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AZ CPA
President & CEO Oliver Yandle
Editor Heidi Frei
Advertising Heidi Frei
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Chair-Elect Eugene Park
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Directors Tahir Alhassan
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Daliah Bui
Jay Ganesan
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Donnie Neves
Dennis Osuch
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Stella Shanovich
Immediate Past Chair Andrea Levy
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Tom Duensing
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Alli Byrne, Trevor Johnson Mike Nyman, Adrian Ochoa
Amy O’Loughlin, Becky Pusch
AZ CPA is published by the Arizona Society of Certified Public Accountants (ASCPA) to provide information, news and trends to the accounting profession. It is distributed six times a year as a benefit to ASCPA members. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication. Opinions expressed by contributors are not necessarily those of the ASCPA.
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Lauren E. Murro, CPA Chair, Arizona Society of CPAs
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Championing the CPA Profession: The Essential Role of Advocacy in Shaping Our Future
This time of year, many people are excited for football season, and we have hope for cooler weather in Arizona.
In tradition, this is also my opportunity to explore the topic of advocacy for CPAs. My first thought upon receiving this article topic was what do people think when they hear “advocacy”? It can be commonly misunderstood, carrying negative connotations such as advocates are “loud” or “difficult.” When I think about what advocacy is, the following terms come to mind: support and promotion, representation and voice, education, legal and policy change, community engagement, and empowerment.
In today’s dynamic financial environment, our role as CPAs remains vital. To ensure the profession continues to thrive, advocating for our role, our value and our future should be top-of-mind. We are not just accountants. We are auditors, tax advisors and financial consultants among others, who provide advice or comfort to those who may not understand the financial aspect of business as well as we do. In my first article, I indicated we must humbly brag about being CPAs to attract talent and cultivate the future of the profession. I’ll expand that statement here. We must also humbly brag about our profession to ensure our significance is not underappreciated.
Many people have a limited view of accounting. While most of my family members still respond with “oh right, tax deadlines …” when I indicate I’m busy in the spring, I was ecstatic the first time I realized my husband learned to explain to others “she performs financial statement audits, mostly for bank requirements.” By being advocates for the profession, we can educate the public about the depth of our work and enhance the overall perception and respect for CPAs. We can participate in policy discussions and contribute our expertise to the policymakers to support fair practice and ethical standards within the industry. Active advocacy can also foster a sense of community among CPAs, allowing us to share knowledge and support each other, further enhancing our skills.
One of the primary purposes of the ASCPA is to create opportunities for members to maximize their potential through advocacy. This includes reviewing legislation for any impact on the CPA profession, hiring an exceptional group of lobbyists to assist us, and having a robust political action committee, as well as hosting events such as CPA Day at the Capitol, the Conformity Debrief and participating in the Tax Legislation Review Committee. I had the opportunity to attend CPA Day at the Capitol and found the experience enlightening from both sides of the table. Not only was I able to share my experiences and expertise as a CPA with policymakers, but I learned firsthand more about their roles and the day-to-day processes at the Capitol.
Being a part of the ASCPA, I have had numerous opportunities to be an advocate for our profession, ranging from sharing information among peers regarding recruiting and leadership or how we are trying to adapt to artificial intelligence, to participating in more formal advocacy events and even writing this article. I encourage members to look at their opportunities to be a champion of CPAs to secure a better future for ourselves and the profession as a whole. l
Warm Regards, Lauren Murro
Member News
Donald Neves, CPA
Promoted to managing director at EY.
Kwok Leung Cheung, CPA (Albert Cheung)
Promoted to principal at REDW Advisors & CPAs.
ASCPA 100% Club
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If you are part of a 100% Club organization and would like your company photo to be featured on the 100% Club webpage, please send it to cquinonez@ascpa.com.
Legislative Report: By The Numbers
By Ryan DeMenna
This year’s legislative session had it all. State lawmakers dealt with issues ranging from border security and education funding to a territorial-era abortion ban and possible impeachment. Given the amount of legislative activity, the simplest way to look back at this year’s session is to take a look “by the numbers.”
