Today's CPA May/June 2015

Today’sCPA MAY/JUNE 2015

TE X AS SOCIETY OF

C E RT I F I E D P U B L I C AC C O U N TA N T S

TSCPA’s 2014-2015 Year in Review

From Stressed Out to Burnout – Understanding the Differences, Effects and Solutions Hospital Cost Reduction: Does Lean Provide the Answer?

Conducting Effective Fraud Brainstorming Sessions

Also: An Update on Today’s CPA

CONTENTS

CHAIRMAN Mark Lee, CPA

VOLUME 42, NUMBER 6 MAY/JUNE 2015

EXECUTIVE DIRECTOR/CEO John Sharbaugh, CAE

EDITORIAL BOARD CHAIRMAN James Danford, CPA

cover story 22 TSCPA’s 2014-2015 Year in Review

Staff MANAGING EDITOR

26 An Update on Today’s CPA

DeLynn Deakins ddeakins@tscpa.net 972-687-8550 800-428-0272, ext. 250

society features

TECHNICAL EDITOR

20 Capitol Interest

House vs. Senate

C. William Thomas, CPA, Ph.D. Bill_Thomas@baylor.edu

COLUMN EDITORS Greta P. Hicks, CPA Mano Mahadeva, CPA, MBA C. William (Bill) Thomas, CPA, Ph.D.

WEB EDITOR Wayne Hardin whardin@tscpa.net

CONTRIBUTORS Ali Allie; Melinda Bentley; Rosa Castillo; Jerry Cross, CPA; Anne Davis, ABC; Donna Fritz; Wayne Hardin; Chrissy Jones, AICPA; Rhonda Ledbetter; Craig Nauta; Judy Neathery; Catherine Raffetto; Judy Todd; Patty Wyatt

DIRECTOR, MARKETING & COMMUNICATIONS Janet Overton CLASSIFIED Donna Fritz Texas Society of CPAs 14651 Dallas Parkway, Suite 700 Dallas, Texas 75254-7408 972-687-8501 dfritz@tscpa.net

Editorial Board Arthur Agulnek, CPA-Dallas; Aaron Borden, CPADallas; Jacob Briggs, CPA-Fort Worth; Kristan Allen Crapps, CPA-Houston; James Danford, CPA-Fort Worth; Melissa Frazier, CPA-Houston; Greta Hicks, CPA-Houston; Baria Jaroudi, CPA-Houston; Brian Johnson, CPA-Fort Worth; Tony Katz, CPA-Dallas; Jeffrey Liggitt, CPA-Dallas; Mano Mahadeva, CPA-Dallas; Alyssa Martin; CPA-Dallas; Dawne Meijer, CPA-Houston; Marshall Pitman, CPA-San Antonio; Kamala Raghavan, CPA-Houston; Barbara Scofield, CPA-Permian Basin; Brinn Serbanic, CPACentral Texas.

Design/Production/Advertising

12 Spotlight on CPAs

Beat of a Different Drummer

technical articles 27 From Stressed Out to Burnout – Understanding the Differences, Effects and Solutions 32 Hospital Cost Reduction: Does Lean Provide the Answer?

38 CPE: Conducting Effective Fraud Brainstorming Sessions columns 4 Chairman’s Column A Part of Something Bigger 6 Tax Topics Moving On 7 Business Perspectives Caring for Customers 8 Accounting & Auditing Implementation Deadline for New Revenue Recognition Standard Delayed 9 Tech Issues Excel Data Analysis and Reporting Roadmap 14 Chapters Going Strong for 75 Years departments 16 Take Note 45 TSCPA CPE Course Calendar 46 Classifieds

The Warren Group thewarrengroup.com custompubs@thewarrengroup.com

© 2015, Texas Society of CPAs. The opinions expressed herein are those of the authors and are not necessarily those of the Texas Society of CPAs. Today’s CPA (ISSN 00889-4337) is published bimonthly by the Texas Society of Certified Public Accountants; 14651 Dallas Parkway, Suite 700; Dallas, TX 75254-7408. Member subscription rate is $3 per year (included in membership dues); nonmember subscription rate is $28 per year. Single issue rate is $5. Periodical POSTAGE PAID at Dallas, TX and additional mailing offices. POSTMASTER: Send address changes to: Today’s CPA; 14651 Dallas Parkway, Suite 700; Dallas, TX 75254-7408.

CHAIRMAN’S COLUMN

A Part of Something Bigger

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Editor’s Note: In the final Today’s CPA issue of TSCPA’s fiscal year, Chairman Mark Lee, CPA-Houston, reflects on 2014-2015.

By Mark Lee | 2014-2015 TSCPA Chairman

s I started my term as your TSCPA chairman for 2014-2015, “be a part of something bigger than yourself ” became my theme for the year.

I chose this theme because I believe that we as CPAs are better together and can do more together as a unified force. TSCPA is an organization that understands the value of your license and how hard you worked to become a CPA. In the accounting profession, there are responsibilities and duties that can be daunting for a single individual. This is where TSCPA can assist you with tools, support and networking opportunities you need to be successful both professionally and personally. TSCPA is also dedicated to protecting your license. Speaking with a combined voice and the power of a constituency of 27,000 is more influential than an individual speaking alone.

As I’ve traveled and met with members throughout Texas during the year, I’ve been inspired by the collective energy coming from the TSCPA chapters. There is a determination that CPAs share to serve as leaders for their employers, their professional organization and in their communities.

You can read more about the highlights of the year in the article “TSCPA’s 2014-2015 Year in Review,” which is our cover story in

THANK YOU FOR GIVING ME THE OPPORTUNITY TO SERVE AS YOUR 2014-2015 CHAIRMAN. WITH TSCPA, YOU CAN BECOME PART OF SOMETHING BIGGER.

this issue of Today’s CPA. The time has gone by quickly and was full of activity.

We started the year with a new strategic plan that will guide the organization until 2017. You can see the concept of “something 4

bigger” reflected throughout the plan. The “something bigger” concept resonates in the importance of maintaining professional competency with lifetime learning, achieving career success, speaking on behalf of the profession through advocacy, involvement in the community and making TSCPA a stronger organization.

A legislative agenda was developed for the 2015 session of the Texas Legislature. In conjunction with the legislative session, CPAs went to Austin in January to meet with members of the Legislature. The CPAs were there to offer support to legislators and communicate TSCPA’s legislative priorities. They were also in Austin to accept official legislative recognition of the CPA Centennial Celebration. Through resolutions, the Texas House of Representatives recognized the 100th anniversary of the profession and the Senate congratulated CPAs on their 100 years of service.

At TSCPA’s upcoming Annual Meeting of Members in June, we will kick off the celebration of TSCPA’s 100-year anniversary.

In the area of continuing professional education, I am truly impressed with the depth and scope of high-quality programs offered by the TSCPA CPE Foundation. Not only are there live conferences and seminars, there are literally hundreds of programs offered online and through other formats. One popular program we continued this year was the free professional issues webcasts.

These webcasts cover the top issues facing the profession and give participants two hours of CPE credit.

The Society’s recruitment and retention efforts focused on welcoming new licensees and programs geared toward the various segments of the membership in their area of accounting practice.

Membership has grown this year and the retention rate remains high.

The TSCPA committees were hard at work to meet their tasks in support of the new strategic plan. One effort was TSCPA and the Young CPAs and Emerging Professionals Committee hosting the first statewide CPA Day of Service on Saturday, May 2. This single day of service was an opportunity for members to assist in their local community by participating in a volunteer activity of their choice. It’s exciting to see the commitment of the young CPAs to have such a positive impact not only on our profession, but in the community as well.

Thank you for giving me the opportunity to serve as your 20142015 chairman. For more than 20 years, I have been involved with this tremendous organization. I hope that you are taking full advantage of the value that connection with TSCPA and the chapters brings to you. There is a support system here – other CPAs who can advise and help you. With TSCPA, you can become part of something bigger. n Mark Lee

can be contacted at Mark.Lee@aglife.com.

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YOU’RE A CPA.

TAX TOPICS

Moving On

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By Greta Hicks, CPA | Column Editor

Volunteer with TSCPA and Your Chapter

o, I’m not retiring and I’m not quitting, but I am resigning as the Tax Topics column editor for Today’s CPA magazine. It’s time for a younger person to come in with fresh ideas. I encourage you to welcome the new column editor, Jason Freeman, CPA-Dallas, and offer him the encouragement that you’ve given me these past 14 years.

What am I going to do? I am reallocating my time usage. In 1976, I began to volunteer on Houston Chapter and TSCPA committees.

After 40 years, it is time for me to move over and make room for younger people to experience the rewards of volunteering with the many fine CPAs around the state. Volunteering has been a fulfilling, learning and growing experience, and it is important that as many CPAs as possible have this opportunity to grow as individuals and develop their leadership skills. I encourage you to determine your area of interests and volunteer for the committee of your choice. It’s fun. It’s interesting. It makes your local chapter and TSCPA better organizations.

Through the years, those of us on committees have met CPAs from all over the state. Volunteering has provided us with information resources where we can call up and say, “Have you had this experience …?” And, in return, people have called and asked, “I have this problem … Do you know …?” Many of the tax articles that have appeared in Today’s CPA have come from the questions people have asked. My thought was that if one person had this question, perhaps many more needed the same type of information. I grew because many times, I had to research to find the answer. Thanks – you made me stretch and kept my brain cells growing.

Greta Hicks, CPA

Volunteering for a committee or other service is an excellent way to get the most from your TSCPA membership. TSCPA has many committees and you can also become actively involved by volunteering with your local chapter. To learn more, go to the Volunteer community on TSCPA’s website at tscpa.org. Under the Resource Center tab, go to Member Communities and then scroll down and select Volunteer.

It’s hard to admit that the committees can get along without us “old folks,” but we need to move over and move on to other challenges. At 74, time is a valuable commodity and for me, it is past time to reset my priorities. Over the years, it was work, volunteering and family. Not necessarily good planning on my part. I can’t undo the past. However, I can strive to put family first and add in travel, and then work as time and energy permits. Yes, I’ll continue IRS problem resolution, writing articles and presenting webinars on tax and IRS problem resolution subjects, just not to the extent of the last 38 years.

Some committees are harder to give up than others. Most people may not know or may not remember that in the 1970s, there were not that many women in CPA organizations and we were not encouraged to become committee members. With the evolution of the CPA profession and its professional organizations, the dynamics of the last 40 years have been a great time to be a Certified Public Accountant.

Get involved! n

is a consultant on IRS problems, seminar discussion leader, author of continuing education courses and web content provider. She can be reached at gretahickscpa@yahoo.com or www.gretahicks.com.

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6

Today’sCPA

BUSINESS PERSPECTIVES

Caring for Customers

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By Mano Mahadeva, CPA, MBA | Column Editor

lmost everywhere we go in society, we hear about customer service. Service providers, dealerships, retailers, sports venues and others ask us for customer service feedback. While this can be somewhat annoying, it is a simple reality that businesses are seeking the same end goal – finding new ways to meaningfully engage customers. While most businesses want to deliver a great customer experience, few are investing the necessary resources to create it. Simply meeting your customer’s core service requirements qualifies you only to compete, with no guarantee of winning business or garnering loyalty. To gain loyalty, a company needs to connect with the customer and the customer needs to connect with the company.

Think about your last experience as a customer. How was your experience? If you had a question, did anyone offer to help you? Was there genuine interest displayed in helping you? Did anyone take the time to listen to you to truly understand your needs? Did they give you their undivided attention or were they distracted? Questions such as these present significant organizational challenges, as well as opportunities. The biggest is that this makes every employee in any organization a marketer so customer engagement becomes everyone’s responsibility!

Several reasons have been put forth to explain the lack of a successful customer service program in companies. These include being the only provider for a service within a geographic area; selling a product that does not have a complement; having a dominant market position; trimming of costs during a market downturn; complacent leadership due to past success; and just simply not trying.

Lack of commitment to customer service by key leaders is an issue that impacts all initiatives. If leadership does not provide strong support from the top down, the proposed initiative of customer service will likely fail. A focus on “what’s in it for the company” instead of “what’s in it for the customer” is a very popular recipe for disaster. A mechanistic approach to customer service with a focus on efficiency, consistency and cost effectiveness instead of an approach with responsive empathy, a focus on skill, experience and customization, will usually fail to meet any customer service objective.

In the end, only one thing really matters in a service encounter – the customer’s perception of what took place. As such, there needs to be a total focus on all underlying factors that affect those perceptions. So put yourself in the shoes of a customer and simulate the experience. What positive action can be enhanced? What negative events need to be eliminated?

What are the non-value-added processes? What are the distractors? In other words, how can we make this a delightful

Mano Mahadeva, CPA Today’sCPA May/June 2015

and engaging experience for the customer such that it will be etched in their minds?

Companies such as Nordstrom, Disney, Enterprise, Starbucks, Lexus and Southwest Airlines are determined to keep customers happy. Howard Schultz, the CEO of Starbucks, made clear his belief that employee satisfaction leads to customer satisfaction. All Starbucks employees, called “partners,” are provided with training on “hard skills” (mix drinks, run the cash register) and on “soft skills” (to connect with customers – smile, eye contact, etc.). They also keep their employees satisfied with competitive hourly wages, health benefits, stock options and free tuition.

Then there is the story of Toyota, which announced the arrival of a luxury car called Lexus back in the late 1980s. Soon after its initial sales, a few cars were detected to have a problem.

The company recalled every car, but it was not the recall that did it. Every notice had an apology and an offer to pick up each car, fix it, wash it and top it with gas before its return! There are many other wonderful stories published and found on the net that describe how engaged employees have helped their companies deliver similar experiences.

Following are some keys to creating a quality customer service program: • Lead from the top; send a strong message to the organization that quality customer service is here to stay and model this behavior.

• Hire smart people who are motivated and committed to act in the company’s best interest.

• Provide the necessary training to help your employees learn how to orchestrate the experience.

• Structure appropriate incentives and benefits for your employees.

• Give the necessary information and authority to each employee so that he/she can solve problems that arise and there is no “passing of the problem.”

• Ensure that each employee understands that he/she is the face of the company.

• Obtain feedback from customers about your company’s performance on a regular basis.

• On every possible occasion, THANK your employees for what they do and THANK all customers for their business.

Simply proclaiming a quality customer service strategy is not enough! It must be applied sensibly throughout the company.

Customer service is an integral part of everyone’s job and not an extension of it. A customer is the most important asset of any company. Without them, the business is naught. n

is Chief Financial Officer with Solis Health in Addison, Texas. He serves on the Editorial Board for TSCPA. Mahadeva can be reached at mmahadeva@solishealth.com.

7

ACCOUNTING & AUDITING

Implementation Deadline for New Revenue Recognition Standard Delayed

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By C. William Thomas, CPA, Ph.D. | Column Editor

n May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) released an accounting standards update (ASU) converging U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) into a uniform, principles-based standard for revenue recognition from customer contracts. Since the release of the ASU, there has been much debate about the implementation deadline, originally set for Jan. 1, 2017. Some affected companies argue that they do not have sufficient time to comply with the changes, while others say delaying it would penalize companies that are proactive about adoption.

Delayed Until 2018 The new standard replaces a great deal of the previous guidance for revenue recognition. With around $360 billion of deferred revenue on the books of S&P 500 companies, implementation of the new standard will have a significant impact across all industries. It will take time to modify systems and understand the new rules. For that reason, standard setters have delayed the implementation date of the new standard to Jan. 1, 2018.

Some companies have observed that a lack of guidance on implementation from FASB makes it difficult to meet the original implementation deadline. According to the Securities and Exchange Commission, many questions remain on how to implement the new rules. For example, Ford Motor Company commented on the ambiguity of the rules, saying that it might have to change how it accounts for each car sale. The company estimates the new accounting system required to implement the standard will cost in the neighborhood of $300 million and that it provides little additional benefit for investors.

Companies that supported keeping the 2017 timeline said that pushing back the date would penalize those who have been proactive about making the changes. Some of these companies have observed that the costs of implementation will naturally and inevitably grow if the implementation deadline is extended. These companies will be allowed to choose to adopt the standard early.

Industries Impacted To some extent, the new standard will affect almost all companies and industries due to the significant increase in required disclosures. The following is a brief overview of some of the most impacted industries.

Entertainment and media: Since a majority of their contracts deal with intellectual property, these entities need to C. William Thomas 8

determine what type of licenses they are going to use, because revenue is now recognized when those rights are transferred.

Technology: Currently, certain industries have operating rules that formerly delayed revenue recognition, but under the new standard, those rules no longer apply. As a result, terms of contracts will have to change.

