@bdo.com.

Encouraging engagement with firms is another goal. “How do we create value and encourage firms to become involved?” he asks. “I’d like to do some fact finding and pulse-taking initiatives in that area.”

Environmental, social, and governance (ESG) issues also are of great interest to Randy, who wants to help the COCPA take a leadership role in reporting beyond the current standards. “It’s an area that has always fascinated me,” he says.

“We’ve been seeing an increased focus on this area, especially the social aspect.” (See Randy’s ESG article on page 16.)

May/June 2021 | www.cocpa.org

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THE FUTURE READY PROFESSION

CPA EVOLUTION:

A Status Update

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PA Evolution is a joint initiative of the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA), focused on transforming the CPA licensure model to reflect the rapidly changing skills and competencies the accounting profession requires today and will require in the future. It will put in place a flexible and adaptable licensure approach that will serve as the foundation for future-proofing the CPA profession.

• Newly licensed CPAs should demonstrate strong common core competencies.

• The new CPA licensure model should position the CPA for the future.

• The new CPA licensure model should continue to protect the public interest.

Based on this feedback and lessons learned from studying other international and domestic licensure models, NASBA and the AICPA developed a new approach to CPA licensure. In 2020, both the AICPA Governing Council and the NASBA Board of Directors voted to support advancement of the CPA Evolution initiative. The AICPA and NASBA are now moving forward with implementing the new model.

WHAT IS THE NEW LICENSURE MODEL? The new CPA licensure model takes a core + discipline approach, starting with a deep and strong core in accounting, auditing, tax, and technology that all candidates will be required to complete. Each candidate also will choose a discipline in which to demonstrate deeper skills and knowledge. Regardless of chosen discipline, this model leads to full CPA licensure, with rights and privileges consistent with any other CPA. A discipline selected for testing will not mean the CPA is limited to that practice area.

• Results in one CPA license.

WHAT DOES THIS MEAN FOR THE UNIFORM CPA EXAMINATION? The specific content of the core and the disciplines will be determined by a CPA Exam practice analysis, which is currently underway.

Practice analyses — gathering information about the current and future state of the profession and the work of newly licensed CPAs — are conducted periodically as part of the AICPA’s ongoing efforts to make sure the Exam is current and to maintain its validity and reliability. The current practice analysis likely will wrap up in 2022, and an Exam Blueprint will be exposed for public comment in mid-2022.

The AICPA and NASBA expect the new Exam will launch in January 2024.

WHAT’S NEXT FOR STUDENTS AND CPA CANDIDATES? Aspiring CPAs who are college first years now will be among the first to take the overhauled version of the CPA Exam when it launches in 2024. Current CPA candidates will be able to sit for the current CPA Exam until the launch of the new Exam. And a transition plan is

Bu sin es s

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analysis and ng rti po re

Based on this feedback and lessons learned from studying other international and domestic licensure models, NASBA and the AICPA developed a new approach to CPA licensure.

• Is adaptive and flexible, helping to future-proof the CPA as the profession continues to evolve.

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• The profession supports the need to change the CPA licensure model.

• Reflects the realities of practice, requiring deeper proven knowledge in one of three disciplines that are pillars of the profession.

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Over three years, NASBA and the AICPA gathered input from more than 3,000 stakeholders from across the profession on how to transform CPA licensure and meet the needs of the marketplace. During these conversations, several key themes became clear:

CORE

ACCT : AUDIT : TAX : TECH

This model: • Enhances public protection by producing candidates who have the deep knowledge necessary to perform high-quality work, meeting the needs of organizations, firms, and the public.

• Is responsive to feedback, as it builds accounting, auditing, tax, and technology knowledge requirements into a robust common core.

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NewsAccount | May/June 2021

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being developed for candidates who have started but not completed the CPA Exam process as of January 2024. Under the new model, the AICPA and NASBA expect to attract students who today wouldn’t necessarily choose the CPA route but who are becoming more critical to the success of the CPA profession.

HOW ARE THE AICPA AND NASBA SUPPORTING ACCOUNTING ACADEMIC PROGRAMS AND EDUCATORS? Accounting educators will play a vital role in preparing students to pursue the CPA under this new licensure model. The AICPA and NASBA are committed to helping educators every step of the way.

The AICPA and NASBA have engaged with faculty and practitioner volunteers to build a model curriculum that aligns with the core + discipline licensure model. The model curriculum will launch this June, and updates will be posted on EvolutionofCPA.org.

Faculty can also access the Academic Resource Hub, https:// thiswaytocpa.com/segmented-landing/academic-resource-hub/, a free database of content from the AICPA, accounting firms, academics, and AICPA teaching-award winners that will help faculty prepare students for the rapidly evolving demands of the profession. The hub contains over 200 resources on topics like data analytics and cybersecurity, for a range of class levels, to use in classroom instruction.

Under the new model, the AICPA and NASBA expect to attract students who today wouldn’t necessarily choose the CPA route but who are becoming more critical to the success of the CPA profession.

Throughout 2021, the AICPA will hold a series of faculty webinars including regular updates on CPA Evolution and deep dives into emerging topics to include in accounting courses. Check out the schedule at https://thiswaytocpa.com/segmented-landing/educator-webinars/.

As CPA Evolution continues to progress, please check back for updates at EvolutionofCPA.org. If you have questions, please reach out to Feedback@EvolutionofCPA.org.

May/June 2021 | www.cocpa.org

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DIVERSITY, EQUITY & INCLUSION

Together, We Can Make a Difference: A 12-Step Plan to Address Racism and Unconscious Bias

BY KIMBERLY ELLISON-TAYLOR, CPA, CGMA

Tragic, sad, and unbelievable are just a few of the words to describe COVID-19.

Those words apply as well to the most recent events involving Ahmaud Arbery, Breonna Taylor, Christian Cooper, and George Floyd. The events involving Black and African Americans have been hurtful, shocking, and polarizing.

But here is where the similarities stop. With the COVID-19 pandemic, there is targeted funding, expected outcomes, and accountability, as well as the best and the brightest minds working together on treatment plans and a vaccine. With over 565,000 pandemic-related deaths in the United States and more expected, COVID-19 requires a basic understanding of the threat, consistent safety precautions, individual accountability, and new thinking about how we work and interact.

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e need similar resources and focus to address the consequences of systemic racism and unconscious bias. Instead, in the pre-pandemic environment, we noted more than a few cases of “changing direction” in diversity and inclusion with less funding, reduced headcount, and less organization-wide emphasis. Further, in many instances, diversity and inclusion were managed far below the top leadership, and the approach has been mostly risk-management-based, with a focus on what “not to do” rather than how to achieve lasting change.

Over the years, Black and African Americans were cautiously optimistic when the CEO said, “Inclusion is important.” However, if my mom was right and “love is as love does,” we needed more than words. We need specific plans with accountability and expected outcomes to address racism and unconscious bias.

The pain pouring out over the past days is a consequence of an agony that permeates every aspect of our lives — writing a check in the grocery store and being asked for ID when no else is, being looked over for promotions, and or even having others cross the street to avoid you. The statements issued by business leaders have been beautiful and well written. But are they just words?

In the Black and African American community, along with the guidance to “avoid the police,” “never leave the store without a receipt or bag, even for gum,” and “never walk with your hood up,” we have added another one: “Make sure you get it on video.”

The frequency of tragic events has accelerated to a level we can no longer ignore, a point where sleeping at home in bed, visiting friends, taking an afternoon jog, going into your own home, or visiting a park to bird-watch are not safe. What’s different now is the cumulative effect of horrific videos showing multiple scenarios. These scenarios refute the “these are isolated incidents” reasoning. This is also why it is disheartening to see the distractions from the message we are working hard to get across. And while the destruction of property and violence are unacceptable on every level, we must maintain our focus on inclusion and not be swayed from the progress we want and need.

What else is different? We have visible and public encouragement from our allies and champions. I am personally overwhelmed by the outpouring of support from our colleagues who always said, “Kimberly, I see you.” My photo gallery is a rich kaleidoscope of people from across the accounting profession. I have appreciated the interactions, the friendships, and the opportunity to give my colleagues a safe space to ask questions they wouldn’t be able to ask anyone else. I

Now that we are talking about gaps in opportunity, access, and equity in the Black and African American community, the rest of the world is hearing what we have long known — there are systemic challenges in education, employment, health care, nutrition, business capital, prison sentences, etc. am now compelled to expand that safe space, to give a different view, and to help with progress.

Now that we are talking about gaps in opportunity, access, and equity in the Black and African American community, the rest of the world

is hearing what we have long known — there are systemic challenges in education, employment, health care, nutrition, business capital, prison sentences, etc.

We must work together to overcome these systemic challenges. Over the years, leaders and professionals across the accounting profession have come together to address economic, regulatory, pipeline, and advocacy challenges and initiatives. This gives me great confidence that we can make a difference in our own firms and businesses. Progress won’t be made overnight, but our resolve must be unwavering, whether it takes three weeks, three months, or three years.

Wondering where to start? Recognizing that firms and businesses are in different places, please consider these 12 steps for revamping or even starting inclusion initiatives: 1. ACKNOWLEDGE THE CHALLENGES FACED BY THE BLACK AND AFRICAN AMERICAN COMMUNITY. An authentic voice is required, and that only happens if there is at least a basic understanding of the underlying hurt. Unless we are willing to suffer the discomfort of confronting our own belief systems, the changes will only last as long as an amazing, visionary leader is in place. Please note that just because you don’t use the “N” word, it doesn’t mean that you have not unconsciously discriminated with your actions or lack thereof.

2. CONDUCT A “LISTEN AND UNDERSTAND” TOWN HALL WITH IDEAS CROWDSOURCED FROM TEAM MEMBERS ACROSS THE ORGANIZATION. These are opportunities to hear from the Black and African American community and learn things that may have never been considered.

Many of our colleagues are afraid of saying the wrong thing, but you should just speak from the heart. Put yourself in our shoes. How would you feel if it were you or your family?

3. REVIEW THE DATA. Assess the initiatives around recruitment, promotions, and overall retention of Black and African American team members. Ask tough questions, evaluate the legal department’s concerns, and determine actionable insights. It is true that there are many aspects of diversity, but right now we are talking about the Black and African American community. Where are you recruiting? What résumés are reviewed?

What candidates are interviewed, and who interviews them? Please don’t get distracted by the diverse segments that are easier to show results. Gender is an area where we see focus and increasing improvement. However, those results are not evenly reflected for Black and African American women. One step further, are there Black and African American executive leaders?

4. ASK PERIODICALLY FOR HONEST FEEDBACK ON THE CULTURE OF THE ORGANIZATION, AND COMMUNICATE TRANSPARENTLY ABOUT THE RESULTS AND ACTION PLAN. More than words are needed. Team members and, in particular, Black and African Americans are asking for progress across the talent management life cycle. Inclusion and “the best and brightest” are not contradictory statements. Many organizations have at least one Black or African American team member, but this is not perceived as diversity.