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The 2024 session was a 160-day policymaking marathon that ended on June 15. Over the last 10 years, Arizona’s legislative sessions have lasted an average of 140 days. The longest session in the state’s history was last year, when lawmakers remained in session for 204 days.
State legislators introduced 1,660 pieces of legislation, which is slightly higher than previous bill introductions over the last 10 years, which have averaged 1,423 bills every year.
Last session, lawmakers sent Governor Katie Hobbs 1,561 bills. Of those, she signed 205 and vetoed a record-setting 143 bills. The previous recordholder was former Democratic Governor Janet Napolitano, who vetoed 58 bills that the Republican-controlled Legislature sent her in 2005.
Governor Hobbs’ veto stamp (which was given to her by Governor Napolitano), didn’t get as much use this year. State legislators sent Governor Hobbs 332 bills, of which 73 were vetoed.
There was a noticeable uptick in the number of resolutions. Resolutions, if passed by the Legislature, circumvent the Governor and go directly to the ballot for voters to decide. Lawmakers in the House introduced 65 resolutions while their peers in the Senate introduced 47. Of those, 11 were referred and will appear on your ballot in November.
There was also an uptick in legislative vacancies. This year alone, there were seven departures. That number jumps to 12 if you include the vacancies since the last election.
Of the 1,660 bills lawmakers introduced this year, the Arizona Society of CPAs (ASCPA) closely tracked 156 bills impacting virtually every area of tax law.
But the ASCPA worked closely with lawmakers to ensure that two of those bills – Electronic Payment Parity and Income Tax Conformity – became law.
Electronic Payment Parity
As members of the ASCPA know all too well, individuals can send payment for Arizona income taxes owed to the Arizona Department of Revenue (the Department) electronically or by mail.
Taxpayers who submit payment by mail don’t accrue late-payment penalties if the full payment is postmarked on or before Tax Day. But taxpayers who submit payment electronically must submit payment on the business day before Tax Day or face a late payment penalty.
To address this inconsistency, the ASCPA worked with the Department to craft legislation to ensure that taxpayers who submit payment electronically are treated the same as those who submit postmarked mail submissions.
The legislation, House Bill 2875, specifies that a taxpayer’s electronic payment is deemed to have been made when the taxpayer initiates
payment, which is the “electronicequivalent” of dropping your payment in the mail.
When you look at House Bill 2875 “by the numbers,” it’s clear that Arizona legislators know they can rely on the ASCPA to both identify and properly address these types of gaps in Arizona tax law and administration. The bill received unanimous support from all 10 members of the House Ways & Means Committee, a “Yes” vote from 58 members of the 60-member House (one legislator was absent and there was an existing vacancy), unanimous support in the seven-member Senate Finance Committee (although, one legislator was absent), and 29 “Yes” votes from the 30-member Senate (again, one legislator was absent).
One lawmaker, while explaining their vote, thanked the ASCPA for “bringing the code up to 21st century standards.”
The bill then received the crucial nod from Governor Hobbs, who signed it into law on March 29.
Senator Bennett discusses the state budget process with attendees at the Professional Issues Update in Prescott.
Income Tax Conformity
Federal income tax conformity is an annual priority for the ASCPA. If the state’s tax statutes aren’t updated and aligned with federal tax code changes made in the preceding year, then taxpayers are forced to make assumptions when filing their state taxes. This leads to uncertainty and confusion, which results in higher costs, needless complexity and amended returns.
The ASCPA and its advocacy team have done an exceptional job of ensuring that lawmakers understand the importance of income tax conformity.
The ASCPA hosts the Income Tax Conformity Debrief before the legislative session kicks off in January. This event gives legislators the opportunity to mingle with members of the ASCPA, ask questions about conformity, and learn about changes made at the federal level that will impact Arizona taxpayers.
The ASCPA doubles-down on the importance of conformity (and other legislative priorities) when they swarm the Capitol for CPA Day. Members of the ASCPA are gracious enough to take time out of their busy schedules to visit the Legislature and meet with lawmakers to advocate for the priorities of the profession.