Communications: Products and services formerly grouped together will have to be separated, requiring allocation of revenue according to stand-alone pricing.

Real estate: The new standard could significantly change the timing of revenue recognition for many arrangements. As a result, the standard may require management to perform a comprehensive review of existing contracts, business models, company practices and accounting policies.

Engineering and construction: All existing revenue recognition guidance will be substantially replaced, which includes the percentage-of-completion method and the completed contract method. Under the new standard, revenue is recognized when a performance obligation is satisfied.

Automotive: The new standard requires entities to determine when control of the good or service has transferred to the customer. This may result in earlier recognition if contracts are determined to transfer control over time.

Industrial products and manufacturing: Under the new standard, the gross profit method of calculating revenue, costs of revenue and gross profit based on the percentage-ofcompletion method are no longer allowed.

Pharmaceuticals: Like the entertainment and media industry, a significant portion of the pharmaceutical industry contracts deal with intellectual property. The intellectual property contracts will need to be carefully evaluated to determine if revenue should be recognized at a point in time or over time.

Retail and consumer: Under the new standard, transactions that include customer incentives and loyalty programs can affect the amount and timing of revenue recognition. Companies in this industry must carefully evaluate such transactions when applying the new standard.

Final Thoughts The new standard will significantly impact businesses across many industries and sectors. To those companies that needed a delay, FASB’s decision is a welcome relief, if only temporary.

Regardless of the official reprieve, it is important for controllers and CFOs of affected entities to begin preparation for transition to the new standard.

For more information and updates on the new standard, see related sections of www.fasb.org. n

is the J.E. Bush Professor of Accounting in the Hankamer School of Business at Baylor University in Waco. Thomas can be reached at Bill_Thomas@baylor.edu.

Today’sCPA

TECH ISSUES

Excel Data Analysis and Reporting Roadmap

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By Will Fleenor, CPA, Ph.D., Member K2 Enterprises

his column provides a roadmap for analyzing data and preparing financial and other management reports in Excel. Efficiency and effectiveness are important objectives.

The data we need for effective management reports no longer resides in a single on-premise database. Even for small to medium businesses (SMBs), data often resides in numerous places – some real-time data and some traditional batch processed data – some in the on premise and perhaps some in the cloud (e.g., your email and global address list).

For years, CPAs and other financial professionals have been using Excel (often with a great deal of success) to make sense of data coming from multiple sources. A local delivery company may need information from their Microsoft Access delivery database and also from their financial database to effectively analyze delivery costs.

The entire process becomes further complicated when the online order system is hosted. This creates a third cloud-based dataset that should be integrated for effective analysis and reporting.

To be effective, you need to get the most information you reasonably can (i.e., cost does not exceed benefit) out of all your data – regardless of where it resides. Manually pushing data out of ERF systems, accounting software and other databases into Excel is a slow, time-consuming and error-prone process. Often, the data has to be “reformatted” and otherwise “converted” to meet our analysis, which can require hours of manual conversion.

Worst of all, data pushed into Excel is dead data. The cord is cut. Anything that changes from that moment on is not part of the analysis, including error corrections and omitted transactions posted at a later date. It is pretty hard to be efficient (much less effective) doing business this way. There is a better approach. Just follow the roadmap.

Figure 1. Excel Data Analysis and Reporting Roadmap.

Step 1. Importing Data Using Excel Queries In addition to being a great analysis tool, Excel is a great query tool.

Excel has been an Open Database Connectivity (ODBC) standard compliant client since 1993. This allows Excel users to connect directly to literally hundreds of commercial database products, including the vast majority of accounting software products. For example, QuickBooks, Sage 50, Microsoft Dynamics, Open Systems Traverse and dozens more are all ODBC-enabled applications.

If you use SQL databases, Excel is also a capable SQL client. In fact, there is a long list of database applications for which Excel is Today’sCPA May/June 2015

a capable client. It includes Microsoft Access, XML datasets, data from analysis services sometimes referred to as data warehouses or OLAP cubes, data from other Excel files, and more.

If our objective is to build a better analysis and reporting spreadsheet, then getting the data into Excel by query is a must.

These live hooks, to the most recent versions of all our data, give us the ability to update the data (1) quickly, (2) easily, (3) with low risk of error, and if we choose, (4) automatically every time we review the report or examine the analysis. All that time previously spent pushing the data out and then opening Excel and cleaning it up (e.g., inserting and deleting rows and columns, copying, cutting, pasting and reformatting) is no longer needed; we simply click “Refresh.” Best of all, the risk of errors is significantly reduced.

To access your data from inside Excel, you first need to determine what application is hosting your data and what type of query it supports. This is the easy part. Just research your software or service on the web, ask your consultant or VAR, or ask IT. IT may not be receptive to this request, because it means more work (and risk) for them in setting up and managing the rights of the query client. IT’s ability to control what your query can see can be very granular in higher-end products like Microsoft Dynamics or Sage 500. They can, for example, restrict access

by IP address, time, day of the week, etc. However, even with QuickBooks, there is some level of control over what a query client can see and/or do.

The database administrator (i.e., the person who sets up users, passwords and user rights) will have to grant you the right to make the queries. Sometimes, users face political obstacles in getting these rights. Their objections to your request may not make sense.

Why wouldn’t you allow your users to pull in the same data they are allowed to push out? If you can go into the database and push it out, why shouldn’t you be able to sit in Excel and pull it in?

Once you are granted the rights to query the database, you need to configure Excel so it can see your database. This is a one-time deal that will take a consultant or qualified IT person no more than 10 minutes. Now you are ready to pull data in. The query feature is accessed under the Data tab. (See Figure 2.)

Finally, ask the database administrator for a database dictionary.

This will help you find the data elements you are looking for in the mass of tables and records you will find in your dataset.

Step 2. Leave the Data Alone Numerous studies (e.g., Panko-Halverson 2010) have documented high error rates in Excel spreadsheets prepared and used by business professionals. The most common cause is human error in updating existing files, such as adding this month’s data to the file or typing a number over a formula by mistake. continued on next page 9

TECH ISSUES continued from previous page Figure 2. Excel Query Options.

The next most common cause of errors is when users turn data into reports by inserting and deleting rows and columns, copying, cutting and pasting, etc. This is a high-risk approach to creating reports. Anytime you start manually manipulating data, you run a high risk of errors. Leave the data alone! Build your reports in separate sheets that point to your datasets. You can still filter your datasets for analysis or to find records, but don’t modify or delete records or fields.

Step 3. Build Reports and Analyze Data in Separate Sheets Using the old approach of turning the data itself into the report by inserting rows and columns, copying and pasting, etc., was never very efficient and would work poorly with queries. Every time you refresh your query, all the deleted rows and columns would come back and your inserted rows with subtotals would be gone.

Fortunately, there is a much better (and easier) solution. Using the queries discussed in Step 1, we can automate the process of getting our datasets into Excel. With the help of the Excel Tables features, we can create reports based on these datasets that automatically update when the dataset is updated. This process can significantly reduce time and effort required to update reports. It also significantly reduces the risk of errors by eliminating manual updating and altering of raw data.

Start by gaining a good understanding of Excel Tables. The Tables feature brings easy-to-use database tools to Excel. When datasets are turned into “Tables,” you can use the table name and the field name in building a formula. For example, if you had a dataset where you had a field named “Amount” and the Table was named “Sales,” you 10

could summarize that field with the following formula: =SUM(Sales[Amount]) Using the Table name and the field name in the formula is called “structured referencing.” It allows you to build formulas that summarize fields rather than static ranges like H3:H350. Formulas using static ranges do not work well with Tables that are refreshed and, as a result, the number of records changes. Using structured references allows you to build formulas that reference “dynamic” ranges – ranges that change in size as the data is updated.

If you are building static reports (the report layout does not change from period to period) that are updated periodically and are based on only one Table, the =SUMIFS() function is likely a good choice. This function allows you to summarize data by as many criteria as you would like. So, for example, if you have an inventory dataset that contains fields for Warehouse, Vendor, and Category, you could use one formula to easily build a formula that summarizes your data by Warehouse, by Vendor, by Category. This function works with “structured references” to Tables.

Step 4. Relate Tables and Build Reports from Multiple Sources You also need at least a basic understanding of how to summarize data with PivotTables and PivotCharts. PivotTables and PivotCharts are well suited to quickly summarize large amounts of data in multiple different ways. This works well for data analysis and data mining.

For analysis and reporting that requires data from multiple related Tables, you will need to use PivotTables. The Excel Data Model (new in Excel 2013), which allows you to relate tables, is designed to be used with PivotTables.

The following is an example of how such reporting could be useful to a small business. Assume that we have three closely held businesses, each of which is accounted for in a separate Sage 50 database. We would like to build a spreadsheet that will consolidate the trial balances of these three companies. Further, we would like to have the ability to get an up-to-date consolidated trial balance any time we want on a moment’s notice, as long as the three underlying Sage 50 databases are up to date. This would allow us, for example, to quickly see how much cash we have and where it is.

Since the data is in Sage 50 (an ODBC-enabled application), we can use ODBC queries, as described in Step 1, to bring each of the three trial balances into one Excel file – each as a separate Table in a separate sheet. Since the account numbering structure is the same for all three businesses, the account numbers (key field) along with the Excel Data Model can be used to consolidate the three closely held businesses. The Excel Data Model allows us to identify the related fields in the three trial balance Tables.

The screen capture in Figure 3 shows the resulting consolidated trial balance. This consolidation can be updated at any time by “Refreshing” the queries and the PivotTable. The queries can be set to “Refresh” automatically when the file is opened. To create this type of consolidation report, use the PivotTable and PivotChart Consolidation Wizard.

Those working for large entities will want to explore the PowerPivot add-in (new in Excel 2013), which makes it possible Today’sCPA

A Better Approach The costs (inefficient workflow) and risks (human error) of creating reports by pushing data into Excel and then transforming that data into the report makes this approach to reporting unacceptable.

Automating the process of moving the new data into Excel and updating the reports and analysis clearly makes more sense. Since Excel contains easy-to-learn and useful tools to make this automation happen, why wait? n

Figure 3. Consolidated Trial Balance.

to relate multiple different types of databases with literally hundreds of millions of records, all from inside Excel. If you are interested in mining your data to make more informed business decisions on short notice, you should consider Microsoft’s new “Power BI” (Business Intelligence) service that lets you share, collaborate and report on data from multiple sources, including the cloud.

Will Fleenor

is a shareholder in K2 Enterprises, where he develops and presents continuing professional education programs to accounting, financial, and other business professionals across North America. You may contact him at will@k2e.com.

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11

SPOTLIGHT ON CPAS

Beat of a Different Drummer Houston Auditor Keeps the Music Alive

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By Anne McDonald Davis

ercussionist Frank Sharp enrolled at the University of Houston planning to major in music – until his “inner accountant” piped up. “I started to think practically. What were my real career options as a music major?” explains Sharp.

“Many people get music plus education degrees and teach. Only part of a very small pool of people competing for performance jobs get them – the Houston Symphony, for example.”

Sharp decided to explore the university’s business school. Like many CPAs, math had always come easily to him and those first accounting courses pointed to a new path.

He recalls: “That’s what I ultimately did, the five-year program with a masters, then straight to public accounting. Absolutely no regrets. I’ve been in auditing since day one, and I really enjoy it. It’s interesting to see the insides of all these businesses. I find the work that I do interesting on a daily basis. There’s enough variety and challenge to keep me engaged.”

After eight years at a Houston firm working on mostly small public companies’ audits, in 2014 Sharp was recruited to LaPorte CPAs and Business Advisors, a Louisiana company that four years ago entered the Houston market with the acquisition of a local firm. “I’ve been fortunate to work at firms that aren’t sweat shops – [they are] flexible environments,” comments Sharp. “I appreciate that. I plan to be in this for the long term.”

LaPorte’s work-life-balance awareness has allowed the Houston auditor to keep music in his life. Many evenings will find him rehearsing or performing with a cover band that performs hits from the ‘70s, ‘80s and ‘90s.

He laughs: “Anything by Rush is usually a really good drum song. The last time we played at a little bar and grill down from our office, and I invited everyone.”

Sharp particularly values the opportunity to serve on the board of Young Audiences 12

Frank Sharp playing cover tunes with fellow CPA bandmate Mike Galvan (right) and friend Guy Branche (left)

Frank Sharp, CPA-Houston

of Houston, a nonprofit whose goal is to educate children about the arts.

“Arts are the first place funding gets cut in our schools,” he says regretfully. “We work closely with HISD to identify children who don’t have access to an arts program, hoping to inspire them to want to take part.

I wouldn’t be the person I am today without music. It’s not just about learning to play an instrument or sing – it helps you grow.”

A strong believer in community involvement, Sharp takes special pride in the efforts of TSCPA and the Houston Chapter. The incoming chair of the Public Relations Committee, he cites an upcoming

initiative to heighten awareness among the Houston accounting community of the many programs – such as CPAs Helping Schools – that have evolved and succeeded over the years.

He enthuses: “I think it’s important to be active and support your profession. Houston is a huge chapter; we’re pretty unique in that.

I want to help the committee show members and potential members what all we’ve done.”

At the end of the day, Sharp feels he has been able to reconcile his math brain with his musical heart by “making my own decisions and not relying on outside expectations. Do what you want to do. Be true to yourself.” n Today’sCPA

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CHAPTERS

Going Strong for 75 Years

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By Rhonda Ledbetter | TSCPA Chapter Relations Representative

elebrating its 75th anniversary in December 2014, the Panhandle Chapter was founded Nov. 21, 1939. The first president was Walter (Chick) Russell and the secretary was Robert Hibbetts, who went on to become TSCPA president in the 1957-58 year.

In preparation for the 75th anniversary celebration, chapter past president Marilyn Ault responded to the request for members to share remembrances. “Leonard Gerhardt was chapter president when I joined in 1956.

I remember because he called me at work and said he had my CPA certificate, and met me after work to hand it to me. No swearing-in ceremonies back then!”

Several months in advance, a committee was formed to plan a fun event. Members included Anne Carpenter, Becky Douglass, Selena Fogg, Cory Joiner and Alicia Pickens. They decided on a luncheon, where the chapter could showcase the impact that CPAs make in the community outside of their careers. They scheduled it during a popular all-day CPE seminar and were rewarded with attendance of almost 300 – impressive for a chapter of 500 members.

The theme of community involvement was carried out at the event by asking participants to bring money and canned goods for the High Plains Food Bank. The result was 200 pounds of food and $600 donated, including money raised by those who bought poinsettia plants that were used as decoration.

To visually demonstrate the extent of CPAs’ service to their profession and their community commitment, the current president, Alicia Pickens, asked people – group by group – to stand and remain standing if they had ever been a: • director or officer on the TSCPA board; • TSCPA committee member; • chapter president; • chapter officer or director; or • chapter committee member.

More stood up as she asked for those who had promoted an accounting career by giving a presentation to the WTAMU Accounting 14

The Panhandle Chapter celebrated its 75th anniversary in December 2014.

Club, mentoring or tutoring students, or participating in WTAMU Meet the Firms.

The excitement built as she called for those to stand who had used their knowledge and expertise to help others when they: • taught an accounting or financial course at a school; • taught a financial management course, such as Financial Peace University at church; • provided free tax advice; or • prepared tax returns through VITA or any other organization that provides free tax services to people in need.

Showing that CPAs’ community impact reaches far outside of the profession, she got most of the rest on their feet who had: • volunteered at any area nonprofit organization; or • been a religious organization’s lay leader, served on its board or volunteered in any capacity.

The message was powerful. And the applause was inspiring.

Members have participated in different areas of public education to promote the CPA career field by proctoring Academic

Decathlons, judging in UIL Accounting competitions, participating in Career Days, judging in DECA Conferences, and being involved with the Amarillo Independent School District’s “Ready For the Real World” events.

She explained that, in addition to the contributions of individual members, the chapter manages a healthy scholarship commitment to area accounting students.

It currently offers three UIL scholarships and two scholarships at West Texas A&M University. The chapter was recently inducted into the WTAMU Old Main Society, for contributing over $50,000 in scholarships over the years.

The planning committee obtained a proclamation from the City of Amarillo, which was presented at the luncheon.

The mayor and City Council declared it to be “CPAs of the Panhandle Chapter Day.” Unable to attend because of severe weather-related flight cancellations, TSCPA Chairman Mark Lee, CPA-Houston, spoke via a phone connection. He led the group in a sparkling cider toast to the success of the chapter in supporting members as they work toward their pursuits in the profession.

