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The Kentucky

CPA

Journal

Issue 1 2018

The Journal of the Kentucky Society of CPAs

Blockchain: Today and tomorrow Also: • Decrypting taxation of cryptocurrency • Cyber insurance • Tax reform: It's real and it's here

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The Kentucky CPA Journal / Issue 1 2018

What’s inside

What’s inside Administration

President's message.......................................... Page 4 Across the Board............................................... Page 5

Business and Industry

6 tactics that make for happy employees...... Page 6

Tax in the Bluegrass

Tax reform: It's real and it's here.................... Page 8 After Tax Reform webcasts.............................. Page 8

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Blockchain: Today and tomorrow.................. Page 10 Blockchain technology webcast...................... Page 13 Decrypting taxation of cryptocurrency......... Page 14

CPE

2018 spring conferences................................... Page 16

Technology

Is cyber insurance necessary........................... Page 18

Ethics

Do you really know who you are paying...... Page 21 Upcoming fraud webcasts............................... Page 23

Educational Foundation

Create a Legacy................................................. Page 24

Accounting careers

Meet the Ambassadors.................................... Page 26 Become a KyCPA Student Ambassador........ Page 28 College Leadership Institute........................... Page 29

Feature

Engagement letters: Your first line of defense against malpractice claims................ Page 30

Society

KyCPA honors 100% Champions................... Page 34 Spring Awards Banquet................................... Page 35 Day at the Races................................................ Page 35

Members

Welcome new members................................... Page 36 Members in motion.......................................... Page 37 KyCPA member profile: Lindsay Fouts........ Page 38

Watercooler

By the watercooler............................................ Page 39

Classifieds....................................................... Page 39

The 2017-2018 KyCPA Board of Directors: Kevin Joynt, president, of Deloitte & Touche, Louisville William Jessee, immediate past president, of Henderman Jessee & Company, Louisville Rebecca Phillips, president-elect, of MCM CPAs & Advisors, Louisville Elizabeth Woodward, secretary-treasurer, of Dean Dorton, Lexington John Chamberlin of Van Gorder Walker, Erlanger Steve Daniels of T&C Contracting, Louisville, who is also a member of the executive committee Kris Kemp of Myriad CPA Group, Owensboro Skip Looney of Rudler, Fort Wright, who is also a member of the executive committee Wes Omohundro of Allen Company, Inc., Lexington Elizabeth Rankin of ANEW 401k TPA, Louisville Marisa Smith of Airgas MidAmerica, Bowling Green Douglas Allen of Kentucky Community & Technical College System, Versailles Heather Cochran of RFH in Lexington Esther Thompson-Long of LG&E and KU Services Company, Louisville Mike Campbell of Venminder, Elizabethtown and Cambell is also a member of the executive committee Editorial Board Chair: Mark Loyd of Bingham Greenebaum Doll, Louisville

CEO - Darlene Zibart Editor - Matt Lambert Associate editor/Art director - Kimberly Lindsey Associate editor - Katherine Sproles Letters to the editor: If you have ideas to share, opinions to express or suggestions for future stories, please email Editor Matt Lambert, KyCPA communications director, at mlambert@kycpa.org. Advertising: If you would like to advertise in The Kentucky CPA Journal, please contact the Society at marketing@kycpa.org; 502.266.5272. Please note: this publication is not technically reviewed. Opinions expressed in The Kentucky CPA are those of the authors and do not necessarily reflect Society policy or editorial concurrence. Publication of advertisements does not constitute an endorsement of products or services. The editor reserves the right to accept or reject advertising and editorial material in accordance with editorial judgment and publication guidelines.

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The Kentucky CPA Journal / Issue 1 2018

Administration

President's message By Kevin Joynt, CPA

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new year always brings with it additional deadlines to meet and unknown obstacles to overcome. However, most importantly, a new year allows us the opportunities to grow, learn and improve, and for KyCPA, we have hit the ground running in 2018. As I mentioned in a previous letter, Darlene Zibart was selected as the new KyCPA CEO, assuming her duties in Dec. 2017, and we are looking forward to her leadership. During the CEO interview process, Darlene told members of the selection committee (which included several KyCPA board members) that she was excited to build on the success of the Society, but that she also would embrace change as our profession and the needs of our membership continue to change. Being KyCPA’s CFO for more than a decade, Darlene watched intently as our Society – and the entire accounting profession for that matter – evolved and grew. Through rapidly changing technology our industry has changed the way we interact with each other and our clients. But one thing that has not changed is KyCPA’s commitment to serving our members. Still the question remains, what is the optimal way to continue to communicate and engage with our members? This was a main topic of discussion at our recent board/staff retreat organized by Darlene. After two days of discussion, we realized that there were many issues facing the Society that we simply did not have the definitive answer to – from

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how many CPE courses to offer to the most effective way to communicate with our members. As we discussed our options moving forward, we came to a few significant realizations. We want to give our members the support and resources they need and deserve. So, we want to hear from you. The board agreed that the best way to get an accurate assessment of the Society and our membership was to invest in an independent market analysis focused on the current and future needs and wants of our members. We are already in the process of interviewing market research firms to undertake this task and intend to start field testing in the upcoming months. We also agreed that KyCPA needed to increase personal, one-on-one outreach efforts with our members throughout the state. Given our technology-driven lives, it can be way too easy to disconnect from each other on a personal level. This is why KyCPA staff and board members have committed to ramping up the number of firm visits held annually throughout Kentucky. It is critical that KyCPA has a clear line of communication with its members, finding out what is important to you and letting you know how the Society is supporting and advocating for all our members across the state. We are excited about KyCPA's future and want to thank all our members in advance for participating in the forthcoming survey. We will provide additional information this spring. I look forward to seeing you soon. About the author: Kevin Joynt is a managing director at Deloitte & Touche LLP in Louisville and can be reached at kjoynt@deloitte.com.


The Kentucky CPA Journal / Issue 1 2018

Administration

Across the Board By Darlene Zibart, CPA

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hen the Society was formed 94 years ago, the purpose was to create a place for learning as well as establish a professional community of our peers. The world we live in today could not have been imagined. Facebook, Instagram, Alexa and Google have all played a part in changing how we communicate, learn and interact with each other. In this constantly evolving environment, how does the Society maintain its relevancy and meet the needs of the changing demographic of our membership? What do our members expect from the Society? How do they want to learn? What's the best way to communicate with them? At the 2018 KyCPA Strategic Board Retreat, we focused on these questions but realized we do not have the answers. In the coming months, you will hear more about the market research focusing on these issues. We all have extremely busy lives, but when the marketing firm contacts you by phone or email, I implore you to take the time to answer the questionnaire. This organization is only as good as the input we receive from our members. Your responses will help shape the future direction and focus of the Society. The one prevailing theme that I took away from the retreat was that of “community.” In this age of online communication, the feeling of belonging to a community can get lost. The board and staff feel it is imperative that we place an emphasis on faceto-face visits with our members. To engage with you and to listen to you so that we can learn what

KyCPA's CEO Darlene Zibart and Membership Development Manager Samantha Soutar took a trip to Elizabethtown to meet with Society member Chris Carter of Stiles Carter and Associates. is important to you. As your new CEO, I’m excited about the opportunity to have an in-person meeting with many of you and learning about the issues and concerns that you personally face on a day-to-day basis. In the coming months, we will be reaching out to firms and industry members throughout Kentucky to schedule these meetings. The accounting profession is changing but the one thing that remains constant is the Society’s commitment and dedication to its members. The Society exists for one reason and one reason only and that is to serve you, our member.

About the author: Darlene Zibart, CPA is the CEO of the Kentucky Society of CPAs. She can be reached at dzibart@kycpa.org or 502.736.1372.

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The Kentucky CPA Journal / Issue 1 2018

Business and Industry

6 tactics that make for happy employees By Sabine Vollmer This article first appeared in CGMA Magazine. For more articles, sign up for the daily email update from CGMA Magazine at http://bit.ly/2svn2AY.

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ccountants and finance professionals could be more productive if they were happier at work, research by Robert Half suggests. Happy employees are better employees because they are more engaged and more satisfied, they change jobs less often and their mental health outside of work is better, according to Marsha Huber, CPA, CGMA, a happiness researcher and associate professor of accounting at Youngstown State University in Ohio. Huber, who was not involved in the Robert Half research, suggested that these benefits can translate into saved recruiting and training costs and even fewer sick days and lower medical costs. Surveys by staffing firm Robert Half found that two-thirds of employees in North America, Europe and Australia are generally happy in their jobs, but accountants and finance professionals rank in the bottom half of the happiness scale among eight different professions. Accountants came in fifth and finance professionals were dead last in being happy at work, a survey of more than 12,000 working professionals in North America found. They were also the least interested in their work. “In general, to help any employee become happier on the job is to help them find meaning in their work,” Huber said. “We need to help some accountants progress in their careers. Other accountants may need to feel they are doing something meaningful. For example, an accountant who works for a non-profit may earn less then peer accountants but loves her work because she finds the work rewarding.”

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How to work happy

Happiness at work is shorthand for employees being satisfied because they have a great experience on the job, Robert Half suggests. Needs, goals and preferences that change from employee to employee make this experience a highly individual one, but Robert Half concluded that the following six factors are key drivers of job satisfaction: Hire to fit. Set expectations by crafting detailed job postings that clearly communicate to prospective hires what the job entails. When you select job applicants that seem suitable, conduct in-depth interviews and thoroughly check references, you avoid skills alignment issues. Also, devote attention to interpersonal abilities during the interview process to avoid hiring someone who’s brilliant but is going to irritate other workers. Finance professionals that Robert Half polled in the U.S. and Canada said they did not feel wellmatched to their work. They said they aren’t able to use their strengths on the job to a high degree. Reward smart risks. Empower employees to make decisions on their own, or with minimal direction, to let them develop problem-solving skills they can use to advance their careers, build confidence and feel comfortable suggesting new ideas. Invite your entire workforce to brainstorm new ideas and approaches. When somebody tries something that doesn’t work, capture the lessons learned through the failure and celebrate the smart risk taken. About one-quarter of the professionals Robert Half polled in the U.S. and Canada said they wield little or no control over their work (23 percent) and feel they have few opportunities to be creative (26 percent). Make employees feel appreciated. Offer gratitude for a job well-done. Be specific when you recognize an employee and deliver the praise in a timely manner. Provide frequent feedback not only to individuals or the less experienced workers but to the entire team.


