AZ CPA Dec. 2016

AZ CPA December 2016

Managing Fraud Risks Bylaws Ballot Inside

Emotional Intelligence — Enhancing Your Leadership Skills

The Arizona Society of Certified Public Accountants y www.ascpa.com

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AZ CPA DECEMBER 2016

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Board of Directors Chair Chair-Elect Secretary/Treasurer Directors

• Comprehensive Planning • Investments / Strategies • 401(k) Analysis Armando G. Roman CPA/PFS MBA Wealth Manager

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AZ CPA DECEMBER 2016

of Certified Public Accountants (ASCPA) to provide information, news and trends in the profession of accounting. It is distributed 10 times a year as a regular service to members of the Society. The ASCPA, its members, board of directors and administrative staff assume no responsibility for advertisements herein. The ASCPA and the above people also assume no liability for business decisions made by readers in reference to statements and/or claims in articles or advertisements within this publication.

Opinions expressed by contributors are not necessarily those of the ASCPA.

Arizona Society of CPAs 4801 E. Washington St., Suite 225-B Phoenix, AZ 85034-2021

Joshua N. Mozell

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Telephone (602) 252-4144 AZ Toll-Free (888) 237-0700 www.ascpa.com

AZ CPA Volume 32 Number 10

December 2016

Features

In Good Company 13

Rufus Glasper, Ph.D., CPA, CGFM, Receives Boy Scouts Lifetime Achievement Award and Reflects on His New Position at The League for Innovation

by Patty Gannon

Columns & Departments

Chair’s Message by W. Gregory Nelson, CPA

6

Member News

7

Board Highlights

8

A Dash of SALT by James G. Busby, Jr., CPA

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Quick Quiz

21

Classifieds 22

15

Managing Fraud Risk

Managing fraud risk is a systematic process that has benefits for organizations beyond protecting assets and reputations.

by David L. Cotton, CPA (in VA), CFE, CGFM

19 Emotional Intelligence — Enhancing

Your Leadership Skills

Arizona Society of Certified Public Accountants 4801 E. Washington St., Suite 225-B Phoenix, Arizona 85034-2021 www.ascpa.com

Emotional intelligence is one of the most important tools we can develop to be successful in today’s business world.

by Brittney Williams, CPA, CGFM

DECEMBER 2016 AZ CPA

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ASCPA Chair’s Message

The Best of Both Worlds — Blending Hard and Soft Skills A year ago my phone rang. It was my friend Ronald with bad news from my hometown. “Remember Sam?,” he asked. “He passed away last week and not in a good way.” I cringed. My two significant encounters with Sam during high school were not pleasant. We didn’t mesh at all.

by W. Gregory Nelson, CPA “Soft Skills: a combination of interpersonal, social and communication skills, as well as specific character traits, attitudes and emotional intelligence, among others.”

I Googled Sam’s obituary. Reading between the lines, I learned he led an immensely troubled life. I’m sorry for that and also sorry that my hurt feelings bubbled back to the surface. Back in school, I was focused on developing my hard skills in academics and understanding the facts. But I later learned that intermingling more soft skills into daily life might have benefited both Sam and me, and maybe we could have been friends.

Later, as a young CPA, I learned that looking at a situation using strictly logic didn’t always produce the best outcome. Instead, using a blend of my CPA hard skills and a liberal dose of soft skills would have worked out better in many situations. With hard skills, the rules remain the same regardless of your company or the people you are working with. But with soft skills, the rules change, and so should our communication, problem solving and approach to teamwork.

To succeed, our profession requires a blend of hard and soft skills. As young CPAs, we have to demonstrate our technical competency, but there is no test for our soft skills other than real world experience. Soft skills are not just important; they are critical to our success. Explaining the nuances of the financial statements or tax returns to clients or the CEO deserves your best efforts at clear communication and understanding of not just the numbers, but what those numbers mean.

In fact, I recently read about two surveys that confirm this. One study was conducted by Harvard University and another study analyzed Fortune 500 CEOs. The studies established similar results — that 75–80% of long-term success can be attributed to soft skills and the remaining to technical or hard skills.

Over the years I’ve come to realize that life doesn’t happen to us, it happens for us. It is up to us to find opportunities to learn and practice our soft skills. If you are seriously interested in developing your soft skills, here are a few suggestions: • Take a course. Your ASCPA offers many courses on leadership and professional development.

• Seek a mentor. Find a mentor and be specific about the skills you would like to develop. Your ASCPA has recently implemented a mentoring program to help.

• Volunteer. Many nonprofit organizations give you the opportunity to build soft skills. In addition, participating in high-profile volunteer work also demonstrates to your employer that you are serious about your community. And yes, there are always volunteer opportunities available at your ASCPA. Rest in peace, Sam. I wish I had worked to develop my soft skills earlier. We might have had a very different relationship. n

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AZ CPA DECEMBER 2016

Member News Megan M. Faust, CPA, has been promoted to corporate vice president and CFO of Amkor Technology, Inc. Anita Baker, managing principal of CliftonLarsonAllen’s employee benefit plan group, has been elected to the American Institute of CPAs (AICPA) board of directors effective Nov. 1, 2016, through May 2020.