The behind-the-scenes efforts of the ASCPA’s advocacy team are ongoing, but it’s these critical in-person interactions that truly relay the importance of issues like conformity to state lawmakers.
This year, the ASCPA worked with the Chairs of the House Ways & Means Committee and Senate Finance Committee to introduce identical versions of the conformity legislation. Advancing identical versions allows a bill in one chamber to be substituted for its twin in the opposite chamber, and this legislative “fast-track” ensures that the bill advances through the policymaking process as quickly as possible.
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Top photo: The ASCPA hosted its third annual Income Tax Conformity Debrief in December, bringing together Arizona CPAs and state legislators to discuss changes made to the Internal Revenue Code and the importance of passing income tax conformity early.
Left photo: The ASCPA receives recognition during the Senate Floor session while in the Senate gallery during CPA Day at the Capitol.
Looking Ahead
For decades the ASCPA has focused on working with the most adept policymakers who understand and support the issues that are important to the profession: regardless of party affiliation.
The President & CEO of the ASCPA, Oliver Yandle, works tirelessly to ensure that the ASCPA voice is heard in the policymaking process. These unwavering advocacy efforts have not only positioned the ASCPA as a trusted resource to legislators and their staff, but has solidified the ASCPA’s critical role in the policymaking process.
Simply put, the ASCPA is the gold standard for advocacy.
Oliver’s ongoing efforts are bolstered by Emily Webb, the ASCPA’s director of government relations, who has brought a renewed energy to the ASCPA’s advocacy efforts.
However, the trust and reliance that Arizona policymakers have in the ASCPA is the direct result of the dedicated members who serve on the ASCPA’s Tax Legislation Review Committee (TLRC).
Lawmakers are undeniably competitive, and the ASCPA and its advocacy team recently tapped into their competitive nature by looking at conformity ‘by the numbers.’
In the last 20 years, the earliest the conformity bill was signed into law was February 14, 2011, or 60 days before Tax Day. In 2017 and 2023, conformity was signed into law on March 3, 43 days before Tax Day. In 2012, conformity was signed on March 16, 30 days before Tax Day. And this year, conformity was signed into law on March 18, 28 days before Tax Day.
So, if lawmakers want to earn that coveted top spot, Valentine’s Day (which also happens to be Statehood Day) is the date to beat.
The Numbers Always Change
As focus shifts to the 2025 legislative session, it’s clear that the complexion of the state Legislature will change dramatically.
There are 13 sitting lawmakers who are not running for reelection, and four of the lawmakers who resigned or will not be seeking reelection are running for Congress. There are also nine former lawmakers hoping to make a return to the state Legislature. Republicans currently hold a single-vote majority in the House and Senate, and there are – arguably – five competitive legislative districts that will determine if Republicans remain in the majority, if Democrats flip one or both chambers, or if there is a split Legislature.
The TLRC, which has existed within the ASCPA in various forms for years, reviews all tax-related legislation to ensure that the mechanics are in order, helping to avoid unintended consequences if it becomes operational as law. This thorough “scrubbing” is welcomed by lawmakers and their staff who want to ensure they get it right.
So, regardless of where the numbers fall and who controls the Legislature, the ASCPA will always be there to advocate for its members and the profession. l
Ryan DeMenna is a partner at DeMenna Public Affairs, which has been supporting the ASCPA’s advocacy efforts for more than 20 years. To learn more about how you can support our advocacy efforts, visit www.ascpa.com/advocacy.
Top photo: ASCPA members at the Arizona Capitol advocating for support of the profession’s priorities. Pictured from left to right: Andrea Levy, Anne Cornelius, Emily Webb, Kate Franklin, Michael Lemme, Stella Shanovich, David Walser, Kelly Damron, Jared Van Arsdale, Elizabeth Dennis, Oliver Yandle. Bottom left: ASCPA members Michael Lemme, Kate Franklin and Elizabeth Dennis meet with Senate Minority Leader Mitzi Epstein during CPA Day at the Capitol. Bottom Right: ASCPA members Stella Shanovich, Kelly Damron, Jared Van Arsdale and Anne Cornelius meet with Representative Matt Gress during CPA Day at the Capitol.
