Exploring the issues that shape today’s business world.
Gauging Corporate Earnings Manipulation
Navigating Next Steps for SQMS Implementation
Tips for Protecting Aging Clients
Strategies for Not-for-Profit Profitability
Why Lifestyle Firms Are Redefining Success And More!
Geoffrey Brown, CAE President and CEO, Illinois CPA Society
As our legislation to create new pathways to becoming a licensed CPA in Illinois makes its way to being signed into law, embracing adaptability must become the focus.
When people think of the traits of certified public accountants (CPAs), they likely think of the tenets of trust, integrity, and technical expertise. But there’s another foundational attribute of CPAs and the CPA profession—adaptability.
As the world around us rapidly evolves, so too must the requirements for becoming a licensed CPA. Discussions across the country in recent years about just this—modernizing CPA licensure—have sparked successful legislative efforts in dozens of states, including here in Illinois.
We’re still celebrating the May 2025 passage of House Bill (HB) 2459, which amends the Illinois Public Accounting Act to create two additional pathways to CPA licensure in our state and enhance CPA practice mobility. These new pathways include:
1. Obtaining a bachelor’s degree with the required concentration in accounting, completing at least two years of relevant work experience, and passing the Uniform CPA Exam.
2. Obtaining a master’s degree with the required concentration in accounting, completing at least one year of relevant work experience, and passing the Uniform CPA Exam.
EXPLORE
www.icpas.org/ hb2459
While we strove for modernization with this bill, adaptability was also a key component of our efforts. This is why we also wanted to preserve the state’s legacy licensure pathway, which requires aspiring CPAs to complete 150 credit hours of qualifying education, complete one year of relevant work experience, and pass the Uniform CPA Exam. In all, future aspiring CPAs considering licensure in Illinois will have three distinct pathways to consider, which should allow for ample adaptability for their unique situations.
Collectively, these amendments represent a significant step forward in modernizing CPA licensure requirements while maintaining rigorous standards, ensuring that we attract top talent to the accounting profession while honoring the tenets the profession is entrusted with.
Of note, our legislation is slated to become effective in 2027. This offers ample time to pause, reflect, and ponder how we’re going to leverage the new licensure pathways for maximum benefit. There’s been an arguably pressing need to eliminate unnecessary barriers to entry into the CPA profession for several years, most notably, the time and costs required to become a CPA. Further, addressing Illinois’ ongoing accounting talent shortage and growing need for CPAs to serve the business community and protect public interests is critical. So, as drafters of this legislation, we’re committed to supporting candidates, educators, and employers through this transition. We encourage open dialogue and welcome questions about what these changes mean for all stakeholders.
We also acknowledge change can be challenging, but it’s necessary to help overcome the obstacles on the horizon—think talent pipeline issues, shifting demographics, and changing regulatory standards, just to name a few. Although not always credited with being adaptable, CPAs and the CPA profession have always evolved to successfully meet the needs of the world we live in. By creating these new CPA licensure pathways, we’re once again showing our adaptability, and I’m hopeful the next generation of professionals will now be positioned for success.
I’d like to recognize the efforts of HB 2459’s sponsors, Reps. Natalie Manley, CPA (D-Joliet), and Amy Elik, CPA (R-Edwardsville), Sen. Suzy Glowiak Hilton (D-Oakbrook Terrace), and co-sponsor Sen. Chris Balkema (R-Pontiac). Their support in the Illinois General Assembly was instrumental in advancing this important initiative for the accounting profession in our state and ensuring its readiness for the future.
ILLINOIS CPA SOCIETY
550 W. Jackson Boulevard, Suite 900, Chicago, IL 60661 www.icpas.org
Publisher | President and CEO
Geoffrey Brown, CAE
Editor
Derrick Lilly
Assistant Editor
Amy Sanchez
Senior Creative Director
Gene Levitan
Proofreaders
Kristin McGill | Mari Watts
Photography
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Circulation
Jeff Okamura
Chairperson
Brian J. Blaha, CPA | Winding River Consulting LLC
Vice Chairperson
Mark W. Wolfgram, CPA | Bel Brands USA Inc.
Treasurer
Jennifer L. Cavanaugh, CPA | Grant Thornton LLP
Secretary
Lindy R. Ellis, CPA | Ernst & Young LLP
Immediate Past Chairperson
Deborah K. Rood, CPA | CNA Insurance
Amy M. Chamoun, CPA | Cherry Bekaert Advisory LLC
Pedro A. Diaz de Leon, CPA, CFE, CIA | Sikich LLP
Kimi L. Ellen, CPA | Benford Brown & Associates LLC
Monica N. Harrison, CPA | Tinuiti
Joshua Herbold, Ph.D., CPA | University of Illinois
Enrique Lopez, CPA | Lopez & Company CPAs Ltd.
Kimberly D. Meyer, CPA | Meyer & Associates CPA LLC
Girlie A. O’Donoghue, CPA | Portillo’s Inc.
Matthew D. Panzica, CPA | BDO USA PC
Jennifer L. Rada, CPA | PwC LLP
Leilani N. Rodrigo, CPA, CGMA | Galleros Robinson CPAs LLP
Richard C. Tarapchak, CPA | Verano Holdings Corp.
Andrea Wright, CPA | Johnson Lambert LLP
Stephanie M. Zaleski-Braatz, CPA | ORBA
BACK ISSUES + REPRINTS
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Insight is the magazine of the Illinois CPA Society. Statements or articles of opinion appearing in Insight are not necessarily the views of the Illinois CPA Society. The materials and information contained within Insight are offered as information only and not as practice, financial, accounting, legal or other professional advice. Readers are strongly encouraged to consult with an appropriate professional advisor before acting on the information contained in this publication. It is Insight’s policy not to knowingly accept advertising that discriminates on the basis of race, religion, sex, age or origin. The Illinois CPA Society reserves the right to reject paid advertising that does not meet Insight’s qualifications or that may detract from its professional and ethical standards. The Illinois CPA Society does not necessarily endorse the non-Society resources, services or products that may appear or be referenced within Insight, and makes no representation or warranties about the products or services they may provide or their accuracy or claims. The Illinois CPA Society does not guarantee delivery dates for Insight. The Society disclaims all warranties, express or implied, and assumes no responsibility whatsoever for damages incurred as a result of delays in delivering Insight. Insight (ISSN1053-8542) is published four times a year, in spring, summer, fall, and winter, by the Illinois CPA Society,
Martin Green, ESQ
Senior Vice President and Legislative Counsel, Illinois CPA Society @GreenMarty
Under the Adult Protective Services Act, Illinois CPAs have a legal duty to report suspected abuse, neglect, or financial exploitation of their vulnerable clients.
Among the many bills that have made their way through the Illinois General Assembly during this year’s spring legislative session is Senate Bill 1551, which amends the Adult Protective Services Act (APSA). Specifically, the bill extends mandated reporting responsibilities to broker-dealers and investment advisors, requiring these groups to report instances of abuse, neglect, or financial exploitation of vulnerable adults (i.e., any Illinois resident age 18 to 59 living with a disability and any adult age 60 or older who live in a domestic setting).
Although this reporting requirement has already been part of a certified public accountant’s (CPA) legal responsibilities, it recently occurred to me that it’s rarely discussed or highlighted within our profession despite regular occurrences of these actions. In fact, the Illinois Department on Aging (IDOA) responded to 22,178 reports of abuse, neglect, or financial exploitation of vulnerable adults in 2024 alone.
While the APSA doesn’t specifically define abuse, neglect, or financial exploitation, IDOA addresses and clarifies these actions. The guide, “What Professionals Need to Know – Reporting Adult Abuse,” defines these actions as the following:
• Abuse: Physical, sexual, or emotional maltreatment or willful confinement of an individual.
• Neglect: The failure of a caregiver to provide an adult with the necessities of life, including, but not limited to, food, clothing, shelter, or medical care. The neglect may be either passive (nonmalicious) or willful.
• Financial exploitation: The misuse or withholding of an adult’s resources by another to the disadvantage of the adult or the profit of another.
It’s important for CPAs to remember that if they suspect any of the above actions are happening to their clients, they have a legal duty to report them to IDOA’s 24/7, toll-free hotline at 866-800-1409. When calling, CPAs should be prepared to provide IDOA staff with the following so investigators can conduct a thorough inquiry into the report:
• Specific details that give rise to abuse suspicion.
• Information about the victim and abuser, including contact information for both.
• The general condition of the victim, including whether they’re in immediate danger and if they’re in a position to self-report their abuse.
Additionally, CPAs should keep a record of the date, time, name of the IDOA intake representative, and any reference number provided on the call. The report will remain confidential, but there’s always potential for CPAs and other reporters to provide testimony in a judicial or administrative hearing.
The APSA includes provisions to protect individuals who, in good faith, report suspected abuse, neglect, or financial exploitation from civil and criminal liability and professional disciplinary action. This is meant to encourage individuals to report without fear of repercussions. Therefore, mandated reporters, including CPAs, who fail to fulfill their legal duty would be considered a Class A misdemeanor. Violation of the act could also result in discipline by the Illinois Department of Financial and Professional Regulation, as Section 20.01 of the Illinois Public Accounting Act provides, inter alia, grounds for discipline.
With the act designating some 34 categories of mandated reporters and including criminal penalties for failure to report abuse cases, it’s clear where the legislature stands in protecting vulnerable adults. The Illinois General Assembly recognizes mandated reporters hold special positions of trust in society, resulting in the attachment of a legal duty to report suspected abuse, neglect, or financial exploitation. CPAs are recognized as mandated reporters due to their trust by society, professional training, broad array of financial services provided, and close relationships with clients, which put CPAs in a unique position to identify suspected abuse, neglect, or financial exploitation.
Therefore, I encourage you to download IDOA’s guide and make it part of your and your firm’s professional library. In fact, consider making this guide a discussion point for your next staff meeting to review reporting duties and the signs of abuse, neglect, and financial exploitation.
A CPA’s legal duty as a mandated reporter shouldn’t be overlooked or taken for granted. Engagement with your clients and members of your community places you in a position of special trust, and the public interest dictates fulfillment of this legal duty to protect vulnerable adults.
The Illinois CPA Society is proud to recognize these individuals and organizations on their accomplishments.
Lifetime
Joseph F. Bigane III, CPA | Managing Director, JFB Tax Consulting LLC
Lester H.
EMERGING LEADER
Kashane O. Morgan | Senior Audit Consultant, Komatsu Ltd.
EXPERIENCED LEADER
Danielle D. Booker, Ph.D., CPA | Assistant Professor of Accounting, Loyola University Chicago
EMERGING LEADERS
Garima Arora, CPA | Risk and Financial Advisory Consultant, Deloitte LLP
Ashley M. Carboni, CPA | Director, KPMG LLP
EXPERIENCED LEADERS
Nicole M. Lindley, CPA | Tax Partner, Mowery & Schoenfeld LLC
Sylwia A. Nazar, CPA, CDFA® | Partner, Friedman & Huey Associates LLP
Lisa A. Busto, Ed.D., CPA | Professor, Harper College
Joshua Herbold, Ph.D., CPA | Teaching Professor and Associate Department Head, Gies College of Business, University of Illinois
Andrew M. Guerrero, CPA | Senior Manager, Adelfia LLC
GOLD MEDALS (TIE)
Matthew R. DiMillo, CPA | Illinois Wesleyan University | Mowery & Schoenfeld LLC
Maclain Smigielski, CPA | University of Nebraska–Lincoln | Deloitte LLP
SILVER MEDAL
Jeremy Reda, CPA | Indiana University Bloomington | Ernst & Young LLP
BRONZE MEDALS (TIE)
Anna Rutkowski | Loyola University Chicago | PwC LLP
Yuzhe Zhang | University of Illinois | KPMG LLP
Beacon Awards
Distinguished Service Awards
Eric Fader, JD, CPA
Leslie
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How many executives are manipulating their corporate earnings? New research says the truth is in how you ask about it.
BY JOSHUA HERBOLD, PH.D., CPA
WHILE HEADLINES ABOUT SCANDALOUS frauds or large accounting restatements may grab our attention, it’s not always clear if these events and other forms of earnings manipulation are as common as they appear. Fortunately, we have new research to help us navigate this issue.
According to recent research by Assistant Professor Alex Vandenberg from the University of Illinois Urbana-Champaign, along with his colleagues Nicole Cade and Joshua Gunn (both from the University of Pittsburgh), more than 1 in 4 executives admitted to some form of earnings manipulation.
This high frequency rate may reveal systemic risks and pressures that impact financial reporting integrity, internal controls, and audit planning. And, no doubt, it has broad implications for standardsetting and enforcement initiatives, as it undermines public trust in corporations and their financial reporting—more importantly, it damages the credibility of the accounting profession.
Understanding this rate of earnings manipulation in the economy is essential for certified public accountants (CPAs) and regulators. In corporate accounting, understanding these trends can help CPAs
enhance internal controls and advise boards on areas vulnerable to misreporting due to incentive pressures. For auditors, knowing how often earnings manipulation occurs can also support better industry and engagement risk assessments, allowing for more focused materiality judgments and more targeted procedures in high-risk areas, like revenue recognition, reserves, and accruals.
Accounting researchers broadly define earnings manipulation as any act in which managers intentionally intervene in the financial reporting process in order to obtain some benefit for themselves or their company. These acts can be within the scope of Generally Accepted Accounting Principles (GAAP) or not.
In their study, Vandenberg and his colleagues surveyed high-level executives from organizations in the Russell 3000 Index (mainly, chief financial officers, chief accounting officers, controllers, and CEOs) about manipulation of earnings at their companies.
While accounting researchers have studied earnings management for decades, this study is likely the first to directly ask executives about their own experience in this area. As Vandenberg explained in a recent podcast: “Before our study, most people assumed executives would never admit to manipulation when asked directly. There’s too much at stake: It could be illegal or cost them their job. So, no one had really tried asking them directly in a standard survey.”
In the survey, executives were asked about five categories of earnings management and their behaviors in each from 2018-2023. To the researchers’ surprise, a staggeringly high number of executives admitted that their companies had manipulated earnings during that timeframe. “Specifically, nearly 27% said their company had done it at least once in the past five years,” Vandenberg explains.
The five categories in the survey, along with definitions, examples, and the percentage of executives who reported at least one instance of earnings manipulation from that category, are as follows:
• Real Earnings Management (18%): Changing an operational activity to meet a near-term target at the expense of longterm value. For example: A company might delay necessary maintenance or cut research and development spending in the fourth quarter to reduce expenses to meet quarterly earnings expectations, even though this harms long-term asset reliability or innovation.
• Disclosure Obfuscation (8.8%): Altering a disclosure to make unfavorable information more difficult to find or understand. For example: A company could attempt to hide the financial impact of a major product recall by using vague language or burying the disclosure in a complicated footnote.
