New Jersey CPA - Spring 2023

SPRING

PREPARING FOR AND PROVIDING EXPERT WITNESS TESTIMONY

EVALUATING THE RISK OF FRAUD IN ESG DISCLOSURES

SPECIAL SECTION

THOMAS

Honoring NJCPA’s retiring CEO, RALPH ALBERT

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RALPH ALBERT THOMAS, CPA (DC), CGMA Chief Executive Officer & Executive Director rthomas@njcpa.org

THERESA HINTON Chief Operating Officer thinton@njcpa.org

DON MEYER, CAE Chief Marketing Officer dmeyer@njcpa.org

RACHAEL BELL Managing Editor rbell@njcpa.org

KATHLEEN HOFFELDER, MA Senior Content Editor khoffelder@njcpa.org

DIANE ESPIRITU Senior Graphic Designer despiritu@njcpa.org

THE NEW JERSEY SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

105 EISENHOWER PARKWAY SUITE 300, ROSELAND NJ 07068 973-226-4494 | NJCPA.ORG #NJCPAMAG

READ NEW JERSEY CPA ONLINE AT NJCPA.ORG/ NEWJERSEYCPA

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TO ADVERTISE OR PROVIDE SPONSORED CONTENT IN NEW JERSEY CPA Visit njcpa.org/advertising or contact Eileen Proven at eproven@njcpa.org or 862-702-5640

The Legacy of Ralph Albert Thomas

Ralph Albert Thomas, CPA (DC), CGMA, CEO and executive director at the NJCPA, will be retiring after 23 years at the helm. Enjoy the special collection of photos and commentary describing Ralph’s time at the NJCPA.

4 Riding the Changing Tide of the Accounting Profession

From the great CPA shortage to the latest technological advancements and increasing use of remote/hybrid operations, the accounting profession is filled with many challenges and opportunities. Those able to adapt and change will be able to thrive.

Preparing for and Providing Expert Witness Testimony

Providing expert witness testimony and reports can be lucrative and fulfilling. But federal, state and local jurisdiction requirements vary, so CPAs engaging in this specialty need to be aware of the rules.

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Evaluating the Risk of Fraud in ESG Disclosures

Auditors must consider how a company incorporates environmental, social and governance (ESG) into its mission, vision and purpose for clues into its reliance on ESG factors to attract investors, employees and other stakeholders. Material misstatements impact financial reports.

New Initiatives for a New Future

BY DON MEYER, CAE, NJCPA CHIEF MARKETING OFFICER

During the past year, the NJCPA Strategic Planning Committee (SPC) and Society staff reviewed the organization's strategic plan to ensure that it is agile and adaptive. After careful analysis, the SPC affirmed that the Society’s vision, mission and strategic pillars remain relevant but the four directional initiatives approved by the Board in 2016 need updating.

The proposed directional initiatives build on the Society’s work of association modernization and image evolution and focus on the NJCPA’s vision: To equip and empower New Jersey’s accounting and finance professionals to thrive in their careers.

The initiatives were designed to maximize impact in core areas such as education, advocacy and member service, while stretching the Society’s thinking to ensure that the organization attracts and engages the next generation of professionals.

Much has been accomplished in the past six years, including:

y Approval of the new Affiliate membership category

y The Membership+ program, providing 20 free CPE credits to all members

y Transitioning education programs and Society meetings to digital platforms

y Heightened awareness of the NJCPA and CPA profession among lawmakers and media

y Transitioning the Society’s phone and communication systems to Microsoft Teams, which was essential to internal and external communication at the outset of the pandemic

In developing new directional initiatives, the SPC identified areas that need improvement; practices that the NJCPA should continue or increase/emphasize; practices that the Society should stop doing or direct resources away to higher priorities; and areas where there is a gap in knowledge and further research is needed. Looking forward, the SPC examined the key challenges for the organization, including the retirement and loss of seasoned members and the shifting needs and behaviors of members and prospective members. To address these challenges, the NJCPA needs to foster the growth of the next generation of accounting and finance professionals and raise awareness of accounting as an appealing career option among students.

The three proposed directional initiatives are:

y Sustain Market Share. The NJCPA will create and implement a model to sustain market share that assures it is recognized as the leading voice and preeminent membership association for accounting and finance professionals who live and/or work in New Jersey. Qualified professionals will recognize the NJCPA’s professional development and advocacy strength and view Society membership as fundamental to professional success.

y Improve the Member Experience. The NJCPA will provide members with a high-quality, inclusive and innovative

member experience throughout their career journey. The member experience will be personalized yet consistent across member groups and will include opportunities to engage in professional development, networking, advocacy and community outreach. NJCPA membership will deliver consistent, high-level value for members and the communities they serve.

y Amplify the NJCPA Brand. The NJCPA will take its brand identity that projects integrity, strength and value and amplify it to the population of accounting and finance professionals who live and/or work in New Jersey. The brand will resonate with members, nonmembers, accounting firms, companies, organizations, the media, legislators, regulators and other stakeholders. The Society’s brand will generate feelings of pride and unity for members and volunteer leaders across the organization.

These initiatives will work in concert with each other to build the pipeline, membership, engagement and the Society’s professional image to grow our community and bolster the pride that New Jersey CPAs have in their membership organization. By championing these initiatives, as well as programs such as the Member-Get-a-Member campaign (njcpa.org/mgm), individual leaders and members can play a key role in driving membership recruitment, engagement and retention.

Periodicals postage paid at Roseland, NJ, and at additional mailing office. POSTMASTER: Send address changes to New Jersey CPA, 105 Eisenhower Parkway, Suite 300, Roseland, NJ 07068-1640.

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.

A strategic plan defines what will constitute success — a roadmap for where the NJCPA plans to go — but it is also a dynamic document. Time, circumstances and outside forces will likely require periodic adjustments to ensure that the plan is meeting member needs and positioning the NJCPA for organizational success.

What do you think of the proposed directional initiatives? Let us know at feedback@njcpa.org.

RIDING THE CHANGING TIDE OF THE ACCOUNTING PROFESSION

By BENJAMIN ASPIR, CPA, MST EISNERAMPER LLP

Many of the recent changes have led to increased merger and acquisition activity among public accounting firms. In addition, private equity has made significant majority investments in accounting firms.

Firms are seeking to reduce overhead costs, increase headcount and add geographic and practice niche areas. Historically low unemployment combined with a shortage of accountants has created a talent war for CPAs. The competition for talent has led to overall higher salaries in the industry.

The accounting profession, specifically public accounting, has experienced tremendous transformation in the last few years. The COVID-19 pandemic and advancements in technology have accelerated industry trends, paving the way for specialization, niche practice areas and remote work.

THE GREAT CPA SHORTAGE

As Baby Boomers (born in the mid 1940s to mid 1960s) reach retirement age, there are not enough professionals to replace them. Baby Boomers outnumber CPAs in Generation X (born in the mid 1960s to early 1980s). Additionally, the majority of Millennials (born in the mid 1980s to mid 1990s) are not yet experienced enough to fill the more senior roles in firms.

The increasing number of retirements among sole practitioners has created a steady stream of CPA practices for sale. This has led to the trend of CPAs venturing out on their own, thereby decreasing the pool of available talent for firms to hire.

The Great Recession from 2007 to 2009 greatly increased the number of students majoring in accounting. Students sought stable careers that were more insulated from severe economic downturns.

According to American Institute of CPAs (AICPA) statistics, 2010 had one of the highest numbers of CPA candidates in history. Post Great Recession until the COVID-19 pandemic, the U.S. had been fortunate to experience a stable economy.

The side effect of economic stability was a reduction in students seeking ‘safer’ careers in accounting.

Statistics indicate that CPA licensure has been declining in the last several years. In my opinion, the 150-credit-hour requirement for CPA licensure has turned away some would-be accountants. The prospect of a fifth year of college compounded by an additional year of tuition expense has led to stifled growth in CPA licensures.

In addressing the issue, many CPA firms have embraced the usage of right-shoring to bridge some of the talent gap. Right-shoring shifts certain work to lower-cost jurisdictions to find the right balance of both cost and efficiency. Such a strategy requires significant upfront investment, and not all firms have the budget for such a strategy. The effect of the CPA shortage has firms considering adding non-CPAs for certain positions.

TECHNOLOGY ADVANCEMENTS

When I entered public accounting in 2007, the ‘paperless office’ was sweeping through the profession. Since 2007, the profession has progressed by leaps and bounds in terms of technology. Tax and accounting software has evolved to become more efficient and user friendly, as well as more automated. Many manual data entry tasks have become a thing of the past.

Cybersecurity has become critical for businesses in an interconnected world. Hacker intrusions and ransomware attacks have become more common and sophisticated. As a result, firms dedicate a substantial portion of their technology budgets to cybersecurity defense.

Technology advancements have also created a near-seamless transition to a work-from-home environment as the COVID-19 pandemic shifted many CPAs away from the office. The use of remote technology has allowed CPA firms to utilize conference meeting software not only for client and staff meetings but for business development and thought leadership. An external firm webcast can now reach people around the world, opening a new avenue for business development and increased firm branding.

Historically, CPA firms were restricted to their geographical footprint for hiring employees. Technology has allowed firms to hire employees across the country who can now work remotely.

The advancements and transformations in technology have come at a major financial cost to CPA firms. Technology budgets can range from hundreds of thousands of dollars to well into the millions of dollars for larger firms.

SPECIALIZATION AND PRACTICE NICHES

In an increasingly complex business world, clients are relying more on their CPAs to be their trusted advisors. The evolving client relationship has opened the door to a plethora of services outside the traditional tax and accounting offerings. Advisory services have increasingly become a steady area of growth.

The number of CPAs that are ‘generalists’ has diminished. Working on accounting, tax and audit engagements has become too complex, and those with only general knowledge may represent a risk to firms. Increased technical complexity due to legislation and accounting and auditing pronouncements has made it nearly impossible to develop expertise in all areas of tax, audit and accounting.

As a tax professional, I have seen firsthand the increased tax complexity that has led to specialization. The 2017 Tax Cuts and Jobs Act (TCJA) represented the first major tax

overhaul of the Internal Revenue Code in 30 years. The TCJA was far reaching and had several major provisions, such as:

y The state and local tax cap for individuals, which led to the passage of pass-through entity tax regimes by dozens of states, each with their own deadlines and set of rules

y The complete overhaul of the taxation of international income

y Creation of the 20-percent qualified business deduction (IRC Sec. 199A)

y A new limit on interest deductions for businesses (IRC Sec. 163(j))

y Economic nexus — the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair overturned the law requiring a physical presence within a state before collecting sales tax. The new economic nexus standard opened pandora’s box for wide adoption by state and local governments. State nexus analysis studies have become critical since the Wayfair decision.

The transformation within the accounting profession has brought challenges. However, many positive changes have occurred as a result, such as job security and wage growth. It is important as CPAs that we look to be industry leaders and embrace change as a profession. The next generation of CPAs is counting on us.

Benjamin Aspir, CPA MST, is a senior manager at EisnerAmper LLP. He is the leader of the NJCPA Federal Taxation Interest Group and can be reached at benjamin.aspir@eisneramper.com

PREPARING FOR AND PROVIDING EXPERT WITNESS TESTIMONY

By ROBERT J. VALAS, CPA/ABV, CVA, CFE CULLARI CARRICO LLC

PROFESSIONAL STANDARDS AND NONAUTHORITATIVE GUIDANCE

The primary standard related to litigation support services is AICPA Statement on Standards for Forensic Services (SSFS) No. 1. The requirements of AICPA Statements on Standards for Valuation Services (SSVS) apply when the expert will testify on valuation related matters, such as economic damage calculations. It should be noted that paragraph .50 of SSVS Section 100 provides a reporting exemption when a valuation is performed for a matter before a court, an arbitrator, a mediator or other facilitator, or a matter in a governmental proceeding. The developmental provisions of SSVS still apply when a conclusion of value or calculated value is expressed. There are also several practice aids published by the AICPA that address various practice issues related to communications in litigation and dispute services including serving as an expert witness or consultant.

In all cases, the practitioner must comply with AICPA Professional Standards and the Code of Professional Conduct. The federal, state and local jurisdiction requirements related to the submission of expert reports and the admissibility of expert witness testimony will vary, so the practitioner should consult with client legal counsel. The practitioner, however, should be familiar with the Federal Rules of Evidence (FRE) and the Federal Rules of Civil Procedure (FRCP), especially in federal court proceedings.

CLIENT ACCEPTANCE CONSIDERATIONS

Prior to accepting an engagement, the practitioner should determine the clientpractitioner relationship, that is, whether his/her client is the attorney or the attorney’s client. When the client is the attorney, the work and communications of the practitioner may be privileged and protected from discovery by the opposing side. In either case, the practitioner should discuss with legal counsel prior to the commencement of work the extent to which their work and communications are protected.

The practitioner should also assess the following prior to accepting the engagement:

y Does a conflict of interest exist that could impair objectivity? Objectivity may be considered impaired when an existing or prior business relationship conflicts with the interests of the client and the ability of the practitioner to objectively provide expert witness services.

y Do they have the qualifications and ability to provide expert witness services?

y Will the attorney and/or their client restrict the scope of the practitioner’s work? A scope restriction may entail limiting access to certain information or individuals that could influence the practitioner’s judgement and preclude them from complying with professional

When a practitioner is engaged by an attorney or a client to serve as an expert witness, they need to be aware of certain professional and legal requirements in the development and preparation of their report and expert witness testimony.

standards. During the client acceptance process and prior to commencing work, it is important for the practitioner to be cautious in their written or verbal communications with the potential client and to avoid statements regarding the facts of the case that may be interpreted as conclusion. Such written and/or verbal statements may be subject to discovery.