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Contributing to Effective Issues Advocacy
By Emily Webb
Your membership dues and your investment in the ASCPA PAC help fund the important work the ASCPA advocacy team does to protect the CPA credential, advance the profession and advocate for sound policy in Arizona. In tandem, CPA volunteers contribute their professional expertise as guidance on issues that matter and dedicate their time to helping us develop relationships with legislators. All of these contributions, combined with the support of the best lobbyists, put our priorities into action.
2024 Legislative Wins
The ASCPA had a successful legislative session on behalf of Arizona CPAs. No matter the year or the issue, the ASCPA has your back at the Legislature.
Third Annual Tax Conformity Debrief
In December, newly elected and incumbent legislators heard from Arizona CPAs about changes made to the Internal Revenue Code. This event reiterated the importance of income tax conformity and encouraged lawmakers to get the ball rolling early. Income tax conformity legislation (HB 2379) was the seventh bill signed by Governor Hobbs on Mar. 18 after Senate President Warren Petersen expedited the bill through the House.
Tax Payment Parity
The ASCPA led the legislative effort to create parity between tax payments via snail mail and electronic funds transfer (EFT). Prior to HB 2875, state statute allows snail mail payments to be accepted on the date of the post mark where EFT payments needed to process before the bill was considered paid. HB 2875 included language that would allow the Arizona Department of Revenue to accept an EFT payment upon initiation of the transfer, like the postmark on a mailed payment. This created efficiency in statute and will save taxpayers money.
CPA Day at the Capitol
The third annual CPA Day at the Capitol was held in February. In addition to building a stronger connection between state policymakers and the ASCPA, attendees advocated for early income tax conformity, maintaining the gold standard of licensure mobility and reciprocity, and a willingness to engage as nonpartisan resources to legislators.
Engaging Stakeholders
The ASCPA Tax Legislation Review Committee (TLRC) worked with various stakeholders this session to provide insight on bill language. The TLRC worked with the Financial Planning Association (FPA) to address a conflict in statute that would not allow taxpayers to use retirement distribution accounts to make tax payments. Not only did the TLRC meet with the FPA to add an amendment, but also with the ADOR and the bill sponsor, Sen. J.D. Mesnard. This is an example of how the ASCPA has enhanced the organization’s standing, its advocacy program and volunteers with state policymakers. Legislators on both sides of the aisle seek feedback and review from the ASCPA and our expert members on tax legislation.
Thank you to the volunteers of the ASCPA’s Tax Legislation Review Committee, who serve Arizona and the profession by providing nonpartisan technical expertise on all tax legislation: James Busby, Gary Williams, David Walser, Ed Zollars, Michael Lemme, Chris Hallstrom, Elizabeth Dennis, Michael Martin and Caron Mitchell.
Emily Webb is the director of government relations at the Arizona Society of CPAs. You can contact her at ewebb@ascpa.com.
Legislators Supported
The ASCPA PAC acts as the collective, cohesive voice of the entire CPA profession in Arizona politics.
In supporting Republican and Democrat candidates who align with the profession and the ASCPA’s goals and priorities, the PAC serves as the “CPA Party,” ensuring CPAs have a seat at the decision-making table when it matters.
Thank You to Our PAC Contributors
The ASCPA PAC is a well-respected voice at the Arizona Capitol, renowned for providing guidance and expertise in accounting, finance, business and tax matters.
A political action committee (PAC) is a fundraising entity that pools contributions from individuals and donates those funds to campaigns for or against candidates, ballot initiatives or other PACs. The ASCPA’s PAC exists to ensure CPAs and the CPA profession have a seat at the policymaking table. It ensures CPAs can focus on accounting, while we monitor changes in policy and oversight for you.
Without active participation in the political process, we risk CPAs and the CPA profession being overlooked or otherwise adversely affected by legislation. Thank you to our top donors in the 2023-24 fiscal year who have donated $200 or more to the ASCPA PAC.
