November/December 2017

TR TH IE E N N 12 NIA J C SE / P E 31 L E E / PA 1 N G 7 D E S 3

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THE NEW NORMAL: BUILDING A DIVERSE AND THRIVING PROFESSION

Page 4 HOW DIVERSITY AND INCLUSION IS SHAPING THE CPA PROFESSION Page 8 AN ACCOUNTANT’S PERSPECTIVE THROUGH THE YEARS Page 10 MANAGING MILLENNIALS AND BABY BOOMERS IN TODAY’S WORKFORCE

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contents N OV E M B E R / D E C E M B E R 2 0 1 7

THE MAGAZINE OF THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

4 How Diversity and Inclusion Is Shaping the CPA Profession RALPH RALPH ALBERT ALBERT THOMAS, THOMAS, CGMA CGMA Chief Chief Executive Executive Officer Officer & Executive & Executive Director Director rthomas@njcpa.org rthomas@njcpa.org ELLEN ELLEN C. C. McM SHERRY, cSHERRY, CGMA CGMA Chief Chief Operating Operating Officer Officer emcsherry@njcpa.org emcsherry@njcpa.org DON DON MEYER MEYER Chief Chief Marketing Marketing Officer Officer dmeyer@njcpa.org dmeyer@njcpa.org RACHAEL RACHAEL BELL BELL Managing Managing Editor Editor rbell@njcpa.org rbell@njcpa.org KATHLEEN KATHLEEN HOFFELDER HOFFELDER Content Content Editor Editor khoffelder@njcpa.org khoffelder@njcpa.org MARC MARC L. L. REIN REIN Multimedia Multimedia Specialist Specialist mrein@njcpa.org mrein@njcpa.org

From new programs developed to encourage diversity hiring to educating employees on the awareness of differences, diversity and inclusion has come front and center in the accounting profession. Find out what programs your company could incorporate.

8 An Accountant’s Perspective Through the Years

READ READ NEW NEW JERSEY JERSEY CPA CPA ONLINE ONLINE ATAT NJCPA.ORG/ NJCPA.ORG/ NEWJERSEYCPA NEWJERSEYCPA DEDESIGN/ S IGN/ P RODUCTI P RODUC ON T I ON / / A DVERTISING ADVERTISIN G THE THE YGS YGS GROUP GROUP 3650 3650 WEST WEST MARKET MARKET STREET STREET YORK, YORK, PAPA 17404 17404 Advertising Advertising Contact: Contact: LAURA LAURA GAENZLE GAENZLE ACCOUNT ACCOUNT EXECUTIVE EXECUTIVE 717-430-2351 717-430-2351 laura.gaenzle@theygsgroup.com laura.gaenzle@theygsgroup.com

Learning how to manage all ages in the workforce is a challenge, but accounting firms and corporate accounting departments are realizing all groups will have to make some concessions to get along. Having a diverse workforce according to age is just as needed as diversity by gender or race.

Chewing down No. 2 pencils may be a thing of the past, but busy tax seasons are still prevalent. Learn how one accountant has changed along with the profession, and see what is necessary for old-time bosses and new mentors to co-exist.

2 CLOSE UP

Five Things I Learned from the NJCPA Bylaws Vote

THE THE NEW NEW JERSEY JERSEY SOCIETY SOCIETY OFOF CERTIFIED CERTIFIED PUBLIC PUBLIC ACCOUNTANTS ACCOUNTANTS 425 425 EAGLE EAGLE ROCK ROCK AVENUE AVENUE SUITE SUITE 100, 100, ROSELAND ROSELAND NJNJ 07068 07068 973-226-4494 973-226-4494 | NJCPA.ORG | NJCPA.ORG #NJCPAMAG #NJCPAMAG

10 Managing Millennials and Baby Boomers in Today’s Workforce

12 ACCOUNTING, AUDITING & ATTEST

Cognitive Technologies and the Impact on Audits 13 ADVOCACY & LEGISLATIVE ISSUES

Improving New Jersey’s Fiscal Outlook Via the Lottery 14 BECOMING A CPA

The Value of Becoming a CPA and the Struggles to Get There 15 BUSINESS ADVISORY SERVICES

Managing Clients’ Books with QuickBooks Online Accounting

16 CORPORATE ACCOUNTING

Analyzing Financial Statements: How CPAs Can Deliver Value 17 FIRM & PRACTICE MANAGEMENT

Moving from Hourly Billing to Value Billing 18 FORENSIC ACCOUNTING, LITIGATION SERVICES & BUSINESS VALUATION

Matrimonial Cases: Rising Above the Numbers 19 TAX

Ready or Not, Here They Come: New Centralized Partnership Audit Rules

20 TECHNOLOGY & INFORMATION MANAGEMENT

Four Productivity Apps Ideal for Smaller Firms and Their Clients 21 NJCPA NEWS

yy NJCPA Publishes Annual Report yy Join the Emerging Leaders Interest Group yy Tax Season Survival Tools 23 CLASSIFIEDS 24 MEMBER STORY

Vibert Wailoo, CPA

CLOSE UP

Five Things I Learned from the NJCPA Bylaws Vote

BY RALPH ALBERT THOMAS, CGMA, CEO AND EXECUTIVE DIRECTOR

At the NJCPA, we remain committed to promoting and protecting the CPA, our profession and its foundation of quality and ethics. Our members have, and always will, come first. We determine any new programs, policies or organizational changes with our members, never as an afterthought. Earlier this year, NJCPA members voted to turn down the proposed expansion of the Associate member category to include those who do not hold a CPA license. We heard you, loud and clear.

We stand by our members’ decision and are thankful for the number of participants who voted.

We also learned a few things along the way. These include: 1. THE VOTERS We need to do a better job of understanding our members before we bring an issue to a vote — on anything.

Specific voting stats: yy There were 2,617 votes cast: 1,646 voted no; 971 voted yes. yy Younger members, in general, were more supportive of the proposal. Millennials were more likely to vote for the bylaws changes with 46 percent voting no, compared to 65 percent of Baby Boomers voting no. yy The most recently licensed members voted in the majority for approval of the bylaws. Those most opposed to the bylaws vote were sole proprietors.

2. THE MESSAGE There was a misunderstanding of the proposed Associate definition, and

misinformation was posted on the Open Forum. There was a perception that the membership category would be open to virtually anyone. In fact, the proposed Associate category would only have applied to those accounting professionals who hold a bachelor’s degree or equivalent and meet specific employment criteria: owners or professional staff members of a CPA firm; corporate, government or college/university finance professionals; or full-time college/university accounting professors.

Administrative changes: yy Since the vote was all-or-nothing, administrative changes included in the proposed bylaws were also voted down and will be resubmitted for a new vote.

We should have split up the various elements of the bylaws changes so they could have been voted on individually.

3. THE MEDIUM While we used many mediums such as press releases, articles and social media to explain the bylaws changes, we should have listened more to your responses along the way and utilized other opportunities, such as in-person meetings, to discuss the proposal.

5. THE OUTCOME As a result of what we’ve learned during the voting process, we are developing more initiatives to reach out to members and have more contact in general via chapter and interest group meetings, online forums and in-person gatherings.

Coming soon, we plan to conduct a survey to garner your feedback.

In short, we’ve listened but we’re going to listen more.

We welcome your feedback. Please feel free to reach out to me at rthomas@ njcpa.org or 973-226-4494 ext. 232 or any of our staff at njcpa.org/staff.

4. THE TIMING It was not ideal timing for the communications about the proposal. We should have provided information sooner, allowed more time for the proposal to be reviewed/ discussed and provided more opportunities for discussion.

New Jersey CPA (ISSN 1534-6692) is published six times per year by the New Jersey Society of Certified Public Accountants, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068. Issue No. 66 Copyright © 2017 New Jersey Society of Certified Public Accountants. Annual membership dues include $9 for a one-year subscription to New Jersey CPA magazine. Members may not deduct subscription price from dues.

Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 425 Eagle Rock Avenue, Suite 100, Roseland, NJ 07068-1723.

The materials and information contained within New Jersey CPA are offered as information only and not as practice, financial, accounting, legal or other professional advice. The opinions expressed herein are those of the authors and not necessarily those of the New Jersey Society of CPAs. Publication of an advertisement in New Jersey CPA does not constitute an endorsement of the product or service by the New Jersey Society of CPAs.

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NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

THE NEW JERSEY TRIENNIAL ENDS 12/31/2017 YOUR CHECKLIST:

y y y

120 CPE credits New Jersey Law and Ethics Course Annual 20 CPE Credit Minimum

Learn more at njcpa.org/triennialfaqs.

HOW DIVERSITY AND INCLUSION IS SHAPING THE CPA PROFESSION

By KATHLEEN HOFFELDER, NJCPA CONTENT EDITOR

Just talking about diversity and inclusion (D&I) shows how far businesses have come. The concept used to be part of a human resources handbook that was never incorporated into everyday life. But today, D&I has become top of mind for all professions, particularly accounting.

Whether working in an accounting firm, as part of the CFO’s department, or as a sole practitioner, accountants have benefitted immensely from diversity in the workplace. Having a diverse office and espousing inclusion techniques generally makes for a well-rounded, more tolerant office environment. But it also has a practical, business application, too — diverse staff should help firms attract and retain more diverse clients.