The Kentucky CPA Journal / Issue 1 2018

Respondents in the Robert Half North America survey who were 55 or older were less likely to receive constructive feedback (44 percent) than those under 34 (54 percent). Offer work that’s interesting and meaningful. Let employees know through multiple channels that their contributions matter and that they are part of something larger than themselves. One way to do this is to allow employees to volunteer and establish ties with the community. Research suggests employees who feel their work is worthwhile are nearly 2.5 times more likely to be happy than those who feel the job they do is “just work.”

Workers at very large companies (2,500 or more employees) feel the lowest sense of accomplishment, according to Robert Half research. Play fair. That means managers must ensure every team member knows what it takes to get promoted or earn higher pay and workers must have a chance to say when they feel a sense of inequality. To ensure employees feel their pay is equitable to that of others doing to the same work, employers must periodically benchmark salaries. Knowing the going rate is vital to recruiting and retaining top talent.

Business and Industry

Only 70 percent of women feel they are treated fairly compared to 74 percent of men. Likewise, 52 percent of women say they are paid fairly versus 58 percent of men, according to Robert Half research. Help employees establish supportive workplace relationships. Managers can promote a positive workplace culture by creating opportunities for employees to forge and strengthen bonds with colleagues. For example, enlist older or more-experienced workers to support their lessexperienced coworkers. Sabine Vollmer (Sabine.Vollmer@ aicpa-cima.com) is a CGMA Magazine senior editor.

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Tax in the Bluegrass

Tax reform: It's real and it's here Article provided by the AICPA

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ecently, Congress passed and the president signed into law, the Tax Cuts and Jobs Act – the largest tax reform bill in the last 30 years. “President Trump signed the Tax Cuts and Jobs Act into law, giving the country the first fundamental tax reform since 1986,” said KyCPA CEO Darlene Zibart. “It’s likely some time will be needed to work through implementation, including the production of new IRS forms and guidance to accommodate the many changes involved.” Among the provisions of the final bill, which the Joint Committee on Taxation estimates will cost $1.4 trillion over 10 years, are: lowering of the corporate tax rate to 21 percent, seven individual tax brackets (10, 12, 22, 24, 32, 35 and 37 percent) and an increase in the standard deduction to $12,000 for single filers and $24,000 for married couples, and repeal of personal exemptions and miscellaneous itemized deductions.

Most of the legislation’s tax cuts for individuals would become effective in January 2018 and expire in 2025 (and revert to the rules prior to this legislation) to comply with Senate budget rules. However, the reduction in the corporate rate would become effective in Jan. 2018 and be permanent. In a statement issued after passage of the tax package, AICPA President and CEO Barry C. Melancon, CPA, CGMA, said the legislation contains several provisions that should be welcomed by CPAs and their clients. He expressed disappointment, however, over lawmakers’ decision to exclude CPAs from the measure’s treatment of passthrough entities. “Congress should have provided parity for pass-throughs, regardless of their line of business, in order to achieve a fairer, simpler and more competitive tax code,” he said. “The AICPA pointedly and repeatedly made the case that all professional service firms – including accounting firms – should have received the new deduction.” The CPA profession’s advocacy led to the inclusion of several beneficial provisions in the final tax package. Specifically, Congress expanded the number of taxpayers who may use the cash method

After Tax Reform webcasts 2 CPE hours each Business Tax Updates and Recent Developments March 30

Individual Tax Update and Recent Developments March 26

Capitalization, Depreciation and Disposition Offered on March 9, March 29 and April 12

The Flow Through Entities Deduction Offered on March 5, March 23 and April 4

Choice of Entity Offered on March 2, March 21 and April 5 Register now at http://bit.ly/2018AfterTaxReform

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Travel and Entertainment Expense: Review and Update Offered on Feb. 28 and April 11


The Kentucky CPA Journal / Issue 1 2018

of accounting without further restricting its use. Lawmakers also decided to adopt many AICPA supported provisions, including: • Retained the business interest expense deduction for small businesses (under $25 million) • Preserved the current tax treatment of nonqualified deferred compensation • Simplified the kiddie tax • Simplified the inventory rules for small businesses • Expanded the exception for small businesses from the uniform capitalization rules

• Removed computer or peripheral equipment from the definition of listed property • Provided consideration of an inflation index • Allowed nonresident aliens as qualifying beneficiaries of an electing small business trust • Repealed the PEASE phaseout of itemized deductions • Repealed the technical terminations rule for partnerships • Repealed the corporate Alternative Minimum Tax

Tax in the Bluegrass

“In anticipation of implementation of these and other changes to the tax code, the AICPA is prepared to guide our members through the legislation’s intricacies and impact,” Melancon said in the statement. “The nation’s CPAs can count on us during this time of transition – and beyond.” To learn more about the CPA profession’s views on tax reform, visit the AICPA’s Tax Reform Resource Center.

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Blockchain: Today and tomorrow By Thomas G. Stephens, Jr., CPA, CITP, CGMA

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The Kentucky CPA Journal / Issue 1 2018

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or several years now, you have likely been hearing about “blockchain” and its potential impact on organizations of all sizes and in all lines of business. Yet, blockchain remains a mystery to many professionals, not only in terms of what it is, but also how it will potentially be used to drive the results many are expecting. Read on, and in this article, you will learn what blockchain is, how it is being used today, and how it likely will be used in the future to produce desirable outcomes.

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Consensus. Before a transaction is accepted into the blockchain, all parties to the transaction must agree to it.

What is blockchain?

At its core, blockchain is an electronic, shared, distributed ledger that can be used to record transactions and track virtually any type of asset across a network. The assets that blockchain can track can be “hard” assets such as personal property or real estate, or they can be “soft” assets such as intellectual property. Blockchain is a core technology that facilitates other applications and solutions. For example, Bitcoin is the most widely known application in use today that takes advantage of blockchain technology. Just as the applications on your computer run on top of an operating system – likely Microsoft’s Windows or Apple’s MacOS – so, too, do applications run on top of blockchain. In this regard, blockchain can be thought of as an “operating system” for commerce. In a traditional, non-blockchain environment, each party to a transaction keeps its own set of records. For example, a bank would maintain its own ledger of a customer’s activities and so too would the customer. Periodically, a third-party auditor might be brought in to compare the two sets of records to ensure their agreement. However, in a blockchain environment, all parties to a transaction have access to the same ledger because the ledger is replicated to each party every time a transaction occurs or is updated; therefore, the data remains synchronized amongst the participants in the transaction. Further, blockchain protects the transaction – and by extension, all parties to the transaction – through the following four key characteristics.

1. Consensus. Before a transaction is accepted into the blockchain, all parties to the transaction must agree to it. This ensures that only authorized transactions are recorded. 2. Provenance. Because the transaction ledger maintains a complete history of all events associated with the asset, the history of the asset is easily viewed and the ownership of the asset is easily proven. 3. Immutability. Once a transaction is recorded in the distributed ledger, no party can change it because the transaction is encrypted. If a transaction is recorded in error, a new transaction must be entered to reverse the error. 4. Finality. The distributed ledger becomes the single point-of-reference for determining the ownership of the asset or the history of the transactions related to the asset.

How is blockchain used today?

While still a relatively new technology, practical applications of blockchain are appearing in today’s business world with increasing regularity. The following are four examples. The first recorded use of blockchain technology is that of Bitcoin, a form of digital currency. By taking advantage of the distributed ledger concept found in blockchain technology, Bitcoin eliminates

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The Kentucky CPA Journal / Issue 1 2018

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Blockchain continued

Current uses: • • • •

the risk of a digital currency being “spent” on multiple occasions, an issue that must be resolved for digital currencies to become mainstream. But blockchain usefulness is not limited to Bitcoin or any other form of digital currency. In fact, numerous organizations and various industries are taking advantage of blockchain technology today. For instance, Capital One and Gem Health are using blockchain technology to reduce the amount of time it takes to process payments made to healthcare providers. The two companies take advantage of an application that uses blockchain to verify transactions more quickly than by using traditional methods, and in the course of doing so, reduces friction in payment processes. This in turn creates a more efficient payment

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Digital currency Verify transactions more efficiently Better visibility during application process Secure contracts

processing system and yields faster payments to health care providers. Likewise, IBM Global Financing has created an application that uses blockchain to assist over 4,000 trading partners to purchase goods and services from suppliers using credit supplied by IBM. As a result of implementing this blockchain-based application, each organization is able to have better visibility into the order-todelivery pipeline and the number of disputes filed and the time necessary to resolve each dispute has been reduced substantially. Bitproof is one of many companies that has developed a blockchain-based application to secure contracts and prevent tampering once a contract is signed. Using Bitproof’s SealX application, a fullyexecuted contract is uploaded

to a distributed ledger that is accessible by all parties to the contract. Thereafter, based on the four key blockchain characteristics listed previously, no party can alter the terms of the contract without the agreement of all other parties.

What does the future of blockchain hold?

Looking ahead, what types of problems will blockchain be used to solve? The options are nearly endless. For example, a car rental company could implement a blockchain-based application to speed the process of renting a car. The distributed ledger shared between the company and the customer could contain information such as driver’s license number and expiration date, credit card number, and insurance information and all that data could be continually verified using blockchain.


The Kentucky CPA Journal / Issue 1 2018

Therefore, when the customer arrives to pick up the car, the paperwork currently involved would be virtually eliminated. Another example of potentially using blockchain to solve a business problem is in the area of supply chain. A supplier and a customer could use a blockchain-based application to facilitate commerce. Purchase orders, receiving reports, invoices and even payments could be created, communicated and settled with virtually zero friction and almost instantaneously leading to reduced costs and a more efficient trading environment. In the governmental arena, blockchain technologies could be used to facilitate digital voting. Voters could cast their votes from the privacy and comfort of their own homes. Then, they could easily and anonymously access the blockchain to confirm that their votes were recorded as cast.

In turn, perhaps voter turnout rates would increase because voting would no longer require a trip to a polling location. Also in the governmental arena, blockchain could be used to create and validate identity documents such as passports, birth certificates, wedding certificates, and drivers’ licenses. In sum, virtually any type of transaction or event that involves an asset – “hard” or “soft” – and multiple parties is a candidate for a blockchain-based app.