Firms must determine that they will recruit, develop, advance, and retain diverse individuals. One way to do this is by pushing back on candidate pools and interview panels that do not reflect the inclusion CONTINUED ON PAGE 8 May/June 2021 | www.cocpa.org

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DIVERSITY, EQUITY & INCLUSION CONTINUED FROM PAGE 7 initiative. Another way is to crowdsource new ideas from across the firm, as well as to seek referrals for high-performing talent — in this case for Black and African Americans.

5. ESTABLISH APPROPRIATE FUNDING THAT IS ALIGNED WITH OUTCOMES EXPECTED. In the COVID-19 environment, funding of new initiatives is challenging, but please don’t let that stop you from doing what you can.

6. COMMUNICATE THE VISION. It is important to bring everyone together on the initiative so it becomes a lived part of the mission, purpose, and values of the organization with accountability at both the individual and management levels. Start with the end in mind. Review the business case for diversity and inclusion. An example is from my Experience Inspiration session on “When Everyone Has a Seat at the Table” (youtube.com/ watch?v=T3K8nsMELvU#action=share).

7. ENCOURAGE ALLIES TO JOIN THE AFFINITY GROUPS, AND CREATE NEW GROUPS BASED ON HOBBIES AND INTERESTS. Both are needed to promote teamwork and a sense of belonging and to improve retention.

8. DETERMINE WAYS TO PROMOTE INDIVIDUAL AND COLLECTIVE ACCOUNTABILITY FOR THE INCLUSION CULTURE AND THE ORGANIZATION’S CORE VALUES. Making everyone responsible in performance evaluations is a great way to align the messaging with the day-to-day life. The chief diversity officers or human resources can’t be the only ones with the inclusion core values in their performance plans.

9. JOURNEY-MAP THE EMPLOYEE EXPERIENCE OF VARIOUS EMPLOYEES. Map their experience across the life cycle of hiring, pay, day-to-day work assignments, performance reviews, promotions, and leadership development. Where are there inconsistencies? Why? The results will highlight opportunities for training — for the individual team members as well as middle and executive management.

10. CONDUCT DIVERSITY AND INCLUSION TRAINING. The training should go one level deeper than the “Sense of Belonging” or “Respect Everyone” training that may be in place. The training must include enhanced real-life exit interview information and work scenarios. It is not surprising if many team members exit the current training thinking, “Who are those people that do those terrible things?” and do not realize the consequences of their own actions.

Further, the training must be for everyone, similar to training on sexual harassment, insider trading, ethics, etc. Why? Because inconsistent training already has led to inconsistent results.

11. REVIEW WHAT ADDITIONAL SUPPORT AND TRAINING CAN BE PROVIDED TO MIDDLE MANAGERS BASED ON VARIOUS SCENARIOS AND EXIT INTERVIEWS. Ask and evaluate if middle managers support and promote the inclusion initiative. Many Black and African Americans have reported a disconnect between what the CEO says and how middle management executes the message.

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NewsAccount | May/June 2021

12. MOVE INCLUSIVE LEADERSHIP TO THE MAIN STAGE. If this area is a key strategic priority, it must be discussed, promoted, and reported in the general session with top leadership involvement.

Breakout sessions are usually for optional topics. Further, inclusive leadership must be demonstrated authentically across conference speakers, panelists, and the program.

The 12 steps list underlying detail that must be customized to each firm or company. There are many other considerations that may make some of the things I listed challenging, including pipeline, size of firm, revenue, geography, specialization, etc. But we can all acknowledge, understand, and work with others for progress. Inclusive leadership is a business imperative that has implications for our customers,

Inclusive leadership is a business imperative that has implications for our customers, clients, and business partners as well. clients, and business partners as well. Even if you are in an area where you don’t know a single Black or African American person, you can still implement strategies. It is also true that you could do all of these steps and still have challenges recruiting and retaining Black and African American employees, but there still is tremendous benefit to be gained.

In a COVID-19 environment with significant economic impacts, we must implement a sensible and realistic plan that promotes progress — every step forward helps. When the camera is off, the social media furor has diminished, and if or when the next tragic event unfortunately happens, we must remain committed. With individual and collective understanding, inspiration, encouragement, lessons learned, and tone at both the top and the middle, our efforts will help those interactions at the workplace, the grocery store, the apartment building, the gym, and the park happen differently.

We have come together on other initiatives and have made a great difference in promoting the public interest. It is time to use the lessons and best practices we learned to reduce and one day eliminate racism and unconscious bias. Together, I am sure we can do it.

Kimberly Ellison-Taylor, CPA, CGMA, is executive director, Finance and Thought Leadership, for Oracle. She is a former AICPA chairman, former chairman of the Association of International Certified Professional Accountants, and former chairman of the Maryland Association of CPAs. She currently is the vice chairman of the AICPA’s National Commission on Diversity and Inclusion.

This article originally appeared in the Journal of Accountancy (c) 2020, Association of International Certified Professional Accountants. All rights reserved. Reprinted by permission.

SALES AND USE TAXATION

Colorado Launches New Geographic Information System Online July 1 Deadline Looming

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pril 1, 2021, the Colorado Department of Revenue announced, pursuant to sections 39-26-104(3)(c)(III)(B) and 39-26-105.2(2), C.R.S., that the Geographic Information System (GIS) (https://colorado.ttr.services/) described in those sections is now online and available for retailers to use in determining the jurisdictions to which tax is owed and to calculate appropriate sales and use tax rates for individual addresses. The GIS is part of the new Colorado Sales and Use Tax System (SUTS) (https://tax.colorado.gov/SUTS-info).

Retailers must take the following actions by July 1, 2021: • Retailers that were sourcing all sales to their business location pursuant to section 39-26-104(3)(c), C.R.S., must begin applying the “destination sourcing” rules set forth in section 39-26-104(3)(a) and (b), C.R.S. • Retailers that were utilizing address databases certified by the Colorado Department of Revenue pursuant to section 39-26-105.3, C.R.S., must ensure that the database provider is using the most recent information provided by SUTS in order to be held harmless under the terms of section 39-26-105.2(3), C.R.S.

Retailers currently using origin sourcing will find resources for transitioning to destination sourcing on the CDOR website at tax.colorado.gov, including: • GIS Help Page • Transition to Destination Sourcing Information • SUTS Information Page • SUTS Help Page • SUTS Frequently Asked Questions • SUTS Participating Home Rule and State-Administered Jurisdictions Beginning July 1, 2021, all retailers will be required to apply the destination sourcing rules. The Department does not have the authority to grant exceptions to these rules.

All retailers are encouraged to file sales tax returns for the state, state-administered local jurisdictions, and participating homerule cities using SUTS. It is a one-stop portal that allows taxpayers to do all manner of tasks related to collecting and remitting sales and use tax in an easy, automated, and seamless fashion. The system has the following capabilities: • Accurate address location capability • A uniform remittance form • A single point of remittance • A taxability and exemption matrix • The ability to calculate tax rates on items with differing tax rates in the same jurisdiction • A record of the history of any changes To access SUTS, or learn more about its capabilities, visit tax.colorado.gov.

COCPA GOVERNANCE

Bylaws Amendment Proposed for Member Comment At its April 21, 2021 meeting, the COCPA Board of Directors approved the following proposed Bylaws amendment for publication to the membership for comment. PROPOSED ADDITIONS ARE NOTED IN ALL CAPITAL LETTERS, BOLDFACE. Comments should be emailed to Mary E. Medley, CEO, at mary@cocpa.org by June 15, 2021.

ARTICLE IV - BOARD OF DIRECTORS Section 1.

The Board of Directors shall consist of the Chair, Vice Chair who shall be Chair-elect, Treasurer, immediate Past Chair, and six Directors-at-large, at least three of whom shall be Fellow Members and one of whom shall be a non-member Community Member,

and the Secretary. Three of the Directorsat-large shall be elected each year, in the manner prescribed by Article VI of the Bylaws, for a term of two years. THE CHAIR OF THE YOUNG PROFESSIONALS COUNCIL SHALL BE A NON-VOTING, EX-OFFICIO MEMBER.

May/June 2021 | www.cocpa.org

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STATE OF THE PROFESSION

Quick Pulse Survey 3: Work/Life Balance Challenges Continue

BY AVENUE M GROUP

This report is the third in a series of benchmarking collaboratives conducted by Avenue M Group (Avenue M) on behalf of state CPA societies. At the end of April through early May 2020, 18 CPA societies took part in the first round of the COVID-19 Quick Pulse Survey. Fourteen participated in a second round of the survey which was fielded from the end of August through mid-September 2020. On behalf of 15 state CPA societies, Avenue M Group launched the third and final sentiment survey in January 2021. The same survey was administered all three times in order to track changes and trends and provide benchmarking data. Responses came from partners, shareholders, sole practitioners, C-Suite executives, staff members, controllers, corporate accounting and finance professionals, and government employees.

A

ccording to the more than 350 COCPA members who responded to the final survey, 93% believe COCPA has met or exceeded expectations during the pandemic. This statistic has gone up 1% with each study (survey 1: 91%, survey 2: 92%).

While the percent of respondents who indicated COCPA has fallen a bit short of their expectations has decreased over the course of the studies (8%, 7%, 5%, respectively), 2% stated the organization has not met expectations at all, which is a 1% increase from the second study.

The overwhelming sentiment shared by 92% of COCPA respondents was that COVID-19 has been disruptive, to varying degrees, to

experiencing any financial impact on their business. After the fielding of the second survey, the number of respondents that selected “There has been no financial impact on my business” increased 8% (21%). This number went up 2% (23%) with the third survey.

Overall, these numbers point to the fact that, even if individuals experienced negative financial impact earlier on in the course of the pandemic, roughly one-quarter are now in a more positive financial situation.

More specifically, over one-third (36%) of sole practitioners reported that they have not experienced a financial impact on their business due to COVID-19. However, 16% of

92% their organization. This is down 3% from the initial survey. More specifically, 3% shared that COVID-19 has continued to cause complete disruption to their work (down 3% from survey 1), and 11% of COCPA respondents report a reduction in staff (down 2% from survey 1).

The financial implications brought about by the pandemic have shifted over the course of the three surveys. In Spring 2020, 13% of COCPA respondents indicated they were not 10

NewsAccount | May/June 2021

open-text box for “Other, please specify:” that COCPA could provide support by advocating for an extension to the 2021 tax deadline (now a moot point).

While in April 2020 many CPAs were looking to COCPA to provide guidance on compliance with new government relief programs, the need for this service has dropped with each subsequent survey (survey 1: 61%; survey 2: 48%; survey 3: 45%). Additionally, the need for guidance/tips for organizations facing a cash flow crisis dropped by 14% over the course of the past year.

EMPLOYEES In the second survey, it was reported that 33% of COCPA respondents had a reduction

of COCPA CPAs shared that the COVID-19 pandemic has been disruptive to their firm, organization, or company.

This is down 3% since the initial survey.

respondents who work at a company with 500+ employees and one-third of those who work in the not-for-profit sector anticipate the financial impact from the pandemic will last over two years.

Similar to the previous surveys, respondents indicate that the COCPA can be most helpful in the short-term by providing complimentary access to on-demand webinars on current topics and live webinars with Q&A. Also, many respondents indicated in the

of staff at their physical office, and most employees continue to telecommute. The data in the third survey is similar, but lower by 1% (32%). Additionally, while the number of respondents whose companies are working completely remotely dropped drastically from survey 1 to survey 2 (from 22% to 9%), the number increased 2% in the third survey (now at 11%). These fluctuations may continue, and while some employees can expect to work 100% remotely in the future, it is likely more will return to the office (whether

full-time or hybrid with remote working) as vaccine rollout efforts progress.