• Accrual Manipulation (6.6%): Using accounting choices and discretion allowed by GAAP to report earnings that don’t accurately represent the company’s economic performance. For example: A company could reduce expenses by underestimating bad debt or warranty expenses or by assuming longer useful lives for assets.
• Material Omissions (3.9%): Deliberately withholding information that could discourage investors from investing in the company. For example: A company may fail to disclose that a key contract with a major customer is about to be terminated.
• Accounting Fraud (0%): Intentionally misstating information in financial statements with the intent to mislead users. For example: A manager might recognize revenue on nonexistent transactions in order to meet an aggressive growth target. These percentages are likely to represent a “floor” or lower bound on the actual rate of each type of earnings manipulation, according to the researchers. While executives are unlikely to report manipulations that haven’t occurred, they could be reluctant to admit to behaviors that are illegal or that might be considered undesirable. According to the study, “estimates obtained via [survey responses] will be downwardly biased if executives who have manipulated earnings are more likely to lie, skip questions, or refuse to participate in the study compared with executives who have not manipulated earnings.” In survey research, this is known as the social desirability bias.
To address social desirability bias, the researchers supplemented their survey with something that hadn’t been done in accounting research before: a list experiment. In a list experiment, respondents are randomly assigned to receive either a list of non-sensitive items or the same list plus a sensitive item. Then, they report how many (but not which) items apply to them.
By comparing the average counts between groups, researchers can estimate the frequency of sensitive behaviors without individuals directly disclosing them. For instance, an example of a non-sensitive item may be: “My commute to work is 45 minutes or longer,” or “My company has an employee-friendly vacation policy.” An example of a sensitive item may be: “I’m aware of a time in the past five years when my company materially misrepresented information in the financial statements with the intent to mislead.”
According to Vandenberg, the technique is indirect and allows executives to answer honestly while maintaining a high level of plausible deniability: “It’s so strong, in fact, that no one—including us—can know whether any individual admitted to manipulation. But as researchers, we can use the overall results to estimate how many executives manipulated earnings.”
Of course, there are downsides to using a list experiment—one being that it adds statistical noise to the data. This means that much larger sample sizes are often required to obtain statistically reliable results (here, the researchers were able to get responses from nearly 1,000 executives).
However, even with this drawback, for two of the categories of earnings manipulation, the researchers found estimated frequencies that were higher than the estimates from the direct survey. For example, in the real earnings management category, the list experiment frequency was 29.9% versus 18% in the survey, and in the accounting fraud category, the list experiment frequency was 12.4% versus 0% in the survey.
“It’s really interesting because, in the direct survey, exactly zero executives admitted to fraud. But in the list experiment—which is designed to promote honest responses—the results suggest more than 12% of companies engaged in it,” Vanderberg says.
Overall, the researchers’ findings suggest that when you give executives a way to answer honestly and privately, the rate of earnings manipulation comes out a bit higher.
Joshua Herbold, Ph.D., CPA, is a teaching professor of accountancy and associate head in the Gies College of Business at the University of Illinois Urbana-Champaign and sits on the Illinois CPA Society Board of Directors.
Following these next steps will help ensure your firm’s new quality management system is both well-designed and well-executed in time for AICPA’s looming professional standards deadline.
BY HEATHER LINDQUIST, CPA
FIRMS THAT PERFORM ENGAGEMENTS under Statements on Auditing Standards, Statements on Standards for Accounting and Review Services, and Statements on Standards for Attestation Engagements should be spending part of their summer studying up on the AICPA’s new Statements on Quality Management Standards (SQMS). With an effective date requiring that firms’ quality management systems be designed and operational by Dec. 15, 2025, there’s little time to waste.
EXPLORE
In my winter article, I gave an overview on the importance of learning the basics of what’s required under the new SQMS, building a design and implementation team, developing a roadmap for the design process, and understanding the new risk-assessment requirements. However, at this stage in the SQMS implementation journey, firms should be moving beyond identifying and assessing risks to responding to quality risks through their policies and procedures, sufficiently documenting the design of their quality management systems, and communicating and training personnel about the changes. Here, I’ll be addressing all three of these important next steps.
www.icpas.org/ sqmstips
As I outlined in my winter 2024 Insight article, “6 Tips for Implementing the New Quality Management Standards,” the new SQMS lays out a framework that includes two process-oriented components: 1) risk assessment and 2) monitoring and remediation. These two components are integrated with six environmental and operational components (governance and leadership, relevant ethical requirements, acceptance and continuance, engagement performance, resources, and information and communication).
Overall, the nuts and bolts of this new framework require firms to set quality objectives, identify and assess quality risks, and design responses for the six environmental and operational components.
Developing effective responses to quality risks involves leveraging current firm policies and procedures and potentially designing new ones. For example, SQMS No. 1, “A Firm’s System of Quality Management,” requires certain “Specified Responses” be incorporated into a firm’s quality management system, addressing presumed risks within the system. One of the “Specified Responses” requires firms to establish policies and procedures to annually obtain personnel’s confirmation of compliance with independence requirements. (Many firms already have such a process in place and will only need to link this response to related risks within quality management design documentation.)
Conversely, firms will likely need to design new policies and procedures for “Specified Responses” relating to information and communications. Specifically, firms will need to address risk associated with external communication about the firm’s quality management system, including the nature, timing, extent, and form of any such communications.
While firms must incorporate “Specified Responses” into their quality management systems, these alone won’t address all quality risks. Firms will need to review current policies and procedures, mapping these out against identified quality risks and designing new responses where necessary.
Further, SQMS No. 1 requires firms to assign ultimate responsibility and accountability for the quality management system to the managing partner (or equivalent) as well as certain other roles. This includes assigning operational responsibility for the quality management system, compliance with independence requirements, and the monitoring and remediation process. Though the same individual may assume responsibility for all these roles, the standard requires firms specify (and document) which individual or position will fulfill each task.
SQMS No. 1 also requires firms to develop documentation supporting both the design and operation of their quality management systems. Firms in the midst of the design and implementation process must determine the best method of documentation to:
• Facilitate understanding of the system’s operation by personnel, including roles and responsibilities.
• Ensure consistent implementation and operation of the responses (i.e., policies and procedures).
• Provide sufficient evidence of design, implementation, and operation of the responses to support the evaluation of the system.
Importantly, design documentation can take many forms and will vary in complexity based on each firm’s circumstances. However, regardless of its form, the design documentation must assign required roles, demonstrate that a risk-assessment and response design process was performed (including the establishment of quality objectives), and, if applicable, address relevant network participation considerations.
For example, one approach could be creating a quality management document supported by a risk-assessment and response document, with each part serving the following purposes:
• Quality Management Document: This summarizes the firm’s approach to quality management with policies and procedures for all eight components. For the two process-oriented components in the new SQMS (risk assessment and monitoring and remediation), the document would include policies and procedures related to how the firm administers each process. For the six environmental and operational components requiring risk assessment, the policies and procedures summarize the responses to identified quality risks (including the required “Specified Responses”) linking back to the risk-assessment and response document. Additionally, the document would assign the required roles.
• Risk-Assessment and Response Document: This provides evidence of the firm’s risk-assessment process, including the establishment of quality objectives, identification and assessment of risks, and development of appropriate responses. The document demonstrates the linkage between risks and designed
responses (policies and procedures that flow into the quality management document). The firm can periodically revisit this document to reexamine conclusions on quality risks and determine the need for new or revised responses depending on changing conditions and circumstances.
The existence of a written document means very little without a commitment to educating firm personnel about how to live out its contents. Though not everyone needs to understand the ins and outs of the firm’s quality management system, having all personnel possess a general understanding of quality management and its role in the firm’s operations is critical to ensuring they adhere to the firm’s newly designed policies and procedures.
To foster this understanding among personnel, begin by spreading awareness. Circulate the quality management document to all personnel and hold a short meeting to familiarize them with the SQMS basics, including policies and procedures (current and new) and the process that firm leadership went through to identify, assess, and respond to quality risks.
Stella Marie Santos, CPA, managing partner at Adelfia LLC, champions this approach, explaining that her firm has always made reading its quality control document a part of the employee onboarding process. Now, with the new SQMS implementation looming, Santos says the firm plans to hold specific training to educate personnel about the upcoming changes and the firm’s new quality management document.
Of course, even after the Dec. 15 implementation deadline, firms should consider how to maintain quality management awareness.
Randall Miller, CPA, partner at Hawkins Ash CPAs, suggests a method his firm uses to keep employees up to date on policies and procedures: requiring employees to confirm receipt of and review the firm’s updated quality management policies and procedures each year alongside their annual confirmation of compliance with independence requirements.
In addition to awareness, providing context of the “why” behind certain policies and procedures is important. For example, firm personnel should consider the criticality of completeness, retention, and secure storage of engagement documentation during training, as well as prior to locking down engagement files.
For Santos and her team, the plan is to explain the concept of quality risk assessment during training and provide context about the resulting responses and how various business considerations may impact risk, which may then lead to new or amended responses in the future.
Further, asking personnel to identify connections between their roles and quality management concepts, such as whether their continuing professional education plans align with the type of work they perform, can be an effective tool for gauging understanding. Overall, a successful quality management system hinges on a firm’s ability to comprehensively identify quality risks, develop responses to the risks, and successfully communicate and achieve buy-in from all personnel. Spending sufficient time tackling these challenges will help ensure that your firm’s system isn’t only well-designed but also well-executed.
Heather Lindquist, CPA, is the Illinois CPA Society’s director of peer review and professional standards.
Each year, millions of aging Americans fall victim to some type of financial fraud scheme. Here’s how CPAs can play a vital role in serving as their first line of defense.
BY CHRIS CAMARA
some aging clients may be unaware of the latest scams, are generally less suspicious of fraudulent activities, may be more isolated from regular social interaction, and/or may have to manage cognitive decline impairments.
IF YOU SEE SOMETHING, SAY SOMETHING. That’s the advice Mark Gallegos, CPA, MST, tax partner at Porte Brown LLC, gives his elderly clients when they receive a suspicious email, text, or phone call demanding money or personal information from them.
“If something doesn’t seem right, I advise my clients to just pick up the phone and call me, to not even hesitate,” Gallegos says.
While no one is immune from financial fraud, elderly individuals are particularly vulnerable. According to the FBI’s Internet Crime Complaint Center’s (IC3’s) 2023 Elder Fraud Report, people ages 60 and over lost a combined $3.4 billion to fraud worldwide in 2023, with the average loss per victim totaling $33,915.
As noted in IC3’s report, older adults are disproportionately targeted and lose more money in scams than their younger counterparts, in part because they usually have more assets.
Other factors that are unique and specific to the aging population also make these individuals more susceptible to fraud. For example,
Not surprisingly, these vulnerabilities require extra vigilance and proactive measures from the people closest to them—and in some cases, that person is their certified public accountant (CPA).
Here, three CPAs offer guidance and best practices for how other practitioners can best protect their aging clients and serve as their first line of defense.
A CPA’s first move should be to encourage their aging clients to speak up and contact them directly when something appears suspicious, Gallegos emphasizes. He recalls a time when one of his clients, a woman in her early 80s, was led to believe that the IRS needed her to immediately repay her tax bill through $15,000 in Apple gift cards. Frightened by the phone call, she drove to the mall to comply. It wasn’t until she was questioned by an Apple store employee that she called Gallegos: “I said absolutely not—don’t buy anything. I need you to leave the store and just go home. The IRS communicates by letter, not by a phone call out of the blue.”
Gallegos’ client can hardly believe she fell for that impersonation scam today. However, Gallegos understands how the fear and desire for a quick resolution can lead some to follow through. But, as Gallegos always reminds and warns his clients, “Once the money’s gone, you’re never getting it back.”
The most effective defense against scammers is the most straightforward: explaining the latest scams to clients and how to prevent them. Of course, while this is best done in person, CPAs should supplement this communication with emails, phone calls, or mailed letters.
While CPAs are often considered more trusted than any other advisor, sometimes only a fraction of clients get all the guidance and advice they need and crave, says Elizabeth Buffardi, CPA, CFP, president and owner of Crescendo Financial Planners Inc. and cochair of the Illinois CPA Society’s (ICPAS’) Personal Financial Planning Member Forum Group. Therefore, she recommends having ongoing conversations with clients throughout the year rather than a one-time check-in during tax season.
“In all of the downtime after tax season—the theoretical downtime— to me that’s the best time to re-engage with your clients so that you as their CPA stay top of mind with everything that’s going on in their lives.”
For Buffardi, sometimes it takes more than a phone call to make this connection with her aging clients. In fact, she’s gone as far as making a house call to an elderly couple in a Chicago assisted living facility to help them with the fundamentals—changing their mailing address, checking their Social Security accounts, and gathering tax documents.
Mary Pat Wesche, CPA, PFS, CFP, a financial advisor at Forum Financial Management, notes that her firm maintains strict protocols to prevent fraud, so she’s constantly reinforcing the need to protect personal information with her clients. In fact, this frequent communication makes it easier for her to determine if her elderly clients don’t sound like themselves.
Because financial decision-making can be affected by neurological changes, Wesche reminds CPAs that they can and should— with their clients’ permission—double-check unusual requests, especially large money transfers.
In those cases, Wesche will call a family member or other approved contact of the client to gauge what’s going on: “We can’t explain their whole financial situation to them. We’re not going to disclose a lot, but we’re going to say, ‘Hey, we got a call from your mom. We don’t know why she needs this $10,000. Can you check on her and see what’s going on?’”
With the client’s OK, Wesche recommends that CPAs create a circle of trusted contacts to serve as a safety net for cases like these. The contacts may include family members, attorneys, insurance providers, bankers, or executors of their will. Wesche says she collects this contact information from every client from age 60 on up. Caretakers sometimes bring clients to their appointments, but she won’t let them sit in on meetings if they’re not on the list.
Additionally, CPAs can encourage clients to appoint powers of attorney to carry out their affairs and protect them from financial exploitation as long as that person is trustworthy (e.g., even family members can be perpetrators of elder financial exploitation).
1. The Grandparent Scam: A con artist calls and tricks a grandparent into volunteering the name of a grandchild. Later, the fake relative, pretending to be in distress, asks for money. With the help of artificial intelligence these days, scammers can clone the real voice of a relative to make it more believable.
2. Financial Services Scam: Appearing to come from a legitimate bank, mortgage company, or debt collector, the victim receives a text, phone call, or email saying their account has been compromised. They ask for personal information, such as a password or Social Security number, to fix the issue.
3. Tech Support Scam: The most common con against the elderly targets their unease with technology. Sometimes a victim’s computer screen will go blank, and a pop-up message offers a helpline. The scammer will ask the victim to log in remotely or seek compensation to repair the fake problem.
4. Government Impersonation Scam: Scammers pretend to be from the IRS, Social Security Administration, or Medicare, asking for money to cover unpaid taxes or face a stoppage of benefits unless the victim provides personal information.