Sally A. Taylor, CPA, was promoted to CEO of KeatsConnelly. Dale A. Walters, CPA, is now chairman of the board.

Robert K. Minniti, CPA, received his Ph.D. Adam C. Bowman, CPA, of Moss Adams LLP was elected treasurer of Gabriel’s Angels Board of Young Professionals.

Benjamin L. Cilek, CPA, of Apollo Group was named treasurer of the Rio Salado Foundation.

Top photo: (l to r) Steve Tait, Allen Nahrwold, Peggy Ullmann, Dan Baran, Robert Wyndelts, Don Bays and Bruce Nordstrom.

Second photo: (l to r) Tour Guide Tom Romay, Tour Guide Don Vogt, and ASCPA members Bruce Nordstrom, Don Bays, Peggy Ullmann, Robert Wyndelts, Dan Baran, Steve Tait and Allen Nahrwold.

Power Plant Tour Seven members of the ASCPA went on a tour of the Palo Verde Nuclear Generating Station. The tour was arranged by ASCPA member, Bruce Nordstrom, who is on the board of directors of Arizona Public Service, one of the co-owners of the nuclear facility.

At the time of the group’s visit, Unit 3 Reactor was shut down for maintenance procedures. As a result, the CPAs were allowed to go into what is known as the containment area within Unit 3. And, in order to enter the containment area, protective white suits were required to be worn.

“This was such a fantastic and amazing experience,” said Peggy Ullmann at the conclusion of the tour. “The management team of the Palo Verde Nuclear Generating Station made us feel like VIP visitors. They were terrific!”

“The security measures just to get in and out of the station are highly sophisticated and controlled. And, the protection protocols once you are inside the station grounds, and especially in the reactor buildings, are outstanding,” added Allen Nahrwold.

All agreed the tour was a once-in-a-lifetime opportunity. – by Donald Ray Bays, CPA, ABV, CVA, CFF

Member Appreciation Event The ASCPA treated 100+ members and their guests to a special showing of the movie: The Accountant.

DECEMBER 2016 AZ CPA

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Future CPAs

Highlights of October Board of Directors’ Meeting Among other actions at its October 19, 2016 meeting, the ASCPA Board of Directors reviewed the following:

Consent Agenda The consent agenda, which included the board minutes, financial statements and bylaws changes, was approved.

Approval of Life Member

ASCPA President & CEO Cindie Hubiak was the guest speaker at Barbara Marie Bond, CPA’s Xavier College Prepatory high school’s accounting class. Hubiak explained the relevance of the CPA designation to the students. The course is sponsored by and in partnership with the AICPA under the Accounting Pilot and Bridge Project (APBP). The APBP team offers content knowledge, delivery and assessment expertise with the APBP curriculum. Bond attended the APBP Professional Development sessions, where she spent three days learning how to deliver a fully packaged, one-year college accounting curriculum for her high school students. This is the first year the class was offered by Xavier.

Rob Dubberly chaired the committee composed of Rufus Glasper, Mark Landy, Bruce Nordstrom, Peggy Ullmann and Cindie Hubiak. Randy Fletchall and James Susa were approved as life members by the board.

Service Tax Strategy Board members engaged in a spirited conversation about taxing personal services. Cindie shared information from a meeting the Society led with a number of other organizations.

Accountancy Board Consolidation Board members reviewed and provided input on the recommendations from the Arizona Department of Administration’s Nonhealth Regulatory Board and Occupational Licensing Study, which included recommendations that could affect the Accountancy Board.

Strategic Plan Update Cindie provided an update on the progress to achieve the Society’s strategic measurements. She also relayed several notes of appreciation from members who attended the showing of the movie “The Accountant,” hosted by the Society.

A Day in the Life

Support the Profession You can make a difference by donating to the Arizona CPA Foundation for Education & Innovation. Your donation will assist us in granting scholarships to accounting students in Arizona.

Donate now at www.ascpa.com/foundation

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AZ CPA DECEMBER 2016

Michael Chesin, Julia Miessner and Nancy Thomas shared the challenges and joys they experience in their life and job.

If you have questions or would like additional information, please contact Cindie Hubiak at (602) 324-2888; AZ toll free at (888) 237-0700, ext. 203; or chubiak@ ascpa.com.

A Dash of SALT

Major Changes to Arizona’s Exemptions For Sales to Nonresidents This month’s state and local tax (SALT) column addresses recent legislative changes that significantly restricted Arizona’s transaction privilege (sales) tax exemption for proceeds from sales to nonresidents, clarifies that the changes did not affect Arizona’s exemption for interstate and foreign transactions, and explains how to document Arizona’s exemption for sales in interstate or foreign commerce.

For many years, Arizona offered a broad sales tax exemption for “sales to nonresidents of this state for use outside the state if the vendor ships or delivers the tangible personal property out of this state.”

The exemption applied to sales of all types of tangible personal property, and it even applied to sales to nonresidents who were visiting the state as long as their vendor shipped the property sold outside the state for use outside the state.