Here’s to the Panhandle Chapter! n Today’sCPA

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TAKE NOTE

Today’sCP A MAY/JUNE 201

5

TEXAS SO CIETY

TSCPA Member Recruitment Campaign TSCPA is continuing to reach out to Texas CPAs who have not yet joined to encourage them to connect with their professional association that is responsible for connecting, protecting and advancing CPAs in Texas.

You can help. Be sure to promote the value of TSCPA membership to your nonmember colleagues and urge them to join your professional community. To learn more about how TSCPA serves CPAs, please visit www.tscparoi.org. n

OF

C E RT I F I E

D PUBLIC AC C O U N

TSCPA’s 201

01 Year in4-2 Review5

Also: An Update on To

From Stresse d Out to Burno ut – Understan ding the Difference s, Effects and Solutions Hospital Cost Reduction: Does Lean Pro vide the Answ er?

day’s CPA

TSCPA Member Carlos Cascos Serving as Texas Secretary of State TSCPA member Carlos Cascos, CPA-Rio Grande Valley, is now serving as the 110th Texas secretary of state.

Among the many duties of the office, the Texas secretary of state serves as chief election officer and chief international protocol officer for the state. Additionally, the secretary is the senior advisor and liaison to the governor for Texas border and Mexican affairs.

The secretary of state’s office provides a repository for many official business and commercial records required to be filed with the state. The office also publishes government rules and regulations, and over the years, the office’s connection to the business community has expanded the secretary of state’s role to serve as an economic ambassador for Texas.

Not new to public service, Cascos was elected as Cameron County judge in 2006 and was re-elected in 2010 and 2014. He previously served on the Texas Public Safety Commission and as a Cameron County commissioner from 1991 through 2002. He is a graduate of the University of Texas at Austin. TSCPA congratulates Cascos on his appointment. n 16

TA N T S

Conducting Eff ective Fraud Brainsto rming Session s

Online Version of Today’s CPA Available on TSCPA’s Website Each issue of Today’s CPA magazine is available online for members.

Today’s CPA is posted on the website in a digital format, as well as .PDF files that can be downloaded. The magazine can be accessed from the home page on tscpa.org. Click on the link on the right-hand side of the home page just below News Alerts and the CPE Catalog. Then click on “Members Only: See articles and archived issues of Today’s CPA” and log in to read featured articles and recent issues. n

Accountants Confidential Assistance Network Seeks Volunteers The Accountants Confidential Assistance Network (ACAN) program befriends a number of CPA candidates around the state as part of the ACAN peer assistance program that helps Texas CPAs, CPA candidates and/or accounting students who are dealing with alcohol, chemical dependency and/or mental health issues. Can you help? Please contact Craig Nauta at 800-428-0272, ext. 238; 972-687-8538 in Dallas; or at cnauta@tscpa.net.

On behalf of John B: this is a 12th man doing a 12th step. n Today’sCPA

Succession Planning Resource: Practice Management Institute

New TSCPA Member Insurance Offering: Identity Theft and Cyber-Security Protection from MetLife Defender TSCPA is pleased to offer members MetLife DefenderSM, a comprehensive service to protect against a range of identity theft and other cyber risks. An identity is stolen every three seconds in the United States. Whenever an individual goes online to pay bills, shop and connect with friends and family, he/she may be putting personal data at risk.

TSCPA offers the Practice Management Institute to assist members with their succession planning needs and issues. The Practice Management Institute is a resource available only for TSCPA members.

Developed in partnership with the Succession Institute, LLC, it provides free material and content on succession planning. There are also CPE self-study course offerings available at a discounted rate for those who would like to receive CPE credit. To learn more, please go to the CPE section of the TSCPA website at tscpa.org, scroll down and select Practice Management under Tools and Information. n

Depending on how you structure your account, MetLife Defender can provide: • Financial Data Protection – proactively stops threats to your credit and debit card information before there’s a breach, guards your bank account information, monitors and protects credit scores, and provides immediate 24/7 assistance if your wallet is ever lost or stolen.

• Identity Theft and Personal Data Protection – secures over 25 key pieces of data, including your full name and mailing address, Social Security number, bank account information, driver’s license, passport number and social networking logins.

• Health Data Monitoring – protects against medical identity theft by proactively stopping exposure of data associated with your health records, medical insurance, Medicaid/Medicare information and more.

• Online Child Safety Services – monitors your children’s Facebook, Twitter and Instagram accounts to protect against cyberbullying, predators and other online threats, including identity theft of a minor.

Gain Peace of Mind With MetLife Defender, you can have peace of mind knowing that you and your family are protected from cyber threats.

If you have any questions or would like to receive additional information on offerings for TSCPA members, including more information on the MetLife Defender program, contact a representative directly by calling 800-845-8941 or visit the TSCPA Member Insurance Program website at tscpainsure.org. For more information on how MetLife Defender protects against a full range of cyber threats, go to www.getdefender.com/TSCPA. Coverage may vary or may not be available in all states. *“2013 Identity Fraud Report by Javelin Strategy and Research.” Identity Theft Assistance Center. Web. 18 Dec. 2014. http://www.identitytheftassistance.org/ pageview.php?cateid=47 n Today’sCPA May/June 2015

Preparing for the CGMA Exam The Chartered Global Management Accountant (CGMA) designation was created by AICPA and the Chartered Institute of Management Accountants (CIMA) for CPAs who work in business, industry and government. The CGMA is a global designation that elevates the profession of management accounting and can give CPAs a competitive advantage.

All candidates for the CGMA designation are now required to pass a comprehensive strategic case study exam. To help candidates prepare, the CGMA Exam Live Review Course is being offered July 20-22, 2015, at AICPA’s boardroom in New York City. During this event, Adrian D. Sims, MBA/MCIM – one of the leading instructors for the CGMA exam – will provide a strategy and discussion on how to maximize scores and pass the exam. Candidates will be assigned time-constrained tasks to complete. To learn more and register, go to the CGMA website at www.cgma.org/events/pages/cgma-examreview-course2.aspx.

Other resources that can assist in preparing for the exam include the CGMA learning program, as well as a tutorial, case study guide, practice exam, and Harvard ManageMentor. To learn more, visit the Become a CGMA section of the website at cgma.org and click on Exam Preparation Materials for AICPA members. n 17

TAKE NOTE TSCPA Thanks 2014-2015 Student and Faculty Reps As part of TSCPA’s outreach to accounting students, the Society utilizes volunteer campus reps to maintain a presence at Texas colleges and universities. The campus rep program serves to promote TSCPA student membership, share information and gain valuable feedback from students. A special thanks goes to those students and faculty members who represented TSCPA so well throughout the year.

Faculty Reps Larry G. Stephens – Austin Community College District Anthony B. Ross Sr. – Concordia University Texas Debra L. Moore – Dallas Baptist University Michael R. Daub – Howard Payne University Emily Bellamy – LeTourneau University Karen Russom – Lone Star College System Bob Thomas – Midwestern State University Michelle Avila – Our Lady of the Lake University Ralph Turner – Schreiner University Lisa Hull – Tarleton State University - Waco Campus Joseph Krupka – Texas A&M Commerce Tara Blasor – Texas A&M University Mary Stanford – Texas Christian University Veronda Willis – The University of Texas at Tyler Amy Foshee Holmes – Trinity University Rob Walsh – University of Dallas Mattie C. Porter – University of Houston - Clear Lake Susan Sorensen – University of Houston - Clear Lake Tiffany DeLuze – University of Mary Hardin-Baylor Allison McLeod – University of North Texas Art Agulnek – University of Texas at Dallas Linda R. Vaello – University of Texas at San Antonio Rod Elrod – University of the Incarnate Word Ramon Fernandez – University of St. Thomas

Student Reps Christopher Capehart – Austin Community College Amy Sheahan – Dallas Baptist University Caroline Stanley – Hardin-Simmons University Sarah Carlyle – Schreiner University Kelly Mathison – Southern Methodist University Renee Townsend – St. Edwards University Beniamin Gross – St. Mary’s University Marissa Mata – Texas A&M International University Justin Jevric – Texas A&M University - Corpus Christi Naomi Jaramillo – Texas Wesleyan University Keenya Kelley – Texas Woman’s University Nora Caballero – The University of Texas at Brownsville Kimberly Wallace – The University of Texas at Tyler McKayla Donovan – Trinity University Hyunjung Kim – University of Houston Van Vo – University of Houston Sarah DeVore – University of Texas at Arlington Yizhen Wang – University of Texas at Dallas Nathan Hawks – University of Texas at Dallas Sahara Rodriguez – University of Texas at San Antonio Amy Janke – University of the Incarnate Word JaeHun Yang – University of the Incarnate Word

n

Members Expelled The following people have had their membership in TSCPA expelled by the Executive Board under TSCPA Bylaws Article III, Section (4B) (1). This action was a result of the revocation of their CPA certificate by the Texas State Board of Public Accountancy.

• Eddie Adkins, Jr., Grand Prairie; • Gary W. King, Fort Worth; • Janice G. Knight, Cypress; • Joe G. Mayer, Double Oak; • Thomas G. Ratcliffe, Jr., Ingram; • Ralph E. Rice, Houston; • Robert J. Rockett, Fort Worth; • Edward Francis Thomas Stuart, Friendswood; and • George A. Weber, Gulf Breeze, Florida n 18

Today’sCPA

Notice of 2015 TSCPA Annual Meeting of Members and Board of Directors Meeting, and TSCPA Centennial Anniversary Celebration June 26-27, 2015 Westin Galleria Dallas The Westin Galleria Dallas is the gateway to all points north, south, east and west in the Dallas-Fort Worth Metroplex. The hotel is located within the impressive Galleria shopping center with over 200 shops, restaurants and attractions all just an elevator ride away. Each spacious guest room offers Westin’s signature Heavenly Bed®, high-speed Internet access, two dual-line speakerphones with data ports, and satellite television. Also enjoy access to the best shopping, dining and entertainment offered in prestigious north Dallas.

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Rates: $189 single or double Hotel cut-off date: May 25, 2015* Ask for Texas Society of CPAs room block * The number of rooms available in our block is not unlimited. The block may sell out prior to this date. Make your reservations as early as possible to ensure that you are accommodated.

100 Years Strong – 2015 marks the 100th anniversary of the Texas Society of CPAs. Our yearlong centennial celebration kicks off at this Annual Meeting of Members. n

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Today’sCPA May/June 2015

19

CAPITOL INTEREST

House vs. Senate

D

By Bob Owen, CPA | TSCPA Managing Director, Regulation and Legislation

uring most legislative sessions, the battles are between Democrats and Republicans. Not so this time. During the 84th Texas legislative session, the battles are between the House and the Senate. With strong Republican majorities in both the House and Senate, the Democrats have been more marginalized than ever. With the change in the Senate of the long-standing two-thirds rule to a three-fifths rule, meaning it now only takes 60 percent of the senators to agree to bring a bill to the floor for debate, the Democrats lost their only remaining leverage to block Republican-authored legislation.

The Senate Republican leadership didn’t waste any time in taking advantage of its new-found power. It quickly passed gun rights legislation, tax cuts, road funding, school performance reform, fingerprint restrictions, lower spending caps and public integrity unit reform. In all fairness, the gun rights bills, school performance reform, lower spending caps and public integrity unit reform were the early bills that passed on a 20-10 straight party line vote. Those bills would have never made it to the Senate floor under the old two-thirds rule.

Tax cuts, road funding and fingerprint restrictions had bipartisan support.

Other social issues that might be expected to be pushed through by the Republican majority, such as abortion controls, school vouchers and gay marriage restrictions, are still working their way through the process. There does not appear to be a sense of urgency for the social issues bills. There are 26 bills related to abortions that have been filed, all awaiting committee hearings. The primary school voucher bill, SB 276 by Sen. Donna Campbell (R-New Braunfels), was heard before the Senate Education Committee and is still pending in that committee.

Several bills dealing with gay marriage have been filed; some have had a hearing while most have not. All have been left pending before a legislative committee. The social issues will be battled between the Senate and House, if they make it out of the Senate.

Border security is also front-and-center. Border security is a combination of specific bills and the budget. There is a difference of opinion between the House and Senate on how to secure the border and how much money to spend doing it. The House budget includes about half as much as the proposed Senate budget.

Elected Republican leaders campaigned on repealing the law that allows in-state tuition for undocumented Texas residents. Is that border security? Evidently, Senate leadership thinks it is because it assigned the bill to the Senate Subcommittee on Border Security (a subcommittee of the Veterans Affairs and Military Installations Committee – don’t ask me about rational committee designations) rather than the Senate Higher Education Committee. By contrast, the House assigned its bill to the Higher Education Committee. As of this writing, the Senate bill was approved by the full committee on a four-three vote, despite 11 hours of testimony opposing the bill during a hearing that lasted well past midnight. The bill is now ready for the Senate floor, but it takes at least 19 senators to agree to debate the bill, and rumor has it that not all Republicans are supportive. If it passes 20

the Senate, the bill faces tough sledding in the House, where Speaker Joe Straus has made it known he thinks the repeal is a bad idea.

The Senate’s proposed tax cuts include reductions in property taxes for homeowners and franchise tax reductions. The school property tax exemption is increased from $15,000 to 25 percent of the Texas home median market value. That’s more than doubling the current exemption, and the exemption amount increases or decreases based on home values. It’s expected to deliver a beginning tax break in excess of $200 for Texas homeowners. The franchise tax rate would be reduced 15 percent, and the small business exemption would be increased from $1 million to $4 million.

By contrast, the House spent the majority of its floor time early in the session passing HB 1, the state budget bill that authorizes $209.8 billion in state spending. The bill sponsor, CPA and TSCPA member Rep. John Otto, House Appropriations Committee chairman, managed the floor debate process. In an 18-hour debate that didn’t end until 5:40 a.m., over 300 amendments were offered and over 200 passed. Nevertheless, the budget submitted by Otto and the Appropriations Committee passed basically intact by a 141-5 vote.

The five no votes were conservative Republicans. The overwhelming majority vote for the bill will be important as the budget process continues when the House and Senate budget conference committee deliberates.

The House budget is $8 billion below the cash available to the state and $2 billion below the constitutional spending cap. The state cannot spend above the constitutional spending cap without a vote of the Legislature to do so, and legislators are not willing to take that vote for fear of primary election retribution.

The Senate budget is slightly higher than the House at $211.4 billion, but there are substantial differences in how the money is spent for border security, public school funding, Medicaid funding, mental health, Texas Tomorrow Fund and state building repairs. Legislative leaders were optimistic about reconciliation of the two budgets at press time. As usual, the hard budget decisions will be made in the House/Senate conference committee at the very end of the session.

Despite the state being flush with cash and the optimism expressed by budget leaders, don’t be surprised if a special session is required before the budget is passed. It’s likely the philosophical differences more than the actual dollars might prevent timely agreement.

What’s the House position on tax cuts? It likes them just as much as the Senate, but the House has a substantially different approach. The House proposes a sales tax rate cut of 0.3 percentage points from 6.25 percent to 5.95 percent. The proposed sales tax rate cut would benefit both individuals and businesses. The House plan lowers the franchise tax rate even more than the Senate, a 25 percent reduction to 0.375 percent for retailers/wholesalers and 0.75 percent for all others with the same reduction for EZ rate filers as the Senate. The House does not propose to change the small business exemption.

Lt. Gov. Dan Patrick was quick to react to the House tax cut proposals, issuing an almost immediate press release saying, in Today’sCPA

part, the House “plan does not include any property tax relief to homeowners, is out of step with Texans, my office, the Senate and the governor…” After that bombastic start, he ended his release with, “The Texas Senate and I look forward to working with the House and Gov. Abbott to iron out our differences in the best interest of all Texans to provide tax relief as quickly as possible.”

Don’t get excited about your tax cuts. Regardless of which tax cuts are finally passed, they won’t amount to much for the individual taxpayer. Homeowners would initially save a little over $200 per year with the increased homestead exemption. The proposed cut in sales taxes would generate about $170 per year per household, but that would be all households, not just homeowners. Just think what you can do with an extra $3-$4 a week.

Perhaps the most exciting potential tax cut for CPAs is the possible repeal of the annual $200 “professional fee” that we pay every year when we renew our CPA license. (Every other licensed professional in Texas also pays the fee.) Professional fee is a euphemism for an occupation tax. This $200 goes directly into the state’s general fund and is not used by the Texas State Board of Public Accountancy to administer and regulate CPAs. The bill repealing this head tax passed the House. Maybe the House and Senate won’t argue over this one.