5. Romance Scam: Con artists create fake social media profiles and trick online dating victims into funding visas, travel expenses, or medical emergencies.
Notably, Illinois CPAs are already mandated to report suspected abuse, neglect, or financial exploitation under the Adult Protective Services Act. However, Illinois legislators are working on passing legislation supported by ICPAS that would further protect vulnerable adults, especially elderly individuals, from financial exploitation. If passed, Illinois Senate Bill 1551 would require investment advisors and similar qualified individuals to report when they have a reasonable belief that financial exploitation has occurred with an eligible adult. Further, the bill allows advisors to delay disbursements from a person’s account if they suspect elder financial exploitation. However, Gallegos reminds CPAs that fraud isn’t limited to just aging clients. “I have clients who are 25 years old, 35, 45, 55, and they all fall for the same stuff. Some of the younger ones are more apt to be on their smartphones just clicking away because that’s what they do—and I get it, it’s easy,” Gallegos says. “In my opinion, you have an ethical responsibility to communicate information whether they’re elderly, a teenager, or anyone in between.”
The way Buffardi looks at it is through the simple necessity of taking care of one another: “No. 1, karma takes no prisoners, and No. 2, I feel like in the craziness that we’re living in, we have to look out for each other—we’re all we have.”
Chris Camara is a Rhode Island-based freelance writer who has covered the accounting profession for more than 20 years.
Here’s how firms and other organizations can better plan for the changes ahead.
BY RANDY JOHNSTON
SURPRISES CAN BE WELCOMED with open arms, especially in cases of parties or special recognitions of others. On the other hand, unexpected surprises in business, particularly with technology, are less welcomed, mainly when a system failure or slowdown occurs. However, when you think of the evolution of artificial intelligence (AI) and its incorporation into the applications we use daily (think, smartphones, Word, Excel, Google Search, etc.), I’d argue that many of technology’s surprises today are quite pleasant.
Of course, there’s one nagging challenge that technology presents many business teams: keeping up with the rapidly evolving landscape. In fact, many of your teams may already be planning for Microsoft’s big update on Oct. 14, 2025, when tech support for Windows 10, Office 2016, and Office 2019 will end—surprise! Speaking of surprises, this year is Excel’s 40th birthday and Microsoft’s 50th birthday! How should we celebrate?
While I can’t stop these unexpected, perhaps unwelcome, surprises from occurring, I can offer advice on how best to deal with these challenges.
Technology is a tool that, when used properly, can help you achieve your goals faster, with less effort, and less overall cost—and it’s clear that trends in AI and machine learning will positively impact the accounting profession for many years to come. We’re already seeing accounting professionals use AI to write emails, create presentations, and write articles or blogs for their firm’s websites (I didn’t do that for you!). Just through my own work with AI, I’ve seen 5% to 40% measured productivity gains, depending on the task. Of course, if you plan on using AI for productivity improvements, my recommendation is to choose one platform and stick with it, whether it’s Claude, Perplexity, Microsoft 365 Copilot, ChatGPT, Gemini, or Lllama. There are also various accounting AI platforms available, including TaxGPT, Blue J, MakersHub, Digits, and more.
To fully realize the benefits of AI (automating tasks, streamlining workflows, data-driven insights), you’ll need to invest in ensuring your software and hardware systems at least align with the available tools and are ready for what’s to come next. Not surprisingly, costs are only going up for systems powerful enough for successful AI integration. Though, if you buy software and hardware wisely, you’ll get many years of productivity from your platforms.
Notably, even with cloud computing and the broad adoption of software as a service, you must understand that powerful personal computers (PCs) are still essential and that AI-enabled or capable PCs must be even more powerful than standard PCs. For example, these five characteristics are essential in a PC you intend to use with AI.
• Neural Processing Unit (NPU): AI-enabled PCs come equipped with an NPU, which is specifically designed to handle AI and machine learning tasks efficiently.
• Copilot+ PC: These PCs include Microsoft Copilot, which provides AI-driven assistance and features like image generation, real-time translation, and more.
• Enhanced Performance: AI PCs are optimized for tasks like data analysis, training AI models, and running complex simulations. They have powerful central processing units, graphics processing units, and ample random-access memory.
• Local Processing: AI-enabled PCs can process AI tasks locally, reducing the need to send data to cloud-based servers. This enhances security and allows offline operation.
• Adaptability: AI PCs can learn, adapt, and make decisions autonomously thanks to machine learning algorithms and neural networks.
When considering adopting any new technology and how doing so can help your business, it’s important to be thoughtful about your investments of time and money rather than be sporadic and reactionary to whatever new tool comes out by way of the tech giants and the private equity and venture capital firms bringing new technology providers to market.
Of course, it’s certainly understandable why vendor hype exists. Getting excited about the latest innovations in technology is both interesting and surprising. However, as wise managers and buyers, it’s important to recognize overpromised capabilities. As I often say, “follow the money,” and be aware of the many untruthful sales pitches out there. After all, being able to separate marketing buzzwords from real-world functionality can help you better evaluate innovative technologies and fully integrate them successfully into your systems.
Before deploying any new technologies across your organization or firm, I recommend:
• Looking for independent reviews and peer recommendations.
• Considering trial periods and sandbox testing to experiment, try new features, and troubleshoot potential problems.
• Assessing customer support and long-term vendor stability.
• Taking note of the lessons you’ve learned from past technology failures. (What went well and what didn’t?)
• Considering scalability, reliability, and return on investment (ROI) potential.
• Performing careful contract reviews—better yet, consider using AI to summarize contract terms.
• Applying a complete IT governance framework. This includes assessing your business objectives and needs, identifying relevant standards and regulations, reviewing available frameworks, consulting with experts and peers, assessing compatibility and scalability, evaluating resource availability, conducting a pilot implementation, and measuring success through continuous improvement.
If you don’t already have one, make sure to develop a strategic plan for any new technology you want to adopt—consider it your roadmap. As part of this plan, I recommend:
• Aligning tech investments with firm growth and strategy.
• Prioritizing security and scalability in software selection.
• Conducting annual tech reviews to assess effectiveness.
• Budgeting for ongoing technology investments.
• Performing a cost-benefit analysis of any automation and AI adoption.
• Reducing software redundancy and overlapping subscriptions.
• Leveraging tax incentives for technology upgrades.
• Applying training and change management to ensure firm-wide adoption of new tools while addressing employee resistance to technology changes.
For tactical implementation strategies, you should also apply best practices for immediate efficiency gains, automate routine bookkeeping and financial reporting tasks, set up dashboards for real-time insights into organization performance, integrate AI assistants for client or customer inquiries and scheduling, ensure ROI on technology investments, conduct periodic cost-benefit reviews, and avoid common pitfalls like underutilizing software.
If you follow these steps and add specific business needs for your organization or firm, you’re more likely to be successful using technology—and you’ll certainly be less prone to the unexpected and more likely to be rewarded with the pleasant surprises that technology can offer.
Randy Johnston is the executive vice president of K2 Enterprises.
It’s been more than a decade since the Illinois CPA Society reported on the top frauds impacting the accounting profession. Here’s an update on the current landscape and what stakeholders can do to address the rising problem.
BY CAROLYN TANG KMET AND AMY SANCHEZ
Just over a decade ago, the accounting profession was awash with headlines about corporate fraud. In its summer 2013 Insight article, “The 21st Century’s Top 10 Frauds,” the Illinois CPA Society (ICPAS) gave an overview on the popular fraud cases at that time, including WorldCom, Waste Management, Enron, Tyco, and Freddie Mac, among others. These scandals, all stemming from C-suite impropriety, prompted sweeping reforms in corporate governance and financial reporting.
Today, fraud looms large, in part because regulatory reform doesn’t address the root cause of fraud—greed.
“Greed is always going to be greed,” says Brad Sargent, CPA/CFF/ABV, CFE, CFS, CIRA, CCA, CRFAC, FABFA, founder and managing member of The Sargent Consulting Group LLC.
“However, the good news is that in prosperous economic times, the rationale to step over the line is often eliminated. If people feel that wealth is being shared, they’re less likely to cross that line.”
Sargent explains that widening wealth disparity intensifies the motivation for individuals to commit fraud, and in today’s environment, it appears the stage is perfectly set for a surge in unethical activity.
According to the Association of Certified Fraud Examiners’ (ACFE)
“Occupational Fraud 2024: Report to the Nations,” organizations collectively lost $3.1 billion to fraud between January 2022 and September 2023. Additionally, ACFE reported that the percentage of estimated revenue lost to fraud during both years also remained
steady at 5%. However, the difference is scale. In 2012, just over one-fifth of cases resulted in losses exceeding $1 million, whereas by 2024, the average loss per case surged to $1.7 million.
Since ICPAS last reported on specific fraud cases in 2013, a couple shifts have contributed to a changing fraud landscape. For starters, the COVID-19 pandemic has changed the way fraud is committed. While pandemic lockdowns prevented fraudsters from being able to easily work together to commit fraud, the economic pressures of the pandemic, combined with the opportunity of remote work and emptier offices, have further fueled the problem and created new avenues for committing fraud—for instance, fraudulent activities through the Employee Retention Credit (ERC), a tax credit designed to help businesses retain employees on the payroll during the pandemic.
The ongoing evolution of technology has also introduced new challenges and widening opportunities for accounting fraud. For example, cryptocurrency, with its decentralized nature and aliasbased transactions, has created a new avenue for fraudsters to exploit. The lack of standardized accounting practices for digital assets, coupled with the rapid evolution of blockchain technology and the proliferation of decentralized finance (DeFi) platforms have introduced complex financial structures that are challenging both auditors and regulators, further expanding the scope for fraudulent activities.
“Technology has significantly transformed the landscape of fraud detection and commitment,” says Timothy J. Voncina, CPA, CFF, CGMA, CMA, CFE, a principal with Baker Tilly’s forensic, litigation, and valuation services practice. “While tools like cloud accounting, blockchain, and artificial intelligence (AI) offer robust mechanisms for enhancing transparency and security, they also present new challenges.”
Nitin Bhojraj, CPA, DBA, CFE, teaches accounting and fraud prevention and detection at DePaul University. He says the key difference between fraud cases today versus historical cases is how quickly and cheaply accounting fraud can be carried out with today’s technologies.
“Instead of waiting weeks for a few individuals to respond to thousands of mailed solicitations, a modern fraudster can now send thousands of texts and have their few potential victims identified in a matter of seconds,” Bhojraj stresses.
Despite the pandemic and technological advancements within the past decade, the underlying motivation for fraud has remained constant over the years, allowing it to persist.
“What surprises me most about fraud related to cryptocurrencies, digital assets, etc., is that the overall archetype of these cases is the exact same as any other fraud from the past few hundred years,” Bhojraj explains. “Fraudsters look for vulnerable individuals, build trust, convince victims to give money without question, and prevent victims from discussing the matter with friends, family, or authorities. This occurred with The Charitable Corporation in the 1700s, is occurring with cryptocurrency scammers today, and will likely occur hundreds of years from now.”
Some fraud cases making headlines in recent years are proving this to be the case. Here are eight recent fraud cases that highlight the current landscape.
Perhaps the most notorious fraud case in recent years is FTX. The cryptocurrency exchange gained traction through strategic marketing, building credibility by partnering with high-profile figures like Tom Brady and Steph Curry, and offering a user-friendly trading platform for attracting both retail and institutional traders. All the while, FTX was improperly diverting billions of dollars in customer deposits to Alameda Research, a trading firm also owned by FTX’s CEO, Sam Bankman-Fried. Leveraging cryptocurrency, FTX was able to move and mismanage customer deposits without immediate detection. By tying the valuation of both FTX and Alameda to its proprietary cryptocurrency, FTT, the two entities were able to artificially inflate their balance sheets, creating the illusion of growth and financial stability.
FTX’s downfall occurred when a competing cryptocurrency exchange announced it would liquidate its holdings of FTT, which caused a run of customer withdrawals. It soon became clear that FTX lacked sufficient reserves to meet customer demands, exposing an $8 billion shortfall. By November 2023, Bankman-Fried was convicted of fraud and conspiracy charges and sentenced to 25 years in prison.
2. Gotbit, ZM Quant, and CLS Global
Another popular cryptocurrency case involved three companies— Gotbit, ZM Quant, and CLS Global—and 15 people. These groups were charged with engaging in widespread fraud and market manipulation that accounted for the seizure of $25 million worth of cryptocurrency.
According to an October 2024 Reuters article, the companies engaged in sham trades to artificially inflate the trading volume and
market value of various cryptocurrency tokens before selling them off, leaving innocent investors “holding the bag.”
“This is a case where a new-age technology, cryptocurrency, meets an old school fraud, in this case a ‘pump and dump’ scheme, which is as old as the stock markets,” Joshua Levy, acting United States attorney, told reporters.
3. Anton and James Peraire-Bueno
Another cryptocurrency fraud that gained national headlines involved two brothers, both graduates of Massachusetts Institute of Technology. In 2024, Anton and James Peraire-Bueno were charged with wire fraud and money laundering after stealing $25 million of the cryptocurrency, ether, in a matter of 12 seconds.
The U.S. Department of Justice (DOJ) highlighted this as the first case of its kind, emphasizing the brothers’ sophisticated understanding of the Ethereum system’s transaction validation process (the technology platform behind the ether cryptocurrency). Their scheme involved intercepting and altering pending private transactions to siphon off the funds. When approached by Ethereum representatives, the brothers refused to return the stolen funds and instead attempted to launder them.
4. Andean Medjedovic
DeFi is a relatively new blockchain-based set of financial services gaining popularity and acceptance. While DeFi can offer certain benefits to investors, it does come with risks. For instance, there have been cases where scammers program a cryptocurrency’s smart contract to “pull the rug out” from under investors.
In February 2025, a Canadian man—Andean Medjedovic—was charged with exploiting vulnerabilities in two DeFi protocols to fraudulently obtain $65 million from investors. According to a U.S. DOJ press release, from 2021-2023, Medjedovic allegedly borrowed hundreds of millions of dollars in digital tokens, which he used to engage in deceptive trading that he knew would cause the protocols’ smart contracts to falsely calculate key variables.
5. Arup
The rise of AI has completely changed the game for fraudulent activity. Deepfakes, for example, use AI-generated fake videos, audio, and/or images to deceive individuals and organizations into thinking they’re interacting with a trusted source.
A recent, damaging example of this type of fraud involved the British engineering company, Arup. During a video conference call, fraudsters used deepfake technology to impersonate Arup’s chief financial officer and other senior management and dupe an employee into sending $25 million to the unidentified perpetrators. The staff member made a total of 15 transfers to five Hong Kongbased bank accounts before eventually discovering it was a scam upon following up with the company’s headquarters.
As previously stated, COVID has brought on fraud cases related to the ERC, and in January 2025, the U.S. DOJ indicted seven individuals in the largest ERC fraud case to date.