DOCUMENTS AND DISCOVERY

The courts have established rules for the determination of admissible evidence and expert witness testimony. The practitioner needs to carefully evaluate the documents examined and the requirements of each legal jurisdiction as it relates to reliance by the expert and the preparation of their report. Generally, the practitioner can rely on documents that have been authenticated by the parties to a proceeding or accepted by the court. However, the practitioner may want to consider stating in the written report that they have not corroborated the information.

There may also be documents provided to the practitioner that are subject to confidentiality agreements. If the confidential information is referred to in the expert report, the practitioner should consider using cautionary language in the report, such as labeling the information as confidential or subject to nondisclosure agreements. During an engagement, there will be various documents requested and received by the practitioner for consideration in the

expert report. In some circumstances, all documents received need to be disclosed and in others only those documents received, read and considered in the report must be disclosed. Any documents prepared by the practitioner, including written notes taken during phone calls or meetings, may be discoverable and subject to cross-examination by the opposing side. Again, the practitioner should consult with legal counsel regarding the requirements of each legal jurisdiction.

The opinion of an expert witness can be based on fact or assumption. An assumption may also be based on facts, presumption of facts or assumptions provided by the client and/or legal counsel. The practitioner should analyze their assumptions to determine if they are reasonable. The practitioner should also prepare documentation in support of their written report, the sufficiency of which is a matter of professional judgement.

EXPERT WITNESS REPORT AND TESTIMONY

Not all expert witness engagements require the preparation of a written report. The practitioner should consult with client legal counsel to determine if a written report is required, including the form and content. If a written report is required, the content of the report should comply with Rule 26 of the FRCP, especially in federal court proceedings. Although the FRCP does not preclude client legal counsel from assisting the practitioner, it is important for the practitioner not to subordinate their judgement. The practitioner is not an advocate for their client but an advocate for their work product and opinion. When testifying as an expert, the practitioner must also be able to defend their report with strength and conviction. An expert witness report is not considered evidence or admissible data in a trial, therefore oral testimony will be required for a trier of fact to consider the expert’s opinion.

The opinion expressed in a written report should also comply with the FRE, especially in federal court proceedings. Rule 703 of the FRE permits an expert to rely on another expert, witness, or facts and data, provided such reliance is what other experts would reasonably rely upon

in practice. Any documents relied upon by the expert should be disclosed in the report. A failure to comply with the FRE may result in the expert being disqualified as a witness or their testimony being limited or excluded entirely.

It is common for the opposing side to challenge the expert witness report and opinion through the filing of a Daubert motion. The reasons for a Daubert motion may be attributed to an expert failing to utilize methods commonly used by similar professionals, use of untested or biased data, unsupported assumptions, failure to consider material facts and other issues. The expert report must comply with the Daubert standard, as conveyed in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)

SCHEDULE AND TIMING OF TRIAL

The schedule and timing of litigation is determined by the court and/or circumstances from each opposing side. The practitioner needs to understand the timing and expectations of legal counsel as it relates to the written report and expert witness testimony. The practitioner should also expect delays and adjust their schedule accordingly. These delays can last months and even years.

Robert J. Valas, CPA/ABV, CVA, CFE, is a partner at Cullari Carrico LLC. He is a member of the NJCPA and can be reached at rvalas@ cullaricarrico.com

LEARN MORE

March 17 or April 28, Live Webcast — or On Demand

THE ACCOUNTANT AS THE EXPERT WITNESS

March 22, April 4 and additional dates, Live Webcast

I WANT THE TRUTH: PREPARING TO BE AN EXPERT WITNESS

njcpa.org/events

DO MORE

EARN THE AICPA FORENSIC ACCOUNTING CERTIFICATE

njcpa.org/certificates

EVALUATING THE RISK OF FRAUD IN ESG DISCLOSURES

By MELISSA A. DARDANI, CPA, CFE, MA cc MD ADVISORY SERVICES

As the financial markets shift toward a focus on ethical investing and responsible capitalism, corporate accountability becomes a significant concern of regulatory agencies, corporate shareholders and prospective investors. Environmental, social and governance (ESG) reporting can be viewed as a measure of corporate ethics in these categories — a measure that is often intangible and, therefore, difficult to quantify.

The Securities and Exchange Commission (SEC) has created a Climate and ESG Task Force within the Division of Enforcement and has introduced proposed enhancements to ESG disclosures made by investment companies and advisers. They also previously designated authority to the Financial Accounting Standards Board (FASB) to establish and maintain Generally Accepted Accounting Principles (GAAP) as the authoritative accounting standards for publicly traded companies. This article discusses the intersection of these two governing bodies as it relates to the risk of material misstatement of ESG factors in a company’s financial statements. Further, the Auditing Standards (AS) of the Public Company Accounting Oversight Board (PCAOB) can be applied to understand where the auditor’s responsibility theoretically begins and ends as it relates to risk in ESG disclosures.

AUDITOR’S RESPONSIBILITY FOR SUPPLEMENTAL INFORMATION

PCAOB AS 2110 describes the requirement for the auditor to understand the entity and its environment, including industry and regulatory factors, company objectives, strategies, key performance

indicators and related business risk. An auditor must consider how a company incorporates ESG into its mission, vision and purpose for clues into its reliance on ESG factors to attract investors, employees and other stakeholders. In addition, key performance indicators (KPIs) and financial highlights reported by the company, proxy letters and published shareholder correspondence can help the audit team better understand the entity and environment.

In planning the audit and assessing the company’s risk, materiality thresholds must be established. A misstatement or omission is material if there is a substantial likelihood that it would influence the judgment of a reasonable user of the financial statements (AU-C §320.02). Materiality is generally considered in quantitative terms but can also be viewed qualitatively. For example, an occurrence of fraud is material without respect to transaction size. Risk and materiality assessment extends to supplemental information within or surrounding the financial statements.

The audit standards provide three tiers of requirements related to supplemental information. AS 2701 guides the auditor engaged to audit supplemental information and defines what constitutes relevant supplemental information. AS 2705 and 2710 define auditors’ responsibility for required (covered by FASB, GASB or FASAB) and optional supplementary information, respectively. They are summarized in Table 1.

Within the financial statements, ESG disclosures and measures could be found within debt or equity financing on the balance sheet, assets held by an investment company in accordance with an ESG strategy and revenues from grants or related expenditures for the purpose designated by the grantor and other government-issued credits and incentives for green practices. Non-financial-statement ESG disclosures

or measures that may accompany the financial statements could include items discussing business strategy and risk, directors, executive officers, corporate governance, executive compensation and legal proceedings. Documents containing or referencing the audited financial statements that may contain relevant ESG disclosures could include the annual report or proxy statement to investors.

THE SEC AS A GATEKEEPER

According to a May 2022 SEC report, 2.4 percent of all funds as of September 2021 had names containing ESG buzzwords such as sustainable, responsible, ESG, climate, carbon or green. Further, the Forum of Sustainable and Responsible Investment has also documented growth in ESG funds, from 55 in 1995 to 1,741 in 2020. ESG marketing practices in a

PRESCRIBED PROCEDURES

AS 2701 To obtain sufficient appropriate audit evidence to express an opinion on whether the supplemental information contained in the basic financial statements is fairly stated, in all material respects, in relation to the financial statements as a whole (AS 2701.02)

• Reconcile to the underlying accounting, records and financial statements (AS 2701.04c).

• Test the completeness and accuracy (AS 2701.04e).

• Determine criteria and methods, the appropriateness and consistency of the criteria and methods, and adherence to any relevant regulatory requirements (AS 2701.04a-b.)

• Assess the risk of material misstatement and other materiality considerations (AS 2701.03a-b).

• Assess any related relevant evidence obtained from the audit (AS2701.03c).

• Obtain appropriate management representations (AS 2701.05).

AS 2705 To ensure information required by GAAP but reported outside the basic financial statements is reported in accordance with authoritative guidelines for measurement and presentation (AS 2705.06)

AS 2710 To ensure voluntarily disclosed information that contains the audited financials is not materially inconsistent with the information or presentation of information in the financial statements (AS 2710.04)

• Determine preparation methods, consistency of application, significant assumptions and adherence to any prescribed guidelines (AS 2705.07a).

• Verify consistency with management inquiries, audited financial statements and other knowledge obtained (AS 2705.07b).

• Apply additional procedures if necessary (AS 2705.07d).

• Read the information and determine its consistency with the financial statements.

Table 1

competitive capital market can be aggressive and misleading. In response, in May 2022, the SEC proposed enhanced disclosures by investment companies and advisers about ESG investment practices. If passed, the Investment Advisers Act of 1940 and the Investment Company Act of 1940 would be amended to require registered investment companies and advisers to provide additional information related to their ESG investment practices.

Under the proposal, investment companies, which include mutual funds, closed-end funds and exchange-traded funds (ETF), among others, would be subject to increased ESG disclosure requirements. Broadly, funds would be designated as one of the following:

y An ESG-Focused Fund, meaning ESG factors are a significant or main consideration in selecting investments or in its engagement strategy with portfolio companies;

y An Impact Fund, which seeks to achieve a specific ESG impact; or

y An Integration Fund, which considers ESG factors for investment decisions among other factors.

There are defined strategies within the ESG-Focused Fund category, and the investment company must indicate which one(s) it is employing. They include tracking an ESG index, applying an inclusion or exclusion screen to investments based on industry and activities, employing ESG proxy voting policies, and engaging with portfolio companies regarding ESG. The required disclosures are to be included in the management discussion and analysis section of the annual report. This information would theoretically fall under the purview of AS 2701 as supplemental information required pursuant to the rules and regulations of a regulatory authority (AS 2701.A2(b)).

The SEC proposed rules also include the requirement to tag their ESG disclosures using Inline XBRL for ease of accessibility. Providing a data structure for these disclosures ensures investors, market participants and other stakeholders can extract, filter,

reduce, aggregate and otherwise analyze the information being put forth by the funds, furthering the transparency to stakeholders and accountability of the reporting companies. The proposed Inline XBRL taxonomy requirement for ESG disclosures is evidence of its materiality in the eyes of the SEC.

THE INTERSECTION OF FASB AND THE SEC

The SEC’s proposal is focused on added disclosure requirements for investment companies. Yet, as a result of the proposed requirements, there could be an unintended consequence to portfolio companies seeking this type of institutional investment. Information required by the investment company in making their ESG investment decisions will require reliance on the portfolio companies’ audited financial statements, as well as their verbal and written assurances. Material misstatement by the portfolio company impacts the stakeholders of their financial reports, including the investment companies.

As for auditors of investment companies, AS 2701.A2(b) defines supplemental information as that which accompanies the financial statements and that is required pursuant to the rules and regulations of a regulatory authority (such as the SEC). In order to fall under the broader guidance of AS 2701, the information must also be covered by the auditor’s report on that information in relation to the financial statements, which includes that the financials are, in all material respects, fairly stated. The auditor must consider areas of the basic financials in any ESG-related figures and disclosures. They must consider what evidence, if any, is necessary to obtain assurance that the basic financial statements are fairly stated in all material respects.

For investment companies, a disclosure of investments is required under ASC 946-210-50-1 and SEC Regulation S-X Rule 6-04. While it is not the responsibility of the external auditor to perform “passthrough audit procedures” of the companies listed on the schedule of investments, the schedule is part of the basic financial statements and thus cannot be ignored. The auditor should consider if obvious

discrepancies exist between the proposed changes to the investment companies’ annual report and the schedule of investments.

When evaluating audit risk, the auditor should understand if the investment company has an ESG risk management process in place to aid in vetting out the portfolio companies prior to engaging in an investment partnership. The audit risk model accounts for inherent risk and control risk in assessing the risk of material misstatement (AS 1101). Thus, the more effective and robust system of internal control surrounding a company’s ESG efforts means that less audit evidence is required.

Melissa A. Dardani, CPA, CFE, MAcc, is the founder and managing member of MD Advisory Services, a boutique forensic firm. She is a member of the NJCPA and can be reached at melissa.dardani@mdas.cpa

READ MORE

ESG KNOWLEDGE HUB

njcpa.org/hub/esg

LEARN MORE

March 16 or April 12, Live Webcast

ENVIRONMENTAL, SOCIAL AND GOVERNANCE FOR ACCOUNTANTS

March 20 or April 19, Live Webcast

GETTING STARTED WITH ESG

March 22, April 11 and additional dates, Live Webcast

WHAT DOES FRAUD LOOK LIKE?

March 29 or April 27, Live Webcast — or On Demand

THE IMPACT OF ESG-RELATED MATTERS ON FINANCIAL STATEMENTS AND AUDITS

njcpa.org/events

Accounting for Digital Assets: Key Considerations for Practitioners

BY DR. SEAN STEIN SMITH, CPA, DBA, CMA, CFE, CITY UNIVERSITY OF NEW YORK-LEHMAN COLLEGE

In the aftermath of a disastrous year for cryptoasset prices, centralized crypto organizations and market sentiment around cryptoassets more generally, 2023 is going to be a recovery year. One fact remains abundantly clear: the sector is in clear need of comparable, consistent and understandable financial reporting and disclosure practices. As cryptoassets have become more mainstream, and blockchain-based applications have continued to be adopted by firms in virtually every economic area, the need for more transparency and better reporting continues to grow.