Across all three surveys, those working in the business and industry/corporate finance sector have faced the most layoffs, with 33% reporting in survey 3 that they have experienced a reduction in employees at their place of work as a result of the pandemic.

Other concerns of COCPA CPAs include (verbatim responses): forced taking of PTO and technology problems while officing at home.

FINANCIAL In the final survey, 27% of COCPA CPAs reported concerns over losing revenue due to business closures. Over the course of the past year, this statistic has improved. In April 2020, 44% of COCPA members were concerned with business closures, and roughly one-third (32%) expressed the same concern in the second survey. Other financial concerns expressed by CPAs include: seasonal employees did not return, staffing harder due to lack of J1 visa employees, hired minors for seasonal positions, and budget cuts impacting the school district.

PERSONAL The ability to maintain work/life balance remains the main challenge for the majority of COCPA members. Over half (52%) cited this as a challenge, which is similar to the results from survey 2 (53%). Overall, roughly two-fifths(39%) of respondents are concerned with maintaining connection and company culture while working from home, which could be contributing to challenges with maintaining work/life balance. Other comments expressed by CPAs include: several leaves of absences and many early retirements and handling stress caused by the pandemic and current events.

Similar to the previous studies, COCPA members’ most pressing concerns and challenges surrounding COVID-19 continue to vary based on their business sector.

Maintaining work/life balance is a constant concern for all members, but with the third survey these concerns are most prevalent for those working in the business and industry/ corporate finance sector (up 9% since survey 2) and consulting/advisory sector (up 13% since survey 2).

While there has been a slight improvement since fielding the second survey, for those working in public accounting, their most pressing concern continues to be navigating PPP/SBA and evolving changes in law (51%, down 3% from survey 2).

DEMOGRAPHIC OVERVIEW EMPLOYMENT STATUS

PERCENT

Partner/Shareholder/ Owner

30%

Sole Practitioner

22%

Retired but still practice

2%

Director/Manager

9%

Staff Member

11%

President/CEO/COO/CFO

7%

Corporate Accounting/ Finance Professional

4%

Controller

3%

Retired and no longer work

3%

Consultant

4%

Government Employee

4%

Unemployed

1%*

Internal Auditor

1%*

Department Chair/ Professor/Teacher

0%*

Other

2% n = 368

SECTOR

PERCENT

Public accounting

64%

Business & Industry/ Corporate Finance

16%

Not-for-profit organization

5%

Consulting/Advisory

6%

Education/Academia Other

2% 47%

n = 350 Three percent of COCPA members continue to experience complete disruption to their work due to COVID-19. This remains unchanged from the second survey and is the same as the benchmark average.

While the sample size for those working in education/academia was low (n=7), the majority of this audience (71%) indicate the pandemic has been extremely disruptive to their workplace. Nearly one-quarter (23%) of those in the consulting/advisory sector have not found COVID-19 to be disruptive to their business.

• Three in ten respondents are partners, shareholders, or owners.

• Over half of respondents identify as female.

• Nearly two-thirds of respondents work in public accounting.

• A little over one-quarter of respondents have been a CPA for 21 to 30 years.

• About one-quarter of respondents work in an environment with 2 to 5 employees.

YEARS A CPA

PERCENT

Fewer than 3 years

2%

3 – 6 years

6%

7 – 10 years

7%

11 – 20 years

20%

21 – 30 years

26%

31 – 40 years

25%

41 – 50 years

13%

More than 50 years

1%*

n = 334 of COCPA members indicating the pandemic has greatly decreased business operations dropped by nearly 7% since the first survey was fielded and by 3% since the second survey was fielded.

On a positive note, business has greatly increased for 10% of those specializing in managerial/corporate accounting/finance, and business moderately increased by 23% for those specializing in consulting/advisory services.

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COCPA members (4%) are less likely than the aggregate group average (5%) to indicate COVID-19 has greatly decreased their business operations. Overall, the percentage May/June 2021 | www.cocpa.org

11

stronger strategies for a

COMMUNITY

MAY 20-21, 2021 Virtual • CPE: 9.0

Register at COCPA.ORG/NOTFORPROFIT 12

NewsAccount | May/June 2021

STRATEGIC RESOURCES

Why Choose .CPA? The Internet Domain for the Accounting Profession

BY ERIK ASGEIRSSON, PRESIDENT AND CEO, CPA.COM

T

The AICPA and CPA.com launched the .cpa domain in September, 2020, for CPA firms looking to build trust in their online interactions and improve their branding.

In January, 2021, application by individual licensed CPAs became available, as well.

op-level domains are the handful of letters at the end of an email or website address, such as .com or .org.

Use of a .cpa domain allows practitioners to strengthen their brand identity in online communications. And, it provides better security and resistance to internet fraud, such as phishing and spoofing. Because the domain is available only to licensed CPAs and licensed CPA firms, it promotes greater trust with clients and the general public. We live in a digital age, and CPAs can improve the trust and security in their online calling cards with this new restricted domain.

Thousands of firms already have registered their preferred .cpa domains, and many have been strategic and creative with the names they are pursuing. Domains including technology.cpa, pensionaudit.cpa, restaurant. cpa, dentist.cpa, and atlanta.cpa have been secured to promote firm services and expertise in a particular niche or practice area, industry vertical, or geographical location.

Some firms also have capitalized on common marketing or search terms with domains including cloud.cpa, my.cpa, and your.cpa.

Go to register.domains.cpa for details and resources including a white paper, FAQs, and sign-up information. You also will find a video at www.youtube.com/watch?v=OnTSU5kfTkw in which speakers discuss how firms are creating new branding opportunities with their .cpa domains by moving beyond just their firm names.

We live in a digital age, and CPAs can improve the trust and security in their online calling cards with this new restricted domain.

The new restricted domain offers several advantages: • It provides better security and resistance to internet fraud as discussed in the blog available at www.cpa.com/blog/cpa-domain-bright-line-security-and-trustdigital-world.

• It promotes greater trust in online interactions with clients and the public.

• It allows more focused branding.

• It demonstrates that firms and individual CPAs are progressive and professional in the digital sphere.

Domain names are awarded on a first come, first served basis for licensed CPAs, firms, and certain approved organizations, such as state CPA societies.

May/June 2021 | www.cocpa.org

13

NETWORKING OPPORTUNITIES

Give a Little, Gain a Lot: Making Connections The COCPA Way

BY NATALIE ROONEY

A

Over nearly three decades in public accounting and private industry, Dave Loucks, CPA, knows the knowledge he has gained is important, but the networks he has developed are even more so. He shares how his COCPA membership has been vital in helping him develop his career and his personal and professional networks.

s a student at the University of Denver, Dave Loucks crossed paths with COCPA CEO Mary Medley who taught his business writing class. She also attended DU’s Beta Alpha Psi meetings and spoke to students about business etiquette. “It was good information everyone needs to hear in college,” Loucks says. “She talked about the different opportunities being an accounting major could offer. I still share those opportunities with young people today.”

After beginning his career in public accounting, Loucks eventually switched to industry as the CFO of a software company during the internet boom and subsequent bust. “It was fun, but there’s a saying I use: ‘If you’re spending more time with the company’s litigator than the general counsel, it’s time to find a new job,’” he chuckles.

Loucks returned to public accounting for another seven years before partnering with a friend to develop a software application to deter14

NewsAccount | May/June 2021

mine the asset retirement obligation (ARO) for oil and gas companies.

In 2009, they sold the company to Opportune. Loucks has continued to work at Opportune as a consultant and helps over 170 companies with their ARO through their application Assent 143. Always striving for new opportunities, he also has developed a software application for the new lease standard. “I’m probably the only person who was mad that the FASB delayed adoption for private companies to 2022,” he says.

TURNING INVOLVEMENT INTO OPPORTUNITY Over the years, Loucks realized that information updates can be harder to come by as you become so focused on the work in your own industry. To stay current with broader issues, he joined the COCPA Public Company Practice Forum (PCPF) and has been a member for more than 25 years. “It’s a networking group that talks about account-

ing issues,” Loucks says. The group includes members in both industry and public accounting.

For Loucks, the PCPF turned out not only to be a resource for issues and networking, but it also brought him a new job. “I originally joined the Forum to stay current on the industry and not rely solely on my own viewpoint,” he says. “I wanted to hear what other practitioners had to say. The Forum keeps me on top of the issues that affect people in industry or public accounting which helps me on the consulting side, as well.”

Loucks says his COCPA involvement connects him with people he wouldn’t normally encounter through his workday. “It’s only through the Colorado Society that you meet certain people and then develop long term relationships and friendships. Over time, they learn what you do, and you refer work back and forth. As accountants, our best source of referrals is other accountants, but we lose sight of that sometimes as competition gets in the way,” he says.

to find a committee or group to help them keep current and take advantage of the networking opportunities that CPE events can offer.

Put yourself out there. Continue to attend events even though they’re virtual.”

Yes, it’s more challenging to connect virtually, Loucks says. “But this is just a new and different challenge. We’re always learning about a new industry or client and trying to figure out how to connect with them.

This is why being a CPA is fun.”

Even though the PCPF is currently meeting virtually, Loucks says the Forum is always welcoming new members – as all the COCPA committees and groups are. “Find the right place where you can contribute,” he encourages. “Get into those virtual meetings and participate.

You’ve got to give a little, but you’ll get a lot back. Figure out what you want to get out of it and what you can give to it to make it a mutually beneficial win-win.”

“Get involved and find the right things for you, whether that’s going to CPE, joining a committee, or being a member of a special interest group.”

COCPA HAS SOMETHING FOR EVERYONE For members in industry who think COCPA involvement is really just for those in public accounting or accounting nerds, Loucks says, “Not at all. Society involvement will help you get outside of your industry box. You’ll hear about issues facing other industries, and that makes you a better businessperson,” he says.

Loucks adds that it’s never too soon or too late to start networking.

“You just have to do it. The business environment may not be the ideal situation right now, but you just have to start doing it, even if it’s virtually. Get involved and find the right things for you, whether that’s going to CPE, joining a committee, or being a member of a special interest group.”

Loucks himself says he wasn’t particularly active in the COCPA beyond the PCPF, but then he started getting more involved by attending CPE conferences and eventually joining a conference planning committee.

After attending and planning multiple events, he had a “hey, I can do that” moment. Now he teaches too. “My goal when I teach is for the attendees to be able to say to someone else, ‘I learned something today,’” he says. “I want them to look back years later and remember something else they learned.”

VIRTUAL NETWORKING IS STILL NETWORKING Just because we’re all communicating virtually these days, Loucks says it’s no reason to stop networking, learning, or participating in professional activities.