Public school finance is another contentious issue between the House and Senate. The House is proposing a complete finance reform bill changing the school funding formulas to provide more equity and to add $3 billion to school funding. The Senate seems to prefer to defer major school finance reform until after the Supreme Court rules on the pending school finance lawsuit, which will not come until after the current legislative session.

Today’sCPA May/June 2015

These are all House resolutions. Hopefully, the Senate won’t object. n is TSCPA’s managing director of regulation and legislation. Contact him at bowen@tscpa.net.

Bob Owen, CPA

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Established by AICPA and CIMA, two of the world’s most prestigious accounting bodies, the CGMA designation represents accomplished professionals who drive and deliver business success, worldwide. ®

Find out more at cgma.org 13085C-312

For CPAs In addition to the possible $200 professional fee repeal, TSCPA is supporting legislation that will eliminate filings with the secretary of state for limited partnerships and professional associations. These required reports were instituted before these entities were required to file franchise tax returns. The required information can now be supplied on the franchise tax return, eliminating the need for the secretary of state reports. CPA and TSCPA members Rep. John Otto and Sen. Charles Perry have filed the appropriate legislation. The House bill was approved by the Ways and Means Committee and was awaiting floor debate scheduling at press time.

CPAs must also be on alert for bills that might negatively impact the profession. So far, the biggest concerns are over licensing reform bills that are designed to eliminate as much occupational licensing as possible and limit licensing agencies’ abilities to protect the public from non-licensees. None of these bills are specifically targeting CPAs, but all would complicate CPA regulation and potentially dilute the value of the CPA designation.

The Fun Stuff It’s not all budgets and beefs during the legislative session.

Legislators do deal with the important issues.

• HB 584 establishing the National Day of the Cowboy on the fourth Saturday of July each year.

• HCR 35 and HCR 42 both designating the cowboy hat as the official State Hat of Texas.

• HCR 39 designating Hico as the official Steak Capital of Texas.

• HCR 43 designating Dripping Springs as the official Wedding Capital of Texas.

• HCR 62 designating Nocona as the official Classic Car Capital of Texas.

• HCR 64 designating Llano as the official Deer Capital of Texas.

• HCR 69 designating Jasper as the Butterfly Capital of Texas.

• HCR 65 designating the western honey bee as the Official State Pollinator of Texas.

• HCR 93 designating Abilene as the official Storybook Capital of Texas.

• HCR 101 designating Texas vodka and red grapefruit juice as the official drink of the 84th legislative session.

13085-312 CGMA/State Soc CoBrand Ads_3rdPage.indd 1

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4/1/13 1:39 PM

COVER

TSCPA’s 2014-2015 Year in Review

By DeLynn Deakins, Today’s CPA Managing Editor

With the 2014-2015 fiscal year coming to an end, it’s time to take a look back at some of the highlights of the year. TSCPA began 2014-2015 with a new strategic plan. The plan will guide the organization from 2014 until 2017. It was introduced at the Annual Meeting of Members and Board of Directors Meeting last June. The objectives of the plan are professional competency, career success, advocacy, culture and community, and operational excellence. TSCPA uses the objectives to assess the organization’s direction, set priorities, focus resources and strengthen operational excellence. This year, TSCPA completed the following activities and programs in support of these objectives.

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Today’sCPA

A Focus on Regulatory and Legislative Advocacy TSCPA advocates for Texas CPAs by influencing the decisionmakers who impact the accounting profession. Activities include work at the state and national levels.

Before each Texas legislative session, TSCPA’s Legislative Advisory Committee (LAC) reviews the environment and recommends an agenda to the Executive Board. As part of this process, the State Taxation Committee makes recommendations to the LAC for changes in state tax law that might improve simplicity, consistency and technical efficacy.

For the 2015 Texas legislative session, TSCPA’s primary agenda item was to propose legislation to eliminate redundant filing requirements for limited partnerships and professional associations. These entities must periodically file reports with the secretary of state. The requirements were enacted prior to the margin tax law that requires limited partnerships and professional associations to file franchise tax returns.

TSCPA proposes that the information required by the secretary of state be included on the franchise tax reports eliminating the need for the additional periodic filings.

Other items on the legislative agenda include: • Oppose sales taxes on professional services due to the negative impact on the economy, jobs and business expansion; and • Recommend changes to the Texas franchise tax as proposed by the State Taxation Committee, and monitor any proposed changes to the tax for clarity, consistency and equity.

In conjunction with the legislative session, CPAs made their biennial visit to the Legislature on January 27 in connection with the TSCPA Midyear Board of Directors Meeting. The CPAs were not only there to offer support to legislators and inform them of TSCPA’s legislative priorities, but they were also there to accept official legislative recognition of the CPA Centennial Celebration. In 1915, Certified Public Accountants were created, the Texas State Board of Public Accountancy (TSBPA) was legislated into existence and the Texas Society of CPAs (TSCPA) was organized. House Resolution 183 recognized the 100th anniversary of the profession, and Senate Resolution 18 also congratulated CPAs on their 100 years of service to the public. CPAs then spoke to legislators or their staffs.

That evening, TSCPA hosted a reception for legislators and their staffs continuing to celebrate the CPA centennial. Speaker Joe Straus (R-San Antonio) was the keynote speaker. The program included a video presentation highlighting TSBPA’s 100 years of service. After the program, approximately 250 CPAs and their guests were joined

by CPAs and TSCPA members, Railroad Commissioner David Porter, Secretary of State Carlos Cascos, 47 House members and four senators for the reception. For more information on the House and Senate resolutions, TSCPA’s activities and the issues of the 2015 legislative session, please see the Capitol Interest article in the March/ April 2015 edition of Today’s CPA magazine. You can also keep up-to-date on legislative activity through TSCPA’s blog Today’sCPA May/June 2015

at http://tscpaatthecapitol.com or by following us on Twitter @TSCPACapitol.

The CPA-Political Action Committee (CPA-PAC) is an important part of TSCPA’s advocacy efforts. The CPA-PAC allows TSCPA to have a voice in Texas legislative and political affairs. The CPA-PAC is directed by the TSCPA PAC committee, which works closely with local chapters and their public affairs committees to determine the policymakers who should receive contributions. To learn more about the CPA-PAC and make a donation, please visit TSCPA’s website at www.txcpapac.org.

TSCPA’s Federal Tax Policy Committee (FTP) serves as a voice to represent Texas CPAs to the U.S. Congress, Department of the Treasury and the Internal Revenue Service (IRS) on U.S. tax matters.

This year, the committee sent comment letters on relevant and significant issues to the IRS and members of Congress. They included letters to the IRS on inconsistent bond premium amortization reporting; Revenue Procedure 2015-20, which provides relief for small businesses from the reporting requirements related to implementing repair regulations; and IRS Notice 2014-21 related to the treatment of transactions involving virtual currencies.

The FTP also sent letters to members of Congress. In the letters, the committee urged Congress to support the IRS’s budget at a level to properly fund taxpayer services; encouraged strong support of the mobile workforce bill re-introduced by Senators Sherrod Brown (DOH) and John Thune (R-SD); recommended immediate congressional action on expired and expiring federal tax provisions; and suggestedthatHousememberssigntheSchneider-Luetkemeyer-QuigleyHudson letter opposing cash accounting changes proposed in Chairman Camp’s Tax Reform Act of 2014.

For updates on the work of the FTP, please see your weekly electronic Viewpoint newsletter and Tax Issues e-newsletter, and visit the Federal Tax Policy Blog on the TSCPA website.

TSCPA’s Professional Standards Committee (PSC) responds to exposure drafts issued by accounting and auditing standard-setting bodies that have an impact on the practice of accountancy in Texas.

In the 2014-2015 year, the PSC submitted letters to the Financial Accounting Standards Board on the exposure drafts titled Simplifying the Measurement of Inventory, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items and Simplifying the Presentation of Debt Issuance Cost.

The PSC also responded to the Governmental Accounting Standards Board’s proposed statement titled Fair Value Measurement and Application, as well as the AICPA Professional Ethics Executive Committee’s proposal titled Breach of an Independence Interpretation. To view the proposals and read the PSC’s letters of comment, please go to TSCPA’s website at tscpa.org. Under the Resource Center tab, scroll down to Member Communities, and select Professional Standards Committee.

Continuing Professional Education That Meets the Needs of CPAs The TSCPA CPE Foundation continues to be a premier provider of high-quality continuing professional education. The range of topics and course delivery formats – from live programming to web based – offer the ultimate in convenience for busy CPAs. In addition to the live conferences, clusters and seminars, there are hundreds of webcasts, webinars, self-study and other formats available.

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COVER continued from previous page

The CPE clusters were popular again this year. They were held in Galveston, South Padre and San Antonio. The clusters are designed to be an ideal combination of business and relaxation, with a choice of courses covering the hottest topics in accounting, auditing, internal controls and skills for success. By attending the clusters, CPAs can earn CPE credit while adding balance to their professional life and family time.

An optional pre-conference workshop was open for the Advanced Health Care Conference. It was held the afternoon prior to the conference and gave attendees an additional four hours of CPE credit. The workshop was well received and will be offered with the 2015 Health Care Conference in July.

Six of the conferences were available both live and online via webcast. The two delivery methods made it easier to attend the conferences at a time that would accommodate a variety of schedules.

New this year, TSCPA began offering individual sponsorship opportunities for the conferences and seminars. With this option, sponsors can choose from single-day display, lunch or break sponsorships, or networking reception opportunities.

The professional issues webcasts remained a popular benefit for members. With these free, two-hour webcasts, members can earn two CPE credit hours while learning about the top issues facing the profession. Speakers included TSCPA Chairman Mark Lee, CPAHouston; Lisa Ong, CPA-Dallas, member of the AICPA National Commission on Diversity and Inclusion; TSCPA Managing Director of Regulation and Legislation Bob Owen, CPA-Dallas, and TSCPA Executive Director/CEO John Sharbaugh, CAE. They discussed federal legislative and regulatory matters, the Texas legislative session, an update on the activity of the AICPA National Commission on Diversity and Inclusion, topics related to the IRS, PCAOB and FASB, and more. The next professional issues webcast is scheduled for the end of May. To keep members informed about upcoming CPE programs, TSCPA sends a timely CPE calendar each week to members via email. It lists the various courses and has links to register online.

You can also access the extensive online CPE catalog, which is available on the TSCPA website. It provides a very comprehensive lineup of programs, as well as scheduling flexibility and price levels that can fit your budget. For more information and to register, visit the website at tscpa.org, or call the TSCPA staff at 800-428-0272 (972-687-8500 in Dallas) for assistance.

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Membership Connections In the recruitment and retention area, TSCPA’s free membership program welcomed new licensees for complimentary membership for the fiscal year in which they were licensed. TSCPA and the chapters focused on connecting with these new CPAs and getting them involved and engaged. Through the program, the Society had the opportunity to reach new licensees from a variety of backgrounds across Texas. Membership grew by nearly 4 percent for the year. TSCPA and the chapters are working to reinforce the benefits of membership as the new CPAs become fee-paying members. In addition to recruiting these new licensees, a recruitment brochure was mailed to nonmember CPAs licensed in the last three years who were not eligible for the free membership program. Those prospective members are offered a special introductory dues offer for state and chapter dues.

The Rising Stars Program was continued to spotlight future leaders.

The program recognizes CPA members 40 years old and younger who have demonstrated exceptional leadership skills and active involvement in TSCPA, the profession and/or their communities. Nominations were received from across the state. A task force of TSCPA Executive Board members served as the selection committee, and after receiving over 60 nominations in 2013-2014, they selected 20 up-and-comers. The Rising Stars were honored at the 2014 Annual Meeting of Members and featured in the September/October 2014 issue of Today’s CPA. Business and industry members remained an area of focus for TSCPA. The month of April was designated again as business and industry month. The theme for this year’s business and industry month was “Be a Part of Something Bigger Than Yourself.” A brochure was sent to all business and industry members promoting TSCPA’s value, resources and upcoming education. Other efforts included hosting panel discussions that provided members with ideas to improve business partnering in their finance organizations. The panel discussions were held in the Austin, Dallas, Fort Worth, Houston and San Antonio chapters.

The Society held behind-the-scenes events for business and industry members. At these events, presentations were made from financial professionals at the organizations that were visited. As of press time, behind-the-scenes tours were held in, or planned for, the Central Texas, Dallas, Fort Worth and San Antonio chapters. New this year, special networking opportunities and behind-the-scenes tours were held in conjunction with the Energy Conference and Nonprofit Organizations Conference in April and May. The events were offered at no cost to conference registrants on a first-come, first-served basis.

Student membership is also vitally important to TSCPA. As of April 1, 2015, the Society has 1,809 student and candidate members.

The Campus and Faculty Rep Programs remained active. In these programs, TSCPA works with Texas students and educators to serve as a connection on campuses across the state.

The Accounting Career Education (ACE) program offers an opportunity for members to share their knowledge about accounting careers with students. Available tools include career guides, videos and lesson plans for educators. TSCPA volunteers visited schools across the state to share information about accounting careers. TSCPA hosted special behind-the-scenes tours for students in Abilene and El Paso, and a panel presentation for community college students in Dallas. These events gave students more insight into the variety of career Today’sCPA

options available to CPAs. If you are interested in serving as an ACE program volunteer, please contact your chapter.

Striving to enhance the Society’s diversity efforts, TSCPA invited members of the ALPFA, NABA and Ascend organizations to attend the Executive Board meeting in April.

Social Media Activities TSCPA is active on various social media outlets, including Facebook, Twitter and LinkedIn. TSCPA’s Facebook is updated several times a week with professional news and articles, member news, infographs, blog posts and other helpful information for members. In addition to these efforts, several TSCPA chapters have their own Facebook page to share local events, member news and photos.

With more than 2,500 members, LinkedIn continues to be TSCPA’s most popular and most followed social media channel.

TSCPA’s LinkedIn account is reviewed, moderated and updated

by TSCPA employees to keep members informed of the latest professional news, trends and upcoming activities. There are also members-only LinkedIn subgroups for Business and Industry, and Young and Emerging Professionals.

The Society’s Twitter page, @TXCPAs, is updated daily. There is also a Twitter account for student and candidate members, @ TXCPA2B, which provides student-oriented information like exam updates, accounting news and career advice.

This year, TSCPA also created a new Twitter handle for governmental affairs, @TSCPACapitol. TSCPA Managing Director of Regulation and Legislation Bob Owen, CPA-Dallas, uses this Twitter account to share up-to-the-minute news on legislation affecting Texas CPAs and the accounting profession.

Members can also stay current on Society and accounting profession news through TSCPA’s blogs. The blogs include: • Executive Director/CEO John Sharbaugh at www.thesharblog. org; • TSCPA at the Capitol at tscpaatthecapitol.com; • Federal Tax Policy Committee at tscpafederal.typepad.com/ blog; • TXCPA2B blog, written by accounting students for soon-to-be Texas CPAs, at www.txcpa2b.com; • Business and Industry blog at industryissues.wordpress.com, which began featuring posts from guest bloggers from TSCPA’s chapters.

360 Degrees of Financial Literacy Program The 360 Degrees of Financial Literacy program was created to educate consumers on personal finance and sound money management skills. The program continued this year. TSCPA’s consumer finance website, ValueYourMoney.org, offers free personal finance resources, FAQs, articles, tax tips and other helpful information.

The following activities supported the program: • Updated content for all life stages on ValueYourMoney.org; • Updated the Tax Talk section for the 2015 tax season with resources and tools to assist Texas taxpayers; • Created a new logo for Tax Talk and produced an infograph on Why You Should Hire a CPA; • Developed materials and promoted 2015 Financial Literacy month in April; Today’sCPA May/June 2015

Austin Chapter members Tony Ross and Coalter Baker (above). Rio Grande Valley Chapter members Carol Collinsworth and Barbara Kremer.

• Continued distributing TSCPA’s free, monthly personal finance e-newsletter, Take Off ! which features articles and advice on saving, budgeting, tax planning and more.

New this year, TSCPA created a ValueYourMoney Facebook and Twitter account for consumers. Every Thursday during tax season, a new tax tip was posted along with the hashtag #DidYouKnow. Encourage your colleagues, family and friends to check out all the resources available on the site at ValueYourMoney.org, and to follow ValueYourMoney on Facebook and Twitter.

TSCPA Continues Member Benefit Partnerships Digital Marketing Solution: Radiate360 – TSCPA continues its partnership with Radiate360 to offer an easy-to-use digital marketing solution to connect with clients online. It enables you to create and manage a mobile-optimized website, connect and maintain your social media presence, promote your services and much more. Radiate360 also offers analytics tools to measure your website traffic, social media reach and campaign success.