WHY BE DIVERSE? By definition, diversity means having different elements, qualities or characteristics, which, when applied to people, means having more than one national origin, color, religion, socio-economic stratum or sexual orientation. An office environment with that mixture, therefore, should promote idea generation, innovation and participation. “When diversity is celebrated in any work environment, it

provides employees the assurance that the employer recognizes and embraces that people with different backgrounds, skills, attitudes and experiences bring fresh ideas and perceptions,” says Ann Marie Reyher, CPA, director of wealth structuring services at Lombard International.

EMPLOYEE SATISFACTION But can there be diversity without inclusion? Most accounting professionals would say no. “Diversity doesn’t work without inclusion. CPAs can be very diverse but if inclusiveness is not embedded into a firm’s culture, all the value of diversity is lost,” explains Imad Khoury, SPHR, national director of talent acquisition at CohnReznick. He notes that “diversity and inclusion have helped the profession with the fact that CPAs are now aware of the importance of a diverse workforce and creating an inclusive work environment.”

CONTRIBUTORS

In order of appearance

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ANN MARIE REYHER, CPA Director, Wealth Structuring Services Lombard International

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

IMAD KHOURY, SPHR National Director of Talent Acquisition CohnReznick

GLENYS MEREJO, CPA Director Citrin Cooperman

For Glenys Merejo, CPA, director at Citrin Cooperman, being a member of a diverse organization like the New Jersey Society of CPAs (NJCPA) has helped her build a great career in the accounting profession. Diversity, according to Merejo, has given her the ability to understand coworkers who are different than her, “not just race, gender or nationality but, more importantly, their personality, lifestyle, education and what makes them tick.” Taking this deeper dive into what coworkers are all about allows her to “create closer work friendships and employ their talent and experiences so that our work together can be more productive,” she says.

Diverse teams, in general, help to avoid the complacency of groupthink, adds Edward I. Guttenplan, CPA, CGMA, MBA, managing shareholder at Wilkin & Guttenplan, P.C., and 2017/18 president of the NJCPA. “They challenge the status quo and guard against settling for less-innovative or creative solutions to businesses’ complex problems. There is also the social and economic impact of providing opportunities to those in our communities who may have different cultural backgrounds or have otherwise found the pathway to economic success more challenging,” he says.

A diverse office also has a positive impact on retention and staff engagement, he notes. “Through diligent practice, patience and understanding, we have achieved a unique culture that celebrates diversity by honoring the differences in our multigenerational firm and opens the door to embracing all forms of diversity.”

Joan A. Kampo, SPHR, SHRMSCP, director of human resources at WithumSmith+Brown, agrees. If you surround yourself only with individuals who are just like you, it can inhibit progress, she says. “People from differing genders, races

EDWARD I. GUTTENPLAN, CPA, CGMA, MBA Managing Shareholder Wilkin & Guttenplan, P.C.

and backgrounds bring different experiences and viewpoints which can all come together to help solve problems as a team.”

According to Anthony Newkirk, senior manager of diversity and inclusion at the American Institute of CPAs (AICPA), diversity initiatives1 need to start with the c-suite and funnel down. “If your employer does not look to hire both entry-level staff and c-suite leaders of diverse backgrounds (including gender, age, ethnicity, etc.), you may want to reconsider your strategy.” He explains that “diverse leaders in the c-suite provide unique perspectives and serve as role models for younger diverse staff.”

Working in a diverse state like New Jersey also helps encourage companies to initiate diversity programs. Citrin Cooperman’s Merejo says “as one of the most diverse states in the country, diversity is not only a part of New Jersey, it is who and what we are.” In a dozen municipalities in Bergen County, for example, Hispanic populations more than doubled in the first half of this decade, while Asian populations in several other towns grew at a similar rate, according to press reports quoting U.S. Census Bureau survey information in 20162.

JOAN A. KAMPO, SPHR, SHRM-SCP Director of Human Resources WithumSmith+Brown

CLIENT BENEFITS In competing for business, how a firm relates to a client is crucial. Going an extra step, for example, and discussing local politics or, town news with a member of a client’s staff is appreciated, but having that same conversation in a client’s native language secures more of a bond.

With clients becoming more racially diverse, it is “good business sense and important to the success of any firm to hire individuals who reflect their customer base as it leads to a greater understanding and awareness of our clients’ needs,” agrees WithumSmith+Brown’s Kampo.

Lombard International’s Reyher notes that “the service professional needs to be ready to serve all types of clients as the percentage of diverse entrepreneurial clients rises.” She says, “it is always better to have multiple interpretations and approaches to be able to serve a greater variety of clients and situations, rather than everyone contributing the same thoughts and conclusions.” She adds, “an organization that harnesses diversity is able to draw upon the widest possible range of views and experiences so it can listen to and meet the changing needs of its end client.”

KENNETH BOUYER Diversity & Inclusiveness Recruiting Leader EY Americas

SHAUN BUDNIK, CPA Audit Innovation Leader KPMG

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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Accounting professionals, she says, can also learn how to be better managers when faced with diverse clients. For example, “a manager may be approached about conflicts and dynamics between employees and have to mediate between them.

When tackling this type of issue, or even an issue with a client, hearing about another’s experience can shed light on a life different than your own and provide you with a new perspective. When you evaluate your struggles, values and experiences, you can really begin to grasp where an individual is coming from and understand the why of their actions and behaviors,” says Reyher.

But an awareness of D&I benefits for staff and clients is not enough without actionable programs. As CohnReznick’s Khoury notes, “awareness has to be translated into actions at all levels of the organization to make D&I one of the business drivers.”

INITIATING CHANGE Many companies have embraced D&I programs aimed at women, minorities or certain age groups. EY, for one, creates specific programs that address every part of the recruiting pipeline. “We’ve kept a dedicated focus on attracting women and ethnically diverse students and professional hires and also focus on outreach to LGBT+, veterans and people with disabilities,” says Kenneth Bouyer, diversity and inclusiveness recruiting leader for EY Americas. He adds, “two thirds of our workforce are Millennials.”

EY also offers equal parental leave for new mothers and fathers, offering up to 16 weeks of fully paid time off when welcoming a child through birth, adoption, surrogacy, foster care or legal guardianship.

“Additionally, U.S. employees are also now eligible for a lifetime maximum of $25,000 per family to cover the cost of advanced reproductive technology procedures (i.e. in vitro fertilization), surrogacy and adoption fees. Equalizing parental leave allows both parents to thrive personally and professionally,” says Bouyer.

In support of people with autism, EY launched a neurodiversity program this year, hiring 14 individuals to serve as accounting support associates across the country. In other diversity and inclusion initiatives, it created EY Unplugged, which enables ethnically diverse staff to network and connect with one another.

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Other firms have internal programs to foster a better D&I culture. As CohnReznick’s Khoury explains, “with an established campus recruiting strategy, the firm’s D&I Council has been able to leverage D&I by bringing a diverse pool of candidates into the networking process as well as the interviewing and hiring process.”

PERSONAL REFLECTIONS Though diversity in the workforce has changed for the better, it still has a long way to go. As WithumSmith+Brown’s Kampo puts it, 10 years ago the accounting industry “seemed to still largely reflect the demographic of those who traditionally entered the accounting field — white males. Since then, the demographics have changed.”

She notes that there are many more female accounting students and definitely more women in the industry currently. “However, there still is a higher amount of turnover of females at the senior accountant to managerial levels, and that is a challenge that all firms must continue to be aware of, address and ultimately work to improve,” she says.

For CohnReznick’s Khoury, a culture of diversity in the workplace is a necessity. “I am passionate about the topic of D&I. As a Middle Eastern gay man in a traditionally conservative industry, D&I initiatives have allowed me to showcase how being accepted and included is the cornerstone of any organization.”

Shaun Budnik, CPA, audit innovation leader at KPMG, not only credits a diverse office with helping her be successful, but having diverse mentors as well.

“Having a mentor is about what valuable insight they offer, regardless of gender, race, religion or professional background,” she says. “My personal board was comprised of a female partner, a few male partners and a few professionals that worked outside of my company.”

As a founder of Wilkin & Guttenplan, Guttenplan knows first hand how to set up D&I programs. “We made it our focus to create a unique, multigenerational workplace that honors our diversity. We began our mission by embracing the ideas, work styles and methods of our younger generations. We found ourselves learning to consider and balance the needs of everyone, from seasoned partners to first-year staff,” he said. Simple differences came down to teaching younger

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

staff the importance of face-to-face meetings and training older staff on how to review files using digital mark-ups.

NEXT GENERATION Generation Z, those individuals born between 1996 and 2010, are already filtering into the workforce in either a full- or parttime capacity. This generation is entering the workforce at the most diverse time in history, so they are likely to adapt to D&I programs better than other age groups, but challenges still remain.

As WithumSmith+Brown’s Kampo notes, accounting students today come from all backgrounds and nationalities. “We are starting to see more diversity in the students who are majoring in accounting, which is a positive sign, but it will take a few years to see the impact in our workplaces.”