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The Great Office Debate: Productivity, Culture and Career Growth in a Hybrid World
By Trevor K. Johnson, CPA
As companies and organizations work to bring teams back together in the office, for at least part of the standard workweek, managers and leaders alike face some challenges. Many employees enjoy, and have become accustomed to, the flexibility, sense of autonomy and lack of commute –all of which come with working remotely. However, are remote employees sacrificing productivity or career growth in exchange for these benefits? Like many things in the accounting world, I would argue that it depends.
Personally, I have had a positive experience in my fully remote position with my firm; although, I acknowledge that others’ experiences may be different. I do not think there is one solution for all. Managers need to adapt and remain agile to continue leading successful business operations while simultaneously addressing the remote versus in office considerations to keep their people happy and productive.
Return to office mandates have been a hot topic the last few months. Whether companies are pushing for a full return, back in the office five days a week, or attempting a hybrid approach with a specified number of days in office, no approach is perfect for all. This is part of the reason leaders are dealing with challenges, and sometimes pushback, from their staff and employees. Leadership often cites culture, collaboration and camaraderie as reasons to return to the office. I agree these are critical components, especially for more junior staff and those in the early stages of their careers – training, coaching and networking tend to lend better in an in-person setting.
However, what about the more seasoned staff, those with some years of experience under their belt? If they can work productively in a remote environment, should they be required to report to the office? How significant is the risk of employee turnover resulting from implementing a return to office policy? It will largely depend on how much staff value the feeling of working autonomously and not having to commute over the career satisfaction and comfort of their current positions, which will be different for everyone. It is unlikely any policy will please everyone, but by encouraging employees and empowering them to drive and shape their own working arrangements to the extent possible (and appropriate), some challenges may be alleviated.
My experience working from home full time has been positive. Although my role is fully remote, I have still been able to make connections with my clients and colleagues. I would note; however, it does take some
intentional, deliberate action to make this happen – for example, picking up the phone instead of composing a lengthy email; and checking in with team members periodically via a video call for that virtual, face-to-face connection. These are things effective managers are likely already doing but simply require a bit more thoughtful effort in a fully remote setting.
Additionally, just as leaders need to remain flexible when thinking about any sort of return to office mandate for their employees, team members should do the same. Even though my role is fully remote, there are times when I need to meet with a client or prospect in person, or attend a live face-to-face training, both of which require travel. Furthermore, with respect to career growth and development, establishing clearly defined expectations and maintaining open lines of communication between employees and their supervisors is crucial to a successful career in a remote environment. In my experience, having this adaptability and flexibility has been a key component of being an effective manager.
Working completely remote does present some challenges, including feelings of isolation, lack of social connections and small talk around the office, and more difficulty from a training perspective. As mentioned earlier, many of these concerns can be addressed while continuing to work fully remote; however, they can only go so far. There is no true replacement for quality, face-to-face connections with colleagues, clients and team members. This is especially true with newer, less-experienced professionals who may require more training and supervision. Managers and leaders must find the right balance of remote and in-office requirements to effectively manage their teams, keep team members content and continue fulfilling the mission of their organization in today’s ever-changing business environment. l
Trevor Johnson is a senior manager at CohnReznick and an ASCPA member. Johnson serves on the ASCPA’s editorial committee and can be reached at trevork.johnson@cohnreznick.com.
What’s Happening at the ASCPA?
Free Webinar: Strategic Planning for High-Income Business Owners
Converge, the Arizona Society of CPAs’ annual conference, returns this October with the experiential learning, collaboration and atmosphere that you’ve come to know and love. Attend one day or register for both days to include a special half-day of interactive workshops.
See all sessions and register at www.ascpa.com/converge
Member Appreciation Free CPE Days –Maximize Your Membership
Nov. 13-14, 9 a.m. – 4 p.m.
In honor of ASCPA Member Appreciation Month, we are bringing you two days of free webinars. You can earn up to 12 CPE credits by attending all sessions. Each day will include six, one-hour presentations. You can choose which sessions you would like to attend. One registration gives you access to all the presentations.