Summary and conclusions

Though still not widely understood by many, blockchain is one of the more exciting technologies to have appeared in decades. By ensuring consensus, provenance, immutability and finality through the use of a distributed ledger, blockchain greatly reduces the friction associated

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with a given transaction and improves security for all parties associated with that transaction. In turn, businesses will be able to process transactions faster and less expensively than ever. Remember, blockchain is an underlying, core technology and applications are built to take advantage of blockchain’s capabilities to improve business processes. To that end, be alert to the ever-growing list of blockchain-based applications and consider implementing those that can help your organization to become more efficient and more secure. About the author: Thomas Stephens is a CPA and shareholder in K2 Enterprises. He can be reached at tommy@K2e.com.

Webcast - Blockchain Technology: What Every CPA Should Know Offered on Feb. 20, March 29 and April 18 2 CPE hours

Topics include: • • • •

An explanation of blockchain Review of the nomenclature associated with blockchain technology Detailed examination of the blockchain technology model Review of current and potential applications for blockchain in accounting, auditing and business in general • Potential impact on the CPA profession

Register now at http://bit.ly/BlockchainCPA

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The Kentucky CPA Journal / Issue 1 2018

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Decrypting taxation of cryptocurrency How does cryptocurrency work?

By Mark A. Loyd, Esq., CPA

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he most well-known cryptocurrency, Bitcoin, was launched in 2009. Other cryptocurrencies include Lifecoin, Darkcoin, and Dodgecoin. What is cryptocurrency?

Cryptocurrency is not as cryptic as it may come across; in essence, it is virtual currency. According to the Internal Revenue Service, “Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account and/ or a store of value.” IRS Notice 2014-16, I.R.B. 938 (2014). Like traditional government issued and backed currencies, like the U.S. dollar or the euro, cryptocurrency may be exchanged as payment for goods or services or held as an investment, but it is not legal tender and thus does not have to be accepted as a form of payment. Cryptocurrency, which is convertible into government-backed (or fiat) currency, can have an equivalent value in such currency, i.e. a U.S. dollar value.

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“In brief, the Bitcoin system is a public ledger. It denotes who owns each unit of Bitcoin available. Transactions amount to debiting one address and crediting another, while public key cryptography ensures transactions are secure.” William J. Luther, "Demystifying Bitcoin." The public ledger is known as the “blockchain.” Notably, transfers may be done almost anonymously, somewhat like cash changing hands in the physical world, but transfers of cryptocurrency occur in the virtual world and are all recorded in the blockchain. A cryptocurrency “miner” uses “computer resources to validate Bitcoin transactions and maintain the public…transaction ledger,” according to IRS Notice 2014-16. Cryptocurrency exchanges facilitate cryptocurrency transactions.

Who uses cryptocurrency?

Regular people like you and me use cryptocurrency. There are many companies that accept payments in the form of Bitcoin, including Microsoft, Virgin Galactic, Dish Network and many others listed on 99bitcoins.com. But some cryptocurrencies are used on the so-called dark web by terrorists, drug traffickers, human traffickers and other criminals.

According to the IRS, how is cryptocurrency taxed?

Cryptocurrency is property for federal income tax purposes, according to the IRS. “General tax principles applicable to property transactions apply to transactions using virtual currency,” according to IRS Notice 2014-16. When a taxpayer gets paid with cryptocurrency, they have gross income in the amount of the cryptocurrency’s fair market value at the listed exchange rate value. “When a taxpayer successfully 'mines' virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income.” Income resulting from mining cryptocurrency would be self-employment income. As with any exchange of property for property, a taxpayer may recognize gain or loss on the exchange of cryptocurrency for other property, depending on the taxpayer’s adjusted basis in the cryptocurrency.


The Kentucky CPA Journal / Issue 1 2018

The character of that gain or loss depends on whether the cryptocurrency is an ordinary asset (held for sale to customers in a trade or business) or a capital asset (held for investment).

(filed with Financial Crimes Enforcement Network (FinCEN)). The IRS has reportedly stated that virtual currency is not reportable on IRS Form 8938 or FinCEN Form 114.

Can cryptocurrency be exchanged tax-free?

Is the IRS taking measures focused on compliance by cryptocurrency users?

Prior to the federal Tax Cuts and Jobs Act of 2017 and assuming that cryptocurrency is property, then a swap of cryptocurrency treated as a business or investment asset for like-kind property may have qualified as a tax-free like-kind exchange under Section 1031 of the Internal Revenue Code of 1986, as amended. Of course, a taxpayer would have needed to claim 1031 treatment on IRS Form 8824, Like-Kind Exchanges. The 2017 Tax Act, however, now limits 1031 treatment to real property.

Are there federal tax information reporting requirements for crypocurrency?

Receipts of cryptocurrency in transactions are subject to information reporting, such as Form 1099, to the same extent as the receipt of any other payment made in property. Other reporting requirements may possibly apply, such as Form 8938, Statement of Specified Foreign Financial Assets (filed with the IRS), FinCEN Form 114 and Report of Foreign Bank and Financial Accounts (FBAR)

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The IRS has a keen interest in cryptocurrency transactions, similar to its interest in cash dealings. This is due to the perception that such transactions are anonymous and not readily traceable when IRS reporting rules are not followed (Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business). Consistent with its interest in cryptocurrency transactions, the IRS obtained an order from a U.S. District Court in California against Coinbase, Inc., a virtual currency exchange, to enforce a summons for account records for over 10,000 Coinbase customers, each with $20,000 or more in annual trades during 2013 to 2015. The court found that the “summons as narrowed by the court serves the IRS’s legitimate purpose of investigating Coinbase account holders who may not have paid federal taxes on their virtual currency profits.”

Are there state tax issues to consider?

If you think of cryptocurrency as intangible personal property,

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then the state income tax issues parallel the federal income tax issues, i.e., taxability of the transactions and character thereof, reporting, etc. If cryptocurrency is exchanged for nonexempt, taxable, tangible personal property or services, then sales tax would seem to come into play as it would in transactions involving fiat currency or property. In this regard, one could think of cryptocurrency as a form of thirdparty facilitated bartering. “Show me the MONEY!” – Jerry Maguire in Jerry Maguire (1996) Probably the hardest thing to wrap your head around in trying to understand cryptocurrency is the fact that it exists in the virtual world and there is no physical manifestation of it as there is with a U.S. dollar, for example. Once you get around that, one may think of cryptocurrency as intangible personal property, and generally the tax consequences follow. About the author: Mark A. Loyd, Esq., CPA, is a partner of Bingham Greenebaum Doll in Louisville and chairs its Tax and Employee Benefits Department. He chairs the Society’s Editorial Board and Tax Committee. He can be reached at MLoyd@bgdlegal.com; 502.587.3552.

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The Kentucky CPA Journal / Issue 1 2018

CPE

2018 spring conferences You may find out more and register now for any spring conference at kycpa.org. Spring Business Conference

Nonprofit Conference

Gratzer Education Center, Louisville X

Gratzer Education Center, Louisville X

Topics: • New tax law update • Kentucky legislative update • Banking security • Treasury management and new payment types

Topics: • Accounting and auditing FASB Update • Nonprofit taxation • Nonprofit governance and best practices • Internal controls—lessons learned from recent Kentucky cases

Early Bird Fee: Register by April 6 KyCPA member: $324 Nonmember: $424

Early Bird Fee: Register by April 12 KyCPA member: $199 Nonmember: $299

Regular Fee: After April 6 KyCPA member: $374 Nonmember: $474

Regular Fee: After April 12 KyCPA member: $249 Nonmember: $349

Employee Benefit Plans Conference

Governmental Accounting & Auditing Conference

April 20

April 25

8 CPE hours

8 CPE hours

Gratzer Education Center, Louisville X

April 26

May 7-8

8 CPE hours

16 CPE hours

Marriot Louisville East

Topics: • DOL issues update • Common audit findings • Correction methods for common plan failures Early Bird Fee: Register by April 11 KyCPA member: $324 Nonmember: $424 Regular Fee: After April 11 KyCPA member: $374 Nonmember: $474

Topics: • Applying lessons learned from GASB 68 to GASB 75 • GASB Update • Reporting model reexamination • Internal audit and risk management • Economic update • The impact of user security awareness Early Bird Fee: Register by April 23 KyCPA member: $424 Nonmember: $624 Regular Fee: After April 23 KyCPA member: $474 Nonmember: $674

X Live Webcast option

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The Kentucky CPA Journal / Issue 1 2018

Kentucky Accounting Educators Conference May 17-18

15 CPE hours

Gratzer Education Center, Louisville Topics: • Emerging standards update • Blockchain technology • Internal audit • Ethical decision making Fee: $199 Educators only. No discounts available.

CPE

Health Care Conference May 23

8 CPE hours

Gratzer Education Center, Louisville Topics: • The opioid epidemic • Medicare vs. Medicare Advantage • Long term care regulations • Kentucky Health Exchange • Effects of baby boomers on Medicare • ACA update • IT hot topics • CFO panel Early Bird Fee: Register by May 9 KyCPA member: $324 Nonmember: $424

Retirement Planning for the CPA Conference May 22

Regular Fee: After May 9 KyCPA member: $374 Nonmember: $474

8 CPE hours

Gratzer Education Center, Louisville X Topics: • New tax law—effects on retirement planning • Social security • Asset protection • Retirement investment options

Save the date

Early Bird Fee: Register by May 8 KyCPA member: $324 Nonmember: $424

Aug. 23 - Gratzer Education Center, Louisville

Regular Fee: After May 8 KyCPA member: $374 Nonmember: $474

kycpa.org

Manufacturing Conference

June 8 - Gratzer Education Center, Louisville

Forensic Accounting Conference Business Valuation Conference Aug. 24 - Gratzer Education Center, Louisville

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The Kentucky CPA Journal / Issue 1 2018

Technology

Is cyber insurance necessary?

By Randolph P. (Randy) Johnston

C

yberattacks are becoming more frequent, more invasive, and more lucrative to bad actors. It is not a matter of if your firm will have a breach of security, it is simply a matter of when this occurs. While experts try to argue the merits and risks of using cloud providers versus premise-based solutions from a security perspective, all types of technology are vulnerable from your mobile phone to your hosted or SaaS service. When an attack occurs, the costs of reporting required by compliance regulations, down time and loss of data will be among the losses. Since we can’t be sure that all the efforts of your technology teams on cybersecurity will keep the bad actors out, one way to mitigate that risk is to shift the risk of cybercrime to cyber insurance carriers. There are almost 100 providers of these policies today. Public practice firms as well as industry businesses have a variety of regulations that must be followed for computer systems and computer-based records. For example, breach reporting laws exist in

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47 states. These laws have driven recommendations to encrypt all data whether in motion over the internet or at rest on a local drive, server or storage device. However, both Tennessee and Louisiana currently require reporting a breach even if the data is encrypted. Other regulations that control Personally Identifiable Information (PII), Personal Health Information (PHI), or Payment Card Industry (PCI) that frequently exists in our client records or on our mobile devices. One defense that you can implement is multi-factor authentication (MFA). With the March 1, 2018 changes in PCI regulations requiring MFA, the fact that many banks and other financial institutions implement MFA for larger or business accounts, as well as the requirement early in 2017 by the IRS to use MFA with tax software applications, it has become clear that the minimal best practice for security is adding MFA for most businesses. If you don’t have MFA or encryption, your risks increase; just like in the 1990s not having a firewall or anti-virus software increased your risks.