BankAmericard Cash Rewards™ Visa Signature® Credit Card – TSCPA members can apply for this credit card that rewards customers with up to 3 percent cash back on certain purchases, all while supporting TSCPA initiatives. In addition to earning cash back rewards for yourself, use of this card benefits the Society at no extra cost to you.

For more information on your TSCPA member benefits, please visit the Member Benefits Marketplace under the Resource Center tab on the website at tscpa.org.

Looking Forward to the 2015-2016 Year Be sure to read your upcoming July/August 2015 issue of Today’s CPA magazine for an introduction of TSCPA’s incoming Chairman Allyson Baumeister, CPA-Fort Worth. She’ll be discussing the Society’s plans and goals for the next fiscal year.

The magazine will also cover the upcoming celebration of TSCPA’s 100-year anniversary. The festivities for the anniversary will kick off at the 2015 Annual Meeting of Members in June. A history book was written and will be on sale at the Annual Meeting. Look for more details to come about the anniversary celebration in the months ahead. n 25

FEATURE

An Update on Today’s CPA

I

By Today’s CPA Technical Editor C. William (Bill) Thomas and Today’s CPA Managing Editor DeLynn Deakins

n each year’s May/June issue of Today’s CPA magazine, we include a brief report on the activities of the Editorial Board, and the work being done to keep the magazine as timely and relevant as possible.

The economy continued to rebound in 2014, with business activity and the job market in recovery. Financial and real estate markets have again posted all-time highs, which has been a bright sign for investors, as well as a reminder from history that markets can go both ways. The oil boom that started several years ago has begun to fizzle (how many times have we seen that?) and the price of oil is now hovering around $50 per barrel, with some projecting it will go still lower in coming months. This promises to affect the Texas economy in negative ways.

In Washington, D.C., mid-term elections saw Republicans take control of both the House of Representatives and the Senate, while Democrats still have control over the Executive Branch. Bipartisan politics is a thing of the past and gridlock seems to prevail in Washington.

Public opinion of elected officials at all levels is at an all-time low.

While tax increases and a strengthening economy are providing some relief, federal budget deficits persist amid talk of tax reform and debate on how the federal deficit could be balanced with a mixture of more spending cuts and tax increases. The role of government in the economy has continued to be a source of both hope and concern for business people in general, and CPAs in particular. During the next 12 months, we head into the 2016 presidential election season. Who knows how many promises will be made and broken?

On the tax scene, the Foreign Account Tax Compliance Act of 2009 is spurring an increasingly global push for cross-border transparency and has the federal government casting a wide net against offshore tax evasion.

More baby boomers are retiring, fostering a need for better understanding of tax and financial planning alternatives, and the government has imposed a new Net Investment Income Tax for the wealthy.

Doubt about U.S. transition to International Financial Reporting Standards has turned to more likely convergence and projected implementation dates extended yet again. New global accounting standards on revenue recognition and leases are being hammered out with much difficulty. Meanwhile, the Private Company Council has implemented a new financial reporting framework for small and medium-sized entities, and auditing standards for non-public entities have been completely re-codified and simplified, including a new audit report format. On the managerial accounting scene, there are continued pushes for efficiencies, with accounting methods to match: time-driven activity-based costing and LEAN accounting are hot topics. All of these topics have helped shape the content of articles in Today’s CPA.

Overview Today’s CPA is a bi-monthly, peer-reviewed magazine. The articles submitted for consideration are reviewed by members of TSCPA’s Editorial Board. The Editorial Board represents a cross-section of the overall membership of TSCPA. Their names are listed in the magazine’s masthead each issue.

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We attempt to balance the magazine’s content to cover the various interest areas of TSCPA’s membership. Articles may include a technical analysis and/or informed commentary on the topic, and each issue includes an article that provides continuing professional education (CPE) credit. This article is peer reviewed, and the quiz is pre-tested by reviewers prior to publication.

In Figure 1, you’ll find a comparative summary of our activities for the past three calendar years. It shows that the rate of submissions to Today’s CPA has been declining, while our acceptance rate has gone up. The key to maintaining high-quality material in our journal is increasing the number of submissions. We are continuing our efforts to solicit more submissions from both practitioners and academics.

In spite of the decline in submissions, we still have about a 12-month backlog of articles and a publication calendar extending into 2016.

Figure 1. Summary of 2012-14 Activity Articles

2014

2013

2012

Received

28

32

36

Accepted

20 (71%)

21 (66%)

15 (42%)

Rejected

6 (21%)

5 (16%)

10 (28%)

In Review

2

6

8

Invited Short Articles

2 accepted

5 accepted

3 accepted

If you or someone in your organization would like to write an article for Today’s CPA or have an idea you feel can be developed into an article, we encourage you to contact us. If you would like to receive our editorial guidelines, please contact DeLynn Deakins at ddeakins@tscpa.net.

Acknowledgements We would like to thank the members of the Editorial Board for volunteering their time and considerable efforts to review articles for publication, pre-test CPE quizzes, and participate in meetings and on conference calls. We also recognize and thank our copy editor and contributing writer, Anne Davis, and the column editors and contributors: TSCPA Chairman Mark Lee, CPA-Houston; Greta Hicks, CPA-Houston; TSCPA Chapter Relations Representative Rhonda Ledbetter; Mano Mahadeva, CPA-Dallas; Bob Owen, CPA-Dallas; and TSCPA Executive Director/CEO John Sharbaugh.

Beginning in the 2015-2016 fiscal year, Greta Hicks is resigning as the Tax Topics column editor for Today’s CPA. Many thanks go to Hicks for her years of service with the magazine and on the Editorial Board. The new column editor will be Jason Freeman, CPA-Dallas.

We will also have a new technical editor. Bill Thomas is resigning from the position and the process is underway to select a new technical editor.

We also thank the accounting and financial professionals who author articles for Today’s CPA. Authors from all practice areas are invited to submit articles for consideration in the magazine. n Today’sCPA

FEATURE

Y

From Stressed Out to Burnout – Understanding the Differences, Effects and Solutions

By Joshua Herbold and Casey McNellis

our heart races. Your palms sweat. Your pupils dilate so you can take in more of the information around you. Your body pumps more sugar and fat into the blood stream, getting your muscles ready for action.

What’s causing all of this? Are you being chased by a grizzly bear?

Not even close. You’re a CPA, and you’ve got work to do!

When non-accountants consider the work of accountants, two themes likely emerge: stress and taxes. While many CPAs don’t specialize in the latter, everyone most certainly experiences the former. In a survey of 101 CPAs from a western state (68 percent from public practice, 32 percent from private industry, nonprofit and government) clearly shows that stress exists in all areas of our profession. In fact, using a common psychological measure of stress (the Perceived Stress Scale; see Cohen et al. 1983, in Journal of Health and Social Behavior), CPAs in the survey report a higher perceived level of stress than even law enforcement officers1.

Stress often leads to burnout, which is generally considered to be a precursor to job turnover. According to human resource experts, the accounting and auditing profession ranks sixth among all jobs for turnover (being beaten out for high turnover only by fast-food workers, low-level retail jobs, meter readers, nurses and child care workers) (see K. Gerencher 2005, in MarketWatch). This article explores the relation between stress and burnout for CPAs, and gives advice on how to reduce both.

Stress vs. Burnout Oftentimes, the term “burnout” is considered synonymous with “stress;” however, these two phenomena are not the same. Stress is generally associated with having too many responsibilities in too short of a timeframe; burnout is a progressive condition that originates with stress, but materializes with emotional exhaustion and eventually results in detachment from, and cynicism towards, others Today’sCPA May/June 2015

and diminished sense of satisfaction from daily activities (Maslach, Schaufeli, and Leiter 2001, in the Annual Review of Psychology).

While stress, at lower, more manageable levels, has the potential to produce positive and functional workplace outcomes, burnout is completely dysfunctional, associated with poor health and workplace discord (see Cordes and Dougherty 1993 in the Academy of Management Review). When asked to assess their current level of stress among five categories (see Table 1), the majority of the CPAs surveyed (92 percent) acknowledged some form of stress, but approximately 50 percent of the participants (categories 3-5) reported symptoms beyond occasional stress that resemble burnout.

Furthermore, 75 percent of the respondents fell between the second and third categories, the juncture at which burnout symptoms begin to emerge. The results highlight the gradual progression of burnout symptoms and imply that many professionals operate at stress levels on the brink of the exhaustion stage that, if not properly managed, continued on next page

Table 1. Percentage of Participants by Category Category* 1. I enjoy my work. I have no symptoms of burnout

% 8%

2. Occasionally I am under stress, and I don’t always have as much energy as I once did, but I don’t feel burned out.

42%

3. I am definitely burning out and have one or more symptoms of burnout, such as physical and emotional exhaustion.

33%

4. The symptoms of burnout that I’m experiencing won’t go away.

I think about frustration at work a lot.

10%

5. I feel completely burned out and often wonder if I can go on. I am at the point where I may need some changes or may need to seek some sort of help.

7%

*The five categories are from Rohland, Kruse, and Rohrer (2004) in Stress and Health 27

FEATURE continued from previous page Figure 1. Causes of Burnout

Figure 2. Job-Focused Reactions

could lead to adverse results. The feedback of the survey respondents not only asserts the existence of strain among accountants, but also reveals major negative implications that may result from unmanaged stress.

of stress, but perhaps more disturbing, also a greater sense of helplessness in dealing with the stress.

The Burnout Profile While the factors that lead to burnout vary greatly across individuals, Figure 1 highlights a few key factors of the work environment that are associated with the dysfunction.

Excessive stress. Because burnout, by definition, originates with stress, it comes as no surprise that respondents towards the higher end of the burnout scale experienced stress more frequently. Participant responses revealed that this increased stress is associated with many stressors acknowledged within the profession, including time pressure.

Loss of control. The heightened time pressure that exists with burnout symptoms is especially relevant, as deadline intensity is a phenomenon partially imposed by the demands of the job.

Accordingly, accounting professionals’ schedules often fall victim to the actions of others, resulting in a loss of control over perhaps the most salient factor in the environment: time. As the figure indicates, the professionals surveyed felt less control over their time when symptoms of burnout were present.

Mismatches. Another key driver of burnout is the mismatch between an individual’s work environment and that same individual’s ideal employment setting. Put another way, burnout is the result of stress that exceeds an individual’s ability to cope.

To the extent that stressors resulting from the aforementioned work environment are manageable, the mismatches are decreased.

As Figure 1 illustrates, professionals who experienced fewer symptoms of burnout also reported a relatively greater ability to cope with stress. As symptoms of burnout increased, however, coping perceptions dipped well below stress levels. This pattern reveals a more complete picture of the relationship between stress and burnout, and implies that with the onset of burnout symptoms, individuals operate not only with higher levels 28

Implications for Accounting Practice Ultimately, success in the practice of accounting is derived from a formula that is contingent upon two relationships: 1) professional-to-career and 2) professional-to-client. Both interactions are at odds with job burnout.

Reactive career management. Very simply, professional success requires a healthy relationship between the professional and his/ her career. This relationship is naturally defined by complexities and opportunities that are ripe within the profession, compelling professionals to engage in proactive career management with the effective and efficient use of available resources. In responding to the stressors of the work environment, professionals reporting burnout symptoms were more likely to accept less money and/or pass up promotions to achieve lower levels of responsibility (see Figure 2).

While these results, in isolation, are not necessarily indicative of dysfunctional behavior, these individuals were also less willing to employ the guidance of a mentor and had less desire for management to provide motivation to employees and to foster a deeper sense of purpose in the work performed. The aspiration for less responsibility, when juxtaposed with the lack of mentor interaction and the diminished yearning for greater purpose, highlights a sentiment of resignation in workplace activities.

Intuitively, the profession operates most effectively when those who comprise the practice are functioning at their best. Such reactive career management illustrates a non-optimal interaction in professionals’ relationship with their careers, thus holding dire implications not only for personal health, but also for firm success.

Diminished client service. The stability of the professionalclient relationship rests firmly on professionals’ ability to deliver continued on page 30 Today’sCPA

FEATURE continued from page 28 Figure 3. Burnout Effects on Job Satisfaction and Client Service

quality client services. The successful rendering of client service requires professionals to approach engagements with appropriate levels of effort, competence and objectivity; but it also compels them to promote a positive working relationship with client personnel.

Feelings of cynicism or detachment, which generally occur after the onset of emotional exhaustion, potentially constrain a professional’s ability to approach client service with the requisite healthy attitude.

Professionals who reported more burnout symptoms in the survey also internalized client work issues to a greater extent (see Figure 3).

While such internalization may be inevitable in accounting work, it should be matched with an equal or greater perception that clients appreciate and respect the efforts that professionals devote to their (client) concerns. However, these same professionals – the ones reporting higher degrees of burnout – perceived that clients generally did not respect their time. As the figure indicates, these perceptions become increasingly deficient relative to internalization when burnout symptoms exist (categories 3-5), effectively implying another relationship imbalance, and thus a significant degree of detachment in the professional-client relationship. The danger of this interaction lies in the resulting negative attitudes that may be directed towards the primary driver of firm success: client relationships.

Managing the Issue When it comes to reducing stress, the conventional wisdom in the profession seems to go as follows: Simply go to work for a smaller accounting firm or look to private industry. Indeed, a quick review of practitioner and academic articles on the stressors of the profession indicates substantial attention devoted to the perceptions of those working for the largest accounting firms or those within commuting distance of major metropolitan areas.

However, the current survey was administered in a region with no major cities and a minimal Big 4 presence, and thus the results effectively highlight that dangerous levels of stress exist even in the most unsung areas of the accounting environment. Accordingly, the following paragraphs discuss stress management techniques for all walks of the profession.

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Figure 4. Propensity for Burnout Across Work Approaches

The Physiological Perspective Understand how stress works. While the aforementioned results point to dire consequences stemming from burnout symptoms, a general consensus among researchers and clinicians is that dysfunctional stress can be prevented. Understanding how stress works is the first step. Even though most of the stressors in accounting don’t require great physical feats to overcome, the human body has evolved to react to stress in a physical way. In stressful situations, the body’s sympathetic nervous system kicks into action. The sympathetic nervous system is part of the autonomic nervous system, which regulates things like heart rate and breathing – and, as the name implies, does so automatically, without any conscious effort on the part of the individual. In response to stress, the sympathetic nervous system efficiently and automatically prepares the body for action by increasing muscle strength and readiness, decreasing blood clotting time, increasing heart rate, increasing sugar and fat levels in the blood, dilating pupils, increasing perspiration and increasing mental activity.

Take the stairs! Due to the physiological connection to stress, nearly every article about coping with stress mentions regular exercise as one of the top stress-relieving strategies. In the past, researchers thought that regular exercise alleviated stress through the release of endorphins in the brain. However, more recent research shows that exercise actually gives the body a chance to “practice” dealing with stress. The brain and body don’t differentiate between different types and causes of stress, so stressing the body physically with exercise trains the same sympathetic nervous system that kicks into action with the onset of workplace stress. Less exercise means that the body is less efficient in responding to stress. Interestingly, those in the survey experiencing burnout were less likely to engage in regular exercise activities.

Mental Processing Breathe! The other main category of stress-relieving activities involves taking time for the “thinking brain” to overcome the reaction of the autonomic nervous system. In sports, many coaches suggest taking “focus breaths,” which simply involve breathing in for four counts, holding the breath for four counts, then breathing out for four counts. Because the physiological response to stress is automatic and fast, focus breaths give the conscious brain time to kick in.

Understand the bigger picture. While professionals in the midst of job burnout reported that certain mental processing activities are not fruitful avenues for management to explore in combating workplace Today’sCPA

Stress is Everywhere Regardless of the trade or profession, stress is everywhere. In the case of the accounting profession, stress and burnout are often confused.

It is crucial for accounting professionals to understand when stress results in functional behaviors and increased performance and when it becomes problematic. While the methods for stress management seem obvious, the results of the survey indicate that these solutions are not necessarily advocated or employed.

After all, individuals experiencing burnout potentially lack the capability or motivation to understand the harmful effects of the condition and/or functionally respond to the symptoms on their own. By devoting the necessary resources to developing solutions to the problem, firm leaders will not only make positive contributions to the overall workforce, they will also likely generate returns through the enhancement of work quality and client service. n issues, research suggests otherwise. One particular study found that public accountants who possessed the ability to find a sense of purpose, and thus see the “bigger picture” in stressful events, reported lower levels of exhaustion (see Law et al. 2008 in Advances in Accounting Behavioral Research).