Loucks is an instructor for the Professional Development Institute at the University of North Texas. He tells attendees they’re still building their networks through virtual courses. “I remind them they need to have someone to call when they’re stumped. I encourage everyone May/June 2021 | www.cocpa.org

15

SUSTAINABILITY REPORTING

Assessing Organizational Value from a Multi-dimensional Perspective

BY RANDY L. WATKINS, CPA, CGMA, CCIFP

ESG 16

NewsAccount | May/June 2021

If one common theme has emerged amid the uncertainty in 2020, it is the record-setting pace at which long-standing norms were challenged. The rapid shift in the state of the U.S. economy due to the pandemic spurred numerous conversations on the best course of action moving forward and caused leaders to take a critical look at what drives sustained, long-term value across an organization.

H

istorically, the U.S. economic system has favored companies that create value through profitability, growth, and retained earnings. This places extreme weight on measuring success through reporting

Organizations have an eye on how ESG impacts value creation and assists in recovery. only on financial components. However, this past year has taught us that perhaps considering economic value from a multi-dimensional viewpoint rather than a solely financial one is a better approach. Focus on environmental, social, and governance (ESG) factors has increased in recent years, and organizations have an eye on how ESG impacts value creation and assists in recovery.

SHIFTING REPORTING STANDARDS It is no secret that an organization’s culture can impact hiring and reputation, or that assessing environmental impact can affect a business decision. However, how many people make an investment decision based on corporate culture or employee satisfaction? How many consumers factor in an understanding of a company’s environmental impact when making a purchase? These questions are presented somewhat rhetorically. Many people at least consider how companies treat their employees, commit to company culture, and assess their environmental impact when choosing business partners. Data even show that

ENVIRONMENTAL • Climate change • Greenhouse gas/carbon emissions

younger investors and consumers (www.gallup.com/ workplace/257786/millennials-worry-environment-company.aspx) place a higher level of importance on these factors. Ultimately, decisions are made largely on personal economic impact—best cost, most value, or highest return on investment. Most companies’ annual reports focus on financial position and results, risks that could jeopardize future financial results, product innovations that are expected to enhance future financial results, and more.

However, to date, it has not been a requirement for an organization to provide information that reports on environmental impact, social efforts, or corporate governance.

The concept of sustainability reporting can be traced back to the 1980s in the form of environmental reports produced by chemical companies which were battling an image problem. This evolved into the broader idea of corporate social responsibility, which was more of an internal commitment made by small- or medium-sized businesses with the aim to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically oriented practices.

Some organizations have already taken it upon themselves to report on their ESG initiatives. In recent years, the concept increasingly has gained mainstream attention, especially from institutional investors. Broadly, ESG reporting refers to qualitative discussions of certain topics and quantitative metrics used to measure a company’s progress against specific ESG risks, opportunities, and strategies.

Examples of ESG information can be found in the tables below:

SOCIAL • Diversity, equity, and inclusion (DEI) • Wage gaps

• Environmental policies

• Health and safety

• Energy/renewables usage

• Human rights and child labor protections

• Water usage • Land protection • Biodiversity • Waste management

• Data privacy

GOVERNANCE • Board composition • Executive compensation • Ethics • Bribery and corruption • Lobbying • Political contributions

• Community relations • Employee engagement

CONTINUED ON PAGE 18 May/June 2021 | www.cocpa.org

17

SUSTAINABILITY REPORTING CONTINUED FROM PAGE 17 While there presently isn’t a single authoritative set of standards governing this type of reporting, there are a handful of frameworks developed by certain global companies that aim to provide guidance.

The Sustainability Accounting Standards Board (SASB) was created in 2011 to develop a framework for sustainability accounting and reporting. In December 2012, the American Institute of Certified Public Accountants (AICPA) created the Sustainability Assurance and Advisory Task Force to develop standards for providing assurance on sustainability reporting. Since then, multiple reporting frameworks have popped up, including the widely used standards created by the Task Force on Climate-Related Financial Disclosures (TCFD). The current leading five sustainability and integrated reporting organizations — the Carbon Disclosure Project (CDP), the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), and the Sustainability Accounting Standards Board (SASB) — have been collaborating as they look to move toward a common reporting standard.

BENEFITS OF ESG REPORTING Recent data suggests that the benefits of reporting on a company’s ESG efforts go far beyond stakeholder goodwill, becoming central to the creation and allocation of capital. A June 2020 Morningstar report (www.morningstar.com/content/dam/

lished a Perspectives Paper (www.ivsc.org/ files/file/view/id/1928) indicating that ESG reporting has and will continue to play a bigger role in the creation and determination of value. The article goes on to indicate many potential financial implications resulting from ESG factors that will have valuation impacts as well. Some include: • Asset impairment, including goodwill; • Changes in provisions for onerous contracts due to increased costs or decreased demand; • Changes in useful lives of assets; • Changes in provisions and contingent liabilities arising from fines and penalties.

The SEC has even taken a step recently in furthering ESG reporting by enacting new Regulation S-K disclosure requirements which require additional human capital disclosures, including human capital measures or objectives that management focuses on in managing the business. Additionally, sustainability risk issues are increasingly integrated into organizational risk frameworks such as the Enterprise Risk Management (ERM) framework developed by ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

THE CPA’S ROLE Most of the companies initially producing ESG reports have been larger, multi-national organizations with vast resources. However, as already mentioned, ESG reporting

During 2019, 9 out of 10 S&P 500 companies produced sustainability reports. marketing/emea/shared/guides/ESG_ Fund_Performance_2020.pdf) revealed that over the 10-year period ending in 2019, nearly 59% of surviving funds across the environmental, social, and governance categories considered have outperformed their average surviving traditional counterpart. During 2019, nine out of 10 S&P 500 companies (www.ft.com/content/87a922a18d60-4295-a9d8-d2c1ab5d788e) produced sustainability reports.

In February of this year, the International Valuation Standards Council (IVSC) pub18

NewsAccount | May/June 2021

is gaining considerable attention from boards, investors, employees, suppliers, lenders, regulators, clients, and many others, thereby increasing pressure for companies of all sizes to begin exploring how they are addressing — or plan to address — the many aspects of ESG. As smaller companies begin their own journey of creating an internal framework for identifying and defining relevant ESG initiatives and measures and developing data-driven reports, it’s important they consider the roadmaps that already exist. Some

content has been developed by the AICPA and the Center for Audit Quality (CAQ), laying out potential steps that management and boards of directors can follow through this process. These roadmaps suggest that companies begin with the following: • Prioritize the ESG topics that are relevant and material to the organization; • Establish the board’s role in oversight; • Align ESG priorities with the company’s enterprise risk management process; • Integrate ESG priorities into the company’s strategic plan; • Implement internal controls around the collection of data, processing, and reporting of ESG data.

With this significant increase in attention, there is a growing focus on the reliability of the data and assurance provided by third parties. The CAQ has developed a resource called The Role of Auditors in Company Prepared ESG Information (www.thecaq.org/ wp-content/uploads/2020/01/caq_role_ of_auditors_present_future_2019-12.pdf) that focuses on how auditors may play a role in enhancing the reliability of decision-useful ESG information produced by companies.

As a company considers how to provide assurance on ESG data reported to stakeholders, thought should be given to the scope and level of assurance necessary for the purpose or objective of the reporting.

Two types of attest services that may be considered include: • Review of ESG Report: A review engagement pursuant to Statements on Standards for Attestation Engagements, (SSAE), AT-C Section 210, provides limited assurance about whether any material modifications should be made to subject matter (in this case, the ESG reported information) in order for it to be in accordance with (or based on) the criteria (whatever established framework is selected as most appropriate), resulting in the expression of a conclusion. A review is substantially less in scope than an examination.

• Examination of ESG Report: An examination engagement pursuant to SSAE, AT-C Section 205, provides reasonable assurance about whether the subject matter as measured or evaluated against the criteria is free from material misstatement, resulting in the expression of an opinion. This engagement type would be most consistent with the traditional audit of financial statements.

For an example of an ESG report containing both types of independent reports, auditors can refer to the 2019 Environmental, Social & Governance Report (http://books.vno.com/ books/vntz/#p=1) produced by Vornado Realty Trust.

Given that these types of assurance engagements require both time and money, management and boards should ensure they have adequately considered users’ needs as they relate to the information presented. As a first step, it may be most appropriate to produce a report where no assurance is given.

Some sort of ESG reporting has existed for decades, but the focus and attention on this type of information have intensified over the past several months. The currently estab-

Accountants and auditors are uniquely skilled to play key roles in stewarding, interpreting, and reporting on ESG data, paving the way for a multi-dimensional approach to evaluating success. lished frameworks are sure to continue to evolve and merge, and we likely one day will have a reporting framework that is generally accepted, much like GAAP. Accountants and auditors are uniquely skilled to play key roles in stewarding, interpreting, and reporting on ESG data, paving the way for a multi-dimensional approach to evaluating success.

Randy L. Watkins, CPA, CGMA, CCIFP, is a partner with BDO LLP, in its northern Colorado office and COCPA Chair of the Board of Directors. Contact him at rwatkins@bdo.com.

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May/June 2021 | www.cocpa.org

19

GOVERNMENTAL ACCOUNTING

One State Auditor Makes the Cut: Ray Joins GASB

BY NATALIE ROONEY

C

Just one state auditor serves on the Governmental Accounting Standards Board: COCPA member and Colorado State Auditor Dianne Ray, CPA. She shares what it’s like to create and set governmental accounting standards.

olorado State Auditor Dianne Ray, CPA, says it wasn’t necessarily on her radar to join the Governmental Accounting Standards Board (GASB) as part of her career path, but when a position came open, and the Board was specifically seeking a state auditor, her interest was piqued. “I thought it could be a very interesting next step,” she says. “I decided to apply and see what happened.”

Ray was appointed to serve, and her term began, July 1, 2020.

Board members are appointed by the trustees of the Financial Accounting Foundation for a five-year term and may serve up to 10 years. The chairman serves full time, and the six other members, of whom Ray is now one, serve on a part-time basis.

BEHIND THE SCENES The GASB’s mission is to establish and improve standards of state and local governmental accounting and financial reporting that will: • Result in useful information for users of financial reports, and • Guide and educate the public, including issuers, auditors, and users of those financial reports.

As such, the members of the GASB are required to have knowledge of governmental accounting and finance and a concern for the public interest in matters of accounting and financial reporting - a perfect fit for Colorado’s state auditor.

Ray says she had no idea of the breadth and depth of information the GASB staff prepares for Board members until she received her first packet of information about proposed government accounting standards. Each contains background information, staff research, and “everything in great minutiae including how we’ll discuss the information,” Ray explains. “I’m so impressed with the knowledge level as well as all the information the staff gathers for us and their efforts to reach out to stakeholders for feedback.”

Also, the packets include questions to determine how Board members feel about the issue at hand. “We use those questions for discussion in the meetings,” Ray says.

During Board meetings, staff members review the information at a high level, pose the question(s) and ask Board members to weigh in.

Then, intense discussion begins.

“We discuss the proposed standard line by line, paragraph by paragraph, over a number of months,” Ray says. “Do we agree with the approach? Should we take a different approach? This is why it’s

20

NewsAccount | May/June 2021

We each bring a different way of looking at things, and it’s why the discussions are so important and interesting.

Ultimately, we want to make sure a standard applies to all stakeholder groups. important to have people from different backgrounds on the Board.