The defendants, who operated the scheme at a purported credit repair business known as Credit Reset, submitted 8,000 refund claims for ERC and Sick and Family Leave Credits, totaling more than $600 million. According to prosecutors, the defendants exploited these programs by submitting fraudulent claims on behalf of ineligible businesses, inflating employee numbers, and misrepresenting wages. In total, they successfully secured over $44 million in government funds through this scheme, which they then spent on various luxury goods, including jewelry, electronics, designer clothing, and automobiles.
Beyond the ERC, another prominent COVID-related fraud involved the not-for-profit (NFP) organization Feeding Our Future. NFPs are often susceptible to financial wrongdoing, mostly because of their limited resources, including tighter budgets, fewer staff, and higher reliance on trust—meaning, they’re more likely to go under the radar. The March 2025 case against Aimee Bock, founder of Feeding Our Future, is a good example of this. Bock and others defrauded a U.S. government-funded child nutrition program of $250 million. Bock and other defendants involved in the case lied about the number of meals and children they served to get reimbursed by the government—some conspirators admitted to submitting thousands of fake names of children they were supposedly feeding. They spent allocated funds on fancy vacations and travel, luxury vehicles, and real estate.
Largely driven by the demand for sustainable products and practices, deceptive greenwashing tactics have also been on the rise in recent years. Though many corporate companies have been guilty of these practices, Volkswagen has had the largest greenwashing fine to date, according to a March 2024 article in The Week. In 2015, the company was caught rigging two of its diesel engines to make them appear to release fewer emissions. In reality, the engines were releasing 40 times the nitrogen oxide permitted by the Environmental Protection Agency. Volkswagen incurred costs of approximately $30 billion, including a $2.8 billion criminal penalty from the U.S. government, and six employees faced criminal charges.
As fraud schemes like these persist over time, experts say regulatory measures must adapt to keep pace.
“Regulators are constantly reacting to new instances of fraud in the marketplace,” notes Steve Jordan, partner of assurance at Aprio. Jordan points out several instances where auditing boards have responded to fraud by implementing measures to improve transparency and strengthen financial reporting.
In the wake of the Enron scandal, for example, the Financial Accounting Standards Board (FASB) introduced rules requiring the consolidation of various interest entities to prevent companies from hiding information “off the books.” More recently, FASB established a principles-based revenue standard (ASC 606) to provide a consistent framework for recognizing revenue across industries.
Similarly, the AICPA Auditing Standards Board modernized auditing standards to address evolving risks, such as introducing the Statement on Auditing Standards No. 145, which enhances guidance for identifying and assessing material misstatements, improving auditors’ abilities to detect fraud in a complex, technologydriven environment.
Another regulatory reform effort was the Sarbanes-Oxley Act of 2002, which aimed to enhance corporate transparency, accountability, and investor protection while also introducing robust whistleblower protections to encourage the reporting of fraud. Additionally, the U.S. Securities and Exchange Commission was granted significantly greater authority to investigate and enforce actions against bad corporate fraudsters.
Of course, with the new U.S. Department of Government Efficiency working to reduce bureaucratic inefficiencies, the Trump administration has already proposed winding down the Consumer Financial Protection Bureau, reduced headcount at the IRS, and terminated at least a dozen inspectors general, including those from the Department of Treasury and the U.S. Agency for International
Development, with plans to remove or reduce more regulatory institutions in the future. Therefore, the future of regulatory oversight on fraud remains unclear. Though, based on these recent actions, we can assume that less oversight can be expected.
Although strong regulatory measures help reduce fraud, Jordan stresses it shouldn’t stop there: “Fraudsters will always try to find a way to stay ahead of regulators by adopting new methods of committing fraud. The quicker regulators can identify and react to actual known fraud schemes with preventative and punitive responses, the quicker the risk of these known instances of fraud being committed can be reduced.”
This is where technology helps. Despite technology’s role in enabling fraudsters to become more innovative in committing fraud, it’s also improved the ability of companies to detect and prevent fraud.
“Organizations are using AI to develop better fraud prevention and detection systems that can analyze large volumes of data and identify any risky or unusual transactions in a matter of seconds,” Jordan says.
“By leveraging AI to expose significant patterns or irregularities, and combining that with real-time monitoring, companies are evolving their fraud-prevention strategies and are better equipped to reduce the risk of fraud destroying their company.”
Voncina notes that continuous professional education on current trends and expanded fraud detection will be essential to detecting and preventing fraud: “As fraud tactics evolve with the introduction and use of AI and electronic media, auditors, regulators, and businesses must stay proactive. Regular training and staying updated on technology improvements will be key to addressing emerging threats.”
Floyd D. Perkins, CPA, JD, LLM, an attorney with Nixon Peabody LLP, who was also chief at the Illinois Attorney General’s Charitable Trust Bureau for 14 years, says today’s frauds can often be detected by qualified and informed auditors, whose very presence and expertise can act as a deterrent.
“New technologies, such as cloud accounting, blockchain, and AI, require trained auditors who know them and can trace electronic assets and records of funds through the systems,” Perkins explains.
“An auditor performing a routine audit is traditionally not skilled at looking for these types of frauds—it now requires an auditor who’s knowledgeable in the underlying technology as well as in the client’s accounting and auditing systems.”
Sargent adds that when it comes to fraud, regulators are always playing catch up. The perpetrators are always up front because they’re figuring out the ways to exploit gaps and vulnerabilities in systems before authorities can even identify them. Regulators and legislators, on the other hand, are often in an inherently slower reactive position. By the time preventative measures have been put into place, fraudsters have already moved on to the next loophole or technological frontier.
This ongoing game of cat and mouse highlights the critical need for continuous improvement in fraud detection, prevention, and enforcement. It also underscores the importance of collaboration between auditors, regulators, and legislators to anticipate emerging threats and adapt more proactively. As fraudsters continue to innovate, the challenge remains not just to catch up but to develop systems and strategies that keep pace with the evolving fraud landscape.
Carolyn Tang Kmet is a clinical associate professor at Northwestern University and a frequent Insight contributor. Amy Sanchez is Insight’s assistant editor and ICPAS’ communications and publications manager.
It’s important for every organization—even not-for-profits—to make a profit. Here are some strategies that might work for your organization.
BY NATALIE ROONEY
Despite what the name suggests, not-for-profit (NFP) organizations need to be profitable. As Frank Jakosz, CPA, CGMA, director in CLA’s National Assurance Technical Group and who’s spent more than five decades in public accounting serving NFP clients of all sizes, puts it: “Profitability helps organizations accomplish their missions and sustain themselves.”
While it’s true that NFPs are tax exempt, which helps offset costs, that alone doesn’t lend itself to a sustainable business operating model, points out Scott Steffens, CPA, a former principal for O’Connor Consulting Services LLC (now Aprio): “NFPs can’t exist if they spend more than they take in, so they’re constantly asking, ‘What can we do to make more and spend less?’”
One way profit-minded NFPs boost revenue is through diversification, Jakosz says: “This is going to be driven by an organization’s type and mission, but I always think of diversification as an investment strategy to manage risk. You’re diversifying funding so you’re not reliant on too few sources.”
Similarly, Steffens encourages NFPs to diversify how their spaces are used as revenue generators whenever possible. He points to how museums of all types and sizes have sought new revenues. “Museums have almost forever operated under the traditional business model of relying on student groups, memberships, and rotating exhibits for funding,” Steffens says. “Now, more are focusing on larger, flashier rotating exhibits, and they’ve begun hosting special events—weddings, corporate meals, concerts, and conventions within their spaces—to bring people in. That’s harder for social service organizations to do, but it’s an example of leveraging what you do against what you have to work with.”
Dorri McWhorter, CPA, CGMA, CIA, MBA, president and CEO of the Executives’ Club of Chicago and former president and CEO of the YMCA of Metropolitan Chicago, thinks similarly, stressing that it’s important for NFP organizations to understand their value propositions and leverage their resources: “Ask what other things you can leverage and make money on. Think of what you do so well, or services you could provide, that could earn new revenue for the organization.”
She outlines four buckets of potential revenue NFPs should consider:
• Consumer-Driven Initiatives: Memberships, program fees, cause marketing, rentals, community partnerships, and retail.
• Philanthropy: Contributions from individuals, foundations, and grants received.
• Government Partnerships: Contracts, capital grants, and appropriations.
• Business Opportunities: Facilities management, workforce training, back-office support, and space and asset rentals.
As an example, McWhorter describes her experience at the YMCA and how the organization diversified its swimming program to turn one revenue source into three.
• Revenue Source One: Consumers pay to participate in swimming instruction programs.
• Revenue Source Two: The YMCA categorized the swim lessons as workforce development because participants earn lifeguard and instructor credentials to use in water-based careers. That effort drew in government funding.
• Revenue Source Three: A corporation passionate about water conservation and teaching people to swim offered a grant to support teaching more people to swim.
Overall, as you consider revenue diversification, McWhorter says it’s important to know your audience, your partners, and how you’ll pivot: “Understand the process and any tweaks you may need to make to get into other revenue streams. For example, with our swimming program, the activity never changed. We just made that swim lesson more relevant to additional revenue sources.”
Another key component to an NFP’s profitability is its fee and cost recovery efforts. “Any fees charged should be reviewed to ensure they’re commensurate with the cost of delivery,” Steffens stresses. “Organizations need to ensure they’re capturing those costs properly and not missing opportunities to recover them. Profitability isn’t only about looking for new revenue but also asking if they’re getting reimbursed properly.”
As part of the cost recovery process, Steffens suggests reviewing all contracts so you understand what costs can be passed through. “Pay attention to inflationary escalators,” he warns. “When possible, recapture those as part of any agreements.” He offers the example of food banks that might need to supplement donations to round out meals because of the higher cost on eggs: “If those prices increase, you have to balance out what’s being donated, which adds to out-of-pocket costs that weren’t anticipated a year ago.”
In terms of risk, Steffens says it’s vital to understand what might happen if a current revenue source was dramatically reduced or went away entirely. “How would you fund your programs?” he asks. “So, before you think about new revenue, protect what you have. It’s important to understand your alternatives for maintaining revenue if there are changes.”
For NFPs that find themselves needing quick cash, Steffens says a cost and risk analysis will help determine appropriate options. For example, you might discover assets, such as excess or unused property or equipment, that the organization could convert to funds. “These are one-time transactions but they’re examples of things that could be monetized to bridge a funding gap without jeopardizing the ability to fulfill your mission,” he says.
Of course, a NFP’s profitability also stems from donations. Experts suggest not shying away from communicating to existing and potential donors on the many ways they can give to your NFP.
“An increasing number of individuals have set up donor-advised funds to make gifts and grants,” Steffens shares. “The simple act of promoting the willingness to accept gifts from individuals, foundations, corporations, and donor-advised funds can bring in new funding. Be aware of all the gift sources out there.”
Notably, gifts from donors don’t always have to be grand gestures— be open to an increased number of smaller gifts that may one day lead to larger gifts. Steffens notes that a big part of growing your donor base is establishing relationships: “Provide opportunities for donors to come to an event—get them excited about your programming. Maybe $1,000 becomes $10,000, and then you become part of an estate plan.”
Investment returns also offer sustaining income to NFP organizations over the long haul and through difficult times. However, Jakosz warns that all investments involve risks that must be mitigated. He suggests adopting a sound investment policy and approach that considers the organization’s short- and long-term needs and objectives, creates a spending policy, reflects the organization’s risk tolerance, and is appropriately diversified.
Importantly, determining what to invest in requires a lot of consideration, and Jakosz advises organizations to seek advice from a reputable investment manager that specializes in serving NFPs. As the finance manager for the Pritzker Military Museum and Library, Lisa Sloan says the organization is doing just that. When the museum was founded, it drew funding simply because of its name. However, for the long term, Sloan stresses that ongoing support is needed from external sources: “We have to think outside the box to creatively and strategically build sustainability.”
As a result, the museum began investing as it worked to fund its mission. Sloan emphasizes that, first and foremost, the internal audit process ensures donor funding is safeguarded throughout the investment process. “You can’t just go off to the races with donors’ money,” she points out. “We must ensure the funds are used correctly and provide full transparency.”
The museum’s investments include a mix of short- and long-term index and private equity funds held through large banks. “We use a professional services firm to guide us,” Sloan says, emphasizing the importance of carefully screening any firm they’ll be working with. “We lean heavily on our advisors’ expertise.”
Sloan offers some additional tips:
• Ensure that the investment process is part of your strategic plan.
• Have patience. “Getting into alternative investments doesn’t happen overnight, and it’s not a decision to take lightly,” she says. “This is a very personalized decision and process.”
• Proceed with caution, and don’t risk what you can’t afford to lose.
In 1938, Mary R. Shedd, wife of John Shedd, founder of Chicago’s Shedd Aquarium, had the foresight to create an endowment to ensure the aquarium’s future.
Since then, the endowment has continued to grow, and Gary Gordon, the aquarium’s chief financial and administrative officer, says today’s goal is to protect against unknown risks while looking at diversified long-term revenue.
Gordon says the aquarium already had a history of successfully investing its resources, but the organization sought to better align its investment strategy with its conservation mission. That goal led to the creation of a $19 million portfolio, funded with Shedd resources and bolstered by a 2022 contribution from Builders Initiative, that would target investments in several sustainability-focused funds. Prior to the creation of the portfolio, the Shedd Aquarium’s team studied existing sustainable investing frameworks used by other organizations before asking their investment partner to establish a fund based on seven goals the team identified. “We followed a wellestablished framework focused specifically on the environmental elements,” Gordon says. The investment vehicles include sustainable private equity investments that he expects will generate returns as strong as other private equity investments.
The aquarium’s new portfolio aligns capital resources with investment opportunities focused on urgent areas, such as aquaculture and ocean health, renewable energy and storage, emissions reductions, sustainable agriculture and land use, and water quality and management.
Gordon describes the environmentally invested fund as serving a double bottom line: “We’re making conservation-aligned investments and using those proceeds to support our conservation mission.”
Additionally, Gordon notes that having a knowledgeable investment partner has been critical to the process: “We told them what we wanted to do, and then they handled the how.”
Today, the Shedd Aquarium is making it a point to share their process and knowledge with others. “The idea of aligning investing with the mission wasn’t new, but it was new to us,” Gordon says. “Hopefully other organizations can learn from our double alignment of investing in what we believe in and then using those returns to further our missions.”
Like any business, NFPs need to adapt their profit strategies during times of uncertainty, especially when political uncertainty is involved. For example, McWhorter says NFPs should know if their federal funds flow through the state and then to the organization, as this may change their communication approach with different political parties.
Although there’s a perception that one political party spends and the other doesn’t, McWhorter points out that, ultimately, both parties spend—just in different buckets—so it’s important to know your audience so you can repackage and market your programs accordingly: “For one political party’s administration, you might want to describe how you support families. If it’s a different political party’s administration, you might want to emphasize growing business opportunities.”