EY’s Bouyer adds that the best way to reach out to the next generation of accounting professionals is to connect with them at a young age. “Building a diverse talent pipeline starts at — or even before — the high school level, and it’s up to businesses and industries at large to attract this talent,” he says. And since accounting or professional services typically are considered “traditional” industries, Bouyer says we need to raise awareness about the tremendous opportunities that exist within the accounting profession.

It also makes sense to connect with non-accounting majors to see what they can bring to the table, he adds. “An important element of our early ID strategy is our commitment to ‘STEAM’ hiring; this focus is an evolution from the traditional ‘STEM’ subjects, including not only science, technology, engineering and math but also the arts, with a focus on hiring more women and non-accounting majors.”

CohnReznick’s Khoury expects positive changes in diversity and inclusion with the next generation of accountants. “In the next three to five years, diversity and inclusion will be embedded into everything we do, so much so that it will become second nature to us,” he added.

1 blog.aicpa.org/2017/05/7-ways-to-improveworkforce-diversity.html 2 northjersey.com/story/news/newjersey/2016/12/08/census-data-show-growingdiversity-north-jersey/95113992/

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AN ACCOUNTANT’S PERSPECTIVE THROUGH THE YEARS

By FREDERICK P. BARA, CPA

MAZARS USA LLP

“Business as usual” is a phrase that’s commonly used throughout the accounting profession.

However, the accounting industry is undergoing a change, meaning business as usual is no longer the norm.

As the bulk of the workforce transitions from Boomers to Millennials, many of the old ways of doing business are being rebooted. Public accounting firms need to adapt to better attract and retain the changing talent demographic. The long hours of busy season and the standard 9-to-5 day are concepts of the past.

Millennials desire flexibility and regular feedback from their mentors. The concept of a boss is shifting from a traditional engagement manager to a leader who evaluates not only how his or her employees interact with the firm on a job-by-job basis, but also how they are growing and developing as professionals.

BUSY SEASON AND WORK LIFE I remember the first firm I worked at. It was a mid-sized public accounting firm in Morristown, NJ. The managing partner was a gruff and well-seasoned CPA who had chewed down No. 2 pencils in every conference room and called you in to review workpapers and tax returns. These were the days before paperless was the hot topic, and e-filing was just becoming the norm.

Busy season was defined as 55-plus hours per week, with core hours between 9 a.m.

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NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

and 5 p.m., and the whole office had bagels and donuts for breakfast on Saturdays.

Most CPAs have experienced some version of this busy season.

But busy season 2017 was something new for me. The hours were still the same — it’s hard to get away from the compressed filing season combined with ever-changing compliance rules — but that was pretty much the only holdover from busy seasons of the past. Saturdays were optional, and I don’t mean you-better-show-up-if-you-know-what’s-goodfor-your-career type of optional; rather, if you were able to meet client expectations and deadlines, you were only expected to be available. Some people did continue to come in to the office on Saturdays (old habits are hard to break), but many of the junior staff were able to leverage the technology available and were as productive, if not more so, working from home on evenings and Saturdays. Partners and senior management made it a priority to push the freedom to work from home when it made sense, including on Saturdays. The ability to avoid a regular commute to the office was well received by most.

BOSS VERSUS MENTOR Previously, I’ve found that reviews and raises were never a huge focus of either employees or bosses. You would do your job, get occasional feedback in the form of review notes, and move on. Once a year, you would spend ten minutes with your boss discussing your work over the past year. However, feedback and professional development are extremely important today.

We are trained to regularly give and receive feedback on a timely basis. We learn how to deliver the feedback in a manner that the recipient will receive positively. Sure, this may seem a bit too politically correct and forced at times, but the intent and ultimate goal is to develop staff by offering comments in a manner they can understand and grow from.

As a result of training and regular feedback, relationships between management and staff grow stronger. Developing an understanding of the goals and desires of our professionals allows the firm to better develop them. The typical boss has been replaced with a mentor; someone the staff knows has their best interest at

heart and is willing and able to advocate on their behalf. There is a significant time commitment involved in being a mentor, but it’s easily outweighed by the benefits of reduced attrition, increased knowledge sharing, and a better ability to interact between co-workers and clients.

DIVERSITY We all have our preconceived notions of what an accountant is supposed to look like. I know I did when I was about to graduate from college. But as I have transitioned through the various levels of public accounting, I have met some truly amazing people and been met head on with a diverse crew.

Firms strive to find the best candidate for the job. We look at individuals who have the knowledge set we desire, but, just as important, we evaluate if they will fit in with our team. Luckily for me, my coworkers are individuals from across the globe. Their unique perspectives and varied backgrounds allow us to reach out and relate to a wide range of clients, and their

fluency in many languages allows us to meet the needs of foreign clients seeking to set up new operations in the U.S. These are all great for business, but, for me, the most important aspect of working with a varied team is how it can teach each of us about different perspectives and being tolerant of differing views.

For as far as the accounting profession has come, we still have a long way to go; this is just the tip of the iceberg. Technology changes on an almost daily basis, and the needs and desires of today’s workforce will most certainly be different than those of its successors. Public accounting will always remain in a constant state of change, and firms that embrace this reality will be well situated to meet the needs of their employees and clients now and in the future.

Frederick Bara, CPA, is a senior manager in the Entrepreneurial Services Group at Mazars USA where he provides advisory and compliance solutions for owner-managed businesses. He is a member of the NJCPA and can be reached at frederick.bara@ mazarsusa.com.

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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MANAGING MILLENNIALS AND BABY BOOMERS IN TODAY’S WORKFORCE

By CHRISTOPHER R. CICALESE, CPA

ALLOY, SILVERSTEIN, SHAPIRO, ADAMS, MULFORD, CICALESE, WILSON & CO.

It is important to maintain a diverse workforce that fits the culture of the company and complements the needs of clients.

Millennials and Baby Boomers make up the majority of today’s workforce. Both generations bring their own expectations, and this can create a divide when trying to manage a multi-generational workforce.

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MILLENNIALS The Millennial generation has varying definitions, but it typically includes anyone born between the mid-1980s and mid-1990s. Millennials require a management team to think outside the box so that they can be challenged by their work, and they expect to be rewarded.

This generation also, to some extent, has a small divide amongst themselves as older Millennials can sometimes set themselves apart from the younger Millennials and the related stereotypes.

Most Millennials have grown up in the open-air workspace era made popular by Silicon Valley tech companies.

While accountants are not quick to adopt this workplace model as it may not be functional in the accounting industry, certain elements can be adopted to help keep Millennials interested in your firm.

More often than not, Millennials shy away from long-term commitments and strict schedules. Flexible work schedules have become popular with Millennials and even other generations as they allow the employee to come and go as they please as long as the work is being completed.

While flexible schedules are important to Millennials, it is even more important for employers to communicate the importance of client service while working outside the office, even if that just means maintaining email.

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

Unlike Boomers, most Millennials grew up with everything at their fingertips on a smart phone. When communicating with clients, some Millennials can find it hard to be professional in emails and may use acronyms or slang typically used in text messaging. Even when texting clients, employees should try to communicate in the same way they would as if it was through email. Employers should make clear the expectations of employees’ communications with clients. When working with a mixed workforce, it is easy to see that Boomers are more comfortable than Millennials talking over the telephone with clients. Until a Millennial is comfortable using the phone with clients, they may depend on emailing clients, even if the client prefers to communicate by telephone. A best practice for Millennials and Boomers would be for employers to go over telephone etiquette in the workplace so that everyone can see how to effectively communicate with clients.

BABY BOOMERS Baby Boomers include those born in the mid-1940s to 1960s. They make up a good portion of the workforce and bring their own set of challenges as management tries to bring on younger staff.

Millennials can learn a lot from Boomers, who have a wealth of experience that would complement the fast-paced mindset of a Millennial.

Baby Boomers typically have already established their families and may not be as concerned about time off. When eval-

uating a position, they may not consider a flexible schedule as an important fringe benefit and will put more weight on health benefits and retirement planning. Although their family is important to them, servicing clients is a high priority. They are used to the typical work day and do not mind staying late or coming in early to complete a task if needed. Boomers are willing to do what they have to do to make sure the work is done. If treated right, Boomers often stay loyal to their employers and do not bounce from job to job. Millennials, on the other hand, tend to always think the grass is greener on the other side and will move from job to job to try to find an employer that accepts them rather than one that tries to change them.

Although they are not quick to adopt technology, Boomers are open minded and can accept change over time. It is important to not rush Boomers to change completely as they need time to adapt to new policies and procedures. Rushing technology changes can lead to frustration and may create unnecessary stress. The best way to have Boomers adopt new technology is to

include them in the evaluation of the products and allow them to give input. This will provide them comfort that the technology is meant to help them and show them that it was evaluated before purchasing.

WORKING TOGETHER When Boomers and Millennials work together, they can learn from each other and will complement each other. Millennials will learn the ways of the Boomers and become better at communication. They also will have the opportunity to see that, as an employee, you need to make sacrifices and work late or come in early without being asked and not expect to receive something in return. Not only does this help get tasks completed on time, but it also helps reduce stress when at work for set hours.

Boomers can benefit from the enthusiasm and willingness to try new ways of doing things that Millennials so easily embrace. Mentoring a younger co-worker can be rewarding. Soft skills, such as knowing how to discuss a difficult situation with a client, are learned after years of experience, and a Boomer can share this accumulated

Be invested

knowledge with younger staff. Boomers can also learn a great deal about new technology from Millennials.