Major Recent Limitation to the Exemption Effective January 1, 2015, Arizona limited its sales tax exemption for sales to nonresidents to sales of motor vehicles to nonresidents by a motor vehicle dealer who delivered the vehicle to a destination outside the state.

Minor Recent Expansion of the Exemption In 2016, the State Legislature added an exemption that enables nonresidents to purchase “works of fine art,” as that term is statutorily defined, at art auctions or from galleries in Arizona for use outside the state tax-free as long as the vendor ships or delivers the item to a destination outside the state. This new exemption went into effect on September 1, 2016.

Even with the minor expansion of Arizona’s exemption for sales to nonresidents, it is still just a vestige of what it was before 2015. Nonresidents are no longer allowed to purchase anything they want tax-free while visiting the state as long as the vendor ships the items they purchase out-of-state.

by James G. Busby, Jr., CPA

James G. Busby, Jr., CPA, is a state and local tax attorney at The Cavanagh Law Firm. Busby previously worked in the SALT departments at Arthur Andersen and Deloitte & Touche. Before entering private practice, Busby was in charge of all transaction privilege (sales) tax audits at the Arizona Department of Revenue.

If you have any questions, please contact the author. He can be reached at (602) 322-4146 or JBusby@CavanaghLaw.com.

Sales in Interstate or Foreign Commerce Are Still Exempt While Arizona vendors are no longer able to sell as many items tax free to nonresidents who visit the state, Arizona’s exemption for sales in interstate or foreign commerce was not affected by the recent legislative changes because the exemption for sales in interstate or foreign commerce is based on the due process and commerce clauses of the U.S. Constitution.

When an Arizona retailer receives an order from a location outside the state and ships or delivers the product to a location outside the state for use outside the state, its receipts from the sale qualify for Arizona’s exemption for sales in interstate or foreign commerce.

DECEMBER 2016 AZ CPA

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Upcoming ASCPA Conferences

Accounting & Reporting Standards Conference

Governmental Accounting Conference

January 11, 2017 Black Canyon Conference Center

February 3, 2017 Arizona Biltmore Resort

This conference is now offered both in-person and as a webcast.

This conference is designed to bring practitioners current with the accounting and reporting standards of the profession. Topics include: • • • •

• •

Financial Storytelling Accounting and Auditing Update Cyber Security Complaints Against CPAs and How to Avoid Them: Real Life Examples From Complaints Filed With the AZ State Board of Accountancy A Closer Look at the New Leases Standard How to Identify Red Flags in Asset Misappropriation Schemes

This conference is designed for CPAs, auditors and accountants in federal, state, local and tribal governments to provide insights and understanding about new developments in governmental accounting and auditing. Topics include: • • • •

• •

•

Learn more at www.ascpa.com/ conferences 10

AZ CPA DECEMBER 2016

• • •

Fraud Risk Management & COSO: Past, Present & Future GASB Update – The Blue Covers Healthcare Impact on Government and Consumers Arizona’s Economy and Universities: Where We Are Now and What is Ahead GASB Update – Current Projects Using Emotional Intelligence to Enhance Leadership Qualities Updates and the Changing Environment within the Municipal Bond Market GAO’s Fraud Risk Management Framework An Action Plan for Information Security Uniform Guidance: Two Perspectives

Documenting Sales in Interstate or Foreign Commerce To substantiate Arizona’s exemption for sales in interstate or foreign commerce, the Arizona Department of Revenue (Department) recommends particular documentation.

According to the Department, suitable records for substantiating the receipt of an order from out-of-state may include purchase orders, letters, or written memoranda on the receipt of orders placed by telephone. Suitable records for substantiating out-of-state shipments include: • internal delivery orders supported by receipts of expenses incurred in delivering the property and signed on the delivery date by the person who delivers the property; • common carrier’s receipt or bill of lading; • parcel post receipt; • export declaration; • receipt from a licensed broker; or • proof of export or import signed by a customs officer.

Practice Tip Significant statutory changes and limitations to Arizona’s exemption for sales to nonresidents recently were implemented, and it is easy to confuse Arizona’s exemption for sales to nonresidents with its exemption for sales in interstate or foreign commerce.

Tax professionals should help guide their clients through the changes to Arizona’s exemption for sales to nonresidents and help distinguish Arizona’s exemption for sales to nonresidents from its exemption for sales in interstate or foreign commerce. n

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In Good Company

Lifetime Achievements and New Beginnings Rufus Glasper, Ph.D., CPA, CGFM, Receives Boy Scouts Lifetime Achievement Award and Reflects on His New Position at the League for Innovation After 30 years in leadership roles, including CFO and Chancellor at Maricopa Community Colleges, Rufus Glasper, Ph.D., CPA, took on a new role this past spring as president and CEO of the League for Innovation in the Community College (League). The League is an international nonprofit organization with the mission to cultivate innovation in the community college environment.

“I have gone from managing 13,000 people, to managing 13 people,” laughs Glasper. “I’m excited to work on new initiatives and focus on student success -— on great ideas and transformative changes. Of course it is different now, when you come up with some great ideas and turn around and realize that you have no one to do that for you. You are looking at yourself!”

“In many ways, I didn’t appreciate what a nonprofit goes through to accomplish their missions. I have served on lots of nonprofit boards, but trying to lead one is different.