Due to the lack of authoritative accounting and audit standards directly connected to blockchain and cryptoassets, the profession has been seeking to provide solutions such as proof-of-reserves, proof-of-solvency practices and other services attempting to bring some much-needed transparency and reportability to the crypto space.

Setting aside specific services or service lines, let’s take a look at a few of the items that accounting practitioners need to keep an eye on as the calendar eventually moves past tax season.

VALUATION IS STILL AN ISSUE

One of the most difficult accountingspecific tasks connected to cryptoassets is obtaining an accurate valuation, but this is a nuanced point. For certain cryptoassets, such as bitcoin and ether, or other widely traded crypto, the valuation process is relatively straight-forward. The vast majority of cryptoassets, however, are not as widely traded or talked about in the mainstream media, and this requires some additional questions to be asked, such as:

y Where is the asset in question traded?

y Are there any “whales,” whose large ownership stakes can distort market activities?

y Where does this cryptoasset tend to be used by U.S. taxpayers or by international actors?

y Are there additional factors such as income production, staking or ownership rights that could influence valuation?

CUSTODY

As the aftermath of the collapse of FTX continues to weigh heavily on the crypto space, as well as provide impetus for new and expansive regulation, a related accounting question has to do with how the cryptoassets in question are being held. Hot wallets, primarily involving investors depositing crypto information with an exchange or other trusted third-party, have certainly seen a decline in popularity as investors withdrew billions from such exchanges during late 2022 and early 2023. Cold wallets, or hardware wallets, are not nearly as convenient, but do provide an additional layer of security and the upsides associated with self-custodianship.

In any case, accounting professionals must be able to have productive and relatively in-depth conversations with clients around wallet security. If a hot wallet is utilized, some of those questions should center around the insurance or investor protection offered by the exchange, and for cold wallets, appropriate documentation and controls need to be established over the safeguarding of the physical device itself. In either case, internal controls, succession planning and data integrity over key information need to be a priority in any accounting conversation.

REGULATION IS COMING

One thing that is almost guaranteed is that regulation, be it from accounting standardsetters or some other body, is coming for the crypto space, and it will be coming sooner than many market actors might expect. While the accounting implications of more regulation are difficult to forecast, one area to keep an eye on is how (hopefully) private-sector solutions can have an impact on the final forms of regulation that do emerge. Mentioned above, proof-of-

reserves is an accounting process already offered by several firms, but it is not an authoritative accounting or auditing standard.

That means that, almost without a doubt, whatever accounting standards do emerge, there will be a period of volatility and dislocation that crypto investors will need to navigate successfully.

No matter what the regulation is that arises, accounting professionals are uniquely well positioned to help clients navigate these fast-changing times. Cryptoassets are here to stay, that much is widely agreed upon by developers, investors and policymakers alike; firms and practitioners must be up-to-date on changes in accounting and regulatory treatment to best advise both current and future clients.

Dr. Sean Stein Smith, CPA, DBA, CMA, CGMA, CFE, is a professor at the City University of New York-Lehman College. He is a member of the NJCPA Board of Trustees and participates on several interest groups. He can be reached at sean.steinsmith@lehman.cuny.edu.

LEARN MORE

March 18, 30 and additional dates, Live Webcast

AN ACCOUNTANT’S GUIDE TO BLOCKCHAIN AND CRYPTOCURRENCY

April 28, East Hanover BLOCKCHAIN, REAL ESTATE AND MORTGAGES

On Demand

A&A AND FINANCIAL REPORTING FOR CRYPTOCURRENCY AND OTHER DIGITAL ASSETS njcpa.org/events

READ MORE CRYPTOCURRENCY

KNOWLEDGE HUB

njcpa.org/hub/crypto

Getting Prepared for CPA Evolution

BY AMY LYSAK, PH.D., ROWAN UNIVERSITY

CPA Evolution — a new model for CPA licensure — is forging ahead with an anticipated launch of January 2024. This initiative was set forth by the American Institute of CPAs (AICPA) and the National Association of State Boards of Accountancy (NASBA) to address the changing demands of accounting practice. With feedback from key stakeholders, CPA Evolution was developed to provide a licensure model that focuses on enhancing the following skillsets: critical thinking; professional judgment/skepticism; problemsolving; understanding of business systems, controls and risks; data management and analysis; and System and Organization Control (SOC) engagements.

The result is a new uniform CPA Exam format that will include a core focus on accounting (Financial Accounting and Reporting or CORE FAR), auditing (Auditing and Attestation or CORE AUD) and tax (Taxation and Regulation or CORE REG) with an overarching theme of technology. It will also require CPA candidates to select one of three discipline areas: Business Analysis and Reporting (BAR), Tax Compliance and Planning (TCP) or Information Systems and Controls (ISC). Although candidates will choose one discipline for their licensure, they will be able to pursue a different career path than the specialization selected for licensure.

In 2022, the AICPA and NASBA made headway with the plan by communicating a transition policy, issuing an Exposure Draft for public comment and providing guidance on the last testing dates under the existing CPA Exam format.

EXAM SECTIONS

The existing FAR, REG and AUD portion of the exams will align with the new uniform CPA Exam’s CORE sections of CORE FAR, CORE REG and CORE AUD, respectively. If a candidate has not passed FAR, REG or AUD, the corresponding CORE section will need to be completed instead.

Additionally, the existing Exam’s BEC section will align with the discipline areas (BAR, ICS and TCP) of the new licensure model. A candidate is not required to take the discipline component of the new licensure model if BEC is completed prior to January 2024. However, if BEC is not complete, candidates will need to select one of the disciplines to meet the CORE+1 model as outlined in the CPA Evolution initiative. The 18-month rule should still be factored into a candidate’s plan; therefore, if any passed section expires after Dec. 31, 2023, the candidate will need to take the corresponding section under the new CORE+1 licensure model.

CPA BLUEPRINT

In July 2022, the AICPA issued its Exposure Draft “Maintaining the Relevance of the Uniform CPA Examination Aligning the Exam with the CPA Evolution Licensure Model” to further help key constituents understand and weigh in on the new exam format. The Exposure Draft included a CPA Blueprint for each section of the exam that assists potential CPA candidates with exam preparation by outlining the exam content; informs educators about the knowledge and skills necessary for CPA licensure; and aids CPA Exam question development. After reviewing stakeholder feedback, the AICPA is expected to provide a final CPA Blueprint by early 2023.

TIMELINE

The last day of testing for the existing exam format of AUD, BEC, FAR and REG is Dec. 15, 2023. NASBA will stop processing BEC exam applications on Nov. 15, 2023, and the last exams for BEC will be administered by Dec. 15, 2023. No CPA Exams will be scheduled or administered by NASBA between Dec. 16, 2023 and Jan. 9, 2024, to allow for the existing IT systems to transition to the new CPA Exam format. Testing under the new format begins on Jan. 10, 2024.

CPA Evolution intends to better prepare future CPAs for a profession that is heavily influenced by technology and data analytics, requires skills in problemsolving and critical thinking, and necessitates an understanding of business risks and how data is managed. As the launch approaches, it is critical for potential candidates to stay abreast of key developments and transition policies that are communicated by the AICPA and NASBA.

Amy Lysak, Ph.D., is an assistant professor in the Department of Accounting & Finance at Rohrer College of Business at Rowan University. She can be reached at lysak@rowan.edu

Best Practices for Closing the Books

BY TOMMY KLEINHANS, CPA, CENTRI BUSINESS CONSULTING, LLC

The month-, quarter- and year-end close processes often create a bottleneck for companies of all sizes and all industries. Most financial executives do not have their numbers in time to meet their reporting requirements and steer their company in the right direction. Instead, many rely on their pulse to make decisions, which could, in turn, become disastrous. Here are best practices controllers and accounting firms can implement in their companies and with their clients in order to focus more on key performance indicators and analysis:

STRATEGIES

y Month-end checklists — When a company has a manual that shows all procedures and tracks against the close deadline, it keeps all teams on the same page and avoids a lag in communication. This also can help decision makers determine where there are bottlenecks in the close process and whether they can be avoided.

y Integrated technologies — When used for reconciliation, inventory, and intercompany, payable, receivable and payroll processes, integrated technologies can save companies an abundance of resources. Having the proper tech stack minimizes manual human error and maximizes optimization.

y Roll forwards — Rolling forward any Excel files, monthly journal entries or subledger reconciliations can usually be done prior to month-end since activity in the last week of the month can be minimal. Having a plan and noticing what part of the plan can be completed in advance can dramatically speed up close times and keep employee hours more constant.

TECH STACK

y Excel — This is the Swiss-Army knife of accounting technology tools. Pivot tables, visualization graphs and formulas are a few of the many ways Excel can be

used to improve month-end. However, be wary: Excel may not be ideal for larger companies with more-diversified reporting requirements or for processes requiring more collaboration. Too much reliance on Excel files in a close process may lead to significant deficiencies during an integrated audit.

y Microsoft Teams — Teams (microsoft. teams.com) is a great tool for not only video calls with a team, but for creating recurring checklists that can be assigned to specific members of the team and rolled forward from month to month. Screen recordings of recurring tasks can also make it much easier to onboard new team members.

y Automation technology — Alteryx (alteryx.com) is a model-creating platform that helps collect, prepare and blend data. It’s a great tool to increase the speed for recurring tasks, re-format legacy system reports, automatically create allocations and customize a KPI report. Zapier (zapier.com) is a webbased platform that allows triggers to be set up across several platforms to increase automation in the close process. For example, a trigger in Zapier can be a positive number in a specific cell of a Microsoft Excel spreadsheet, and a flow can be created so a journal entry is automatically inputted in the financial reporting software (e.g., Netsuite or Quickbooks) and an email of the entry is automatically sent to the supervisor.

y Reconciliation technology — Similar to the automation technology, Blackline (blackline.com) is a never-ending improvement software that can be used to centralize the financial close, intercompany reconciliation and accounts receivable automation processes. Blackline has capabilities such as integration with financial reporting software for reconciliation entries and makes the review process much simpler.

Cadency (trintech.com/cadency) has capability to upload massive amounts of data to integrated ERP systems, automatically match advanced transactions and customize reviewer dashboards to control the status of month-end reconciliations.

y Software integration — There is a plethora of choices when deciding which software to use for financial reporting, payroll, invoicing, receivables, inventory, KPIs and any other facets of a business. Determine the software integration that’s best for the business, develop a plan to implement each product’s integration capabilities and commit!

Having the proper strategies and technology in place to close a company’s books is vital for a successful process, but nothing is more important than having the proper training and adequate professionals. Software training leads to great habits, minimal confusion and autonomous collaboration. As persistent understaffing and greater pressures to report financial data increase in the accounting industry, accounting optimization and transformation is a viable solution.

Tommy Kleinhans, CPA, is a manager at Centri Business Consulting, LLC. He is a member of the NJCPA and can be reached at tkleinhans@centriconsulting.com

LEARN MORE

March 29 or April 26, Live Webcast — or On Demand

SHORTEN MONTH-END: CLOSING BEST PRACTICES

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BUSINESS MANAGEMENT

KNOWLEDGE HUB

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7 Major Retirement Risks to Avoid

BY CARLOS DIAS JR., DIAS WEALTH

The way people plan for retirement has changed dramatically over the last several decades. Those nearing retirement should avoid underestimating their longevity as well as stock market volatility. Here are the seven biggest risks retirees should avoid at all costs, along with tips to address them.

1. LONGEVITY RISK

Average life expectancy has increased from 68.14 years in 1950 to 76.1 years in 2021. One of the biggest threats retirees face is outliving their savings, especially since a 30-year retirement is not as uncommon compared to past generations.

Pro Tip: Use a three-buck strategy to allocate savings that address immediate, near-future and long-term needs. Liquid is anything within the next five years; income is what will be needed for the next 30 years or more; and growth is to offset inflation, taxes and future health care expenses. Delaying Social Security from full retirement age until age 70 will provide additional retirement credits at about 8 percent per year, which means a larger benefit later on.

2. INFLATION RISK

Since 1914, the average inflation rate has been 3.24 percent, and that number should remain constant even if the percentages are still relatively high for the next several months.

Pro Tip: Use Treasury Inflation-Protected Securities (TIPS) and Series I bonds to hedge against inflation. Stay away from speculative or high-risk investments, including private equity, penny stocks and alternative investments if they don’t match the investor’s risk tolerance.

3. TAX RATES RISK

The Tax Cuts and Jobs Act of 2017 lowered the top tax rate to 37 percent starting in 2018 with the majority of the legislation set to expire in 2026, including a lower standard deduction and higher overall tax rates. Pension, bank or annuity interest, short-term capital gains, ordinary dividends, municipal bond income and retirement

plan withdrawals increase the chance Social Security benefits might be taxable. Increased Medicare Part B premiums is also another additional tax for those in retirement who earn over a certain amount.

Pro Tip: Convert a traditional IRA or 401(k) to a Roth in years when income might be lower. Nonqualified annuities (instead of CDs and other bank products) offer tax deferral, which helps with Social Security taxation and Medicare Part B premiums.

4.

HEALTH CARE COSTS RISK

Insurance, Medicare Part B premiums, drug costs, co-pays, co-insurance and deductibles can be costly in retirement. Fidelity estimates an average couple age 65 in 2022 may need about $315,000 saved (after tax) to cover those expenses.