Both Millennials and Boomers have their positive and negative traits. For any employer, it would be helpful to maintain a diverse workforce that fits the company culture. Recognizing that clients are increasingly managed by Millennials, CPA firms need to be able to relate to their focus and concerns. Just as diversity in gender or race can bring various and interesting perspectives to the table, diversity in generation is also valuable. It is important that employers recognize and support the skills that employees possess instead of stereotyping them according to their age. As long as all employees share the common goal of building a successful firm, working together will be more rewarding than challenging.

Christopher R. Cicalese, CPA, MSTFP, is a manager at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co. He is a member of the NJCPA and can be reached at ccicalese@ alloysilverstein.com or on Twitter at @AthleteCPA.

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11

ACCOUNTING, AUDITING & ATTEST

Cognitive Technologies and the Impact on Audits

BY ALISSA WUERFEL, CPA, AND ANTHONY SIKORA, CPA, KPMG LLP

Data produced in the world is growing at a rapid pace. This raises a number of challenges for many businesses, including how to protect and manage that data. But it also creates a potential advantage for auditors who are able to harness technology in order to collect, transform and analyze data while enhancing audit quality.

Auditors are encountering the big data phenomena as their clients and the general public generate an increasing amount of electronic and digital data. As the standard independent auditor’s report states, an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. This typically is accomplished by examining select items in order to express an opinion on the accuracy of the financial statements.

But new technology now allows auditors to interpret large populations of data.

For example, cognitive technology allows auditors to mine companies’ internal data and external structured and unstructured data. This technology uses algorithms to enable software to read multiple forms of data to summarize information and reach conclusions much in the same way that a human thinks and makes decisions. The use of advanced analytics and cognitive technologies make it possible to rapidly and precisely analyze larger, more-complete populations of financial and non-financial information, while generating richer, more-detailed audit evidence for evaluation and providing executives with actionable insights about their organizations, their core processes and their controls.

A SHIFT IN THE AUDITOR’S ROLE While the use of cognitive technology adds to the evidence to support the audit opinion, interpreting the results and identifying the most appropriate data to support the audit conclusion remains with the auditor, not the technology. In fact, identifying which data set is relevant to the overall conclusion requires significant judgment by the auditor, particularly in addressing disconfirming evidence. As the potential

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sources of structured and unstructured data increase, the presence of disconfirming evidence will become more prevalent, requiring an experienced auditor with relevant industry experience to interpret the results and form an audit conclusion.

INVESTING IN THE TOOLS AND SKILLS In deploying these new cognitive technologies, audit firms will need to make significant investments in infrastructure and programs. Firms also will find that it will take time to learn how to best use the data and tools to enhance audit quality and provide the business insights their clients expect. Summarizing and organizing the data so an auditor can interpret the results should be of the highest priority, and to achieve this, partners and employees will need new skills. Firms will also find it important to attract individuals with information technology backgrounds, or those with degrees in data science or data analytics, to supplement the basic audit skillset. While it will take time for firms to develop the right skills, the use of technologies, including cognitive, process automation, and data and analytics, means changes ahead for both firms and their clients. The tools used in a cognitive audit will continue to evolve rapidly as new data sources, both structured and unstructured, are created and included in the auditors’ assessment.

Audit firms will continue to identify ways cognitive technologies can transform audit procedures that support audit

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

conclusions and the audit opinion. Audit evidence will increase through the use of these technologies. However, firms will need to continue to rely on auditors with the right knowledge and industry experience to interpret the results, document the audit considerations based upon the outcome of these procedures, and form the appropriate audit conclusions.

Learn about the KPMG Master of Accounting with Data and Analytics, a graduate program that includes the study of data mining and data visualization at kpmgmasters.com.

Alissa Wuerfel, CPA, is a senior manager in KPMG’s audit practice where she has worked primarily with life sciences, chemical and industrial product companies.

She is currently in the National Audit Solutions group developing custom data solutions for use in audits. Alissa can be reached at awuerfel@kpmg.com.

Anthony Sikora, CPA, is a senior manager with KPMG primarily serving consumer market and industrial manufacturing clients. He is a member of the NJCPA and can be reached at anthonysikora@kpmg.com.

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NOV. 17, VOORHEES

INTEGRATING AUDIT DATA

ANALYTICS INTO THE AUDIT PROCESS

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AUDITING ARTICLES AND RESOURCES

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ADVOCACY & LEGISLATIVE ISSUES

OPINION

Improving New Jersey’s Fiscal Outlook Via the Lottery

BY FORD M. SCUDDER, TREASURER OF THE STATE OF NEW JERSEY

After decades of rosy assumptions, unfunded benefits increases and chronic underfunding by previous administrations, New Jersey’s State Retirement Systems faced an Unfunded Actuarial Accrued Liability of $49 billion, constraining New Jersey’s budget and encumbering the state’s finances. This reality has taken public pension funding in New Jersey from being a long-term commitment to a crushing taxpayer burden and our state’s greatest fiscal challenge.

Fortunately, on July 4, Governor Christie signed Senate Bill 3312, the bipartisan Lottery Enterprise Contribution Act (the “Contribution Act”). The Contribution Act is the culmination of Governor Christie’s unique proposal to contribute the New Jersey Lottery to the State Retirement Systems. This innovative and responsible action marks the turning point in the state’s long-term credit rating slide by immediately reducing the Retirement Systems’ unfunded liability by $13.5 billion and elevating its actuarial funded ratio to 59 percent from a 45 percent basis. Moreover, it solidifies the viability of the State’s Retirement System for more than 760,000 state employees and retirees while simultaneously reducing the General Fund obligation to the system.

Under the Contribution Act, the State made an irrevocable Contribution of the Lottery Enterprise to a newly established Common Pension Fund L for the benefit of the Teachers’ Pension and Annuity Fund (the “TPAF”), the Public Employees’ Retirement System (the “PERS”) and the Police and Firemen’s Retirement System (the “PFRS”) for a 30-year term. The Lottery Enterprise consists of all the assets, properties, interests and rights, existing or acquired in the future, useful or necessary to operate the State Lottery. The Contribution Act does not contain any termination provisions. Any decision by a future State Legislature or Governor to reverse the contribution would trigger extremely harsh

penalties on the pension plans by violating IRS regulations.

During the course of the 30-year commitment of a steady stream of $37 billion in funding, the contribution is projected to elevate the funded ratio to 90 percent by 2047, years earlier than immediate full-funding of the Actuarially Determined Contributions (ADC). In addition, as the state continues the 1/10ths ramp-up to full funding of the pension payment and achieves the current statutory rate of return of 7.65 percent (reduced from an unrealistic 8.25 percent at the start of the Christie Administration), total pension liabilities under GASB 67 will decrease while GASB funded ratios will increase.

Adding this $13.5 billion contribution to the record-high annual state pension payments made by the Christie Administration (more than double the combined total contributions of all other New Jersey governors since 1995) will immediately improve New Jersey’s fiscal outlook. In addition, these pension solvency actions taken for the benefit of generations of current and future public employees and taxpayers, build upon Governor Christie’s bipartisan reforms of 2011 that are providing $120 billion in savings over 30 years to the pension and health benefit systems.

And it is worth noting, there will be no impact to state programs currently funded

by Lottery proceeds. Since the Lottery’s inception, net Lottery proceeds have been and will continue to be dedicated to state aid for education and state institutions. While the General Fund will no longer receive the Lottery proceeds, the General Fund’s current contribution to the retirement system will be reduced by exactly the same amount for the first five years, leaving the same amount of resources available to fund all current programs previously paid for through net Lottery proceeds.

In total, the Lottery Enterprise Contribution positively addresses the state’s

chief fiscal challenge and taxpayer burden, mitigating the fears of bondholders, rating agencies and public employees by significantly reducing the unfunded liability of the Retirement System and guaranteeing a steady revenue stream for the system in the future.

For all of these reasons, the bipartisan Lottery Enterprise Contribution Act will not only provide pension security for decades to come, it immediately improves New Jersey’s fiscal outlook.

Ford M. Scudder was sworn in as New Jersey’s State Treasurer on September 20, 2016, after serving as Acting State Treasurer since November 9, 2015.

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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BECOMING A CPA

The Value of Becoming a CPA and the Struggles to Get There DIANNA L. GILLULY, HOLMAN FRENIA ALLISON P.C.

When someone chooses to pursue a career in accounting, their end goal should be to become a CPA. The benefits are immeasurable. Corporations in every industry, nonprofit organizations, public accounting firms and governments worldwide look to CPAs to meet their needs. Firms are now looking for junior accountants with CPA status or newly graduated accounting students who are studying for the exam and possibly have passed some sections.

Having a CPA license can provide you with the following benefits: yy Respect and Credibility. When someone finds out you are a CPA, they look at you in a better light. The profession is held in high esteem and respected in other business fields. Ever since the financial crisis, there has been particular emphasis on corporate accountability, and organizations rely on CPAs for the financial health and integrity of their companies. Additionally, it often is easier for CPAs to get business loans, negotiate contracts and get referrals from others.