“Now I get the opportunity to talk from a new perspective. In my previous position, I could educate, but I could not advocate because I was receiving revenues from the state. Now, I can speak on what I think is in the best interest

of community colleges. It frees me up to be in the space of examining what does student success really look like?

What is transformative innovation and how can it be sustained? We have been fortunate to get support from people like Joe Biden and President and Michelle Obama. Because of this support, we have done some things in the last seven years that we haven’t done in the past 25 years.

“I came into the system with the goal of becoming the CFO of Maricopa Community Colleges (MCC) and after that goal was reached, I became the executive vice chancellor, and then the chancellor, and I stayed in that seat for 13 years.

“When I started, there were 130,000 students, at our highest point we served 275,000 students. We had become more efficient – we had to make some cost effective moves, but over time quality can suffer. Then the state budget director told me that the state was cutting funding to the MCC system.

I asked, ‘Why would you do that to the number one provider of workforce training to the state?’

“That is not the message you want to hear, but it is the environment of community colleges across the country, and we try to figure out every way to keep open access to our students.

“The best thing about focusing on the financial aspects, and the thing that I am most proud of, is I am leaving the MCC systems, one of the largest systems in the country, with a Triple A bond rating from all three houses, with zero funding from the State of Arizona. During the recession, we were one of the only institutions to not have one zero day – not one day without pay.

“I’ve often been accused of being too conservative. Someone asked me if I ever do anything spontaneous.

And I said, ‘to you it may appear to be spontaneous, but no I don’t! Everything is planned!’ When you have 13,000 lives and a quarter of a million students’ lives at stake, you don’t make compulsive decisions. I may make some decisions that some would say are risky – but they are measured and calculated.”

DECEMBER 2016 AZ CPA

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New ASCPA Mentor Program Assist someone or get guidance in reaching your personal and professional goals through the ASCPA’s new Mentor Match program.

The ASCPA is launching a new mentoring program and is looking for members who are interested in mentoring and/or being mentored.

Why mentor?

• Do you enjoy coaching and helping others?

• Have you learned a lot of lessons throughout your career that you would like to share with others?

• Is strengthening the future of the CPA profession important to you?

Why would you want a mentor?

• Do you often encounter situations that you would like to discuss with someone who has been there?

• Are you thinking of a career change or are you feeling stuck and would like some guidance through your transition?

• Have you taken over new responsibilities and could use more direction?

The mentoring program is flexible with options for inperson or virtual mentoring. Each mentor/mentee match will determine when and how often they will meet. We recommend that you spend at least one hour each month with your mentor/mentee and make a minimum six-month commitment to provide and receive the best experience.

Become a mentor or mentee today at www.connect.ascpa. com. Click on Engage in Mentoring in the navigation bar and choose “About Mentoring.” Follow the steps to sign up as a mentor or mentee.

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AZ CPA DECEMBER 2016

Glasper got his CPA so he could move into the CFO position and it has served him well. “Getting my CPA really broadened my exposure to other individuals in private practice and government and industry. Having a CPA in education was kind of an anomaly at the time. My CPA credential was received extremely well by the chancellor of MCC 30 years ago. He really liked the fact that he could count on me, in fact, he said: ‘If anything goes wrong around here financially, I’m going to hold you responsible!’

“My CPA gave me access to circles that normally I would not have gravitated to. Being involved in the ASCPA and the AICPA also gave me more exposure.”

Glasper has gotten a lot of exposure.

Over the years, he has received many honors and awards including: ASCPA Life Membership, Thurgood Marshall Award Of Merit, The Anti-Defamation League’s Community Partnership To Fight Hate Jerry J. Witosky Torch Of Liberty Award; The Victoria Foundation’s Advocate for Education Award, The Glendale Chamber Foundation/The City of Glendale Cesar Chavez Diversity Award, and The National Council On Black American Affairs Leadership Award, just to name a few. In October, he received the Lifetime Achievement Award from the Boys Scouts of American Grand Canyon Council.

“Scouting was a part of my family growing up,” says Glasper. “When you live in the suburbs of Chicago, you don’t know much about camping. Scouting gave me exposure to the national forests and to backpacking. I support the mission of the scouts and the communities they are now reaching out to, and I believe they can help change our future.”

His volunteer roles, community and board service positions are numerous, including serving on the boards of the Arizona Community Foundation, the Greater Phoenix Economic Council, and on the board and as past chair of the ASCPA. Glasper is married and has two daughters and one grandson. n — Patty Gannon.

Managing Fraud Risk

by David L. Cotton, CPA (in VA), CFE, CGFM “Fraud can’t happen to us. We only hire people we trust.”

That’s what most organizations think. One of our most important jobs as accountability professionals is to disabuse our organizations and clients of this notion. Fraud is almost always devastating to an organization. Often, in addition to the monetary and reputational damage, the sense of betrayal and loss of trust in employees and leaders can have long-lasting deleterious— even catastrophic—impacts.

Devastating frauds can be prevented. And small frauds can be detected before they become devastating frauds. For well-run organizations that make a commitment to protecting stakeholder assets, fraud risk management guidance is available.