The Kentucky CPA Journal / Issue 1 2018

Technology

Consider having security security awareness throughout for infection. Malware, that training at least once per year, the organization and have fewer is malicious software such as but perhaps as often as four security errors made. ransomware, can be planted that times per year. Instruction for demands payment, destroys Bad actors, whether they team members on what to do, live files and backups or simply are individual, organized crime or not, and how to recognize or state actors have discovered transfers valuable data from attacks will drive up awareness, that obtaining PII data can be your business to the bad actor. and in turn, drive down your profitable when it allows them The most effective attacks are the risk. This could include simple ones that occur that you never to access bank accounts, credit training like recognizing bad detect. If a breach occurs on your cards, retirement accounts, email, not clicking through stock holdings and other data, and you have a reporting links and making sure that monetary instruments. While the incident, industry standards anti-virus is running properly suggest that $250-500 per person perception of many businesses as well as how to report and is that the bad actors only target is needed. Consider if you do respond to a suspected issue. work for a business, and obtain larger players, anyone who is You can use services that test connected to the internet is a individual’s records as part of your organization with social potential target. This is made that work. One project could engineering as well as using tools result in hundreds or thousands even easier with automated that run network vulnerability cracking tools that can be of breach reports required. This scans or external penetration table from Ponemon illustrates obtained for less than $100. tests. Studies have shown that Automated tools identify specific the cost by industry: organizations that have security targets with vulnerabilities, transfers valuable data from your business to the bad actor. The most effective attacks are the ones as a priority from the top levels desirable characteristics for Continued on p. 20 that occur that you never detect. If monetary a breach occurs on your data, and you have a reporting incident, of management have more gain and easy targets

industry standards suggest that $250-500 per person is needed. Consider if you do work for a business, and obtain individual’s records as part of that work. One project could result in hundreds or Average cost required. per record by industry in 2016 (U.S.,theincost USD) thousands ofbreach breach reports This table from Ponemon illustrates by industry:

$-

$50

$100

$150

$200

$250

$300

Healthcare Financial Energy Services Consumer Technology Media Hospitality

$86

$264 $247 $246 $245 $226 $220 $218 $200 $198 $186 $177 $172 $148

$350

$301

$400

$450

$402

kycpa.org

Average Breach Cost Per Record by Industry in 2016 (US, in USD)

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The Kentucky CPA Journal / Issue 1 2018

Technology

Cyber insurance continued Just because your provider claims to have appropriate backups, security and other protections in place, what have you done to confirm this? Have you tested your restore capabilities, business continuity/ disaster recovery plan or reviewed your incident response plan (IRP) lately? What about your internal controls? Have you reviewed the strength of your various controls and procedures? To counter this risk, insurance companies have begun to offer insurance to specifically protect against the threat of digital attacks. Most of you purchase casualty and liability insurance to protect the business from unforeseeable risk. Cyber insurers either offer separate

Webcast - Internet Security Tools for Accountants

March 12 - 2 CPE hours Topics include:

• Leading cybersecurity facts and trends • Single most important security strategy • Encrypting smartphone communications • Developing cybersecurity plan for enterprise • Strategic security checklist • Starter cybersecurity Strategy for CPAs and more

Register now at http://bit.ly/ InternetSecurityTools

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policies or riders can be added to your existing policies to assist in reporting, forensics and litigation. The policies available and related premiums and coverage are still developing. As you review policies, listen to your underwriter but consider the cost of: 1) Downtime 2) Remediation 3) Forensics 4) Litigation 5) Reputation damage 6) Loss of data It would be our hope that your business is never attacked or worse yet breached. However, with the simplicity of today’s attack tools, the value of business data and vulnerabilities in our

various hardware and software systems, even if everything is perfectly implemented there are no guarantees that your protection mechanisms will keep the bad actors out. So how can you shift the risk of cybercrime? Cyber insurance! About the author: Randy Johnston is a nationally recognized educator, consultant and writer with over 30 years experience in strategic technology planning, systems and network integration, accounting software selection, business development and management, disaster recovery and contingency planning, and process engineering.

Webcast - HIPAA Data Security: Legal Requirements & Handling Breaches

Offered on Feb. 23, March 16 and April 11 2 CPE hours Topics include:

Understanding HIPAA specific data security requirements • Myth busting - not all medical data is HIPAA sensitive • What is Protected Health Information (PHI)? • What data is HIPAA sensitive and constitutes a breach if not protected? • What options do we have to protect HIPAA sensitive data? • How do different organizations protect data? • What is a Business Associate Agreement (BAA) and do I need one? You've had a breach. Now what? • Defining the extent of your breach and infraction level. • Identifying remediation requirements. • Deploying the remediation and calculating the costs.

Register now at http://bit.ly/HIPAAdataSecurity


The Kentucky CPA Journal / Issue 1 2018

Ethics

Do you really know who you are paying? This article first appeared in CGMA Magazine. For more articles, sign up for the weekly email update from CGMA Magazine at http://bit.ly/UZ07NC.

By Cecilia Locati, ACMA, CGMA

F

rom fake invoicing and pay-and-return schemes to personal purchases with corporate funds and payment fraud, fraud in the procurement-to-pay process is very common and extremely difficult to prevent and detect. According to the 2016 Report to the Nations on "Occupational Fraud and Abuse by the Association of Certified Fraud Examiners (ACFE)," fraudulent disbursements are the most common form of asset misappropriation. Of all the types of fraudulent disbursement, billing schemes are the most common with an average of 22.2 percent of the cases and a median loss of $100,000. The following real-life examples illustrate common scenarios of procurement fraud in small and medium size enterprises. The first case study is an example of an electronic disbursement fraud while the second and the third relate to billing schemes.

Case study 1: MediaCo

Jenny was managing the finance and administrative activities of MediaCo, a small media production company specializing in documentaries for TV, co-founded by Kevin and Ivan. Over time, Jenny found an easy way to boost her wages. When approving payments, Kevin always cross-checked the invoices and payment details thoroughly. Ivan approved the payments without double-checking them against the invoices. From time to time, Jenny would enter her sister’s bank details into the online banking system instead of a supplier’s account details. She would then submit the payment for approval to Ivan. Ivan would approve without noticing that the bank details on the payment were different from those specified on the supplier’s invoice. After a couple of weeks, when she knew that Ivan was out of the office, she would include the same vendor invoice in a payment (with the correct vendor bank details) and ask Kevin to approve it.

Jenny was the only one who managed the accounts at MediaCo, and she could easily allocate the cost of the fraudulent payment to a number of P&L accounts to cover up the shortage. One day, she was forced to stay at home for a couple of weeks through illness, and the cofounders’ personal assistant covered for her. Following a call from an angry vendor who complained about not receiving payment on his last invoice, the personal assistant looked into the finance files to check whether the invoice had been paid. Thus it was discovered that by paying invoices to her sister’s bank account, Jenny had managed to embezzle approximately $75,000 over a three-year period.

Case study 2: KitchenCo

Matt was the marketing manager for KitchenCo, a bespoke kitchen manufacturer. He convinced the company’s owner of the need to invest approximately $125,000 to improve KitchenCo’s online presence. The owner did not have any background in online marketing and social media presence, but he knew that some of his competitors were investing in such activities and he wanted to keep up with them. Matt created a shell search engine marketing company called SEMCo with a fancy website and his wife as the company director. He painted SEMCo as one of the top companies on the market and got the owner to approve an inflated quote for SEMCo’s services. Then, Matt engaged a couple of inexpensive contractors to whom SEMCo subcontracted the work for a much lower price than what KitchenCo paid SEMCo. After a few months, during a networking dinner, the owner met a search engine optimization (SEO) consultant, and when their conversation turned to KitchenCo’s SEO initiatives, the consultant was amazed by the price KitchenCo had paid and stated that he had never heard of SEMCo. Because of this conversation, the owner asked KitchenCo’s finance director to carry out some checks on SEMCo and found out that it was owned

Continued on p. 22

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Ethics

Case study continued by Matt’s wife, and the price KitchenCo had paid was well above the market average.

Case study 3: GlassesCo For 15 years, David was the finance director of GlassesCo, a retailer that sold spectacles and lenses. GlassesCo used a small legal firm, LegalCo, and over the year David got to know John, the owner, quite well. At a certain point, the two men came to the following agreement: John would inflate the number of hours of consulting provided to GlassesCo. David would approve the inflated invoices, and they would split the fraudulent proceeds. This arrangement was quite easy to pull off because David was the only approver of the invoices. One day, the CEO of GlassesCo received an anonymous email reporting that David was approving inflated consulting invoices. The CEO engaged a fraud investigator to verify whether the claims were true. By reviewing David’s email archive, it became obvious that he was colluding with John in a pay-and-return fraud scheme worth $37,500 over the past two years. Due to the email archive retention period, it was not possible to ascertain whether the loss was even greater; however, given the length of David’s service and for how long LegalCo had been providing services to GlassesCo, it is quite likely that the loss amounted to much more than that.