When asked about the extent to which they attempt to understand the relationship between their job role and the “bigger picture,” 60 percent of respondents in the current survey who scored below the median (i.e., generally don’t attempt to understand their role within the bigger picture) reported some level of burnout (see Figure 4).

For those at or above the median, only 42 percent experienced burnout symptoms. Interestingly, the level of stress frequency was not statistically different among the two groupings, ultimately implying that those at or above the “bigger picture” median still experience stress, but are more resilient to its negative effects. Researchers indicate that managers, through proper training and supervision, can nurture this “bigger picture” attribute into a workplace approach.

Dealing with Burnout Repairing your relationship with work. For CPAs who have progressed beyond stress and into burnout, additional measures may help alleviate the issue. As noted earlier, burnout is generally considered to be the result of mismatches between an individual’s work environment and that same individual’s ideal work environment.

Banishing Burnout, by Michael Leiter and Christina Maslach, is a very good resource devoted to helping professionals identify and resolve the mismatches that are most critical to the professional-tocareer relationship. Leiter and Maslach, two of the top researchers in the area of job burnout, identify six areas in which mismatches generally occur: workload, control, reward, community, fairness and values. Their book contains a set of questionnaires that help those suffering from burnout to identify the area or areas with the greatest mismatch (between actual and ideal work environment), and then discusses possible solutions for each of the six areas. While every person’s exact situation is likely to be unique, the book offers a great starting point for helping to overcome burnout and repair the professional-to-career relationship.

Today’sCPA May/June 2015

Joshua Herbold is an associate professor of accounting and Casey McNellis is an assistant professor of accounting in the Department of Accounting and Finance, School of Business Administration, at the University of Montana.

Footnote 1. Ramey et al. (2012) reported on the stress levels of law enforcement officers in Biological Research for Nursing.

References Cohen, S., T. Kamarck, and R. Mermelstein. 1983. A global measure of perceived stress. Journal of Health and Social Behavior, vol. 24 (December): 385-396.

Cordes, C. L. and T. W. Dougherty. 1993. A review and integration of research on job burnout. Academy of Management Review, vol. 18: 621-656.

Gerencher, K. 2005. Where the revolving door is swiftest: Job turnover high for fast-food, retail, nursing, child care. MarketWatch.

Retrieved Feb. 17, 2014, from http://www.marketwatch.com/story/ job-turnover-highest-in-nursing-child-care-retail?pagenumber=1.

Law, D. W., J. T. Sweeney, and S. L. Summers. 2008. An examination of the influence of contextual and individual variables on public accountants’ exhaustion. Advances in Accounting Behavioral Research, vol. 11: 129-154.

Leiter, M. P. and C. Maslach. 2005. Banishing Burnout. San Francisco, CA: Jossey-Bass.

Maslach, C., W. B. Schaufeli, and M. P. Leiter. 2001. Job burnout.

Annual Review of Psychology, vol. 52: 397-422.

Ramey, S.L., N.R. Downing, W.D. Franke, Y. Perkhounkova, and M.H. Alasagheirin. 2012. Relationships Among Stress Measures, Risk Factors, and Inflammatory Biomarkers in Law Enforcement Officers. Biological Research for Nursing, vol. 14 (1): 16-26.

Rohland, B. M., G. R. Kruse, and J. E. Rohrer. 2004. Validation of a single-item measure of burnout against the Maslach Burnout continued on next page Inventory among physicians. Stress and Health, vol.

20: 75-79.

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FEATURE

Hospital Cost Reduction: Does Lean Provide the Answer?

H

By Laurie Burney and Ben Dawson

ealth care providers are facing increasing pressure to reduce costs. A major source of pressure is grounded in the U.S. government’s initiatives to make health care more affordable and to increase accountability.

The most publicized initiative to address the cost of health care is The Patient Protection and Affordable Care Act, which was signed into law on March 23, 2010. Two of the major goals of this act are (1) to increase the number of individuals covered by health insurance and (2) to slow the rate of growth of health care costs (Wilensky 2011).

A less-known approach by the federal government to increase transparency of health care costs is publishing the amount of charges by different U.S. hospitals for common services provided to Medicare patients1. While the raw data is not adjusted for factors such as location and type of hospital, the variation in costs is vast. In an NBC News article, Maggie Fox (2014) reports that the cost of treatment for a heart attack is approximately $15,000 in Ogdensburg, N.Y., but over $66,000 in Brownsville, T.X. Actually, realizing a slowed growth rate long term is pivotal for the economy, as well as for health care providers who are balancing the pressure of becoming more efficient while not compromising effectiveness. Perhaps the application of lean manufacturing principles offers an approach for achieving these goals.

What is Lean All About?

Thin. Sparse. Efficient. These words are the description of “lean.”

It is a word that has rapidly changed the business world in the last 25 32

years. The expression was first coined in a 1988 article by John Krafcik, an MBA student at the Massachusetts Institute of Technology (MIT) Sloan School of Management. His research focused on the automotive industry and was continued by the International Motor Vehicle Program at MIT. This research ultimately resulted in the publication in 1990 of The Machine That Changed the World. This book provides a thorough description of the Toyota Production System, which is the most recognized lean manufacturing system.

Lean strategy is a totally different philosophy from traditional management strategies. In traditional environments, manufacturers attempt to achieve economies of scale through large production batches, thereby pursuing a goal of the lowest unit cost. These companies assume that profit comes from full machine utilization and labor efficiency comes from increased production. However, this method most often results in bloated inventory levels and unnecessary waste.

Lean companies have a very different culture and process. The primary focus is on the customer, eliminating waste and continuously improving through small projects while at the same time recognizing that longterm value creation is achieved through employees. Inventory is reduced through Just-In-Time ( JIT) processes and the flow of production transitions to a pull rather than a push system. Companies act on customer demand and simplify both operations and reports (Kennedy and Maskell 2006). Over the years, the lean philosophy has proven to be extremely beneficial for companies that successfully undertake the culture change required to alter mindsets and processes.

This innovative strategy also requires a different approach for Today’sCPA

management accounting. “Accounting for Lean2” is the term that encompasses the modifications necessary to a company’s accounting and management control processes to support lean manufacturing philosophy. Traditional accounting methods, which were designed for mass production systems, undermine the goals of lean. Lean manufacturing violates the mass production principles and focuses on making products one at a time through a smooth production flow. Inventory is kept low and large batches are avoided. Traditional systems also produce lengthy, complex reports to measure dozens of insignificant details and ratios. This accounting system can be wasteful and inefficient, as well as promote non-lean behaviors. To mirror lean principles, accounting for lean uses new, simplified measurements and focuses on value streams (Maskell and Baggaley 2004).

Accounting for Lean changes the method of cost allocation and product costing by using value-stream costing. An example of a valuestream income statement is pictured below. Kennedy and Maskell (2006, 9) describe a value stream as “a sequence of processes through which a product is transformed and delivered to the customer.” It includes all functions, such as production, sales and accounting, that are involved in the flow of the product from receipt of materials through customer delivery.

Unlike standard costing, lean systems attempt to avoid overhead allocation to products. Instead, the system is structured to have costs directly charged to the relevant value stream. Costs associated with the overall facility and not specific value streams are considered sustaining costs. These costs often include information technology, human resources and other support costs. Instead of focusing on individual product costs, value stream reporting allows the information user to see the bigger picture, which helps managers make strategic decisions about the profitability of their revenue streams. These reports are often issued weekly to improve cost control (Kennedy and Maskell 2006).

Accounting for Lean also solves the dilemma created by JIT processes.

A reduction in inventory will typically hurt a company’s profitability on

paper in the early years of adoption as inventory buildup on the balance sheet is sold and the cost hits the income statement. In value stream reports, these inventory changes are segregated and applied as “below the line” adjustments. This reporting process allows managers to easily view the true impact of lean processes (Kennedy and Maskell 2006).

Another reporting tool utilized in a lean environment is a box score.

The box score, as shown in Figure 2, creates a view across three dimensions of a value stream: operational, capacity usage and financial. This tool is used for reporting on the value stream, making decisions with a strategic focus, and determining the financial effect of decisions. It is another way to succinctly display key performance indicators in a sensible format for management decision making (Kennedy and Maskell 2006).

Figure 2. Box Score Example

VS2

Sales

$2,708,333

$2,855,041

$5,563,374

Material costs

$1,040,000

$691,189

$1,731,189

Employee costs

$190,667

$393,575

Equipment-related costs

$156,000

$357,682

Occupancy costs

$120,022

$234,826

Other value stream costs

$296,942

$114,461

Value stream profit

$904,702

$1,063,308

($395,491)

$1,437,213

33%

46%

Inventory reduction or (increase) Profit Corporate allocation Net OI ROS

Units per person

466

470

559

On-time shipment

92%

92%

98%

Next Week 9/18/xx

Planned Future State 12/31/xx

Dock-to-dock days

15

15

8

First time through

65%

68%

82%

$112.75

$111.20

$97.61

42

43

42

Average product cost AR days Capacity1 Productive

24%

24%

29%

Nonproductive

63%

63%

45%

Available

13%

13%

26%

Sales

$2,708,333

$2,750,420

$3,277,083

Material Cost

$1,040,000

$1,056,161

$1,131,312

Financial

Conversion Cost

2

VS1

$358,963

This Week 9/11/xx

Operational

Figure 1. Value Stream Income Statement Example Sustaining

Last Week 9/4/xx

Total Plant

Inventory Profit Return on Sales

$693,333

$698,560

$669,275

$3,120,000

$3,112,000

$1,664,000

$975,000

$982,000

$1,476,496

36%

36%

45%

$1,095,413 $496,780

1.

$36,528

$391,376

2.

________

$411,403

The SMA, Applying Lean Accounting Fundamentals beyond the Manufacturing Floor discusses capacity measurements in more depth.

Conversion Costs represent all value stream costs other than materials.

From: Kennedy, F.A., and B. H. Maskell. 2006. “Accounting for the Lean Enterprise: Major Changes to the Accounting Paradigm.” Institute of Management Accountants. NJ: Montvale.

28% $181,436 $1,255,777 $84,874 $1,170,903 21.0%

The lean strategy was first implemented by manufacturing facilities in an attempt to reduce waste and operate more efficiently. Soon, other businesses saw the value of lean and wanted to apply it to their own industry. In recent years, one of the industries reporting success with the lean philosophy is health care. Though very different from a manufacturing plant, hospitals and health care centers are able to utilize lean principles to improve operations.

From: Kennedy, F.A., and B. H. Maskell. 2006. “Accounting for the Lean Enterprise: Major Changes to the Accounting Paradigm.” Institute of Management Accountants. NJ: Montvale.

continued on page 34 Today’sCPA May/June 2015

33

FEATURE continued from previous page Lean Principles at Baylor Scott & White Health As one might expect, health care is different from typical manufacturing operations. Rather than providing a product, hospitals service patients. However, in regards to lean, the general idea is the same. The goal is to recognize waste in all its manifestations and eliminate it so that services are provided to the patients efficiently, while not compromising the quality of care.

As in a manufacturing environment, lean in health care should be structured for continuous flow to speed the product/service from start to finish. Every action and intention is focused on the customer (Toussaint and Gerard 2010). Health care centers need to provide value to patients with every activity. Anything that unnecessarily delays a patient’s surgery or discharge is waste or “muda” that should be eliminated. Many methods are available to reduce waste; for example, changes can be through redesigned buildings, reduced paperwork, improved teamwork or increased employee training.

Health care centers need to provide value to patients with every activity.

Ultimately, customer value is of primary importance, especially in health care. When a person is suffering from a heart attack or stroke, a few minutes could be the difference between life and death. A drop in quality can lead to increased infections, incorrect prescriptions or wrong-site surgeries. All of these mistakes can have catastrophic consequences. Using lean, health care professionals can improve service quality while cutting costs and growing revenue.

The spread of lean to health care began in the Midwest with organizations like ThedaCare in Wisconsin. ThedaCare sought out knowledge about lean processes from a local snow blower factory.

Seeing the efficiency, teamwork and quality inspired ThedaCare to follow the movement originating with Toyota.

The concept of lean health care has spread to local hospital systems as well (Toussaint and Gerard 2010). Temple-based Baylor Scott & White Health (BSWH) relies on lean principles to offer more efficient, quality patient care. Marji Henry, BSWH’s associate vice president of Systems Improvement, shed some light on the new practices. She heads BSWH’s Continuous Learning & Improvement Program (CLIP). This program educates employees and management on lean and facilitates continuous improvement. To best educate management about CLIP, one of the resources used in training is a book called On the Mend by John Toussaint and Roger Gerard. This book follows ThedaCare’s implementation of lean across its health care system and documents support for more efficient processes.

Henry is passionate about giving employees the power to find and solve problems that would otherwise be ignored. Says Henry, “In many health care institutions, we reach a crisis and slap a bandage on 34

something. That action becomes our new process and we never go back to find and eliminate the root cause. With lean, we teach people to discover and eliminate the root cause. It’s all a part of a system designed to facilitate a different way of managing and thinking.”

BSWH started its lean journey seven years ago when Dr. Robert Pryor, then president and CEO of Scott & White Healthcare, and Dr. Paul Dieckert, then the chairman of the board, went to a lean health care seminar at the University of Michigan. Seeing the potential benefits, Pryor sent other BSWH leaders to Michigan to gain knowledge about lean applied within the health care industry. After receiving a favorable response, Pryor decided to bring these ideas back to Texas. Henry, one of the attendees at the seminar, was chosen to lead the initiative; BSWH partnered with an outside consulting firm to start lean implementation. Through internal education and project work, BSWH taught key personnel the basics and goals of the strategy.

Over the past year, BSWH has implemented “daily huddles.” Daily huddles are comprised of natural working groups by functional area or by location. For example, the department chairman, administrator, physician lead and financial representative might huddle together. Another example might be all of the front desk staff huddling together with their manager to solve common problems that might occur at the front desk. All group members learn how to manage according to lean philosophy and how to do daily lean. Leaders go on “gemba walks,” a Japanese term for a place where value is created. These walks give individuals an opportunity to observe the flow of operations and to ask the staff performing the work if they have ideas about how to do the job better, how they might identify waste and what ideas they have about eliminating the waste identified within the departments. All of this may be tracked on what’s called a huddle board. This board is a development tool used to manage and to create a culture where problems are solved by those doing the work through the use of small “Plan, Do, Check, Act” cycles.

On the Mend (p. 50) describes eight primary wastes targeted by lean health care: 1. Defect: making errors, correcting errors or inspecting work already done for error.

2. Waiting: for test results to be delivered, for an appointment, for a bed, for release paperwork.

3. Motion: searching for supplies, fetching drugs from another room, looking for proper forms.

4. Transportation: taking patients through miles of corridors, from one test to the next unnecessarily, transferring patients to new rooms or units, carrying trays of tools between rooms.

5. Overproduction: excessive diagnostic testing, unnecessary treatment.

6. Overprocessing: a patient being asked the same questions three times, unnecessary forms, nurses writing everything in a chart instead of noting exceptions.

7. Inventory (too much or too little): overstocked drugs expiring on the shelf, under-stocked surgical supplies delaying procedures while staff goes in search of needed items.

8. Talent: failing to listen to employee ideas for improvement, failure to train emergency technicians and doctors in new diagnostic techniques. continued on page 36 Today’sCPA

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FEATURE continued from page 34

One area that has already demonstrated improvement through lean principles is The Sleep Institute at BSWH, which receives a good share of its appointment demand from outside referrals. A review of performance data indicated that the 16-bed capacity facility was only able to meet an average of 11 beds per night. Several root causes of this patient shortage were identified. For instance, previously, referrals to the institute were required to go through an internal patient consultation process. This requirement created a backlog of 12 to 14 weeks for patients to participate in sleep studies. In addition, two to three cancellations typically occurred per day or about 50 per month. These cancellations were usually unfilled. The empty beds reduced the amount of available work and employees were often sent home. As a result, employees would have to use their paid time off, thereby reducing employee satisfaction. The Sleep Institute was losing significant money monthly and could not meet its budgetary goals.

A small team applied lean principles starting with building a value stream map of the overall process and patient flow to improve the process and eliminate waste. The team realized that patients referred to the institute had already seen a physician and had been identified as sleep study candidates. The consultation process, which was the primary source of delay, was deemed non-value added and redundant. Instead, the team created a standard direct referral form that is available to all referring physicians in and out of the BSWH system. This form captures all the information that would be needed for the sleep study. Once the internal consult process was eliminated, patients could immediately schedule a sleep study, which resulted in a schedule booked to full capacity.