We each bring a different way of looking at things, and it’s why the discussions are so important and interesting. Ultimately, we want to make sure a standard applies to all stakeholder groups. We get there through these discussions.”

It all comes together to become an exposure draft.

NAVIGATING A STEEP LEARNING CURVE VIRTUALLY In any other year, Ray would have traveled to GASB headquarters in Norwalk, Conn., for an intensive orientation and attended two-and-ahalf days of in-person meetings every five or six weeks. The COVID-19 pandemic hasn’t allowed for that, so Ray has been reviewing information online and attending meetings virtually. “Administratively, it has taken a huge amount of time,” she says. “There’s a lot of information to absorb and a lot to prepare for. It’s a big learning curve.”

Ray says in her first month she reached out to every current Board member with questions, especially in reference to items discussed before her term began. “I wanted to understand how they did things,” she says. “I wanted to know why the Board made certain decisions.

They have all been so helpful. It’s nice to be able to have that kind of relationship.”

Ray also asked other Board members how they balance their GASB roles with their full-time work. “I feel like I’m working non-stop trying to balance both roles,” she says. “I don’t eat into my work for the Office of the State Auditor to do GASB work and vice versa. I keep them distinct and separate. The work has to continue to be done on both sides.”

In the short term, Ray is looking forward to working on Risk and Uncertainties Disclosures which the Board began deliberating in September 2020. “This project brings a different dimension to disclosures because this isn’t to the point of a going concern,” she says. “It’s looking ahead and asking if there’s a problem coming for a government and disclosing something about that.”

For the long term, Ray is excited about the Financial Reporting Model Reexamination and the Revenue and Expense Recognition project, both of which will mean big shifts in how state and local governments approach matters. Exposure drafts have been issued, stakeholder comment periods have recently ended, and public hearings will be held this spring. “We’ll be discussing all of the stakeholder input,” Ray says. “It will take years to get to the final pronouncement.”

WHAT YOU THINK MATTERS According to its website, a vital part of the GASB’s mission is the Board’s charge to “carefully weigh the views of its constituents so that standards and concepts will meet the accountability and decision-making needs of the users of governmental financial reports and gain general acceptance among state and local government preparers and auditors of financial reports…”

The primary means by which the Board solicits feedback on its proposals is through a request for written comments. Ray says she didn’t

fully appreciate those written comments and constituent views until she read them herself. “Stakeholder input is so important, whether it’s responding to a survey or giving comments on an exposure draft,” she emphasizes. “That feedback informs us about how the information is used and what the needs are so we’re not working in isolation. The more users understand this and provide input, the better we are in our decision making.”

Ray says she immediately told her team at the Colorado Office of the State Auditor how important it is to participate in stakeholder comment opportunities. “We have amazing experience in our office,” she says. “We can bring things to the table and contribute in truly meaningful ways.”

As a longtime COCPA member, Ray also is looking for ways to connect with issues important to local governments. She rejoined the COCPA Governmental Issues Forum because “I want to hear what local governments have to say and how they’re implementing the standards,” she says. “I want Colorado CPAs to know if they want to get information to me or have something to offer about the GASB, please reach out. I want to represent what’s happening in Colorado and connect our local efforts to our national efforts.”

Contact Dianne Ray at dray@gasb.org.

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May/June 2021 | www.cocpa.org

21

INVESTING STRATEGIES

SPAC Mania: What’s the Buzz Behind These ‘Blank Check’ Companies?

BY NATALIE ROONEY

If you haven’t yet heard of SPACs – special purpose acquisition companies – brace yourself. Once you’ve heard the term, you’ll begin seeing articles everywhere. SPACs have been around for at least a decade, but they’re seeing unprecedented growth over the past few years. What’s driving the trend? Are SPACs really all they’re cracked up to be?

SPAC STATS Also known as ‘blank-check companies,’ the special purpose acquisition companies (SPAC) structure is booming on Wall Street. Their goal is to raise money from public and private investors, identify an acquisition target, and buy it.

SPACs have been on a dramatic upward trend in recent years, attracting big-name underwriters and investors – including private equity funds, Hollywood stars, and athletes – and raising a record amount of IPO money.

• One in four IPOs in 2019 was a SPAC. Overall, 59 SPAC IPOs raised $13.6 billion.

• In 2020, SPACs ended the year with 248 listings raising $83 billion — year-over-year increases of 320 percent and 513 percent, respectively.

• Through early March 2021, BDO reports more than 225 SPACs raising more than $72 billion.

The money SPACs raise in an IPO is placed in an interest-bearing trust account. These funds cannot be disbursed except to complete an acquisition or to return the money to investors if the SPAC is liquidated. A SPAC generally has two years to complete a deal or face liquidation. In some cases, some of the interest earned from the trust can be used as the SPAC’s working capital. After an acquisition, a SPAC is usually listed on one of the major stock exchanges.

Some see these vehicles as a smart way to invest in newly public companies, while others say unchecked enthusiasm for these financial products bears similarities to the dot-com boom and bust. Recent high-profile examples include Virgin Galactic, DraftKings, and Nikola Motor.

THE DRIVING FORCES Mike Stevenson, CPA, Partner, National Practice Leader – Accounting & Reporting Advisory Services for BDO LLP, says several things are driving the SPAC train. First and foremost, companies’ access to the marketplace through a traditional IPO requires a significant amount of research and due diligence. “Then, it’s a fairly onerous process to go from being a private company to being a public company,” he explains.

According to Stevenson,“When companies market these deals and attempt to go public through the traditional IPO route, management will spend an extensive amount of time marketing the company and its prospects to potential institutional investors. This is traditionally done through roadshows and in-person meetings to connect with investment bankers and potential investors to promote the company and its strengths. Because of COVID-19, this process was disrupted due to restrictions on in-person meetings and travel. Suddenly, it seemed companies didn’t have access to the traditional IPO path.”

A second reason behind the SPAC boom might stem from the amount of unused capital gathering dust during the pandemic. “One way to put that capital to work is going the SPAC route,” Stevenson says.

THE SPAC LIFECYCLE Formation and Initial Public Offering (IPO). A financial sponsor (or sponsors) assembles a management team and funds an equity stake or founders stock in the SPAC. The equity investment funds initial business operations to launch an initial public offering (IPO) and identify an acquisition target. Although the ratio can vary, the founders’ stock often represents approximately 20 percent of the post-offering stock.

A TYPICAL 24-MONTH SPAC TIMELINE Up to 19 months NOT APPROVED

Up to 5 months Investor meetings and shareholder vote

APPROVED

YES

Formation and IPO phase

Target search

Negotiations

SPAC CONTINUES TARGET SEARCH

Agreement reached?

NO Return to target search or dissolve

Up to 24 months

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NewsAccount | May/June 2021

Closing of SPAC merger (De-SPAC)

Wind up and return investment to shareholder

SPAC STOPS TARGET SEARCH

Managing Public Company Operations

Courtesy of CohnReznick LLP

Formation-IPO-Phase. After selecting underwriters, the SPAC files a registration statement with the SEC to initiate the IPO. After responding to SEC comments, the SPAC launches the road show that culminates in underwriting and the IPO. Target Search. At this point, the SPAC begins its official search for an acquisition target. SPACs typically have two years from the IPO date to complete an acquisition. This process proceeds in much the same way as any merger and acquisition (M&A) process. The SPAC identifies and conducts due diligence on potential targets. However, because shareholders can redeem shares, the sponsors need to closely monitor cash to ensure there is sufficient funding to acquire the target and manage post-close operations.

De-SPACing. The de-SPACing process requires the buyer to obtain shareholder approval in accordance with SEC regulations which are complex. The process typically includes the commitment of the founders’ shares to the acquisition, a redemption offer whereby SPAC shareholders can redeem their shares, and the filing of Form 8-K. It contains the information that would be filed in a Form 10, or “General Form for Registration of Securities,” which registers securities for trading on U.S. exchanges.

Managing of Public Company Operations. The acquisition is complete, and the company must comply with all public company reporting obligations under the Securities and Exchange Act of 1934. The transition is a significant one for any private company, requiring enhanced governance, controls, technology, and operating procedures, Stevenson says.

If there is ultimately no viable target or ability to use the cash raised, the money returns to the original investors, and the SPAC dissolves.

NEED FOR GUIDANCE Stevenson says BDO has always offered services to SPACs, but activity has ramped up tremendously in the past few years. “There is a large need on the de-SPAC side to offer accounting and reporting advisory services to assist private companies in becoming public company ready.”

Services a CPA firm could provide in this sector include auditing the SPAC itself or assisting the SPAC through its process of going public on the financial reporting side – but not both, given the independence requirements. A firm also could either assist as auditors for the target company or act in an advisory capacity to help the target become ready to report as a public company when the de-SPAC occurs.

THE INVESTOR SIDE Individuals can invest in SPACs much as they would any other stock, but until a SPAC merges with another company there’s no way to know its viability. A study by law professors at Stanford Law School and NYC School of Law found: • Although SPACs issue shares for roughly $10 and value their shares at $10 when they merge, by the time of the merger the median SPAC holds cash of just $6.67 per share.

• The dilution embedded in SPACs constitutes a cost roughly twice as high as the cost generally attributed to SPACs, even by SPAC skeptics.

• When commentators say SPACs are a cheap way to go public, they are right, but only because SPAC investors are bearing the cost, which is an unsustainable situation.

• Although some SPACs with high-quality sponsors do better than others, SPAC investors that hold shares at the time of a SPAC’s

SPAC RAP SPACs are so cool, one guy wrote a rap about them.

Check it out at bit.ly/SPAC-Rap

ALERT: SEC ISSUES STATEMENT ON SPACS On April 12, 2021, the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies, noting that SPACs need to account for certain warrants as liabilities, not equity.

“We are issuing this statement to highlight the potential accounting implications of certain terms that may be common in warrants included in SPAC transactions and to discuss the financial reporting considerations that apply if a registrant and its auditors determine there is an error in any previously filed financial statements.” For details, go to www.sec.gov/ news/public-statement/accounting-reporting-warrants-issued-spacs. merger see post-merger share prices drop on average by a third or more.

WHAT CPAS NEED TO KNOW Stevenson says it’s important for CPAs to understand the aspects of a SPAC transaction. While CPAs are not likely to be involved in the actual valuation of the target company, “Someone has to determine whether the value of what they’re paying is appropriate,” he says.

CPAs should be aware that the logistics can become problematic and affect the transaction. Stevenson says it’s true that the SPAC process is typically quicker than an IPO, and this factor is magnified during the de-SPAC process.

“If you’re a target company and the SPAC wants or needs the deal to close quickly, then this organization has to shift from private company accounting standards to becoming SEC and GAAP compliant. That ‘lift’ between private and public company accounting and reporting is fairly heavy, time-consuming, and costly,” Stevenson says. “Ensuring you have the resources in place or the ability to find a competent and experienced advisor who works with these types of transactions becomes critical so the deal can proceed as scheduled. If you can’t get ready in time, you risk the deal falling through. Give yourself enough runway to get through the transaction.”