Pro Tip: Health Savings Accounts (HSAs) offer tax-deductible contributions that grow tax-deferred as well as tax-free withdrawals if used for health care expenses. A qualified HSA funding distribution allows a one-time “trustee-to-trustee” transfer up to yearly contribution (whether individual or family) from an IRA or Roth IRA.

5. LONG-TERM CARE COSTS RISK

Long-term care is the most expensive cost with home health care, assisted living and skilled nursing costs increasing on average 1.71 percent to 3.64 percent per year.

Pro Tip: Long-term care insurance premiums aren’t guaranteed, which enables other types of “hybrid” policies such as life insurance and annuities with long-term care riders to be an alternative solution.

6. LIFETIME INCOME RISK

Up until the 1980s, pension plans made up a substantial part of a retiree’s income. According to the Bureau of Labor Statistics, that number has decreased substantially to under 20 percent. Today’s retirees are often left figuring out for themselves how to create a guaranteed stream of income for life.

Pro Tip: Immediate and indexed annuities with income riders focus on the

distribution phase in retirement. Don’t plan on using the same investments for accumulating wealth as those for what you will be living on.

7. STOCK MARKET RISK

Sequence of returns risk is the danger of receiving lower or negative returns early when withdrawals are made in retirement. The 4-percent withdrawal rule is a safe withdrawal consisting of 60 percent stocks and 40 percent bonds first published in the Journal of Financial Planning in 1994. With low interest rates, this rule has been questioned, as data suggests it should be around 2.95 percent to 3.3 percent.

Also, the Rule of 120 (previously known as the Rule of 100) subtracts your age from 120 to get the right percentage of stocks and bonds in your portfolio. For example, a 55-year-old would have 65 percent in stocks and 35 percent in bonds. The problem is that timing and human nature tends to interfere.

Pro Tip: Don’t use outdated rules just to seek optimal exposure. Individuals should re-evaluate their risk tolerance and focus on saving as opposed to chasing higher investment returns.

Carlos Dias, Jr., is a financial advisor, public speaker and founder of Dias Wealth LLC. He can be reached at carlos@diaswealth.com.

5 B2B Marketing Strategies During a Recession

BY BECKY LIVINGSTON, PENHEEL MARKETING

If you’re wondering how your firm can manage its marketing budget during a recession, you’re not alone.

Jane Hales, managing partner at Sapio Research, says, “Companies that cut their marketing budgets due to recession not only make it harder to retain customers but also to bring back new and existing customers once economic growth returns.”

If you’re tempted to reduce your marketing budget, you may be hurting your business more than helping it because you’d be missing out on opportunities in the marketplace. Several studies indicate that increasing marketing during a downturn could lead to growth. Doing so helps to keep the brand top of mind, which in turn is front-and-center when companies are seeking the services you offer.

5 STRATEGIES TO COMPETE

Here are five strategies you can use to maximize your budget and retain valued clients:

1. Turn off or reduce the number of nice-to-have campaigns and focus on mission-critical campaigns during priority seasons.

2. Adjust the metrics you should be focusing on (e.g., clicks) to revenuefocused metrics, such as customer accounts won and deals acquired, cost per marketing qualified lead and cost per sales qualified leads and more. If you’re using a customer relationship management (CRM) system with a sales and marketing component, these metrics should be easy to identify. If not, this becomes much harder.

3. Publish more value-based content that directly supports firm objectives and has a long shelf life. If the content does not support an initiative, do not create it.

4. Use more targeted efforts that demonstrate how your service solves a pain point for clients. A good example of this is a case study or whitepaper. Information in those can be presented in webinars, video format or even a podcast.

5. Promote a tiered service structure giving clients more service option combinations to choose from at a price point that makes sense when they, too, are cutting back. It allows you to upsell services to existing clients.

CHANGING ADVERTISING STRATEGIES

In addition to the above options, advertising during a recession is still wise. However, adjusting what and how you are advertising is crucial. Here are some tips:

y Pivot the business focus to essential services versus the “nice-to-have” option. Market those services more heavily than you may have in the past.

y Update your company’s Google My Business or Bing Business profiles with revised hours, new offers you may have available (like tiered services) and share posts about the firm’s culture.

y Fine-tune ads to focus on the firm’s updated target market. In addition, update your website search engine optimization (SEO) keywords to reflect the new focus.

y Test call-to-action hooks that appeal to your customers’ emotions, such as:

• “We’re here for you. Let’s chat today.”

• “We take the guesswork out of doing your taxes. Contact us today.”

• “Act now and avoid penalties later.”

• “Get as many tax breaks as legally possible.”

• “Join now. You’ll be thanking us all year.”

• “Stop paying too much in taxes. Call us today!”

WHY INVESTING IN MARKETING MAKES SENSE

Here are several reasons why you should maintain, and even invest in, marketing during a recession:

y Avoid losing market share by decreasing initiatives. Instead, keep your brand top of mind as prospects search for providers.

y Reducing marketing spending gives your competitors a clear sign that you are no longer in the fight or that your business is vulnerable. Instead, keep your competition on its toes by tossing creative ad campaigns in their face.

y New market leaders tend to appear during a recession, giving prospects fresh resources to tap. What can you do? Focus on brand awareness using stories to talk about your firm’s culture, how you support the community and ways you provide for others outside of the community.

y Decreasing marketing initiatives also reduces the amount of data you can collect — data that could be crucial in a future market shift.

y Existing customers want to know you’re still there to support them during these tough times, especially business clients. Continued marketing efforts help to stabilize the relationship you have with clients during turbulent times.

According to a 2020 Harvard Business Review article (hbr.org/2020/08/dont-cutyour-marketing-budget-in-a-recession), “Companies that have bounced back most strongly from previous recessions usually did not cut their marketing spend, and in many cases actually increased it. But they did change what they were spending their marketing budget on and when to reflect the new context in which they operated.”

To avoid potentially long-term loss, find ways to leverage marketing to help your firm stay afloat. Work with an accounting marketing consultant to successfully craft and execute your plan.

READ MORE CLIENT ACQUISITION AND RETENTION KNOWLEDGE HUB njcpa.org/hub/clients

LEARN MORE

April 3, Live Webcast — or On Demand

PODCASTS: HOW TO MARKET YOUR EXPERTISE TO GET MORE CLIENTS

March 17 or April 11, Live Webcast

GROW YOUR CPA BUSINESS: LINKEDIN FOR NETWORKING AND REFERRAL njcpa.org/events

Becky Livingston is the owner of Penheel Marketing, a virtual CMO for CPAs and small business owners. She can be reached at becky@penheel.com.

Business and Tax Opportunities for the Food and Beverage Industry

BY CHRISTOPHER MARTIN, CPA, CGMA, CLIFTONLARSONALLEN, LLP

Business owners operating in the food and beverage space have lived through a tumultuous few years. Thinking about what restaurants, supermarkets, and manufacturers and distributors of food products faced between 2020 and today, it is mind boggling that so many of these businesses survived. Those that did shared a common trait: an ability to adapt quickly and decisively. As advisors in this space, CPAs are expected to ensure that clients keep up with, and are ahead of, changes occurring in this industry. Key issues to consider:

INCOME TAXES, OF COURSE

Income taxes are a main driver of many of the conversations CPAs engage in with their clients. Key issues to consider:

y Research and development tax credits. There are various avenues for businesses in the food and beverage sector to take advantage of these credits. Opportunities include innovations and changes in food product formulation; new or improved sanitization methods; ingredients and formulations; ERP software implementation for purchasing and shipping; packaging redesign and methods to increase shelflife; production process changes and efficiencies; and testing to reduce costs and meet regulations.

y Charitable contributions of food inventory. The pandemic resulted in the unpredictability of consumer demand and uncovered supply issues that this sector is still feeling. As a result, companies in the food and beverage space may be left with obsolete or expiring inventory that they can donate to local food pantries or other charitable organizations. By doing so, they can take advantage of an underutilized tax deduction where a business can not only deduct the cost of the food donated but can also receive an additional deduction for a portion of the retail markup they would have received if the inventory was sold at fair market value.

y Last in, first out (LIFO) conversion. In times of rising food costs, it is often beneficial to consider converting inventory valuation from first in, first out (FIFO) to LIFO. LIFO provides a valuation allowance (and tax deduction) in inflationary periods which helps to better match current sales with the related costs. While this is a temporary solution, timing it can be an extremely valuable tool in reducing income taxes in the short term and increasing cash flow for other uses.

OTHER BUSINESS STRATEGIES

There are several other strategies that businesses in the food and beverage space are considering to support increased efficiency, broaden the customer base and cut costs, such as:

y Reassessing pricing strategies. It is often difficult to raise prices on food and beverage products without customer backlash. The last two years have been a period of extremely high inflation, which has a direct impact on the inputs and products that companies are purchasing and utilizing. As such, it is imperative that pricing is changed

in a timely manner to match, or get ahead of, those rising costs.

y Diversifying product lines. Not only should pricing models be adjusted, but it is also important to diversify the current line-up with new and innovative products that meet customer taste. In this way, demand can create new revenue streams that will keep the company competitive and even put them ahead of the competition. There may be some research and development (R&D) credits to take advantage of also.

y Leveraging technology. There cannot be a meaningful conversation about gaining efficiency and cutting labor costs (often the top expense line after product costs) without talking about technological innovation. Technology can be utilized to automate manual packaging processes, create more efficient shipping and receiving practices, provide real-time inventory information and aid in formulation of new products. Coming full circle to the income tax conversation, it’s also a great way to invest in the business. Making sure plans are in place to put equipment in service prior to year-end is critical from a timing perspective.

The issues that food and beverage companies face are not always unique to that industry; however, it is vital that advisors in this space continue to be aware of trends and changes to best assist these business owners make the most informed decisions.

Christopher Martin, CPA, CGMA, is a partner at CliftonLarsenAllen, LLP, and can be reached at chris.martin@claconnect.com

How the Growing Cannabis Industry is Impacting Accounting and Finance Professionals

BY RYAN BRANDT, CPA, MSA, AND SEAN LINDE, CPA, WITHUM

The floodgates are officially open in the Garden State! On Oct. 27, 2022, the Cannabis Regulatory Commission awarded the first annual licenses to eager recreational-use applicants. The untapped markets are endless, with the industry now ready to catapult to meet demand.

However, with anything sweet must come the sour. And accountants will be in high demand to navigate operators through the challenging aspects of cannabis, beginning with immensely unfavorable income taxes.

IRC SECTION 280E IMPLICATIONS

The issue lies within IRC Section 280E, which states rather simply, “No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of the trafficking in controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act).” However, the Section 280E disallowance does not apply to the cost of goods sold (COGS). This allows a grower, producer, wholesaler or retailer of marijuana to deduct from its gross receipts the COGS, despite the language of Section 280E.

Accounting and finance professionals servicing cannabis clients must be vigilant and focus on the costs that should be classified as inventory, which eventually make their way through the cost of goods sold. General and administrative expenses are no longer deductible, and as tax practitioners, we are not used to seeing this with typical business tax returns. Unfortunately, plenty of examples of tax court cases support the reality of this code section. If you are a plant-touching company and try to get creative or challenge Section 280E, it will likely result in an unfavorable outcome.

New Jersey and several other states mirror the federal tax code as it pertains to Section 280E. On the bright side, some states have decoupled from federal

regulation, and New Jersey is on track to follow suit. The state recognizes that for a business to succeed and thrive in this blossoming industry, they do not have to impose harsh tax regulations for new companies, but instead allow them to grow and contribute to the economy. You can follow the progress of the legislation at njcpa.org/cannabis

As most operators lack the depth of expertise surrounding these tax concepts, accounting and finance professionals will play a critical role in the overall well-being of the sector.

ACCOUNTING NEEDS

Beyond taxes, accountants will no doubt be in high demand to maintain accurate books and records for cannabis operators. There is no shortage of users of financial statements in this industry. From fundraising activities to business disputes, reliance on financial reporting is a common denominator. Savvy Garden State entrepreneurs recognize this and budget for spending on either internal or outsourced accounting roles.

While accounting needs for a start-up may seem like standard fare for any sector, cannabis brings something very different to the table. Enter the cash-based cannabis industry! Fortunately, we have left the era of executives driving cash-stuffed duffle bags to neighboring states’ institutions open for deposit. Yet the traditional banking system is still inaccessible to plant-touching entities with federal illegality intact.

Transacting primarily in cash creates a massive opportunity for fraud. Combined with the fact most start-ups lack the resources to develop or implement internal cash controls, it is a recipe for disaster. Accounting and finance professionals will be needed to contribute the knowledge and tools necessary to safeguard such cash-intensive businesses.

In this booming, evolving industry, there is no doubt a built-in demand exists

for high-value cannabis accounting services. There are fundamental accounting and tax roadblocks businesses in this sector need to tap into CPAs for. We are well-suited to help them overcome barriers and support the cannabis industry’s growth to its full business potential.

Ryan Brandt, CPA, MSA, is a senior manager at Withum and can be reached at rbrandt@withum com. Sean Linde, CPA, is a senior manager at Withum and can be reached at slinde@withum.com.