For those who open their own accounting firm, having a CPA license lends credibility and shows people you have the knowledge to help them with their financial and accounting problems. yy Earning Potential. Salaries for CPAs have averaged about 10-percent higher than salaries for non-CPA accountants who have the same or comparable responsibilities. The high demand for CPAs leaves plenty of room for excellent compensation. The employment stability and the opportunity for professional growth assures that there will be long-term earning potential for those with a CPA license.

OVERCOMING THE OBSTACLES Anyone who has obtained their CPA license or is in the process of taking the CPA exam knows the difficulty of the testing process. There is a significant investment both in money and time, but those who

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have completed their journey have said it is well worth it.

There are four parts to the CPA exam requiring hundreds of hours of exhausting preparation. A candidate can take live or online classes, and there are many companies that offer review courses. The registration process is specific, and the exam fees can be expensive. Essentially, your life gets put on hold for a while if you are serious about passing. Once the first part is passed, the clock starts ticking. Candidates must pass all four parts within 18 months of the date the first part is passed.

Disappointment can come when, after putting in all that time and money, you don’t pass a part on the first or even second try. As discouraging as that may be, do not give up. Each time you have to go back and review the material you gain more knowledge, and eventually you will pass all four parts. The elation you will feel will be worth all the hard work and investment.

Your reward for all that time and money will be the designation of CPA after your name, job security — and possibly a big pay raise!

HELP IS AVAILABLE If you need help in learning the process to become a CPA, the first place to visit is the

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

NJCPA website at njcpa.org/becomeacpa.

It explains the education requirements, experience requirements, forms for licensure and has answers to many of your questions.

The website also has the registration package and application for approval in order for you to sit for the exam.

Most review courses are expensive. The NJCPA has a list of courses, comparing what they provide and the fee for each course. When you become a Student or CPA Candidate member of the NJCPA, you can also take advantage of discounts on some of the programs.

Studying for and passing the CPA exam will undoubtedly help you in establishing a prominent, lucrative career.

Dianna L. Gilluly, is a senior tax accountant with Holman Frenia Allison P.C. She is a CPA Candidate member of the NJCPA and can be reached at dgilluly@hfacpas.com.

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BUSINESS ADVISORY SERVICES

Managing Clients’ Books with QuickBooks Online Accounting

BY CHRISTOPHER M. CHUDYK, CPA, AND CHRISTINA M. WHITE, CPA, TRAPHAGEN FINANCIAL GROUP

Many CPA firms work with clients who keep their books using one of the numerous versions of QuickBooks Desktop.

Performing accounting services for these clients, based on the client engagement, generally requires CPAs to use either an accountant’s copy or backup copy. The program offers a variety of editions with a new version released each year. There are even industry-specific upgrades which provide more tailored reporting and accounting functions for contracting, wholesale, professional services, nonprofit and retail.

Over the years, many clients have made the switch over to QuickBooks Online.

With the increasing popularity of computer programs shifting into the cloud, it’s no surprise that QuickBooks has jumped on board with new technology as well.

This makes it more important than ever for CPAs to keep up to date with the latest accounting technology.

To get set up with access to clients’ QuickBooks Online files, the client needs to grant the firm’s administrator with access to their account as the external accountant.

The administrator will receive an email invitation to link the account. Once accepted, the administrator can control which staff have access.

ADVANTAGES yy One of the many benefits of QuickBooks Online for accountant users is that all of the client files are in one central location. CPAs no longer have to worry about managing different file types located in the various editions, versions and years of QuickBooks Desktop. Once external accountant access is granted, the full client list is available on the dashboard along with specific information regarding their accounts, such as the closing date or date last modified. yy The file can be accessed by multiple users simultaneously and is accessible

on multiple devices, including iPads, iPhones and Androids. This can be very useful, for example, during a conference call. Both the CPA and the client can view the same financial reports simultaneously. yy Updates are posted to the client’s file in real-time. When posting adjusting journal entries, the CPA can be sure that their adjustments or changes have been added to the client’s file for immediate viewing. This means no more sending accountant’s copies and changing files back and forth, or trying to remember to adjust a client’s file at a later date. yy The QuickBooks Online version finally allows CPAs to post to multiple accounts receivable and accounts payable accounts in the same journal entry — a feature that the desktop version still does not allow. This makes adjusting journal entries, such as writing off bad debt, a much simpler and more easily traceable process.

DISADVANTAGES yy The main disadvantage to QuickBooks Online is that the interface can be difficult to navigate.

Switching to the online version can take some getting used to for the majority of clients who are already acclimated to using QuickBooks Desktop. For the most part, the capabilities of the program are there, but finding them may be a challenge. yy Some of the more advanced features of QuickBooks Desktop version, for example the use of inventory tracking or job costing features, may either not be available in QuickBooks Online or become more difficult to use. This also includes the industry-specific features that can be added to the desktop version. The program is primarily geared for more simple accounting and reporting functions.

yy There may be fewer report types available in the client’s account depending on the level of their subscription.

However, when accessing the file as an accountant user, many of the reports that are generally used are still available.

Also, the report customization features are limited.

Christopher M. Chudyk, CPA, CITP, is a partner at Traphagen Financial Group where he specializes in implementation of computer software, business tax returns, review and compilations, and tax planning.

Chris is a past leader of the NJCPA Technology Interest Group and can be reached at chris@tfgllc. com. Christina M. White, CPA, is a senior tax accountant with Traphagen Financial Group, where she manages and coordinates accounting functions for general ledger accounting, payroll tax and sales tax, and Nexus issues and filings. She is a member of the NJCPA State Taxation Interest Group and can be reached at christina@tfgllc.com.

LEARN MORE NOV. 13, ROSELAND K2’S QUICKBOOKS ONLINE AND OTHER TOP ACCOUNTING SOFTWARE FOR SMALL BUSINESS Register at njcpa.org/events READ MORE ACCOUNTING TECHNOLOGY ARTICLES AND RESOURCES njcpa.org/topics/software

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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CORPORATE ACCOUNTING

Analyzing Financial Statements: How CPAs Can Deliver Value

BY DR. SEAN STEIN SMITH, CPA, LEHMAN COLLEGE

Financial statements may not seem like the most exciting topic or concept in the business landscape, but these financial documents contain critical information about a business or organization. Whether a CPA’s daily work includes preparing audited financial statements for external users or delivering information and data to senior management professionals, there are several core principles that remain consistent.

Business decisions are driven by quantitative information, and the fundamental information that drives the conversations of management involves the financial performance of the organization.

As the accounting profession and, more specifically, the tasks performed by CPAs continue to be disrupted, interrupted and otherwise upended by technology, artificial intelligence and analytical tools, it is more important than ever for CPAs to differentiate themselves. The CPA credential and, increasingly, the CGMA designation, are well known and established as standards of excellence in the accounting field. Even with such excellent support and standards, it is imperative for accounting professionals to continuously think of new ways in which they can deliver value. As the shift continues from record keeper to business advisor and partner, it is becoming increasingly important for accountants to not only produce accurate deliverables, but to also provide action-oriented information based on this data. While the following points are not meant to be all encompassing, hopefully they serve as a foundation upon which CPAs can deliver increased value from reviewing financial statements.

UNDERSTAND THE TRENDS All too often, financial statements are backward-looking documents that focus on information and events that have already occurred. The ability to analyze financial statements is embedded in every CPA, but the capability to discuss and analyze trends

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impacting the corporation can set you apart from the competition. Even better, if accountants are able to cover and explain these trends, this opens the door to higherlevel decision-making opportunities.

EXPLAIN THE BUSINESS CASE With all of the technical education and training CPAs receive, it is easy to rely on technical definitions and terminology to explain certain issues. That said, it should be relatively easy to understand how such technical terminology and explanations might result in the accounting function being relegated strictly to a back-burner role. Focusing on the business case, understanding what the end users want, and delivering this information in formats that are useful to end users are fundamental ways that CPAs can increase the value of accounting information.

MAKE TECHNOLOGY WORK FOR YOU There are virtually endless articles being written on the importance of technology, analytics, artificial intelligence and the implications that these factors will have on the accounting profession. While there may be some segments of the accounting population that treat these changes and development as threats, they really do add a lot of potential to the financial statement analysis process. Whether a firm or individual uses a plug-and-play analytics package or makes use of functionality in a larger enterprise resource planning (ERP) program, the implications are similar. Drilling deep into

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

the data, comparing and projecting current performance versus a host of factors, and updating said reports in a real-time manner are great tools and options.

Analyzing financial statements, and the creation of reports based off of these analyses, form a large chunk of what many CPAs do on a day-to-day basis. Instead of treating this activity as simply another reporting function, accounting professionals should also focus on the value of extracting and reporting better information. Establishing such a mindset can assist CPAs in not only performing existing roles well, but also allow them to participate in higher-level decision making.

Dr. Sean Stein Smith, CPA, DBA, M.S., M.B.A., CMA, CGMA, is an assistant professor at Lehman College. He is a member of the NJCPA Content Advisory Board, Student Programs & Scholarship Committee, Emerging Leaders Council, Nonprofit Interest Group and Accounting & Auditing Standards Interest Group. He can be reached at drseansteinsmith@gmail.com.