Stevenson adds that historical financial statements will come under scrutiny as the level of testing becomes more enhanced for the newly public company. “Target companies need to be certain they have the ability to provide documentation and become compliant with the rules of a public company immediately after the transaction. That includes the historical financial statements, which are now subject to audits in accordance with PCAOB standards instead of AICPA standards,” he says. “Many companies fail to recognize the additional level of effort required and the increased level of scrutiny included with an audit under PCAOB standards. Ensure you have the right expertise in-house or as an advisor as you go through this process.”

How long will the SPAC craze last? It’s anybody’s guess, Stevenson says. “But there are certainly spaces like health care tech, education tech, agriculture, and electronic vehicles where we’ll see more activity ahead.”

May/June 2021 | www.cocpa.org

23

AUDITING STRATEGIES

Going Remote: Auditing in a Virtual World

BY NATALIE ROONEY

The onset of the COVID-19 pandemic and the shift to remote work required a new way of approaching the audit process. COCPA members describe how their workflow has changed over the past year and why forging connections with each other has become more important than ever.

A FLEXIBLE APPROACH Historically, auditing means being physically present at a client site to meet, interview, personally observe, and review procedures.

But what if you can’t go to a client site in person? These days, firms are taking flexible approaches to get the job done.

When the pandemic began, Eide Bailly LLP created a subcommittee on pandemic response. Protocols were created to determine whether teams would be permitted to go to a client site. “It is very much client driven,” says Ksenia Popke, MAcc, CPA, J.D., Partner at Eide Bailly “Some clients request on-site fieldwork, some are closed to visitors, and some limit our presence to one or two team members for a few days.”

If an Eide Bailly team member isn’t comfortable traveling or visiting clients, he or she always has the option to decline. If a team does travel, everyone follows the COVID-19 protocols. All travel for training has been suspended, which has allowed the learning and development group to be creative with content and delivery.

Jason Kellogg, Partner, Asset Management Audit Technical Leader for RSM US LLP, says while auditing has always lent itself to remote work, the move to fully virtual work has led to some challenges. “That face-toface and relationship building with clients and each other is an important part of the process,” he says.

McMahan and Associates LLC Partner Michael Jenkins, CPA, and his team of 17 typically travel the state performing audit and assurance work, primarily for local governments, school districts, fire districts, and small metropolitan districts. Now, everyone is working from home in several different counties and even from another state. “This has been an evolution in how we do our work,” Jenkins says. “Traditionally, we would schedule our time at the client site, perform field work, and visit different 24

NewsAccount | May/June 2021

client departments to understand clients’ processes and systems. That all stopped.”

Even if clients were open, logistical issues arose because the McMahan team, which is located in the mountain town of Avon, Colo. had to travel for several hours by car with each other – which wasn’t permitted during the pandemic.

TURNING TO TECHNOLOGY Jenkins says the McMahan team was well positioned to transition to remote work in March 2020 thanks to Microsoft Teams. “We were able to use that technology to keep the workflow going.” He adds that Teams allowed the staff to collaborate and keep in touch with each, keeping everyone on track. “It has replaced conversations you might have had by walking around to different departments at a client site. Even though we couldn’t be in the same room with the client, we’ve been able to be on the same screen and the same page. We can work through things in real time which has been an advantage.”

dots. We’ve been in this environment for nearly a year. What have we learned? What can we take forward?”

More flexible work arrangements are here to stay, Popke predicts. She says prior to the pandemic, Eide Bailly also was in the process of integrating Microsoft Teams. It’s now used heavily and will support flexible schedules going forward.

Those who have been grounded from cross country travel may find it doesn’t pick back up at the pace it was pre-pandemic. “I can’t tell you how many times I boarded a plane, flew to New York, took a cab into the city, had a 30-minute meeting, and then turned around and came straight back,” says Kellogg.

“Why do we do things like that? Because the client wanted to see us and have us at that meeting. But I think we’ve learned from the pandemic that it’s not necessary. Yes, live meetings are important because you can’t replicate the social interaction over video.

But audit committees are realizing that we

Even though we couldn’t be in the same room with the client, we’ve been able to be on the same screen and the same page.

Inventory observations have been a bit trickier when travel to a site isn’t possible.

“We’re doing virtual inventory observations through FaceTime and screen sharing,” Popke explains. “We select what we need to see, and the client virtually walks around the warehouse to show us the bin, location, and aisle. They would open boxes when requested and show us the unique serial number of each item selected. Technology helps us be the eyes on the site.”

PERMANENT POSITIVE CHANGES “Auditing has become even more about client and team management as we’re working remotely,” Popke says. “We bring everyone onto a remote platform to connect all of the

don’t need to be live and in person all the time. We can have virtual conversations, be productive, and save a ton of time.”

Kellogg is hopeful that time savings will lead to more balance, and he predicts now that people have had a taste of what that looks like for them personally, it may be difficult to get people back into the office full time. “People are realizing they can accomplish a lot in that time they used to spend commuting. Maybe there’s a hybrid solution emerging.”

Popke has seen audit work become more fluid. “We’re no longer on a classic audit schedule where we’re in the field every two weeks,” she says. “If a client is ready for

us now instead of in three weeks, we can shift the work forward. That flexibility and fluidity are here to stay and will change our approach.”

CONNECTING AND COMMUNICATING Setting expectations is key. “It’s important for everyone, from partners to our youngest staff, to be on the same page,” Kellogg says. “We’re setting clearly defined goals and expectations about working hours and discussing how we will communicate with each other.”

“It certainly has been a different year,” Jenkins says. “We’ve learned from it which is one of the hallmarks of our profession. Accounting doesn’t always have the reputation for being the most exciting profession, but it’s constantly changing, and that means new ways of doing things and new challenges for us to work through with our clients. We’ve been given the opportunity to rise to those challenges. We’ve been doing that by evolving our technology and our approach. The past year has pushed us as a profession to be in tune with the IT side as part of the audit process.”

is back!

Jenkins says it has been comforting to be able to turn to clients as peers and work through problems that have arisen. “It also has been a good way to develop our staff, by letting them be involved in creating solutions. As a business owner, it’s reassuring to know that you’ve got good people you can rely on. We have creative, smart folks who can help clients. We’ve seen that be reinforced many times.”

Kellogg describes the ongoing effort to onboard new recruits into the firm as remote work continues. “We had our newest group of people join us last October, and they’ve only met us virtually. Bringing them up to speed and building relationships are big challenges. How do you get a 22-year-old staff person to work long hours during a busy season when they’ve never been in an audit room?

This waiting game is frustrating, especially for the younger generation, Kellogg acknowledges. Communication is key. “This continues to be uncharted territory. We will travel again. We will have live meetings and trainings again. We’ll go to ball games and

build rapport with our clients and teams again. And, it will take time. Talk to your people. It’s important to take care of yourself and reach out. Your health and wellness are by far the most important thing. The work will get done.”

Popke agrees. “Now more than ever, it’s important to communicate – not just with your internal teams about the status of an audit, but about mental health,” she says.

“Don’t just ask what they’re doing. Ask how they’re doing. Those questions help people feel needed and connected. Everyone is trying to do good work, but you don’t know everyone’s story about coping in this environment, and that is the most important thing.”

Kellogg sees a continued opportunity to create more balance in his life and his team’s lives. “This is a chance to do what’s important whether that’s exercising in the morning, going for a walk with your significant other, or whatever that balance means for you,” he says. “We’re experiencing that we can do these things and still serve our clients.”

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TECHNOLOGY

Cybersecurity and the Cyber Secure Business

BY NATALIE ROONEY

Cyber crime is on the rise for many reasons, but at the top of the list is this: It’s a lucrative endeavor for criminals who can make a lot of money quickly by targeting your organization. Without proper planning and protection, it isn’t a matter of if your business will be compromised but when. What can you do to make your organization more secure?

W

hile the world has grappled with the COVID-19 pandemic, another situation has been brewing, and experts are calling it a cyber pandemic. While people have been able to enjoy the pandemic’s silver lining – improved quality of life by working from home – the massive move to digital life has created a “Trojan horse” for cybercriminals.

From phishing scams to ransomware to data breaches to unemployment insurance fraud, COVID-19 has created a new set of challenges and accelerated existing ones for organizations worldwide.

The FBI’s most recent Internet Crime Report tallied the total cost of the 467,361 complaints the Bureau received at over $3.5 billion in 2019, before the pandemic even began.

In April 2020 alone, the World Health Organization saw a fivefold increase in the number of cyber attacks directed at its staff and email scams targeting the public.

In the pandemic’s early days, the gravity of the cyber situation was already taking hold. In April 2020 alone, the World Health Organization saw a fivefold increase in the number of cyber attacks directed at its staff and email scams targeting the public.

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According to The National Cyber Security Alliance, 20% of small businesses experience some form of cyberattack every year, whether they are aware or not, and 60% of those businesses are forced to close within six months of being hacked. Those who have no idea where to start with their cybersecurity efforts or what to do in the event of catastrophe aren’t alone. More than half of small business owners have no plan in place to deal with a cyberattack.

PwC LLP’s 24th Annual Global CEO Survey asked CEOs how concerned they are about potential cyber threats to their organization’s growth prospects. In 2020, 33% of CEOs said they were concerned, ranking the issue fourth on their list of concerns behind over-regulation, trade conflicts, and uncertain economic growth.

For 2021, 47% of CFOs say they are concerned about cyber threats, moving the issue up to second on their list, only behind pandemics and public health crises.

THE DANGER FROM WITHIN With cyber threats increasing, this past year definitely has been a busy one, says Mike Longo, a systems engineer for BNC Systems, an IT consulting company based in Denver and Dallas. “With the shift to remote work, we’ve been looking at remote worker security,” he says.

“There has also been an uptick in phishing and data mining attacks now that more people are communicating via email. With a remote workforce, it’s easier to make things look legitimate.”

With all of the threats out there in the world, the biggest one is always your own system’s users, Longo cautions. This weakest internal link is why he says education should be an organization’s top priority.

If employees aren’t trained and aware of common threats, they are susceptible to hackers and could compromise company data. Verizon’s 2020 Data Breach Incident Report shows that over 67% of data breaches are caused by credential theft and phishing.

Longo cites several areas of concern: • Suspicious emails that are phishing for user names and passwords or data encryption threats that, when opened, encrypt files and ask for money to be unlocked.

• Holes in software: Software vulnerabilities, flaws, and weaknesses in your security can be exploited. Fortunately, software updates make them nearly impossible to implement.

• Wire and money fraud: CPA firms and other organizations may receive emails asking for payment on an unpaid invoice and requesting a wire transfer. The criminal’s goal is to reach the right person and get him or her to send money.

• IRS fraud: In this scenario, a CPA firm client receives an “IRS notice” that needs to be paid immediately.

“Most of this happens as a result of data mining and phishing exploits where people are trying to get a hold of information and then extract money,” Longo says. “That’s where the profit is on these exploits.

Teach employees to look for these suspicious emails.”

“A data breach can be more destructive to a small company than a large one that might have the funds to deal with mitigation issues,” Longo says. “If a data breach or financial fraud hits a small company that doesn’t have the assets to cover recovery, it can absolutely destroy a business.”