Managing fraud risk is a systematic process that has benefits beyond protecting assets and reputations.

Further, with the 2013 revision and update of COSO’s 1992 Internal Control Framework, a specific focus on fraud risk management became an explicit requirement for COSO followers.1

The 2013 COSO Internal Control Framework and Fraud Risk Management The 2013 COSO Framework includes (along with its three internal control objectives and five internal control components) 17 internal control principles. These principles represent the “fundamental concepts associated with each component.”

The 2013 COSO Framework’s Principle 8 is:

The organization considers the potential for fraud in assessing risks to the achievement of objectives.

In response to issuance of the 2013 COSO Framework, organizations began trying to implement its new principles and seeking guidance on how to comply with Principle 8.

Many organizations — even those that had been conforming to the 1992 framework for 21 years — were taken aback by this new fraud addition. Since COSO’s roots were fraud-focused (the Treadway Commission Report was titled The National Report on Fraudulent Financial Reporting, after all), wouldn’t fraud risk have always been the central focus of the framework? Shouldn’t a sound system of internal control protect an organization from fraud? Perhaps. It depends on how organizations viewed and implemented the framework.

It is one thing to design a system of baseline controls to guard against unintentional errors and misstatements, for example, to install checks and balances, use computer programs to ensure accuracy, require management approvals, segregate duties, and pre-approve vendors. It’s a different matter, however, to design a system that protects against intentional misstatements and fraudulent transactions.

When organizations consider intent, controls designed to guard against unintentional errors or misstatements may no longer do the job. For example, it is possible to deliberately circumvent checks and balances, surreptitiously alter computer programs, forge managerial approvals, override segregation of duties, and add bogus vendors to an approved vendor list.

COSO Principle 8 warrants that all organizations pause and reconsider the adequacy of their controls by asking a simple extra question with respect to every control: Is this control adequate if someone tries to intentionally override or circumvent it? Another— more important—consideration regarding the establishment of Principle 8 is to prompt all well-run and forward-thinking organizations to address fraud risk in a more comprehensive and proactive manner.

DECEMBER 2016 AZ CPA

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It is likely that many organizations following the 1992 COSO framework had not specifically and explicitly considered fraud risk as part of their internal controls and that many of them assumed that baseline controls were more than sufficient.

COSO Principle 8 warrants that all organizations pause and reconsider the adequacy of their controls by asking a simple extra question with respect to every control: Is this control adequate if someone tries to intentionally override or circumvent it? Another—more important—consideration regarding the establishment of Principle 8 is to prompt all well-run and forward-thinking organizations to address fraud risk in a more comprehensive and proactive manner.

The New COSO/ACFE2 Fraud Risk Management Guide To meet the demand for more comprehensive guidance on fraud risk management, COSO and ACFE formed a task force in January 2015. This 31-member task force’s mission was to

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AZ CPA DECEMBER 2016

update the 2008 publication Managing the Business Risk of Fraud—A Practical Guide (MBRF)3 to make it consistent with and supportive of the 2013 COSO Framework.

The task force completed its efforts by the end of 2015, and this new Fraud Risk Management Guide (FRMG) was published in September 2016. The

FRMG is available for purchase at either the ACFE or COSO websites. The executive summary can be downloaded at no cost at http://www.cottoncpa.com/ outreach/thought-leadership.

The graphic above illustrates the overall fraud risk management process.

In addition to aligning with the 2013 COSO Framework’s internal control

components, as shown, these five principles are supported by numerous points of focus that are consistent with those in the 2013 COSO Framework.

To protect stakeholder assets and interests from fraud risks, organizations will carry out the five essential processes explained in the FRMG.

Deterring Fraud Investigating and remediating frauds is expensive. Designing and maintaining preventive and detective controls also comes with a cost. Deterring fraud — establishing an atmosphere and perception that the likelihood of getting caught is so high that it scares potential fraud perpetrators away — is by far the best situation in terms of managing fraud risk.

Fraud deterrence can be achieved when an organization (a) establishes a rigorous fraud governance process and ensures that employees are aware of that process, (b) conducts an aggressive fraud risk assessment periodically, (c) designs, implements, and maintains effective fraud prevention and detection control processes and procedures, and (d) takes swift actions against those who attempt to commit fraud.

Fraud deterrence can be achieved when an organization (a) establishes a rigorous fraud governance process and ensures that employees are aware of that process, (b) conducts an aggressive fraud risk assessment periodically, (c) designs, implements, and maintains effective fraud prevention and detection control processes and procedures, and (d) takes swift actions against those who attempt to commit fraud.

According to the ACFE: The presence of anti-fraud controls was correlated with both lower fraud losses and quicker detection … [W] here controls were present, fraud losses were 14.3%–54% lower and

frauds were detected 33.3%–50% more quickly.4 The guide contains an executive summary and five chapters—each explaining one of the five fraud risk management principles. In addition, the guide contains valuable appendices as well as links to additional, interactive tools that help facilitate the entire process.

Are the Costs Worth the Benefits?

Fraud risk management might sound expensive and time-consuming and will take time away from other seemingly more important activities that the organization needs to accomplish.