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NOV. 20, ROSELAND

ANALYZING FINANCIAL

STATEMENTS, INCLUDING

TECHNIQUES FOR CASH FLOW ANALYSIS

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FIRM & PRACTICE MANAGEMENT

Moving from Hourly Billing to Value Billing

BY JAIME CAMPBELL, CPA, TIER ONE SERVICES

A critical machine was broken in a manufacturing plant, and the company was bleeding cash by the hour. Since no one could fix it, an outside expert was called in.

The expert inspected the machine, drew a red circle around a component and left.

The team rushed to the circled component, saw the issue and fixed it — and the plant was producing again.

When the invoice arrived, the manager was incensed and exclaimed: “Fifty thousand dollars! You were here for five minutes! I want an itemized invoice.” The expert provided one: yy Drawing the red circle…$1 yy Knowing where to put the red circle…$49,999 Value billing — everyone’s talking about it. But why move from something easily measurable to an intangible puddle of risk?

Read on to find out where the advantages are, how to mitigate the risks, and how to deploy people, processes and technology to make it work.

WHY: UNCAPTURED REVENUES If you believe that the only way to generate more value is to spend more time, you’re missing out on the arbitrage of expertise.

If you have a pro who can reveal $50,000 of savings or revenue opportunities in 15 minutes, you’re stuck billing for only 15 minutes. “Well,” I hear you say, “That’s why pros have higher billing rates.” But what billing rate is going to match finding $50K in 15 minutes? If a client gets a 10x ROI in your services, you’d have to sell your client on a rate of $20,000 per hour. Good luck with that.

Although this is a dramatic example, it’s a true story and illustrative of the revenue lost when a firm’s expertise is ultimately underpriced because of hourly billing.

If your firm pays its practitioner team flat salaries, then there is also an opportunity to even more deeply align incentives by allowing value-based engagements to form a bonus pool where the firm’s gross profit targets are exceeded. An hourly engagement creates a misalignment of interests

between the client and the firm, and that leads neither to delight nor profit.

Hourly rates also increase the risk for the client. This results in downward rate/ invoice pressure or unfavorable payment terms, such as after-the-fact invoicing and contracts without a personal guarantee.

There are ways to mitigate those risks, though, and moving to value-based billing makes greater revenue and cash opportunities available because those who bear the risk also get rewarded.

If your firm is bold enough to shoulder the risk by using a value-based model, then you can enjoy the rewards including eliminating receivables and getting powerful testimonials for making an observable, measurable difference in your clients’ financial lives.

HOW: PEOPLE Value billing necessitates practitioners who reliably deliver quickly and accurately the first time, with less time required for quality control activities. You’ll also need people skilled at sussing out value at each end of the engagement: closers who can calculate the value of the potential engagement, practitioners who can highlight the value upon delivery, and an account manager who can check in with the client to crystallize the perceived value when a milestone has been reached.

HOW: PROCESSES An engagement’s value always comes down to time, money and risk. Work with the cli-

ent to determine what’s at stake. Translate time into money, and move from gross revenues down to net, then to the percent of the net target for which your engagement makes a contribution. Let your client come up with the percentages, but ask questions to help them come up with the numbers.

Factor in your client’s desired ROI in your firm’s services.

HOW: TECHNOLOGY Arbitrage is created with deep, broad experience and technology. Make sure your entire team is masterful with the tools of our trade. Examples include: yy Making templates yy Mastering keyboard shortcuts yy Learning techniques to reduce three days of monthly work to 30 seconds of monthly work yy Using video communications and screen sharing technology to reduce or eliminate travel time Whether your firm’s value proposition is peace of mind, saved time or a healthier cash position, value billing can be both exciting and rewarding for all players.

Jaime Campbell, CPA, M.B.A. is the chief financial officer of Tier One Services, a fractional CFO and outsourced accounting firm serving $1 million to $20 million businesses. She is a member of the NJCPA Content Advisory Board and several interest groups. Jaime can be reached at jcampbellcpa@ tieroneservices.net.

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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FORENSIC ACCOUNTING, LITIGATION SERVICES & BUSINESS VALUATION

Matrimonial Cases: Rising Above the Numbers

BY MEGAN A. SARTOR, CPA, SAX LLP

When couples are getting divorced, it is difficult to talk about financial settlements because those numbers are so tainted with emotion. Often times, the settlement discussions are not about the numbers at all. Accountants involved in matrimonial matters have to not only be knowledgeable about the numbers but also be conscious of the parties’ emotions and be able to navigate them carefully. The easy part is the accumulation and analysis of data and the preparation of schedules and reports. The difficult part is taking that data, comparing the results with the client’s goals (or both of their goals if the financial professional is hired jointly) and putting together settlement scenarios that the attorneys and clients can use to settle their case outside of court. The vast majority of matrimonial cases settle outside of court, and that happens in large part because of the financial professionals involved.

The two biggest financial pieces of matrimonial cases are equitable distribution and alimony/support. These two pieces cannot be looked at in silos; they have to be looked at together as there is overlap.

EQUITABLE DISTRIBUTION Equitable distribution is the way that the assets and liabilities of a marriage are divided in New Jersey. Equitable distribution does not necessarily mean equal; it means fair. For each asset and liability, the following is determined: yy Title — Who currently owns the assets: husband, wife or both (joint)? yy Source of funds — What funds were used to acquire the asset or incur the liability? Were they marital funds or separate funds? Separate funds are typically funds that one party had prior to marriage or funds that were gifted/ inherited. yy Value — Determining value is simple for some assets and liabilities and more complex for others. For bank accounts and brokerage accounts, value is determined simply by looking at the statements. Determining the value of 401(k) and IRA retirement assets is more

18

simple, while valuing pension retirement benefits is more complex. For business interests, value should be determined by a professional with valuation credentials.

If there are marital and separate attributes of assets and liabilities, the value of those assets and liabilities becomes more complex and takes more investigation by a professional. yy Allocation of value — What portion of the value is each party entitled to receive? Not all assets and liabilities are divided equally between the parties.

Active assets, in which one party participates more than the other, may be allocated disproportionately. For example, typically a joint bank account is divided equally but if one party owns a business interest in which they actively participate, they may receive a higher allocation of the value of the business interest than the other party who does not participate. yy Allocation of title — Who is going to retain title to the asset or liability post divorce?

ALIMONY Alimony is calculated by determining the income of both parties and the lifestyle of the marriage. The idea is that each party should be able to enjoy a lifestyle similar to that of their marriage. However, in the majority of cases that cannot happen as the income earned is not enough to now fund two separate homes and lifestyles. In New Jersey, for a marriage of less than 20 years, the term of alimony should not exceed the length of the marriage, except in exceptional circumstances.

Now, on the surface, alimony and equitable distribution seem to be separate

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

issues. But let’s say that the net assets to be divided are $20 million. A non-working spouse is going to receive $10 million in net assets, $7 million of which are investment accounts. When calculating if the non-working spouse is entitled to alimony, the income earned on those brokerage accounts will be taken into consideration.

What if one party has a significant amount of separate property assets? The income generated from those assets will be taken into consideration when determining alimony. Or what if those separate assets were being used to fund the lifestyle of the marriage? What if the marital lifestyle was funded by debt?

If parties are far apart on what the amount of alimony should be, accountants can assist by making changes to the allocation of value or allocation of title in equitable distribution.

These are just a few examples of the issues that arise in matrimonial cases where an accountant can really prove their worth, above and beyond the numbers, to help clients come to resolution during a very emotional time in their life.

Megan A. Sartor, CPA, is a senior manager with Sax LLP. She is serving on the NJCPA Board of Trustees and is a member of the Business Valuation Forensic Litigation Services Interest Group and the Student Programs & Scholarships Committee.

Megan can be reached at MSartor@saxllp.com.

LEARN MORE NOV. 28, ISELIN ESTATE AND LIFE PLANNING ISSUES FOR THE MIDDLEINCOME CLIENT Register at njcpa.org/events

TAX

Ready or Not, Here They Come: New Centralized Partnership Audit Rules

BY MARCUS E. DYER, CPA, ESQ. WITHUMSMITH+BROWN

On January 1, 2018, partnerships will be subject to a new set of audit rules, the centralized partnership audit regime of Section 1101 of the Bipartisan Budget Act of 2015, P.L. 114-74 (BBA). These new rules will bring about a sea change in the way audit determinations are made and collected under the Internal Revenue Code (Code).

Section 1101 replaces the cumbersome partnership audit rules of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) and the electing large partnership rules of the Code. Since the BBA’s enactment in November 2015, the Treasury Department has issued two sets of proposed Treasury Regulations to implement the provisions of Section 1101. The initially proposed regulations were issued in January 2017. The proposed regulations were withdrawn and re-released in June 2017.

The purpose of the centralized audit regime is to simplify the IRS’s partnership audit, assessment and collection processes.

While TEFRA broke new ground by shifting the focus of partnership audit adjustments to the partnership level, the BBA goes one step further. It provides that the tax on any adjustments that result from a partnership audit (an imputed underpayment) shall be assessed and collected from the partnership. Therefore, in effect, the BBA converts a pass-through entity into a taxpaying entity, such as a corporation. Moreover, like a corporation whose current shareholders bear the indirect burden of any tax imposed on the corporation, the partners impacted by the BBA’s partnership adjustment are the ones holding their partnership interests during the year the IRS makes its audit determination. In this respect, the current partners are paying the costs of the tax benefits derived by former partners.