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7 ways SMEs can protect themselves against procurement fraud

Segregation of duties: In all three examples, the lack of segregation of duties made the frauds possible or helped to conceal them. In MediaCo’s case, the lack of segregation of duties in the accounting function allowed Jenny to hide the fraudulent payments in the general ledger without anybody noticing. To achieve segregation of duties, responsibility for processing payments should be allocated to a different individual from the one in charge of posting transactions in the general ledger. Another way to segregate duties is to ensure that finance systems require two users to process journal entries: one to post journals and one to release them. In the second case study, segregation of duties could have been achieved by giving the finance department responsibility for carrying out due diligence on the new vendors. This would have uncovered the shell company fraud scheme before the vendor had been engaged. In the third case, David’s fraud would have been discovered much earlier if the CEO had to approve LegalCo’s invoices in addition to David’s approval. To ensure that invoices are independently approved, they should be reviewed by a second individual, other

than the person who holds the relationship with the vendor. Robust reviews: In the first case, the fraud was made possible by the poor controls carried out by one of the two managing directors, who did not check the details of the payments against the supporting documents. In the case of KitchenCo, the owner did not perform a thorough review of the vendor selection process carried out by the marketing manager, which resulted in the engagement of a shell company as a vendor. When approving, the reviewer should be aware of the specific reasons why the approval is needed and the risks it is designed to mitigate. Raising awareness around this topic would help improve the quality of the review performed. Vendor selection and approval: Having a strong vendor selection and duediligence process in place is crucial to avoiding procurement fraud, as the case of KitchenCo shows. A strong vendor selection process should include a bidding procedure and a due-diligence process to ensure that the new vendor is a genuine company and that there is no potential conflict of interest. Once those checks have been performed, the new vendor should be approved by another party who should conduct independent checks to ensure that the selection process has been carried out fairly and without bias.


The Kentucky CPA Journal / Issue 1 2018

Automated controls: Manual processes are more prone to errors and fraud than automated processes. In the case of MediaCo, the fraud would have been much more difficult to perpetrate if, instead of using manual payments, the company was using an automated system. In this case, the vendor details would have been populated automatically based on the data available in the vendor master data. Therefore, provided that appropriate controls around the vendor master data had been in place, it would not have been possible to perpetrate this type of fraud. Ongoing vendor monitoring and benchmarking: It is best practice to monitor an existing vendor’s performance over time to ensure that the level of service meets expectations and the price is appropriate. The monitoring activity should be carried out by a department or

person different from the one managing the relationship with the client on a day-to-day basis. This would have helped prevent GlassesCo from falling victim to the overbilling scheme. Tight analytical and budget review: All of these cases lacked a robust review of the actual and budgeted figures. While more challenging for small, rapidly growing companies, the review process should include not only a tight review of the actualversus-budget figures, but also analysis of the financial ratios and comparative analysis to identify costs that need further investigation. The tighter the controls, the greater the chance of spotting frauds. Hotline: Tip-offs are the most common way of uncovering frauds. Having a formal, structured process to report and follow up suspected instances of fraud and control override

Ethics

helps SMEs encourage people to report such cases. Nowadays, a number of companies, for a flat annual or monthly fee, provide a 24/7 hotline service in different languages. In each case study, the fraudsters saw an opportunity to take advantage of the perceived lack of control and thought they could get away with their scheme. To prevent and detect fraud effectively, senior management must have good oversight over controls. About the author: Cecilia Locati (cecilialocati@ fraudfence.co.uk) is director of Fraud Fence, a consultancy that advises companies on internal fraud prevention. Š 2017 Association of International Certified Professional Accountants. All rights reserved.

Upcoming fraud webcasts Payments Fraud: Detect and Prevent Check, ACH and P-Card Schemes Offered on Feb. 19, March 20 and April 30

Fraud and Cash Receipts: Common Frauds and Internal Controls Offered on Feb. 21, March 14 and April 4

2 CPE hours

4 CPE hours

Register at http://bit.ly/ PaymentsFraud

Register at http://bit.ly/ FraudCashReceipts

Purchasing, Inventory and Cash Disbursements: Common Frauds and Internal Controls Offered on Feb. 22, March 14 and April 4 4 CPE hours Register now at http://bit.ly/ FraudInternalControls

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Educational Foundation

Create a Legacy Legacy Named Scholarships AssuredPartners NL Baldwin CPAs PLLC BKD True Expertise Accounting Blue & Co., LLC Brandon Lloyd Warden Memorial Brown-Forman Diversity Crowe Horwath LLP Dave Calzi Dean Dorton PLLC Deloitte & Touche LLP DMLO CPAs Ernst & Young LLP Freibert CPA Group PLLC Gordon Ford Memorial Henderman, Jessee & Co. PLLC Kelley Galloway Smith Goolsby PSC KPMG LLP KyCPA Presidents Louis T. Roth Memorial MCM CPAs and Advisors National Insurance Agency Papa John’s International Patterson & Company PLLC Penny Gold Honorary PricewaterhouseCoopers LLP Sadie Mae Strothman & Company Accounting William J. Caldwell (Henderman Family Foundation)

Legacy LEADERS CIRCLE • Baldwin CPAs PLLC • BKD LLP • Crowe Horwath LLP • Deloitte & Touche LLP • Ernst & Young LLP • KPMG LLP • Louis T. Roth & Co., PLLC • MCM CPAs and Advisors • Patterson & Company PLLC

Heritage CIRCLE

• Blue & Co., LLC • Bramco, Inc. • Brown-Forman Corporation • Buetow LeMastus & Dick PLLC • DMLO CPAs • Kelley Galloway Smith Goolsby PSC • Strothman & Company

Destiny CIRCLE

• Dave Calzi, CPA • Cloyd & Associates PSC • Dean Dorton PLLC • Fister, Williams & Oberlander PLLC • Freibert CPA Group PLLC • Henderman Family Foundation • Henderman Jessee & Co. PLLC • Jones Nale & Mattingly PLC • Stephen Lukinovich, CPA • Allen Norvell, CPA • Republic Bank & Trust Company • RFH PLLC • Rudler PSC • SKW CPAs & Advisors PLLC • Stock Yards Bank & Trust Co. • Rick Ueltschy, CPA

Pave the Way Campaign Contributor Create a Legacy Campaign Contributor Pave the Way and Create a Legacy Campaign Contributor

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The Kentucky CPA Journal / Issue 1 2018

Educational Foundation

New contributions (does not include pledge payments) Nov. 2017 - Jan. 2018 Legacy Circle Deloitte & Touche LLP*

Destiny Circle

Stephen M. Lukinovich, CPA*

Honors CIRCLE Jennifer R. Hughes, CPA* William J. Jessee, CPA* Kelly J. King, CPA* G. Alan Long, CPA Elizabeth Rankin, CPA* Lori D. Warden, CPA

Gratzer CIRCLE

AICPA* Jaclyn Badeau, CPA Paula C. Hanson, CPA* Jerry W. Hensley, CPA* Rebecca Phillips, CPA* Reed & Co. of Mayfield PSC*

Scholars CIRCLE Nancy B. Davis, CPA* Michael R. Wurth, CPA

Caring CIRCLE

Jake Brock, CPA* Shirley M. Buckner, CPA Helen K. Cohen, CPA* Timothy S. Eldridge, CPA* Ronald Gitz, CPA* John H. Hawkins, Jr., CPA* Joseph C. King, CPA Clifton L. Looney, Jr., CPA* Mary E. Medley, CPA* David R. Price, CPA* Melissa C. Mattox, CPA Kristin McDonner, CPA Wendell D. Miller, CPA Michael S. Mills, CPA Robert E. Mitchell, CPA Gary R. Roth, CPA

Additional Contributors

Rosa M. Fraley Jane C. Gilbert, CPA Woody Long, NIA* Theresa R. Malcolm, CPA William A. Stark, CPA Esther Thompson-Long, CPA* Thank you for supporting the KyCPA Educational Foundation. If you would like see a complete list or to give to the Foundation, go to kycpa.org. If you see an error or need more information, please contact Julie Salvaggio at jsalvaggio@kycpa.org.

*Contributed to the Penny Gold Honorary Scholarship

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Accounting careers

Meet the Ambassadors B

randon Varble of Western Kentucky University, Matthew Schwartz of Berea College and Angela Kurz of Brescia University share their thoughts on being KyCPA Student Ambassadors.

You hosted multiple events while serving as a Student Ambassador. Which was your favorite to host? BV: I really enjoyed hosting the social event we put together this past fall. We held a social event for all of WKU’s accounting majors to join in a casual setting to have conversation amongst each other about our classes and about the different paths we hope to take after we graduate. It was nice to have the opportunity to speak to others about these things; usually when we are with each other we are either in class or in a professional environment, it was nice to have casual conversations and to get to know each other better. I also enjoyed hosting the resume workshop that we put on with Traci Tyler from Alexander, Thompson, Arnold CPA. It was very helpful for us to learn what CPA firms are looking for on our resumes and it was a great experience. MS: Kevin Joynt and Samantha Soutar visited Berea College to speak with the students about their future careers as CPAs. Being able to listen to Kevin’s professional experience made us more aware of the variety of careers and opportunities there are for CPAs. In addition, Samantha provided valuable insight into the benefits of being a member of KyCPA, such as, networking events and serving on task forces.

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AK: My favorite event to host was the resume workshop because I felt that the students were the most engaged at that event. The speaker scheduled by KyCPA was amazing and provided valuable information to the students. It was also a great networking opportunity for not only the other students, but for me as well.

What was the best part of serving as a Student Ambassador? BV: I thought the best part of being a Student Ambassador was having the opportunity to build relationships with others and the opportunity to meet people who I wouldn’t have met otherwise. Becoming a Student Ambassador allowed me to give advice and guidance to other students that helped them decide on a path that they would like to take when starting their careers. I was also able to meet other members of the KyCPA, which helped me build a network of professionals who I otherwise wouldn’t have known. Meeting these professionals helped me obtain an offer to work with a CPA firm in Cincinnati and I’m very grateful for that. MS: Being a Student Ambassador, I was able to build relationships with professionals and other students that I otherwise would not have met if I wasn’t actively engaging with KyCPA. AK: The best part of serving as a Student Ambassador for me was the opportunities afforded by being an ambassador. Not only were there amazing networking, leadership and scholarship opportunities, but also allowed me to improve my organization and public speaking skills by hosting events.


The Kentucky CPA Journal / Issue 1 2018

What was your main takeaway from being part of the Student Ambassador Program? BV: I learned a lot about the process of becoming a CPA, and I learned a lot about how much becoming a CPA can contribute to future success in my career. Being a Student Ambassador also taught me that there is a great community of CPAs in Kentucky through the KyCPA, and I’m sure there is a community like this in most states. I definitely want to be a part of these communities in any state that I may work in as a CPA. MS: There are many more opportunities for a CPA than I could have imagined and KyCPA attracts high quality individuals who are more than willing to help students with their professional goals. AK: My main takeaway from the Student Ambassador Program is that the accounting profession has a family feel to it. Everyone I’ve encountered from KyCPA has a strong desire to not only improve the accounting profession but also to encourage and foster future CPAs.

What goals did you have going into the Student Ambassador Program?