DO MORE

JOIN THE CANNABIS INTEREST GROUP njcpa.org/groups

READ MORE CANNABIS KNOWLEDGE HUB njcpa.org/cannabis

LEARN MORE

March 16 or April 12, Live Webcast EMERGING AND EVOLVING ISSUES IN MARIJUANA AND HEMP/CBD

April 14, Live Webcast — or On Demand

MARIJUANA: A GENERALIZED BUSINESS VIEWPOINT njcpa.org/events

Selling Professional Services

BY RACHEL ANEVSKI, MAOB, PHR, SHRM-CP, MATTERS OF MANAGEMENT, LLC

client must have heard your business name, met you, read something about you, etc. a minimum of seven times. Professional services sales techniques include “peeling the onion” and asking layers upon layers of questions to a decision maker before presenting them with solutions. There are systematic research processes and cold and warm lead generation programs. The list is endless.

When selling core accounting services such as the tax return or the financial statement, CPA firms often have only one differentiator: their people. A person’s unique self is the key ingredient in selling professional services. However, learning to sell professional services is sometimes an unexpected add-on for the aspiring accountant.

In small firms, there may be one or two senior partners who lead this charge. In midsize firms, it is likely a handful of CPAs supported by a marketing director. Large firms often have business development executives (BDEs) to run the ball. Some of those BDEs have risen to the partnership level and oversee successful sales and marketing staff teams.

“WHAT KEEPS YOU UP AT NIGHT?”

In a legacy hand-off from traditional “doorto-door” salesman techniques to an age of solving problems virtually, this remains the question CPAs should look to answer when acquiring a new client. Organizations today require more than the commodities a traditional accounting firm provides, and they expect the CPA to be the solution provider. Firms that recognized this evolution pre-pandemic began acquiring IT managed service providers and other services like talent acquisition shops to grow their solutionbased services for the same end-user client. It’s easier to keep an existing client than procure a new one, so today’s professional

services salesperson has a better shot of cross-selling firm services (and ancillary services) to someone who already knows and loves them.

THE BUSINESS OF ACCOUNTING

Learning how to sell is not an inherent skill set for everyone, but it is necessary. Perhaps accountants who double as entertainers, natural-born leaders, politicians and bartender types adapt the tools to sell more naturally. While some practitioners who are drawn to solving for x, perfectionism and consistency may never find the allure in developing their sales side, there is plenty of room for all types.

In many traditional firms, selling professional services is a catalyst and paramount to earning a title at the top. Second-generation firms are having an easier time solving the business need to acquire market share by leveraging more strategic client acquisition methods such as social media marketing, mergers and sales forces, and adding multidisciplinary service operation departments (a cross-sellers dream and a client’s onestop-shop).

DO IT YOUR WAY AND KNOW YOUR AUDIENCE

There are methodologies for selling and acquiring clients. Sales professionals may rely on the power of seven, which means that to get to closing the deal, a prospective

Understanding your buyer and how you can get them back to doing what they do best (servicing their own customers) wins the medal in professional services. Those who are confident in the arena of selling “themselves” consider a smattering of the above. They know an awful lot about both the prospective client and the decision-maker. They quickly find a way to become likable and compatible with the customer. They ascertain the areas in which they can absorb problem areas displayed, and then they serve that hopeful person/ business with a valuable menu of solutions. Research, connect, empathize, solve and serve.

Rachel Anevski, MAOB, PHR, SHRM-CP, is the CEO and founder of Matters of Management, LLC. She can be reached at rachelanevski@gmail.com.

LEARN MORE

March 16 or April 11, Live Webcast

ADVANCED NEGOTIATIONS: BEYOND GETTING TO YES

March 16 or April 11, Live Webcast

BUILD YOUR PROFESSIONAL PRACTICE: EFFECTIVE SELLING SKILLS

April 14, Live Webcast

BUILD YOUR PRACTICE WITH EFFECTIVE PRESENTATION SKILLS njcpa.org/events

Designing and Implementing Internal Controls in a Virtual Environment

BY JUSTIN ASH, CPA, TIER ONE SERVICES

Nearly every seasoned practitioner has had the conversation in which they, once again, attempt to convince a client that they need to improve their internal controls. Whether the discussion involves inventory counts, sign-off of bank reconciliations or properly authorizing an expense, the reasons clients give for non-compliance can be summed up with some variation of, “I’m too busy.” This repeated conversation highlights a fatal flaw in the traditional perception of designing and implementing internal controls: Internal controls aren’t an annual conversation but a daily one, best suited for clients’ year-round accounting support teams.

UTILIZE A WORKFLOW MANAGEMENT SYSTEM

In the past, we would have scheduled meetings, written memos and provided instructions to clients only to have those instructions tabled or simply forgotten about throughout the year. In today’s digitized environment, CPAs have the option of implementing a workflow management system such as Asana (asana.com) or ClickUp (clickup.com) which results in a searchable database of all activity related to a particular process or set of tasks. Combined with a secure cloud storage platform, workflow systems like these can be customized to address an array of internal control weaknesses and can even make clients more efficient in the process. Controls can be further enhanced through the use of secure online bill payment platforms such as BILL (formerly known as Bill.com).

Most practitioners perceive the design of internal controls to be the easy part and the implementation of those controls to be out of scope. Simultaneously, clients perceive the design of internal controls to be nearly incomprehensible and are willing to implement them, if only someone would instruct them as to how. To leverage the strengths of both parties, the practitioner

can design the recurring processes in the workflow management system, and the client can use those recurring processes to implement benchmarked internal controls.

PUTTING IT INTO ACTION

Consider a fictitious client, Sam & Ella’s Chicken Palace, which serves all manner of tasty poultry. Since Sam & Ella’s is in a rapid growth phase, they have often succumbed to the tyranny of the present, dropping whatever task they are working on to address the most pressing matter rather than looking at the broader systems. Utilizing the above method, Sam & Ella adopted a workflow management system and a cloud storage platform. Next, their year-round accounting department implemented systematized processes for bill pay in which a bookkeeper queues up bills for payment, Sam & Ella perform the authorization function, a controller reviews bills prior to payment and a treasurer initiates the bill pay via the secure online bill pay platform.

This system results in several strengthened controls including proper segregation of duties, limiting access to bank information via the secure bill pay system and creating rock-solid documentation of the process and the actions taken by those involved. Further, the cloud storage system allows the pasting of hyperlinks within the workflow management system ensuring that the relevant information is up to date and at the CPA’s fingertips. Finally, the searchable database inherent in the

• Uses electronic Vendor Payment Policy template to efficiently identify open bills that meet management’s criteria for payment

• Lists proposed bill payments in Asana

• Compares bill payment list in Asana against electronic backup

• Posts corrections for bookkeeper if necessary

• Consults with management in case of cash flow issues

• Pays authorized bills using the payment channels appropriate for each vendor, ideally all electronically

• Notifies vendors of any non-electronic payments

• Maintains Positive Pay system

TREASURY SPECIALIST CONTROLLER

workflow management system provides a detective control, in that any failure of the controls can be easily identified and addressed timely.

Using this approach, any number of preventive, detective and corrective controls can be properly designed and expertly implemented by incorporating them into recurring processes such as:

y Monthly review of completed bank reconciliations complete with a link to the relevant statements and reconciliation reports

y Periodic addition of newly authorized vendors prior to their first payment being due along with a reminder to obtain any Forms W-9 or certificates of insurance proactively.

y Recurring analysis of vendor contracts and comparison with actual activity to ensure contract compliance.

These improved controls resulted in Sam & Ella’s thwarting vendor fraud when an employee attempted to pay a fake vendor. Due to the vendor not being added to the payable system via the approved process, it stood out as odd and was quickly identified as fraudulent. Likewise, the periodic review of bank reconciliations highlighted duplicate payments to a vendor caused by the vendor accidentally charging a credit card on file and the bookkeeper also initiating payment.

The fictitious examples outlined above are merely a taste of the impact that effective controls can have on organizations. If Sam & Ella’s was able to implement robust controls using off-the-shelf software, then similar procedures are sure to sate many clients’ compliance appetites.

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Justin Ash, CPA, is a controller consultant at Tier One Services. He can be reached at justin.ash@ tieroneservices.net.

SALT Obligations When Selling Businesses

BY BRYAN M. HOLM, CPA, MST, HBK CPAs & CONSULTANTS

Business owners should be aware of state and local tax (SALT) obligations as they plan the sale of their business. SALT considerations are often overlooked, and such omission can later delay, impair or nullify a deal. When state and local taxes are not included in the due diligence process, subsequent SALT liabilities become problematic and sometimes costly by giving the buyer leverage to negotiate a lower price. A brief overview of some of those SALT considerations are highlighted below.

SALES AND USE TAX CONCERNS

SALT due diligence transactions have become much more complex in the past five years. In the 2018 U.S. Supreme Court case South Dakota v. Wayfair (Wayfair), the Court denied a challenge to South Dakota’s law requiring remote businesses selling into South Dakota to collect and remit sales tax if they exceed the state’s “economic nexus” threshold. In the wake of Wayfair, physical presence is no longer a requirement for sales tax nexus, causing companies to register, collect and file sales tax returns in many more states.

INCOME TAX ISSUES

States are increasingly applying Wayfair economic nexus principles beyond sales and use taxes. A seller’s advisor should conduct a review of the target company’s income tax records and procedures to identify tax risk. Reviews should include quantifying potential exposure and providing recommendations to address any issues. Also expanding states’ ability to require income tax filings from out-of-state taxpayers is the Multistate Tax Commission’s (MTC) revised guidance addressing the applicability of Public Law 86-272. In its August 2021 guidance, the MTC outlined several activities that would not be considered protected under the 1959 regulation. Unprotected activities would include the likes of assisting after a sale through an electronic chat room or via email, or even placing internet cookies on customers’ computers.

In fact, most businesses engaged in the online sale of tangible property can no longer rely on protection under P.L. 86-272. As the electronic economy evolves, more states are implementing laws to capture taxes on all kinds of digital activities, including assets recorded on a blockchain, such as cryptocurrencies.

EMPLOYMENT TAX EXPOSURE

Independent contractor versus employee misclassification continues to challenge many taxpayers, including sellers of businesses. If a company selling its business has this issue and is not diligent in its compliance, there may be payroll tax and unemployment insurance exposure.

THE CHALLENGES OF REMOTE WORK

The ubiquity of remote and hybrid working models has also added a layer of complexity to state income taxes, franchise taxes, sales and use taxes, and payroll taxes, as well as credits and incentives. As companies heed employee demands for greater flexibility, they might not be aware of the expanded SALT exposure the remote or hybrid working models have created due to having presence in additional state and local tax jurisdictions. These tax risks often become apparent both pre- and post-close and should be addressed to avoid a potential dilution of value, delay of the deal closing or end of the deal.

TRANSFER TAXES

State transfer taxes are another oftenoverlooked area that can negatively impact companies involved in sell-side transactions. A common misunderstanding is that state transfer taxes do not apply when the stock or equity of a business is sold as opposed to a company’s assets. Many states are changing real estate transfer laws to increase tax revenues. For example, individuals taking a stepped-up basis in the assets of a company will pay incremental taxes when the state treats the transaction as a sale of assets versus a sale of equity.

TAX SAVINGS OPPORTUNITIES

State tax due diligence should also ensure sellers are taking advantage of potential tax savings opportunities. The most common opportunities involve tax credits that have not been identified. These can include research credits, job credits and energy efficiency credits as well as ensuring a company is taking advantage of potential state pass-through entity (PTE) elections.

The SALT issues identified are many, but these are not all of the state and local issues to consider during due diligence. From economic nexus to the taxability of transactions to PTE tax elections, it is increasingly important to review SALT matters in the due diligence process. Sellers should commence their internal SALT due diligence to better understand the impact of potential SALT exposures on the value of the company they are offering for sale.

Bryan M. Holm, CPA, MST, is manager with HBK CPAs & Consultants. He can be reached at bholm@ hbkcpa.com

The Dilemma: Sales Taxation of Digital Services and Products

BY JAMES A. BARTEK, CPA, AND BONNIE SUSMANO, J.D., MBA, WITHUM

Over the past several years, the sales taxation of digital goods and services has become a significant issue for businesses because of the boom of software as a service (SaaS), digital products and the distinct challenges of imposing taxes on non-tangible goods or services. As a result, many states have broadened their tax laws to impose sales tax on goods that were previously sold in a tangible form (e.g., music, books and films) and goods and services with no tangible counterpart (e.g., applications, accessed information services, or software or platform as a service).

NEXUS CONSIDERATIONS

Nexus can be established by having employees, an office or other physical presence in a state. Since the landmark South Dakota v. Wayfair case, businesses must comply with the sales tax laws in states where they meet certain economic nexus thresholds. For example, New Jersey enacted a threshold of $100,000 of certain sales or 200 transactions during the current or prior year. Therefore, the burden on businesses to comply with sales taxes has increased dramatically if the business sells in multiple states.

CLOUD COMPUTING COMPLEXITIES

SaaS is taxable for either business or personal use in more than 20 states. In contrast, downloaded prewritten software is taxable in more than 30 states. Many neighboring states view SaaS differently. While New York imposes sales tax on software regardless of how it is delivered or accessed, New Jersey has indicated that SaaS is not an enumerated service and, therefore, not taxable unless it meets the definition of a taxable information service. Other states have enacted exemptions based on business or personal usage. For example, Connecticut applies a reduced rate of 1 percent on business purchases of SaaS.

TAXABLE AND NON-TAXABLE DIGITAL PRODUCTS

A critical difference between a taxable and non-taxable digital product in some states is whether the customer downloaded it or accessed it online. For example, New Jersey imposes a sales tax on sales of specified digital products, defined as digital books and digital audio-visual works or digital audio works transferred electronically. Therefore, the sale of a specified digital product accessed but not delivered electronically is not taxable in New Jersey. However, if the digital product meets the definition of an information service, the sale will be taxable.