Instead of having the entity pay the tax, the BBA allows a partnership to push the liability out. To make a push-out election, the partnership must provide a statement to each person who was a partner in the year under review (the reviewed year)

and indicate the portion of the liability for which each partner is responsible.

In order to determine the amount of tax a partnership must pay, the BBA sets forth special calculation. It entails identifying similar partnership items of income, loss or gain; netting these items against each other; and multiplying this net amount by the Code’s highest ordinary income tax rate.

Some partnerships may be excepted from the strictures of the BBA. A partnership with 100 or fewer partners may opt out of the new partnership audit regime, but only if its partners are limited to the following: C corporations, foreign entities that would be treated as C corporations were they domestic, S corporations or estates of deceased partners. Opting out requires a partnership representative to make an annual election. Notice of the election must be provided to each of the partners.

If a partnership does not elect out of the new audit regime, it must appoint a partnership representative. The partnership representative replaces the TEFRA tax matters partner (TMP). A few key distinctions between the two should be noted. First, a TMP has to be a partner. A partnership representative can be any person, including a non-partner, as long as the representative has a substantial presence in the United States. Second, the partnership representative has vastly more powers than its TEFRA counterpart. Unlike the TMP, whose decisions could be contradicted by other partners, the partnership representative

possesses the exclusive authority to bind the partnership and all partners in an audit.

With only a couple of months to go before the law becomes effective, several issues relevant to the implementation of the new partnership audit rules remain unaddressed.

For example, according to the preamble to the newly released proposed regulations, the Treasury Department and the IRS intend to issue additional regulations that coordinate the application of the rules for partnership income tax withholding to income allocable to a foreign partner where a partnership makes a “push-out” election. A public hearing on the proposed regulations was held on September 18, 2017.

Marcus Dyer, CPA, Esq., is a tax manager with WithumSmith+Brown where he is member of the firm’s tax controversy niche. He is a member of the NJCPA Federal Taxation Interest Group and can be reached at mdyer@withum.com.

LEARN MORE NOV. 14, WEST ORANGE 2017 ANNUAL TAX-PLANNING GUIDE FOR S CORPORATIONS, PARTNERSHIPS AND LLCS

NOV. 16, ISELIN PARTNERSHIP AND LLC TAXATION: ADVANCED ISSUES

DEC. 21, UNION CITY NEW PARTNERSHIP RULES Register at njcpa.org/events

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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TECHNOLOGY & INFORMATION MANAGEMENT

Four Productivity Apps Ideal for Smaller Firms and Their Clients

BY MICHAEL AMORESANO, HUNTER GROUP CPA, LLC

These days, there’s no shortage of software claiming to revolutionize the way your firm does business. While truly powerful programs are out there, smaller firms without an individual dedicated to technology initiatives can find themselves overwhelmed by the choices and intimidated by the execution. To cut through the noise, here are four apps specializing in a variety of practice areas with a focus on low cost, light administration and straightforward implementation.

COMMUNICATION AND COLLABORATION

If you’ve heard of one program on this list, it’s probably Slack (slack.com). Beyond just messaging, Slack’s potential as a productivity tool is rooted in its incredible customization features. You can set up a Slack server or “team” for your office and create sub-servers or “channels” for any job or project requiring multiple people. These channels become an instant open line of communication between team members with support for not just messaging, but file sharing, voice and video calls, and screen sharing, as well as a range of (free!) feature-rich plugins. More advanced users can even build custom programs directly into the software.

Slack supports being a part of multiple teams, and creating a basic team is free. In addition to having a team for your firm, you could set up basic teams with priority clients and the staff assigned to them, creating an additional point of contact with many of the same features as the paid version.

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TASK MANAGEMENT AND DEADLINE CONTROL

Every firm has some method for tracking outstanding work along with client and IRS deadlines. For many smaller firms, it is often an outdated system that might be painful to overhaul, but it is usually the area with the most room for improvement.

Aero’s (aeroworkflow.com) task management, scheduling, staff assignment and time tracking features are custom-built for accountancy, but where it really shines is with Aero Templates. Not only does Aero make it easy to record and share best practices and procedures, but the Aero Library, a constantly updated collection of procedures ranging from reconciling a bank statement to filing your clients’ 1099-MISCs, is also available.

DOCUMENT REQUEST MANAGEMENT

Citrix’s ShareFile (sharefile.com) is a cloudbased data services solution, similar to Dropbox or OneDrive, but with a focus on client-facing tools and enterprise-level encryption. One of the true standout features of the software is the secure client portal, an easy-to-use web service that can be custom branded to match your firm’s image. You can direct clients here to upload files or create a free account and share synchronized folders.

Workflows enable you to build dynamic request lists, with line items that can be directly uploaded by clients, allowing you to easily track documents as they come in.

It also features RightSignature, an e-signature tool in compliance with IRS guidance,

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

excellent for quick turnaround on Forms 8878 and 8879. Finally, ShareFile can integrate directly into email programs such as Outlook, providing a more secure way to send sensitive documents over email.

STREAMLINED BOOKKEEPING

While QuickBooks is likely to remain the gold standard in bookkeeping, there are a number of reasons for smaller clients to consider other options. In many cases, a client may not have a dedicated bookkeeper, requiring an easier-to-use solution they can handle themselves. Furthermore, the licensing fees often leave small businesses paying for features they don’t need.

Among the handful of upstart cloud bookkeeping programs, Wave (waveapps. com) appeals on all counts, especially cost.

Wave’s accounting software is totally free, with their business model centered around cross-selling payroll and merchant services.

It has many of the features of QuickBooks Online, including online banking integration, invoice design, receipt and statement scanning with text recognition, and a robust mobile app. While you likely will not be advocating the switch for clients who already send you a QuickBooks accountant’s copy, Wave is a great pitch for the client who sends you a spreadsheet and a stack of marked-up bank statements.

Michael Amoresano is a software engineer hobbyist and a tax staff member at The Hunter Group in Fair Lawn, NJ, where he has taken up the role of technology advocate. He is a CPA Candidate member of the NJCPA and can be reached at maa@ thehuntergroup.com.

NJCPA NEWS

NJCPA Publishes Audit Report The combined financial statements for the NJCPA and affiliates (NJCPA Education Foundation and NJCPA Scholarship Fund) for the year ended May 31, 2017, have been published. The financial results for fiscal 2017 reflect strong investment returns, the continued effects of changes in the regulatory environment and the ever-changing landscape of the CPA profession.

Unrestricted revenues increased close to 5 percent when compared to the previous fiscal year, primarily due to positive investment returns derived from the bull-market conditions that materialized after the Presidential election. Domestic large and small cap stocks performed very well, as did emerging market stocks and international equities. Membership dues and educational program revenue saw slight decreases of 0.6 percent and 1.5 percent, respectively.

As noted, membership dues revenue decreased slightly in 2017, 0.6 percent, when compared to the prior year, though overall membership was slightly higher (14,900 total members) at the end of fiscal 2017 when compared to the end of fiscal 2016 (14,700 total members). The primary reason for the slight revenue drop while membership rose is due to free student membership being introduced during the year. New Student members totaled 684,

more than double the budgeted amount; recruitment of new Fellow/Associate/ CPA Candidate members also totaled 684, coming in under budget by 6 percent.

Retention of Fellow members increased slightly from 93.3 percent in 2016 to 93.6 percent in 2017, while overall member retention remained flat at 90.6 percent in 2016. Depending on membership category, rates increased between 2.2 percent and 3.75 percent.

As a result of the increased revenues noted, as well as a focus on cost containment, the NJCPA’s net assets increased approximately $198,000 compared to a budgeted decrease of $94,500.

NJCPA EDUCATION FOUNDATION The NJCPA Education Foundation completed the year, which included the close of the second year of the triennial reporting cycle, with slightly more than 25,000 registrants and delivery of more than 103,000 credit hours of CPE. Attendance at seminars and chapter events was slightly lower than anticipated due predominantly to the lack of a limit on self-study credits, resulting in program fee revenue being 4 percent under budget; there was a corresponding percentage decrease in the direct costs of such programs. Net assets decreased approximately $85,000 in the fiscal year

versus a budgeted decline of $231,000, the positive variance primarily the result of realized cost savings and the strong investment returns as previously noted.

NJCPA SCHOLARSHIP FUND Contributions to the NJCPA Scholarship Fund for the fiscal year were 6 percent higher than budget, primarily due to a onetime contribution of $14,500 from an outside foundation. Without such contribution, revenues were still higher than budget by 2 percent but lagged prior year contributions due to reduced chapter support, which was the result of lower attendance at education events as referenced above.

To keep awards in-line with contributions, the Fund reduced the awards total to approximately $406,000. Nearly 85 eligible students were awarded new scholarships, including awards by three chapters, and 67 students received payments on conditional awards granted in prior years. As with the other entities, investment income was strong at approximately $239,000, versus budgeted income of $57,000, which led temporarily restricted net assets to increase approximately $93,000 versus a budgeted deficit of $128,000.