BV: I wanted to further develop professional skills; I wanted to better my communication skills

kycpa.org

and my relational skills while learning new skills like how to work with others to plan events. I really wanted to take on a role that is different from any role I’ve had before and I wanted to learn new lessons from it. My role as a Student Ambassador really helped me develop and maintain these skills. It’s been a great experience. MS: I wanted to bring together more students at Berea who were interested in the CPA profession, so we could learn and work towards our goals with the support of each other. AK: My main goal was to promote the KyCPA student membership on campus.

What are you most proud of after your time in the program? BV: I am most proud of the events that I helped put together. Before becoming a Student Ambassador, I had never worked with others to plan an event. I learned that a lot more goes into it than I had originally thought. You must work with many different people and with different entities to bring everything together perfectly. MS: The number of new Berea KyCPA student members was amazing. In addition, there were five members who decided to start a Berea Accounting Club and KyCPA was fortunate enough to co-host two events to kick-off the new accounting club.

Accounting careers

AK: I am most proud of the huge improvements I have made in both my public speaking abilities and my self-confidence. Hosting events and being a part of a committee allowed me to hone my public speaking skills which added to my self-confidence immensely.

How do you hope to apply the skills you have learned while in the Student Ambassador Program to your future goals? BV: I will continue to use the speaking, communication and relational skills that I have developed and maintained from my time as a Student Ambassador. I know these skills will be very important to have and very useful in the accounting profession. I’m sure in the future I will continue to help coordinate events as well. My experience planning events will come in handy then. MS: I have enhanced my networking skills and I was fortunate enough to learn how to recruit people to KyCPA. These skills are essential for a CPA; you must build strong relationships with your clients and you must have the ability to recruit new clients. So, I will definitely be utilizing and strengthening these skills throughout my career.

Continued on p. 28

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The Kentucky CPA Journal / Issue 1 2018

Accounting careers

Ambassador continued AK: As a student who also works full-time, I have already been able to apply the skills I’ve learned as an Ambassador to my current position as well as in other areas of my life. The confidence I’ve gained as an Ambassador will be a valuable asset for which I will be eternally thankful.

What advice do you have for other accounting students who would like to become involved?

BV: I would encourage them to involve themselves with the

program. It is very rewarding and teaches you great lessons that help develop professional skills. It also provides a lot of information on the process of becoming a CPA and the importance of becoming a CPA. It also provides great networking opportunities and can help you find your own path to success. MS: I’d definitely recommend that they take advantage of the resources that KyCPA makes available to the students. There are interview days, scholarships, networking events and task forces that will enhance your professional and personal life.

Becoming involved will provide you with an organization and people that will only help you grow professionally and you may be provided the opportunity to help others with their careers or solve problems within the accounting industry. AK: I would advise an accounting student to become involved by not only becoming a member of KyCPA, but by applying to become a Student Ambassador. The time commitment is minimal when compared to the benefits afforded by KyCPA.

Become a KyCPA Student Ambassador.

Contact Samantha Soutar for more information at ssoutar@kycpa.org

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Ambassadors will receive benefits including: • mentor opportunity • letter of recommendation • invitation to a KyCPA member-only event • credit for community service hours • invitation to and recognition at KyCPA’s Awards Banquet


Take your skills to the

NEXT LEVEL

at the KyCPA College Leadership Institute. A free two-day program for accounting students.

June 1-2, 2018

KyCPA Headquarters, Louisville

Only a select group of outstanding college accounting students will be invited to participate.

COLLEGE LEADERSHIP INSTITUTE Whether you are a born leader or someone who wants to become a leader by improving your skills, this program is for you! The College Leadership Institute is for Kentucky and southern Indiana accounting students seeking to expand their leadership skills and professional competencies. The program will conclude with a Meet the Firms reception where participants have an opportunity to meet and mingle with recruiters in a fun, casual environment. Complimentary overnight hotel accommodations will be provided for out of town attendees accepted into the program.

REQUIREMENTS Students must complete online application, obtain an educator’s recommendation and meet the following requirements: • • •

• •

Full-time student at an accredited college or university in Kentucky or southern Indiana majoring in accounting Demonstrated leadership potential. Must be at least a sophomore, completed two accounting courses and be enrolled in the 2018 academic year for at least one semester 2.75 GPA Recommendation should be from an educator who is currently teaching, or has taught student applicant

The event rejuvenated my determination to reach my goals and the event provided guidance on how to best reach my goal of obtaining the CPA credential. I thoroughly enjoyed the experience. I felt that I was engaged in the presentations, as well.”

As someone from a smaller school, the Institute helped me network with my peers as well as accounting professionals and exposed me to ideas and experiences I wouldn’t otherwise have access to.”

-2017 CLI STuDEnts

APPLICATIONS DUE APRIL 30 Student Application Forms and Educator Recommendations may be completed online at kycpa.org. More info: kycpa.org or contact Samantha Soutar at ssoutar@kycpa.org


The Kentucky CPA Journal / Issue 1 2018

Feature

Engagement letters: Your first line of defense against malpractice claims

By Alvin Fennell

A

certified public accountant has been preparing income tax returns for a trucking firm for 10 years. Out of the blue, the CPA is named in a lawsuit. It appears that an employee at the trucking firm with a gambling problem was stealing money from their accounts for years. More than $250,000 is now gone. Looking to recoup their finances, the client alleges the CPA should have detected the discrepancy on their books. When the CPA notifies his professional liability insurance carrier of the claim, the first question the defense attorney asks is: “Did you have an engagement letter?”* An engagement letter helps protect the CPA from allegations, including negligence, by providing a record of the contract between your firm and the client. The client, by signing, dating and returning a copy of this letter, demonstrates their acceptance of the contract. In the illustration above, if the CPA has an engagement letter that outlines his responsibility for tax preparation services only – not fraud detection –it serves as a powerful defense tool. If he does not

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have a signed engagement letter, there’s no telling what may happen in the courtroom. "In 2014, 50 percent of all professional liability claims in the AICPA Professional Liability Insurance Program alleging failure to detect theft or fraud arose from tax and consulting engagements,” said Jeffrey Day, vice president and accountants global practice leader at CNA, the underwriter of the AICPA Program. “A well-drafted engagement letter can help prevent these types of claims, as CPAs were not hired to perform those services in these engagements.”

What are the key ingredients of an engagement letter?

“A good engagement letter clearly details what services the CPA will be performing for the client—and what they won’t be performing,” said Jason Wolff, a professional liability specialist at Schwartz Insurance Group, the Kentucky territorial administrator of the AICPA Professional Liability Insurance Program. “When executed properly, the engagement letter may go a long way toward limiting the liability of the CPA firm.”


The Kentucky CPA Journal / Issue 1 2018

While there is no standard engagement letter, they can vary according to the type of services offered and the type of client. Here are the basic components: • Scope of services – a description of the nature of the services to be performed and the deliverables. • Responsibilities of the firm – the specific professional standards and responsibilities of the CPA. • Responsibilities of the client – Since conducting certain work requires the client’s assistance, such as providing records to comply with regulatory deadlines, the letter should identify time frames in which such documents will be provided. • Limitations of the service – To help avoid client misunderstandings, this section explains any limitation of the services including that they are not designed to detect fraud or illegal activities. • Fees and payment terms – This section addresses payment terms, late charges, additional fees and stop-work provisions for nonpayment. • Dispute resolution – By establishing how disputes will be resolved, such as using arbitration or mediation, this section can

help keep a potential dispute from escalating into an insurance claim. • Termination provision – A good engagement letter will also define the steps necessary to terminate the engagement. To craft your engagement letter begin by contacting the AICPA or your professional liability insurance carrier. They may provide templates you can use as the foundation for your letter. “The AICPA Professional Liability Insurance Program provides templates because they are a CPA’s first line of defense against claims,” said Debbie Tomlinson, a professional liability specialist at Aon Insurance Services. According to Tomlinson, the engagement letter templates on the AICPA Professional Liability Insurance Program Policyholder Resource Center are the most downloaded documents on the website. “Amend the templates as necessary for each client,” said Tomlinson. “Sometimes, there may be some nuance to that engagement that doesn’t fit the standard template. If a client has difficulty, we encourage them to call CNA’s risk control hotline and a knowledgeable team member will offer assistance.”

Feature

How often should I review the engagement letter with my client? At minimum, the engagement letter should be reviewed annually and even sooner, if the scope of services changes significantly during the course of the engagement. As new services are added, updating the engagement letter should be a routine part of the discussion. For example, if you began performing audits for a subsidiary of the company and now you’re auditing the parent company—be sure to amend the engagement letter to include these services. “As the scope of the engagement changes, be sure to have the client sign an updated engagement letter,” said Tomlinson. Otherwise you can fall prey to something known as engagement creep. “For example, if you’re now providing investment advice in addition to your other services, be sure to add it during your annual client discussion.”

When should I be using an engagement letter?

Ideally, you should be using engagement letters in 100 percent of your engagements. While use over time has increased, not all CPAs have made engagement letters a routine part of their practice.

Continued on p. 32

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Feature

Engagement continued “CNA has been tracking engagement letter use in malpractice claims reported to the AICPA Program since 1995,” said Day. “During that time, engagement letter use in claims arising from tax practice improved from 20 percent to more than 65 percent. In our experience, there is no question that engagement letters have proven to be a key factor in defending claims when the scope of services is in dispute.” The engagement letter should be an important part of a firm’s internal controls. Ensuring this document is signed by the client before services begin should be a part of the firm’s quality control process. Once you have the engagement letter on record, as you’re communicating with your client it should become an integral part of your documentation procedures. If you step outside the scope of services defined in the engagement letter or are asked to perform additional services, adjust the engagement letter accordingly.

How do I approach my client about using an engagement letter?

Recognizing that the accounting profession is very relationship driven, it’s understandable that CPAs are sensitive to anything that might disrupt that relationship. The CPA is often viewed as an advisor or a friend. The CPA may

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have had a client for 10 years and never used an engagement letter, and may feel tentative about inserting one into the relationship. What CPAs may not understand is that the engagement letter is going to help the relationship grow. It’s going to help define your role, so there’s little question if a problem should arise. “Most people have contracts in place with service providers,” said Wolff. “Whether it’s an electrician or a plumber, usually there’s a contract. A CPA firm is no different. Most clients will see it as a standard document and just sign it.” If you’re still nervous about broaching the subject, Wolff recommends, “Talk to the client and let them know your professional liability program is strongly advising you to start using engagement letters. You are simply complying with your carrier’s recommendation.”

Are there any additional reasons to use engagement letters?