Another critical determinant of whether a digital product should have sales tax applied is whether the equivalent nondigital product would be taxable. In New Jersey, a business must charge and collect sales tax on a digital book just as it would on a hard copy book.

Washington and Pennsylvania recently issued taxability guidance on non-fungible tokens (NFTs), with both states indicating NFTs could be subject to tax. Minnesota also issued guidance indicating that NFTs are subject to sales tax when the underlying product is taxable in Minnesota.

In October 2022, a Maryland County Circuit Court also held that the Maryland Digital Advertising Tax violated the Internet Tax Freedom Act, Commerce Clause and the First Amendment. It appears several other states that were on the verge of passing similar taxes are waiting for a final determination before proceeding to enact their own.

It is important to note that state definitions and guidance regarding the taxability of digital products may not match the taxability of their original non-digital product. Because each state analyzes the taxability of digital products differently, businesses are faced with the task of determining whether a digital product is taxable in the states in which it’s sold.

WHAT ABOUT SOURCING?

Since the advent of digital products, the sourcing rules have continued to evolve and focus on new issues. A common problem for sellers is determining which jurisdiction taxes the digital product. While jurisdictions have different rules for sourcing, the general rule of thumb is for the seller to impose tax in the jurisdiction of the ship-to location (e.g., where used) or the bill-to location (if the ship-to location is unknown). However, many states will provide an exemption for digital products billed to their state but used in another.

The taxation of digital products is quite complex. There are many variables to consider before determining whether a digital product is taxable. As states continue to analyze taxing the digital economy and broadening the tax base, digital products will continue to be a problem area for businesses.

James A. Bartek, CPA, is a partner in charge of State and Local Tax Services at Withum. He is a member of the NJCPA State Taxation Interest Group and can be reached at jbartek@withum.com

Bonnie Susmano, J.D., is a manager in State and Local Tax Services at Withum and can be reached at bsusmano@withum.com

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THE LEGACY of RALPH ALBERT THOMAS

LEGACY of RALPH

Dear NJCPA Members,

THOMAS A message from Ralph

As I close out this chapter in my life — after 23 wonderful years as CEO — I’m reminded how much I think of the NJCPA community as family and how one doesn’t actually say goodbye to family, you keep them close and watch them prosper. So, it’s with this thought in mind that I am retiring from — but not leaving — the NJCPA.

Throughout my time as CEO, I can look back and be proud of so many accomplishments we worked on together — from tax challenges and leading the charge during the pandemic to adapting new digital technologies and having afternoon chats with local high school students.

As a profession, accounting has been tested many times, but it has been proven that if we work together, we can accomplish amazing things. I treasure the vast memories, laughs, challenges, easy wins and even the hard-fought losses we have experienced in the legislature and the business community in our great state of New Jersey.

It will continue to require a concerted effort to keep the accounting profession relevant and timely as well as open and welcoming to aspiring CPAs. We, including myself, all have more work to do. So, onto the next chapter!

Warmest Regards,

Ralph Albert Thomas,

CEO and Executive Director

CPA (DC), CGMA

ALBERT

“Icon,” “Lifetime Leader,” “Number One on ‘Accounting Power 50’, “National Association of Black Accountants (NABA) Legend” and “Distinguished Citizen” are just some of the ways people have referred to Ralph Albert Thomas, CPA (DC), CGMA, for the 23 years he has been CEO and executive director of the New Jersey Society of CPAs. But Ralph is just as proud to be called colleague, advocate, mentor, diversity proponent, husband and father.

As Ralph approaches retirement on June 30, it’s easy to understand why he has come to be accepted in so many circles over the years. His characteristically friendly demeanor and welcoming personality enabled him to sit down equally with New Jersey lawmakers, leaders of New Jersey business organizations, heads of national and state accounting societies and managing partners as well as college boards and accounting students. Ralph’s name has come to be top of mind when journalists question challenges facing the accounting profession, legislators need a sounding board, academia reflect on the new CPA Exam and accounting professionals strive to improve diversity, equity and inclusion.

The Early Years

Staying connected was always important to Ralph — whether with family, friends or his various communities. When it came time to head off to college, he ended up turning down a full scholarship to the University of Texas since he realized he wouldn’t be able to return home to Washington, D.C., as often as he would like. His father, who had little more than an eighth-grade education, moved from Texas to D.C. in 1942 after he realized he would have better job prospects working for the Navy’s recreation department.

Top Left: Ralph with his parents, Joseph and Lucille

Top Right: Ralph in high school

Bottom: Ralph on the sidelines of a Lehigh University wrestling match

Ralph opted to stay close to D.C. for college and was enticed by the high-quality education and academia at Pennsylvaniabased Lehigh University. “Originally I wanted to be an engineer,” admitted Ralph, noting that after the first few days he spoke to the deans of the engineering and business schools, and after doing some career analysis, he discovered the business school was where he should begin his studies.

The high value his father, Joseph, and his mother, Lucille, placed on education was the main impetus for Ralph’s drive to obtain his B.S. and MBA from Lehigh and eventually his CPA, as well as for his sister becoming a teacher and his brother an engineer. Math was always a bright spot for Ralph, which made the decision to go into a math-related field an easy one. “We used to have these math tests and you would get a reward. I was really competitive. I was valedictorian of both my junior high school class and my high school class,” he said.

Lehigh proved to be the right decision as Ralph fit in well at the school and in its social life. “I was always a sports guy,” he admitted — he would have hoped to be a professional golfer if he didn’t go into accounting. Ralph settled for a spot on the golf team, watching basketball and a stint as a student trainer for the wrestling team.

RALPH THOMAS CELEBRATING

Congratulations on an exemplary 23-year tenure as NJCPA CEO. We join with thousands from the New Jersey business and accounting community in saying thank you for your committment to and betterment of our society.

Warmest wishes for a fulfilling retirement.

Painter

Another favorable influence at Lehigh was Jack Keith, a Lehigh economics professor who mapped out what he thought Ralph’s career path should be. As Ralph, who later became the professor’s assistant, explained, “My professor said, ‘this is what your career should look like. Go on to pass the CPA Exam, work for one of the large firms and at the end of the day, ultimately, I see you running a company.’”

Top:

Ralph, NJCPA leaders and staff at the ringing of the bell at the New York Stock Exchange in 2006

Bottom:

2009/10 NJCPA President Robert Traphagen presented the first NJCPA merit coin to Ralph

To that comment, Ralph simply laughed. “But ultimately, everything he said came true,” admitted Ralph. “I worked at Price Waterhouse (which later became PricewaterhouseCoopers or now more commonly PwC) before they merged, then their client, Potomac Electric Power Company,” he explained. “I did some good work there and at American Bell and AT&T, but I still wanted to do more. That’s why I took a job at Citibank in their leveraged buyout group on their due diligence team. We would audit companies in preparation for their buyouts,” he said. Ralph, who worked at Citibank for about 13 years, was vice president and region audit head in their mergers and acquisitions and structured finance group.

The Path to CEO

When the opportunity arose to become CEO at the NJCPA, Ralph didn’t take that prospect lightly. He was already commonly known in the NJCPA community as a go-getter and someone with not only fresh ideas but the energy and wherewithal to get things done — exactly what the NJCPA could use as a CEO. Ralph had been a member of the NJCPA since 1985, was a Trustee and Treasurer. He was considered at that time to be a natural fit for CEO, particularly to Don Richards, a former NJCPA president and now retired partner at EY as well as husband to the NJCPA executive director at the time, Merryl Richards. Don noted when first meeting Ralph that even his name stood out. As Don explained, “Wow, that’s a big name, and why not just Ralph Thomas?

Well, we all came to know his full name is the character of the man — true to his roots, his faith, his family, his education and profession, and true to his friends, who are to be found far and wide.”

Don further explained, “Ralph’s professionalism and leadership skills were clear as day, and on top of that, he was fun, and it was great to work on any and all projects and programs with him.” As he noted, Ralph was exactly the right person to lead the NJCPA. “As time went on, the Society had celebrated 100 years, with strong effective leadership of many great people over those many years. It was again time for an era of new leadership, and after extensive consideration by a search committee and the Board of Trustees, it was once again clear as day, the new leader should be Ralph Albert Thomas.”

Ralph with Convention keynote speaker Frank Abagnale (“Catch Me If You Can”) in 2010

THE LEGACY of RALPH ALBERT THOMAS

Congratulations!

Congratulations Ralph Albert Thomas, CPA (DC), CGMA on the outstanding achievements you’ve accomplished during your 23 years of service as the CEO of NJCPA.

Leaders are people who achieve the unexpected and have the vision and integrity to create an impact that matters in their organizations and their communities and you’ve done just that.

© 2022 Deloitte

Frazer, Evangelista & Company, LLC congratulates Ralph Albert Thomas on 23 years of service to the NJCPA.

Best wishes in any and all future endeavours. Thank you for enhancing our profession and all of your support throughout the years.

Ralph, Marylee and team

www.frazerevangelista.com

Ralph wanted to become CEO, but he asked Don to run the concept by various past presidents and other NJCPA leaders to make sure he would be accepted. He also checked in on the valued opinion of Barry C. Melancon, CPA, CGMA, president and CEO of the American Institute of CPAs (AICPA), who convinced Ralph it was also the right time for much-needed diversity in the profession. As Ralph explained, “Barry said, ‘You won’t get those stock options you were getting at Citibank, but we’re trying to get more people of color interested in the profession. You would be a great role model.’”

Looking back, Melancon, who worked with Ralph on various committees and boards through his early involvement at the AICPA, noted, “To say Ralph will be missed is a tremendous understatement on his overall impact.” To Melancon, Ralph was “a leader on the profession’s national diversity efforts and quality enhancement activities and has remained committed to impact higher education for future CPAs. He has embraced a dynamic vision for the profession and individual CPAs.”

First Order of Business: Engaging Young Professionals

Under Ralph’s leadership, the NJCPA scholarship program, which has surpassed $7 million in distributions to students since its inception in the 1960s, was expanded to help increase the number of minorities and women who enter the accounting profession. Recognizing that aspiring CPAs need to be made aware of the many rewards and perks of a CPA, he led the charge in engaging with these groups. From attending scholarship awards dinners to speaking with professors and members about curriculum changes and job opportunities, Ralph was always front and center with the next generation of CPAs.

Ralph himself was decidedly on board with running the NJCPA, though Citibank was not keen on losing him. According to Ralph, upon informing them of his intentions to leave, he vividly recalls his immediate boss saying, “We need you to stay. Why do you want to go to a nonprofit?” At that time, Ralph headed up the largest segment of the due diligence unit and had a big bonus on tap, but he replied, “I always wanted to run an organization.”

Effective Nov. 29, 1999, Ralph became CEO of the NJCPA — one of the most important choices of his career. At the helm, he wasted no time in getting to work on many initiatives but focused his efforts on three very important orders of business: in forming and connecting with the next generation of CPAs; improving the accessibility of people of color, women and other minorities to the profession; and advocating for New Jersey CPAs in the business community and state and local government.

“Academia takes such a long time to change curriculum. We need to have a collaborative effort between all the various communities to effect real change,” admitted Ralph. He supported many internship programs for students to garner first-hand knowledge of accounting jobs but also from his own experiences. Having had one of the first paid internships in the profession himself years ago, Ralph acknowledges how companies can, and should, assist students along their path to becoming a CPA.

Several NJCPA programs under his tutelage were enhanced, such as Deloitte Foundation’s NJCPA Scholars Award, the introduction of sophomore awards to attract interest from students attending two-year colleges, and other awards in conjunction with the AICPA and the Northern New Jersey Chapter of NABA.

Top Left: Ralph and his “Dancing with the CPA Stars” partner at the 2011 NJCPA Convention

Bottom Left: Ralph with Senator Corey Booker in 2014

Top Right: Ralph with Congressman Josh Gottheimer

Bottom Right: Ralph with 2021 New Jersey gubernatorial candidate Jack Ciattarelli

THE LEGACY of RALPH ALBERT THOMAS

Growing with purpose

Ellen McSherry, former NJCPA chief operating officer and a colleague of Ralph’s for more than 20 years, summed up Ralph’s devotion to students and the accounting profession as “second to none.” But, she added, “equally impressive, to me, is his commitment to helping people. No matter how busy he was he always put work aside to talk and guide. He helped so many people — students, fellow CPAs, staff, friends, business associates and lawmakers. Ralph left his mark on more people than anyone could imagine.”

Sitting on the boards of numerous colleges, including the Accounting Advisory Boards for Lehigh University, Rutgers University, Seton Hall University, Montclair State University and Rider University, Ralph is the epitome of what alumni should strive to be. He is also Trustee Emeritus of

Lehigh University, a member of its Audit Committee and is on its Diversity Committee.

Second Order of Business: Engaging DEI

Improving diversity, equity and inclusion (DEI) in the accounting profession has been a significant objective for Ralph ever since arriving at the NJCPA and with his growing commitment to the AICPA where he was appointed to the inaugural AICPA National Commission on Diversity and Inclusion. Throughout the years, this DEI initiative grew stronger. Under Ralph’s leadership, the NJCPA has broken down several barriers

Commerce and Industry Association of

New Jersey congratulates Ralph Albert Thomas on 23 years of service to the NJCPA.