Download the combined financial statements at njcpa.org/about.

NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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NJCPA NEWS

Join the Emerging Leaders Interest Group As part of the NJCPA’s Strategic Plan to remain relevant and valuable to members, the NJCPA has launched an Emerging Leaders Interest Group, which is open to all members with up to 10 years of work experience.

The new initiative complements the Emerging Leaders Council, which is an appointed, 12-member group that addresses the needs of future, entry-level and early career CPAs, including CPA candidates and new licensees. The interest group focuses on professional development, career guidance, events and networking opportunities that will enhance the entry- to mid-level accounting professional. Members are encour-

aged to connect online in the group’s Connect community.

Recent NJCPA events hosted by the Emerging Leaders Council included the annual Kickball Tournament, 9/11 Day of Service, River Horse Brewery Tour & Tasting, a Topgolf outing in Edison, and a volunteer night at the Community FoodBank of New Jersey.

“Launching a new interest group that is particularly geared for younger CPAs furthers our commitment to the next generation and provides them with the resources they need,” said Edward I. Guttenplan, CPA, CGMA, MBA, president of NJCPA and managing shareholder at Wilkin & Guttenplan, P.C. “It’s important that these members have a way to

communicate among themselves and with the organization’s management.”

Ralph Albert Thomas, CGMA, CEO and executive director of NJCPA, expects the new group to be very useful for young CPAs, adding that “young professionals today need to be bold and to make themselves heard.”

Other NJCPA interest groups include: Accounting & Auditing Standards, Business Valuation Forensic Litigation Services, Federal Taxation, Governmental Accounting & Auditing, Nonprofit and State Taxation.

Join the Emerging Leaders Interest Group, or any other group, at njcpa.org/groups.

Tax Season Survival Tools

The NJCPA has the tools and resources that will enable you to survive the upcoming tax season more confidently and with less stress. These benefits and more are available to NJCPA members. yy Learn about relevant tax topics and trends. Upcoming tax-related CPE courses can be found at njcpa.org/ events. Then, keep track all of your CPE

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credits through the CPE Tracker at njcpa.org/cpetracker. yy Save on tax guides and more. Members save 25 percent on any of the more than 175 Wolters Kluwer CCH® tax and accounting publications including U.S. Master Tax Guide, U.S. Master Depreciation Guide, Internal Revenue Code, Income Tax Regulations and the

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

State Tax Handbook. Visit the NJCPA Member Benefits Marketplace at njcpa. org/marketplace to access the store and the members-only priority code. yy Find per diem and permanent staff. Reach the most qualified candidates by posting your per diem or permanent job openings in the NJCPA Job Bank at njcpa.org/jobs.

You can also search for resumes and only pay for the ones that interest you. yy Get questions answered by your peers.

Members benefit from the knowledge of other tax experts by joining the State Tax or Federal Tax interests group at njcpa.org/ groups. Interest group members have 24/7 access to an online forum to discuss and learn from other members about taxation issues. yy Stay up-to-date on the latest tax news.

Keep your areas of interest up to date (njcpa.org/profile) to receive the most relevant tax articles and information in NJCPA Pulse, a customized e-publication delivered every other Thursday.

Relax after tax season. When busy season ends, find travel deals through Buyer’s Edge, the tri-state area’s premier buying service.

Visit njcpa.org/marketplace to learn more.

CLASSIFIEDS

ADVERTISERS INDEX

MERGERS/ACQUISITIONS

Morris/Somerset CPA looking to slow down. Seeking merger, buy-out or association for tax, consulting practice with excellent clientele. Now in office-share arrangement with low overhead. Reply to file no. 1300.

New Jersey CPA practice for sale: Warren County CPA firm with two retirementminded partners. Long established excellent business and individual practice.

Grosses about $460,000. Contact njcpafirm4sale@gmail.com.

Northwestern New Jersey CPA practice for sale. Gross billings approximately $400K. Call or email Pat for details at 908684-8300 or patbent4343@yahoo.com.

Established Paramus CPA firm seeking acquisition of accounting and tax practices. Have completed successful acquisition with 99 percent client retention.

Flexible transition plan options. Please call Jerry at 201-655-7411 or email gshanker@krscpas.com.

Established Union County CPA firm expanding. Seeking small business accounting and tax practice. Reply in confidence to union.county.cpas@gmail.com.

Retirement-minded Middlesex County CPA, looking for CPA to take over my firm. Gross $450K+. Must have strong tax background. Small existing clientbase a plus. Reply to file no. 1310 Essex County retirement-minded CPA seeks CPA to assume his partnership interest and continue with remaining partner at our office location. Retiring partner will remain during transition period. Interested candidates should reply to essexcpa@ gmail.com.

New Jersey practices for sale: Warren County CPA: gross $190K, tax only, strong fee structure, cash flow near 45 percent; Mercer County CPA: gross $498K, 80 percent from businesses, strong fee structure, cash flow near 50 percent. For more information, call 800-397-0249 or visit www.aps.net.

CPA firm for sale in central New Jersey, $600K, high fees, very profitable, established, can move. Find out how truly special this practice is; call Larry 954-5361269 for details.

Seize a merger acquisition opportunity with benefits for you. We are looking for firms ranging from $300,000 to $5,000,000 eager to combine forces as we continue to grow across Northern NJ, Westchester and the Hudson Valley region. Goldstein Lieberman & Company is ideally situated to service all types of industries. Visit www.glcpas.com; email me, Phillip Goldstein, CPA, Managing Partner, philg@glcpas.com; or call me at 800-839-5767 to have a confidential conversation.

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A NEW YEAR EQUALS A NEW OPPORTUNITY! Reach influential accounting and financial executives and a readership of more than 24,000+ in 2018 when you advertise in the award-winning publication, New Jersey CPA! Don’t miss the digital opportunities to connect with NJCPA’s community online: • • •

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Replies to ads with files numbers should be sent to: File_____, New Jersey CPA Classifieds, 425 Eagle Rock, Suite 100, Roseland, NJ 07068. To see additional classified listings or to place an ad, visit njcpa.org/classifieds.

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NEW JERSEY CPA | NOVEMBER/DECEMBER 2017

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MEMBER STORY

Staying the Course

BY KATHLEEN HOFFELDER, NJCPA CONTENT EDITOR

Vibert (Bert) Wailoo, CPA, MBA, CMA, CFF, CGMA, professor of accounting at Kean University, doesn’t do anything lightly. Take, for example, his running. After partaking in a half-marathon in his hometown of Maplewood, he opted for the next big thing — the New York City Marathon.

Eight marathons and some additional half marathons later, Bert kept on running. But now, he prefers long walks and yoga instead.

Bert, a former cricket player having moved to the United States from Guyana in 1969, likens his interest in running to his ability to accept challenges. Sports, for the most part, came easy to him though he enjoys a difficult workout, meeting it head on and then moving onto the next challenge.

He remembers telling his wife, “I’m going to run a marathon.” She did not seem too excited about the prospect, particularly

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since it meant following him to California, Washington, D.C., and Canada. But she became his biggest supporter and he looked forward to seeing her at the finish line. To get through those marathons, he said “you practice but you can’t look at the road every step of the way. It’s 26 miles.” He added, “you need to know what is your pace and figure out how you are going to get there. If you look up at a hill, you are in trouble. I tell my grandson and granddaughter, who are runners, don’t look up the hill.”

CLASSROOM LESSONS That methodical approach is what has kept him teaching accounting at Kean University for more than 30 years. Similar to running, Bert has a process for teaching in each classroom — making sure students know

NOVEMBER/DECEMBER 2017 | NEW JERSEY CPA

upfront that their job is to learn and his job is to teach.

He thoroughly enjoys breaking through to even the most difficult students about the virtues of accounting. And when students question his methods, he is ready for them.

Just like in running where you have to have a goal and think about the steps taking you to the finish line, he said, problem-solving in accounting is similar. “You have to get the steps, like a budget. You have to decide the steps to get there so they are all the same.”

Perhaps most importantly, Bert has a knack for not giving up, which comes in handy when introducing new students to the merits of accounting — and certainly helped him as a runner.

For example, after working the “graveyard shift” from 11 p.m. to 7 a.m. at the Federal Reserve Bank of New York while simultaneously being married and a father to two young children, he went on to attend college at Pace University, eventually achieving his B.A. and his MBA. “America has great specialization,” added Bert. “When I came to this country, I was thinking I was going to major in math,” he said, but accounting offered a lot of math-related courses.

Bert’s corporate experience also had a hand in shaping the kind of teacher he is today. After college, he began working in accounting at International Paper. The corporate world taught him valuable teaching lessons, especially in how to listen. International Paper had a policy at that time in which all new supervisors actually had to learn to manage by taking a course, so Bert went to school to be a better manager.

“What I learned (and to this day I use it all the time) was you have to learn to listen to someone who is working for you until they stop talking,” he said, noting that’s how to fully understand their perspective when approaching a project.

Similarly, he learned it’s important to practice listening to someone that one does not like. “You will learn that someone can have a different point of view than you, but you can still learn something from them.”

Bert Wailoo is a 2017 NJCPA Diversity & Inclusion Impact Award Winner. Read more at njcpa.org/diversity.

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