Sending the signal to your stakeholders that your organization is committed to the strongest fraud risk management processes conveys an important message: your money, your time and effort, and your trust are safe with us.

There are some additional benefits of implementing a fraud risk management program beyond “just” minimizing fraud risk. The risk assessment gives the organization a much better understanding of how it operates.

Importantly, having strong controls in place protects honest employees. Finally, the best, most trusted, and most respected organizations take proactive measures like fraud risk management.

Sending the signal to stakeholders that the organization is committed to the strongest fraud risk management processes conveys an important message: your money, your time and effort, and your trust are safe with us.

That message will attract more investments, more business, more donations, more volunteer efforts, more trust and more respect.

Still Not Sure There is a Need For a Fraud Risk Management Program in Your Organization?

Fortunately, there is an easy way

to find out if making the investment in fraud risk management is the right thing for your organization.

Download the guide’s five “scorecards” at www.cottoncpa.com/outreach/thoughtleadership/. These scorecards are useful for assessing how good the organization’s fraud risk management process actually is right now. They provide key attributes of strong fraud risk governance, risk assessments, control activities, reporting and investigations, and monitoring.

Each attribute can be scored as: red (“we have a problem”), yellow (“we are making progress but have room for improvement”), or green (“we have fully implemented this attribute”). It should only take about 20 minutes to complete each scorecard (perhaps longer for larger organizations). If the results include a lot of red, it is appropriate to be worried since it is likely that the organization is vulnerable to fraud. n

Ennotes: 1. COSO is the Committee of Sponsoring Organizations of the Treadway Commission. (The COSO member organizations are the American Accounting Association, American Institute of Certified Public Accountants, Financial Executives International, The Association of Accountants and Financial Professionals in Business, and The Institute of Internal Auditors.) The Treadway Commission issued its Report of the National Commission on Fraudulent Financial Reporting in 1987. In 1992, COSO issued its initial Internal Control—Integrated Framework (the 1992 framework).

The 1992 framework quickly became the “best-practice” roadmap for designing, implementing, and maintaining a system of internal control. All publicly traded companies in the U.S. and most forward-thinking non-public companies, nonprofit organizations, and academic institutions also adhered to that framework.

2. The Association of Certified Fraud Examiners (ACFE) is the world’s largest anti-fraud organization and premier provider of anti-fraud training and education. Together with nearly 80,000 members, the ACFE

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is reducing business fraud worldwide.

The ACFE administers the Certified Fraud Examiner (CFE) credential.

3. In 2008, the ACFE, IIA, and AICPA published Managing the Business Risk of Fraud: A Practical Guide.

That guide explains how to establish a comprehensive fraud risk management program consisting of fraud risk governance, fraud risk assessments, fraud prevention and detection controls, and an investigation and reporting process.

4. See ACFE’s 2016 Report to the Nations, page 5. Fraud Risk Management R1 10-23-16.docx — www.acfe. com/rttn2016.aspx.

Dave Cotton, CPA (in VA), CFE, CGFM, is chairman of Cotton & Company, LLP, in Alexandria, Virginia. (www. cottoncpa.com) Cotton chaired the ACFE/ COSO task force and was a principal author of the COSO/ACFE Fraud Risk Management Guide. He will be a presentor at the ASCPA’s Governmental Accounting Conference on Feb. 3, 2017.

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AZ CPA DECEMBER 2016

Emotional Intelligence Enhancing Your Leadership Skills

by Brittney Williams, CPA, CGFM How is intelligence measured? We typically consider an individual’s IQ score or measure someone’s book smarts. Emotional intelligence could possibly be even more important than the technical skills. A recent study on CareerBuilder indicated that 71% of employers value emotional intelligence over IQ. Do you consider yourself emotionally intelligent? Which do you consider more valuable to your professional success?

As CPAs, we are often called upon for our technical expertise, however, in a client service-focused industry, it is becoming increasingly important that individuals have the ability to manage emotions; those of staff, clients and most importantly themselves, in a professional manner. Throughout our careers we are constantly building our “toolkit,” striving to become better professionals. The toolkit gets filled with a wide range of tools we obtain from a presentation, read in an article, or, often times just by observation. Emotional intelligence is perhaps the most important tool we can develop to be successful in today’s business world. Emotional intelligence is so valued in today’s business culture that studies have shown that more than 90 percent of top performers have a high amount of emotional intelligence. Emotional intelligence becomes increasingly more important as an individual advances in his or her career. The increased responsibility and leadership result in that individual impacting significantly more people throughout the organization.

Emotional intelligence first became a phenomenon in the mid-1990s with research done by Daniel Goleman, Ph.D. His ideas and research where hailed by the

Harvard Business Review as a “groundbreaking, paradigm-shattering idea” and changed the way businesses looked at employees for hiring, professional development and promotions. Today there is an abundance of literature and research available on the topic, and it has spread throughout the business world as one of the important tools for professional development.