Learn more and register at www.ascpa.com/freecpedays
ABC Networking Event
Nov. 21, 4:30 - 7 p.m
Meet local Attorneys, Bankers, and CPAs (ABC) at this joint networking event with members of the Maricopa County Bar Association and the Risk Management Association Arizona Chapter. Members only pay $30, which includes appetizers and two drink tickets.
Register today at www.ascpa.com/abcevent
Not-for-Profit Conference
On June 23, we hosted the Not-for-Profit Conference at the Desert Willow Conference Center and live via webcast with 198 attendees. Thank you to our committee, speakers and attendees for making this an excellent opportunity for learning and connecting. You can continue connecting with your nonprofit colleagues by joining the Not-for-Profit Community on Connect (connect.ascpa.com/ communities).
Special thanks to our platinum sponsor, Eide Bailly.
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The Profession Problem in Accounting: Beyond the Pipeline
By Jessica L. Levin, DBA, CMP, CAE, DES
The accounting industry frequently laments a “pipeline problem,” attributing it to a deficiency of new talent entering the profession. However, the genuine concern extends beyond a scarcity of candidates; it encompasses the profession’s antiquated practices and entrenched cultural norms. It’s high time to address these fundamental issues head-on.
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The Myth of the 55-Hour Week
The belief that working 55 hours is considered a “reduced” schedule is a significant obstacle. This outdated mindset originated when long hours were seen as a necessary sacrifice. However, today’s expectations are different. Recent graduates prioritize work-life balance and mental wellbeing. Industries that adapt to these changing values will need help to attract and retain talent. This issue is wider than the younger generation, though. Even experienced CPAs experience decreased productivity after several hours. Humans are not designed to work in front of a computer all day.
The “We Worked Crazy Hours” Mentality
Countless experienced professionals take pride in the long, demanding hours they endured early in their careers. However, glorifying past hardships as a benchmark for new talent is counterproductive. Instead, we should prioritize creating a supportive and balanced work environment that fosters productivity and job satisfaction.
Struggles With Hybrid Work
The accounting industry faces a pivotal moment when introducing the hybrid work model. The pandemic hastened the transition to remote work, but many firms are still reluctant to embrace this change fully. Flexibility is no longer just an added benefit; it has become necessary. While firms have made progress by adapting out of necessity, they still face challenges with training in a hybrid environment. Establishing comprehensive hybrid work policies catering to the firm’s and its employees’ needs is crucial. Faceto-face interaction is invaluable, but it should be carefully planned and purposeful to maximize its benefits.
Disconnect Between Academia and Reality
The education provided by universities often needs to fully meet the practical requirements of working in accounting firms. While academic programs emphasize technical expertise and theoretical knowledge, they frequently overlook the essential hands-on experience and interpersonal skills needed in the profession. To bridge this gap, universities and firms should collaborate to provide a more comprehensive education that integrates real-world applications, prioritizes soft skills and offers insights into the dynamic industry landscape. Firms are equally responsible for working with the educational system to ensure the profession is attractive and favorably positioned in an academic setting.
Lack of Diversity and Inclusion
The accounting profession needs help with diversity and inclusion. Historically, the industry has been dominated by a homogenous demographic, which can limit perspectives and hinder innovation. Efforts to attract a more diverse talent pool often fail due to entrenched biases and inadequate support systems for underrepresented groups. To effectively tackle the profession’s challenges, firms must focus on creating an inclusive culture that values and supports diversity in all its forms.
Outdated Career Progression Models
The traditional career progression models in accounting firms often need to be more flexible and follow a strict hierarchy, providing little room for individuals to create their career paths. This uniform approach may be disheartening for those who desire diverse experiences and opportunities for growth. Upgrading these models to permit cross-department moves, experiences in different roles and personalized career development plans can make the profession more appealing to new talent.
Emphasis on Compliance Over Advisory
The accounting profession has historically been centered on compliance work, such as audits, tax filings and regulatory adherence. However, the importance of advisory services is increasing as businesses require strategic guidance to navigate intricate financial environments. Firms that do not adapt to offering more advisory services risk becoming obsolete. Prioritizing advisory roles can also attract talent interested in a more dynamic and impactful career.