The effect of these changes was an additional three patients per day participating in a sleep study. Moreover, the lead time for participation in the sleep study procedure was reduced from 12 to 14 weeks to approximately three days. As a result, outside referrals increased from zero to 133 monthly over a four-month period with a corresponding increase in estimated revenue by an average of $204,000 per month.

Monthly patient no-shows and cancellations were reduced from 50 to four for a 92 percent improvement. In this situation, implementing lean principles clearly had a tangible impact.

36

The focus of The Sleep Institute is to provide value to patients dealing with sleep disorders. Unnecessary paperwork and inefficient operations only hurt the quality and timeliness of the service provided.

Eliminating bottlenecks and waste, and facilitating continuous flow improve the patient’s experience and the bottom line.

In another example, BSWH altered the layout of a clinic in Marble Falls. A team of staff members observing the clinic identified several problems with the layout of the facility, which was determined to be less than ideal in several areas. Some parts of the clinic had more space than needed, while other areas were too confined to comfortably perform daily activities. Using the original blueprints, the team developed current state and future state flow diagrams for patients and staff. The project team determined the appropriate amount and type of space for each clinic. Workstations were shifted to central locations and work cells were created. Procedure rooms and supply closets were consolidated and shared.

These changes reduced patient walking distance by 15 percent and nursing staff walking distance by 9 percent. The provider walking distance was decreased by 40.8 percent. This layout change allowed the staff and medical professionals to spend more time with the patients. Additionally, the clinic no longer needed 2,720 square feet and was able to reduce rent payments. The savings associated with this project amounted to approximately $231,200. Additional unused space of 1,447 square feet was repurposed as an allergy clinic and audiologist clinic. These two clinics could generate an extra $400,000 in annual revenue.

BSWH is utilizing working groups, gemba walks and huddle boards to find and fix problems at its many locations. Instead of slapping a bandage on issues, employees are given the power to creatively find solutions. Most importantly, these solutions start with the people who do the work and are supported by management. On the Mend says the essential part of lean is to do away with the traditional hierarchical structure. Teamwork is key and no one works in isolation.

Cross-functional teams facilitate this change. Executives now work alongside employees and staff to find areas for improvement. Doctors, pharmacists and nurses work together to best service the patient. The medical culture of autonomy is changing in the name of quality.

Today’sCPA

What’s Next for BSWH? BSWH began its lean journey seven years ago and is already enjoying measurable benefits from its lean implementation. As it continues its journey, BSWH plans to implement more changes across the organization; one of those might be its accounting system to support lean, with an ultimate goal of applying lean principles to its accounting function (lean accounting).

Lean health care is increasingly common across the country. Henry is currently enrolled in a masters of business operational excellence at Fisher College of Business, Ohio State University. This program has a concentration in health care.

Over the past decade, rising health care costs have been a heated topic of debate. According to On the Mend, a nationwide shift to lean is a possible answer. Perhaps the solution to America’s most complex problem will come from a manufacturing strategy created by the Toyota Motor Corporation. n Laurie Burney, Ph.D., CPA (TN inactive), CMA – Waco, Texas

is an associate professor of accounting at Baylor University. She may be contacted at Laurie_Burney@Baylor.edu.

Ben Dawson

is an assurance associate with PwC. He may be contacted at Dawsonben76@yahoo.com.

Footnotes 1. This information can be found at tinyurl.com/p6zh983.

2. The term “Lean Accounting” is used to describe the application of lean principles to the accounting function.

References Kennedy, F. A., and B. H. Maskall. 2006. “Accounting for the Lean Enterprise: Major Changes to the Accounting Paradigm.”

Institute of Management Accountants. NJ: Montvale.

Fox, M. “New Hospital Data Shows Giant Swings in Prices.”

Web NBC News. 16 Jan. 2014. http://www.nbcnews.com/ health/new-hospital-data-shows-giant-swings-prices-1C9838777 Maskell, Brian H., and Bruce Baggaley. 2004. Practical Lean Accounting: A Proven System for Measuring and Managing the Lean Enterprise. New York, NY: Productivity Press.

Toussaint, J., and R. A. Gerard. 2010. On the Mend: Revolutionizing Healthcare to save Lives and Transform the Industry. Cambridge, MA: Lean Enterprise Institute.

Wilensky, G. R. 2011. “Bending and Stretching the Health Care Cost Curve.” Business Economics 46 (3): 163-166.

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37

CPE ARTICLE

Conducting Effective Fraud Brainstorming Sessions: Best Practice Tips and Available Resources for Your Audit Teams Curriculum: Accounting and Auditing

Level: Basic

Designed For: CPAs and audit practitioners Objectives: Discusses auditors’ consideration of fraud and the art of conducting effective fraud brainstorming sessions Key Topics: Fraud detection, brainstorming techniques and attributes of effective brainstorming sessions Prerequisites: None Advanced Preparation: None

38

Today’sCPA

By J. Owen Brown, Ph.D., CPA

Fraud risk remains a pervasive issue and accounting fraud, in particular, continues to be a major concern for organizations of all sizes, in all regions, across all industries. A 2014 survey of more than 5,000 company executives across both the United States and internationally conducted by PwC revealed that one in three organizations was victimized by an economic crime during the most recent year.1 The Association of Certified Figure 1. Auditors’ Consideration of Fraud – Applying AU-C 240 and PCAOB Interim Fraud Examiners (ACFE) Standard AU 316 to the Audit Planning Process. estimates that the typical organization loses 5 percent of its revenues each year to fraud. In Conduct Fraud Brainstorming Session its 2014 study, the ACFE found that the median loss caused by financial statement fraud exceeded $1 million, and at the time of the study, 58 percent of the victim organizations had not recovered any of their losses due Document Evaluate Assess Respond to fraud and only 14 percent Risks and Fraud Risk Risks of to Assessed had made a full recovery2. It is Responses Factors Misstatement Risks no surprise that fraud detection due to fraud remains a high priority for the accounting profession. Auditors’ responsibilities related to fraud are addressed in AU-C 240 (Formerly SAS No. 99), Consideration of Fraud in a Incentives 1. Financial Statement Level 1. Staffing of Engagement Financial Statement Audit, for 2. Assertion Level 2. Nature of Audit Procedures audits of non-issuers and Public 3. Timing of Substantive Procedures Company Accounting Oversight 4. Extent of Procedures Applied Board (PCAOB) interim standard AU 316 for the audits Fraud of issuers.

Risk While the standards acknowledge that the primary responsiOpportunities Rationalizations bility for preventing and detecting fraud rests with company management and those charged with governance of the organization, auditors do have several explicit Auditors’ Consideration of Fraud requirements when addressing the risk of material misstatement of the Prior to conducting the fraud brainstorming session, auditors financial statements due to fraud. Included in the requirements for should collect information regarding the risk of material misstatement planning an audit outlined by AU-C 240 and AU 316 is a discussion due to fraud. This information may include reviewing prior year (i.e., brainstorming session) among engagement team members about working papers, discussing with management and those charged how and where the entity’s financial statements might be susceptible with governance regarding the entity’s processes for preventing and to fraud, an evaluation of fraud risk factors identified from the brain- detecting fraud, and reviewing the entity’s internal controls established storming session and through other risk assessment procedures (e.g., to mitigate the risk of fraud. This information is then incorporated from discussions with management and others within the entity), an in a formal brainstorming session attended by key engagement team overall assessment of the risks of material misstatement due to fraud, members. The purpose of the brainstorming session is to identify fraud and finally, documentation of this fraud risk assessment process, in- risk factors, guided by the fraud triangle, and to instill the importance cluding the audit procedures designed to respond to the fraud risk as- of remaining professionally skeptical, notwithstanding an auditor’s sessments. continued on next page Today’sCPA May/June 2015

39

CPE ARTICLE continued from previous page past experience of management honesty and integrity.

Based on the engagement team’s evaluation of the identified fraud risk factors, an assessment of the risks of material misstatement due to fraud is made at the financial statement level and at the assertion level. Auditors respond to the risk assessment by designing audit procedures to mitigate these risks. Figure 1 summarizes the auditors’ consideration of fraud, recognizing that the fraud brainstorming session permeates the entire process.

Conducting a Brainstorming Session A fraud brainstorming session can be broken down into the following five steps: (1) select the team; (2) choose an approach; (3) prepare for the meeting; (4) conduct the meeting; and (5) follow-up and documentation.

Select the Team Auditing standards require the engagement team’s key members to participate in the fraud brainstorming session. At a minimum, participants should include the lead engagement partner and review partner, and team members from the senior manager through incharge auditor rank. For larger audit clients or for clients with preidentified risks of material misstatement due to fraud, audit teams may consider engaging with a fraud specialist and IT audit specialist.

Ideally, the entire engagement team, including less-experienced audit staff and tax professionals should also participate. Participation from junior staff allows the audit team leader to promote a tone of professional skepticism and also allows for known risk assessments predetermined by the audit partner to be communicated to the entire engagement team.

Choose an Approach There are many different approaches available for conducting the brainstorming session, and several of these techniques are outlined later in this article. The most common structure currently used in practice is an open-ended approach with face-to-face communication.

Regardless of the specific technique chosen for the brainstorming session, the effectiveness and efficiency of the session can be improved with the use of an agenda.

Beasley and Jenkins (2003)3 advocate circulating an agenda in advance of the meeting to inform the discussion participants of the timing of the brainstorming session and the specific topics to be discussed. Doing so can also provide a broader context for participants to think about potential fraud risks prior to the brainstorming session, which can improve brainstorming effectiveness. The agenda is also useful for documenting the risks identified and the related responses along with when the brainstorming session took place and who attended – all of which must be documented and retained in the audit files.

Prepare for the Meeting To prepare for the meeting, the team leader should inform those participating in the brainstorming session the date and location of the session, and that they will be discussing the relevant fraud risks of the client. All participants should be expected to prepare a written 40

list of potential fraud risk factors prior to attending the brainstorming session.

As part of preparing for the discussion, participants who are new to the engagement should seek to gain an understanding of the entity’s business processes, business risks, corporate governance structure and internal control system. A review of the prior year’s audit findings and risk assessments can help to identify risks that may still be present on continuing audit engagements. Finally, the team leader should assign a recorder for the brainstorming session and also distribute the agenda to those participating.

Conduct the Meeting Throughout the meeting, an explicit emphasis on applying professional skepticism when conducting the audit should be made by the discussion leader. Ideally, the audit partner or forensic specialist should lead the meeting. Brainstorming members tend to rise to the performance level of the discussion leader. So, if a strong member does not take the lead during the session, the other participants may begin to disengage, thus limiting the effectiveness of the discussion.

The partner or specialist should also set the tone for the meeting by encouraging participation from all members and emphasizing that every idea is valued.

A strong leader can also help prevent two common pitfalls that can hinder the effectiveness of a brainstorming session: social loafing and group dominance. Social loafing occurs when certain members, typically the less experienced staff, disengage from the process and rely on other members to carry the discussion. Social dominance occurs when one or two members exert excessive influence over the brainstorming process, which prevents other members from actively participating and sharing their views.

It’s not uncommon for brainstorming sessions to use checklists to help guide the meeting. As a word of caution, these checklists should be limited to use by the brainstorming leader and should only serve as a discussion guide. Studies show that auditors who use a standard fraud risk checklist make less effective fraud risk assessments than auditors who do not use a checklist 4. A standard fraud risk checklist may inhibit participating auditors from recognizing new and unique risks which may be present at the client. Auditors also weight the importance of self-identified risks more than pre-identified risks presented on a checklist, which may lead to instances when preidentified fraud risks are not given sufficient attention.

The fraud risk factors identified during the brainstorming session must be documented in a formal fraud risk assessment memo. As previously discussed, the agenda listing the timing of the brainstorming session and the audit team members who participated in the discussion should also be incorporated into the risk assessment memo. Once adequate time has been given to generating fraud risk factors and no new ideas are being generated, the session should transition to synthesizing and evaluating the identified fraud risk factors. This discussion should also specifically address how the audit plan will be adjusted to respond to the significant risks identified.

Finally, the leader should conclude the meeting by giving credit to the entire group and discussing the timing for post-brainstorming followup.

Today’sCPA

Follow-Up and Documentation Auditors’ consideration of fraud also includes a formal assessment of the risk of material misstatement due to fraud and how the audit team has responded to the identified risks. The fraud risk assessments and the audit team’s responses to the risks identified must also be documented in the audit files. Fraud risk responses include changing the staffing of the audit (e.g., including specialists and auditors with more client or industry experience), changing the nature of audit procedures (e.g., changing the type of procedures performed and incorporating elements of unpredictability into standard procedures), changing the extent of audit testing (e.g., increasing sample sizes) and changing the timing of audit procedures (e.g., performing substantive testing at or near the end of the client’s reporting period).

The engagement leader should follow-up after the brainstorming session to ensure that proper documentation of the audit team’s fraud considerations has occurred and that the audit plan includes appropriate responses to the identified risks.

Brainstorming Techniques Now that more than a decade has passed since SAS No. 99 was enacted, the audit profession has had an opportunity to study various techniques for conducting brainstorming sessions, while also identifying distinct attributes of effective fraud brainstorming sessions. Importantly, PCAOB has raised concerns about whether audit firms are conducting effective brainstorming sessions and following appropriate guidance in the standards. PCAOB has cited three specific issues related to fraud brainstorming that audit team leaders should be aware of: (1) lack of evidence that a brainstorming session was held; (2) brainstorming sessions occurred after planning and after substantive fieldwork had begun; and (3) key members of the audit team did not attend the brainstorming session5.

In response to these expressed concerns from PCAOB, below are four types of brainstorming techniques that have been examined in auditing research that team leaders may find appropriate for their engagements.

Open-Ended The most common approach for conducting fraud brainstorming sessions is an open-ended session conducted face-to-face. In this approach, the team leader will start the discussion by introducing a topic, but all members are encouraged to share ideas as they come to mind. Since ideas are being discussed in a free-form setting, it is important to have a designated note taker who is not directly participating in the discussion. This approach also requires a strong leader, which is recommended to be the audit partner or a forensic specialist, so as to avoid the common pitfalls of social loafing and group dominance discussed previously. Additionally, open-ended discussions may also lead to production blocking, which occurs when individuals are delayed from expressing their ideas because they are waiting their turn to speak. This interference can limit the number of unique ideas expressed during the brainstorming session.

There are several benefits to this free-form approach. Accounting studies show that the group interaction component of open-ended brainstorming leads to the identification of more quality fraud risks than a collection of fraud risks identified by the same number of Today’sCPA May/June 2015

individuals who do not interact6. Also, since most auditors have never experienced a material fraud, the open-ended discussion allows senior members of the engagement team to leverage their experiences. Junior staff, who typically spend more time locally at the client’s site, can contribute to the discussion by sharing their more recent experiences interacting with members of the client’s management team.

Strategic Reasoning Strategic reasoning takes place when auditors consider how management may be committing fraud and concealing it from standard audit procedures. The idea behind this technique is to encourage auditors to think about the audit as a strategic game rather than as a game of chance. Fraud brainstorming sessions and subsequent fraud risk assessments may be suboptimal if auditors don’t have an understanding of how a fraud could occur and which account(s) are most susceptible. By thinking like a fraudster, strategic reasoning facilitates the creation of new audit tests to identify instances of fraud rather than simply increasing the sample size of a standard set of audit procedures. By changing the nature of audit procedures rather than the extent of prior procedures, auditors can tailor their audit approach to be more responsive to identified fraud risks.

A study by Vicky Hoffman of the University of Pittsburgh and Mark Zimbelman of Brigham Young University7 examined the benefits of using a strategic reasoning process in conducting fraud brainstorming. They required auditors to reason strategically by answering the following three questions: (1) What potential frauds may been perpetuated by management? (2) How could management conceal these frauds from being detected by the standard audit plan?

(3) How could the standard audit plan be modified to detect the concealed frauds? The authors found that the strategic reasoning process enables auditors to design more effective fraud detection procedures by not falling prey to the “Same as Last Year” approach to conducting audit planning. In their study, auditors who utilized a strategic reasoning approach were more likely to change the nature of audit procedures in response to identified fraud risks than auditors who did not use the approach.

Computer-Mediated Today’s high-tech, computerized audit environment has dramatically changed how audits are performed. Fraud brainstorming sessions may also be enhanced by incorporating electronic meeting systems or other group support systems. There are multiple benefits of using computer-mediated technology to conduct brainstorming sessions. For example, participants do not have to wait their turn to speak because they can capture their thoughts as they come to mind by typing them into a computer. The group support system is then able to share each participant’s ideas to the other members participating in the session through their individual monitors or via a projector.