Fortunately, emotional intelligence can be developed, in contrast with the traditional IQ score, which essentially remains unchanged throughout most of our adult lives. Emotional intelligence can affect all areas of life, as human relationships are at the heart of the concept. Critical skills in business such as time management, tolerance of change, communication, social skills, flexibility, anger management and, not to mention, the ability to manage stress, all can be affected by an individual’s ability to develop the skills associated with emotional intelligence. Emotional intelligence skills are those intangible qualities that you look for in a new hire, or that make you naturally gravitate toward someone as a mentor, or a leader.

Interpersonal skills allow you to conduct a difficult, yet productive, conversation with a positive outcome. The key component of having high emotional intelligence is that an individual is aware of his/her emotions and is able to regulate them, and this awareness and regulation are directed both inward to one’s self and outward to others.

Emotional intelligence, as it was originally presented in Daniel Goleman’s books Emotional Intelligence: Why It Can Matter More than IQ and Working with Emotional Intelligence, consists of five categories in which individuals can enhance their emotional intelligence: • Self- awareness — understanding your own strengths and weaknesses and the impact that your attitude and actions can have on others.

• Self-regulation — being able to control one’s reactions to others.

• Motivation — not just for money or prestige, but for something greater.

• Empathy — the ability to have

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true compassion for another allows people to be of service and connect with others.

• Social Skills — this skill can come more naturally to some individuals.

Self-assessments and tools to enhance skills in each of the five elements are readily available today.

Emotional intelligence can affect not only our performance at work, but our home relationships and physical and mental health. Learning how to manage stress, read others and create healthy internal responses, are all part of developing one’s emotional intelligence. Group trust, cooperation and efficiency is increased when individuals are displaying higher degrees of emotional intelligence.

Very early on in our professional lives, most of us learn which areas we are most successful in and those areas that require some extra attention. The willingness to look at ourselves and our weaknesses and make a concerted effort to improve our weaknesses is what will set us apart as leaders. When you look to top management in your organization, or to the leaders whom you respect the most, what do you think it took for them to get to where they are today?

Their mistakes allowed for self-evaluation and reflection and opportunities to improve their approaches. Good leaders strive to improve their interactions with others, to create a positive impact on those around them and on their organization as a whole. Those leadership qualities are not developed overnight, as self-improvement is a continuous process; one never graduates.

Our behaviors and patterns are so engrained in us, it’s often difficult to even recognize how our reactions to situations can be improved. Emotional intelligence can be approached like any new skill, through practice. Changing our thought patterns and behaviors is the same. At first, we may feel uncomfortable exhibiting a different behavior, but eventually it becomes more natural.

In addition to self-assessment tools, asking for feedback from others can be a great way to know how to improve.

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Emotionally intelligent people have common habits that can be imitated.

Individuals with high emotional intelligence often focus on the positive and surround themselves with positive people; they are always looking for ways to make life more fun, happy and interesting. They are able to set boundaries for themselves. They are forward thinking and willing to let go of the past. People with high degrees of emotional intelligence are continually learning and seeking knowledge.

Everyone can work to cultivate these tools. In our fast-paced environment with high demands on our time and resources, let us not forget to take the time to work on becoming the kind of leaders we look up to.

Here are a few thoughts from Dr. Norman Rosenthal* that, if applied consistently, will certainly help you sharpen the emotional intelligence in your toolkit.

1. Listen – don’t interrupt or change the subject.

2. Don’t judge or edit your own feelings too quickly.

3. Connect your feelings with other times you felt this way.

4. Connect your feelings with your thoughts.

5. Listen from within, listen to your body.

6. It’s okay to ask. If you don’t know how you are feeling, ask someone else.

7. Focus in on your unconscious feelings.

8. Reflection is key. Ask yourself how do I feel today?

9. Written reflection … Journal how you feel today.

10. Know when enough is enough. n * Norman Rosenthal: Helpguide.org.

Building the Emotional Intelligence of Groups, by Vanessa Urch Druskat and Steven B. Wolff.

Brittney Williams, CPA, CGFM, is with Heinfeld, Meech & Co. and is an ASCPA member. She will be speaking about this topic at the Governmental Accounting Conference on Feb. 3, 2017.

AZ CPA Quick Quiz You’ve Read It, Now Get Credit Take this quiz online or submit this hard copy on AZ CPA content.

Receive a score of 70% or more and earn one hour of CPE credit in specialized knowledge. It’s that easy!

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Members: $25 Nonmembers: $40

Online Access Login to www.ascpa.com and go to CPE/OnDemand CPE Quick Quiz to access links to all active quizzes. Purchase quiz and the quiz link and password will be emailed to you. Your results will be sent immediately after completing, and certificates are emailed within two business days.

Hard Copy Please select one answer for each question. Fill out registration/payment information below and mail or fax to the Society office. Quiz results and certificates will be emailed to the address provided on the registration form. *This quiz will be available until December, 2017. Please note that users have three attempts to pass the quiz with at least a 70% score.

December 2016 Issue of AZ CPA* 1. In the Chair’s message, soft skills are attributed to what percentage of long-term success? m 70-75% m 75-80% m 100% 2. The major recent limitation to Arizona’s exemptions is the sales of this product: m Furniture m Fine Art m Motor Vehicles 3. Which of these topics will be presented at the Governmental Accounting Conference? m FASB m Information Security m Networking 4. Having a CPA license helped Rufus Glasper: m Broaden his exposure in private practice, government and industry. m Move into the CFO position of MCC. m Both of the above.