Ralph, you have been a true professional and great advocate for your members. You will be missed! Good luck in your retirement.

Ellen McSherry and Ralph at an Executive Women of New Jersey awards banquet

THE LEGACY of RALPH ALBERT THOMAS

at community colleges and with underprivileged youth to help them consider accounting careers.

Dr. Henry Odi, deputy vice president for equity and community, associate provost for academic diversity and an adjunct professor at Lehigh University, praised Ralph’s focus on DEI. “As a result of his unwavering commitment to diversity and inclusion, Ralph accepted the challenge of chairing the Diversity and Inclusion (D&I) Committee, the first committee of its kind in the history of the Board of Trustees of Lehigh University.” He added, “In fact, he was a trailblazer for Board of Trustees committees at colleges and universities across the country during a period in U.S. higher education history when diversity and inclusion were not embraced at the important governing body level.” Odi noted that Ralph’s impact

as a leader and positive role model went far beyond his role as CEO of NJCPA and his Lehigh Board of Trustees role due to his mentoring and ability to provide guidance to hundreds of undergraduate students of color across the country who are now corporate professionals in the fields of accounting, finance and management.

Similarly, Mark P. Holtzman, CPA, Ph.D., associate professor and chair of the accounting and taxation department at the Stillman School of Business at Seton Hall University, appreciated Ralph’s dedication to Seton Hall students and his DEI initiatives. He explained, “I feel so privileged to have worked with Ralph and benefited from his participation in the Accounting Advisory Board at Seton Hall University.” Holtzman added, “His hard work, thoughtful ideas, connections in the profession and

Ralph with NJCPA past presidents (l to r)

Robert Traphagen, Paul Stahlin, Ken Moore and James Blake in 2009

with industry, and his efforts in improving diversity together create a long-lasting legacy that will benefit our students in the future.”

Aside from his own experiences in this area, Ralph also had good mentors. Ralph’s choice of Carolyn L. Smith, CPA, a retired audit manager at Coopers and Lybrand (PricewaterhouseCoopers), 1977-79 president of NABA, former treasurer of the District of Columbia and the first AfricanAmerican woman in Washington, D.C., to pass the CPA Exam, could be considered one of the best around. Ralph followed Carolyn’s advice on many occasions.

“Carolyn was a key reason I became a CPA and sought out leadership roles. She has taught me many valuable lessons, such as never give up, be straightforward in everything you do, lead by example

and encourage others to do the same,” Ralph said.

Having gotten involved with NABA soon after becoming a CPA, then as a former national and chapter president, and later receiving lifetime member status, Ralph influenced many along the way. “There is still a shortage of people of color in accounting as CPAs, but I had the opportunity to change some of that dynamic,” he said, admitting there’s still much more work to do.

Guylaine Saint Juste, current president and CEO of NABA, noted that part of Ralph’s success as a DEI influencer is that he, “…models integrity, wit and a generosity of spirit that both inspire and challenge us to become the best version of self.” She added that as a lifetime member of NABA, “Ralph’s commitment to

equitable representation at all levels of the accounting profession includes his tireless and selfless service to both organizations and leaders.”

Ralph is planning on furthering his commitment to NABA after retirement since he will be serving as the inaugural chair of the NABA, Inc. Foundation. As Saint Juste explained, “It’s proof positive that Ralph has yet so much more to share, teach and ‘lift as he climbs.’”

Third

Order of

Business: Advocating for Change

Ralph’s roots in advocating for CPAs and the accounting profession grow deep. To Ralph, it is a sense of accomplishment when organizations call on him and the NJCPA to ask, “What does your organization think?” Having that “seat at the table” is important to Ralph. And, aside from just being heard, he’s proud to back those sentiments up with data taken from member surveys and polls.

While first at the NJCPA, he supported many initiatives that helped improve CPA firm operations and client relations. As CEO, Ralph oversaw the advocacy efforts of the NJCPA, which included

many legislative/regulatory victories such as the following:

y Successfully advocating to get a provision removed from a medical malpractice bill that would have placed an annual $50 surcharge on the CPA license fee. (2003)

y Governor Jon Corzine signing “mobility” legislation allowing CPAs licensed in other states to practice public accountancy in New Jersey without having to register here. (2008)

y “Single sales factor” legislation being enacted. (2008)

y Governor Corzine signing a bill extending the net operating losses

(NOL) carryforward period, which eased the tax burden on businesses by allowing them to carry NOLs forward for up to 20 years and mirroring federal tax code. (2009)

y Governor Corzine signing an NJCPAsupported financial literacy bill that established a three-year program to provide financial literacy instruction for high school seniors in six public school districts. (2009)

y Beating back the legislative initiative to adopt a sales tax on professional services. (2009)

y Governor Christie signing legislation to phase out New Jersey’s estate tax. (2016)

Congratulations to NJCPA on 125 years of support to the industry and our best wishes to Ralph

Albert Thomas

for his 23 years of impressive leadership!

Paychex is proud of our ongoing connection as an NJCPA Premier Partner.

Resources & tools to support accounting professionals: Accountant Tools and Resources | Paychex

y Governor Murphy signing the New Jersey Pass-Through Business Alternative Income Tax Act (BAIT) (2020) and subsequently signing important amendments (2022). The NJCPA received the Power of A Silver Award from the American Society of Association Executives for its role in passage of the New Jersey BAIT.

Ralph has continuously helped to improve the business climate in New Jersey and has been sought by lawmakers. “Ralph has been a trusted leader and advocate in New Jersey as we’ve worked to provide greater economic opportunity for businesses and residents across our state,” said Assembly Speaker Craig J. Coughlin. “His knowledge and all-around professionalism make him a standout, and it was with great

pleasure that I appointed him to the New Jersey Sales and Use Tax Commission in 2018. It has been a privilege to work together, in all his capacities.”

Ralph also served on former New Jersey Senate President Steve Sweeney’s bipartisan Economic and Fiscal Policy Working Group, which authored the “Path to Progress Report,” a series of reforms to assist New Jersey’s economic recovery.

“During his 23 years at the helm of the New Jersey Society of Certified Public Accountants, Ralph Thomas has played a pivotal role in advising legislators, governors and business leaders on a wide range of complex fiscal issues. When Congress slashed the deduction for state and local taxes (SALT), Ralph led the CPAs’ twoyear campaign to get the state to enact an innovative corporate tax workaround that

is saving New Jersey business owners hundreds of millions of dollars a year on their federal income taxes,” said former New Jersey Senate President Steve Sweeney, who is currently the advisory board chair of the Steve Sweeney Center for Public Policy at Rowan University. “Ralph continues to provide expert advice as a member of the Sweeney Center’s Multi-Year Budget Workgroup. His career embodies the best traits

THE LEGACY of RALPH ALBERT THOMAS

Ralph interviewing then Senate President Steve Sweeney in 2018

of professional expertise, civic involvement and nonprofit leadership. I have been proud to count him as a friend and an adviser,” he added.

Ralph is also a member of the New Jersey Chamber of Commerce Board of Directors, New Jersey Chamber of Commerce Cornerstone Initiative and the Commerce & Industry Association of New Jersey Board of Directors.

According to Thomas Bracken, president and CEO of the New Jersey Chamber of Commerce, Ralph has been one of the most staunch and tenacious proponents of improving the business environment in the state over the last several decades. “There has not been one major economic initiative that the State Chamber has led, and there have been many, that didn’t include the NJCPA and Ralph Thomas,” he

said. “Any successes we had were absolutely benefited by Ralph being part of the team. Individuals with the stature of Ralph Thomas are few and far between and, when you add in his willingness to always engage, you have a very special person. He will be greatly missed by the accounting industry, the business community and me personally. You hate to lose ‘go to’ allies because they are few in number.”

Others praised Ralph’s ability to collaborate effectively on various business issues. Calling Ralph a highly respected advocate and voice on complex tax issues, Michele N. Siekerka, Esq., president and CEO of the New Jersey Business & Industry Association (NJBIA), cited his work on eliminating the estate tax in New Jersey, knowing that this was one issue (among many) driving individuals and affluence out of our great

state in retirement. “Ralph was steadfast in reminding our policymakers that as fiduciaries, accountants must advise their clients to seek tax benefits that meet their needs and with regard to estate tax, it meant advising clients of their options to move to more tax friendly states in order to protect their assets,” she said.

Michele Siekerka and Ralph with TV host Steve Adubato

NJBIA thanks Ralph for his tireless efforts, sage advice, and advocacy on behalf of our New Jersey business community.

Wishing you the very best in retirement.

Congratulations on 23 years of outstanding service to the NJCPA and the accounting profession.

WilkinGuttenplan thanks you for your outstanding contribution and countless efforts to support initiatives involving the next generation of accountants and exceptional leadership in DEI.

Ralph’s ability to work with numerous business groups is precisely what Melanie Willoughby, executive director of the New Jersey Business Action Center (NJBAC), is thankful for. “He positively impacted the business climate in New Jersey by continuing to remind the state’s leaders about the messages passed from business clients to their accountants about doing business in the state,” she said, noting his “dedication to serving the business community is unrivaled.”

As Senator Steven Oroho (R-24), the only CPA serving the New Jersey Legislature, explained, Ralph was highly regarded on both political aisles. “I have great admiration for Ralph’s dedication and effectiveness in supporting financial professionals, advancing good public policy, and representing the concerns and needs of the accounting industry in New Jersey,” he said. “Ralph has long been a trusted voice in the State House on complex tax policy, budgetary and financial regulatory issues. For many years, his sage advice has helped guide legislators and governors, Republican and Democrat. Over the years, Ralph has become much more than just a trusted professional colleague. I’m glad to say he’s become a dear personal friend.” Nationally, he is also a member of the National Association of State Boards of Accountancy’s (NASBA) State Society

Relations Committee (former chair), serves on its Diversity and Inclusion Committee and is a member of the National Association of Corporate Directors.

Dale Florio, partner at Princeton Public Affairs Group, attributed Ralph’s “steady hand” over the course of the years as helping to maintain the profession’s impeccable professional and ethical standards in the face of an ever-changing political and business climate. “What I will remember most about Ralph’s contribution is the way he made the Society a ‘go to’ voice of business reason for policymakers, the media and the business community at large. When he spoke on behalf of the Society, people listened. He positioned the Society as a beacon of honest insight and thoughtful recommendations.”

After

Retirement

Ralph’s retirement marks an important transition for the NJCPA and its members, though Ralph’s legacy will live on far after he walks out the door in Roseland. He plans to continue his advocacy and CPA career awareness efforts not just in New Jersey but other states as well. He will remain active in the accounting community, giving back to the profession through foundation work and executive-in-residency roles to help inform the next generation of aspiring CPAs.

To Ralph’s wife, Valerie, his retirement is bittersweet and well deserved. “Ralph has given so much to so many people and brought others up along the way. He has generously given of his time, talents and treasure by sitting on nonprofit and educational boards, spearheading training sessions, being a sought-after speaker, providing scholarships to many students over the years and donating to causes dear to his heart,” she said. “God has blessed him and he has paid it forward,” noting that he took the lessons he received from his late parents and passed them on to others.

“Now he can enjoy the things he didn’t have enough time to do before — playing golf comes to mind,” she continued. “I am so happy that he will have the chance to

slow down and we can spend more time together. Since I work from home, if he wants to go out and play golf a few days a week, I’m okay with that.” As for Ralph’s constituents, perhaps Ken L. Bishop, president and CEO of NASBA, summed up best what he and others will miss the most when Ralph retires: his character. “When I look back at the many relationships that I have made during my tenure at NASBA, I am often amazed by their competencies, capabilities and accomplishments. Ralph Thomas is certainly a prime example of each of those characteristics.” However, he added, “There is a much shorter list of individuals who stand out as being nice folks who care about others and who are simply a pleasure to be around. Ralph is on the top of that list.”

AWARDING EXCELLENCE

Awards Ralph has won include the following:

y Leonard C. Johnson Award for being an advocate for New Jersey employers (NJBIA, 2022)

y “Top 100 Most Influential People in Accounting” by Accounting Today for the past 11 years.

y African American Chamber of Commerce of New Jersey’s (AACCNJ) Business Award (2021)

y NJBIZ ICON Award (2021, 2018)

y #1 on NJBIZ Accounting Power 50 (2021, 2020)

y ROI Influencers Power List – People of Color (2021, 2020, 2019)

y ROI Influencers Power List – Associations (2021, 2020)

y NABA Special Presidential Award for Professional Achievement (2020)

y Boy Scouts of America’s Accounting Distinguished Citizen Award (2019)

y AICPA Inclusion Champion (2018)

y NABA National Chairman’s Award (2018)

y Lehigh University’s Dr. Costel Denson’s ’56 Award for identifying and implementing pathways to increase diversity in the workplace and educational institutions (2018)

y NABA New York Chapter President’s Award for Leadership and Excellence (2017)

y Boss Award from NABA’s Northern New Jersey Chapter (2017)

y NABA’s National Achievement in NonProfit Award (2010)

y NABA’s Presidential Service Award (2010)

y NABA Legend Award (2009)

Ralph and Valerie with daughter, Morgan

The Traphagen Team honors your 23 years of service to the Society and celebrates your outstanding career!

For more than two decades, you have been instrumental in furthering the NJCPA’s mission and have empowered New Jersey’s accounting professionals to thrive in their careers.

Among your many accomplishments throughout your professional career, not only have you been recognized as a National Leader, but also as One of the Top 100 Most Influential People in Accounting !