Similarly, Jakosz says NFPs must be mindful of the needs of the communities they operate in: “To stay relevant and make a positive impact, organizations must grow with new services that address new missions. Connect with people outside of the NFP world, including with local and regional officials, to ask what they might need down the road.”
Further, Steffens reminds NFPs to research what’s happening at the IRS and know the parameters around giving: “When the tax code was simplified with the larger standard deduction, it meant fewer deductions for charitable giving. That impact on taxpayer behavior is important.”
The future of NFP revenue hinges on how next-gen givers make contributions. Steffens recommends exploring how tools like social media might come into play for giving: “We’re familiar with influencers promoting brands; are there opportunities to utilize influencers to promote the charitable aspects of your organization? The future of giving isn’t through blanket snail mail campaigns—it’s through providing ample opportunities to make those gifts.”
Jakosz reminds NFPs to keep in touch with investment advisors, bankers, and attorneys, and even consider having these professionals on their boards.
Importantly, McWhorter reminds that certified public accountants (CPAs) are uniquely qualified to help NFPs understand the variety of resources out there and how to access them: “Understanding the differences in how private and government funding flows and how it’ll impact the organization is critical. CPAs can help with that.”
As Sloan says, “Having the right individuals in place is a pathway to resilience, growth, and long-term impact.”
Overall, she says the keys to sustaining your NFP are being open to change and new ideas, diversifying support, and understanding your financial strategy: “Remain responsive to the challenges around you so you’re able to service your mission, not just today, but for tomorrow.”
Natalie Rooney is a freelance writer based in Eagle, Colo. A former vice president of communications for the Ohio Society of CPAs, she has been writing for state CPA societies for more than 20 years.
A growing number of accounting firm owners are making the intentional choice to align their professional and personal lives, with priority tilting toward their out-of-office interests.
BY CLARE FITZGERALD
The typical benchmarks of success for smaller certified public accounting (CPA) firms are evolving. While financial and operational metrics, client retention, and other key performance indicators will always be important for assessing a firm’s health and viability, more firm owners across the country are adding a new performance category to the mix: how well the businesses support their personal priorities. In fact, these firm owners are intentionally building and structuring their practices to primarily support the pre-defined lifestyles of their choosing.
Although the specifics of lifestyle firm priorities vary by owner—be it travel, family, faith, health, hobbies, or general flexibility—the ultimate goal is simple: prevent work from taking over life.
Jason Blumer, CPA, CEO of Blumer & Associates CPAs PC, a Greenville, S.C.-based advisory firm serving design, marketing, and creative agencies, learned from experience that too much growth for a smaller accounting firm can have a big impact on lifestyle. As a young CPA, Blumer took over his father’s firm but struggled to balance work and life. This led him to found Thriveal, a CPA network that inspires counter-cultural firm owners to embrace their entrepreneurial creativity within the profession.
As an advisor to other firm owners, including those interested in putting lifestyle first, he says the definition of a lifestyle firm is one “where the owner’s lifestyle can be primary and nothing in the firm’s structure or team takes that primary focus away.” Essentially, you can “do what you want,” he says, by targeting enough profitability to support that lifestyle.
Of course, as firms start to expand and need more structure as meetings and client demands multiply, working from the airport or ski lodge doesn’t always work. “Finding balance becomes hard when intentions are competing against each other,” Blumer acknowledges. “Often, we find we’re trying to live one way, but it conflicts with how our work is set up.”
Aligning work and values isn’t an easy task—and doing so requires a lot of thought about trade-offs. Sometimes, the questions that firm owners need to ask themselves can veer into being philosophical.
Michael Meihaus, CPA, is the owner of Meihaus CPA, a small firm based in Escondido, Calif. that specializes in defined contribution retirement plan audits. When building his firm, Meihaus, a father with young children and a “very finite amount of time,” says it was critical to identify and define what he wanted to prioritize: “The endless pursuit of money has been shown to be meaningless. You really have to consider what you care about and what price you’re putting on those things.”
Blumer agrees. He counsels firm owners to evaluate their own personal goals without making comparisons to the curated images of other people’s houses, cars, and vacations on social media: “Ask yourself what a lifestyle firm means and if you’re building the right runway to meet your goals.”
Although the size of lifestyle firms can vary, Blumer points out that many lifestyle firm owners rely on, well, themselves. This shouldn’t come as a surprise, and the support of one or two others, such as an administrative professional to help with the calendar and a parttime accounting professional to assist with client work, is usually sufficient to support the firm. But those who aspire to grow beyond themselves will need to find the sweet spot, and that means being intentional about hiring and growth.
“When you think about hiring, you have to be careful that it won’t detract from your goals,” Blumer warns. “Employees generally seek career growth and advancement, so you have to be clear with them on whether the firm is set up to offer that or not. Of course, if you want to offer those opportunities, you’ll need to be aware that growth may be needed—and that can mean the end of your lifestyle firm as you originally envisioned it.”
Notably, misalignment of expectations can create frustration among employees, Blumer adds: “If you find yourself with a team of five or seven people, but you’re still putting only your lifestyle first, it will create tension. People are going to wonder why you’re camping all the time while they’re doing all the work.”
In other words, you must also become mindful of your employees’ lifestyle wants and needs or hire those whose align with yours.
For Meihaus, employing other people was part of his goal as an owner. He thinks hiring at a lifestyle firm will naturally have a lot of variability by owner: “Often, it just comes down to how you’re wired and how you think about it. Managing people brings its own set of challenges and stresses, so you need to carefully select people and decide how to maximize their contributions.”
Knowing yourself and your strengths and weaknesses is also key. When Meihaus stepped out on his own, he quickly discovered that the administrative side wasn’t his strength, so he brought on someone for that work. He later hired an operations manager, which opened time and energy for him to focus on sales.
Meihaus also relies on outside resources, such as a consultant who performs his quality control reviews. “Larger firms have access to more internal resources, but smaller firms may need to outsource services to make sure things get done right,” he explains.
Importantly, focusing on lifestyle doesn’t mean setting low standards. Instead, lifestyle firms are taking a more intentional approach to the types of services they offer and to whom.
Josie Parr, CPA, MST, owner of Josie Parr CPA LLC, a small, nichebased firm based in Sarasota, Fla., spent much of her career at a large regional firm where she worked long hours and lived what she describes as a “compressed and stressed lifestyle.”
Recognizing that she loved doing taxation work but didn’t want to pursue the traditional trajectory of a tax career, she decided to start her own firm. “I didn’t do everything right at first, but ultimately I learned how to build a successful firm,” she explains. Parr attributes much of that success to the choice she made to offer “white-glove tax strategy services” to a small number of clients.
“That structure gave me balance. Now I’m able to do work that I love and enjoy my life,” she says, noting that she works about 20 hours a week for fewer than 50 tax clients, a schedule that gives her time for running her second business, Solo Tax Coach LLC, where she coaches other solo practitioners on building their firms.
Finding a niche should be a strategic choice, Blumer says, who points to volume-heavy work like payroll and bookkeeping as potentially huge value areas for lifestyle firms: “You can have 50 clients who don’t need you that much and you can do the work at night or on weekends. When all the clients look the same, a lot of the work can become very process oriented.”
Parr has experienced this too, sharing that her niche practice allows her to better market to her target clients and saves her from having to rethink and reinvent new strategies for every client.
Meihaus adds that lifestyle firm owners can find opportunities in work that others don’t want. In his case, he saw that he could offer a unique value proposition in the “super-niche area” of employee benefit plan audits. “There’s so much opportunity out there for those who are paying attention,” he says. “Pick the right field, build good processes, and offer a better, more responsive service model.”
Technology has driven, and in many ways is accelerating, the lifestyle firm trend. According to Parr, social media has been one of the biggest drivers, both in terms of concept exposure and access to resources: “It’s so much easier now to find other people who are creating these firms for insight and inspiration and to build your own brand and channel through it.”
As social media makes it easier to market firms, other technologies are creating the efficiencies needed for small firm owners to
manage work and life. Automated tools have helped small firms build processes, and artificial intelligence (AI) is playing a role too.
According to a 2024 CPA Practice Advisor/Canopy survey, 57% of respondents expect more work to be automated in the next five years. Eighty percent of respondents believe they’ll use more AI in the next three to five years.
Parr says much of the industry is looking for automation to improve their processes. She uses a virtual assistant that automates messaging and reminders for clients. “I don’t need five employees to do things like I would’ve in the past,” she says.
Blumer notes that AI will replace some roles and expand others. For example, administrators can take on more volume as tasks become automated. He also cautions that firms need to be conscious of security risks associated with AI. “You need to have your safety protocols in place,” he says, noting that some small firms will need to consider hiring for tech and security roles.
Operating a lifestyle firm doesn’t equate to an easy, stress-free work life. But for those with a business and entrepreneurial mindset, the reward—whatever that’s determined to be—can be worth the risk.
“You get to be in charge of everything, but there’ll still be problems,” Parr stresses, who learned that setting boundaries and managing decision fatigue is important. “At first, I felt pressure to scale and grow, but then I realized it wasn’t even necessary to be successful. You just have to set up the right model—with the clients and revenue that works for you. When you focus on that, the rest of it all falls into place.”
Blumer agrees that the ability to say no is important for lifestyle firm owners: “If you want to stay small, you have to be just as intentional
about it as those wanting to grow. Entrepreneurs are often wired to say yes, but you’ll have to say no to a lot of opportunities.”
The concept of lifestyle firms may also have the potential to attract more CPAs of tomorrow—especially those who might not want to invest in the 80-hour workweeks that previous generations were accustomed to.
“I absolutely think that lifestyle firms are an opportunity for the future of the industry, especially for entrepreneurial types who see a vision for a client service model or for creating relationships and clients for life,” Parr says. However, she recommends that those interested in designing their own firms spend time working for an established firm first to develop their knowledge and skills.
Meihaus agrees that aspiring firm owners should hone their expertise before striking out on their own, but he believes that some of the most attractive industry opportunities of the future will be in small-firm ownership: “There’s a lot of work out there that’s too small for big firms but can be wonderful little niches if you have an entrepreneurial mindset and desire to control your own destiny.”
He also encourages those thinking about the lifestyle firm as a career option to remember that there can be back-up plans: “If you’re business-minded and take a responsible approach, why not try it? The worst that can happen is you may need to go crawling back to a former employer. But if you leave a firm with dignity, you can often get rehired.”
As Meihaus says: “If I hadn’t tried, I always would’ve wondered what could’ve been.”
Clare Fitzgerald is a freelance writer covering the accounting, finance, and insurance industries.
Claire Burke, CPA CFO and Treasurer, Dearborn Group claire_burke@mydearborngroup.com
Here’s how corporate finance leaders can weather this period of economic uncertainty and use it as a competitive edge.
Those who thrive in a dynamic, challenging environment may be embracing the complexities that crop up each week in our current economic landscape. Others, however, may be wondering simply how to survive the uncertainty.
In an era defined by geopolitical tensions, shifting trade policies, and volatile markets, corporate finance leaders today face mounting challenges in maintaining stability and profitability. For instance, tariffs—once a distant concern for many—have become a disruptor, impacting supply chains, input costs, and international competition. Coupled with broader economic uncertainty, these factors necessitate a new level of agility and foresight in corporate finance.
So, how can finance leaders proactively navigate the tariff landscape and safeguard their organizations’ long-term success? I believe it starts with following these eight best practices.
While it seems obvious, navigating this period of uncertainty will require corporate finance leaders to first understand tariffs. Tariffs act as a form of tax on imported or exported goods, which directly increase the cost of goods sold and affect profit margins. For companies with complex global supply chains, tariffs can significantly alter the economics of sourcing and manufacturing decisions. However, given the magnitude of the Trump administration’s proposed tariffs, the impact goes well beyond these types of companies—even to the smallest of organizations. That said, here are a few key tactics that’ll help mitigate any financial risks from tariffs regardless of your organization’s size:
• Cost modeling: Finance teams must build flexible cost models that incorporate different tariff scenarios. This includes performing a sensitivity analysis to understand how tariff changes impact profitability across products and regions.
• Supply chain audit: A thorough audit of the current supply chain can uncover hidden dependencies on high tariff regions. Finance leaders should collaborate with procurement and operations to identify alternative suppliers in lower tariff regions or domestic markets.
• Currency risk assessment: Tariffs often lead to currency volatility. Finance teams should monitor foreign exchange exposure and consider hedging strategies to manage this risk.
Traditional forecasting methods are often insufficient in uncertain economic environments. Instead, corporate finance leaders should adopt dynamic scenario planning to prepare for multiple outcomes.
In this current economic climate, effective scenario planning involves:
• Creating multiple financial models: At a minimum, finance leaders should prepare base, optimistic, and pessimistic scenarios. These models should reflect variables like tariff increases, inflation, interest rate hikes, employment rate, and supply chain disruptions.
• Stress testing liquidity: Understanding how each scenario impacts cash flow and working capital is critical. Leaders should identify how long the company can operate under stress and what cost-saving levers can be pulled if needed.
• Cross-functional collaboration: Finance should work closely with operations, sales, and strategy teams to ensure forecasts reflect business realities and customer behaviors.
The ripple effect of tariffs often begins with the supply chain. Therefore, having a finance-led strategy to enhance supply chain resilience can better protect your margins and reduce your exposure to geopolitical risks.
Here are a few strategic actions to consider:
• Diversification: Relying heavily on a single region or supplier is risky. Finance leaders should support diversification efforts by analyzing the cost-benefit of expanding supplier bases across multiple countries.
• Nearshoring and reshoring: Though potentially more expensive initially, moving production closer to key markets can mitigate tariff exposure and reduce transportation risks.
• Inventory optimization: While holding too much inventory ties up working capital, having too little exposes you to disruptions. Finance can help find the balance by refining just-in-time models and using predictive analytics.
Tariffs intersect closely with global tax strategies, so having a comprehensive tax strategy can help offset any financial burden. Consider these tactics:
• Transfer pricing adjustments: Adjusting your transfer pricing policies to reflect new cost structures can help optimize tax liabilities across jurisdictions.
• Utilizing trade agreements: Finance and legal teams should work together to explore preferential trade agreements, such as free trade zones or bilateral treaties, which may reduce tariff burdens.
• Leveraging duty drawback programs: In some jurisdictions, companies can reclaim duties paid on imported goods that are later exported. Understanding and leveraging such programs can result in substantial savings.
In uncertain environments, access to capital becomes both more critical and more difficult. Finance leaders should take proactive steps to preserve liquidity and ensure capital flexibility. To do so, consider:
• Strengthening the balance sheet: This can involve improving receivables collection, managing payables strategically, and reducing nonessential expenses.