Rethinking Firm Structures
Firms also need to reevaluate their structural models, considering whether a corporate structure might be more effective than traditional partnerships. Corporate structures can offer greater flexibility, scalability and growth opportunities, making firms more competitive and appealing to new talent. While fostering a sense of ownership among partners, partnerships can sometimes be too rigid and slow to adapt to the changing business environment.
Eight Ways to Address the Profession Problem
To tackle these issues, we must:
1. Redefine Work Hours: It’s essential to shift the focus from hours worked to outcomes achieved. Implement realistic and sustainable work hours that promote work-life balance.
2. Modernize the Work Culture: We must abandon the “we worked crazy hours” mentality and instead foster a culture of support, mentorship and well-being.
3. Embrace Hybrid Work: It is essential to develop and implement policies that support hybrid work arrangements. Ensure employees have the tools and resources to succeed in remote and in-office environments. Progress has been made, but firms need help with training and learning in a hybrid environment and planning meaningful and productive face-to-face interactions.
4. Enhance Academic Collaboration: It is important to work with universities to bridge the gap between education and practice. It is crucial to provide students with practical experience and a clear understanding of what to expect in the profession.
5. Foster Diversity and Inclusion: Committing to creating an inclusive culture that supports and values diversity is essential. Implement robust diversity initiatives and support systems to attract and retain talent from diverse backgrounds.
6. Modernize Career Progression: Develop flexible career progression models that allow for personalized career paths, lateral moves and cross-functional experiences.
7. Shift Towards Advisory Services: Emphasize the importance of advisory roles. Train and encourage accountants to develop skills in strategic advisory services to meet evolving client needs.
8. Re-evaluate Firm Structures: Consider whether a corporate structure might offer more flexibility, scalability and growth opportunities compared to traditional partnerships.
The accounting industry’s pipeline problem clearly indicates underlying challenges. To effectively tackle this issue, we must embrace modern work models and establish more robust partnerships between academia and the industry. This approach will help us create an environment that can attract and retain top talent.
You can learn what the ASCPA is doing to connect with accounting students at www.ascpa.com/student. l
Jessica Levin is COO and North America Regional Director for Abacus Worldwide. She will speak at the ASCPA’s Converge conference in October. Visit ascpa.com/converge to see the full agenda and register.
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Fraud Prevention
By Jaclyn M. Veno, CPA (licensed in NC and SC)
Occupational fraud represents a significant risk to every organization, regardless of size or industry. The Association of Certified Fraud Examiners (ACFE) defines occupational fraud as “the use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.” The ACFE estimates that organizations lose 5% of their revenue each year to occupational fraud. While 5% may not seem like a significant amount, when this percentage is projected against the Gross World Product (GWP), it totals more than $5 trillion lost due to fraud globally.
About the Report
The ACFE Report to the Nations is the largest global study on occupational fraud. The report is based on 1,921 real cases and spans 138 countries and territories. It explores the costs, schemes, victims and perpetrators of fraud.
The ACFE’s methodology for this report is based on the ACFE 2023 Global Fraud Survey, an online survey of Certified Fraud Examiners conducted from July 2023 to September 2023. Respondents provided information on the largest occupational fraud case they had investigated, with criteria requiring that the case involved occupational fraud, the investigation occurred between January 2022 and the survey period, the investigation was completed by the time of survey participation, and the perpetrator(s) had been identified with reasonable certainty.
Highlights from the Report
There are many insights that can be gained from this report. Of the 1,921 cases included in the survey, there were more than $3.1 billion in losses. In addition, 22% of cases had losses of more than $1 million.
The most common form of occupational fraud is asset misappropriation, or the theft of an employing organization’s assets, being present in 89% of fraud cases. Common examples of asset misappropriation from the ACFE Report were cash larceny, skimming, billing schemes, payroll schemes and expense reimbursement schemes. Despite asset misappropriation being the most common form of occupational fraud, it is also the least impactful to organizations, with an average median loss of $120,000.
On the other hand, financial statement fraud was only present in 5% of cases. However, it is deeply impactful, causing a median loss of $766,000. There are plenty of examples of financial statement fraud, which includes revenue recognition fraud, expense fraud, and fraudulent financial reporting to deceive investors, creditors or regulators.