Because engagement letters help defend against malpractice claims, many carriers in the insurance industry may offer incentives that reward CPAs for the use of engagement letters: • Premium credit – Many insurance companies will provide a discount on your professional liability insurance premium. The

percentage of the discount depends on the percentage of your practice that is using engagement letters. The higher the use, the higher the credit typically. Conversely, underwriters may surcharge your premium if you’re not using them at all. • Mediation deductible credit – In the event of a claim, if there is a signed engagement letter in place that stipulates the dispute must go through mediation first, in many cases the insurance company will offer a sizeable credit on the claim deductible. This credit may be as high as $5,000, which can go a long way toward cutting the firm’s expenses during a claim. • Deductible credit – Several insurance carriers offer a deductible credit on claims reported from non-attest services, in which the CPA had a signed engagement letter in place. This credit may be as high as 50 percent, and can also help reduce a firm’s expenses through the claim process.

What does using engagement letters say about my firm?

As a CPA, you’re held to a high standard. Using engagement letters demonstrates your professionalism. It says you’re not going to leave your firm exposed to potential litigation. It illustrates you’re using the tools at your disposal to protect


The Kentucky CPA Journal / Issue 1 2018

your staff, your finances and your reputation. Moreover, the establishment of a written understanding with a client regarding the services to be performed is required by AICPA Professional Standards for most services. What better way to establish this understanding than through an engagement letter. In the opening of this article, we began with a story of a possible claim scenario. Imagine this scenario. You receive an angry phone call. Your client claims they hired you to prepare a compilation and in the course of your work you missed the

fact that their controller stole more than $500,000 from their accounts. They threaten to sue for damages. You respond by saying, “Let’s review the engagement letter.” You and the client look at it together. Clearly defined in the limitation of services section is a statement that you are not responsible for detecting fraud or illegal activities. The client noticeably calms down. “If that conversation takes place,” said Wolff, “it may help avoid the client filing a lawsuit. They may realize it’s not worth it. They signed a document that

Feature

says you’re not responsible. In many cases the engagement letter is going to help you and us.” While we know engagement letters provide a strong line of defense if a professional liability claim is filed, what we don’t know is just how many conversations like the one above, result in stopping a potential lawsuit. When you consider the advantages of using engagement letters, it’s a bit mystifying that CPAs are not using them in 100 percent of their engagements. *The claim example is for illustrative purposes only.

About the author: Alvin Fennell is a vice president at Aon Insurance Services, a division of Affinity Insurance Services, the consumer, association and program business of Aon plc (NYSE: AON), the world’s leading insurance brokerage. Aon Insurance Services has been the administrator of the AICPA Professional Liability Insurance Program since 1967. The AICPA Program provides coverage to more than 25,000 CPA firms nationwide. To learn more, visit cpai.com or contact Alvin at 215.773.4713 or alvin.fennell@aon.com. Contributor: Jason Wolff is a partner and strategic advisor at Schwartz Insurance Group in Louisville, Kentucky. Schwartz has been the exclusive Territorial Administrator to the AICPA Professional Liability Insurance Program for over 20 years and recently celebrated their 60-year anniversary serving businesses, families and professionals insurance needs. Jason can be reached at (502) 451-1121 x130 or Jason@SchwartzInsGrp.com. This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. You should discuss your individual circumstances thoroughly with your legal and other advisors before taking any action with regard to the subject matter of this article. Only the relevant insurance policy provides actual terms, coverages, amounts, conditions and exclusions for an insured.

kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Society

KyCPA honors 100% Champions T



















 









he following firms and businesses ensure all eligible CPA employees are members of KyCPA. This demonstrates their commitment to the profession, to the Society’s high ethical standards and a commitment to life-long learning. We appreciate their support of KyCPA and its mission. The information below is verified annually at the time of membership renewals. Inclusion on this list is an opt-in basis. If your organization would like to join the list of 100% Champions, or you have questions about the program, please contact Heather Hibbs at hhibbs@kycpa.org or 502.736.1368. 



























We make every effort to ensure the accuracy of this list. If you have voluntarily notified us of your 100% Champion status and we have left your name off this list, please let us know immediately, by contacting Heather Hibbs at hhibbs@kycpa.org.

100% Champions as of Jan. 17 • • • • • • • • • • • • • • • • • • •

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Addington & Mills, PSC, Lexington Alexander & Company, PSC, Owensboro Alexander Toney & Knight, PLLC, Madisonville Alford Nance Jones & Oakley, LLP, Madisonville The Allen Company, Inc., Lexington Allen CPAs & Advisors, PLLC, Lexington Allston Advisory Group, LLC, Louisville Anderson Jones CPAs, PSC, Maysville Andrews Tackett & Associates, PSC, Flatwoods ANEW 401K TPA, LLC, Louisville Anneken Huey & Moser, PLLC, Ft Thomas Anneken Huey & Moser, PLLC, Ft Wright Baldwin CPAs, PLLC, Lexington Baldwin CPAs, PLLC, Maysville Baldwin CPAs, PLLC, Flemingsburg Baldwin CPAs, PLLC, Louisville Baldwin CPAs, PLLC, Richmond Bennett & Company, CPAs, Louisville Berry Kington & Utley, PSC, Madisonville

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

BKD, LLP, Louisville BKD, LLP, Bowling Green Blue & Co., LLC, Lexington Blue & Co., LLC - Commercial, Louisville Bowden & Wood, PLLC, Louisville Bramel & Ackley, PSC, Ft Wright Buckles Travis & Hart, PLLC, Leitchfield Buetow LeMastus & Dick, PLLC, Louisville Buschermohle & Company, PSC, Louisville Calhoun & Company, PLLC, Hopkinsville Campbell Myers & Rutledge, Glasgow Carr Riggs & Ingram, LLC, Bowling Green Carr Riggs & Ingram, LLC, Russellville CHAN Healthcare, Louisville CHAN Healthcare, Lexington Charles T. Mitchell Company, PLLC, Frankfort Charles T. Mitchell Company, PLLC, Versailles Christian Sturgeon & Associates, PSC, London Compton Kottke & Associates, PSC, Louisville Craft Noble & Company, PLLC, Richmond Crowe Horwath, LLP, Louisville Crowe Horwath, LLP, Lexington Dean Dorton, PLLC, Lexington Dean Dorton, PLLC, Louisville Delta Natural Gas Co., Inc., Winchester DMLO CPAs, Louisville Drane & Company, PLLC, Hardinsburg Duncan Smith & Stilz, PSC, Lexington Ebelhar Whitehead, PLLC, Owensboro Elmcroft Senior Living, Louisville Embry & Watts, PLLC, Morgantown Embry & Watts, PLLC, Beaver Dam Evans Harville Atwell & Co., CPAs, PLLC, Somerset Faulkner King & Wenz, PSC, Mt Sterling Fister Williams & Oberlander, PLLC, Lexington Flynn Accounting, LLC, Jeffersonville, Ind. Fowler Durham CPAs and Advisors, PLLC, Munfordville Franklin Financial Group, Madisonville Freibert CPA Group, PLLC, Louisville Garstka Gander & Crabb, PSC, Lexington Shirley E. Gifford, CPA, Ferguson Grover Greweling & Company, PSC, Louisville Hamilton Thomas & Co., PLLC, Louisville Harding Shymanski & Company, PSC, Louisville Harris & Associates, PSC, Somerset Harrod & Associates, PSC, Frankfort Hibbs and Associates, PLLC, Bardstown Hoover and Morris, PLLC, Livermore Jaynes and Jaynes, PSC, Richmond John T. Lane and Associates, LLC, Mt Sterling


The Kentucky CPA Journal / Issue 1 2018

• • • • • • • • • • • • • • • • • • • • • • • • • •

Jones Nale & Mattingly, PLC, Louisville Kauffmann & Associates, CPAs, Louisville Kelley Galloway Smith Goolsby, PSC, Pikeville Kelley Galloway Smith Goolsby, PSC, Ashland Kelley Galloway Smith Goolsby, PSC, Cold Spring Kemper CPA Group, LLP, Henderson King + Company, CPAs, Louisville Kinkead & Stilz, PLLC, Lexington Kirby & Moore, LLP, Bowling Green Louis T. Roth & Co., PLLC, Louisville Lutz & Associates, Inc., Madisonville Marr Miller & Myers, PSC, Corbin Mather & Company, CPAs, LLC, Louisville McKinney & Associates, LLC, Scottsville MCM CPAs and Advisors, LLP, Jeffersonville, Ind. MCM CPAs and Advisors, LLP, Louisville MCM CPAs and Advisors, LLP, Cincinnati, Ohio MCM CPAs and Advisors, LLP, Lexington Miller Mayer Sullivan & Stevens, LLP, Lexington Monroe Shine & Company, Inc., Louisville Morgan & Associates, LLC, West Liberty Munninghoff Lange & Co., CPAs, Covington Neikirk Mahoney & Company, PLLC, Louisville Owensboro Municipal Utilities, Owensboro Padgett & Mastronardo, PLLC, Walton Tony Page CPA, PLLC, Murray

• • • • • • • • • • • • • • • • • • • • • • • • • • •

Society

Patterson & Company, PLLC, Louisville Peck & Milford, LLP, Paducah Radwan Brown & Co., PSC, Lexington Reed & Co. of Mayfield, PSC, Mayfield Retirement Management Services, LLC, Louisville RFH PLLC, Lexington Vickie C. Richardson CPA, PSC, Mt Sterling Robinson Hughes & Christopher, PSC, Danville Rueff and Associates, PLC, Louisville SKW CPAs & Advisors, PLLC, Lexington Smith & Company CPAs, PLLC, Bardstown Southern Star Central Gas Pipeline, Owensboro Stephens & Lawson, PSC, Louisville Stiles Carter & Associates, PSC, Bardstown Stiles Carter & Associates, PSC, Elizabethtown Strothman & Company, Louisville Stuedle Spears & Company, PSC, Louisville Sullivan & Curry, LLP, Greenville Sullivan Morris Sullivan & Hart, PSC, Lexington Summit Strategic Advisors, LLC, Louisville Tallent & Associates, CPA, Louisville Van Gorder Walker & Company, Inc., Erlanger Verbeck & Kaleher CPAs, Inc., Taylorsville Welenken CPAs, Louisville Williams Williams & Lentz, LLP, Paducah Wise Buckner Sprowles & Associates, Campbellsville Young & Wadlington, PLLC, Lexington

Mark your calendars for these upcoming events Spring Awards Banquet

Day at the Races

April 27 Omni Hotel, Louisville

May 11 Churchill Downs, Louisville

Join us as we celebrate Kentucky’s newest CPAs at our Spring Awards Banquet at the brand new Omni Hotel in Louisville. In addition to recognizing new CPAs, we will award scholarships from the KyCPA Educational Foundation, honor those candidates with exemplary CPA Exam performance, and celebrate those who have completed all four sections of the CPA Exam in Kentucky.