While it’s not cheap to bring in a consultant to evaluate your systems, it can save you money in the long run, ensuring proper security measures are in place, Longo says. “Solutions typically aren’t as robust for a smaller company, but that’s why IT security is scalable based on the business.”

A GAME OF CAT & MOUSE Longo describes the cyber security landscape as ever changing. “Any vulnerability or exploit can come at any time,” he says, describing “white hats” whose job it is to probe systems and find weaknesses before “black hats” do. When vulnerabilities and potential threats are found, the information is released to the IT world, and patches are developed. Most of the time, new exploits are patched before they become widespread.

“It’s always a good idea to engage with an IT person to make sure you have best practices in place, and you’re running things at the current industry standards,” Longo says. “You can never have too much protection when it comes to your – and your clients’ or employer’s – data.”

AN OUNCE OF PREVENTION Although phishing emails can be sneaky, Longo says employees can be trained to identify red flags. “Look for things that are out of the ordinary,” he says. “It could be a wire transfer that doesn’t normally happen, suspicious attachments, bad grammar, spelling errors - anything that might indicate something isn’t quite right.”

At user trainings, employees can learn how to hover the cursor over an email link to see where it really goes. “Sometimes you can tell it’s a fake link,” Longo says.

One of the biggest prevention tips: Never click on an email link. “Even if it appears to be from your bank, don’t click,” Longo advises. “Go to the bank’s official website, and log into your account to see if the information matches the email you received.”

Spam filters and email monitoring programs can mitigate threats before they get to you. These programs strip suspicious links, block attachments, and even scan Excel files and remove macros.

Multifactor Authentication (MFA) is another valuable tool. It requires a cell phone or other secondary device to receive a code or prompt before allowing access to a system or files.

In a perfect world, no one is working from home on a personal computer unless he or she is using a Virtual Private Network (VPN) to access an organization’s network. “If access is only via a VPN, it limits the environment in which damage can be done,” Longo explains.

Sometimes, despite everything you do, a cybersecurity breach happens. Disaster and recovery plans are critical because Longo says evolving cyber threats can even encrypt backups.

While a cyber threat can be scary, a good mitigation plan can put it all in perspective. “Proactive mitigation is critical,” Longo says. “We want to put measures in place before a big problem happens. The saying, ‘an ounce of prevention,’ is the absolute truth.”

30 years experience in public accounting 25 years of service with Lang & Company, CPAs 10 years experience as a business broker for CPAs Providing buyer consultation as well as full service business broker services

Please call for your free consultation 303-726-7646 www.thomaslangcpabroker.com tom@thomaslangcpabroker.com Colorado Real Estate License and CPA license Member of the Colorado Society of CPAs Past Board Member of Colorado Association of Business Intermediaries

Having a knowledgeable IT person or team in place also is invaluable, whether that means having someone on your staff or hiring an outsourced vendor. Regardless of your organization’s size, there’s value in having someone evaluate your systems.

May/June 2021 | www.cocpa.org

27

MEMBER SPOTLIGHT

Building a Legacy: Lucius Ashby Matters

BY NATALIE ROONEY

Lucius Ashby, CPA, might have ended up as a math major if he hadn’t received some sage advice from a friend: “You can’t do anything with a math degree!” So instead, Ashby set his sights on accounting and became one of the first Black individuals licensed as a Colorado CPA. Now, as the Resident Partner in Charge of the Denver office of Banks, Finley, White & Co., Certified Public Accountants, Ashby has been leading the way and serving as a mentor to countless young accounting professionals. A past Colorado State Board of Accountancy member and president, he’ll celebrate his 50th anniversary as a CPA this September.

A

shby was born and reared in Des Moines, Iowa. He ended up in Denver, following his parents after they relocated while he was in the Army. He graduated from the University of Colorado Denver with a very useful accounting degree. “I didn’t know much about accounting when I switched to it,” he reflects. “But I’ve been in public accounting since graduation.”

BREAKING GROUND, LOOKING FOR CONNECTIONS Ashby joined Arthur Andersen’s audit practice right after graduation.

In the early days of his career, his main challenge was finding someone with whom he could relate and talk to as a Black CPA. While he did connect with a few professionals, they didn’t work at a large firm as he did. “There are all sorts of things that come with working at a large firm and learning to navigate there,” he says. “There was no one I felt close to or could talk to. I felt like I was on my own.”

With that said, Ashby also asserts that even though he was just the third Black CPA in Colorado and was really without peers, he never experienced any discrimination as he began his career. “Arthur Andersen was a really good place to start and grow and see what was going on,” he says. “There might have been people who had some feelings of discrimination, but because they never expressed it or let it show, it was a good place to be.” He says people he knew who worked at other firms felt the same way. “The firms were just interested in whether you were smart and could get the job done.”

When he was young, Ashby said he assumed every workplace was as welcoming. “I found out it wasn’t, but at Arthur Andersen, it was.” That environment is part of why Ashby says the accounting profession has been such a great place for him to be and build a career.

After three years at AA, Ashby decided to venture out on his own, founding a firm with two other CPAs. “We specialized in audits, because that’s what we knew,” he says. “As the firm grew in size and I grew professionally, we discovered there were more and more medium-sized firms and small businesses that needed the advisory assistance we could offer.”

Ashby began gravitating away from audit – even though he still does some – and into more of a business advisor role. He loves that each day is different. “I enjoy the challenge that comes when someone has an issue or problem they can’t fix,” he says. “I like figuring out how I’m going to approach and solve it, to achieve the best outcome for the client.”

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Several years ago, both of Ashby’s partners passed away within a month of each other. He tried proceeding alone for a while before reaching out to a larger firm to discuss forging a working relationship. “I needed a relationship with a firm I could trust to talk through things,” he says. The conversations proved fruitful, and shortly thereafter, Ashby joined his firm with theirs, and becoming the partner in charge of the Denver office of Banks, Finley, White & Co. SHARING THE PROFESSION Ashby has enjoyed the opportunities a career in accounting has brought him, and now he generously shares his wisdom with young Black students, encouraging them to consider the profession he loves.

“I enjoy helping them navigate their careers and futures,” he says.

Accounting teaches you a good work ethic, and accountants are respected for those ethics and how they approach things.

“Accounting is a stepping-stone to many different things,” Ashby adds.

“In business, if you understand where the money goes, you understand the business. Even today, accounting teaches you a good work ethic, and accountants are respected for those ethics and how they approach things. This profession gives you the foundation to go out and do a lot of different things.”

NOT QUITE READY TO RETIRE Ashby says his wife, Victoria, keeps asking him when he’s going to retire. His children, Felicia and Armand, are grown and pursuing their own careers and dreams. “I believe you need to have someone you care about, work that challenges you, and something you enjoy doing.”

For Ashby, those things are his wife, accounting, golf, and photography. “Now, I make sure I save time for all of those. Earlier in life, all I did was accounting and work. I’ve brought these other things into my life. It’s a good balance now.”

MANAGEMENT ACCOUNTING

Pandemic Increased the Urgency to Prepare Business for Growth

BY SABINE VOLLMER Editor’s note: This article is part of FM’s “A Year of Evolution: CFOs on 2021” series featuring insights from finance leaders across industries, and their COVID-19 lessons and 2021 plans. To receive weekly updates on this series, sign up for our CGMA Advantage newsletter.

T

he economic and health impacts of the coronavirus pandemic have forced many businesses to address the way they manage uncertainty and risk.

To survive the impacts, which differed by geography and industry, businesses devised strategies based on what-if scenarios.

Artificial intelligence, machine learning, and predictive models helped cut through the complexity, but the speed at which the impacts could be felt also required up-todate data and predictive modelling that had to be repeated frequently.

That created opportunities for companies like Qlik, a U.S.-based software company.

Qlik helps customers around the world tackle complex problems through the use of data analytics. The digital tools produce insights into the data, which allow customers to transform their organizations, whether it’s a business, a university, or a not-for-profit.

The pandemic also created obstacles to pursue these opportunities, says Dennis Johnson, CPA, the CFO of Qlik. FM talked with Johnson about the limitations the pandemic imposed on the company’s global sales force at a time when demand for data analytics software is rising and how the company is overcoming the obstacles.

WITH NO SIGN OF THE PANDEMIC ABATING, WHAT DO YOU SEE AS THE MAIN CONSTRAINTS FOR YOUR BUSINESS IN 2021?

Johnson: It comes back to the inability to travel. Air travel has been limited, and we expect it to be limited for at least the first quarter, probably the first half of next year.

Typically, we hold live events all across the globe, where we’re hosting customers and partners. Almost all of that has shifted to virtual. Not being able to travel and people not being able to congregate in large groups is a limitation.

We’ve been working in a largely virtual environment since the beginning of March 2020. Not being able to have salespeople on planes going to visit customers forced us to think differently about how we have those customer and prospect touchpoints in a virtual environment.

Also, we typically do a big sales kickoff at the beginning of the year to get our sales force fired up, get them all aligned on our objectives. We do it virtually, but again it’s a little more challenging to coordinate that way. When you do a Zoom, it’s very formal.

Everybody is on the call together, and so whether it’s a customer interaction or an internal meeting, you lose those informal interactions with people. You have to focus on putting more resources into it and really being thoughtful about how you plan the agenda to get that same result and impact from it.

HOW HAS PRODUCTIVITY BEEN AFFECTED? HOW DO YOU HELP BUILD THE MENTAL STRENGTH OF YOURSELF AND YOUR TEAM AS THE PANDEMIC DRAGS ON? Johnson: We actually saw a bit of a surge in productivity at the beginning of the pandemic. People wanted to demonstrate we could make this work, that we were going to

fight through this. It was almost a bit of an adrenaline rush.

The longer the pandemic played out, the more that was taxing on people. It put a lot of pressure on people whether it’s parents who are home-schooling children or trying to deal with virtual school, hybrid school, whatever it might be in wherever they live, or taking care of family members who had caught the virus or who have some type of underlying condition and they have to be very careful about not catching the virus.

So that was something that we really had to focus on, to really ramp up our communication cadence.

Our executive team did listening forums where we would get random employees in small groups and just hear them out about what’s going well. What are we doing right?

What’s not going too well? Where could we give you some additional support? Functionally, really ramping up our communications, doing skip-level one-on-ones [employees meet with their manager’s manager], team meetings, functional town halls. The best thing to do was to stay close to people to make sure we understood how they were feeling.

CONTINUED ON PAGE 30 May/June 2021 | www.cocpa.org

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MANAGEMENT ACCOUNTING CONTINUED FROM PAGE 29 ARE THERE SOME THINGS THAT YOU’VE STARTED DURING THE PANDEMIC THAT YOU’RE CONSIDERING KEEPING, EVEN WHEN PEOPLE ARE COMING BACK TO THE OFFICE? Johnson: We would do listening forums in the past, but I think we’ve seen the value of having an executive sit in a room with a cross-functional group of employees in a small setting and opening up the dialogue and encouraging people to be open. That’s been very helpful in terms of us staying close to the organization, really understanding what’s going on, not just hearing it from our direct reports up through the chain but getting close to people. That is definitely something we’ll continue in more a regular cadence maybe than we have in the past.

WHAT APPROACH ARE YOU TAKING TO BUDGETING AND FORECASTING FOR 2021? IS IT DIFFERENT FROM PAST YEARS? Johnson: It’s really not too much different.