Thus, this technique curbs the negative effects of production blocking that may manifest in an open-ended brainstorming session where participants must wait their turn to share their ideas.

Computer-mediated brainstorming sessions can facilitate idea generation by providing anonymity to the participants, which allows continued on next page 41

CPE ARTICLE continued from previous page Table 1. Online and Software Applications for Computer-Mediated and Mind-Mapping Approaches.

Name

Description

Pricing

Link

StormBoard

Online Brainstorming and Collaboration

$0 - $10/month

www.stormboard.com

iMindMap

Mind-Mapping Software

$40+ per user

thinkbuzan.com

SpiderScribe

Online Mind-Mapping and Brainstorming

$0 - $25/month

www.spiderscribe.net

MindMeister

Collaborative Mind-Mapping

$0 - $90/month

www.mindmeister.com

XMind

Mind-Mapping Software

$0 - $99 per user

www.xmind.net

for younger staff to participate without the fear of negatively impacting their reputations or the audit team’s impression of their audit abilities.

Studies show that groups brainstorming electronically identify more relevant fraud risk factors relative to groups brainstorming face-toface8. Given that computer-mediated brainstorming sessions also tend to shorten meeting times, this approach may be a useful alternative for audit teams.

Mind-Mapping A recently published article in Internal Auditing9 outlines the process for using mind maps when conducting fraud brainstorming sessions. Mind maps allow audit teams to visualize and organize their thoughts in real time as they are discussed. The central theme of the brainstorming session, such as “fraud risks,” is presented at the center of the map, and major themes, such as “incentives,” “opportunities,” “rationalizations” or “high-risk accounts,” extend from the central theme like branches of a tree. Key words and topics relevant to each major theme are then tied to each branch so that the entire map is an interconnected network of expressed ideas.

Mind maps help to connect and visualize a wide array of ideas.

As applied to fraud brainstorming sessions, mind maps can help

synthesize identified fraud risks and how the audit team plans on responding to the significant risks. Because mind maps represent a method of synthesizing and organizing fraud brainstorming sessions, they can be applied to any of the previously identified approaches. Table 1 provides links to several online and software applications that can be used for computer-mediated and mind-mapping approaches.

Attributes of Effective Brainstorming Sessions A study conducted by Joseph Brazel of North Carolina State University, Tina Carpenter of the University of Georgia and Gregory Jenkins of Virginia Tech University10 surveyed 179 audit partners, directors, senior managers and managers of each Big 4 auditing firm and one additional international audit firm about their experiences conducting a recent fraud brainstorming session. Chief among the authors’ findings was the identification of several specific brainstorming quality items that directly impacted the quality of the brainstorming session reported by their survey respondents.

The most effective brainstorming sessions shared these qualities: • The session was led by the engagement partner or a forensic specialist.

• An IT audit specialist attended the primary brainstorming session.

• The brainstorming session was held early in the audit planning process.

• The session included a significant discussion about how management could perpetrate fraud and the specific audit responses to the identified fraud risks.

• The engagement partner and manager(s) contributed significantly to the brainstorming session.

The results of their field study indicate that brainstorming sessions

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that contain these items positively impacted both the quality of fraud risk factors identified and subsequent fraud risk assessments.

Furthermore, brainstorming quality positively impacted auditors’ ability to respond to identified fraud risks by adjusting the nature, staffing, timing and extent of fraud-related audit procedures. This finding is especially important in light of PCAOB findings and audit studies showing that auditors often struggle to appropriately respond to identified fraud risks by changing the nature of their procedures.

Final Thoughts An important insight provided by the accounting studies examining fraud brainstorming sessions is that not all brainstorming sessions are created equally. When the quality of a brainstorming session is high, more fraud risk factors are identified and better fraud risk assessments are made; audit teams respond more appropriately to identified risks by changing the staffing of the audit, and the nature, timing and extent of audit procedures that address the risk of fraud.

Effective brainstorming sessions also ensure that the appropriate skeptical mindset is applied when conducting the audit. On the other hand, engagement teams that conduct lower quality sessions spend time brainstorming without achieving the intended benefits.

Auditors’ consideration of fraud should extend beyond the brainstorming session and risk assessment process conducted during initial audit planning. Fraud risks should be updated throughout the audit as necessary, and audit teams should consider holding more than one brainstorming session, such as at the conclusions of fieldwork.

Doing so will ensure that the audit plan has been appropriately tailored to account for the risks identified.

Finally, some methods for conducting fraud brainstorming, such as computer-mediated techniques, have been shown to be as or more effective than traditional open, face-to-face meetings, yet are not frequently used in practice. Implementing new strategies, including strategic reasoning prompts or mind-mapping, can provide a low-cost alternative for improving fraud brainstorming sessions. Regardless of the approach taken, audit teams should strive for high quality fraud brainstorming sessions that are led by the engagement partner or forensic specialist and include significant involvement from every team member. n

J. Owen Brown, Ph.D., CPA

is an assistant professor of accounting in the Hankamer School of Business at Baylor University in Waco. He can be reached at Owen_Brown@baylor.edu.

Footnotes 1. PricewaterhouseCoopers (PwC). 2014. Global Economic Crime Survey. Available at https://www.pwc.com/gx/en/economic-crime-survey/ 2. Association of Certified Fraud Examiners (ACFE). 2014. Report to the Nations on Occupational Fraud and Abuse. Available at http://www.acfe.com/rttn/ docs/2014-report-to-nations.pdf 3. Beasley, M. S. and J. G. Jenkins. 2003. “A Primer for Brainstorming Fraud Risks.”

Journal of Accountancy 196(6): 32-38.

4. Asare, S. K. and A. M. Wright. 2004. “The Effectiveness of Alternative Risk Assessment and Program Planning Tools in a Fraud Setting.” Contemporary Accounting Research 21(2): 325-352.

5. Public Company Accounting Oversight Board (PCAOB). 2007. Observations on Auditors’ Implementation of PCAOB Standards Relating to Auditors’ Responsibilities with Respect to Fraud. Available at http://pcaobus.org/ Inspections/Documents/2007_01-22_Release_2007-001.pdf 6. Carpenter, T. D. 2007. “Audit Team Brainstorming, Fraud Risk Identification, and Fraud Risk Assessment: Implications of SAS No. 99.” The Accounting Review 82(5): 1119-1140.

7. Hoffman, V. B. and M. F. Zimbelman. 2009. “Do Strategic Reasoning and Brainstorming Help Auditors Change Their Standard Audit Procedures in Response to Fraud Risk?” The Accounting Review 84(3): 811-837.

8. Lynch, A. L., U. S. Murthy, and T. J. Engle. 2009. “Fraud Brainstorming Using Computer-Mediated Communication: The Effects of Brainstorming Technique and Facilitation.” The Accounting Review 84(4): 1209-1232.

9. Calderon, T. G., E. J. Conrad, and P. K. Keltyka. 2012. Internal Auditing 27(2): 19-26.

10. Brazel, J. F., T. D. Carpenter, and J. G. Jenkins. 2010. “Auditors’ Use of Brainstorming in the Consideration of Fraud: Reports from the Field.” The Accounting Review 85(4): 1273-1301.

Available Fraud Brainstorming Resources

Online Resources http://mashable.com/2013/09/25/mind-mapping-tools/ http://www.acfe.com/tips-and-tools.aspx http://www.thecaq.org/policy/anti-fraud-collaboration http://www.brainstorming.co.uk/tutorials/tutorialcontents.html

CPE Courses http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/AuditAttest/Standards/StandardsImplementationGuidance/PRDOVR~PC-150034/PC-150034.jsp https://checkpointlearning.thomsonreuters.com/CourseFinder/CourseDetails/7462?courseFlagType=0&source=CourseList&isSeminarView=false https://checkpointlearning.thomsonreuters.com/CourseFinder/CourseDetails/7471?courseFlagType=0&source=CourseList&isSeminarView=false https://checkpointlearning.thomsonreuters.com/CourseFinder/CourseDetails/7461?courseFlagType=0&source=CourseList&isSeminarView=false Today’sCPA May/June 2015

43

CPE QUIZ

By J. Owen Brown, Ph.D., CPA

Conducting Effective Fraud Brainstorming Sessions: Best Practice Tips and Available Resources for Your Audit Teams 1 The Association of Certified Fraud Examiners (ACFE) estimates that the

6 Auditors’ consideration of fraud also includes a formal assessment of the

typical organization loses what percentage of its revenues each year to fraud?

risk of material misstatement due to fraud and how the audit team has responded to the identified risks.

A. B. C. D.

A. True

1 percent 2 percent 5 percent 10 percent

are conducting effective brainstorming sessions except:

Identify fraud risk factors Instill the importance of remaining professionally skeptical Both A and B Neither A nor B

3 What is the most common approach to conducting a fraud brainstorming session?

A. B. C. D.

5 If a fraud risk checklist is used to help guide the brainstorming session, it should be distributed to all team members participating in the session prior to the meeting.

B. False

A lack of evidence that a brainstorming session was held.

Brainstorming sessions occurred after substantive fieldwork had begun.

Key members of the audit team did not attend the brainstorming session.

The session was not led by a forensic specialist.

8 Production blocking, a common pitfall affecting fraud brainstorming sessions, occurs when: A.

D.

Either the audit partner or forensic specialist The audit committee Client management Either the audit manager or audit senior manager

A. True

A. B. C. D.

B. C.

Strategic reasoning Open-ended, conducted face-to-face Computer-mediated Mind-mapping

4 Ideally, the fraud brainstorming session should be led by: A. B. C. D.

False

7 All of the following are concerns raised by PCAOB about whether audit firms

2 The purpose of the fraud brainstorming session is to: A. B. C. D.

B.

Certain members disengage from the process and rely on other members to carry the discussion.

One or two members exert excessive influence over the brainstorming process.

Individuals are delayed from expressing their ideas because they are waiting their turn to speak.

Individuals set aside their own personal beliefs or adopt the opinion of the rest of the group.

9 Strategic reasoning facilitates changing the nature of audit procedures rather than the extent of prior procedures.

A. True

B.

False

10 The most effective brainstorming sessions share all of the following qualities except: A. B. C. D.

An IT audit specialist attends the primary brainstorming session.

The brainstorming session was held early in the audit planning process.

The engagement partner and manager contribute significantly to the session.

The session excludes new staff and interns who lack sufficient audit experience to identify relevant fraud risks.

Today’s CPA offers the self-study exam above for readers to earn one hour of continuing professional education credit.

The questions are based on technical information from the preceding article.

PARTICIPATION EVALUATION

Mail the completed test by June 30, 2015, to TSCPA for grading.

3. The article and exam were well suited to my background, education and experience: 5___ 4___ 3___ 2___ 1__.

If you score 70 or better, you will receive a certificate verifying you have earned one hour of CPE credit – granted as of the date the test arrived in the TSCPA office – in accordance with the rules of the Texas State Board of Public Accountancy (TSBPA). If you score below 70, you will receive a letter with your grade. The answers for this exam will be posted in the next issue of Today’s CPA.

5. It took me___hours and___minutes to study the article and take the exam.

To receive your CPE certificate by email, please provide a valid email address for processing.

(Please check one.) 5=excellent 4=good 3=average 2=below average 1=poor 1. The authors’ knowledge of the subject is: 5____ 4____ 3____ 2____ 1____.

2. The comprehensiveness of the article is: 5____ 4____ 3____ 2____ 1____.

4. My overall rating of this self-study exam is: 5____ 4____ 3____ 2__ 1____.

Name _______________________________________ Company/Firm__________________________________________ Address (Where certificate should be mailed)_____________________________________________________________ City/State/ZIP_________________________________________________________________________________________ Email Address________________________________________________________________________________________ Please make checks payable to The Texas Society of CPAs. __ $15 (TSCPA Member) __ $20 (Non-Member) Signature_____________________________________________________________________________________________ TSCPA Membership No._______________________________________________________________________________ After completing the exam, please mail this page (photocopies accepted) along with your check to: Today’s CPA; Self-Study Exam: TSCPA CPE Foundation Inc.; 14651 Dallas Parkway, Suite 700; Dallas, Texas 75254-7408.

TSBPA Registered Sponsor #260.

Answers to last issue’s self-study exam: 1. C 2. C 3. B 4. D 5. C 6. A 7. A 8. A 9. D 10. A 44

Today’sCPA

TSCPA CPE COURSE CALENDAR

Mark Your Calendar – June/July 2015 CPE Courses Date

Course

CPE Credit

City

6/1 - 6/2

2015 Texas School District Accounting & Auditing Conference

16

San Antonio

6/4

Peer Review Program Advanced Course

8

Houston

6/5

Peer Review Program Advanced Course

8

Dallas

6/10 - 6/12

CPE By the Sea Conference

Up to 24

Galveston

6/15 - 6/17

South Padre Summer Cluster

Up to 24

South Padre Island

6/18 - 6/19

How to Conduct a Peer Review Under the AICPA Practice-Monitoring Programs

16

Dallas

6/22

Annual Update for Accountants and Auditors

8

San Antonio

6/22

The Top 50 Mistakes Practitioners Make & How to Fix Them

8

Houston

6/23

The Top 50 Business Tax Mistakes Practitioners Make and How to Fix Them

8

Houston

6/23

Revenue Recognition: Mastering the New FASB Requirements

8

San Antonio

6/24

Personal and Professional Ethics for Texas CPAs

4

Houston

6/25

Personal and Professional Ethics for Texas CPAs

4

Addison

6/29

Compilation and Review Annual Update: A Seminar Designed for Smaller Firms

8

Dallas

6/29

GASB Statement No. 68: In-Depth Government Pension Accounting and Auditing

8

Austin

6/29

Getting More Active With the Passive Activity Rules and New NIIT

8

Fort Worth

6/29

Fraud Update: Detecting and Preventing the Top 10 Fraud Schemes

8

Houston

6/30

Annual Yellow Book Update and Review: A Realistic Approach

8

Dallas

6/30

GASB Statement No. 68: In-Depth Government Pension Accounting and Auditing

8

San Antonio

6/30

Internal Controls and Risk Assessment: Key Factors in a Successful Audit

8

Houston

6/30

Shortcuts to Tax Cuts: Business Tax Planning Strategies for S Corporations and LLCs

8

Fort Worth

6/30

Personal and Professional Ethics for Texas CPAs

4

Texarkana

7/7

Getting More Active With the Passive Activity Rules and the New NIIT

8

Houston

7/8

Shortcuts to Tax Cuts: Business Tax Planning Strategies for S Corporations and LLCs

8

Houston

7/9

Getting More Active With the Passive Activity Rules and the New NIIT

8

Dallas

7/10

Texas Franchise (Margin) Tax

8

San Antonio

7/10

Shortcuts to Tax Cuts: Business Tax Planning Strategies for S Corporations and LLCs

8

Dallas

7/13

Fraud Update: Detecting and Preventing the Top 10 Fraud Schemes

8

Dallas

7/14

Internal Controls and Risk Assessment: Key Factors in a Successful Audit

8

Dallas

7/15

GASB Statement No. 68: In-Depth Government Pension Accounting and Auditing

8

Houston

7/16

Compilation and Review Annual Update: A Seminar Designed for Smaller Firms

8

Houston

7/16

Auditing Employee Benefit Plans

8

Fort Worth

7/16

Hot IRS Tax Examination Issues for Individuals and Businesses

8

Dallas

7/16

2015 Oil and Gas Institute

11

Dallas

7/17

Annual Yellow Book Update and Review: A Realistic Approach

8

Houston

7/17

Internal Control and COSO Essentials for Financial Management, Accountants and Auditors

8

Fort Worth

7/17

Individual and Financial Planning Tax Camp

8

Dallas

7/19 - 7/21

2015 Advanced Healthcare Conference Plus Pre-Conference Workshop

Up to 25

San Antonio

7/20 - 7/22

Hill Country Summer Cluster

Up to 24

San Antonio

7/20

Annual Update for Accountants and Auditors

8

Dallas

7/20

Hot IRS Tax Examination Issues for Individuals and Businesses

8

Austin

7/20

Forensic Accounting Investigative Practice

8

Fort Worth

7/21

GAAS: A Comprehensive Review for Auditors

8

Dallas

Today’sCPA May/June 2015

45

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TSCPA offers opportunities for members and non-members to advertise in the Classifieds section of Today’s CPA magazine.

To request a classified ad, contact Donna Fritz at dfritz@tscpa.net or 800-428-0272, ext. 201 or in Dallas at 972-687-8501; Fax 972-687-8601.

Today’sCPA May/June 2015

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