• Managing your credit line: Ensure adequate lines of credit are available and negotiate favorable terms before market conditions tighten further.
• Evaluating alternative financing: In challenging environments, traditional lending may be constrained. For alternative funding sources, finance leaders should consider asset-based lending, supply chain finance, or strategic partnerships.
Technology plays a crucial role in helping finance leaders respond to rapidly changing external conditions. When it comes to leveraging technology for help, consider implementing:
• Real-time data visibility: Implementing integrated enterprise resource planning systems enables faster and more accurate financial reporting.
• Predictive analytics: Tools powered by artificial intelligence can help forecast demand shifts, cost pressures, and geopolitical developments, giving finance leaders a valuable edge.
• Automation: Robotic process automation can reduce manual efforts in finance operations, increasing efficiency and freeing up resources for strategic analysis.
During periods of uncertainty, transparent communication becomes even more important, and finance leaders must keep internal and external stakeholders regularly informed and aligned. Consider implementing these best practices to ensure open communication with your stakeholders:
• Clear investor updates: Provide regular, transparent updates on how the company is responding to economic shifts and trade-related developments.
• Internal alignment: Ensure the C-suite and departmental leaders understand financial strategies and their roles in executing them.
• Employee engagement: Clear communication helps reduce uncertainty among employees, especially when cost-cutting measures or strategic pivots are required.
Ultimately, navigating tariffs and economic uncertainty requires a mindset shift. Finance leaders must move from reactive to proactive, embedding strategic agility into the DNA of the organization. To foster agility, adopt the following:
• Continuous learning: Watch global trade developments, fiscal policies, and macroeconomic indicators.
• A culture of adaptability: Encourage experimentation and flexibility in budgeting, capital allocation, and decision making.
• Board-level engagement: Ensure the board understands the evolving financial landscape and is involved in shaping longterm strategy.
Tariffs and economic uncertainty aren’t temporary challenges— they’re becoming structural features of the global economy. For corporate finance leaders, this reality demands a strategic approach, grounded in data, resilience, and adaptability. By anticipating risks, optimizing operations, and embracing agility, finance teams can not only weather volatility but turn it into a competitive advantage.
Brian J. Blaha, CPA Managing Director, Winding River Consulting LLC
bblaha@windingriverconsulting.com
ICPAS member since 2011
Accounting and consulting firms must embrace new pricing models and artificial intelligence to remain competitive in a rapidly changing world.
Whether we like it or not, artificial intelligence (AI) is here to stay—and it’s evolving faster than many of us are comfortable with. Due to the pace of change and the sweeping impact these technological advancements are having on traditional business models, firms must not simply react—they must act with intention.
From a futurist’s perspective, AI represents a hard trend—a development that’ll unquestionably influence the profession. However, how AI impacts our firms and what exactly changes remains a soft trend—one we can influence through proactive planning.
So, how is AI poised to reshape our revenue and talent models, and what should today’s accounting and consulting firms do to prepare for the future?
For more than a century, the billable hour has been the cornerstone of revenue generation in professional services firms. Despite its well-known limitations, it has endured due to its simplicity and transparency. Rates are commonly derived from a multiple of employee salaries and standardized across the firm. Key performance indicators have traditionally included realization and utilization.
However, in an AI-driven firm—where value creation is no longer tied to time—the billable hour may finally meet its match. Traditional performance metrics will lose relevance, requiring a re-evaluation of both how we price our services and how we measure success.
This means firms must prioritize the development of forward-looking pricing models before the billable hour becomes obsolete. While many have moved away from billable hours in recent years, and plenty more are experimenting with fixed fees and subscription models, most are still rooted in hourly-rate structures. Every firm needs to be planning to adopt future-ready pricing models that account for:
1. The cost of emerging technologies.
2. Evolving talent configurations.
3. Investment in professional development.
4. The expense of developing and maintaining AI tools.
With these factors in mind, I suggest firms begin exploring these alternative pricing models based on their provided services:
• Fixed-fee: Perhaps best for defined, project-based engagements.
• Subscription-based: I find this ideal for recurring, standardized services.
• Value-based: A straightforward price tied to the perceived client value delivered.
• Performance-based (contingent fee): Typically linked to specific success outcomes.
• Market-based: Here, fees are aligned with competitive benchmarks in the markets served.
• Hybrid options: Some firms may need to price based on a blend of the above to provide flexible and competitive pricing to their clients.
At this point, failing to explore these pricing models risks putting your firm at a severe disadvantage in sustaining and growing your revenue base.
Traditionally, firms operated under a leveraged talent model shaped like a pyramid: Approximately 10 associates to every partner, with the largest concentration of staff at the base. That model has already shifted due to globalization and the rise of the outsourced and gig economy. Many large firms today aim for a talent composition of approximately 75% United States-based, 20% global, and 5% gig workers, with variations based on their maturity, size, and strategic intent.
AI is likely to bring even further change to firms’ talent mixes, as it introduces a fourth and transformative component: agentic AI. Unlike earlier technologies that enhanced human efficiency, AI— particularly agentic AI—is targeting labor arbitrage by automating process-driven tasks. Specifically, agentic AI is the technology that powers AI agents and chatbots so they can act and interact autonomously without human oversight. As a result, firms must now redefine the very structure of their workforce.
A key metric, revenue per employee, currently averages around $250,000 in the industry. Experts predict this will rise to $450,000 or more in the coming years. But achieving this revenue leap will require a carefully calibrated mix of U.S.-based employees, global talent, gig workers, and AI agents.
Of course, the needed shift in talent mix carries operational implications. Investing in AI will require a solid foundation in project and change management. Specifically, developing and prioritizing AI’s use case should account for business unit alignment, process complexity, estimated time savings, implementation difficulty, and change management demands. The goal ultimately being to allocate development dollars where they’ll generate the most impact.
As firms pour investments into their technology upgrades and AI initiatives, what can’t be overlooked is the upskilling and reskilling of their human talent. Unfortunately, I’ve seen firms lose sight of the massive reskilling effort required as AI displaces repetitive, process-heavy roles. Most firms are currently reassuring staff that jobs aren’t being eliminated—but AI proficiency is rapidly becoming a core skill. Moreover, every employee must elevate their advisory and relationship-management capabilities to move themselves away from the roles being replaced with AI and into the valuecreating, client-facing roles.
Overall, I think soft skills are becoming the new hard skills. While technical expertise will still matter, generative AI will almost certainly take over routine data entry tasks, compliance checks, and document review. The human workforce must evolve to deliver strategic insights, advisory services, and emotional intelligence— areas where people continue to outperform machines.
In short, we’re moving from an era of hyper-specialization to one where breadth, adaptability, and interpersonal savvy are the keys to success.
To remain competitive and become a future-ready firm, I see six areas practice leaders need to focus and act on:
• Reimagine pricing: Develop and pilot alternative pricing models.
• Redefine metrics: Move beyond utilization and realization to include value-based performance indicators.
• Prioritize AI use: Build an AI evaluation framework to select and implement high-impact opportunities.
• Integrate agentic AI: Identify tasks agentic AI can fully automate and recalibrate workforce structures accordingly.
• Adapt change management strategies: Embrace structured methodologies to lead digital transformation effectively.
• Upskill talent: Invest in training programs for AI proficiency, advisory skills, and emotional intelligence.
Overall, as firms seek sustainable growth through modernization, I believe focusing on value creation—through AI adoption, an upskilled workforce, and client-centric pricing models that recognize the worth of your people and services—will be key to differentiation and long-term success.
Jon Lokhorst, CPA, CSP, PCC
Executive Leadership Coach, Your Best Leadership LLC jon@yourbestleadership.com
These nine steps will help leaders strengthen their business cases and move their initiatives forward.
As a leader, you’re expected to solve problems, seize opportunities, and deliver results. But even the best ideas rarely sell themselves. Many worthy ideas fall by the wayside because those who propose them don’t show how the ideas will move important organizational priorities forward. Worse, research from McKinsey shows that 70% of change initiatives fall short of their goals or fail altogether.
Whether it’s a new software platform, process redesign, team restructuring, or other business imperative, many proposals falter not because they’re bad ideas but because they lack a compelling business case for change.
As an example, let’s imagine that you’ve identified a critical problem in workflow management within your accounting department or client accounting services team. To solve it, you envision implementing a cloud-based application that’ll streamline tasks, automate manual processes, and provide real-time accountability for task management. You’re convinced that properly implementing this solution will help your team reduce errors, improve staff culture, and increase client or customer satisfaction. However, your boss isn’t easily sold on the solution, especially given the significant investments in time and money involved in implementing it.
Does this roadblock sound familiar? Well, the good news is that there’s a way you can increase the likelihood of getting your proposal heard and approved—making a solid business case for your initiative.
Through my work experience as a certified public accountant, chief financial officer (CFO), and leadership coach, I’ve identified nine steps that’ll strengthen any business case you bring forward.
Remember, most change initiatives are designed to solve problems. Create a clear and succinct description of the problem to attract attention. In the example above, the problem might sound like this: “Our current workflow process relies heavily on spreadsheets and email, resulting in missed deadlines, lack of clarity for responsibility, and poor visibility into work progress.”
Help your superiors envision the repercussions of not making a change. Outline the consequences of the problem in both the immediate and long term, describing the current approach to the issue as a Band-Aid. As I often tell coaching clients, “Pull off the Band-Aid and let them feel the pain.” In the example above, the pain might include delayed transaction processing and reporting, lost productivity, wasted time, and overburdened staff who are inefficiently following up on tasks instead of focusing on client or customer service.
Show that you’ve done your due diligence by identifying multiple solutions to the problem. Provide a summary of the alternatives you explored and consider creating a chart that compares the critical elements of each alternative presented. Using the previous example, you might compare three cloud-based platforms with varying features and costs, showing how each stacks up on integration, ease of use, and reporting capabilities. Remember, don’t forget to include the “do nothing” option to show the consequences of sticking with the status quo.
Offer your proposed solution and a high-level description of how it’ll be implemented. As part of this process, explain the most significant advantages of your proposal over other options. For example: “Platform A offers the best combination of ease of use, accounting integration, and real-time visibility. Implementation can be completed in six weeks with minimal disruption as we transition from current processes.” Additionally, be prepared to answer the question, “How much will this cost?” and outline the financial investment.
Another question that’s sure to arise is, “How are we going to pay for this?” As this was one of my favorite questions from my CFO days, my suggestion for getting ahead of this is to identify potential funding sources for both upfront and ongoing costs and determine the budget lines that’ll pay for your proposal. If future cost savings will fund the initiative, show the payback calculation. Using the workflow management example above, you might show the estimated upfront investment is $X with ongoing support costs of $Y per year. For instance, you could suggest repurposing funds from discontinuing a software subscription that’ll no longer be needed or drawing from a technology innovation budget. Alternatively, highlight how the solution will create enough efficiency to cover its own cost within a specific time period through reduced staff time, overtime pay, etc.
6. PROVIDE A COST-BENEFIT ANALYSIS
Include nonfinancial costs and benefits with the financial ones. Regarding the workflow management example, benefits might include improved turnaround time, reduced time spent on task coordination, fewer processing errors, and increased accuracy in reporting. While some benefits are hard to quantify, such as improved staff morale, they contribute significantly to value.
Rarely are change initiatives without risk. Leaders are naturally wary of proposals that include all benefits without acknowledging the potential for failure or setbacks. Therefore, it’s important to be transparent about those risks. With the workflow management example, you might acknowledge potential implementation glitches, staff resistance, or a sharper learning curve than expected. To mitigate those risks, you might propose piloting the project with one team or client, offering targeted training and support.
This step assures your superiors that you have a long-term view of success. To demonstrate this, describe how you’ll measure success and determine whether mid-course adjustments are necessary along the way. With the example above, success metrics might include a certain percentage reduction in overdue tasks, a determinable improvement in turnaround time, and decreased time involved in manual status checks.
A clear ask speeds up the decision-making process, and a lack of clarity slows it down. Therefore, prepare your request in the form of a question that compels a prompt response or at least advances the discussion. Say something like, “I’m requesting approval to launch a 90-day pilot of Platform A, beginning Oct. 1, with a full rollout by next spring. How can we move forward with a proposal process to make that happen?”
As I’ve often seen with my leadership coaching clients, taking the time to make your business case can go a long way in getting your proposals approved from the top. In fact, several months after taking a cohort of health care leaders through the process of making a strong business case, the organization’s CFO shared that my business case process worked. He said, “When we asked this group to submit their revised budget proposals, we could tell which leaders went through the training. They took to heart the importance of making the business case and did their homework to submit better requests. Those who followed the process and did a thorough review got approval within 10 minutes of the call.”
All in all, if you want to advance in your career, don’t just find ways to solve problems—master the art of making the business case to get your solutions approved.
Elizabeth Pittelkow Kittner CPA, CGMA, CITP, DTM CFO and Managing Director, Leelyn Smith LLC ethicscpa@gmail.com
ICPAS member since 2005
As private equity investments in accounting firms grow, firm leaders must consider the ethics of balancing profit and public trust.
Ownership models within the accounting profession have evolved over the past several years, specifically with private equity (PE) investment increasingly sought by growth-minded firms. According to a May 2025 Wall Street Journal (WSJ) article, since 2021, roughly two dozen of the nation’s 100 largest accounting firms have either sold an ownership stake to PE investors or have been acquired by firms that have.
As interest grows in the alternative practice structures that have emerged as a result of PE deals, ethics will become increasingly important for firms to consider.
Importantly, the AICPA and several state boards of accountancy allow alternative practice structures provided they comply with independence, governance, and public interest rules from a combination of regulatory bodies, including the AICPA, individual states, United States Securities and Exchange Commission, and Public Company Accounting Oversight Board.
The most common alternative practice structure components include:
• Attest services entity and non-attest services entity distinction: Certified public accountants (CPAs) are required to serve as majority owners in the attest entity, and the non-attest entity can be owned by non-CPAs, including PE investors. The CPA ownership of the attest entity must be in line with the AICPA Code of Conduct’s Independence Rule and Form of Organization and Name Rule.
• Administrative services agreement: Through this agreement, a non-attest services entity may provide administrative services (e.g., HR, IT, marketing, or legal) to a CPA-owned attest services entity. The CPA-owned attest services entity is required to be independent in its operations.
• Parent company ownership: A parent company may own several subsidiaries, including a CPA firm performing attestation services, technology consulting, advisory services, etc. The parent company is prohibited from interfering with the professional responsibilities of the CPA firm performing attestation services. The CPA firm must also have control over attest functions and follow independence rules.
Of course, there are several advantages and disadvantages for accounting firms to consider before forming an alternative practice structure.
The advantages may include:
• Increased access to capital and partner compensation: PE investment can bring more funds to accounting firms, which can improve employee benefits, recruiting, marketing, sales efforts, merger and acquisition activity, and technology (especially around firm planning, workflow, and client experience platforms). Additionally, PE investment makes it easier for existing partners to cash out at attractive valuations.
• Improved operational efficiencies: Many PE-backed firms focus on bringing in expertise to streamline processes and reduce unnecessary complexities. For example, PE firms generally have more access to experts in their network to help with growth, allowing firms to scale faster, offer additional services, and become more competitive.
• Better profitability: Based on the nature of PE investments, PE firms are usually focused on rapid transformation and fast changes that improve the profitability and sustainability of the organizations they own. For example, one strategy that PE firms may utilize is purchasing several accounting firms to merge for synergies and growth. Alternatively, PE firms may try to quickly boost the profitability of the accounting firms they have invested in by increasing offshoring as a talent strategy.
In contrast, the disadvantages may include:
• High cost of profitability: PE firms have a reputation for taking a short-term view, often focusing on cutting costs and increasing profits to be able to create a quicker return on investment. This focus could mean reduced staff, deprioritized professional development, or fast operational changes. One concern is that the human element of working with people could be eroded with more attention toward profit goals. According to the May 2025 WSJ article, doctors have reported increased patients and decreased time with patients because of PE ownership; similarly, accounting firms could experience an increase in client workload, leading to less time per client.
• Heightened independence risks: PE ownership could create attest service independence issues. Even if attest firms have their own governance, PE interests could exert pressure on the attest firm based on the relationships of the PE members with the attest firm. For example, consider the influence on an attest firm owned by a parent company that is under PE ownership or influence.
• Weakened firm culture and industry identity: It is important to remember that accounting firms center around integrity, and they exist to improve public trust by holding accountability with clients who require attest services. Therefore, accounting firms with alternative practice structures need to ensure they can still serve the public interest even while their profits may be prioritized by owners and investors. We have evidence that financial motives by PE ownership could negatively impact the perception of attest firms. For instance, in January 2025, a U.S. Senate committee investigation—led by Sens. Chuck Grassley (R-IA) and Sheldon Whitehouse (D-RI)—released a bipartisan report concerning results from PE investment in health care. The investigation revealed that PE-influenced entities were “putting their own profits before patients, leading to health and safety violations, chronic understaffing, and hospital closures.”
To help mitigate ethical risks involved with alternative practice structures in the wake of PE investments, firms should consider these key actions:
• Establish effective governance: Firms should put people in roles who will consistently monitor compliance and ethics, especially as they relate to undue influence on attest services. An independent governance structure for the attest firm may be ideal since investors in a non-attest entity could exercise undue influence on an attest entity if they are closely related firms. In other words, CPAs need to retain majority ownership and
influence of the attest entity. For guidance, please refer to the AICPA Code of Conduct, Section 1.810.050 under Alternative Practice Structures.
• Implement a strong administrative services agreement: Firms should adopt an administrative services agreement that clarifies the parties involved, defines the roles of non-attest services versus attest services, and describes how non-attest affects the attest services firm operations. This agreement should outline inscope and out-of-scope services. In-scope services could include functions like HR, IT, marketing, and legal. Out-of-scope services could include any services that may compromise independence or compliance, like non-attest firm client acceptance or issuance of audit reports. The agreement should also include pricing between the entities and have clear documentation of how CPAs will be in full control of attest functions and decisions.
• Communicate openly with stakeholders: Firms should transparently communicate to their people, clients, and the public about their ownership structures and how they have implemented safeguards to maintain objectivity and independence. This communication can be accomplished through meetings with employees and clients, written FAQs, engagement letters, the firm’s website, press releases, and dedicated sessions for employees to discuss the safeguards. These communication opportunities highlight the firm’s commitment to ethics and openness.
As your firm may set its eyes on growth via an alternative practice structure, keeping ethics top of mind will be key to maintaining the public’s trust. Ultimately, the firms that effectively balance profit and protect the public interest will succeed in their growth goals while still preserving the profession’s ethical reputation.
Art Kuesel President, Kuesel Consulting art@kueselconsulting.com
By embracing a fluid approach, firms can successfully blend growth and balance that’ll foster a thriving and dynamic work culture.
Much has been written about and discussed on the topic of work-life balance in firms—so much, in fact, that even I covered the topic in my winter 2024 Insight article, “Want a 40Hour Tax Firm? Your Wish Is My Command.”
In case you missed it, the concept I explored was building a firm that eliminates the need for overtime. If a firm limits their client load to maintain balanced staff hours, it can’t materially grow without adding staff—and when great staff is already nearly impossible to find, balanced growth is a challenge.
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Let’s face it, a no-growth environment isn’t compatible with the aspirations of your top talent (including future partners) or the sustainability of your firm. While there will always be room in firms for great people that don’t have professional growth aspirations to become partners, there’s also always a segment of your staff that requires upward momentum to be satisfied for the long term. After all, top talent wants to learn, build their technical expertise by working on new and challenging assignments, be promoted and earn more responsibility, and increase their compensation.
Further, consider that growth provides for additional margins that can be deployed to offset the increasing cost of doing business. This includes raises, technology, and employee benefits. Also, don’t forget that in the face of flat growth and rising costs, your income as a partner will certainly suffer.
Suffice it to say, whether some of us want to admit it or not, growth is important in thriving accounting firms. But with everything we know about burnout and talent and retention challenges impacting our firms, we also can’t ignore the need for balance.
So, how can we reconcile the equally important and seemingly competing levers of growth and balance? Well, perhaps we don’t have to choose one over the other. Perhaps, it just needs a fluid approach where both can be blended together seamlessly. To help illustrate this, consider these five tactics:
1. Identify your target goal: Start with a top-line target in mind that you feel will adequately provide upward growth opportunities for rising talent, as well as financially reward your partners and expand margin growth. On average, this top-line number is between 5% and 20% for most firms (the average last year was around 11%).
2. Build out your plan: Once you identify your top-line target, model it out so it’s more than “just a number.” Sketch your thoughts out on planned fee/rate increases, expected client and team attrition, offshore capacity changes, and advances in technology that can increase output without more input. Further, don’t forget to account for changing
expectations or needs that may impact your plan, including lateral hires (increase in capacity), interest in pursuing additional services like client accounting or advisory services and wealth management, business development initiatives, and other strategic plans. Be sure to also keep your eye on the potential for mergers and acquisitions, as those can be a part of the equation to drive growth (however, in the first few years, margin growth doesn’t always materialize).
3. Be flexible: Your skills in planning for growth may have atrophied in the last several years. For so many firms, the volatility of the past few years has led to a reactionary and triage-laden operating environment. While many firms have posted revenue and margin increases, their successes weren’t necessarily the result of following a deliberate and specific playbook. While having a goal is important, being rigid with that goal doesn’t work in the dynamic operating environment in which we live today. Your approach to growth and balance needs to be fluid to allow for changing circumstances. For example, you may encounter unexpected staff departures that decrease capacity, or you may encounter client departures that increase capacity. You may even recognize efficiencies that come from offshoring or technology adoption that you weren’t expecting. Overall, don’t be afraid to alter your plan as needed to address a changing environment.
4. Measure your progress: Once you’ve set your goal and established your course of action, don’t wait for a year-end progress check. I know most of you are regularly reviewing your work in progress, accounts receivable, and monthly financials— measuring your progress on growth should be no different. Take this opportunity to track your progress on the additional inputs you utilized to create your goal. This will give you frequent measurements of results, and it’ll allow you to adjust course if needed.
5. Don’t forget about balance: As you pursue profitable growth, keeping balance front of mind will also have you checking your staff hours to make sure you’re honoring your promises to your team.
Remember, the pursuit of both growth and work-life balance within accounting firms isn’t just about numbers—it’s about fostering a thriving and dynamic culture. By embracing a fluid approach to growth and balance, firms can adapt to changing circumstances, seize opportunities, and overcome challenges while providing meaningful careers for their top talent, driving profitability, and sustaining long-term success.
Andrea Wright, CPA Partner, Johnson Lambert LLP awright@johnsonlambert.com
ICPAS member since 2010
Being strategic about how your organization adopts and implements AI is critical to ensuring you reap the rewards of productivity, efficiency, and growth.
Ninety-four percent of executives believe artificial intelligence (AI) will transform their industries within the next five years, and it’s been predicted that AI could add $2.6 to $4.4 trillion in value annually. These findings from Deloitte and McKinsey, respectively, make it clear that AI is rapidly becoming a transformative force with immense potential—if implemented strategically.
Here are six steps growth-minded organizations must consider before adopting an AI strategy.
To prevent your AI initiative from becoming fragmented and not producing the results you expect, you should first start by creating a strategic vision for using AI. This involves a thorough analysis of your business processes to find the areas where AI can be most effective. To start, assemble a cross-functional team to pinpoint these areas and their best use cases and create a detailed roadmap with specific goals, timelines, and key performance indicators that’ll monitor your progress.
Importantly, you’ll need to reimagine your existing business processes with the use of these new tools as the foundation for the business objectives they’ll support. While augmenting your human-centric business processes with AI can be valuable, it’s far more beneficial to truly rethink your business in the context of humans and AI working together in order to leverage AI’s full potential.
Many organizations face challenges with poor data quality, including inaccuracies and inaccessibility, which can significantly impact AI models regardless of their sophistication. When implementing AI across your organization, it’s important to keep in mind that the effectiveness of AI is heavily reliant on it being able to access high-quality data.
One crucial step to ensure data quality is to establish a comprehensive data governance strategy. This will help maintain the integrity of your data and processes over time. A data governance strategy should include a comprehensive system of policies, processes, standards, and roles that ensure the availability, usability, integrity, security, and compliance of the data used and generated in the course of business. This means having clear answers and controls around:
• What data is collected. For example, client financial records, tax information, internal firm data, and market data.
• Where data is stored. For example, cloud servers, on-premises systems, and third-party platforms.
• How data is processed and used. For example, tax preparation, audit procedures, financial analysis, client communication, fraud detection, and internal operations.
• Who has data access (and under what conditions). For example, specific firm personnel, AI algorithms, and third-party providers.
• How data accuracy, completeness, and consistency are maintained. This ensures “garbage in” doesn’t lead to “garbage out” from your AI tools.
• How sensitive and confidential client data is protected. This ensures adherence to professional ethics and data privacy regulations.
• How long data is retained and securely disposed of. This details how you’re meeting regulatory requirements and managing risks.
• How compliance is ensured. This includes Generally Accepted Accounting Principles, IRS regulations, and data protection laws, among others.
Additionally, data processing (or data cleansing) is a crucial step for improving data quality, particularly when inaccuracies, errors, and omissions will hamper the machine learning (ML) capabilities of AI. Clean data is fundamental to accurate AI-assisted analysis and informed decision making; without it, AI models can produce misleading and/or incorrect results. Therefore, organizations that invest time and resources into cleaning their data—including through standardizing, validating, deduplicating, and analysis—can unlock the full potential of their AI initiatives and drive better business outcomes.
Legacy systems pose a significant challenge to AI adoption due to their reliance on older business processes and modalities. While it’s possible to begin AI integration without modernizing these systems, it can be time consuming and expensive. If your organization is in a position where this is the only route forward, consider leveraging custom application programming interfaces (APIs) and middleware to integrate existing systems with AI technology whenever possible—think of it as a bridge that allows each of your different applications to communicate with each other.
Importantly, as each organization’s integration needs are unique, it’s recommended to partner with a digital transformation expert that can help design the right integrations for your specific needs.
Remember, AI systems introduce cybersecurity risks—they’re vulnerable to adversarial attacks, data poisoning, and hacking of sensitive algorithms. Organizations should prioritize protecting data from malware and misuse by implementing a robust cybersecurity defense program integrated with their data governance approach. Additionally, companies that plan on using third-party AI models should take extra precautions when working with vendors. Make sure your third-party management agreements clearly outline data ownership; what can and can’t be used by the vendor; and detail the security, confidentiality, and privacy controls that’ll be used by the vendor. These vendors should also be able to provide an independent audit as evidence that they have adequate procedures in place (at least yearly to ensure their product is meeting expectations).
Because AI can amplify human biases and compromise decision making, organizations should consider the ethics of AI use before implementing any new tools or models. For instance, organizations must proactively counter prejudiced data inputs to ensure unbiased AI programming and ML modeling. Annotators can play a crucial role in this by carefully analyzing training data before it’s fed into the algorithm to help prevent biased conclusions.
Further, the processing of sensitive data by AI systems raises ethical concerns about misuse. Organizations can mitigate these risks by implementing strict data governance frameworks, adhering to stringent AI ethics policies, and ensuring compliance with relevant regulations and laws. Designing AI systems with privacy in mind, using techniques like data anonymization and encryption, and maintaining open communication with stakeholders about data usage and protection measures are essential steps in responsible AI adoption.
The increasing prominence of AI in data-centric operations has led to a rise in legal regulations, particularly in highly regulated industries like finance and health care. Organizations must comply with these regulations to maintain high privacy and governance standards. As regulations increase, third-party auditors will likely be in greater demand to help ensure compliance. Ultimately, a flexible approach to compliance can help organizations operating in these and other regulated industries meet evolving standards.
Overall, organizations that proactively address potential challenges and risks associated with AI adoption beforehand will have an easier time ensuring their existing business processes can reap the rewards of productivity, efficiency, and growth.
This column was co-authored with Marcia Jerding, CPA, partner, and Dave Fuge, CISSP, chief innovation officer, at Johnson Lambert LLP.
Brian Kearns, CPA, CFP, RIA Founder, Haddam Road Advisors brian@haddamroad.com
ICPAS member since 1989
As you advise the class of 2025 and their families, consider these options for excess 529 plan balances.
It’s that time of year—graduation ceremonies and parties are here! The gowns are ordered, the travel plans are finalized, and as was the case when I was in school, the mortarboards don’t fit properly (full disclosure, I had to search for the name of the “tassel hat”).
For many American families, education planning is a multidecade enterprise: The parents opened a 529 college savings plan soon after their child was born, and tax-savvy grandparents helped by super-funding it when their grandchild was in diapers.
The 529 is a common tax-advantaged savings plan that many families use to help fund college expenses, including tuition, fees, books, supplies, room and board, etc. Of course, now that the diplomas are received, many of your clients may be asking you (their advisor): “What do we do with the outstanding 529 plan balance?”
For excess 529 plan funds, there are several options available, each with certain rules, limitations, and planning considerations. Some common options include: 1) designating a new beneficiary, 2) paying off education loans, and 3) funding further education.
However, thanks to the SECURE 2.0 Act, there’s a newer option—rolling over some or all the remaining 529 plan funds into a Roth individual retirement account (IRA) in the beneficiary’s name. This option offers an attractive planning opportunity to set up a new graduate with a retirement “nest egg.”
Notably, before the act was passed, this option would’ve incurred a 10% federal penalty and tax on account earnings for a non-qualified withdrawal. Also, when this option originally launched, there was very little guidance from plan administrators, but that has since been addressed (e.g., Illinois’ Bright Start college savings program now has a direct rollover to a Roth IRA form on its website).