It’s maybe slightly more cautious just in terms of trying to predict specifically when things will return back to relatively normal where people will be travelling. So maybe a little more cautious and just being able to pivot one way or the other if things break a certain way, the economy suffers a setback, or things really start to take off. We’re watching the news on vaccines and what that means to the economy very closely.

HOW WILL THE PANDEMIC AFFECT YOUR FINANCE FUNCTION’S OR YOUR COMPANY’S DIGITAL TRANSFORMATION JOURNEY? ANY PLANS TO ACCELERATE OR HOLD OFF INITIAL PLANS? Johnson: We were a public company and went private in 2016. We had a task to really get down our cost to finance and cost to general and administrative expense as a percentage of revenue, which we’ve done. We’ve reduced it dramatically and really driven efficiencies and scale out of the organization. Technology was at the center of that.

We used the world’s best software platforms, whether it’s NetSuite or Concur or Xactly for commissions and Salesforce for customer relationship management, but it all kind of starts with our own technology. We’re using the Qlik products within finance to help scale our organization, drive insights into the business, and really get the most out of our organization from an efficiency standpoint.

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That will continue to be part of our strategy going forward. If anything, we’ll focus more on those types of projects to make sure we’re remaining as efficient as possible and getting the most out of technology.

WHAT IS YOUR MOST IMPORTANT PRIORITY GOING FORWARD? Johnson: The primary focus is bookings growth. We want to continue to take market share and continue to disrupt the industry as we have for several years. The focus for us is really how we drive that bookings growth.

Some of it is increasing productivity of our sales force to make sure that we’re making them efficient and that we see productivity gains year over year.

When we see a particular market where we can add sales capacity and drive bookings, we’re going to do that and despite the pandemic we’ve done that. We continue to hire very aggressively. We’ve retooled and re-prioritized as we’ve gone throughout the year, based on shifts in our market we’ve seen as a result of the pandemic. We continue to invest in our organization and people, our products from a research and development standpoint, in our sales organization, and our customer success in order to continue to drive growth for the company.

We think that when the pandemic ends, we’re going to come out of this on a really strong footing.

WHAT ARE THE BIGGEST THREATS TO YOUR BUSINESS NOW, AND HOW ARE YOU MANAGING THEM? WHAT INDICATORS ARE YOU TRACKING? Johnson: Aviation and hospitality are two industries that we continue to watch very closely.

We look at churn rate. We look at the renewal rates, maintenance, and subscription contracts that are up for renewal; what’s happening within those sectors. And really what we try to do is help our customers through this. We’ve been a little more flexible for customers in industries that have been hit hard. We try to offer them ways to help them through this period of time and to stay loyal to them. Hopefully, they return that with loyalty to us.

HAVE YOUR BUSINESS STRATEGIES CHANGED? ARE THEY BEING REASSESSED? Johnson: What we’ve seen in the pandemic is more of a focus on cloud. It’s becoming top of the agenda for the CIOs we talk to. We are

adapting accordingly and accelerating our cloud strategy, which was already underway. We have our pure SaaS-only offering in the market now. We’re working with our customers in particular, to move them to the cloud and to help them manage their overall total cost of ownership.

The other thing we’ve seen is a move from what we would call “passive” to “active” intelligence. Customers are really looking to access and make decisions on data much more quickly in real time versus relying on static dashboards or reports. In the past you would get a report delivered to your inbox and then the evolution was to dashboards.

We’re looking to make that even more real time with alerting capabilities, which we now build into our product, and mobile capability.

What the pandemic also exposed and what we’re responding to is filling in the gaps in the data pipeline, where the information comes from. Companies realized they had data silos or processes and technology gaps that slowed down their ability to access data and act on it. Creating a more robust data pipeline to manage the data process — accessing the data, transforming and preparing it, analysing it — that’s really becoming a top priority.

Going back even ten years where a business user would have a need for information, they would work with their IT department and they would say, “This is the information that I need. These are the time periods that I need, and I need it done for each month.”

It might take two weeks to get that data, a month to get that data, six weeks to get that data. By the time it would land on your desk or in your email inbox as a PDF report, it was already outdated. Then you start asking questions about, “Well, what about the last six weeks, and how quickly can I get that information to see what’s happened?”

What we’re talking about now is having information on your phone. You get an alert that maybe there’s sales data in a particular region available, and that sales data indicates there’s been a drop-off in sales last week, or yesterday, or this morning, giving the person that’s responsible for that business the ability to jump in and look at what’s going on and talk to people and say, “What’s happening? How do we respond to this?”

SPECIALTY ACCREDITATION

How Can AICPA ABV Credential Holders Help in Times of Need?

W

hile the public health crisis brings extraordinary market conditions, Accredited in Business Valuation (ABV) credential holders are well positioned to assist clients during these unprecedented times. Though privately held business valuations do not strictly follow the public markets, values may be depressed as a result of decreased cash flows, higher risk, or lower marketability caused in part by voluntary social distancing and government-imposed closures, stay-at-home orders, etc. Alternatively, businesses in some industries may see an increase in value due to changes in market demand and consumer habits.

The good news is these challenges present opportunities for ABV credential holders to better serve their clients during these extraordinary times. Uncertain of where to turn, clients may be looking for assistance in the following valuation service areas: ADVISORY SERVICES • Selling their businesses due to market changes • Acquiring other businesses due to advantaged entry points or perceived strategic benefits • Identifying ways to rebuild business value • Planning for cash flows and scenario analysis FAIR VALUE • Testing goodwill, indefinite-lived and long-lived assets for impairment • Determining the fair value of their investments EMPLOYEE STOCK OWNERSHIP PLANS • Exploring whether to utilize the interim valuation date option for ESOPs DISPUTE/LITIGATION • Computing economic damages to business value and assisting with litigation or insurance claims • Navigating the complexities related to bankruptcy and restructuring • Valuing assets for equitable distribution purposes

TAX • Making gifts of stock/membership interests while values are depressed • Seeking advice on other estate planning issues including the use of alternative valuation dates Though this list is not intended to be all-inclusive, it does present examples of how ABV credential holders are helping their clients, and themselves, during the current pandemic. As the fallout from the current health crisis becomes more apparent, the challenges businesses are currently facing will create opportunities for ABV credential holders to enhance their image as competent, credible, and experienced valuation service providers.

Interested in pursuing the ABV credential?

To qualify, a candidate must: FOR CPAS: • Be an AICPA member in good standing • Hold a valid and unrevoked CPA license or certificate issued by a legally constituted state authority • Pass the ABV Examination, which is offered year-round on a continuous basis and available online with remote proctoring (requirement waived for candidates who have passed the ASA credential exam of the American Society of Appraisers, CFA exam level III of the CFA Institute, or CBV credential exam of the Canadian Institute of Chartered Business Valuators)

• Meet the minimum business experience requirement of 1,500 hours of valuation experience within the 5-year period preceding the date of the ABV application • Meet the minimum education experience requirement of 75 hours in the ABV body of knowledge within the 5-year period preceding the date of the ABV application FOR QUALIFIED VALUATION PROFESSIONALS: • Be an AICPA member in good standing • Hold a bachelor’s degree or equivalent from an accredited college or university and complete the AICPA Professional Conduct and Standards Education for Finance Professionals course within 30 days after submitting your application • Pass the ABV Examination, which is offered year-round on a continuous basis and available online with remote proctoring (requirement waived for candidates who have passed the ASA credential exam of the American Society of Appraisers, CFA exam level III of the CFA Institute, or CBV credential exam of the Canadian Institute of Chartered Business Valuators) • Meet the minimum business experience requirement of 4,500 hours of valuation experience within the 5-year period preceding the date of the ABV application • Meet the minimum education experience requirement of 75 hours in the ABV body of knowledge within the 5-year period preceding the date of the ABV application Visit aicpa.org/credentials to learn more about the ABV credential, its benefits, and the pathway to becoming an ABV credential holder.

May/June 2021 | www.cocpa.org

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COCPA.ORG/CONNECT

MOVERS & SHAKERS KERRI HUNTER, CPA Kerri Hunter, CPA, Deputy State Auditor for the Colorado Office of the State Auditor, Denver, Colo., was named the sole nominee to succeed Dianne Ray, CPA, as State Auditor, July 1, 2021.

RON SEIGNEUR, CPA/ABV, ASA, CVA Ron Seigneur, CPA/ABV, ASA, CVA, Seigneur Gustafson LLP, Lakewood, Colo., was appointed to the AICPA Cannabis Conference Planning Committee.

SAM CHERIS, ESQ. Sam Cheris, Esq., special advisor to the COCPA Board of Directors, was named Vice President of the Board of Directors for the Town Hall Arts Center, Littleton, Colo.

LYNNE A. LEHR-BUCK Lynne A. Lehr-Buck, Intrascope Accounting Solutions, Littleton, Colo., serves as Treasurer of the Town Hall Arts Center, Littleton, Colo.

DALBY, WENDLAND & CO., P.C. For the eighth year, Accounting Today recognized Dalby, Wendland & Co., P.C., as a Top Regional Firm in the Mountain States Region which includes Colorado, Utah, Montana, Idaho, and Wyoming.

CLASSIFIEDS PRACTICES FOR SALE, PURCHASE, OR MERGER Selling your firm is complex! ACCOUNTING BIZ BROKERS can help!

We have been selling CPA firms for over 16 years, and we know how to simplify the process. We have a large database of active buyers.

We work with industry specific lenders ready to assist buyers with financing. Contact us today to receive a free market analysis or to start the sales process. Current Listings: Loveland Gross $690k - Sale Pending; Loveland Gross $160k - Sold; Mesa County Gross $120k Sold; Central Mountains CPA Firm Gross $70k; Englewood Gross $310k - Sold: Greeley Gross $255k - Sold. Kathy Brents, CPA, CBI, at 866260-2793 or Kathy@AccountingBizBrokers.com, or visit our website at www.AccountingBizBrokers.com.

To place an announcement in Movers & Shakers, contact Mary E. Medley, mary@cocpa.org. To run a classified advertisement, contact Derrol Moorhead, derrol@cocpa.org. The COCPA reserves the right to edit content for space and appropriateness or to decline to publish a submission.

IN MEMORIAM We extend our sympathy to the families and friends of the following members: Gregory A. Hamilton Member since 1969, Craig, Colorado Marion Wesley Ray Member since 1971, Lakewood, Colorado Michael L. Schulz Member since 1970, Aurora, Colorado

TAX STUDY GROUPS Boulder/Longmont Tax Study Group VIRTUAL ONLY

Wednesday, May 5 and 19, and Wednesday, Jun. 16 Additional 2021 dates: Jul. 21, Aug. 18, Sep. 22, Oct. 20, Nov. 17, Dec. 15. For more information, contact Lynn M. Mitton, CPA, MT, MPA, 303-499-7445, or email lmitton@tandemcpas.com.

Denver Tax Study Group VIRTUAL ONLY

Tuesday, May 25, and Tuesday, Jun. 22 Additional 2021 dates: Jul. 27, Aug. 24, Sep. 28, Oct. 26, Dec. 7. Register at www.cocpa.org.

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