In addition, corruption was present in roughly half of all cases, resulting in a median loss of $200,000. Examples of corruption include conflicts of interest, bribery, illegal gratuities and economic extortion.
Red Flags of Fraud
According to the ACFE Report, in approximately 84% of cases, red flags were present. Knowing these red flags can help organizations gain an advantage on detecting fraud.
Of the 1,921 cases included in this report, 75% of fraudsters displayed at least one of the eight most common behavioral red flags. The most common behavioral red flag since the ACFE’s first report in 2008 was the fraudster living beyond their means. Other red flags include:
• The perpetrator is experiencing financial difficulties
• Unusually close association with vendor/customer
• Control issues, unwillingness to share duties
• Irritability, suspiciousness or defensiveness
• “Wheeler-dealer” attitude
• Bullying or intimidation
• Divorce/family problems
In addition to behavioral red flags, there are some organizational red flags to keep in mind, such as a lack of ethical tone at the top, a lack of documented policies and procedures, low employee morale and high employee turnover.
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Profile of the Fraudster
Interestingly, there is no psychological profile of a fraudster. However, the data from the 2024 ACFE Report to the Nations does show that there are commonalities among perpetrators. Most perpetrators (87%) are usually a first-time offender and lack previous criminal history. Perpetrators are usually male (74%) and have a university degree (52%). And lastly, 53% of perpetrators were between the ages of 36-50 years old.
There are also positive correlations between the age and tenure of the perpetrator, and the losses they are capable of inflicting. For instance, perpetrators that have been working for their organization longer cause higher losses when committing fraud than their less tenured counterparts. According to the report, employees working at their organization for 1 year or less had a median loss of $50,000. In contrast, perpetrators with 10 years or more of experience had a median loss of $250,000.
Lastly, more than half of all fraud cases studied in the ACFE Report to the Nations came from the same five departments at organizations. These departments were operations, accounting, sales, customer service and executive/upper management.
Internal Controls to Help Prevent Fraud
According to the ACFE Report to the Nations, the presence of antifraud controls is associated with lower fraud losses and quicker fraud detection. In addition, more than half of cases occurred due to a lack of internal controls (32%) and an override of existing controls (19%). This data shows that nearly half of the frauds in the ACFE’s study could have been prevented with a stronger system of anti-fraud controls.
The report outlines 18 anti-fraud controls commonly found in organizations, such as the presence of a code of conduct, management review, fraud training for employees, job rotations/mandatory vacation,
etc. The presence of these controls was associated with anywhere from a 23-63% reduction in median losses and a 14-50% reduction in fraud duration if the controls were in place. In essence, all these controls were associated with both faster detection and lower losses. But, according to the data, there are four controls –surprise audits, financial statement audits, hotlines, and proactive data analysis – that are associated with at least a 50% reduction in both fraud loss and duration.
The most common method by which fraud was detected in the report was tips, from both internal employees and outside parties, which account for a staggering 43% of fraud detections, over three times as many as any other method. Although there are many ways these tips were given, the report does note that having dedicated tip hotlines made an organization nearly twice as likely to detect fraud via a tip than an organization without a hotline. The second most common method of detection is by internal audit, 14%, and the third is by management review, 13%.
In conclusion, the 2024 ACFE Report to the Nations contains valuable insight into the types of fraud schemes that are occurring, red flags to watch out for and the value of implementing strong internal controls at organizations. Another statistic showed that 82% of organizations modified their antifraud controls following the fraud, and 95% of the modifications were expected to be effective at preventing future frauds. This report shows that trying to limit the opportunities of employees to commit fraud through internal controls proves to be a worthwhile effort. l
With an extensive background in accounting, auditing and adult learning theory, Jaclyn Veno oversees the development of Level Training programs for Galasso Learning Solutions, one of the ASCPA’s preferred CPE providers. To see a list of their ASCPA course offerings, go to www.ascpa.com/galasso. This article was reprinted with permission by the NJCPA from its Fall issue of New Jersey CPA.
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