Please join us for an afternoon of fun and delicious food as you take in the sights and sounds of horse racing. This is a great chance to network with other KyCPA members and to catch up with friends. Bring your family, friends and business acquaintances for a fun getaway from the office. Whatever your reason, the Day at the Races is an ideal way to spend the afternoon.

Watch your email for invitations, check out the list of upcoming events at kycpa.org or contact Heather Hibbs at hhibbs@kycpa.org for more information. kycpa.org

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The Kentucky CPA Journal / Issue 1 2018

Members

Welcome new members Student

Lejla Ademovic, Western Kentucky University Maegan Bailer, University of Louisville Troy J. Bernier, Western Kentucky University Cassidy Hope Blackford, Western Kentucky University Chasity A. Brown, Sullivan University Hannah Burkhart, Morehead State University James B. Camp, Western Kentucky University Zhide Cao, Asbury University Bradley Cornett, Morehead State University Brandon Lee Cox, Western Kentucky University Just Dhemby-Mboumba, Sullivan University Christopher Cox, Lindsey Wilson College Tammy Duncan, Brescia University Holly Nicole Estes, Western Kentucky University Nathan Thomas Gauger, University of Louisville Daniel Robert Head, University of Louisville Alexis Heaverlo, Sullivan University Ashley B. Henry, Brescia University Logan Kyle Henson, Western Kentucky University Rachel Lynn Hepner, Western Kentucky University Allison Ann Holeman, Brescia University Axel Lee Hollander, Western Kentucky University Huda H. Jabbar, University of Louisville Logan Jenkins, Brescia University Kaylee West Johnson, Western Kentucky University Trevor J. Kahmann, Northern Kentucky University Emma Nicole Khaley, University of Louisville Nicholas Alan Krampe, Western Kentucky University Kayla Lewis, Eastern Kentucky University Haley Grace Lord, Western Kentucky University Afeera Raza Malia, University of Louisville Mariama Mbye, Sullivan University Katera Metcalfe, Western Kentucky University Robert Davis Mitchell, Brescia University Keaton Dale Morton, Alice Lloyd College Kate Ngo, Western Kentucky University Lejla Nuhanovic, Western Kentucky University Adabella Sarai Nunez, Western Kentucky University

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Daman Patel, Western Kentucky University Domonick Petty, University of Louisville Ryan R. Purk, Western Kentucky University Mahira Redzic, Western Kentucky University Sarah Danielle Rife, West Virginia State University Chase Edward Rogers, Sullivan University Terra Michelle Ross, Western Kentucky University Deneshia Sanders, University of Louisville Morgan Shelton, Brescia University Kaitlyn Thomas, Western Kentucky University Kala Danielle Thornsbury, Alice Lloyd College Carrie Elizabeth Vaughn, Western Kentucky University Leah Caroline Vertucci, Brescia University Charles J. Walter, Western Kentucky University Matthew Wright, Campbellsville University

Firm Administrator

Lesa M. Cobb, Freibert CPA Group, PLLC, Louisville Barbara Dugger, Louis T. Roth & Company, PLLC, Louisville Sharon P. Johnson, Hines & Company, PC, Knoxville, Ten.

Non-CPA Associate

John Tyler Axman, Ernst & Young, LLP, Louisville Jordan Aaron Raymond Bond, PricewaterhouseCoopers, LLP, Louisville Sean Matthew Byrnes, KPMG, LLP, Louisville Michelle Riggs, Neikirk Mahoney & Co., PLLC, Louisville

Part-time CPA

Samantha Rose Mahoney, Lexington

Regular

Kevin M. Adams, Strothman & Company, Louisville Jerry D. Arlinghaus, Crowe Horwath, LLP, Louisville Amber Kaitlyn Belviy, Deloitte & Touche, LLP, Louisville


The Kentucky CPA Journal / Issue 1 2018

Stacia Alexandra Bivens, KPMG, LLP, Louisville Kelly Busick, Louisville, J. Shelby Clements, Dean Dorton, PLLC, Louisville Sharon K. Daniel, Patterson & Company, PLLC, Louisville Taylor Nicole David, Alexander Thompson Arnold, PLLC, Murray Donna Driskell, Munninghoff Lange & Co., CPAs, Covington Benjamin Fister, Fister Williams & Oberlander, PLLC, Lexington A. Neill Griggs, Lexington Leslie Gray Groome, Nail McKinney CPAs, Tupelo, Miss. Priscilla S. Howell, Blue & Company, LLC, Louisville Steve Lee King, Meyerowitz & King, PLLC, Louisville Benjamin J. Miller, PricewaterhouseCoopers, LLP, Louisville Stephanie Mobley, ARGI CPAs & Advisors, PLLC, Louisville James Brian Montgomery, Montgomery Webb & Beck, PSC, Bowling Green Yuki Mullins, KPMG, LLP, Louisville

Members

Michael David Murray, BKD, LLP, Louisville Michael A. O’Neill, Southern Baptist Theological Seminary, Louisville Alan J. Ozanne, Merit Electric, Calvert City Clifford Leon Posey, Schulte Hospitality Group, Louisville Peter Neal Riefstahl, DMLO CPAs, Louisville Shelby Lynn Ritchie, Crowe Horwath, LLP, Lexington Yui Rossknecht, Louisville Lauren A. Schuck, Tempur Sealy International, Inc., Lexington Heather Lynn Shults, Humana, Inc., Louisville Rebecca Lee Simpson, Marsh & McLennan Companies, Louisville Ryan C. Smith, BKD, LLP, Louisville Melissa B. Turpie, Atkins & Company, PLLC, Lexington Elizabeth King Zeitz, MCM CPAs and Advisors, LLP, Louisville

Resolution of Respect

Thomas L. Smith, Thomas L. Smith, PSC, Calvert City

Members in motion Blue & Co. named Sherry Cockrell as a manager (healthcare) on the audit team and Vicki Virgin as an administrative assistant (commercial).

Cockrell

Tencza

Myriad CPA Group has merged with Alexander Thompson Arnold PLLC. This includes the Owensboro, Henderson and Evansville, Ind. locations.

kycpa.org

Tilton

Dean Dorton Allen Ford, PLLC named Jim Tencza as Louisville Market Leader, effective Oct. 1, succeeding Gwen Tilton, who is retiring on June 30, 2018 after a 35-year career with the firm.

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The Kentucky CPA Journal / Issue 1 2018

Members

KyCPA member profile: Lindsay Fouts KyCPA: What’s the most rewarding part of your job?

LF: Building relationships, continuous learning and process improvement.

KyCPA: What about your new job at KyCPA appeals to you the most?

LF: I am so proud to work for the organization that represents Kentucky CPAs. It is great to work for the Society and get to know its members as well as be a representative for the Society as a CPA.

L

indsay Fouts is the newest addition to the KyCPA staff, joining the Society as its new controller in early 2018. Fouts comes to KyCPA after spending the last five years with American Commercial Barge Line, where she started as a senior accountant before being promoted to accounting manager. The Jeffersonville, Indiana native has been an accountant for 15 years and tells us why she chose to transition from private industry to working for KyCPA.

KyCPA: Why did you decide to become a CPA?

LF: I worked in industry for about a decade and realized if I wanted to maximize my career potential, I needed the credential. I also liked the personal challenge of it (studying and passing the exams).

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KyCPA: When you are not at work, what do you like to do for fun?

LF: I’m an avid reader. I read as many books in my free time as I can. I love being outdoors, hiking and biking. I also enjoy singing and playing saxophone. I’m a big fan of the music and arts scene in Louisville. I like to travel, go to new restaurants and visit museums and parks with my son.

KyCPA: Do you have any advice for future CPAs or people wishing to get into accounting? LF: Do it! It is a great profession with ever increasing opportunities as we continue to see the baby boomers retire. I would recommend being as knowledgeable with technology (advanced Excel skills, learning accounting software through internships or classes) as you can as the business environment is always changing.


The Kentucky CPA Journal / Issue 1 2018

Watercooler

By the watercooler “Cryptocurrency is such a powerful concept that it can almost overturn governments.” - Charles Lee “I do think Bitcoin is the first [encrypted money] that has the potential to do something like change the world.” - Peter Thiel, co-founder of Paypal “Bitcoin is a technological tour de force.” - Bill Gates, Microsoft co-founder

“It’s gold for nerds.” referring to Bitcoin - Stephen Colbert, American writer, comedian, television host and actor

”[Virtual currencies] may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” - Ben Bernanke, Chairman of the Federal Reserve

Classified ads: Includes businesses for sale or volunteer, nonprofit board positions; 50-75 words, max. Cost is $50 for KyCPA members; $100 for non-members. Email Matt Lambert at mlambert@ kycpa.org and include your billing information. You may post open positions in the job section of the KyCPA LinkedIn page as well.

kycpa.org

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1735 Alliant Avenue Louisville, KY 40299-6326 kycpa.org

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AssuredPartners NL is KyCPA’s official partner in health insurance. Rates are highly competitive get your quote today.

assuredptrnl.com

KyCPA member benefit AssuredPartners NL is KyCPA’s sole agency of record for your health insurance needs. We chose AssuredPartners NL to represent the Society’s membership regarding our group health and dental programs because we want the best and we are confident that you will receive great service from AssuredPartners NL. For more than 20 years, AssuredPartners NL has helped businesses in nearly every industry develop specialized solutions tailored for their needs, and it has done the same for the Kentucky Society of CPAs group health insurance program. Please contact any member of your AssuredPartners NL team if you have questions regarding your renewals or would like to enroll in the group health insurance plan.

Your AssuredPartners NL team Tom Schifano Lane Hettich

tom.schifano@assuredptrnl.com (502.259.9217) lane.hettich@assuredptrnl.com (502.259.9211)

Working together to develop solutions that fit your health and dental insurance needs.

The Kentucky CPA Journal - Issue 1 2018  

Blockchain: Today and tomorrow Also: Decrypting taxation of cryptocurrency

The Kentucky CPA Journal - Issue 1 2018  

Blockchain: Today and tomorrow Also: Decrypting taxation of cryptocurrency