SO, HOW DOES THE ROTH IRA ROLLOVER WORK?
There are a couple things to keep in mind when rolling over 529 plan funds into a Roth IRA. First, there are time constraints to consider. Because the IRS wants to make sure genuine educational funds are being rolled over, the 529 plan account needs to have been open for at least 15 years. If you have clients with 6-year-old children, now’s the time to start funding new 529 plans so the Roth IRA rollover window can be an option for them by the time their children graduate college (I did say this was a multidecade enterprise).
Also, the 529 plan funds being rolled over to a Roth IRA need to have been in the 529 account for at least five years, so any contributions made while the student was matriculated may need to stay in the account for a bit longer depending on when the account was opened and contributions began.
Second, there are dollar constraints. The Roth IRA rollover option is limited to $35,000 per beneficiary (per lifetime). However, your clients wouldn’t transfer the funds in a lump sum. That’s because the IRS now considers graduates just like any other working-age person subject to the same contribution limits. The Roth IRA contribution limit for 2025 is $7,000, so this process could take five years or more to complete. Also, your working-age graduate needs to have earned income at least to the level of the Roth contribution for that year. (Welcome to the working world, graduate!)
Beyond the Roth IRA rollover, there are other options for families to consider.
For instance, if there’s a line of children entering college, the 529 plan owner can change the beneficiary and use the balance to fund the next child in line. So, as an advisor, you might recommend having clients super-fund their eldest child’s 529 plan at the outset and then swap out the beneficiaries as each child graduates.
Also, be aware that combining the Roth IRA rollover and beneficiary change can be tricky if the siblings are close in age (sorry, the rule makers didn’t make this process easy). For cases like this, consider the timing of tuition outflow and the possible five-year window needed to fully complete a Roth IRA rollover when setting up a balance transfer.
Additionally, unused balances can help fund education prior to college. For example, if the younger siblings are in elementary, secondary, public, private, or religious school, the 529 plan can fund up to $10,000 per year of their tuition costs once they’re designated as the beneficiary.
Here are some common 529 plan questions that’ll likely arise from your clients as graduations approach:
• Can anything be done with student loans? Yes, student loan balances can be paid down with 529 plan funds (up to $10,000 per beneficiary). This is the lifetime limit for each 529 plan beneficiary.
• Can someone other than my children become a beneficiary of the balance? A 529 plan owner can make anyone who’s a member of the family a beneficiary without tax consequence (e.g., spouses, ancestors, children, stepchildren, grandchildren, great-grandchildren, aunts, uncles, nieces, nephews, and first cousins).
• What happens when the parents become grandparents? If there’s an outstanding 529 plan balance, they can designate a grandchild as a beneficiary—but keep in mind that there may be a generation skipping transfer tax liability (only if they’ve used up their gift exclusion of $13.6 million each). Most people won’t have this problem. Grandparents may need to file a gift tax return if the balance is over the yearly exclusion (currently $19,000 per grandparent, per recipient).
• What if the new graduate wants to go to graduate school? The balance can be used to fund a graduate degree with the same rules as an undergraduate degree.
As you can see, 529 plans offer a myriad of options when it comes to funding education for several generations. Of course, to make the most out of a 529 college savings plan for the owners and beneficiaries, mapping out a clear strategy well in advance of the tuition-funding years is critical to meeting their family’s needs and aspirations.
Keith Staats, JD Special Counsel, Duane Morris LLP kstaats@duanemorris.com
ICPAS member since 2001
According to a recent IDOR ruling, tariffs aren’t excluded from the Illinois tax base.
To say that tariffs have been a popular topic of conversation in recent months would be an understatement. However, putting politics aside, this is an appropriate time to address the federal government’s tariffs and their impact on Illinois sales taxes.
Notably, the Illinois Department of Revenue (IDOR) was recently asked to rule on this topic and address some concerns via a general information letter (ST 25-0022-GIL). Although general information letters aren’t legally binding and don’t create rights under Illinois’ Taxpayer Bill of Rights, they’re helpful guides related to how the department thinks on specific topics of interest.
In the ruling request, the question posed to IDOR was whether the amount of a tariff separately stated on a customer’s invoice in a taxable retail sale is a portion of the price of the item subject to Illinois Retailers’ Occupation Tax (ROT). IDOR responded, “Yes.”
Let’s decode IDOR’s reasoning. These are the underlying assumptions made in IDOR’s general information letter:
• Tariffs are taxes imposed by the United States on goods imported from another country.
• Tariffs are a component of the cost of an item purchased from a foreign seller by a retailer that’s the importer of record of the items for resale.
• Tariffs are also a component of the cost of an item purchased by a purchaser who’s an importer of record from a foreign seller for their own use or consumption.
With this in mind, let’s examine a couple of the scenarios addressed in IDOR’s general information letter ruling.
Company A purchases tangible personal property (TPP) sold by Company B, and the items are imported into the U.S. The items are purchased for resale by Company A, so no sales tax—Illinois ROT or Illinois Use Tax (UT)—is due on the sale from Company B to Company A. Company A, as the importer of record, pays the tariffs to U.S. Customs and Border Protection when the goods enter the U.S.
Company A subsequently sells the TPP to Company C in a retail sale subject to Illinois ROT, and Company A invoices Company C. The invoice lists the selling price for the items, with a separately stated amount for the tariffs. Company A asked IDOR to rule on whether the separately stated tariff amount on the invoice to Company C is a portion of the selling price subject to Illinois ROT.
Citing an existing rule (Section 130.445(b)), IDOR ruled that separately stated tariffs are part of the selling price of an item of TPP subject to tax. As Section 130.445(b)(1) states, “federal importation taxes are not deductible in computing Retailers’ Occupation Tax liability from the gross receipts of persons who sell such tangible personal property at retail.”
IDOR’s general information letter also addressed a scenario involving the impact of tariffs on a purchaser’s Illinois UT liability. (Remember, Illinois UT is imposed on TPP purchased from a seller who’s not required to charge Illinois ROT on a sale because of a lack of nexus with Illinois.) In this scenario, Company A buys items of TPP from Company B, a seller located outside the U.S. Company A is the importer of record, and the items aren’t going to be resold by Company A.
Let’s say U.S. Company A buys laptops from Chinese Company B for use by Company A’s accounting department. Company B ships the laptops from China directly to Company A as the importer of record. Again, in this scenario, tariffs on the laptops are paid to U.S. Customs and Border Protection when the items reach the U.S. Because Company B doesn’t have nexus with Illinois and isn’t required to charge Illinois ROT on the transaction, Company A is required to self-assess Illinois UT on the purchase of the laptops.
In this situation, IDOR doesn’t consider the tariffs to be a portion of the cost of the laptops subject to the Illinois UT, citing Section 130.445 as the authority for their position. I think IDOR’s ruling on this is generally on point, but the department didn’t provide an explanation for how it decided that tariffs aren’t included in the Illinois UT base but are included in the Illinois ROT base—perhaps, IDOR will have more to come on that.
Overall, it appears that Illinois is the first state to issue a ruling on this topic. With time, I suspect that other states with similar sales tax law definitions of the tax base will generally reach the same conclusion: Tariffs are costs of doing business to retailers who are purchasing items for resale to end users, and tariffs may not be excluded from the tax base.
The views expressed in this article are those of the author and don’t represent the views of Duane Morris LLP.
With an unconventional start behind her, this accounting manager is turning her past into a superpower for helping others thrive in challenging environments.
BY AMY SANCHEZ
For many accounting professionals, their pathway into the profession looked something like this: They graduated high school around age 18, completed a bachelor’s degree in accounting by age 22, are potentially pursuing their certified public accountant (CPA) credential thereafter, and obtained an entry-level role, perhaps at a public accounting firm.
For Amy Sexton, that traditional pathway couldn’t be further from her truth. By age 16, in rural Montana where she grew up, Sexton was working full-time in an office within the oil industry. At that time, oil was big, and a lot of well-paying jobs in the field were available to people without an education.
“Where I’m from, and with how I grew up, education just wasn’t a priority,” Sexton explains. “I would say it was almost discouraged and presented as a waste of time.”
Having been raised by parents of a stricter religious faith, Sexton had only received a formal education up through fourth grade: “My parents pulled my brother and me out of school with the plan of eventually homeschooling us. Their plan of what that looked like and what was important to learn varied greatly from accepted educational standards.”
Without formal schooling, Sexton sought most of her own education: “We had a bunch of books, access to the public library, and copies
of Encyclopedia Britannica. I spent most of my time reading and practicing math problems from those.”
Eventually, the self-taught skills Sexton obtained from the hours she spent reading would come in handy when she made the decision to transition from the oil industry into the accounting profession—a decision made not by interest, but rather, for health reasons: “My asthma and allergies got really severe—I was starting to be hospitalized for it, so I was recommended a career change.”
Though, Sexton wasn’t completely sold on immediately jumping into a full career change: “At the time, I was in my mid-20s, and I felt like I was past the age where college made sense. So, I tried to see what I could accomplish on my own with the experience and connections I already had from Big Oil.”
After a number of interviews that went nowhere, Sexton finally began to consider college: “I did a bunch of college testing and found that my interests, personality, and skill sets were very aligned with the professions of engineer, scientist, professor, and accountant, so, I decided to look more into accounting.”
Pursuing an accounting degree was a crucial turning point for Sexton: “I went from having a certain mindset that I grew up with to realizing how much opportunity there is. It was definitely more than what I had been exposed to and taught to think about the accounting profession.”
Despite beginning college later than most, Sexton sees her untraditional pathway as a competitive advantage—specifically, as it relates to the constantly changing accounting landscape: “Because I went through life without a formal plan, and in the opposite way most people do, I’m a lot more comfortable navigating change and a landscape I haven’t prepared for.”
Over the years, this unique skill set has served Sexton well. Today, she serves as a manager within Wipfli’s outsourced chief financial officer and controller service line, where she’s currently working on obtaining her CPA credential—a professional and personal goal.
“I think because I spent so much of my life feeling undereducated, there’s a bit of me that needs this personal sense of achievement, taking something from its beginning to its completion,” she shares.
Rooted in her personal journey of having to advocate for her own opportunities in life, Sexton has also spent a large part of her educational and professional journey standing up for and mentoring others. In college, Sexton served two terms as a student board member on the Montana Board of Regents, a position she pursued after experiencing challenges with her student appeal process and seeing others experience the same.
Sexton also serves as a mentor to women in accounting, particularly in Wipfli’s overseas teams, which led her, in part, to being recognized with the Illinois CPA Society’s 2024 Women to Watch Award in the Emerging Leader category.
“I grew up with a very traditional set of values where I wasn’t encouraged to embrace a career—in certain parts of the world that’s very much the same case. Since I’ve made a career out of flourishing in environments that weren’t really set up for my immediate success, I feel like I’m particularly well-suited to help women thrive when they’re in that same environment.”
Despite the many challenges and setbacks Sexton experienced throughout her life, she now has the foresight to see them as formative: “If I could go back and change certain things, I would. But at the same time, I am where I am because those experiences have given me a good work ethic and taught me to not give up when things get hard.”
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ICPAS Member Yes
efore venturing into financial planning, I had a brief five-year career as a police officer. I didn’t leave law enforcement because I fell out of love with service. I left because I realized the kind of protection people needed most wasn’t always found behind a badge.
During my time as a police officer, I was assigned to two very different cities—a short drive apart but economically light-years away. In one, wealth was assumed, quiet, and generational. In the other, survival was loud, daily, and uncertain. However, in both cities, I saw how money—or the lack of it—shaped behaviors, opportunities, and even how people saw themselves.
What stuck with me through that experience was this: People don’t make poor decisions just because of poor judgment. Often, they make the only decisions their circumstances allow.
That truth hits home because even while I was in a law enforcement position, I was just learning about money myself. At the time, I was investing in real estate, trading stocks, and slowly building an understanding of how wealth actually works. Being able to see both the systems and financial stresses up close and how they impact one another gave me a unique vantage point and, over time, I knew I couldn’t keep what I was learning about money to myself.
Soon after, I started a nonprofit focused on teaching financial literacy, mainly to youth and working families. In trying to make a change for others, my life changed too. That work introduced me to my wife, who shared a deep belief in service and community. It also eventually led me to my business partner who, at the time, was actually my financial planner; what started as a client relationship grew into a professional, collaborative relationship around a shared mission.
When I transitioned into financial planning, I didn’t see the path as drastic as it looked to those on the outside. It was still about showing up for people, still about protection—except instead of enforcement, it was through education and empowerment. Whether I’m walking someone through a retirement strategy or helping them rebuild from financial trauma, I’m still performing a public service.
Overall, I became a financial planner because I wanted to prevent problems, not just respond to them. I believe that no one should have to choose between paying rent and dreaming a little. I’ve seen firsthand how people are able to move through life differently, and with more confidence, when they’re equipped with knowledge and a trusted guide—and I believe that shift can echo across generations.
While it’s true that technical knowledge matters greatly in our field, I’ve learned that what truly sets you apart as an accounting and finance professional is the ability to see clients behind their portfolios. Being able to find out what shapes a client’s financial worldview, or what barriers they’ve encountered in their lives, gives you a competitive edge. Just like my own career trajectory, every spreadsheet tells a story—but you have to care enough to read between the lines to truly understand the hopes and dreams of your clients and ultimately become their trusted financial partner.
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October 27-29, 2025
Aurora, CO & Virtual AICPA & CIMA Forensic & Valuation Services Conference*
October 28, 2025 | Virtual Tax Trends and Insights 2025: Navigating Challenges and Opportunities
November 4, 2025 | Chicago Quality Management and the Future of Monitoring
November 6, 2025 | Chicago Young Professionals Leadership Conference
November 7, 2025 | Virtual Artificial Intelligence Conference
November 10-12, 2025
Nashville, TN & Virtual AICPA & CIMA Women’s Global Leadership Summit*
November 12, 2025 | Virtual IRS/Tax Practitioners Symposium
November 19, 2025 | Chicago & Virtual Accounting & Auditing Conference
December 2, 2025 | Chicago & Virtual Advanced Not-for-Profit Conference
December 3, 2025 | Virtual Excel Conference
December 4, 2025 | Springfield Quality Management and the Future of Monitoring
December 4, 2025 | Half-Day, Virtual Advanced Topics in Flow-Through Taxation
December 8-10, 2025
Las Vegas, NV & Virtual AICPA & CIMA Construction & Real Estate Conference*
December 11, 2025 | Virtual Employee Benefits Conference
January 15, 2026 | Virtual State and Local Tax Conference
March 19, 2026 | Chicago & Virtual Corporate Finance Conference
May 14, 2026 | Chicago & Virtual Employee Benefits Conference
*ICPAS Co-Sponsored Conference