5. Where might one go to gain knowledge from the experience of others in order to enhance their professional goals? m The mall m Join the ASCPA Mentor

Program m The library 6. COSO’s 1992 Internal Control framework was revised to include

a focus on fraud risk management for COSO followers in this year: m 2011 m 2012 m 2013 7. What is the best situation in terms of managing fraud risk? m Investigating and remediating m Deterring through the perception that getting caught is likely m Maintaining preventative controls 8. Using the scorecard assessment for Fraud Risk Management attributes, a red card means: m There’s room for improvement m We have a problem m We’ve fully implemented this attribute 9. The following is not one of Daniel Goleman’s five categories to enhance emotional Intelligence: m Self Regulation m Empathy m Meditation 10. People with high degrees of emotional intelligence are: m Continually learning m Happy with the status quo m Focused on positivity

Quick Quiz Registration Name: ____________________________________________________ Email:_____________________________________________________ Telephone: _________________________________________________

Payment

m Member: $25 m Nonmember $40 Checks: Please make payable to: The Arizona Society of CPAs Credit Card:

m Visa m MasterCard m American Express

Credit Card #: _______________________________________________ Expiration Date: _____________________________________________ Name on Card. _____________________________________________ Mail to: ASCPA, 4801 E. Washington St. Suite 225-B, Phoenix, AZ 85034-2021; fax to (602) 324-6043; scan and send to ASCPACPE@ascpa.com.

DECEMBER 2016 AZ CPA

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Classifieds Business Opportunities/ Practices for Sale Sole Practitioner Seeks Succession Plan — North Central sole practitioner, tax-oriented with some write-up, compilation and consulting. $300K+ annual revenues consisting of 25% individuals, 65% corporate, partnership, S corporations and trusts and 10% write up. Typical practice serving many long term family owned businesses and owners. Looking to explore merger/buyout in 2016 or 2017.

Will transition 1-2 years. Principals only, please respond to: Centralphxcpa@gmail. com.

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AZ CPA DECEMBER 2016

Bachelor’s degree in Accounting/ Finance; CPA license; public accounting experience; minimum of 2-5 years of work experience in commercial business/working with commercial clients; proven manager experience; and an entrepreneurial spirit to assist in the growth of our commercial niche. If you are ready for a great opportunity to take your career to the next level and join an organization with an impressive culture, benefits and compensation package, visit www.redw.com!

AUDIT SENIOR ASSOCIATE — COMMERCIAL FOCUS — UP TO $10K SIGN-ON BONUS — REDW — You will oversee the entire audit process – from planning to issuance of the auditor’s report – with guidance from department leaders. This position includes a high level of client interaction and leadership opportunities, allowing you to develop your independent auditor judgement/technical skills. You will need a Bachelor’s degree in Accounting/ Finance; passed/conditioned for the CPA exam; minimum 2-5 years public accounting experience; knowledge of AICPA, GAAP, FASB. If you are ready for a great opportunity to take your career to the next level and join an organization with an impressive culture, benefits and compensation package, visit www. redw.com!

CPA OPPORTUNITY— Growth opportunity for the right CPA. Small firm specializing in closely-held businesses and their owners is looking for CPA with at least 5 years experience. Complex tax services, compilations, and reviews. Ideal candidate will be self-motivated and able to manage client relationships. Central Phoenix location, full benefits package, and long-term growth potential. Email resume and cover letter explaining why this opportunity appeals to you to steven@pacecpas.com.

N O RT H S C O T T S D A L E F I R M SEEKING AN EXPERIENCED SENIOR TAX PREPARER — Partridge & Associates CPAs PLC — Seeking an experienced Senior Tax Preparer

to prepare higher end business and personal tax returns. Important to be a team player with management growth opportunity. Primary responsibilities include: • Preparation of higher end returns • Assist Tax Manager with review of returns • Respond to IRS and other taxing authorities as needed • Tax meetings • Experience with QuickBooks • Experience with tax software. Prefer Bachelor’s degree with emphasis in Tax/Accounting, or other related field.

Current E/A or CPA. 3+years of recent experience in public accounting. Salary depending upon experience. http://www. partridgecpas.com.

SR. GLOBAL TAX SPECIALIST – INTERNATIONAL – Isagenix — The Sr. Global Tax Specialist is responsible for providing expertise in global tax affairs including domestic and international tax, compliance, tax audits and other corporate projects. This position will be accountable for maintaining and preparing all aspects of tax compliance and ensuring timely, complete and accurate reporting. The role requires proficient knowledge of tax as it serves to provide support to leadership in making various business operation decisions. How to apply: https://careersisagenix.icims.com/jobs/1689/sr.-globaltax-specialist---international/job.

PART-TIME CPA NEEDED IN AHWATUKHEE — Mountainside CPA LLC — Part-time CPA needed for yearround tax preparation work. Hours are very flexible. Proseries tax software experience a plus. Applicants should have 5+ years experience in individual and business tax preparation. Contact: http://www.mountainsidecpa.com.

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