We thank you for all your hard work and dedication to our profession. It’s been an honor and privilege to work with you.

We wish you all the best in a well-deserved retirement.

dedication to service

Success is measured not only by what you accomplish, but also what you inspire in others. For 23 years, Ralph Thomas, NJCPA CEO and Executive Director, has dedicated his work to service and advocacy — influencing the future of the profession and creating a community of shared experiences and voices.

THANK YOU, RALPH, FOR YOUR SERVICE AND ENJOY THE NEXT CHAPTER. withum.com

NJCPA 2023 Convention & Expo: Breaking Through

Recognizing that accounting professionals may be facing a sea change of staffing, branding and operational issues, the NJCPA will hold its 2023 Convention & Expo June 13 through 16 to discuss “breaking through” career and organizational challenges to awaken new opportunities. The Convention will be held at the Borgata in Atlantic City.

The Convention promises to inform, enlighten and provide new ways to manage, reach new markets and more effectively and efficiently retain customers and staff. Keynote speakers will have attendees thinking outside the box, delving into new ways to communicate and plan for the future, while industry experts will be on hand to explain the latest accounting trends.

Keynote speaker Dave Delaney, author, CEO and founder of Futureforth, will explain the value in strengthening company culture and how to “actively listen.” By

rethinking how to communicate, Delaney will help attendees realize the practical ways they can improve their company culture.

Susan O’Malley, former president of the NBA’s Washington Bullets (later renamed Washington Wizards) and the first female president of a professional sports franchise, will discuss life lessons and the best ways to lead by example. Her insider stories on entertainment, hockey and basketball will truly hit home to all attendees.

Leading industry expert James C. Bourke, CPA.CITP, CFF, CGMA, managing director of advisory services at Withum, will be on hand in two ways — keynoting a session on what’s driving the rapid change in the profession and moderating an inaugural technology showcase of the latest and greatest industry software, platforms and automation.

A returning keynote speaker, Gene Marks, CPA, author, columnist and owner

of Marks Group PC, will take a deep dive into the new political and economic environment that organizations must navigate. He will also guide attendees on how to take the right path towards profitability.

Roosevelt D. Bowman III, senior investment strategist with AllianceBernstein, will deliver a national economic outlook, and he will also be a panelist for the New Jersey Business and Economic Roundtable.

Professional updates will occur on the latest tax challenges; big data; risk management; internal controls; new energy credit provisions; S corporations; and qualified retirement plans, to name a few. Attendees will also be entertained by live music, participate in the Annual Business Meeting and have the chance network and liaise with dozens of NJCPA sponsors and exhibitors in the Expo Hall.

See the full Convention agenda and register at njcpa.org/convention

CPAs Offer Career Advice to High Schoolers

NJCPA’s annual Career Awareness Program, which runs from October to December, reached nearly 100 high schools throughout New Jersey. NJCPA members shared their personal stories with students, showcasing the varied career opportunities in accounting. A special effort was again made to present at urban schools to encourage a wider population of students to explore accounting careers.

The presentations, which were both virtual and in-person, were designed to inform students about tasks a CPA performs, what academic requirements are necessary for such a career and what jobs are available upon becoming a CPA as well as to dispel any inaccuracies students may have about the accounting profession.

Michael Stillitano, CPA, CGMA, founder of Stillitano Consulting LLC and an NJCPA Trustee who presented at the Middletown High School Career Fair last fall, said, “High school students are at the point in life where they are thinking about what they want to do in the future. They are thinking about colleges and majors;

the majority of them have no clue what they want to do in the future. That is why it is so important that we (CPAs) introduce them to accounting careers and the benefits of a CPA license so they can add accounting to the list of options to consider.”

It is particularly the right time to reach out to these students since many are open to a variety of career choices. As Stillitano explained, “Some of the students I met with have already taken some accounting courses, but the majority have not. Most are under the impression that if they are not good in math, then accounting is not for them. Some feel accounting is boring. It is getting beyond these myths and showing them career options with an accounting degree and CPA, and the benefits those careers will have as they advance in them.”

The presentations are also used to promote the NJCPA scholarship offerings, which include $1,500 scholarships for college-bound New Jersey high school seniors intending to major in accounting or obtain a concentration in accounting and scholarships ranging from $2,000 to $6,500

for accounting students at New Jersey colleges or universities who are currently in their sophomore or junior year or in their senior year and entering an accountingrelated graduate program.

In addition, the Deloitte Foundation Scholars Minority Scholarship was created to open the doors to the accounting profession for New Jersey high school seniors who are racially or ethnically diverse and considering accounting as their college major. Multiple scholarships of $1,500 each will be awarded to qualifying applicants from the following New Jersey high schools as part of the program: Rahway High School, West Orange High School, Dwight Morrow High School, Union High School, Sayreville War Memorial High School, Williamstown High School and New Brunswick High School. The schools were chosen based on student demographics and outreach from the NJCPA Career Awareness Program.

To participate as a Career Awareness Program presenter, go to njcpa.org/ volunteer

Lottery Lessens Student Loan Debt Burden

Ten NJCPA members were randomly selected out of 182 applicants in December as winners of the 2022 NJCPA Student Loan Debt Lottery. Each winner will receive $1,200 towards their student loan debt.

The NJCPA Student Loan Debt Task Force created the lottery to offset some of the debt burden that members may have accumulated on their way to becoming a CPA. Collectively, lottery applicants had well over $7 million in student loan debt, and this year’s winners had an average of $48,011.20 in debt each. To be eligible for the lottery, winners had to be an NJCPA Fellow, Associate or CPA Candidate member with debt totaling more than $1,200. Awards were disseminated from the NJCPA Scholarship Fund, which has awarded scholarships to more than 2,000 high school and college students since its inception in the 1960s. The 10 Student Loan Debt Lottery winners are:

y Regina M. Ficarra, CPA, staff accountant at WilkinGuttenplan

y Christopher Martin, CPA, CGMA, partner at CliftonLarsonAllen

y Amy L. Mooney, CPA, tax accountant at Dimensional Accounting Services

y Joseph E. Polanco, staff accountant II at Withum

y Andrea Rega, senior audit associate at WilkinGuttenplan

y Brian J. Rizzi, CPA, semi-senior tax accountant at Marcum LLP

y Melisa Sirak, CPA, staff accountant at WilkinGuttenplan

y Nicholas W. Smith, CPA, senior accountant at Withum

y Ryan Stacy, CPA, staff accountant at Ernst & Young LLP

“The Student Loan Debt Lottery is a wonderful way to assist those of us in the accounting profession who may have accumulated debt on our journeys to become a CPA. It’s also a reminder of how much student loan debt affects all of us,” said Melissa Dardani, CPA, CFE, MAcc, managing member of MD Advisory Services and a member of the Student Loan Debt Subcommittee of the NJCPA Emerging Leaders Council.

Zachary Cohen, CPA, senior manager at CFGI and the chair of the Emerging Leaders Council, added, “Student loan debt continues to weigh on young professionals today. It’s important we recognize that and offer programs and awards that can help lessen the cost of becoming a CPA.”

MERGERS/ACQUISITIONS

Whitman Business Advisors

www.whitmanbiz.com has been helping CPA firms with their M&A needs since 2008. We are working with several non-NJ headquartered firms that are looking for a foundational firm to expand their foot-print into NJ. If your revenues exceed $2.5MM annually then we should talk today! To confidentially discuss this opportunity, please email us at pw@ whitmanbiz.com.

For 17 years, Accountants Advisory Group has been specializing in M&A nationwide with a focus on firms of all sizes in NJ and NY. We work with both parties from beginning to end while finding the best possible strategic and cultural matches. We advise and consult during negotiations, preparing LOIs, and working with attorneys on closing documents. If you are seeking an M&A transaction or advice if M&A is your best option, email Joe Tarasco joe@ accountantsadvisory.com

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.

Monmouth County retirement-minded

CPA seeks CPA to assume his partnership interest and to continue with remaining partner at our office location. Retiring partner will remain during transition period. Practice has large individual and small business tax preparation service. Cash collections in excess of $1,000.000. Reply in confidence at njcpa.org/classifieds

Matthews, Panariello P.C., a full service Bergen County firm located in Paramus, is looking to merge or acquire firms, sole practitioners, or accounts (audits, reviews, compilations and tax preparation and compliance services). We are a peer reviewed firm with a strong track record of client retention. We have been successful in prior acquisitions; let's talk. Visit our website at www.mpcpas.com To confidentially discuss email Peter at pmanetta@mpcpas.com.

Solo practitioner in Skillman, NJ grossed $196,000 in 2020, mostly in non-profit audit. I would like to exit the business by Summer. Would be a good opportunity for someone ready to go out on their own. I am asking 33% of retained billings for three years, due to me as the cash comes into the buyer. I am remaining in the area and will help as needed. Contact henrybmurphy@gmail.com.

ROFESSIONAL SERVICES

Do you have your WISP? According to the IRS, you need a WISP! Not only can eMDTec help you with putting together your WISP, but we can also provide the technical services needed for compliance with our managed I.T. service plan. At eMDTec, we ensure your I.T. operations align to help you work seamlessly and keep your data safe. Contact us at sales@ emdtec.com or call 973-239-2160 today! www.emdtec.com.

Quality Review for CPA firms: audit, review, compilation, employee benefit plans, Yellow Book, revenue recognition. Contact James M. Sausmer, CPA at 732-261-7710 or james.sausmer@gmail.com.

ADVERTISERS INDEX

26 ADP | adp.com/NJCPA

31 AFRICAN AMERICAN CHAMBER OF COMMERCE OF NEW JERSEY | aaccnj.com

17 ACCOUNTING PRACTICE SALES | aps.net

28 BEDERSON |

To see additional classified listings or to place an ad, visit njcpa.org/classifieds

This CPA Gets to Watch Live Music in His Office

BY KATHLEEN HOFFELDER, NJCPA SENIOR CONTENT EDITOR

Gregory Levine, CPA, hadn’t originally planned on becoming a CPA nor did he set his sights on the music industry. Those two paths simply came together.

Greg, who would not have it any other way, is now a senior director of finance at The Orchard, an independent distribution arm of Sony Music Entertainment. He sees the nuances of his early career as laying the groundwork for where he is today. Take his first job in tax at Arthur Andersen in 2000. Before the collapse of Enron and Arthur Andersen, Greg realized that valuations excited him more than just tax. “I started in media entertainment in tax but after about a year I moved into valuations. The valuations group was more finance focused. It had the technical accounting, but we also did goodwill impairment testing, financial modeling and discounted cashflow modeling. It was a different atmosphere than tax,” he says.

Fast forward to when Greg landed a job at BMG Entertainment. His valuation experience and having a music client previously came in handy when he was hired into a corporate accounting role at BMG, where he performed high-level deal analysis. According to Greg, his group was responsible for giving deal advances to artists for their content. At that time, “they wanted to centralize all of the various deals out of BMG and wanted a central team to review and analyze that kind of information,” he explains.

BMG merged with Sony Music Entertainment in 2005, and Greg began working in corporate accounting for Sony. That was when he decided to become a CPA — having a boss who was also a CPA helped. “In order to stay competitive, I really needed to get my CPA,” he says. Greg’s boss was also able to sign off on his accounting work experience, which was needed for

the license. “The fact that I worked for a CPA made the transition to get my sign-off and license much easier.”

Greg stayed at Sony for more than 12 years, moving eventually to the global digital finance department, which focused on their key digital providers (such as Spotify, Apple and Amazon) and making sure digital revenue was properly recorded on their front-line labels’ books (Columbia, Epic, RCA, etc). “They were like shared services but on the revenue side,” he explains. At Sony, Greg worked on interesting label purchases, notably the heavy metal label, Relapse Records.

When the CFO asked him to join his team at The Orchard, Greg remembers him saying, “I need somebody that understands digital accounting and the systems that Sony uses,” noting that there were many opportunities at such a large company. When he made the leap to The Orchard, Greg was able to see all the different parts in accounting since it is run as a separate business unit. “We’re dealing with payables and receivables and oversee the invoice and revenue processing for all the digital stores. We license everything for our digital stores,” he says. “We have some owned content where we process royalties, but most of it is a distributed business model versus Sony, where they own the content for the artist. We’re onboarding smaller companies to our Orchard platform, distributing their content, taking over their invoicing — constantly working with the tech department to scale our systems.” The Orchard has an office in the U.K., where they work with the tax department. “It’s more interesting than general accounting,” he maintains.

Working on smaller accounts has some advantages too. “We get to watch live music in our Orchard offices almost every week (smaller artists trying to break out). That is probably most fun to watch a band perform at 4 p.m. on a Thursday and then go home,” says Greg, who lives in Holmdel with his wife, Andrea, and children, Seth (13) and Sienna (11).

MONDAY, MAY 8 | 12:30 P.M.

DEAL GOLF & COUNTRY CLUB

Play 18 holes on a beautiful, Par 71 course.

Connect with members over lunch and a putting contest.

Celebrate the upcoming retirement of Ralph Albert Thomas, CEO and Executive Director, at a special dinner reception.

Unite with peers for 2023’s best collaboration, inspiration and innovation.

Discover new ways to break down barriers, including:

Strategies to navigate and grow in 2023 and 2024

A master communicator’s secret weapon

Drivers of change and what the profession will look like tomorrow

Leadership and life lessons

35 CPE sessions on timely, technical and insightful topics

PREMIER SPONSOR: